IKEAs Strategies - Case Study Example

Running head: Ingvar Kamprad Ingvar Kamprad, IKEA. Entrepreneurship Introduction Ingvar Kamprad, the founder and chairman of IKEA, a multinational organization providing furnishing services, is known to be one of the most ‘energetic entrepreneurs’ in the world (Edvardsson & Enquist, 2008). Stories about Kamprad indicate that his entrepreneurial skill is an inherent talent that he possessed; however, his hard work to nourish this talent that began in his childhood continued through his future years untiringly and has led strong foundation on which IKEA stands today. His ability to create and innovate something that could add value to others and himself through hard work and daring courage to take risks and face failures has made him one of the strongest entrepreneurs of all times. His simplicity, humility and honesty have kept him close to his people and customers. His humility can be seen in IKEA’s purpose of providing a better everyday life for the majority of the people. His strong trust in his employees and customers has provided a strong foundation to build the IKEA Empire. In addition to innovative thinking, Kamprad also exercised leadership style and practices that were in line with his strategic vision. Kamprad may be regarded as an undeterred business man and always embraced challenges as if he had anticipated them. In IKEA, continuous learning and learning culture were regarded as the most important requirements for carrying out sustainable and innovative businesses. One of the key elements of business management is its strategies. IKEA’s strategies were unique and in line with the vision that Kamprad had. Kamprad’s emergence as a famous and successful entrepreneur can be regarded as a legacy that he created since childhood, and carried forward with continually enhancing the business and profits. Even as a child and as a beginner, Kamprad focused on making profits with minimum investment and costs, which was later incorporated into the big furniture business that he started. With low-cost as the strategy, Kamprad was able to bring innovation into managing business, product designing, and achieve customer satisfaction. IKEA’s lean production philosophy is meant for reducing cost, providing well-designed furniture, and adopting environmental-friendly methods. Other cost-saving strategies included low cost logistics, large simple outlets, simple marketing and advertising methods and providing a self service assembling system. These strategies helped in significant price reduction. Moreover, standardized packages and maximum stacking for minimum storage helped in saving storage space for IKEA (Edvardsson & Enquist, 2008). Another important business strategy of IKEA was the supplier quality, which was based on criteria such as good quality supply of raw materials with low prices. Kamprad believed in establishing long-term, profitable and productive relationships with the suppliers, which in turn helped in matching IKEA’s capacities with production complexity. Thirdly, at IKEA, customer expectations decided the product design and delivery. Absolute customer focus was the key to sustainable business for Kamprad. Secondly, leadership exhibited by Ingvar Kamprad is considered as one of the few notable exceptions that helped IKEA to continue to step into leadership role after becoming market leaders, which otherwise is not the case. Kamprad exemplified his visionary leadership by anticipating as well as continually standing up to all sorts of challenges. Kamprad’s success stories narrate about his attitude and behavior that reflected in all his actions; he was successful in setting the agenda to his employees as well as competitors, thereby, defined the path that he wanted others to follow. Kamprad always felt pride in his achievements, but that did not stop him from growing further. His sheer focus on cost reduction and innovation helped in utilizing resources in the best possible manner. Kamprad is said to have never confronted his competitors’ boycott and other undesired challenges, but emerged with innovative ways of further improving his business, thereby made his stand stronger. His beliefs were instilled in IKEA as values that further helped in creation of the IKEA industry. Kamprad strongly believed that implementation of low-cost as a strategy would require commitment and involvement from every employee; therefore, inculcating innovation as one of the elements of corporate culture became a key practice. This practice requires great deal of involvement with customers and employees, which Kamprad is known for. Edvardsson and Enquist emphasize the importance of leadership in harnessing the innovative talent that is strategically matched to the business requirements by stating, ‘companies need to understand what drives customer value, and then focus their leadership on these drivers with a view to differentiating themselves from other companies in their particular industry’ (2008; p.98). Thirdly, in addition to being an entrepreneur himself, Ingvar Kamprad has built an entrepreneurial culture within IKEA, which provided every employee an opportunity to autonomously innovate new products, designs and ideas of running the business. Cultivation of such culture stems from effective and visionary leadership, as possessed by Kamprad. His constant involvement with employees and customers not only strengthened his relationship with stakeholders, but also reinforced his efforts in continuously looking for opportunities to expand and improve the business. While this helped in identifying business opportunities in external environment, his management and leadership styles gave sufficient room for innovation and platform for discovery of opportunities within, or even by chance. IKEA’s corporate culture can be concisely referred to as focused on continuous improvement, flexible, innovative and customer-driven. Through these practices, Kamprad continuously sought for new combinations of resources that his employees possessed in the form of knowledge, talent and skills; and his customers possessed in the form of expectations, affordability and satisfaction. IKEA’s objectives were not only limited to customer satisfaction and profits through low costs, but also extended to meet environmental and societal needs, which Nattrass and Altomare (1999) referred to as the ‘Natural Step framework.’ Overall, IKEA’s purpose is reflected in its vision that states, ‘IKEA’s purpose is to provide a better everyday life for the majority of people’ (Nattrass & Altomare, 1999; p.48). IKEA’s culture is driven by its values that include simplicity, humility and honesty in internal relations, among co-workers, and in external relations with suppliers and customers; risk-taking approach; daring to be different, questioning assumptions and asking ‘why’; and daring to take responsibility. Kamprad strongly believes in taking up fearless endeavors and being fearless in life; this aspect of his nature clearly reflects in his entrepreneurial organization. IKEA has a flat hierarchal structure, with minimum vertical levels. Kamprad focused on creating corporate culture with low cost and high efficiency along with high quality and best service. His strategic decisions were extremely simple and could be understood by one and all. Sweet and Nilsson (2003) assert that IKEA’s success is attributable to its strong entrepreneur who chose to drive a different business model, and sustain competitive advantage by uniqueness that was unmatchable. Kamprad’s visionary approach helped in creating a value chain structure around IKEA’s skills (Rosenhauer, 2008). Conclusions and learning In conclusion, the most important and critical elements of any business include its strategies, leadership and culture. With reference to Kamprad, and to summarize Kamprad’s journey in the entrepreneurial role, the key characteristics visible to others include honesty, trust, humility, courage, commitment and a desire to continuously improve. His successful entrepreneurship teaches us that these specific personality traits along with self motivation to achieve one’s ambition are extremely important for one to become an entrepreneur. Business management essentially revolves around products/services, people and leadership, with each of these factors mutually interdependent. Strategic alignment of processes and leadership practices to the organizational goals is necessary to achieve the goals. Having a wide vision helps in guiding the leaders through the path of achieving organizational goals. Business management also entails managing change because change cannot be avoided in any business and under any situation. Leaders need to realize this and embrace changes by being prepared for the change; having courage to face the challenges that accompany change; and by guiding others through the change while ensuring organization is not deviating from its vision. Sustaining performance and market value is the most challenging task for organizations in contemporary business world, for which organizational strategies need to be strong and unique; however, it is easy for competitors to imitate strategies that worked for one organization, thereby making those strategies less competitive; hence continuous improvement and innovation is extremely important for any organization to sustain its competitiveness and remain as the business leader. References Edvardsson, B and Enquist, B. (2008). Values-based Service for Sustainable Business: Lessons from IKEA. Oxon: Taylor & Francis. Nattrass, B.F and Altomare, M. (1999). The natural step for business: wealth, ecology and the evolutionary corporation. 2nd Ed. Canada: New Society Publishers. Rosenhauer, S. (2008). “Profit is a Wonderful Word”: IKEA’s Strategy Behind the Profit. Germany: GRIN Verlag. Read More