Case study: IKEA
For our case study we talked to store manager of one of largest IKEAs in Nederland, IKEA Amsterdam.
Bellow you can find the questions prepared, our expectations, the interview and some final thoughts on this case study.
This is a semi-structured interview, prepared after the first analysis of the subject, that was sent to our interviewee before the meeting. Martyn read the questions prior to the meeting.
1. Is your company in crisis?
- 1.1 Did you try to predict it?
- 1.2 Could you predict it?
- 1.3 Do you think you could have done something else to predict it better (and what)?
2. Do you have a department that does market research?
- 2.1 What is their contribution in predicting a crisis?
- 2.2 Have they been helpful avoiding a crisis?
- 2.3 Do you think there is unused potential for using information/resources in predicting a crisis?
3. What have you done to overcome the crisis?
- 3.1 Were you prepared for it? What were the actions taken?
- 3.2 Was the market research particularly useful?
- 3.3 Did you prepare for a specific crisis? Or did you prepare for general crisis?
Before our actual interview at IKEA Amsterdam we had some expectations about crisis management at IKEA Amsterdam. For being local store we did not expect a large effort on crisis management. We did expect mechanism to be in place to handle certain crisis situations. IKEA is a company that even though we are in an economic crisis manages to remain in a profitable situation.
In our case study we talked about possible crisis situations that might occur within the IKEA company and their strategy and ability to predict them. The interview showed that on a local level IKEA did not have a clear strategy on crisis prediction. Rather IKEA tries to create a innovative environment to deal with crisis situations. By staying in touch with their customers they try to create innovative products to keep their business going. The rule of thumb in IKEA is that "To prevent is better than cure" The real crisis prediction happens on the higher level of IKEA. The IKEA is a multinational organization which managed by two organizations located in Sweden and Nederland. INGKA Holding B.V. owns the industrial group Swedwood, which sources the manufacturing of IKEA furniture, the sales companies that run IKEA stores, as well as purchasing and supply functions, and IKEA of Sweden, which is responsible for the design and development of products in the IKEA range. INGKA Holding B.V. is wholly owned by Stichting INGKA Foundation, which is a non-profit foundation registered in Delft, Netherlands. The European logistics centre is located in Dortmund, Germany, and the Asian logistics centre is located in Singapore.
Store manager of IKEA introduce himself and he talk about his experience during his work in Japan:
- "I was in Japan for 6 years, it was incredibly exciting, has a culture which is totally different than anywhere else. We had no stores at all, but when I left, we had 3 stores and I was the manager of the third one. The stores in Japan run very well, and it’s because of the concept of IKEA. It shows that the concept is so good, as long as you implement it successfully."
- Question: Did you have a different design for Asian market?
- Store manager: "No, the only different in Asia is the regulation. For example, the height of the mattresses or the sizes of light bulbs are smaller."
- He further said: "Now that I’m the store manager of IKEA Amsterdam, the store concept is a little different, we call it Value Added Participation (VAP) store. So this concept means that I personally invest in this store for 6 years, and in this way I have more freedom than other stores. This is my intentional investment, so it gives me the opportunity to develop the business even more. The founder of IKEA believes that IKEA started to get little bit autocratic and very similar to each other. So he wanted some percentage of the stores - I think 25% of stores - to become VAP stores, and those hopefully keep the entrepreneurship of the organization going and developing."
- Question: Have you been successful avoiding a crisis?
- Store manager: "For IKEA, I look at the crisis as an advantage. Crisis is good for IKEA. It is an opportunity for IKEA to do a better job. When I look at the 2008 crisis, it has a positive effect of IKEA. If we look to our core values, IKEA has a very clear vision which is to offer a wide range of home furnishing, with good design and good quality, at reasonable prices. It’s all about low price. Low price doesn’t mean cheap, low price means low price and good design, and this is what we are very good at doing."
- Questions: How do you look at the current crisis in the context of IKEA?
- Store manager: "I don’t think it is a crisis for IKEA, IKEA is growing incredibility quickly. In 22 years we grew massively and in the next 10 years, we have 10 tasks to do and it’s very much about development and grow. I think we are now about three hundred stores in 28 different countries, and we are the biggest home furnishing company in the world. So, the growth is massive, both from the turn over, people and businesses - and all this things grows. That’s why the founder is concerned about the growth. He's trying to slow down the fast growth of IKEA and to take care of the existing business, that’s why we investing back to the businesses now through the VAP store concept."
- Questions: One of the risk factors to the IKEA business are the logistic challenges, to supply all their stores around the world. Regarding a possible crisis, what is your idea about that?
- Store manager: "Now we want to decentralize our supply system to different regions. For example, when we worked in Japan, it took nine weeks to transfer "BELLY" bookcases from our production facility, in Germany, to Japan. This lead to a situation in which we had to order around 450 bookcases every time. With the creation of production facilities in China, we were able to drop delivery times significantly, therefore, solving some logistic problems before they grew out of hand"
- Another risk factor that could jeopardize IKEA's business is the growth and globalization of IKEA. In our case study we also asked the store manager of IKEA about this possible risk.
- Store manager: "It is important to make sure that you don’t lose your market and control over your business. This is the reason why IKEA invests in small localized stores all over the world. It’s important to ask yourself while you're growing, how you can stay close to the the same core-values as when IKEA started. "
- We also inquired the store manager if the 2011 and 2004 tsunami catastrophes affected the IKEA supply chain. The store manager dodged the question only saying that stores in Japan were well prepared, and also they were mainly getting materials from other regions in the world that weren't affected.
Conclusion and other thoughts
The store manger of IKEA Amsterdam did not reveal any crisis prediction processes taking place on a local level. On a localized level IKEA watches market aspects that matter most to them. For instance, through market researches (from hired companies), they realized that people living in Amsterdam often don't have or make use of a car. Most of the time they use the public transportation system to reach the Amsterdam IKEA store. Without adequate transportation they can't take big furniture home. Measures are being taken to establish delivery services to make sure people without a car, still can get their furniture at IKEA. They try to grow and evolve with their customers by watching the customer preferences closely.
From this case study came forward that logistics and customer preferences are aspects that IKEA uses on a localized level to identity possible treats and opportunities for the business.
However, during the interview, although we asked direct questions about crisis, the store manager focused on different aspects. Leaving space for the though that real crises management and prediction effort comes from the central management of IKEA.
IKEA may enjoy a privileged position during an economic crisis but, they still need to look out for other crisis. IKEA being such a globalized company, is more "exposed" to any crisis that happens in the world. Crisis situations that affect their natural resources, employees and/or customers are always of importance and possible and, therefore, close attention should be paid to factors that indicate their occurrence.
- 2011 Tōhoku earthquake and tsunami, Wikipedia - http://en.wikipedia.org/wiki/2011_T%C5%8Dhoku_earthquake_and_tsunami
- 2004 Indian Ocean earthquake and tsunami, Wikipedia - http://en.wikipedia.org/wiki/2004_tsunami