IKEA's Structure and Control System Analysis - 630 Words | Case Study Example (2024)

FAQs

How would you describe IKEA's Organisational structure? ›

Generally, IKEA organizational structure can be classified as hierarchical, reflecting massive size of the business that integrates 11 franchisees operating in more than 500 locations in 63 countries.

The organisation of IKEA follows a matrix structure where each country has a Service Office (SO) and a national headquarter with support units.

The non-hierarchical organization structure of the organization ensures that all the employees have a duty of care and respect for one another. As a result, employees at IKEA do not have titles. At the same time, they do not get special privileges with regards to the positions that they hold.

When looking at IKEA's organization structure at the corporate level, it is more mechanistic than it is organic and it isn't as flat as it is at the lower levels of the organization. On the other hand, at the lower levels of the organization such as the store level, the structure is much flatter and organic.

An organizational structure is either centralized or decentralized. Traditionally, organizations have been structured with centralized leadership and a defined chain of command. The military is an organization famous for its highly centralized structure, with a long and specific hierarchy of superiors and subordinates.

Company structure is a system outlining how the activities are organized and directed to achieve goals. These activities will generally include the rules to be followed and the roles and responsibilities of those within the company.

In a matrix structure, individuals work across teams and projects as well as within their own department or function. For example, a project or task team established to develop a new product might include engineers and design specialists as well as those with marketing, financial, personnel and production skills.

A matrix organization is a company structure where teams report to multiple leaders. The matrix design keeps open communication between teams and can help companies create more innovative products and services. Using this structure prevents teams from needing to realign every time a new project begins.

IKEA stores rely on a "fixed path" design

IKEA showrooms use a “fixed path” layout — there's a designated road that you must follow, and it guides you through the store in one direction. In most stores, customers only see about 33% of the merchandise on offer.

What was the main problem for IKEA? ›

The pandemic limited growth in FY21, and IKEA retail sales benefited as the world re-opened. On the other hand, inflation and supply chain issues impacted FY22 sales, and lead to rising costs and higher prices. That means sales have grown in money, but sales quantities have not kept up.

Focus Strategy

The cost focus and differentiation focus are the two aspects of the company's main strategy. IKEA uses a combination of these strategies to achieve its vision. One of the strategies it uses is its cost leadership strategy.

The IKEA effect, named after everyone's favorite Swedish furniture giant, describes how people tend to value an object more if they make (or assemble) it themselves. More broadly, the IKEA effect speaks to how we tend to like things more if we've expended effort to create them.

Edgar Schein, a prominent organizational psychologist, identified four key elements of an organization's structure: common purpose, coordinated effort, division of labor, and hierarchy of authority.

Democratic Design is at the core of each IKEA product. The five dimensions that make this concept allow our designers and collaborators to create products that are for everyone. Get to know Democratic Design and the principles that bring it to the products and to the homes of the many people.

The project-based structure features the best of both the traditional line and functional organizational structures: it's simple, with the first tiers answering only to a direct supervisor. The final tier is the team responsible for completing whatever project is set before them.

A start-up is a typical example of an organization having a simple structure because apart from the founder there may be one or few employees who multi-task, and take care of all that has to be done to help attain organizational goals. Communication is informal and there is a high degree of collaboration.

Buildings, aircraft, skeletons, anthills, beaver dams, bridges and salt domes are all examples of load-bearing structures. The results of construction are divided into buildings and non-building structures, and make up the infrastructure of a human society.

A system that outlines how specific activities are handled to fulfill a strategic mission is known as an organizational structure. Rules, roles, and obligations are all part of these activities. The organizational structure also determines the flow of information between divisions within the corporation.

The four main forms of business structures in the United States include sole proprietorship, partnership, limited liability company, and corporation.

Why is structure important in the workplace? ›

Structure will give employees more clarity, help manage expectations, enable better decision-making and provide consistency. Organizational charts also assign responsibility, organize workflow and make sure important tasks are completed on time.

What is a functional organisational structure? In this type of organisational structure, businesses are organised according to their roles and skills into smaller groups or departments. This may include, for example: sales. marketing.

Amazon is an excellent example of a flat organization. Like Google, it has few managerial roles, and employees can move up or down within the company as needed. This structure allows for faster communication and decisions. Additionally, Amazon is known for its fast response time to changes in the market.

Examples of organizations with a functional structure include: Amazon, Starbucks. A functional structure groups employees into different departments by work specialization. Each department has a designated leader highly experienced in the job functions of each employee supervised by them.

Matrix organizational structures are often used in project management because they speak to both the product of the project and the function of the management producing it.

A simple structure is the most basic operating system that a business can use to centralize its activities. Also known as the flat structure, the simple organizational structure doesn't have multiple layers of management or formal departments.

In the strong matrix or project matrix organization structure, the project manager has most of the power, resources and control over the work. The functional manager is there to add support, technical expertise, look after HR issues etc…

Matrix structure is a type of organizational structure where employees are grouped concurrently by two different operational dimensions. Functional structure divides the organization based on specialized functional areas such as production, marketing, and sales for the purpose of management.

Market penetration.

IKEA uses market penetration strategy aggressively.

How is IKEA structured globally? ›

IKEA Retail is our core business. We currently operate 482 IKEA stores, shops and planning studio's in 31 countries, generating 89% of all IKEA sales worldwide. Ingka Centres operates 44 shopping centres in 14 countries, under different trademarks, always anchored by an IKEA store.

“The biggest challenge has been getting products out of China, where there has been a very limited capacity,” Chief Executive Officer Jon Abrahamsson Ring of Inter Ikea, the worldwide franchiser for the brand, said in an interview.

IKEA's approach to design and production goes against business norms. Rather than design and create the product and then set the price, as goes the convention, the company establishes the price first and then reverse engineers the product. The simple, pared-down and minimalistic design of the furniture is no accident.

To keep pace with consumer demand, furniture is created from cheap and harmful materials, or illegally felled timber, and processed using wasteful and polluting factory techniques. It not built to last, is hard to recycle, is not desirable enough to resell, and ends up in landfill.

1. Billy bookcase. The Billy bookcase has cemented itself firmly as one of the most popular products in the IKEA family. It is estimated that every five seconds, one Billy bookcase is sold somewhere in the world.

Exceptional In-store Experience

Ikea brilliantly displays products employing the best lighting systems to generate more sales. It strategically arranges best-matched items in mock rooms to encourage impulse purchases and inspire decor.

Through a massive vertical integration strategy, IKEA became one the largest consumers of wood in the world, and built a plants capable of pulverizing wood into dust and manufacturing many multipurpose boards at one time.

We are informal, pragmatic and see bureaucracy as our biggest enemy. We are constantly looking for new and better ways forward. Whatever we are doing today, we can do better tomorrow. Finding solutions to almost impossible challenges is part of our success and a source of inspiration to move on to the next challenge.

2.1 What type of organizational culture is most representative of IKEA? The culture of IKEA is focused on equality in the workplace and is orientated to the person. The Swedish company has an “Incubator Culture”, because of its “informal, open and caring”⁴ management style.

„To create a better everyday life for the many people, this is the IKEA vision.” Our mission as a business is „to offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.” Our vision also goes beyond home furnishing.

How does IKEA's organizational culture contribute to the firm's success? ›

IKEA empowers its staff to take charge of their actions and the environment. Taking responsibility for its people enables the firm to grow and prosper. Through empowerment, IKEA wins the trust of its workers making them forward-looking and positive about the goals and achievement in the firm.

Known to practice transformational and charismatic leadership styles, Ingvar Kamprad had been a driving force for many decades behind the phenomenal success of the home improvement and furnishing chain.

IKEA's approach to design and production goes against business norms. Rather than design and create the product and then set the price, as goes the convention, the company establishes the price first and then reverse engineers the product. The simple, pared-down and minimalistic design of the furniture is no accident.

The IKEA values were shaped during a time in Sweden when the living conditions were harsh. People had to get by with what they had. This fostered a culture of entrepreneurship and hard work, and made people more pragmatic and mindful of resources. A lot has changed since the early days of the IKEA brand.

They identified 4 types of culture – clan culture, adhocracy culture, market culture, and hierarchy culture. You can take the Organizational Culture Assessment Instrument (OCAI) to assess your organization's culture in just 15 minutes and make strategic changes to foster an environment that helps your team flourish.

To meet the challenges of unsustainable consumption, climate change and growing inequality, we are taking ambitious steps towards a more sustainable future through collaboration with partners, co-workers and customers. Our three focus areas are: Healthy and sustainable living. Circular and climate positive.

Industry-wide supply chain challenges

However today, like many other industries, IKEA continues to face significant transport and raw material constraints driving up costs, with no anticipated break in the foreseeable future. Disruptions are expected far into 2022.

“To create a better everyday life for the many people.” This vision goes beyond home furnishing. We want to have a positive impact on the world – from the communities where we source our raw materials to the way our products help our customers live a more sustainable life at home.

IKEA's key resource involves around 1,400 suppliers from over 60 countries. These suppliers provide IKEA with furniture designs, wood, distribution facilities, and other necessities the company requires to function.

What is IKEA's strategy for managing its supply chain? IKEA's strategy is focused on increasing efficiency, reducing costs, and ensuring quality throughout its supply chain. The company also strives to ensure that its supply chain is socially and environmentally responsible.