Internalising a brand across cultures: the case of IKEA - Essay Example

Internalising a brand across cultures: the case of IKEA The quick ascendance of business organizations in up and coming economies has resulted to much-needed urgency and added interest in gaining added knowledge of the use and dissemination of managerial tactics from their standpoint. The viewpoint is devoid of taking for granted the current and existing Western ethnocentric accepted view. Companies may enlarge their operations in other countries by setting up operations abroad through replication of their value chain stores, for example, their sales, and marketing structures. On the other hand, there is little knowledge in regards how such international companies institute their replica models successfully, and how they adapt to local environments abroad, through their effects on human resource driven learning processes. To understand better these subjects, this report develops a theoretical framework of global Human Resource (HR) policies and actions in business franchises from developing markets across their subsidiaries in well-established markets. It is found that IKEA Company has well-structured organizational mechanisms put in place that encourage and maintain a continuous learning process intended at regular adjustments of the structure for replication. This report additionally gives some insights and direction into the reasons, considered business opportunities and hurdles in international transfer of Human Resource Management policies and practices in a dynamic world. Introduction Financial and Business organizations may grow and decide to venture into different markets abroad. This they may do through setting up of similar business models or replicas of their organizations. A number of business franchise companies have succeeded in replicating their business models abroad. Companies such as Starbucks and McDonalds have successfully established multiple franchises in foreign markets (Watson 1997). Business expansions that adopt a fixed format are said to enjoy economies of scale while at the same time reaping from brand recognition. Consequently, Business integration-responsiveness theorists argue that those particular gains frequently need to be exchanged with gains of local adjustment (Bartlett & Ghoshal 1998). This brings out the question of to what length international replicators mix the process of business replication and adjustment to local markets and what influences the choices made. This report analyzes a Swedish home décor company IKEA and its internationalization procedures and practices of its retailing section. According to the literature review, IKEA's cross-border growth and expansion in over four and a half decades have, initially testing the waters through a number of strategies resulted to replicating a structure. However, it is pointed out that the reproduction followed by IKEA is not precisely the same recommended model of a fixed replica as analyzed and advocated by Winter and Szulanski (2001). In contrast, IKEA results to combining the benefits of structure consistency with local adjustment. Local adjustment, for instance, by market-specific IKEA operational offices brings about discovery knowledge and learning. The acquirement and achievement of such knowledge gathering experiences are handled and coordinated systemically through the Human Resources management practices. This is done through devoted and enthusiastic sections and departments that are tasked with promoting internal organizational knowledge sharing in addition to executive business code of operation such as organizational values that insist on the significance of staff questioning current structures and endlessly participating in sharing of knowledge. IKEA, therefore, performs extremely well after combining the benefits of duplicating their franchise operations with the gains realized after being able to adjust and transfer the ensuing knowledge and skills through the international corporation. This process is commonly known as flexible replication. Clark (1985) discusses the best modalities to implement flexible replication. He notes that the main element in putting into practice and running flexible replication effectively lies in treating the whole structure as a chain of command of extra or fewer features. He additionally notes that at the top lies elements of IKEA's idea model, which lie fixed and unchanged, while in the lower cadres, lies the other flexible variables known as the concept in practice variables, which include products offered in the market and prices. The concept variables are allowed to fluctuate in response to the acquisition of new knowledge. Replicating Companies Theoretically, companies may engage in cross-border expansion ventures by replicating their whole businesses internationally. However, under the business management research perspective, replication means the formulation of identical retail outlets that deal with a similar product or service (Winter & Szulanski 2001). Companies whose business structure is centered on mass production of goods and services characterize a number of sectors and industries, from electronics to confectionery and fast food companies. These companies are located in multiple countries and thus have multiple regional presences. Nelson and Winter (1982) formulate theories that explain the relationships and the features that exist between the parent business organizations and their replicas. From their work, it is therefore argued that there are features of replication to all multinational corporations because there are significant overlaps between the parent companies and their international branches in relation to their everyday habits and policies that govern their daily modus operandi. This overlap is also seen in the corporation's intangible assets that are employed to facilitate financial operations of the company. Nelson and Winter (1982) argue that the overlap of their operating procedures if facilitated by the company efforts to transfer knowledge and learning. The Human Resource department is usually responsible for the learning process of such multinational corporations. Replication is regarded as a demonstration of global business cooperation and integration (Barlett & Ghoshal). Replication and Strategy Baden-Fuller and Winter (2007) were the initial contributors to the theory of replication as a strategy view. These scholars formulated a double faceted structure whose initial stage involved exploring the possible formats available for application in the replication process. The second and the final stage involved an exact application and exploitation of the agreed upon structure. Fundamental to their perspective is the theoretical Arrow Core perspective: that is the complete and right requirement of the basic, replicable elements of a company structure and its perfect target appliance (Winter & Szulanski 2001). The theory details the replicable elements and traits undergo formulation and generation, and the nature of the business surroundings in which they are significantly worthy of replication. The Arrow Core perspective addresses the whom, where and how the replicating company should try to replicate. The specifics of this theory are, however, unattainable for a replicating business organization due to the level of ignorance about various different elements of the Arrow Core theoretical standpoint. Therefore, the nature of replicable features of a multinational corporation and the processes for replication that the multinational corporation undertakes can only be approximated with Arrow Core standards set as a benchmark. The Process of Internationalization Johanson and Vahlne (1977) analyze the process of internationalization as a road map process of acquiring knowledge. The Uppsala structure formulates internationalization as a procedure of incremental commitments of assets propelled by rising experiential expertise. The authors describe the process that begins from markets situated domestically and consequently expanding to neighboring countries. This process progresses further and more distant country are reached eventually. While the process takes place, overseas operations characteristically substitute the use of exports to employing more challenging and difficult modes of operation. This may include entities such as sales entities and subsidiaries. Therefore, in this model, gaining knowledge of the market and present market obligation and loyalty propel elements of change and future decisions that regard future activities (Jonsson 2007). Experimental or experiential knowledge and experience are very important especially to the process of internationalization. This is because understanding how the process works minimizes future operational risks and additionally presents a platform for gaining information and familiarity of internal assets and understanding the available opportunities for mixing them with external assets (Eriksson et al. 1997, Cited in Petersen, Pedersen & Sharma 2003). The process of such organizational knowledge acquisition can only be facilitated by the presence of administrative structures such as the Human Resource structures in an organization, in order to facilitate the process of internationalization in the organization. Forsgren (2002) states that the Uppsala structure needs to advance beyond the theoretical view, that knowledge is preserved principally by company branches in any particular market. He also states that the structure does not need to develop by implanting its knowledge analysis as a promoter of the process of internationalization in a perspective of organizational knowledge acquisition in multinational corporations. Erickson et al. (1997) also argues that the process of internationalization does not involve knowledge acquisition about international business environments only. He says that knowledge must also be acquired on the interior assets of an organization, and how the company can react when uncovered from fresh and untried conditions. Erickson et al. (1997) also says that a business organization needs to formulate models and capabilities that can direct the exploration of experimental acquisition of knowledge about overseas markets and companies. In other words, there is need to understand the structures and the nature of the flow of information within an organization, in order to grasp how the process of internalization works. It is also important to understand how the multinational companies such as IKEA deploys Human Resource machinery to manipulate such flows of information in preferred directions and at preferred levels. IKEA'S Process of Internationalization According to the Economist (2006), in the course of the company's 70-year history, it has developed from a minute sole proprietorship business into one of the global leaders in its field of operation. Starting its operations approximately six decades ago, the organization has embarked on a global expansion exercise, driven by the organization's specific knowledge-founded resources, most notably their reputation. The company also has very noticeable marketing structures and strong standard operating policies for recognizing, obtaining, and delivering knowledge between sections in their business network (Tarnovskaya & Chernatony 2011). The company recognized the need for local exploration in attaining a successful international market expansion through the process of replication. The company also realized the need to share information internally and the need to establish frameworks that would facilitate movement and transfer of knowledge (Kippenberger, 1997). IKEA notion of the theory in implementation adds more emphasis in the process and learning features. The company is flexible in its operations, the human resource usually allowing employees to exercise their freedoms, and not subjecting them to punishments when they make mistakes. The company's management stresses the need to maintain an entrepreneurial spirit within the organization (Jonsson & Foss 2011). They also advocate for employees to challenge the modus operandi of already proven ways of doing things. They argue that the worst kind of situation would be one that the employees do not make blunders. Conclusion Multinational corporations have come up with vital players in many industrial sectors. Replication is renowned to be a strategy of cross-border expansion. IKEA has a distinct model in regards to international replication. The company stresses the importance of the hierarchical method to the structure of replication. The company has a flexible structure that serves to address basic and particular challenges that arise within a specific market (Norton, Mochon, and Ariely, n.d.). The company, through its Human Resource management, facilitates knowledge transfer within the organization, thus facilitating internationalization process. Bibliography Bartlett, C. and Ghoshal, S. (1998). Managing across borders. Boston, Mass: Harvard Business School Press. Blomstermo, A., Eriksson, K. and Sharma, D. (2004). Domestic Activity and Knowledge Development in the Internationalization Process of Firms. Journal of International Entrepreneurship, 2(3), pp.239-258. Clark, K. (1985). The interaction of design hierarchies and market concepts in technological evolution. Research Policy, 14(5), pp.235-251 Economist. 2006. 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