IKEA's Approach to Innovation - Essay Sample

Introduction

Ingvar Kampard formed IKEA in 1943. Kampard sought to avail families with low-cost furniture designs through the convenience of catalog sales. During its inception, IKEA's business model was of vertical integration that united various suppliers under it, coordinating long-run production schedules, and controlling distribution. In 1964, the model expanded with the introduction of the company's first warehouse store. The expansion eliminated an entire step in product distribution by enabling customers to pick-up furniture form the warehouse.

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IKEA seeks to create a better everyday life for the majority of people. In particular, it produces a wide variety of well-designed home furnishing items at low prices so that a majority of people can afford to purchase them. Hence, their primary customers include farmers, college students, young professionals, and on-the-go families. In its marketing strategy, it acknowledged the widening definition of family to encompass multiracial, multigenerational, and single-sex family arrangements. Therefore, in its furniture designs, IKEA targets all types of customers regardless of their race, sexual orientation, gender, and level of income. These customers have diverse needs, tastes and preferences in furniture designs that vary between regions and cultures. For example, urban apartment dwellers prefer specially designed storage units. Similarly, Americans' wardrobe needs include deeper drawers. Likewise, most customers want furniture that is frugal and practical; items that fit their style and cultural values of home.

The success of IKEA as a global furniture manufacturer lies in meeting these diverse customer needs. IKEA first takes the initiative of understanding the needs to create furniture items that satisfy these needs. In particular, through its Loyalty Program and Home Visits Program, IKEA researchers gain entrance to consumer homes to establish individual and community needs for furniture designs better. The practical furniture items that IKEA manufactures for different types of customers evidence the results of such efforts. For instance, Americans' wardrobe needs are satisfied by the inclusion of deeper wardrobes.

Nevertheless, the journey to reach where it is today took IKEA through a process of innovations as it sought to strengthen its ties with consumer families and encourage repeat business as customers shifted from one phase of life into another. In the beginning, IKEA used imaginative distribution and delivery options. For example, in 1955, its employee discovered the company's "flat-box" approach while loading a table into a client's vehicle. He simply removed the table's legs for it to fit into the automobile, which leads to the vision of delivering furniture unassembled. This innovation created IKEA's formula of "knock-down" furniture, flat-box storage and shipping, and assembly by customers equipped with IKEA-developed assembly tools and visual instructions. Another innovation that IKEA pioneered was the distribution created through unique corporate-supplier relationships. These relationships with other Scandinavian manufacturers provided assurances of long production runs, which enabled it to maintain its competitive edge during its earliest days. Notably, IKEA still uses these process innovations today. For example, aware of the significance of supplier relationships, it maintains a constant vigilance in working with suppliers to find ways to reduce costs while maintaining high-quality standards.

IKEA's Organizational Design Elements

IKEA has an integrated or matrix organizational structure. In such a structure, the entity groups its products or product markets internally as it shares power among two or more dimensions. A matrix structure entails attaining a functional and product focus. In IKEA, multiple lines of authority are evident within the various subsidiaries around the globe. Similarly, the entity places employees in teams to work on specified tasks. IKEA's matrix structure aligns with its strategy that employs flexible replication as a means to achieve internationalization. In particular, the company implements a standardized concept in all the markets it enters despite the cultural diversities.

The primary strength of a matrix organizational structure is that it creates lateral communication channels while reducing the need for vertical communication by creating task teams focused on specific projects. Likewise, it enhances communication among different teams and departments by forcing organizational members to maintain close contact to attain project success. Such increased contact among teams within the company enables information to penetrate the organization, which improves decision-making and response time. Hence, a company can adapt to a changing situation, such as customer needs, quickly and flexible. However, this structure's weakness lies in the interpersonal skills dependency. In particular, the matrix structure creates a multidisciplinary maze in which organizational members must be skilled in interpersonal skills and be aware of orientation differences. IKEA has managed to overcome this weakness by training of co-workers in the IKEA Way.

Further, of the four interorganizational perspectives, I think IKEA is taking collaboration with other organizations to compensate for resource dependencies and uncertainty. This can be described by the resource dependency theory that is based on the assumption that the most essential goal of a company is to survive, and that survival needs different types of resources that cannot all be generated internally. Hence, organizations depend on the external environment for these resources. A major strength of IKEA lies within the corporate-supplier relationships it forms with other manufacturers. In particular, it collaborates with 1,300 suppliers in 53 countries. Notably, its managers recognize that the company can provide affordable furniture without necessarily owning the factories. In addition, aware of the significance of supplier relationships, IKEA maintains constant vigilance in working with the suppliers to establish ways to cut costs while maintaining the required quality standards. Evidently, the interorganizational collaboration with suppliers has served IKEA well as it continues to have a competitive edge in the furniture industry both in Scandinavia and globally.

IKEA's Culture

Culture is a complex issue that encompasses all of a company's shared values, beliefs, attitudes, behaviors, and assumptions. It is wide, to include all elements of the entity's internal and external relationships. In addition, it is deep, in that it guides employees' actions even to the extent that they are not aware it is influencing them. The four types of organizational culture are a clan, adhocracy, market, and hierarchy.

Of these culture types, IKEA has a clan culture. In this culture, people are friendly and have a lot in common. In particular, it is similar to a large family. The company is held together by tradition and loyalty. Such a culture values employee involvement, teamwork, consensus, and a humane working environment. Likewise, companies with a clan culture define success within the framework of meeting customer needs. Further, a clan culture emphasizes flexibility and discretion. Irrefutably, IKEA's cultural purpose is about creating a better everyday life for the majority of people. The primary terms that define this culture are informal, humbleness, simplicity, down to earth, honesty, cost-conscious, enthusiasm, and common sense. Attaining this cultural purpose means that employees have direct personal experience with the customers' needs. Similarly, IKEA is like a large family where various strategies link management and co-workers at all levels to their customers. For example, the Antibureaucracy week places managers on stock room and selling floor, answering customer queries, tending registers, or unloading merchandise from trucks. Notably, this fosters a friendly environment and teamwork within the company. In addition, Kampard takes on the parental figure within IKEA as he nurtured the idea of the IKEA family evidenced by referring to employees as co-workers.

Notably, a clan culture has many advantages. For example, the emphasis of flexibility promotes innovation and creativity as evidenced in IKEA. Similarly, such a culture creates a positive environment for employees to work since they feel valued and appreciated. Likewise, by fostering teamwork, collaboration, and cohesion, a clan culture ensures that all organizational members have unity in the direction towards the attainment of the company's vision. For instance, it is now engraved in all IKEA's employees that its mission is to offer a broad array of home furnishing items of good design at low prices so that the majority of people can afford to purchase them. Notwithstanding, the primary weakness of the clan culture is that employees can become overly focused on maintaining group harmony and fail to challenge the status quo and redundant ways of doing things.

IKEA's Challenges

IKEA's current external environment consists of political, economic, social, technological, and legal factors that affect its performance. The key players in this environment include customers, suppliers, competitors, and regulators.

Just like any other company, IKEA faces numerous challenges posed by its external environment. In particular, with 1,300 suppliers in 53 countries, its integrated design, production, and distribution face many problems. First, the high numbers of suppliers weaken long production runs and disperse supply lines. Moreover, suppliers have different ways of working. Second, IKEA's global reach means that domestic needs differ from one region to another or that some areas like Eastern Europe have few suppliers capable of high-quality, low-cost production. The third challenge that IKEA faces is high competition from other furniture manufacturers. Moreover, other furniture start-ups continue to learn from IKEA, which creates new competition in the furniture industry. Finally, the company also faces the rise of imitators in providing low-cost, quality home furnishings. Such imitators tarnish IKEA's brand image by manufacturing poor quality furniture that leads critics to believe IKEA has abandoned its maverick techniques, relinquished its innovative edge and abandoned its strict core values.

Looking at IKEA's external environment, a flat organizational structure would be ideal. Moreover, this environment is dynamic with changing customer needs, advancement in technology, and unstable political and economic situations. A flat organizational structure would provide a wide span of authority, low specialization, decentralization, and loose departmentalization within IKEA. In such a structure, the company can have multiple teams reporting to the Chief Executive Officer (CEO) and taking on projects based on the teams' capabilities and competencies, and the project's importance. For example, it can allow the formation of a team that specializes in making Billy's bookcase, one that understands the bookcase founder's (Billy) vision. In addition, a flat structure can support IKEA's culture of innovation as it allows flexibility within a company. Undeniably, this can be helpful to IKEA especially when navigating the fast-moving furniture industry. Likewise, it can empower workers to try new things and grow as professionals.