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IKEA Background and Analysis

IKEA began operating in Sweden in 1943.

The founder of IKEA is Ingvar Kamprad who is from Sweden.

The previous CEO of IKEA is Mikael Ohlsson, replaced by Peter Agnefjall in 2013.

IKEA is a private limited company that own by an organization controlled by Kamprad family.

IKEA is an international home furnishing retailer that sells good quality design in low price furniture, bathroom, kitchen and accessories around the world.

Originally IKEA only sold wallet, pens, watch, picture frame and jewelry.

IKEA has grown to be largest global furniture retailers.

IKEA is cooperating with more than 1,500 suppliers around the world, which is around 50 countries in designing their own furniture.

IKEA trade internationally which have 341 stores in 38 countries. (Germany, United stated, France, Italy, United Kingdom, Sweden, Spain, Canada, Russia, China and others)

The mission of IKEA is “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.”

 The vision of IKEA 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”

The objective is to produce affordable price of product for the customer who cannot afford to buy expensive product. Ensure the customer found what they are looking for in the store at a low price.

B) An analysis of how the culture is transmitted to the employees.

IKEA’s employees are the most valuable resources in the organization.

When employees are productive, it will help increase the growth rate.

IKEA is dedicated in becoming an excellent employer for thousands of employees around the world.

IKEA offers a safe and healthy environment as well as advancement opportunity for every single one of its employees.

IKEA contains human rights and respect for each employee and they work in a living and strong company culture.

Employees value teamwork, modesty, ease, cost-awareness and rational.

They are always ready to learn and improve.

IKEA encourage employees to question accepted solutions, test new ideas and see mistake as a way to grow and develop.

IKEA uses “VOICE” (a company-wide survey) to monitor how the employees opinion on various aspects of their employment at IKEA.

Every year, IKEA will ask employees to fill in the survey to inquire their dissatisfaction and what kind of motivation do they need.

Based on the results from the survey can help to define areas to improve at IKEA.

The “IKEA Leadership Index” quantifies how employees look into their managements.

IKEA continue to provide a safe and healthy working environment for all their employees because the safety of employees and customers is always a main priority at IKEA therefore employees should have an adequate training before they have access to the safety gear and equipments.

All employees within the retailer and distribution must undertake safety training prior to work at IKEA.

Therefore, each IKEA outlet must have a risk manager who is responsible for local safety routines based on the IKEA Group Risk Manual.

IKEA’s employee’s business travels are provided with latest travel-risk information and a 24 hour global emergency service.

IKEA builds strong relationships with employees to make them feel that they belong in their workplace.

Well-functioning internal communication is a process which helps the employee’s ability to perform their tasks, to learn and develop effective leadership.

Every manager has the responsibility to ensure their employees have the ability and tools to receive and understand the information given.

Managers in IKEA receive support from tools and specialists available as part of the basic leadership training programmed.

The IKEA Intranet consists of multi-channel such as newsletters, easily accessible notice boards and plasma screens, regular meetings and closed-circuit radio.

IKEA has a web-enabled service that allows the employer to connect with employees from different countries with limited access to receive news and information about various IKEA activities.

Employees in different ages or different stages in their lives might have different abilities and demand. Therefore, IKEA provide a fair working hour, responsibility, to every employee according to demographics.

C) Discuss on how external and internal environment influences the organizational culture.


  • IKEA have the low cost of production therefore the price of the product is reasonable.
  • Mainly is because the product is made in China.
  • IKEA have better expansion to other market because IKEA have long term brand name recognize globally.


  • IKEA use the innovation of technology and systems in order to shorten the queues, tracking and scheduling the product.
  • IKEA using environment friendly product as a potential for innovation of technologic
  • IKEA inventor new technology that can shorten the queues that can save time
  • The IT department will keep updating the catalogue to the website of IKEA in order easier for customer to get the latest information about the product.
  • IKEA provide online shopping for the customer to make order directly. Customers just place a product to add to cart. By using this way it enables customers and staff saves the time.

Rivalry within the industry

  • In Malaysia there is handful of competitor in the furniture industry.
  • Besides that, there are many of retailers in the market.
  • There are Tesco, The court and Carrefour.
  • On top of this many retailers some are import from China and India. Therefore they can sell at lower price in the market.
  • This shows that the competition of the competitor in this industry is pretty high.

Bargaining power of suppliers

  • The bargaining power of suppliers in IKEA is low.
  • IKEA has good relationship with suppliers around the world and most of them are from China which consist of 1380 suppliers in 54 countries
  • IKEA has its own manufacturing company like Swedwood Manufacturer.
  • Therefore it is clear that IKEA can threats the suppliers to enter into their business.

Bargaining power of buyers

  • Customers like to compare the price among the retailers. Therefore price war will happen against each other.
  • Customer direct purchase from China also involved in the direct competition market.
  • So the consumers have many alternatives.
  • Bargaining power of buyer is high. Because they got many choices which manufacturers they can buy from.

Threats of new entrants

  • There are no entry barriers in the industry.
  • But the strength of competition may repulse the potential entrants. Because they have recognize their brand name globally.
  • Retailers only can operate a small business, they do not have enough capital besides that they lack of good relationships with the supplies, and therefore they do not have the strength to compete with IKEA.
  • Therefore the threat of new entrant is high, if competitors want to invest a lot in their business for a long term.

Threats of substitutes

  • As the styles are changing according to trends. The industry move from wood to plywood, plastics even iron.
  • As the market is becoming more concerned about environment friendly therefore many firms are practice for go green.
  • As the basic functional demand of customers have remain the same. Therefore there are no threats of substitutes.

Internal environment:


  • Giving employee 2 weeks of training before start work.
  • Training is being conducted by senior manager and learning and development trainers from IKEA stores across the country.

Incentive and benefits

  • Full time employees are given full medical and dental insurance (include spouse and family members.)
  • Paid maternity or paternity leave
  • Employees are entitle to a discount on purchase in IKEA


IKEA abolish junior pay rate and introduce a new pay structure whereby ensuring one rate of pay each position regardless time with IKEA or age.

Human Resources

  • IKEA recruit employee through interview
  • HR does the recruitment and training for the advantage of IKEA.
  • HR is held responsible to maintain and reinforce the culture in IKEA.
  • IKEA employees come from different background that is being shared to develop and transform their vision into a reality.
  • HR needs to ensure that employees and managers are capable of working together towards attracting, expanding, and stimulating a pleasurable work experience.

Change in Leadership Style

  • Transformational leadership which include 4 elements. /democratic and paternalistic style. /autocratic leadership style
  • Intellectual stimulation
  • Inspirational motivation
  • Individualize consideration
  • Idealize influence

Internal management

  • IKEA practice informal management style.
  • IKEA have to adapt their business style according to the countries culture.

Performance appraisal

  • This is the process whereby the employer evaluates the employee based on their job performance during a specified amount of time.
  • Employee that achieves a good performance shall be rewarded accordingly.
  • IKEA practices VOICE and leadership index too
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