Reference no: EM133323636

CASE-STUDY: IKEA IN THE UNITED STATES

Active in 48 countries with approximately 400 stores, IKEA is the world's largest furniture retailer. In 1985, IKEA came to the United States. It struggled quite a bit in the beginning, not opening a single store between 1993 and 1999. It eventually figured out the right recipe for this market. Currently operating 44 stores with 14,000 employees, US operations contribute $5 billion of IKEA's global sales ($36 billion), ahead of its home country sales in Sweden (but behind those in Germany).

While keeping prices low has always been a hallmark of IKEA's strategy, directly supporting it is its efforts in human resource management (HRM). Its HRM centers on radically reducing staff turnover and creating a stable and nurturing working environment in an industry notorious for high turnover. Toward that end, IKEA US offers generous wages and benefits compared with its rivals. Hourly employees receive an average of $15.45 an hour, and entry-level employees $11.87 an hour-nearly five bucks higher than the federal minimum wage of $7.25. In comparison, Walmart hourly employees receive an average of $13.38 an hour, and entry-level employees merely a dollar above the federal minimum wage. Influenced by the home-country norms, IKEA's benefits are extraordinary by US standards. Even part-time employees enjoy health benefits for just 20 hours of work per week. Full-time employees annually receive 24 paid vacation days and five sick days-essentially "unheard of" in the United States, according to Fortune. Employees working for more than ten years can get 34 days of paid time off plus five sick days.

The IKEA culture also discourages workaholics. Instead, work-life balance is a big deal. "If you can't did job in a reasonable amount of time," head of human resources for IKEA US, an American executive, told a reporter, "you're doing something wrong." Few stick around after work hours, and everybody takes weekends off-of course, except those on-duty running the stores during weekends. Most employees take a "European-style" long vacation of several weeks.

At IKEA, egalitarianism runs deep. Similar to the parent company, IKEA US is not very hierarchical. All in-store employees are called "shopkeepers." Few executives have business cards. Everyone sits side-by-side at no-frills IKEA desks in an open floor plan at the firm's US "service office" (IKEA-speak for "headquarters") in Conshohocken, Pennsylvania (a suburb of Philadelphia). IKEA US's number-one executive, the country manager, on one of his store visits in Miami directly worked with a "shopkeeper" on how to most effectively move trash from the warehouse to the dumpster.

Inclusion and diversity are also part of IKEA's DNA. Not only are half of its US employees women, more than half of its senior managers and executives are women too. Some IKEA commercials feature gay couples. Since 1995, IKEA has offered domestic partner benefits. Starting in 2016, IKEA has covered gender reassignment surgery. Sometimes, its policies are viewed as "going too far" in more conservative markets. For example, in Italy, a politician called for a boycott after IKEA organized an event in support of gay marriage.

Country manager Lars Petersson, an expatriate from Sweden, is proud to put a Swedish spin on notions such as egalitarianism, work-life balance, and inclusion in an American workplace. "We don't make different considerations in different countries," he shared. "It's not that we aren't appreciative and interested in local culture. We are very much. But there are some fundamental things that we are not negotiating." In 2016, IKEA US is one of the only four proud non-US-owned firms that join the ranks of Fortune 100 Best Companies to Work for.

Source: "This is how we successfully invaded the US market," Business Insider, 6 June 2012: www.businessinsider.com; "At IKEA: No ranks, no rancor," Fortune, 15 March 2016: 202-203; "The 100 best companies to work for," Fortune, 15 March 2016: 141-165; "The magic in the warehouse," Fortune, 15 December 2016: 183-189.

Question: 1. How can firms such as IKEA select, retain, reward, and motivate the best employees that they can attract? How can they link the management of people from diverse cultural and professional backgrounds with firm performance?

Question: 2. Every country has formal rules, laws, and regulations governing the dos and don'ts of HRM. Informal rules of the game embodied in cultures, norms, and values also assert powerful influence. As HRM becomes more strategic, the VRIO dimensions are increasingly at center stage. Keeping these in mind, what norms should Ikea adopt based on the American way of doing things in order to succeed? What are the blunders and mistakes to avoid when it comes to people management?