Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
ECU 10201793 | Chamara Sampath Amarasinghe
1
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Executive Summary The key intention of this report is to conduct a strategic analysis of IKEA’s business strategy, organisational organisational structure, organisational leadership style, the founders’ leadership style they
follow still and to identify the areas of the organisation where they need to reorganise. As a market leader in all around the world IKEAs’ market is outsized. Due to that as identified in
the first part of the thesis the external and internal environment is covered by varies forces that makes IKEAs’ business more complex.
This report has identified the current strategy of IKEA by using the appropriate theories and models where I have consider about the data available in their web site also. As IKEA is a very large company which deals with more than 410 million shoppers per year strategic area that IKEA should improve in order to overcome the challenges they face in the market currently have been identify using the SWOT and the PESTEL analysis of the previous report. Being a company which manufacturer and retail furniture in a large scale, IKEA is directly affect to the world reduction of the forest. Due to these reasons to make the brand image positive in the customers mind, as a company IKEA has started number of projects to protect the environment such as reduce the gas emission, using plastic and etc to make furniture with wood and using public transport whenever they can. As a company that has a unique concept, well trained employees, a challenging pricing strategy, when analysing and identifying t he IKEAs’ strategy I could identify that all the factors for the growth of the company is in a positive side. Nowadays due to the dynamic environment strategic management plays a vital role in the successfully operating organizations. Further it plays an essential part of the organizations to achieve their goal successfully. So after identifying and analysing the organisational structure, system, business strategy and the leadership style, I have presented some recommendations for the company to improve its it s operations further.
ECU 10201793 | Chamara Sampath Amarasinghe
2
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Table of Contents 1.0
Introduction ............................................................................................................... 5
2.0
Current strategies of IKEA ........................................................................................... 6
2.1
Does the organisation plan to grow? ....................................................................... 6
2.2
What products and services does it plan to produce? ............................................. 6
2.3
What customer and geographic markets does it plan to service? ............................ 6
2.4
What generic strategy does it plan to follow to position itself uniquely against
competitors? ..................................................................................................................... 6 2.5 3.0
What position does it plan to hold in the future? .................................................... 6 Issues of strategy implementation in IKEA .................................................................. 7
3.1
Appropriateness of the structure and systems in IKEA ............................................ 7
3.1.1
Organisational structure .................................................................................. 7
3.1.2
Organisational systems .................................................................................... 7
3.2
Appropriateness of the leadership style in IKEA ...................................................... 7
3.2.1
Levels of leadership ......................................................................................... 8
3.2.2
The qualities of successful leadership .............................................................. 8
3.2.3
Ingvar Kamprad’s leadership style (Appendix 08) ............................................. 8
4.0
Key success factors ................................................................................................... 10
5.0
Recommendation ..................................................................................................... 11
5.1
The positioning of IKEA ......................................................................................... 11
5.2
Strategic implementation ...................................................................................... 11
5.3
Change the organisational structure ..................................................................... 11
5.4
The winning wheel framework (Appendix 09) ....................................................... 12
5.5
Diversification ....................................................................................................... 12
ECU 10201793 | Chamara Sampath Amarasinghe
3
Assignment 02 : IKEA 5.6
STRATEGY IDENTIFICATION AND IMPLEMENTATION
The paradigm shift ................................................................................................ 12
6.0
Conclusion ................................................................................................................ 13
7.0
References ............................................................................................................... 14
8.0
Appendices ............................................................................................................... 15
ECU 10201793 | Chamara Sampath Amarasinghe
4
Assignment 02 : IKEA
1.0
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Introduction
The main purposes of this assignment is to analyse and identify the IKEA’ s current strategic choices, identify the barriers and issues for implementing the strategies and recommending some strategic initiatives and areas for improving the strategy implementation for IKEA. This report is based on the information about IKEA (Appendix 01) in Helsingborg, Sweden in 2005. According to the information in the case study, IKEA has to face some critical issues such as re-entering into the Japanese market, intensity of competition, keeping the core founding values alive and the risk of drifting into the stuck in the middle situation etc. As a management consultant, I have previously identified the strength, weaknesses, opportunities and threats for IKEA (Appendix 02) by conducting a strategic analysis of IKEA’s internal and external environment. With the use of that SWOT analysis, in this report some new strategic initiatives will be introduced for IKEA to improve (Appendix 03), after identifying the present strategy and the issues for implementing that strategy. “Business strategy is the link between environmental demands (including customers’ desire), organizational capabilities and key stakeholders desires.”(Hubbard, 2008)
Where are we now, where do we want to be, how do we get there and how do we ensure our arrival are the main problems in selecting the strategy. In the first (previous) report the answer for the first problem was provided by conducting a situational analysis for IKEA and generating a SWOT. In this report, the other areas also will be covered with the use of models and frameworks such as Ansoff’s matrix, value chain, strategic clock etc and new
strategic options will be recommended for IKEA as the final outcome.
ECU 10201793 | Chamara Sampath Amarasinghe
5
Assignment 02 : IKEA
2.0
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Current strategies of IKEA
Strategy is a match between the organisation and its environment. To identify the current strategies of IKEA, the following five questions should be taken into account.
2.1
Does the organisation plan to grow?
Yes, IKEA is implementing almost all the growth strategies of Ansoff (Appendix 05) and their vision and mission facilitate the growth (Appendix 01).
2.2
What products and services does it plan to produce?
Products: IKEA produce quality furniture at a lower cost. Services: IKEA provides retailing service for furniture plus other household products. The main objective is to provide an unmatchable service and product quality at an unmatchable price. (Appendix 01)
2.3
What customer and geographic markets does it plan to service?
IKEA is a global organisation and it targets customers in every geographical market in all over the world (Appendix 01). The type of their presence varies from market to another. In one market they may operate their own outlets (e.g.: in US) whereas in another they may appoint agents or they just export (e.g.: in Sri Lanka Don Karolis & Sons Co.).
2.4
What generic strategy does it plan to follow to position itself uniquely against competitors?
IKEA was following the “cost leadership” as its competitive strategy sometimes back, but to
position itself uniquely against the competition, a hybrid strategy is followed at present (Appendix 04). IKEA is trying to achieve the “best cost provider” status by lowering the costs
through value leveraging and increasing the value (Appendix 06) through differentiation, simultaneously.
2.5
What position does it plan to hold in the future?
IKEA is trying to achieve the “best cost provider” or the “value for money” status with the
use of its hybrid competitive strategy. (Appendix 12)
ECU 10201793 | Chamara Sampath Amarasinghe
6
Assignment 02 : IKEA
3.0
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Issues of strategy implementation in IKEA
To identify the issues of strategy implementation in IKEA, the corporate culture should be taken in to account. The corporate culture of IKEA consists of the organisational structure, systems and the leadership styles.
3.1
Appropriateness of the structure and systems in IKEA
3.1.1 Organisational structure The organisational structure and systems play a vital role when it comes to successful strategy implementation. The structure of an organisation is the way that its operations and activities are arranged. Though it’s hard to determine whether the structure comes first or strategy comes first, according to Alfred Chandler structure follows strategy as changes in strategy lead to changes in structure. IKEA has a divisional or product based structure at present (Appendix 07). Though it’ll help to strategy implementation through efficiency, the effectiveness may be decreased due to the competition among divisions for the centralised resources. Since providing more resources for each department is unfeasible at the moment due to the cost reasons, the current organisational structure can be identified as a drawback for the strategy implementation in IKEA.
3.1.2 Organisational systems In most organisations the route causes for many problems are the system deficiencies. IKEA has to face the same situation as its control systems do not fit with its strategy. The IKEA strategy encourages innovation while the control system discourages innovation, as control and innovation are not mutually exclusive. Therefore the control system in IKEA is another drawback for strategy implementation.
3.2
Appropriateness of the leadership style in IKEA
"Leadership is the art of getting someone else to do something you want done because he wants to do it." (Eisenhower) The leadership can be the path to success for an organisation whereas it can be the path to failure for another. There’s no doubt that the leadership of Ingvar Kamprad was the key
success factor of IKEA, but it should be taken into account that the style of the leadership is ECU 10201793 | Chamara Sampath Amarasinghe
7
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
subjected to change when the strategy is changed, to facilitate a successful implementation of the strategy. The main leadership activities are direct action, managing people and managing information, but there’s something special in IKEA, which is the leading by example. As an
example, at IKEA frugality is not limited to the organisation’s red tape. The top management including the CEO is practising it in the real life to be examples for lower level staff members to follow. “It helps that frugality is as deeply ingrained in the corporate DNA as the obsession with design. Managers fly economy, even top brass.”
3.2.1 Levels of leadership The CEO, board of directors, top management team and significant managers are the four levels of leadership in IKEA. According to Collins, there are five levels of leadership in an organisation and the contribution of each level is critical for the successful implementation of the strategy. (Appendix 10)
3.2.2 The qualities of successful leadership
Having a strongly held vision
Communicating that vision
Converting that vision into reality
3.2.3 Ingvar Kamprad’s leadership style (Appendix 08)
Leadership by example
Highly task oriented
He considers wasting resources as a moral sin
More towards democratic leadership
Always goes for the economy class in flights
Writes both sides of the paper
ECU 10201793 | Chamara Sampath Amarasinghe
8
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
He doesn’t have his own office room and he always stands out among other corporate
executives
Always think from both the employee and customer perspective before spending money
He always tries to go for the best deal possible when purchasing products and services for the business as well as for his personal use
He also abided to the rules and regulations of his own company
His vision is one with no limits and he always dreams for more
ECU 10201793 | Chamara Sampath Amarasinghe
9
Assignment 02 : IKEA
4.0
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Key success factors
Continues development of contemporary new designs
Continuous innovation is a key success factor for IKEA because innovation plays a vital role when it comes to differentiation as well as cost reduction. Therefore superior innovation is the number one key success factor for IKEA.
The hybrid strategy
IKEA’s hybrid strategy is the second important key to success. Though there’s a risk of
drifting into the stuck in the middle situation, successful implementation of the hybrid strategy will allow IKEA to minimise the threats of new entrants as well as the threat of other rivals in the industry.
Continuous reduction in costs and prices
IKEA’s value leveraging technique is another key success factor. Lowering prices across its
entire offering by an average of 2% - 3% each year, while having the best designers and the latest technology, is something that their competitors can’t c opy easily.
Flat packed furniture
Though many people criticize this as a weakness, still it’s one of the main key success factors
of IKEA. Because, though anyone can design flat packed furniture nobody can do it like IKEA. Since IKEA is having the best designers with them, they can design that furniture in a user friendly way than any manufacturer.
In store architecture
The IKEA store architecture is another key success factor for IKEA as it helps them to double their sales. The ambience of the outlets also helps IKEA to add value to their products and differentiate them from the competitors.
Technology
IKEA use the technology to the maximum level to minimise the cost of their products. Though having latest technology can be copied by the competitors, it’ll be a key success
factor as it helps to slash the costs of production.
ECU 10201793 | Chamara Sampath Amarasinghe
10
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
5.0
Recommendation
5.1
The positioning of IKEA
The current positioning of IKEA is the low price furniture, but since its generic strategy is to achieve the best cost provider status through the hybrid strategy, the positioning should be changed from low price furniture to value for money furniture.
5.2
Strategic implementation
With the use of triple loop learning model (Appendix 13) IKEA can adapt the recipe, Strategy development, strategy implementation and corporate performance by identifying the preferences of its customers, level of motivation of employees, financial stability of the organisation and the effectiveness and efficiency i n operations. Since the timber is the only major weakness that IKEA has, it’ll be recommended to make
use of its biggest strength, the creative designing team to overcome the issue. It’ll be recommended to provide the customers vid eo recorded instructions with the
product and upload those instructions to social networking sites. Through that IKEA can reduce the cost of advertising, printing and can increase the customer satisfaction by identifying and satisfying their needs before the competitors. As the threats in the ecological environment have the potential of becoming serious issues, it is advisable to use the strength of the designing team to come up with suitable, feasible and acceptable solutions beforehand. It’ll be recommended to have backup plans if the company drifted into the suck in the middle situation due to the hybrid strategy. But, do not try to change the strategy as it’s one of the major sources of IKEA’s competitive advantages.
5.3
Change the organisational structure
The current divisional structure is a drawback for IKEA when looking at its disadvantages. Therefore it’s recommended to implement the network structure instead of divisional structure. Mckinsey’s 7s model (Appendix 11) will be useful when changing the
organisational structure, because all the other 6s in Mckinsey’s 7s model should be changed along with the structure.
ECU 10201793 | Chamara Sampath Amarasinghe
11
Assignment 02 : IKEA
5.4
STRATEGY IDENTIFICATION AND IMPLEMENTATION
The winning wheel framework (Appendix 09)
When it comes to strategy implementation, IKEA should follow the elements in the winning wheel framework such as balanced everything, adapt rapidly etc for a better and productive implementation of the strategy.
5.5
Diversification
IKEA can diversified through backward integration and try to produce timber for themselves. It’ll help them to reduce their raw material costs further as well as to get rid of the bottle
neck in timber supply.
5.6
The paradigm shift
If the loop 2 (Appendix 13) which is the strategy development is unsatisfactory, IKEA will have to abandon the old recipe and adopt a new one. This paradigm shift should be based on the cultural web elements (Appendix 14). The new paradigm will be based on the taken for granted assumptions of IKEA.
ECU 10201793 | Chamara Sampath Amarasinghe
12
Assignment 02 : IKEA
6.0
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Conclusion
The main purposes of this assignment is to analyse and identify the IKEA’s current strat egic
choices, identify the barriers and issues for implementing the strategies and recommending some strategic initiatives and areas for improving the strategy implementation for IKEA. To identify the current strategy the five questions were taken into account. After identifying the current strategy, the issues for implementation of the strategy were identified through analysing the IKEA’s organisational structure and leadership styles. Some recommendations
were proposed after identifying the key success factors for IKEA, which will be useful for improving the IKEA’s strategy implementation.
ECU 10201793 | Chamara Sampath Amarasinghe
13
Assignment 02 : IKEA
7.0 (n.d.).
STRATEGY IDENTIFICATION AND IMPLEMENTATION
References Retrieved
September
26,
2010,
from
Profex:
http://www.profex.co.uk/images/pdf%20files/Foundation/44BOP04Specimen.pdf About
us.
(n.d.).
Retrieved
08
07,
2010,
from
www.ikea.com:
http://www.ikea.com/aboutus/ Eisenhower, D. D. (n.d.). What is leadership? Retrieved September 25, 2010, from Mind Tools: http://www.mindtools.com/pages/article/newLDR_41.htm Hubbard, G., Rice,J., & Beamish, P. (2008). Strategic Management: Thinking, Analysis, Action (3rd ed.). NSW: Perason Education Australia. Welcome to The Times 100 . (n.d.). Retrieved 08 11, 2010, from www.thetimes100.co.uk:
http://www.thetimes100.co.uk/case-study--swot-analysis-sustainable-business-planning-110-368-2.php Suuronen, H. Z. (n.d.). Leader of the future. Retrieved September 27, 2010, from Henric Suuronen: http://www.henricsuuronen.com/portfolio/leaderfuture.pdf Zakomurnaya, E. (2007, April 03). Ingvar Kamprad, Founder, IKEA. Retrieved September 27, 2010, from Good 2 Work: http://www.good2work.com/article/3391
ECU 10201793 | Chamara Sampath Amarasinghe
14
Assignment 02 : IKEA
8.0
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendices
Appendix 01 – About IKEA IKEA is an internationally known home furnishing retailer. It has grown rapidly since it was founded in 1943. Today it is the world's largest furniture retailer, recognised for its Scandinavian style. The majority of IKEA's furniture is flat-pack, ready to be assembled by the consumer. This allows a reduction in costs and packaging. IKEA carries a range of 9,500 products, including home furniture and accessories. This wide range is available in all IKEA stores and customers can order much of the range online through IKEA’s website. There are
18 stores in the UK to date, the first of which opened in Warrington in 1987. (Welcome to The Times 100) Vision: The IKEA vision is to create a better eve ryday life for the many people. (About us) Mission: Offering 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. (About us)
ECU 10201793 | Chamara Sampath Amarasinghe
15
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 02 – SWOT Analysis Strengths
The IKEA culture itself is strength for IKEA as it supports the IKEA’s competitive position.
The culture and the method of packing the furniture (flat packed) are huge strengths which helps the company to reduce their operational costs (value leveraging).
The IKEA brand itself is strength for IKEA. It’s a world renowned brand for low price quality furniture. “Awareness of our brand is much bigger than the size of our company” – CEO, Anders Dahlvig.
When IKEA was leveraging value, all the costs were reduced except the designing cost. IKEA increased the cost of designing rather than reducing it. Today IKEA has the best designing team; they are the dominant factor of IKEA’s success.
Successfully implementing the hybrid strategy without drifting into a stuck in the middle situation has created an unique strength for IKEA which can’t be easily imitated by the
competitors
IKEA’s price reduction strategy is strength for the company as the competitors ca nnot beat the price of IKEA since it’s slashing off 2 – 3 percent from overall prices in every
year.
Weaknesses
The main row material, timber is the bottle neck in IKEA’s operations. Even the high
timber prices are also a huge issue for IKEA.
Niche market – the minimalist design doesn’t appeal to everyone.
Product and style selection is limited.
Opportunities
Low inflation rate will be an opportunity for IKEA as it’ll maintain constant prices for raw
materials.
Holding hands with EU will create opportunities for IKEA, as it allows the company to buy raw materials and labour from members of EU without any extra tax.
ECU 10201793 | Chamara Sampath Amarasinghe
16
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Developments in machinery will be an opportunity as the improved machinery can increase the productivity and reduce the unnecessary costs.
Since IKEA is having its own web site where the customers can do online shopping, the preferences over online shopping activities will be an opportunity. It will also help IKEA to reduce the cost of outlet maintenance.
Emergence of social networking sites such as face book and YouTube will create opportunities, as it’ll help IKEA to cut down its adv ertising expenditure.
Low level of bargaining power of customers and suppliers will be an opportunity as IKEA can retain them at a lesser cost.
Threats
High taxation can create threats for IKEA as it can increases the overall cost which conversely affect the furniture prices.
Preferences over paperless processes can create a threat for IKEA, as the company is giving the catalogues and furniture building instructions i n printed form.
Deforestation will be a huge threat for IKEA as its main source of raw materials is timber.
Higher level of industry rivalry can be a threat for IKEA as they might have to sacrifice their profit margins to beat the competition.
ECU 10201793 | Chamara Sampath Amarasinghe
17
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 03 – TOWS Matrix Figure 3.1
Internal factors
Weakness (W)
Strengths (S)
Hybrid strategy
Poor timber supply
Latest technology
Targeting only value conscious buyers
The brand name
External factors
Designing team
Limited options for customers
Opportunities (O)
Low inflation
Holding hands with EU
Emergence of social networking
Use the technology to cater the need of online shopping and social networking.
Use the relationship with the EU to increase the timber supply.
Use the designing team to develop new styles that consume lesser timber to face the deforestation.
Identify new materials that can replace the timber to overcome the poor timber supply and the deforestation issue.
Preferences over online shopping Threats (T)
High taxation Preferences over paperless processes
Deforestation
Increasing competition
ECU 10201793 | Chamara Sampath Amarasinghe
18
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 04 – Porter’s Generic Strategies Competitive Advantage
Low Cost
Differentiation
Cost Leadership
Differentiation
Broad
IKEA
Competitive
Best Cost Provider
Scope
Narrow
Differentiation Cost Focus
Focus
Figure 4.1 Cost Leadership:
The product will be manufactured at a cheaper cost than the competitors. Only one firm can be the lowest cost provider in an industry. Differentiation: The product is different from the competitors’ products. Product quality, brand name,
product innovation etc help organisations to differentiate themselves from the competition. Cost Focus:
Cost based competitive strategy for small or niche market. Differentiation Focus:
Differentiating the products for a small or a niche market. Best Cost:
Combination of low cost and differentiation, but not lowest cost or highest differentiation.
ECU 10201793 | Chamara Sampath Amarasinghe
19
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 05 – Ansoff’s Growth Matrix Market
Figure 5.1
New
Existing
Existing
Market
Market
Penetration
Development
Product
New
Product
Diversification
Development
Market Penetration:
IKEA is running sales promotions to penetrate the market and customers are pretty much attracted to those.
Many facilities are provided in IKEA stores to make shopping at IKEA a leisure activity and through that the company is expecting more sales from the customers.
Cross trading also allows IKEA to penetrate the market by getting more from the existing customers.
Market Development:
IKEA is continuously expanding to new geographical markets and there are 226 stores in Europe, Asia, Australia and US, 19 are set to open in next year; 2006.
Product Development:
IKEA is continuously developing new products cheaper and cheaper to cater the needs of their customers.
Diversification:
IKEA has diversified from the retailer status to the manufacturer (backward integration).
ECU 10201793 | Chamara Sampath Amarasinghe
20
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 06 – Value Chain Analysis
INFRASTRUCTURE HRM TECHNOLOGY DEVELOPMENT Profits
PROCUREMENT Inbound
Operations
Logistics
Outbound
Marketing
Logistics
& Sales
Services
Figure 6.1
Inbound logistics
Transportation
of
Timber
to
the
Storing them in the warehouse
Updating the inventories
factory
Storing timber
Marketing and sales
Quality check
Labelling and positioning the furniture in the outlets.
Operations
Pricing the furniture
Advertising and sales promotional
Machining timber
Assembling
Painting and polishing
Quality checking
Flat packing with installation
Services
instructions
Giving installation instructions
Changing and repairing faulted items
Handling
activities
Outbound logistics
Hybrid strategy
customer
complains
Transporting the flat packed furniture to outlets.
ECU 10201793 | Chamara Sampath Amarasinghe
21
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 07 – Structure and Systems IKEA’s organisational structure
Figure 7.1
IKEA Org. Size Maturity Stage Shakeout Stage
Declining Stage
Growth Stage
Introductory Stage
Org. Life Simple structure
Functional structure
Divisional structure
SBU structure
Matrix structure
IKEA is in the Shakeout stage, which is just before the maturity and it has a divisional or product base structure.
Figure 7.2 Source: http://stevenclark.com.au/wp-content/uploads/2008/06/d.gif
Advantages of divisional structure:
Clear managerial accountability for each division as a profit/investment unit
Encourages sensitivity to region/product-specific demands and opportunities
Efficiencies and economies of scale available f rom centralised functions
Co-ordination available from centralised strategic planning and control
ECU 10201793 | Chamara Sampath Amarasinghe
22
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Disadvantages of divisional structure:
Potential fragmentation of overall objectives and markets
Potential conflict between central management generalists and divisional specialists
Potential competition between divisions for centrally allocated resources
Units may not be large enough to support managerial overheads
(Profex)
Mintzberg’s six structural components
Figure 7.3
Systems Different types of systems in an organisation:
Operating systems
Information systems
Control systems
Financial & budgeting systems
Decision making systems
Reward systems ECU 10201793 | Chamara Sampath Amarasinghe
23
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 08 – Leadership style of Ingvar Kamprad Ingvar Kamprad uses the leading by example method. Kamprad has made it clear that continuous cost cutting in all business areas and activities is a top priority. To underline the importance of this activity and setting out an example for the staff Mr. Kamprad is known to always fly economy class and also despite his considerable wealth drive around in a very old Volvo car. As a result of this all IKEA managers are known to be very cots conscious which in turn cascades to all levels throughout the organization. By setting an example Kamprad is able to save millions in travel costs and unnecessary expenses. (Suuronen) Kamprad's vision has always been the driving force of the IKEA's success. He believes that the company exists not just to improve people's lives, but to improve the people themselves. The core of the IKEA idea is "democratic design": the trinity of attractive form, inexpensive production, and high function. That idea, combined with what Kamprad calls "the underdog's obsession with always doing the opposite of what others were doing," propelled him along a path of constant innovation and experimentation. "We are a concept company," used to say Ingvar Kamprad. IKEA's concept is articulated in a document drafted by him in 1976: "a furniture dealer's testament." It outlines a set of nine commandments including perpetuation of the "IKEA spirit" of enthusiasm, thrift, responsibility, humbleness, and simplicity; and "always asking why we are doing this or that . . . refusing to accept a pattern simply because it is well established." Striving for being as egalitarian as his brand, Kamprad insists on flying economy class, taking the subway to work, driving a 15-year-old Volvo and encouraging IKEA employees to write on both sides of a paper. He also asserts that his home is furnished mostly with IKEA products. Kamprad also has been known to visit IK EA for a cheap meal and to buy Christmas presents in the post-Christmas sales. Kamprad has been extremely shrewd in creating IKEA's organizational structure. In 1982 he established an intricate system of foundations, trusts, and holding companies to avoid high taxes and ensure that IKEA could not be broken up by family fighting. Rather than face the prospect of watching his life's work destroyed by a succession battle among his three sons, Kamprad split the company in three, restricting his children's ability to change his vision ECU 10201793 | Chamara Sampath Amarasinghe
24
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
fundamentally. He has repeatedly resisted pressure to take the company public, feeling that it would slow its decision-making processes that have allowed its phenomenal growth. (Zakomurnaya, 2007)
Concern for People
Participative
Team based
leadership style
leadership style
d a r p m a K r a v g n I Directive leadership style
Concern for Task
Figure 8.1
Appendix 09 – Winning Wheel Figure 9.1
ECU 10201793 | Chamara Sampath Amarasinghe
25
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 10 – Collins’ five levels of leadership Figure 10.1
Source: http://blogs.southworks.net/vfugante/files/2008/09/image16.png
Appendix 11 – Mckinsey’s 7s model
Figure 11.1
Source: http://www.valuebasedmanagement.net/methods_7S.html
ECU 10201793 | Chamara Sampath Amarasinghe
26
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 12 – Bowman’s Strategy Clock
IKEA
Figure 12.1
Source: http://www.marketingteacher.com/image/content/bowmans_lesson.gif
ECU 10201793 | Chamara Sampath Amarasinghe
27
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 13 – Triple Loop Learning
Paradigm
Development
(Recipe)
of strategy
Corporate Implementation
performance
Efficiency improvement
Single loop
Effectiveness improvement
Double loop
Overall Change (Change the recipe)
Triple loop
Figure 13.1
ECU 10201793 | Chamara Sampath Amarasinghe
28
Assignment 02 : IKEA
STRATEGY IDENTIFICATION AND IMPLEMENTATION
Appendix 14 – Cultural Web
Source: http://www.mindtools.com/media/Diagrams/CulturalWeb.gif
ECU 10201793 | Chamara Sampath Amarasinghe
29