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IKEA is a reputable furniture maker that operates in over 48 countries across the globe. The firm is known for its low-cost business model. Although the firm has managed to expand its operations to more nations, the outstanding fact is that “over 70 percent of its sales come from Europe” (Grant & Jordan, 2015, p. 274). The firm’s decision to use its organizational culture across the globe has faced a wide range of obstacles. The outstanding fact is that IKEA’s internationalization approach has led to new opportunities for learning, innovation, and transformation. This paper goes further to propose a powerful organizational structure that has the potential to revolutionize and support IKEA’s international strategy.
In order to maximize its sales and profits, IKEA should redesign its organizational structure in such a way that it addresses the unique needs of different stakeholders in the respective regions.
Proposed Organizational Structure
The presented case study shows conclusively that IKEA’s internationalization strategy has encountered a wide range of challenges in an attempt to realize its business goals. This has been the case because the firm uses its original organizational structure in foreign countries. IKEA has been associated with a non-hierarchical leadership structure. The style was embraced by the company’s founder by the name Ingvar Komprad. The style has now remained one of IKEA’s critical attributes (Harapiak, 2013). An egalitarian decision-making approach has been used at the firm for many decades. Unfortunately, this democratic approach to leadership has not been received positively across the globe (Tarnovskaya, Ghauri, & Elg, 2014). That being the case, a new organizational structure should be considered to revolutionize the company’s strategy. The goal of the firm should be to attract the best talent, empower more workers, and eventually realize its profits. The organizational chart presented below can therefore make a significant difference for IKEA. The proposed leadership model will ensure more leaders address the diverse needs of the firm’s stakeholders.
A proper organizational chart should be able to support the business model of a company while at the same promoting performance. The chart should be aware of the regional differences and cultures values in every targeted region. This should be the case because IKEA’s entry into the Asian market proved “that one size did not fit all in other aspects of its strategy” (Grant & Jordan, 2015, p. 276). The proposed chart therefore focuses on the diverse issues experienced in different markets. For example, a team-based organizational structure is proposed for the European and American markets. On the other hand, a functionally structured model is outlined for the Asian market (see Figure 1). The employees in the Asian market should be guided and empowered by their leaders in order to maximize outcomes.
Why the Proposed Chart is Appropriate for IKEA
IKEA has managed to achieve its business objectives within the past four decades. The organizational structure has significantly reduced the level of hierarchy especially in the European market (IKEA, 2016). More employees have found it easier to focus on the goals of the company while at the same time fulfilling their personal objectives. This is a clear indication that the original organizational structure pioneered by Ingvar Komprad has delivered positive results (IKEA, 2016). That being the case, the decision to change the structure can significantly affect IKEA’s performance in the European and American markets.
On the other hand, IKEA’s leaders should accept the fact that the global community is characterized by diversity. This concept explains why organizational leadership must be guided by the behaviors and cultural values of the targeted stakeholders (Tarnovskaya et al., 2014). An evidence-based approach to management is something that can transform the performance of an organization (Grant & Jordan, 2015). A company that decides to operate globally should be on the frontline to redesign its business strategy. The approach will make the firm successful. The current performance of IKEA in Asia should be analyzed from a critical perspective. In a country like China, people expect their leaders to guide and empower them. The individuals follow the instructions presented by their managers.
In China, the company’s products were not admired by many young professionals. They believed that such products were expensive. The firm was forced to reduce its prices in an attempt to make profits. That being the case, the proposed organizational chart for the Asian market will definitely support the needs of these employees. In order to record positive results, the company should be on the frontline to recruit more workers from the local cultures (Tarnovskaya et al., 2014). The firm should also ensure the top leadership is characterized by more local players (Harapiak, 2013). When this is done, the company will have initiated a powerful business model that addresses the needs of the stakeholders.
The workers will receive desirable support from their respective leaders. The employees will eventually address the needs of the targeted customers. Although the company’s non-hierarchical model has been successful in the Scandinavian region, it should not be embraced in Asia because of the issue of diversity (Twarowska & Kakol, 2013). At the same time, the use of a horizontal organizational structure for the Western markets will support the company’s business strategy. This model should go further to embrace the power of teamwork. By so doing, most of the employees will be empowered to work as teams and eventually empower the targeted customers. The strategy will make it easier for the firm to maximize its sales and profits.
Conclusion: Summary Statement
It is agreeable that IKEA’s business model has delivered positive results. The firm has been on the frontline to use a horizontal managerial strategy. This approach has made it easier for the company to empower its employees. Consequently, IKEA has maximized its profits in the European market. Unfortunately, the corporation’s decision to expand its operations globally is something that has revealed a number of issues and challenges. This is the case because the firm has faced a number of challenges arising from diversity (Twarowska & Kakol, 2013). The expectations of many consumers in the Asian market differ significantly from those of the Europeans. This situation explains why the current organizational structure might not sustain the company’s internationalization strategy (Grant & Jordan, 2015). In order to maximize its sales and profits, IKEA should redesign its organizational structure. The new structure will also address the unique needs of different stakeholders. The proposed organizational chart will therefore play a positive role towards transforming IKEA’s business performance (Tarnovskaya et al., 2014). The evidence-based leadership structure will make it easier for the company to overcome competition and eventually satisfy the changing needs of its customers.
Grant, R., & Jordan, J. (2015). Foundational strategy. New York, NY: Wiley.
Harapiak, C. (2013). IKEA’s international expansion. International Journal of Business Knowledge and Innovation in Practice, 1(1), 25-51.
IKEA. (2016). Web.
Tarnovskaya, V., Ghauri, P., & Elg, U. (2014). Market driving supplier strategy: IKEA’s global sourcing network in two developing markets. Web.
Twarowska, K., & Kakol, M. (2013). International business strategy: Reasons and forms of expansion into foreign markets. Management, Knowledge, and Management, 1(1), 1005-1011.