Critical Resources
The resource-based theory suggests that valuable, rare, and difficult-to-imitate resources suit best for long-term company success. Theory’s framework is based on assessing, identifying, and strategically aligning resources that will add competitiveness to an organization. Being the largest furniture retailer in the world, IKEA has all the critical resources required to accomplish its goals and successfully meet its mission and vision while upgrading constantly. Certain VRIN (valuable, rare, inimitable, and non-substitutable) company capabilities will be listed within corresponding resource types.
The resource dependency theory states that any business or organization must connect with other actors and organizations in its environment to acquire the needed resources. The main objective of this theory is to reduce dependencies on other organizations and have vital resources to minimize the control of other firms. However, it is rarely achieved in reality: for example, only approximately 9% of IKEA’s raw materials needed for production come from Sweden itself (Garvey, 2017). In general, the company holds physical (tangible), financial, human, and intangible resources.
Tangible (Physical) Resources
Usually, tangible resources provide almost no competitive advantage to the company, but these advantages are not negligible in the IKEA case. Using recycled, hybrid, or unusual natural materials, materials from renewable sources, and special flat packaging are valuable for the company and pretty rare on the market. Other tangible resources are:
- materials, which include raw, production, and packaging materials and supplies;
- technological equipment, machinery used for the production;
- infrastructure, including owned or rented land, stores, offices, and other facilities and maintenance.
Intangible Resources
Intangible is seen as a source of IKEA’s success because they are not easily replicated in factor markets by competing players (VRIN): innovative and straightforward design, unusual product names and specifications, and a strategically planned brilliant distribution scheme (Garvey, 2017). Also, intangible resources include:
- intellectual property: trade names, patented technology, computer software, databases, video and audio material, etc.;
- brand reputation;
- customer experience.
Financial Resources
All financial resources available for use, which are a part of the company’s liquid assets and usually used as business continuity funds, provide continuous running of all processes. Those are capital, cash balances, bank loans, overdrafts, etc.
Human Resources
The set of employees who make up an organization’s workforce includes all the staff, from the essential worker to the general director. Due to a tremendous design quality devotion, IKEA holds a large team of in-house designers and several dozen freelancers (Garvey, 2017). Also, the company has a massive advantage in the job market by hiring non-skilled carpenters for the production lines because of the best up-to-date automated machinery.
Leadership, Governance, and Management
Governance
IKEA continues to expand globally, and its profits are steadily growing mainly because the company management continues to pursue a policy aimed at simplifying life and the opportunity to shop. According to the company’s founders, simplicity and common sense are the best principles (Garvey, 2017). They also claim that in addition to opening new stores, there should constantly be improving and working on existing ones.
IKEA pays attention to the incomes of its employees without separating them by their work positions so that their furniture retail continues to be a priority and remains available for the average worker. IKEA can reduce the prices if the store and production residence country is in crisis to attract as many customers as possible (Garvey, 2017). For example, reducing the prices by 15% will make it possible to carry out the plan, which is planned for a future year, which goal is a long-term investment that is very important for the company in terms of volume sales.
Management and Leadership Styles and Effectiveness
IKEA’s leadership styles are autocratic, democratic, laissez-faire, consultative, and paternalistic. The abundance of approaches increase management effectiveness drastically, and those approaches can be implemented on any level within the company depending on the circumstances and the manager’s decisions. For example, the democratic leadership style is often used at the lowest store level.
Organizational Leadership
Almost all employees have a flexible schedule, which is tailored to the personal preferences of their subordinates. This approach suggests that this company respects employees’ time and allows finding suitable jobs for students, retirees, and additional earnings for everyone who wants to. It is worth noting that there are no age restrictions for the staff in the company.
Also, strict attitude to tardiness and gladly encourage overtime. Each employee has a unique badge, which they use at the entrance and exit of the store. At the end of the month, a work schedule is drawn up, considering employees’ delays, and bonuses are written out for exceptionally hard-working employees (Garvey, 2017). IKEA is generous with various perks for employees right in the workplace: unlimited coffee, showers, and even TVs are all open to the entire staff.
There is a 15% discount for IKEA employees, but this discount can only be used individually. Also, the company has its travel center, which organizes various business trips for staff. A ticket to business class and a five-star hotel is never bought for anyone, even for the top managers.
Management control systems
Cultural controls: every new employee is carefully screened to fit what IKEA wants them to be, and employees need to know how important IKEA’s core values are to them. Education and other virtues are not the most important thing when looking for a new employee. Personality, what kind of person you are and what your values are, are more important. Therefore, employee selection is very important, and IKEA Bäckebol strives to hire people who already have the right values and beliefs that fit the corporate culture. This corporate culture includes entrepreneurial spirit and drive, as well as activity and the ability to take responsibility at work when given the opportunity. They also believe it is important that job seekers are interested in IKEA, which is why they only advertise jobs on their websites. They believe that if a job seeker comes to their website looking for a job, they have taken the first step toward showing an interest in IKEA specifically.
Administrative controls: the organization structure, governance structure, and procedures. The first one is basically the chain of command – for example, at the store level, there are a store manager deputy store manager and at the next level, the structure divides in a few different departments according to their function. About the governance structure – every possible department has a schedule of different meetings, which are essential for the operation process. All procedures, policies and other guidelines are constantly used in all IKEA processes and are constantly being redeveloped. Planning control mostly includes budgets, business, and personnel schedule plans. At IKEA budget is usually planned for 1 year, and the business plan is developed approximately 2-3 years ahead.
IKEA is an organization that uses a lot of financial measures, mainly based on sales and productivity, as cybernetic controls: sales, customer reviews, product costs, values, and other statistics. Global measurements are mainly made by the top managers and the only numbers that the managers at the store count themselves are sales on a daily basis. The reports can be used by managers as well as all employees who are interested.
Reward and compensation controls are more motivational factors. The company has different types of reward systems all around the world, but in the future, IKEA’s goal is to use one single system to make it more fair and easy to evaluate and administer.
Reference
Garvey, P. (2017). Unpacking IKEA: Swedish design for the purchasing masses. Routledge.