BBMM303 Organisational Structure and Design: Cas Study of IKEA

Situation Analysis

IKEA Scandinavian case offers a background on IKEA.

The organization was found in 1943 by Ingvar Kamprad at the age of 17.

IKEA is well known for its flat box storage of furniture.

IKEA offers excellent quality furniture at low costs through operational efficiency.

IKEA is a global brand and has broken geographical boundaries and spread its business to different parts of the world

Problem Identification

The primary problem faced by the brand is a lack of understanding of different cultures.

IKEA works on a standardization model rather than customization.

Customers are having a hard time adjusting to Scandinavian styles. For example US customers do not understand the metric system adopted in Europe.

IKEA straying away from its original values

Lack of understanding of customer’s needs and demands Lack of innovation

High level of competition

Possible Issues

IKEA is facing a delay in delivery due to lack of understanding of the local metric system.

A lack of new designs and poor understanding of customer needs is leading to inefficient level of customer satisfaction

Lack of innovation is leading to an apparent loss of customers. The brand at large is suffering from a lack of creations.

High level of competition offers customers several options to choose from.

Theories: Motivation Need Theory

This theory suggests that in order to attract customers, a business must offer some form of motivation to customers.

This motivation can be physiological, safety, social, esteem or actualization (Zajda, 2015).

IKEA is currently fulfilling physiological, safety and to some extent social needs.

Now the brand must work towards fulfilling esteem needs by offering distinguished products which fulfill customer’s esteem needs.

Customer engagement also serves to fulfil their esteem needs (Harmeling et. al., 2017).

Theories: Glocalization Theory

As the name suggests. This theory is a combination of local and global.

Businesses must adopt glocal strategy.

They must expand the business on a global scale. Use the brand name, brand image, personality, logo, symbols and colors everywhere (Roudometof, 2016).

However, upon entering a new geographic area, business must adhere to local needs and demands (Hsieh, Lee and Yang, 2015).

Recommendations To Ikea

Customization: Instead of a standardization approach, IKEA must adopt a customization approach for a different country. Standardization leads to reduced costs. Customization offers increased level of customer satisfaction. Therefore IKEA must find a grey ground and maintain their standard approach by slightly adhering to local needs and demands

Local recruitments: IKEA must recruit locally. When their employees are from a local area, they will be able to offer a deeper insight about the local needs and demands. These employees would also be less expensive.

International level cultural team: This team must be formed with the aim to enhance diversity within the firm, break stereotypes regarding different regions and bring in an organizational culture of openness and diversity. Organizational culture has a significant impact on organizational performance (Hogan & Coote, 2014). Hence a diverse firm will be able to better understand diverse needs.

Product differentiation: In the face of increasing competition, differentiation strategies help businesses in standing out and surviving the competition. This differentiation can be in terms of product, price, packaging, place of delivery or innovative promotion.

Conclusion

IKEA is a global brand.

The business is facing problems due to lack of understanding of different cultures and hence local needs of their new customers across the globe.

Effective strategies like increased R&D, local recruitments and bringing in an organizational culture of diversity and openness will help in addressing the issue efficiently.

The aim of the recommendations is to ensure increased level of customer satisfaction, positive brand image and enhanced profitability.

References

Harmeling, C.M., Moffett, J.W., Arnold, M.J. and Carlson, B.D., 2017. Toward a theory of customer engagement marketing. Journal of the Academy of Marketing Science, 45(3), pp.312-335.

Hogan, S.J. and Coote, L.V., 2014. Organizational culture, innovation, and performance: A test of Schein's model. Journal of Business Research, 67(8), pp.1609-1621.

Roudometof, V., 2016. Theorizing glocalization: Three interpretations1. European Journal of Social Theory, 19(3), pp.391-408.

Zajda, J., 2015. Globalisation and its impact on education and policy. In Second International Handbook on Globalisation, Education and Policy Research (pp. 105-125). Springer, Dordrecht.

Hsieh, M.F., Lee, C.C. and Yang, S.J., 2015. The Impact of Diversification on Performance in the Insurance Industry: The Roles of Globalisation, Financial Reforms and Global Crisis. The Geneva Papers on Risk and Insurance-Issues and Practice, 40(4), pp.585-631.