Ingvar Kamprad and IKEA Case Study
On the basis of information provided concerning Ingvar Kamprad and IKEA, the organizational theory underlying IKEA will be identified. Associated behavioral problems with IKEA's development will also be discussed. Questions were formulated and are addressed in order to more fully delineate IKEA's organizational strategy and development. Assumptions made will be identified throughout discussions. The questions guiding the discussion are as follows:
What organizational theory served as the basis for IKEA's successful emergence within the furniture retailing industry in Sweden and internationally?
What strategic management principles are evident within Kamprad's efforts?
What barriers/behavioral problems existed and how did IKEA overcome them from a strategic perspective?
Organizational Theory
Ingvar Kamprad largely developed and created sustained growth in IKEA through an organizational philosophy based on strategic management. From the earliest days of IKEA, Kamprad displayed a commitment to seeking out and utilizing strategies for responding to the larger environment which he recognized could either inhibit or further facilitate the company's growth.
Strategic Management Principles
When reviewing some of the principles that have long been associated with strategic management, the assumption that Kamprad largely developed IKEA on the basis of strategic management can be further established. In reviewing Michael Porter's principles concerning long-term strategies leading to the development of core-competencies, it can be determined that Kamprad clearly followed these premises as he built IKEA. These strategies include:
Achieve overall low-cost leadership in the industry
Market products that are differentiated
Focus on market segments for growth in cost and/or differentiation (Bartol & Martin, 1993).
Following these principles, Kamprad adhered to a cost leadership strategy which placed extensive emphasis on efficiency within the company in order to reduce the overall costs of products delivered to customers. As well, he mixed this strategy with a number of efforts to market products that were differentiated. Overall, his goal was to attract those within the furniture market who had not previously had access or resources to purchase furniture. Kamprad's emphasis in terms of a cost leadership strategy was to design functional furniture that was easy and inexpensive to build while marketing products that were differentiated by relying on simplicity in catalogue displays as well as retail outlets, utilizing a self-service approach rather than an intensive salesperson approach, and engage in cash and carry practices. Ultimately, cost savings earned by IKEA were passed through to customers in lower prices.
As evidenced within the case information on IKEA, Kamprad also adhered to Porter's strategy of focusing on market segments for growth in cost and/or differentiation in developing the company's core competencies. Young and low-to-middle income families represented the market segment which Kamprad was committed to attracting.
As Kamprad had indicated in the early days of the company, he was and remained interested in ensuring that the majority of people had the opportunity to afford quality and functional furniture and home furnishings at affordable prices.
Furthermore, Kamprad's utilization of strategic management in establishing and sustaining IKEA is evident in the manner in which he incorporated and served as a visionary of cost leadership. This is best demonstrated in consideration of the steps identified by Michael Porter as necessary for applying cost leadership. These steps included:
Create a good product
Draw advantage from many sources
Study the competition
Make cost a part of corporate culture (Bartol & Martin, 1993).
Kamprad established Ikea on and generated his philosophy throughout the company of these principles in number of ways. He maintained his commitment as the company expanded internationally in creating a quality product that was based on efforts to utilize a variety of sources that represented further low cost advantage for the company. He studied the competition and responded by applying low-cost logistics and large simple retail outlets in suburban areas in order to attract IKEA's targeted market. Through Kamprad's ongoing efforts to maintain...
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