Case Study 6

IKEA: Culture as competitive advantage

Suggested case discussion questions
Q1

Explain how IKEAs culture contributed to its early expansion efforts

IKEAs culture is encapsulated in the expression the IKEA-way. This is the philosophy
Ingvar Kamprad formed during the early years of IKEA and drove its expansion efforts. His
non-conformist ways gave him freedom to focus and innovate on all facets of distribution.
His obsession with low prices, led to an unwavering focus on keeping costs low. He
developed strong reciprocal relationships with his suppliers, such that they could be assured
he would purchase whatever they produced. IKEAs culture has evolved step-by-step and is
seen by those within IKEA as being the cornerstone of its operations. This is believed to such
an extent that managers as seen as missionaries embodying the IKEA-way, explaining to
new and older exployees why things are done the way they are. IKEAs management style is
based on these early experiences and co-workers are encouraged to learn by doing, where
making mistakes is tolerated. Managers are expected to eschew status signifiers and develop
close, caring relationships with their co-workers. Interactions between co-workers and
managers are characterized by informality and egalitarianism. Managers are encouraged to
not take themselves too seriously, to show equalness, involve co-workers in decisions and
exhibit characteristics of humbleness when interacting with others.
Q2

Critically analyse how aspects of the IKEA-way have caused problems in its
overseas experiences in Germany, France and the United States

While IKEAs culture has been a strong factor in its competitive advantage, its expansion into
overseas locations has also brought challenges, when in-country cultural norms clashed with
IKEAs preferred way of doing business. In Germany, IKEAs liking for informal relations
between co-workers and managers has been interpreted as undermining the respect and
prestige traditionally given to a boss. Also, the German worker is felt to be more comfortable
with detailed procedures and work instructions, which contradicts with IKEAs belief in
minimizing bureaucracy and burdensome administration. In France, IKEAs informality has
been interpreted as a sign of weakness, or indecision. Also, its preference for not recognizing
status is felt to cause an identity problem as everyone is on the same level. However, it is
perhaps in the US that cultural differences have been most profound. Swedes traditionally
value muted and controlled emotions, whereas the American sales force were more used to
overt displays of emotion. Swedish managers in the US were also reluctant to tell people
what to do and preferred a more subtle managerial style. However, the American workforce
wanted to know whos in charge and to be told what to do. American employees also wanted
greater recognition for individual contribution, through performance review schemes, which
run counter to traditional Swedish collectivism. Also, the low hierarchy in stores (three levels
from co-worker to manager) inhibited the career progression routes American workers were
used to. These challenges forced IKEA to confront the IKEA-way and make changes to
take account of local norms and expectations
Q3

Using the case and Exhibit 2, outline the factors that contribute to a regional
cluster emerging

The case describes IKEAs emergence from Sweden in the 1950s to become a global firm in
the 1990s and Exhibit 2 provides a useful historical and geographic context for this. It helps
bring Porters notion of a regional cluster to life. From the case, we learn how Kamprads
activities in the 1950s, where he took on established players in the Swedish furnishings
industry, honed his entrepreneurial qualities. One result of this was innovations such as a
reconfigured value chain that allowed IKEA to purchase large, bulk orders from its suppliers,
in contrast with the activities of its competitors. Exhibit 2 explains how access to vast natural
resources, in the guise of pine forests and a belief that everyone, even the working class,
should be able to purchase furniture which was light, beautiful, comfortable, hygienic and
easy to care for helped form a furnishings design cluster in the region. The Nordic countries
nurtured aesthetic characteristics as representations of their social outlook: Swedens love of
air, sunlight and a light, airy, preferably classicistic but soft language of design, integrated
with Finlands weight, power and gloomily ardent colourfulness, were complimented by
Denmarks more extrovert style. These countries take design seriously and saw it almost as a
social obligation to produce furniture that enhanced peoples living experiences while being
relatively low in price. Since 1859, Swedens craftsmen, artisans and manufacturers have
honed their skills and ability to respond to societys ups and downs, and through frequent
exposure to overseas trade fairs and exhibitions ensure that their products have a wider appeal
than their own domestic markets.