Amee Business Excellence Project: IKEA
Abstract
Having a flexible system of policies is an indispensable part of a successful business plan. IKEA, one of the major international furniture retailers, is actively using a variety of diverse strategies to reach their main goal — to provide the customers with affordable production of high quality and gaining profit. In the current research, the company is analyzed according to the EFQM business excellence model. The assessment features the categories people and leadership, policy and strategy, resources and partnership and the business process.
Amee Business Excellence Project
Introduction
The market of furniture is very diverse. It is a perspective one in actively developing countries like China and Russia, where people still need to buy “long-term” furniture. Though, in the developed countries like the United States the majority of people already have all they need in the house. This leads to the decrease of consumers’ desire to buy new furniture. That is why the furniture resellers emphasize the need to buy something better. IKEA, which is one of major companies in this sphere, tries to provide affordable production of high quality and their business policy targets this idea. In the current research, the business excellence model of furniture reselling company IKEA is analyzed. The research features the organizational background, the description of the current business situation and the challenges the excellence model faces and the critical analysis of the overall situation.
Introduction. Organization Background
A Swedish furniture retailer IKEA was found in 1943 and is one of major international companies nowadays. It provides the customers with flat-packed furniture that can be assembled at home without problems. IKEA’s policy combines low prices with high quality of production. The aim of the company is to guarantee better life for those people who are not able to afford more expensive things. The stores provide a wide variety of affordable furniture, so that everyone can find what he/she really needs in the shop. According to the official IKEA website in the United States, the company’s business objective is the following: “At IKEA our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering 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”.
Political factors that are related to IKEA are quite interesting to analyze. Strict law obedience, which is characteristic of the company’s policy, caused multiple problems for business development in Russia. For example, IKEA’s founder Ingvar Kamprad said that the company would not invest into the Russian market anymore because of numerous bribes required. According to him, IKEA was not going to encourage further corruption. There were a number of cases that IKEA’s board of directors made public in local press. One of such cases was the issue when the officials from Samara, a southern Russian city, did not allow the company to open a store, because it was not sturdy enough to withstand a hurricane. Even though such winds never occur in central part of Russia, the local government prevented IKEA from opening the department (Kramer, 2009). In general, the company does not usually encounter problems with the local governments, but sometimes they do occur.
Economical growth of IKEA is stable and its production is popular worldwide because of low affordable costs and simple functional design. There are also numerous cafes and restaurants in the buildings where IKEA stores are located. They serve national Swedish food, which is one of the characteristic features of the company and a part of successful marketing strategy. Reuters write that in the last fiscal year 2012/13 the market shares of IKEA increased by 3.1 percent. Although the company had certain ideological problems with Russian government, the most significant growth of its sales was in Russia and in China. The US market has not been progressing in last years (Pollard, 2013).
Social factors are very import in the business policy of IKEA. The company pays much attention to the advertising campaign, adjusting it to the reality of the country where the target audience lives. For example, in Chinese advertisements they use models who are Chinese, so that the message will be closer to people.
The company also uses modern technologies actively. It is evident that the furniture IKEA produces is of high quality and is produced according to the newest standards. There is another aspect to be mentioned, which is social media integration of the business. Business nowadays “goes online” and using social networks, such as Facebook or Twitter, as well as online stores is crucial in promoting the production. IKEA allows all possible methods of payment and provides comprehensive ordering forms for its customers.
All these aspects work towards the aims the stakeholders of the company have. They successfully sell high quality furniture at affordable prices.
Used Business Excellence Model
Business Excellence deals with improving business performance of the company, developing its managing system and increasing its value for the shareholders. It aims at achieving the best results in all spheres of business activity like strategy, managing people, processes, information, and customer focus. It is possible to call business excellence a philosophy of management. The company uses the EFQM business excellence model. It provides a coherent analysis of the company’s management and organization. It features the following main categories: process, resources and partnership, policy and strategy, people and leadership. The analysis provides the data about the achieved results, actions the organization took to do it and the way the goals are achieved. TQM, or Total Quality Management, is regarded as a basis of business excellence approach.
It is necessary to emphasize the key concepts in the context of IKEA business excellence management (Mann, n.d.):
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Visionary leadership. It is the vivid example of the company’s leaders about the way of conduct and the main principles of business. The founder and director of IKEA Ingvar Kamprad is a millionaire now, but he lives like an average European who does not have much money. He does not wear designer clothes, has an old car and does not stay in luxurious hotels. He says that it is impossible to be a successful businessman without understanding the needs of the customers. Living the way the customers do helps to monitor main tendencies in the demand, which helps IKEA to be the first in the market of affordable furniture.
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Customer-driven excellence. The success of the company is judged by its customers and the way the company works on meeting their requirements and desires. In the beginning of IKEA’s career the company changed its policy from working only in Sweden to the international level. Several stores were opened in other European countries like Poland. On the first day there were many people who wanted to visit the store, and it turned out that there was not enough space for them. That is why the direction decided to let people visit the warehouse and that was the start of their new policy, when the customers can go right to the storage and take furniture themselves, without paying for delivery.
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Organizational and personal learning. This issue implies a well-executed approach to educating the personnel and systematic organization of the learning process. IKEA deals with it perfectly. There is a special notion of IKEA world view, that is about living in a modest, yet beautiful and utilitarian style. Sweden manner of life can be characterized as democratic and egalitarian, and the main personal requirements to people who work in IKEA are just the same.
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Agility. It is well-known that it is impossible to have a successful business without rapid reactions to the changes in the market. IKEA shows that flexibility and desire for innovations guarantee stable profit and popularity among the customers. The company is constantly changing its management for innovations. For example, according to the official IKEA’s the Global 2011 Sustainability Report, the company invested more than 679 million dollars into renewable energy systems. 270 million of euros was spent on installation of wind farms and 200 million euros was spent on the installation of PVs. IKEA has officially planned investments into this sphere for the next 1,5 years. Nowadays the company uses 124 Pvs that are installed in Belgium, UK, US, Spain, Canada, Italy and Germany. 27 additional wind turbines were bought by the company in 2012, and 69 of them have already been launched. Click Green journal writes that
“These major investments in renewable energy, focusing on wind and solar power, are moving toward IKEA’s long-term goal of using 100% renewable energy. More than half of the energy needed to power IKEA buildings now comes from renewable sources” (Click Green staff, 2013).
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Management by fact. This category is concerns the way business analysis is performed in the company, the critical information managers provide and the results they achieve. It is possible to say that IKEA copes with factual management successfully. The company has a number of personal characteristics that are obligatory for its employees. For example, they need to be active, optimistic and willing to take risks. In addition. They need to be responsible for the work they do. The last issue guarantees that each person will do his/her job on a good level, because everyonehas a small and precisely described set of responsibilities.
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Creating value and focusing on results is another important concept in analyzing the company’s business excellence. Judging by business history of IKEA, the company focuses on the results and knows how to achieve them successfully. According to the information provided by the magazine Business Excellence, IKEA “announced a rise in global sales of 3.1 percent to 27.9 billion euros for the year, with like-for-like sales rising 1.8 percent during that period” (2013).
Critical Analysis
Business excellence model of evaluating the company’s performance showed that IKEA has both advantages and disadvantages in its managing system. It is a well-known company with great benefits, that is why every minor mistake becomes a news.
The first news refers to the visionary leadership category, that was mentioned earlier in the essay. The founder of IKEA Mr. Kamprad is going to leave the company where he has been working for the last 70 years, because the youngest of his three sons is ready to replace him in the direction board. Though, this is not the main issue that is actively discussed in the mass media. The problem is that Mr. Kamprad does not live in Sweden, where his business is officially registered. He resides in Switzerland, where the taxing laws are not that severe for millionaires, as they are in Sweden (Reuters, 2013).
IKEA makes everything possible to be eco-friendly and to promote their achievements in the media to let everyone know about it. For example, their stores in the United States are equiped with new charges for electric cars, that are gaining popularity among the Americans nowadays. It makes the customer’s experience in the store more pleasant than it used to be. The first thing is that it is convenient. The second thing, that is very important, is that the customers understand that IKEA cares about them (Motavalli, 2013).
Another problem IKEA faced in the recent time is that the company is accused of spying on its employees. The scandal arouse in France, when the company fired a woman after having investigated with the help of a private detective into the reasons of her illness. IKEA had an access to the employees bank account details, personal mobile phone number and security number. This led to numerous court procedures against the company in Frace, where violating private information is equal to breaking the revolutionary principles of Liberté, Égalité and Fraternité (Clark, 2013).
Though there are more examples of successful management in IKEA than of failures. One of the key points is that the company establishes high standards on the quality of their production. Even though IKEA’s furniture is affordable and has a simple design, it is made of good certified wood. The company is not using the wood that was cut illegally, even if it costs less. It helps to set high standards on the furniture in the market and is a good example for smaller and developing companies (Reed, 2013).
IKEA is actively investing money in their business. The company is open for all types of innovations. These are points that IKEA invested in during the last several years:
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Alternative energy sources like solar energy. IKEA invested approximately 150 million dollars in covering with solar battery systems nearly 85 percent of roofs in their US shops. In addition, tha company invested into 11 solar panel units in 2011 financial year. This construction generates 6.800 KW of electricity. This innovation reduces CO2 production by 7.700 tons.
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Another issue is about the light bulbs. The company became one of the first major US retailer companies that stopped selling standard incandescent light bulbs and started selling energy saving ones. Those are Halogen, Solar, compact fluorescent light bulbs, and LED.
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US Tree planting is also of of the major issues where IKEA showed itself as an innovative company. Starting from 1998 the US IKEA departmeant with the help of its co-workers and customers have invested into planting of proximately 2 million trees on the whole territory of the US. They were doing it with their partner, American Forests. This initiative also helps to reduce the harm from the production of CO2 (Click Green, 2012).
Conclusion
The market of furniture is actively developing in the modern world. The countries vary by the average income of their citizens like the USA and China. That is why the purchasing ability differs. IKEA shows how it is possible to function successfully in all kinds of surrounding. The company has a flexible financial and social policies, adjusting the commercials and other kinds of promoting to their target audience. The current essay reports the findings about analyzing IKEA’s activity according to the business excellence model. It is pointed out that the company is working successfully in the market of furniture for many years and knows perfectly the principles of self-assessment and total quality management. The company is developing the EFQM business excellence model. It provides a coherent analysis of the company’s management system and organization. The assessment refers to the following main categories: process, resources and partnership, policy and strategy, people and leadership. IKEA is working hard on their business performance and tries to cope with the problems that appear, regarding them as a possibility for growth.
References
Clark, N. (2013). Revelations That Ikea Spied on Its Employees Stir Outrage in France. The New York Times. Retrieved from http://www.nytimes.com/2013/12/16/business/international/ikea-employee-spying-case-c asts-spotlight-on-privacy-issues-in-france.html
Reed, S. (2013). How Reliance on Trees Can Help Forests. The New York Times. Retrieved from http://www.nytimes.com/2013/06/20/business/energy-environment/20iht-green20.html
Mann, R., Mnderohammad, M. (n.d.) Understanding Business Excellence. An Awareness Guidebook for SMEs. Asian Productivity Organization.
n.d. (2013). Ikea Founder to Leave Board. Reuters. Retrieved from http://www.reuters.com/article/2013/06/04/us-ikea-idUSBRE95316820130604
Montavalli, J. Shop While You Charge: Consumers and Retailers Are Plugging In. The New York Times. Retrieved from http://wheels.blogs.nytimes.com/2013/07/09/shop-while-you-charge-consumers-and-retai lers-are-plugging-in/
n.d. (2013). Nothing Flat-packed about Ikea’s Sales. Business Excellence. Retrieved from http://www.bus-ex.com/article/nothing-flat-packed-about-ikea%E2%80%99s-sales