How IKEA Used Scandinavian Culture to Promote Its Business - Essay Example

? International strategy Background of the case The case describes how IKEA used Scandinavian culture to promote its business in various international locations around the world. Through the case study, the impact of Scandinavian culture on various global economic regions will be evaluated. The objective of the company was to make quality furniture accessible to the middle class families (IKEA, 2013a) The Company has been following a soft and informal management approach in most of its business regions (IKEA, 2013b). However, the company suffered few cultural setbacks in countries such as United States and United Kingdom, where the business practice and customer perception were different (Jackson, 2002). Disadvantages of Scandinavian business culture From the case study, it is clear that IKEA has been following a Scandinavian business culture, even in most of its international assignments. Scandinavian business culture is dominated by a direct style and more open culture. Conversations are more liberal and personal, and they prefer not asking questions after meetings or presentations. It should be noted that this culture is opposite to America or Asia, where business meeting are more formal and structured (Warner and Joynt, 2002). A typical Scandinavian culture gives high importance to consensus in every decision they take. Hierarchical structure is more or less flat and decision making can be sometimes very lengthy, because agreement has to be taken from every member of the business. Ingvar Kamprad, the founder of IKEA followed a similar culture. His distinctive style and objective of making a difference in the lives of common people drove his expansions strategy. He followed a non-conformist philosophy and looked at all facets of his distribution strategy, in order to focus and innovate (Politis, 2000). During the initial days, the objective of the company was to keep the costs low, and most of the strategies were made keeping this objective in focus. Supplier relationships were made reciprocal so that the company is above to sell whatever they have produced. Managers were expected to keep caring and close relationships with their subordinates and co-workers. Interactions between the co-workers and managers were characterized by egalitarianism and informality. In the following sections, IKEA business cultural and strategies will be discussed which the company implemented in different international assignments. While the culture of IKEA was a strong factor in contributing for the success of the company in its homeland, the same culture caused many issues and roadblocks when the company went for expansion strategy (Hofstede, and Minkov, 2010). The business culture of the host countries was vastly different from the way IKEA was doing business and caused cultural as well as business conflict (Huettinger, 2008). In Germany managers do not call each other by their first names as it is perceived as disrespectful. Business culture in Germany is mostly authoritative where managers takes order from bosses and are not supposed to perform any activity taking their own initiatives. This is vastly opposite from IKEA’s normal way of doing business. Thus, when IKEA entered Germany, its collaborative and opted business culture did not go well with the strict authoritarian German business culture. IKEA’s preference for informal relations between managers and co-workers was misinterpreted as disrespecting the boss and undermining the traditional rule of respecting authority. Also, the business culture is more adaptable to detailed work structure and a lengthy procedure, which is opposite IKEA’s cultural of minimalist bureaucracy and making things less burdensome. Similarly, in case of France, the informal culture of IKEA was interpreted as a sign of indecision and weakness. Also, in IKEA, recognition of status was not considered important, which again was interpreted as a negative sign in Germany. Even though the company was able to reduce communication problems arising in most of its international counterparts, the major problems aroused while working in United States (Tarnovskaya and Chernatony, 2011). Sweden business culture is characterised as emotionally controlled and value muted, whereas Americans are more comfortable by display of emotions and expressions of contributions as well as achievements. Swedish managers working in United States preferred a subtle management style and expected their subordinates as well as co-workers to perform tasks according to their own creativity and decision (Sweden.se, 2013). Contrary to this, American workers prefer to be told what to do and they want to know who is the leader or in charge of the assignments. American workers wanted a greater recognition for their work, through a competitive performance management review, which was opposite to the collaborative review preferred by the Swedish business culture. Also, a flat hierarchy system inhibited the workers from America from the path of career progression they were used to. All of the above problems led to chaos in the internal organization and impacted the overall sales and profit of IKEA in these countries (Baraldi, 2008). To resolve this, IKEA had to make certain changes in its business culture in order to gel with the cross-cultural businesses. Advantages of Scandinavian business culture Even though Scandinavian businesses are the highest taxpayers in the world and the work hours are less than most of other countries, their business culture is considered one of the best around the globe. Also, the Nordic region is among one of the richest places in the world. Pragmatism and down to earth attitude have created a third form of business representations unique to Scandinavians. Even though other places have not been able to follow this style of business culture, Scandinavian culture is considered as one of the highest and most sough after ways of doing business. This culture has also been the topic of research in many renowned institutions and research universities. Many features of the culture make it favourable for business. Scandinavian business is known for its exceptional strength in social responsibility, ethics, health, environment and accounting. Apart from that, areas such as shareholder value, customer satisfaction and trustworthiness in management are also given importance. The Scandinavian culture works on knowledge economy and according to many research analysts, this culture will be the best suited for solving challenges which organisations and companies are facing in the present knowledge society (Blomkvist, 2012). The management style in motivating and network oriented and employee empowerment is one of the top priorities for the top management. In Scandinavian culture, management of values and goals is given more importance than strict command and control system. Even though businesses strive to grow and prosper, rivalry and competition within industry is not given much importance, which is opposite is case of countries like United States. Scandinavian management is mostly democratic. Employees are result oriented and always to for discussions with colleagues and subordinates in order to reach consensus. Democratic managers are both goal oriented and result oriented and are better at creating employee happiness, employee productivity and collaboration among staff. Scandinavian culture is dominated by short power distance and a flat company structure helps in establishing better collaboration among the employees. At the time when competition has become intense, creativity and innovation in business culture has become a very rare scenario. Here Scandinavian business culture has differentiated itself in a way which, according to scientists may become the most desirable work culture in future (Ciabuschi and Martin, 2012). Conclusion and Recommendations Thus, the Scandinavian culture provides both opportunities and challenges for the global economy. While the collaborative management allows free flow of creativity and decision making within firms, too much of freedom can become harmful for the organisation (Ghemawat and Reiche, 2011). The same managers might forget to manage properly while building friendship with everyone in the office. This can result is a very de-motivating form of business culture. Sometimes, these managers empowering freedom are afraid of solving conflicts, shy in conversing and are not involved in advancing towards the goal of the organisation. For employees, it results in stress, de-motivation and lack of cohesion among themselves as well as their bosses. Many cultures have tried to adapt the Scandinavian culture but have failed in time. Also, the cultures have failed to raise a positive work output in many regions outside Scandinavian culture. The main region is improper understanding and misrepresentation of the culture. The first and foremost rule for international expansion which IKEA failed to follow was exhaustive and comprehensive research about the target country. The company did not pay attention to the minor details regarding cultural preferences and blindly followed its own culture. Also, the company failed to understand the local taste and preferences which hampered the overall brand preferences. Thus, in many regions including United Kingdom, IKEA faced competition from local furniture brands, even though both companies have almost similarly manufactured products. IKEA never hired any local expect to know the regional preferences better. In future, major challenges for managers from Scandinavia especially while operating in international business will be to keep a balance between goal oriented business culture and relationship oriented business management (Eriksen, Kruse and Larsen, 2006). The objective of the managers should be to transfer the focus of happy and freedom oriented employees towards the goals and objectives of the organisation. Even though close contact between employees and managers will be important in future, the management will be have to keep a level of authority in order to engage employees and oriented their goals and objectives towards the goals of the organisation. Reference List Baraldi, E., 2008. Strategy in industrial networks: Experiences from IKEA. Emerald Management Reviews, 50(4), pp. 99-126. Blomkvist, K., 2012. Knowledge management in MNCs: The importance of subsidiary transfer performance. Journal of Knowledge Management, 16(6), pp. 904-918. Ciabuschi, F. and Martin, M. O., 2012. Knowledge ambiguity, innovation and subsidiary performance. Baltic Journal of Management, 7(2), pp. 143-166. Eriksen, T.T., Kruse, M. and Larsen, G., 2006. The Scandinavian way. [online] Available at http://www.cifs.dk/scripts/artikel.asp?id=1481&lng=2 [Accessed 17 Aug 2013]. Ghemawat, P. and Reiche, S., 2011. National cultural differences and multinational business. 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