Magoosh GRE

SWOT analysis of IKEA

| December 7, 2012

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Introduction

The following essay is a critical analysis of two of Gareth Morgan’s metaphors in relation to a real organization that, over the course of the organization existence and expansion, has in some way applied these two metaphors for attaining success and sustainability. The metaphors that will be discussed for this study are the image of an organization as an organism, and an organization as a culture. The organization studied in relation to these metaphors is IKEA, the home furniture retailer. Relevant examples within the organization evolutionary process will be given where necessary to illustrate the significance of the metaphors in question. It is, however, vital to learn the organization background to delve any further.

IKEA prides itself to be the most successful and largest furniture retailer in the world, and boasts provision of everything and anything for a home, having products suited for people of all ages, and all this at low prices. The company promises excellent value for money spent with all of their products designed with an emphasis on natural colours to bring a light and airy atmosphere within a home. This concept is based purely on IKEA’s Swedish origins, where people pride themselves in living in harmony with nature with simple home designs which offer maximum efficiency in all weathers (http://www.iamaceo.com/marketing/ikea-brand-success-strategy/).

IKEA’s vision, “to create a better everyday life for the many people” is reportedly largely aimed at the global middleclass which is also evident from their business idea, “to offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them” (http://www.ikea.com/ms/en_GB/about_ikea/press_room/student_info.html).

To achieve this global mission, IKEA is well known for having a rapid internationalisation process from its Swedish origins and its rapid expansion into countries with cultures very different from its original Swedish national culture (Hollensen, 2007). With 265 stores worldwide, where 235 are owned by the IKEA group while the remaining 30 by franchisees outside the group; the extent of IKEA’s expansion is obvious (IKEA, 2007). Although owned by franchisees in some countries, the IKEA concept and trademark are solely owned by Inter IKEA Systems B.V in Netherlands. This means Inter IKEA Systems B.V is the franchiser for all IKEA stores within or outside of the IKEA group, ensuring uniformity of corporate values right from the centre (IKEA, 2007).

Having looked into the organisation’s background, it is now important to study Morgan’s metaphors, which can then be applied to the organisation. Firstly, Morgan suggests that organisation theorists, after decades of comparing organisations as mechanistic entities, have moved to the biological sciences for more apt comparisons, where individuals, groups, organisations, populations or species of organisations, and their social ecology are paralleled with molecules, cells, complex organisms, species and ecology (Morgan, 2006, pg 34). The idea derived from drawing such comparisons is that certain species of organisation are adapted to certain external conditions just as certain species of organisms are to certain environments (Morgan, 2006, pg 33). Such metaphoric views have changed the classical mechanistic focus on efficiency, and structure to the basic element of survival with more emphasis on the organisation-environment relationship (Morgan, 2006; 1998). This can be further complimented with modern environmental analysis methods like SWOT (strengths, weaknesses, opportunities and threats) and PEST (political, economical, sociological and technological) analyses, that have been developed solely for comparing an organisation’s internal abilities to the external factors that may or are affecting its survival and performance in that environment (Johnson et al, 2008; Kotler, 2003).

Within the metaphor of an organisation as a living organism, Morgan introduces certain characteristics like the open systems approach, adaptability to the environment (contingency theories), different species of organisation etc (2006; 1998), but this essay will mainly look into the organisation as an open system, and its adaptability to the external environment. The open system approach is based on the theory that organic systems at the cell level, as complex organisms, and as part of a population of organisms, exist in constant interaction with their environment, and this interaction is vital for the very survival and sustainability of the organism. A similar approach can be applied to an organisation, where individuals, groups, and the complex organisation are in constant interaction with their market environment for survival (Morgan, 2006; 1998; Dowling et al, 2008; Johnson et al, 2008).

In support of the open systems approach Morgan discusses the law of requisite variety according to which, the internal regulatory/functioning mechanisms of a system must be at least as diverse as its environment in order to deal with the variety and challenge posed by the environment (Morgan, 2006; 1998; Watson, 2002). This brings us to the challenge of adapting internal characteristics to the external environment, also called ‘contingency theories by Morgan (2006), where he argues that all organisational systems are open systems in relation to the environments they operate in, and careful management is needed to “satisfy and balance internal needs and to adapt to environmental circumstances” (Morgan, 2006, pg 42). This approach assumes that the environment dictates the changes within the organisation, and that managers employing different approaches to management, must continuously strive to bring about a strategic fit between internal and external factors (Morgan, 2006; Johnson et al, 2008). This is especially applicable to multinational organisations that have to constantly adapt themselves to local conditions, whilst still working towards the original corporate objectives. Dowling et al (2008) summarise this by saying,

“…the International Organisation will be called on to operate across a wide variety of competitive environments and yet somehow balance these diverse social, political and economic contexts with the requirements of the original home context.” (Pg 25)

IKEA has been one of those international organisations that have had to constantly adapt to the different environments where it operates. The company had initially employed an ethnocentric approach of management where only Swedes were recruited for management positions so as to ensure the original ‘Swedishness’ of the organisation. But this approach eventually met with criticism and a temporary setback in IKEA’s overseas operations, where the organisation was faced with the task of revising its overseas recruitment policies in order to meet the demands of local cultures and employment laws (Kling and Goteman, 2003; Kochan et al, 2002). According to Bjork (1998), every time IKEA was faced with a struggle due to internationalisation, new cultural management policies would be implemented, the latest being Diversity Management.

IKEA has had to rapidly transform itself from an ethnocentric corporation to an organisation that embraces people of all backgrounds, and has in many communiqués expressed the importance of having a culturally diverse workforce in order to obtain competitive advantage on the global scene. This is evident from the organisation’s recruitment websites in various countries, where emphasis is given for potential employees to ‘be themselves’, but at the same time adhere to shared corporate values such as ‘simplicity’, ‘cost-consciousness’, ‘hard work’ etc, but almost all of the websites show a picture of a man and woman of Scandinavian origin (see case, also Bjork, 1998). This has created a paradox within the IKEA Group’s core values, where there is still a strong emphasis on the company’s Scandinavian background. This is found more on the websites of stores directly owned by the IKEA Group, whereas the stores owned by outside franchisees are more receptive to their local environments. IKEA in Dubai, UAE, for example, is franchised by Al Futtaim Group, which acts as the main recruiting agency for the company. Since its opening in 1991, the Dubai franchise has been a major success story in terms of recruitment and organisational performance, which led to its expansion into neighbouring Abu Dhabi.

(http://www.ikeadubai.com/content/careers.asp http://www.afuturewithus.com/careers/al-futtaim/home.aspx).

The above, if studied in context with Hofstede’s cultural dimensions, would suggest that IKEA was more or less forced to employ external organisations, like in the case of Dubai, for its local recruitment procedures, as Middle Eastern cultures pose stronger environments due to rigidity in peoples’ cultural and traditional preferences, requiring the organisation to recruit local personnel to manage local workforce and operations (Hofstede, 1997; Trompenaars and Hampden-Turner, 1998). This may not be largely applicable in western operations, as again according to Hofstede, western cultures are weaker and more flexible to adapt, creating flexible environments in which to operate, thus not requiring external agencies for local operations, and IKEA may even get away with having its Scandinavian focused marketing efforts in such environments (1997; Trompenaars and Hampden-Turner, 1998), and moreover, ‘brand’ culture is more prevalent in the west than in the Middle East (Kotler et al, 2006). It can thus be asserted that in the case of the Middle East, the environment dictates the changes within the organisation in accordance to Morgan’s adaptability theory (2006), whilst in the west; the organisation may have more of an influence on the external environment due to the power of the brand upon consumers’ psych, which is in contradiction with Morgan’s theory of the environment being the dominant party.

The above clearly shows IKEA’s existence in accordance with Morgan’s organism metaphor due to the organisation’s focus to change its internal capabilities to match with the external environmental factors. The company seems on the right track by employing external agencies with more local knowledge to manage local operations exhibiting need for change, and to tap into local talent, which may also prove less expensive when compared to its Scandinavian counterparts (Keeley, 2003), especially where the environment seems the dominant force.

The organisation as a culture metaphor is slightly intertwined with the above concept of the organism, where the organism metaphor refers to a series of internal changes within the organisation to fit with external changes, the culture metaphor refers to a change in the very behaviour of the organisation through a change in its corporate culture (Morgan, 2006). Corporate or organisational culture, as defined by Schein (2004) is,

“A pattern of shared assumptions a group learned as it solved its problems of external adaptation and internal integration that has worked well enough to be considered valid and, therefore, to be taught to new members as the correct way you think, perceive, and feel in relation to those problems” (Pg 17)

In other words, the methods the organisation uses to bring about the internal changes to align with the environment are expressed in the form of culture. Schein (2004) puts the definition in simpler words by saying, “it’s the way we do things around here”. But since organisations are made up of groups and individuals, where each individual brings in their own personality and characteristics to a group, based on their own cultural mental programming (Hofstede, 1997) in the society, the organisational culture then becomes a culmination of different cultures and perspectives brought in by the external society. This brings us to the assumption that organisational culture is largely affected by societal and national cultures (hofstede, 1997; Morgan, 2006).

In light of the above discussion on the changes IKEA was forced to bring about for its international operations, it may now be significant to learn about the company’s corporate culture. IKEA’s corporate culture is based on the concept of shared values, some of which, as the organisation proclaims, are togetherness, cost-consciousness, respect, and simplicity. These values project a very democratic form of leadership where considerable freedom is given to employees to contribute to the company’s success. IKEA claims to treat all employees, no matter what rank they carry, as partners in the business. The company also boasts no restrictions upon employees in using their own initiatives and offers full support to meet each individual’s needs, ambitions and capabilities. But perhaps the most important proclamation is that “you can take IKEA out of Smaland but you can’t take Smaland out of IKEA”. Smaland being the village in Sweden where the founder Ingvar Kamprad was born and raised, and also the place to which IKEA attributes its qualities like humility, simplicity and hard work.

(http://www.ikea.com/ms/en_US/jobs/join_us/ikea_values/index.html)

This clearly indicates IKEA’s attachment to its roots in spite of its internationalisation. This also suggests that the core-culture of IKEA, especially where individual branches are directly owned by the IKEA group, is quite rigid and is aimed at promoting its Swedish culture to the rest of the world rather than incorporating the different local cultures that it operates in, but where the branches are owned by franchises in places or countries with strong national cultures, IKEA has had to change its internal culture to align with the national culture(s).

Hence the organisation can be seen as a culture due to the fact that, like in the case of IKEA, it has a set of values and beliefs and methods of doing things that are shared and expressed, and taught to new comers as the right way to go, where these values and beliefs and expressions are largely influenced by the individuals and their own perceptions, which are then shared by a group, and are extended to the whole organisation (Morgan, 2006; Schein, 2004; Mullins, 2003; Robbins, 2001). This is especially evident in the case of IKEA, where the dominant cultural element initially has been the Scandinavian focus, as the organisational structure was largely made of Scandinavian personnel and the culture was passed on to new recruits. But due to the company’s aim of expanding worldwide, they have had no choice but to change this internal cultural focus to incorporate other cultures to make up a core organisational culture based on Scandinavian principles rather than personnel, but a culture that embraces differences in local operations, hence creating flexibility.

After studying the two metaphors, the writer is inclined to the assumption that both these metaphors deal with the same element of changing the internal to align with the external. It may be plausible to think that a distinction between the two may not even be necessary, because, if an organisation changes its internal operations, at some level, it is ultimately engaging in changing some aspect of its behaviour, which suggests change in culture. So the main critique for Morgan may be that he has introduced too many divisions of metaphors when they are all intertwined in some respects with each other.

References:

DuPraw, M., & Axner, M. (1993). Working on Common Cross-Cultural Communication Challenges. Alexandria, VA: Public Broadcasting System

Hammer, M.R., Hart, W. And Rogan, R. (1998) ‘Can You Go Home Again? An Analysis of the Repatriation of Corporate Managers and Spouses’, Management International Review, 38(1): 67-79

Hendry, C. (1994) Human Resource Strategies for International Growth. Routledge: London

Hickson, D., McMillan, C., Azumi, K. And Horvath, D.  (1979). ‘Grounds for Comparative Organisation Theory: Quicksands or Hardcore?’ in Lammers, C. And Hickson, D. (eds) Organisations Alike and Unlike, Routledge and Kegan Paul

Hofstede, G. (1997). Cultures and Organisations: Software of the Mind. McGraw Hill, London

Hollensen, S. 2007. IKEA: Expanding through franchising to the South American market? – Case Study III.1, Global Marketing – A decision-oriented approach, 4 ed. Essex, England: Financial Times Press

IKEA. 2007. Facts & Figures, IKEA Group 2007: Corporate PR, IKEA Services AB

Johnson, G. Scholes, K. Whittington, R. (2008). Exploring Corporate Strategy. 8th Edition. England: Pearson Education Ltd

Keeley, T.D. (2003). International Human Resource Management in Japanese Firms. Palgrave, London

Kerr, C., Dunlop, J.T., Harbison, F. And Myers, C.A. (1973). Industrialism and Industrial Man. Penguin, USA

Kling, K., & Goteman, I. 2003. IKEA CEO Anders Dahlvig on international growth and IKEA’s unique corporate culture and brand identity. The Academy of Management Executive, 17(1): 31-37

Kochan, T., Bezrukova, K., Ely, R., Jackson, S., Joshi, A., Jehn, K., Leonard, J., Levine, D., & Thomas, D. 2002. The Effect of Diversity on Business Performance:: Diversity Research Network

Kotler, P. (2003). Marketing Insights. John Wiley & Sons, Inc: New Jersey

Kotler, P., Pfoertsch, W. (2006). B2B Brand Management. Springer-Berlin: Germany

Larkey, L.J. (1996). “Toward a theory of communicative interactions in culturally diverse workgroups”, Academy of Management Review, 21:463-91

Milliman, J., Von Glinow, M. And Nathan, B. (1991) ‘Organisational Life Cycles and Strategic International Human Resource Management in Multinational Companies: Implications for Congruence Theory’, Academy of Management Review, 16: 318-39

Morgan, G. (2006). Images of Organisation. Sage: London

Morgan, G. (1998) Images of Organisation. Sage Publications, London

Mullins, L.J. (2003). Management and Organisational Behaviour. Pitman Publishing, London

Neuliep, J.W. (2008). Intercultural Communication: a contextual approach. Sage Publications, USA

Robbins. S.P. (2001) Organisational Behaviour. Upper Saddle River, NJ: Pearson/Prentice Hall, Pearson Education International

Rollinson, D. (2005). Organisational Behaviour and Analysis. 3rd edition. Pearson, England

Schein, E.H. (2004). Organisational Culture and Leadership. 3rd edition. John-Wiley, San Francisco

Schuler, R.S., Budhwar, P.S. and Florkowski, G.W. (2002) ‘International Human Resource Management: Review and Critique’, International Journal of Management Reviews, 4(1): 41-70

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Scullion, H. And Linehan, M. (2005). International Human Resource Management. Palgrave-Macmillan, New York

Torbiorn, I. (1997) ‘Staffing for International Operations’, Human Resource Management Journal, 7(3): 42-51

Trompenaars, F., and Hampden-Turner, C. (1998) Riding the Waves of Culture: Understanding Diversity in Global Business. 2nd edn. McGraw-Hill: New York

Watson, C.V. (2002). Multiculturalism. Open University Press, Philadelphia

Online Resources:

  • Iamaceo (2011) “IKEA brand success strategy”

http://www.iamaceo.com/marketing/ikea-brand-success-strategy/

Assessed on the 23rd of February 2011

  • IKEA (2011) “Student Information”

http://www.ikea.com/ms/en_GB/about_ikea/press_room/student_info.html

Assessed on the 24th of February 2011

  • IKEA Dubai (2011) “Jobs at IKEA”

http://www.ikeadubai.com/content/careers.asp

Assessed on the 25th of February 2011

  • A future with us (2011) “Jobs at IKEA”

http://www.afuturewithus.com/careers/al-futtaim/home.aspx

Assessed on the 25th of February 2011

  • IKEA (2011) “Join us”

http://www.ikea.com/ms/en_US/jobs/join_us/ikea_values/index.html

Assessed on the 26th of February 2011

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Category: Business, Free Essays