Case Study 6
IKEA: Culture as competitive advantage
Suggested case discussion questions
Q1
Explain how IKEA’s culture contributed to its early expansion efforts
IKEA’s 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. IKEA’s 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. IKEA’s 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 IKEA’s 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 IKEA’s preferred way of doing business. In Germany, IKEA’s 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 IKEA’s
belief in minimizing bureaucracy and burdensome administration. In France, IKEA’s
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 who’s 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 IKEA’s 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 Porter’s notion of a regional cluster to life. From the case, we learn how Kamprad’s
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: Sweden’s love of
air, sunlight and a light, airy, preferably classicistic – but soft – language of design, integrated
with Finland’s weight, power and gloomily ardent colourfulness, were complimented by
Denmark’s more extrovert style. These countries take design seriously and saw it almost as a
social obligation to produce furniture that enhanced people’s living experiences while being
relatively low in price. Since 1859, Sweden’s craftsmen, artisans and manufacturers have
honed their skills and ability to respond to society’s 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.