IKEA

IKEA was established by Småland entrepreneur, Ingvar Kamprad in the 1940s (IKEA 2007). The original IKEA concept was based on providing a large range of quality, well designed, functional home furnishing products at the lowest price possible so that as many people as possible can afford them.

Kamprad started advertising in local newspapers in the late 1940s and soon became too busy to make house calls (IKEA 2007). As a result, he produced a mail order catalogue which he had delivered via the local milk round delivery. This was the beginning of the free annual IKEA catalogue which today, is produced in 27 languages for 34 countries / territories throughout the world and delivered to more than 100 million homes, free of charge. Interestingly, the catalogue is still an integral part of pulling customers and consistent with modern push technology although society has moved significantly towards post modern pull technology in new communication and media and indicates that we still continue to use old and new media together.

The first IKEA store outside of Sweden opened in 1963 (IKEA 2007). The opening was such a success that it led to the idea of opening up the warehouse and allowing customers to serve themselves. Another important development of the IKEA concept demonstrating IKEA’s flexible organisational culture. IKEA customers are actively involved in the shopping experience, choosing, collecting, transporting and assembling the IKEA products. Flat packaging resulted in reduced transport costs which also meant lower prices for consumers. According to IKEA of Sweden (1996), IKEA shoppers are pro-sumers – half producers and half consumers. This is consistent with Foucault’s ‘technologies of power relations’ discussed in lectures where the consumer becomes part of production. Knowledgeable co-workers are available to provide advice and support if needed, but the concept of ‘you do your part, we do ours, and together we save money’, relies on very limited sales support and service. The industrial economy was based on a value chain from manufacturers to retailers whereas the value chain in the new information economy includes positions related to information technologies such as designers and operators (Introduction to the Network Society 2007).

IKEA were also very quick to establish a presence on the Internet in 1997, with their history timeline on their website stating ‘1997 - IKEA opens in a place where no one lives – the Internet’. Their website today is a global portal which provides information about the IKEA concept and franchising and provides links to individual sites providing local information.

IKEA founder Ingvar Kamprad is quoted in a 1993 Annual Report stating ‘if retailers are to succeed in an overseas market, they must not only master the traditional skills of market segment cultural and economic traditions of the host country’, (Ikea of Sweden 2006). Today, IKEA has more than 235 stores in more than 30 countries and more than 110,000 co-workers.

IKEA has developed its own global distribution network with suppliers usually located in low-cost nations, with low proximity to raw-materials and reliable access to distribution channels. The products produced are standardised for the global market (Ikea of Sweden 1996). Although the strategy to standardise products does consider cultural sensitivities, IKEA’s marketing manager believes that consumer tastes are merging globally.

Although IKEA is made up of many organisations throughout the world which employ co-workers to perform a specific purpose and function and manufacturers are subcontracted throughout the world for supplies, some functions such as such as research and development are centralised in Sweden. Other functions such as human resources, finance and store construction also span the whole company regardless of organisational boundaries. Other support functions including, Information Technology, Communication, and IKEA Indirect Materials and Service also provide service to IKEA stores globally.

For example:

· Their Communication Division is responsible for producing the catalogue which is distributed to 250 million homes throughout the world. The Communication Division produces all on-line and hard copy publicity and information that reaches their consumers and co-workers world-wide. Employment in Communication is only available in Älmhult, Sweden.

· The IKEA Indirect Materials and Service section purchases all of the materials that the IKEA co-workers need to perform their work. This includes uniforms, pens and forklift trucks. With the sheer size of IKEA world-wide, this provides them with maximum buying power to purchase goods at low prices. This service is located in Sweden, Germany, France and the USA.

· IT is located in Sweden, Germany, France, USA and Singapore.

Since all of these functions are carried out in a similar way, co-workers can easily transfer their experience from one part of IKEA to another providing them with personal and professional developmental opportunities (IKEA 2007).

The flexibility of modern business is a reflection of the flexible nature of new networks (Introduction to the Network Society 2007). In the 19th century, the structure of business was generally vertical with its reliance on mass production systems and mass distribution networks. However new technologies in the new economy have altered business structures to become flexible and horizontal with production and consumption relying on the new global and digital networks (Introduction to the Network Society 2007). Organisations can redeploy their workers from one market to another globally, since the global economy allows flexible and arbitrary linkage between nodes.

Commentary – what do others say

Dr Les Pang uses IKEA as an example of a flat and boundaryless organisational structure (Pang, L n.d.) Pang claims that problems with traditional organisational structures include lack of flexibility to adapt to a rapidly changing world, poor communication of ideas, difficulty for customers and suppliers to navigate the organisation, turf battles and poor responses to customer needs. By reducing the layers in an organisation, optimal efficiency and effectiveness are achieved (Pang, L n.d.).

Pang highlights IKEA’s close working relationship with its suppliers which has brought production to world class standards and acknowledges their ability to refine the role of the customer to choose, select, transport and assemble their products which has resulted in lower prices for customers and global growth for IKEA (Pang, L n.d).