Discuss TWO (2) challenges faced by IKEA to maintain the quality of its products and services to customers due to the huge expansion to many geographical areas worldwide.
IKEA is a multinational organization that designs and sells ready-to-assemble furniture,kitchen appliances and home accessories. Founded in Sweden in 1943 by 17-year-old Ingvar Kamprad, IKEA has been the world's largest furniture retailer until today.
The rise of furniture price in Sweden between 1935 – 1946 has trigger Mr Kamprad to take the opportunity to form IKEA. In 1953, IKEA started its operation from a factory that was converted into a warehouse. It sales grew from SKr 3 million to SKr 6 million in 1955. In 2020,there were a total of 445 IKEA stores worldwide. In the financial year of 2019,the global revenue generated by the IKEA Group amounted to 41.3 billion euros.
Lead by an extremely ambitious leader, IKEA hold onto a unique management philosophy instill by the founder. Mr Kamprad main focus is not the profit alone but on improving the quality of life of the people. He is a visionary leader who always look at problems as an
opportunity. He taught his employee that it is good to be different. Kamprad has built a very close relationship with his employees. In their annual dinner, the employees went first to the buffet, followed by the managers and Kamprad was among the last. The company operated very informally. They stressed on simplicity and attention to details. In IKEA – “Complicated rules paralyze”. They organized “antibureaucrat week” that requires managers and employees
to work together in their showrooms and warehouses for at least a week in a year.
Compare to traditional wood furniture that were normally made from dark wood, IKEA offer a line of simple contemporary design furniture. IKEA had over 20,000 products offering, of which 12,000 types formed the core of simple, functional items that are common across their
stores worldwide. They also introduced self-service and cash and carry concept that is new to furniture business model.
In its operation, IKEA’s designers and managers were always looking for less expensive, good quality alternative materials for their products that lead to change from using teak wood to oak and finally pinewood furniture. With regard to its products, IKEA aims to provide products that cover the total home area, indoors as well as outdoors with loose as well as fixed home furnishing that are affordable to the majority of people. Initially, the target market was the young, low to middle income families. Currently, they also targeted the office segment as well the older and richer people.
Additionally, to maximize its production, IKEA always search for new suppliers who have access production capacity. By having reliable suppliers and utilized the suppliers’ access capacity, IKEA was able to sustain its unique low price levels. Among all, the most noticeable
aspect of IKEA strategy was its successful retail operation despite of its worldwide locations.Its unique characteristics of its stores such as having a supervised play area for children, in stores café and fully equipped nursery and baby-changing facilities were proven successful.Since 1970’s IKEA has expanded its retail outlets and warehouses to cover Austria, Belgium,Canada, Denmark, France, Italy, Netherland, Norway, Malaysia, Singapore, Thailand, Kuwait,Morocco, Egypt and many others. It has approximately 208,000 co-workers worldwide.Having the expansion strategy in placed and implemented rapidly, the biggest concern of the management was whether the expansion would make it difficult to retain the company’s cultural values that was one of the back bone of its success. In order to maintain the cultural bond, it is important for the headquarters to sustain the common cultural beliefs among the top management of its branches. Thus, they try as much as possible to have the majority of their management group are among Swedish or Danish in which somehow were questioned by some employees in different countries. Another concern was the different of attitudes among workers from different part of the world for instance the American. The founder’s cultural beliefs and management style has dominated the way IKEA works and sustain its competitive advantages.Some has questioned what will happen if the Mr Kamprad is no longer in the company?
（b）Discuss TWO (2) challenges faced by IKEA to maintain the quality of its products and services to customers due to the huge expansion to many geographical areas worldwide.
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