Ikea hierarchy

Running Head: IKEA ORGANIZATIONAL STRUCTURE

IKEA ORGANIZATIONAL STRUCTURE 2

Topic: IKEA’s Organizational Structure

Mohand Aljehani

MGT510 Strategic Planning

Calvin A.Lathan

28/11/2017

Introduction

Organizational structure bridges the gap between strategy and its implementation thus determining the extent of organizational effectiveness (Grant & Jordan, 2016). Companies like IKEA consistently strive to widen footprints across the globe, however, this globalization achievement comes with increased competition. This makes it essential for firms to transform by instilling complex organizational structures that are not only supplemental to effective strategic implementation but also providing the need for middle and operations management involvement (Radomska, 2014). Additionally, an organic structure is ideal as it catalyzes the alignment of processes to systems with aim of reinforcing viable outcomes and behaviors. This formalization of processes promote authenticity, rationality and creates order-oriented decision making. In result, an increased innovation which is coupled with global expansion is bolstered by the deeper efficiency and effectiveness standards (Grant & Jordan, 2016).

About IKEA

IKEA Corporation is a world leading furniture and home appliances manufacturer and retail organization. Despite starting as a small company, the firm has grown by leaps and bounds to its currently global presence across 28 countries with a sizeable employee-base. It is renowned for viable business strategies such as the coveted new product development strategy, cost leadership strategy and its latest international expansion strategy. In the same token, it has a robust management style of leadership with example that promotes its vision embracement of creating a better everyday life for many (Dudovskiy, 2017). Its management style has been so crucial in defining strategic guidelines that impact on the extent of employee involvement in strategic execution. It blends employees’ activities with strategy and foster interrelationship between operations and strategy. Despite resource scarcity being a setback, their optimal usage leads to successful implementation. (Radomska, 2014).

Current IKEA Organizational Structure

It is undeniable that IKEA currently has adopted a good hierarchical organizational structure. It has scored several firsts that leverage on its hallmarks such as a solid financial strength, market leadership and democratic design concept. It has conceived a flat hierarchical structure characterized by fewer layers of management between its top level management and frontline employees (Dudovskiy, 2017). This creation makes a supervisor to oversee many employees hence minimizing close supervision but encouragingly deepening the level of freedom of action for the employees. It has resulted in excellent performance enjoyed by IKEA as it has built a welcoming employee attitude of ownership and job involvement. Despite the flat structure heightening the need for greater employee satisfaction and self-actualization (Porter & Siegel, 2006), it is still plagued by role ambiguity, confusion and limited career growth hence the need for structural transformation to actualize its dreams of a more innovative international business model.

IKEA Hierarchical Organization Structure

Inter. IKEA Holding B.V

IKEA System B.V

IKEA Industry Holding. B.V

IKEA Supply AG

IKEA Sweden AB

New IKEA organizational structure.

IKEA Corporation has a focused goal of attaining greater global expansion backed by high innovative ability. This is only achievable when a proper structure is in place such as an organic structure (Chu, Girdhar, & Sood, 2013). It is renowned for being flexible, decentralized in nature and also complemented by low formalization levels. This structure breeds a seamless exchange of information. It designs broader job descriptions where employees only major in relevant duties as per the firm needs (Chu et al., 2013). It is perfectly in sync with employees thirst for higher job satisfactions. It forms a near one jigsaw-size fits it all status that foster innovativeness and entrepreneurial behavior that IKEA believes in. (Covin & Slevin, 1988).

IKEA Organic Organization Structure

Inter. IKEA Holding B.V

IKEA System B.V

IKEA Industry Holding. B.V

IKEA Supply AG

IKEA Sweden AB

Administration Staff

Purchasing Staff

Production Staff

Project Manager 1

Administration Staff

Purchasing Staff

Production Staff

Project Manager 2

Determination for the need of an Organic Structure

IKEA operates in several countries across the world making it open to increased competition. This may be retrogressive to the company for example within Russia where it has had dwindling sustainability (Dudovskiy, 2017). Additionally, its wide geographical representation and wide pool of personnel makes supervision and control an uphill task. It is in equal measure battered with minimal flexibility. Given the fact that firms are as sound as their structures, it is important that firms set clear guidelines on the extent of their formalization, centralization, hierarchy and departmentalization. IKEA prides itself of a cross functional team, cross hierarchical team, decentralized system, minimal formulization, wider control span and need for free information flow. (Chu et al., 2013).

IKEA is in dire need of being top at their innovation to safeguard its global expansion quest. This is only attainable when the organization structure correlates with the business strategy, policies and management style (Grant & Jordan, 2016). The firm’s effectiveness thus pivots on harnessing good employee behaviors and nurturing a positive attitude. To remedy the almost rigid mechanistic structure IKEA has, it is inevitable to change to a flexible and decentralized organic structure that propels innovativeness. This unique structure will not only catapulted the integration of several companies operating under its trademark but also promoted an organizational culture of a shared vision, objectives and values that forms the building block for successful strategic implementation. (Grant & Jordan, 2016).

Conclusion

IKEA, a world market leader in home appliances and furniture business has a hierarchical structure currently fashioning its operations. However, this limits its sustainable competitive advantage and innovativeness objectives as it seeks for global expansion. It therefore requires a more fluid structure that is an organic one to bring sanity through bettering its franchising system, broadening its external business adaptability, improving communication quality, clarifying roles and expediting decision making. The organic structure is immensely authentic and brings everyone on board, however, it may lead to erratic customer experience if not well implemented. (Covin & Slevin, 1988).

References

Covin, J. G., & Slevin, D. P. (1988). The Influence of Organizational Structure. Journal of Management Studies, 25, 217–234.

Chu, V., Girdhar, A., & Sood, R. (2013). Couching Tiger Tames the Dragon. Business Today, 22(15), 92-96.

Dudovskiy, J. (2017). IKEA Group Report, Retrieved from https://research-methodology.net/ikea-group-report

Grant, M., & Jordan, J. (2016). Foundations of Strategy. Hoboken: Wiley.

Porter, L. W., & Siegel, J. (2006). Relationships of Tall and Flat Organization Structures to the Satisfactions of Foreign Managers. Personnel Psychology, 18, 379–392.

Radomska, J. (2014). Model of Successful Strategy Execution: Revising the Concept. Problems of Management in the 21st Century, 9(3), 213-222.