Analysis of IKEA Organizational Culture Using Hofstedes Framework - Case Study Example

Analysis of IKEA Organizational Culture Using Hofstede’s Framework Introduction A culture defines the way in which an organization is framed to operate. It entails the values, goals, and processes that have an influence on the actions, decision-making, as well as the communication adopted by the organization. Organizational culture is a very important component that can determine the success of a business enterprise. The culture of an organization can be influenced by various factors ranging from the founders, the nature of business, the location, general patterns of behavior, and the personalities of the employees as well as the history of the company among other factors. Collectively, every employee is influenced by the culture of the organization hence there is a trend of behavior, habits, attitudes and collective thoughts that are evident within a given organization. For a successful business, the culture that is upheld should be aligned to the goals and the vision of the organization. An analysis of an organization’s culture reveals the potential position of an organization as well as its future. Irrespective of the size or the function of a company, there is an underlying organizational culture (McNamara, 2000). In this analysis, we shall consider the organizational culture that has been adopted by Ingvar Kamprad Elmtaryd Agunnaryd (IKEA) as it relates with the cultural orientation of the country of origin (Sweden). In addition, based on the company’s widespread stores across the world, we will analyse it in the context of Hofstede’s five-model framework. This analysis begins with developing a background of IKEA. IKEA’s Background Ingvar Kamprad Elmtaryd Agunnaryd (IKEA) is a company that has been named after its founder Ingvar Kamprad. It was established in Smaland, in Sweden in 1943. The company started from a very humble background where the founder began selling frames, clocks, pantyhose, pencils, wallets, and jewelry. Kamprad tried as much as possible to source some of the items that people wanted and ensured he got them at a price that was affordable to a majority of them. The company grew progressively from step to step under his management. He later diversified and began dealing with furniture; the company prides in being one of the largest furniture companies in the world today. Since the start of the company, Ingvar was focused on one aspect, which was provision of quality products at affordable rates. The growth of IKEA can be attributed to this character, its products have been known have a broad market especially among the middle class. IKEA’s Organizational Culture An organizational culture entails the beliefs, norms, values, and assumptions that are adopted by its workforce and influences how they carry on with their daily operations of the organization. Organizations have varied cultures depending on its size or the background among other factors. From the way the people in an organization conduct themselves, to the interactions with the customers and suppliers, it is possible to judge the culture of an organization. Through the culture, we are able to understand how an organization operates and how decision-making is done. The culture that has been embraced by IKEA to date has been based on the founder of the company. Most of the organizational values and assumptions were developed around the 1950s and have been maintained to date. According to Ingvar’s typical thoughts that are still part of the company’s culture is that opportunities emanates from problems. As adopted by Ingvar, the values of simplicity and fellowship are the main drivers of the company; they form part of its present culture (Inter IKEA Group, 2014). From the start, the company adopted a strategy to make the company simple such that the customers would easily relate with it. The company grew progressively while retaining its clientele; it went from selling pencils and cards to retailing of furniture to the development of the first company’s showroom in Almhult. A number of factors characterized the early IKEA’s simplicity. Customers were allowed to test the products and have a feel on whether they were good for them. This made many customers to relate with the products. On the other hand, the convectional use of tem number was replaced by use of a simple name that the customer would easily remember. The introduction of a childcare facility within the facility made the showrooms more attractive to visit for mothers with small children. This demonstrates that clearly IKEA has been very customer conscious. It is also evident that the company has adopted some eating facility in all its stores, the customers get to enjoy hot dogs and other Swedish delicacies within the store. The company is very conscious on the cost of its products. From the furniture to the hotdogs, the cost is usually relatively low. The founder has incorporated the culture of being cost effective that comes from his personal lifestyle. Despite being one of the world’s richest individuals, Ingvar chose to fly in economy class and stay in less costly hotels (Tarnovskaya, & de Chernatony, 2011). He believes in cost-effectiveness and that is the culture that has been adopted by the organization. To incorporate the need of all the people, IKEA has a culture that embraces equality. There is no major difference between the employees and the directors except for the responsibilities held. This is a model developed by the Ingvar, who could even relate with his employees as equals and friends. Learning from his model, the directors have also embraced the same nature of relationships with the employees. Based on these beliefs, it is paramount that a new employee has to be oriented to the culture of the organization for a certain period. This culture has been adopted across all the countries that the IKEA has stores. In addition, the company’s mission, values and mission are a must-know for every employee and should be stressed to every customer. All the employees, including the directors at IKEA are made equal through the adoption of a common uniform. This makes it impossible to identify who is senior to who. IKEA culture has been sustained though there are some few changes that have been seen across the nations. In order to protect the original culture of the organization, ‘Kraft 80’ program was established that led to the development of the management tool that is used by the organization (Bjork, 1998). In addition, the ‘IKEA-Spirit” characterizes the company’s culture. The IKEA spirit is based on a nine-point propositions that are listed below: The product range – our identity The IKEA-spirit – a strong and living reality Profit gives us resources. Reaching good results with small means Simplicity is a virtue Doing it a different way. Concentration – important to our success Taking responsibility – a privilege Most things still remain to be done - A glorious future! (Bjork, 1998) Having looked at the culture that has been adopted by IKEA, lets shift gears and review the propositions of Hofstede’s theoretical framework that will be used in the analysis of this company. Hofstede’s Theoretical Framework This framework was developed to elucidate the effect of national cultures on the organizational culture. It is evident that the rigidity of national cultures varies from one country to another. For example, the western culture is seen to be more flexible than the eastern culture (Hofstede, 2009). Therefore, multinational firms have to confront this challenge; some organizations are obliged to conform to the national cultures while others opt to retain their original identity. Hofstede’s framework was developed to help analyze the effect of national culture on the organizational culture. This framework has been widely used in the in diverse disciplines in order to facilitate an understanding of business dynamics. In his framework, Hofstede developed five dimensions in which the organizational culture and the national culture interact. These are individualism versus collectivism, uncertainty avoidance, power distance, Masculinity versus femininity, and long-term perspective versus short-term perspective (McSweeney, 2002). When addressing the dimension of individualism versus collectivism the focus is on how people relate in each culture in their individual capacities. In this regard, there are societies, which embrace individualistic approaches while others collectivism. Individualistic societies usually focus on personal interests as well as that of the family members. On the other hand, individuals in the collective societies are inclined to the overall good of the society or the group they belong to. There is so much loyalty in the group as opposed to pursuance of personal interests (Soares, Farhangmehr & Shoham, 2007). The second dimension is that of uncertainty avoidance. Every society is faced with its uncertainties. However, the reactions towards the uncertainties vary. In this dimension, Hofstede addresses the level of being threatened by uncertainties and the mechanisms that are developed by various cultures to avoid them. In some societies, there are rules that are developed to prevent uncertainties. There are usually very strict rules in cultures that have high uncertainty avoidance in order to prevent the situations that bring about uncertainties. In addition, such cultures develop and sustain very stringent security measures (Soares, Farhangmehr & Shoham, 2007). The third dimension is the power distance, which brings the aspect of the power inequality, and the relationship with authorities as provided in various societies. In this dimension, the context of hierarchy is put into perspective at both the family and organizational levels. In some societies, the power distance is too high hence, increasing the rate of dependence levels while in others, the power distance is low hence there is a close interaction, and the levels of dependence are minimal (Soares, Farhangmehr & Shoham, 2007). The other aspect that is addressed in the framework is the masculinity versus femininity dimension. Organizations are described either as feminine or masculine depending on their traits. While the masculine societies are concerned about achievement and success, the feminine ones are concerned about the care given to others as well as improved quality of life (Soares, Farhangmehr & Shoham, 2007). The masculine cultures according to Hofstede (2001) develops the principles of competitiveness, ambition, assertiveness, success and achievement while the feminine ones are inclined to embracing compassion, quality of life and relationships. Finally, the society can be inclined towards either long-term or short-term perspective. In the long-term, the society becomes thrifty and perseveres in order to attain future success. Contrarily, a short-term perspective is inclined to achievements of the past and now. Hofstede (2001) described these dimensions in an effort to understand the interactions between the national culture sand the organizational culture. Why the Choice of Hofstede’s Framework The choice of this framework is based on the view that IKEA is a company that upholds its originality and its founder’s thoughts. Hofstede model is one that analyzes the influence of a national culture on the culture of an organization. Hofstede’s propositions raise some fundamental questions; is IKEAs culture affected? How? and why? The analysis will provide some of the answers to these questions. Analysis of IKEA Organizational Culture based on Hofstede’s Theoretical Framework IKEA is a multinational organization that has established its stores in various countries that bear different cultures. Each of the five dimensions will be used to analyse IKEA’s organizational culture. The perspective under focus are the traits that have been passed on by Ingvar as it relates with the culture of the rural Sweden where he came from. Individualism versus Collectivism IKEA’s culture is inclined more on the collectivism perspective as opposed to individualism. However, the culture exhibits both collectivism and individualism. The background of the company plays a role in the development of the individualistic component. This is because the Swedish people have a tendency to be independent (Ryan, 2002). However, the company asserts the need for togetherness hence promoting collectivism. The culture of individualism is inclined mainly to the effort of an individual for their own benefits while collectivism embraces the good of the entire organization where there is sharing of responsibilities as well as teamwork is encouraged. Teamwork is highly encouraged in IKEA’s corporate culture in order to facilitate the growth of the organization (Novicevic et al., 2012). To advance collectivism, the culture requires that every individual in the organization should ‘lead by example’. On the other hand, just as the founder treated his employees as friends, the same is encouraged by the culture to the management. This promotes the concept of collectivism that IKEA has adopted all across the national cultures that the business operates. IKEA has a strong belief in fellowship. This has greatly helped advance the culture of collectivism across its stores distributed across the world. The individualistic approach that is encouraged is geared towards promoting the collective efforts of the organization. This strategy has helped the company exhibit productivity in various regions irrespective of the prevailing culture. The vision of the organization provides an opportunity to advance the collective efforts for their benefit as well as that of the organization. Uncertainty Avoidance Hofstede (2001) did an analysis of the culture of Sweden and categorized it as a low uncertainty avoidance culture. According to his theoretical framework, it means that the Swedish requires less rules and regulations. The chances of avoiding uncertainties are low because the government caters for the welfare of the people adequately (Ryan, 2002). Likewise, IKEA has embraced the same cultural inclination; the degree of uncertainty avoidance is low. The company has entrenched the culture of constant innovation and improvement hence making the levels of uncertainty avoidance low. In addition, the employees at IKEA are encouraged to develop new ideas that contribute to the development of the organization. Despite the fact that uncertainty avoidance is low at IKEA, the company is cautious and has a clear plan of how it endeavors to develop its products (Bloch, 2005). This means that the level of uncertainty avoidance for IKEA is not too low. Another aspect that makes the company to have a little bit ‘high’ uncertainty avoidance is the culture that was developed by the founder of cost effectiveness. This makes the managers and directors conscious of how the organization utilizes its resources. In addition, the company gives preference to projects that can generate income to the company in the long-term. Therefore, the company is conscious of the level of risk that it takes. According to Ward (2011), the company does not fear to make risks where there are opportunities. This is based on the founder’s concept that where there is a problem lies an opportunity. Therefore, the company is not too rigid to embrace new developments. This contributes to the classification of the organization in the category of low uncertainty avoidance culture as proposed by Hofstede (2001). The company also entrusts employees with responsibilities that they are required to execute under their own discretion. This indicates that the levels of bureaucracy at IKEA are relatively low. Masculinity versus Femininity The culture adopted by IKEA is inclined to femininity as opposed to masculinity. In this case, the country of origin (Sweden) has its stake as described by Hofstede (1991). He observed that the Swedish mainly demonstrate the feminine culture, they are focused on developing friendships as well as good working environments. Ingvar constantly supported this type of culture by encouraging close interactions between the management and the employees in order to create a friendly working environment. The culture of the organization is clearly built on the principles of humbleness and simplicity. The original culture has been spread to the other regions of the organization’s operation, however, as pointed out by Bannister (2004), the organizational culture is not purely feminine, there are masculine cultures especially in the regions outside Sweden. The company’s femininity is advanced by the culture of embracing equality and diversity. The culture of the organization is that all people should be provided with equal opportunities especially those that would want to work with IKEA. The company does not segregate individuals on any particular grounds. It is also apparent that the employees have equal opportunities and the organizational structure is flat. This means that there is open communication between the employees irrespective of their position in the company. The opportunities given for leadership are divided equally between the males and the female candidates (Johansson & Thelander, 2009). The gender equality component that is embraced by the organization is a feminine culture as described by Hofstede (2001). Power Distance Ingvar encouraged the culture of close interactions between the staff and the management. Through this strategy, the power distance is seen to be low across the countries for IKEA. The organization has a more flat organizational structure that has no bureaucracy. The hierarchy in the structure is minimal. There are strict rules that guide the roles that are discharged by the employees. These roles can be adjusted appropriately to fit the interest of the company. There is an increased engagement among the employees that yields more results for the organization (Korsgaard, Rask, & Lauring, 2008).  The humbleness culture that is adopted by IKEA creates an environment of mutual respect and trust between the employees and the customers. In addition, the concept of simplicity allows the management to act in a manner that they are capable of interacting with the employees as well as the customers (Stover, 2010). Additionally, the equality that is part of the organizational culture creates a scenario where the power distance is greatly narrowed. This means the employees are at liberty to interact with the managers as well as the customers. This makes it possible for the management to have a full understanding of the running of the organization. Long-term versus Short-term Orientation IKEA is inclined towards the long-term cultural inclination as provided by Hofstede (2001). The strategies developed by Ingvar from the start of the company are based on building a sustainable business that focuses on the future (Jonsson, & Foss, 2011). The culture of the company has entrenched need for continuous improvement of the organization. This is geared towards gaining a competitive advantage that would ensure the organization focusses on its future. In addition, the innovative culture that is embraced by the organization is geared towards supporting future development of the organization. Conclusions The Hofstede’s framework is ideal for analysis of IKEA. This is because the company has a culture that is greatly influenced by the country of origin (Sweden) as well as its founder, Ingvar Kamprad. Ingvar’s focus is mainly on the long-term orientation of the organization. in addition, the company has been made to have flat organizational structure that reduces the power distance. It is also based on the culture of humbleness and simplicity, aspects that relates to feminine culture. On the other hand, the company embraces the culture of collectivism while having relatively low levels of uncertainty avoidance. References Bloch, D. (2005). No rest for ikea in the furniture wars. PR Week, , 20. Retrieved from http://search.proquest.com/docview/217595991?accountid=45049 Edvardsson, B., Enquist, B., & Hay, M. (2006). Values-based service brands: Narratives from IKEA. Managing Service Quality,16(3), 230-246. Retrieved from http://search.proquest.com/business/docview/198052745/D5EB08307D40419APQ/7?accountid=45049 Hofstede, G. (2001). Culture’s Consequences: Comparing Values, Behaviors, Institutions and Organizations across Nations. Thousand Oaks CA: Sage. Inter IKEA Group. (2014). Our Heritage. Retrieved from http://inter.ikea.com/en/about-us/heritage/ Johansson, U., & Thelander, Å. (2009). A standardised approach to the world? IKEA in China. International Journal of Quality and Service Sciences, 1(2), 199-219. retrieved from http://search.proquest.com/business/docview/818662618/D5EB08307D40419APQ/2?accountid=45049 Jonsson, A., & Foss, N. J. (2011). International expansion through flexible replication: Learning from the internationalization experience of IKEA. Journal of International Business Studies, 42(9), 1079-1102.  Korsgaard, S., Rask, M., & Lauring, J. (2008). The diversity management paradox in globalization - the swedish IKEA way. Rochester: Social Science Research Network. Retrieved from http://search.proquest.com/business/docview/1095309742/867D53C8CACE4491PQ/11?accountid=45049 McNamara, C. (2000). Organizational culture and changing culture. Free Management Library. Retrieved from http://managementhelp.org/organizations/culture.htm McSweeney, B.(2002). Hofstede’s model of national cultural differences and their consequences: A triumph of faith – a failure of analysis. 55(1), 89-118. Novicevic, M. M., Morf, D., Evans, M., Sanders, L., Sun, W., & Cecil, C. (2012). Adapting competencies for emerging markets: The case of IKEAs entry into china. Journal of Applied Management and Entrepreneurship, 17(2), 4-22. Retrieved from http://search.proquest.com/docview/1026584778?accountid=45049 Ryan, N. A. (2002). A case study of the trust for international brands in Sweden. Retrieved from http://www.scribd.com/doc/51287354/In-brands-we-trust Soares, A. M., Farhangmehr, M. & Shoham, A. (2007). Hofstede’s dimensions of culture in international marketing studies. Journal of Business Research, 60 : 277–284 Stover, B. (2010). Defining IKEA: Globalizing the swedish modern ideal. (Order No. 1477062, Northern Illinois University).ProQuest Dissertations and Theses, , 97-n/a. Retrieved from http://search.proquest.com/docview/528021359?accountid=45049. Tarnovskaya, V. V., & de Chernatony, L. (2011). Internalising a brand across cultures: The case of IKEA. International Journal of Retail & Distribution Management, 39(8), 598-618. Ward, A. (2011, Jan 27). Wrappers come off ikea structure. Financial Times Retrieved from http://search.proquest.com/docview/847547654?accountid=45049 Read More