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Microsoft Word - MGT202 AT2 Case Study Analysis.docx MGT202 AT2 Case Study Analysis (20%) Due date: 5pm, Friday of week 7 Word length: 1,500-2,000 words (start counting from Introduction to Recommendations) As IKEA, the world’s largest furniture retailer, pursues its global expansion, a number of events have occurred which threaten the company’s long-cherished culture. You are required to read the extracts below and research more on IKEA’s culture. Ikea: against the grain By Richard Milne Mr Kamprad founded [IKEA] in 1943 just to the north of Älmhult, a community surrounded by dense forests and little else. Fifteen years later he opened the first shop in the town in what would become a global empire of flat-pack furniture. Ikea is one of the most extraordinary success stories in postwar European business. Famed for its Scandinavian chic but cheap tables, bookcases and beds, its self-assembly wares inspire admiration and frustration in equal measure. Now the privately held group is looking to cement its status as the world’s biggest furniture retailer by increasing the number of stores by 50 per cent by the end of the decade and almost doubling its sales and customer numbers. But the expansion raises questions of whether the unique corporate culture forged in Älmhult is fully steeled for such rapid growth from China to the Dominican Republic. Ikea has suffered a series of high-profile stumbles, ranging from a corruption scandal in Russia to allegations of spying on staff and customers in France and airbrushing women out of its catalogue in Saudi Arabia. Steen Kanter, a senior executive at Ikea from 1971 to 1994, says: ‘I’m concerned about Ikea’s culture. I think the foundation of Ikea is its culture and I hope it doesn’t go by the wayside.’ Mr Kanter, who now runs Kanter International, an advisory firm, says he was in an Ikea store in Boston this month. ‘I don’t feel the same spirit when I go into Ikea. There is a danger that Ikea just turns into another big impersonal company,’ he adds. Christopher Bartlett, an emeritus professor at Harvard Business School who has written several case studies over three decades on Ikea, has similar concerns: ‘In any company that is as large and diverse as Ikea it does become a challenge [to maintain the culture].’ Critics have derided the Älmhult culture, with Johan Stenebo, a former personal assistant to Mr Kamprad, portraying the company as a cult-like dictatorship within the province of Småland, seemingly filling in for North Korea. Most of its chief executives, including Peter Agnefjäll, who will take over next year, have worked as Mr Kamprad’s personal assistant and they seem to echo one another over the decades. Mr Agnefjäll himself says that Älmhult is ‘in many ways the heart of Ikea’. But the culture goes much deeper. Mikael Ohlsson, Ikea’s chief executive, says: ‘We always recruit through values. We spend an enormous effort in strengthening the values: togetherness, down to earth and hard working.’ An article in MIT Sloan Management Review corroborates this, noting how Ikea’s standard jobs questionnaire plays down skills, academic credentials or experience to focus on values and beliefs. Would-be employees can even take a culture quiz on Ikea’s website to gauge their suitability. Mr Ohlsson contends that such a strong culture allows senior executives to have deep trust in country or store managers. ‘We can have a very decentralised organisation with the culture as a foundation. We can have a very flat and unbureaucratic organisation,’ he says. Fredrik Håkansson Lund, Älmhult’s store manager, has ‘big freedom within frames’, Mr Ohlsson says. Mr Lund has the biggest range of Ikea products in the world – some 10,000 of them – at his disposal. He can use these as he wants to decorate showrooms in a way that inspires local customers. On the other hand, Mr Lund cannot customise products or branch out of the set product ranges. Tina Petterson-Lind, the head of Ikea’s range which is designed for the world from Älmhult, says products are split into three categories: the vast majority are global; some have local differences such as a darker wood in one market than another; while a few are designed specifically for a set country. Tailor-made products are very much the exception because Ikea takes little notice of the modern management tenet of ‘think global, act local’ by imposing similar store design and product offering whether in Bangkok or Baltimore. That allows Ikea to save on costs on volume and logistics. But it has caused problems in some parts of the world, says Mr Kanter, who ran part of the Swedish group’s operations in the US in the 1980s and 1990s. He recalls how Ikea’s launch ran quickly into trouble in the US because the mattresses were too hard, drinking glasses too small and kitchens not big enough for the Thanksgiving turkey. Still, as Mr Kanter says: ‘Ikea is relatively good at admitting when they screw up.’ The US business was turned around by changing the products to suit local tastes. Even for that seemingly obvious step, Mr Kanter says he had to guarantee he could generate enough work for an entire factory with the new, larger kitchen units before he received approval to change it. The recent mistakes have had more serious implications. In Russia, Ikea fired two senior executives in 2010 for tolerating bribery, while this year a man with apparent connections to another top manager was jailed for corruption. The case attracted particular attention because Ikea had adopted a tough stance against corruption. But as Prof Bartlett notes: ‘There is often a tension between the corporate culture and a national culture.’ Another case came to light when it emerged that women had been airbrushed out of certain pictures in the Saudi catalogue over several years. Amid global media interest, the Swedish group admitted that this was partly due to its production guidelines and promised a change. Perhaps most serious was the case in France where Ikea sacked the country head, finance director, risk manager and head of human resources following allegations the company had gained illegal access to police files and used private detectives to pry into the home lives of employees and dissatisfied customers. Ikea responded with workshops on its code of conduct over the summer with its 9,000 French staff encouraged to discuss what happened, and by appointing an ethical committee. Mr Ohlsson says the problems are isolated, not a sign of the culture buckling as the company expands. ‘The culture has been an anchor for a long, long time. It is really the inner strength of Ikea. In our co-worker survey, spirit and culture are voted as one of the real assets of Ikea. We are very much against prestige and hierarchies. [But] with 140,000-150,000 co-workers there can always be an exception,’ he says. One worry is about the pace at which Ikea plans to grow. It wants to open 20 to 25 stores a year until the end of the decade, rising to 500 in 2020 from 338 today. It opened just seven last year. The plans could mean up to €20bn of investment and 100,000 jobs in the next eight years. Sales are planned to almost double from €27bn in the year to August. Mr Kanter recalls an expansion in the late 1970s when Ikea went from 35 to 50 stores in one year. ‘I remember how scary that was. That resulted in a big corporate initiative in 1980 where we didn’t open a single store.’ But Prof Bartlett says that, for all his concerns, Ikea has been one of the most successful companies at preserving its culture as it grows. Returning to visit Ikea in 2006, a decade after a previous case study, he saw little difference: ‘The culture had been remarkably robust and well maintained and it is very well embedded. It tends to be transferred mouth to ear.’ Älmhult plays a critical role in that process, with managers from around the world arriving to exchange ideas and hear the latest thinking from Småland. Mr Agnefjäll says the expansion makes the focus on culture all the more important. ‘Every company needs something that glues it together. For some companies it is an organisational chart. For other companies such as Ikea it’s our culture. If we share the same values and the same vision we can put more trust in people working in the organisation,’ adds the future chief executive. Source: ‘IKEA: against the grain’ (adapted), FT.com, 13/11/2012 (Milne, R.) © The Financial Times Ltd. All Rights Reserved. Case Study Questions: A. determine the values at the heart of IKEA’s culture B. consider the problems which the company has experienced in maintaining its values while expanding its operations globally (focus on the extracts provided above) C. provide recommendations to IKEA *** You must apply relevant concepts and theories you have learned to date. This assessment is a short report format, containing: Table of Contents 1.0 Introduction (5-10% of word count) 2.0 Company’s analysis 2.1
2.2 3.0 Conclusion (5-10% of word count) 4.0 Recommendations References Other requirements: • Use Times New Roman 12 pt font (headings can be 14pt) • Double-space your document to allow room for feedback • State your name and student number in the document header • State the word count in the document header • Comply with the APA referencing style Submission method: Via the Turnitin dropbox on the Course Hub