IKEA Company Cultural Issues in International Business

IKEA is Swedish company that deals with designing and selling of “ready to assemble furniture” (IKEA systems, 1999). IKEA Company is among the largest well-established organizations in the world. Recently, IKEA expanded its market into China and opened several stores in Shanghai city. However, there is an issue of culture difference between Sweden and China. Because of the distinctive Chinese culture, it is obvious that there are Cross-cultural issues in the management of IKEA China Company. This paper will discuss how IKEA Company integrates its international marketing strategies to align with its marketing activities considering issues of culture differences so that IKEA can prosper in the Chinese market.

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Cultural issues the two countries

There are many cultural differences between China and Sweden in relation to the market and investment. One major difference is in terms of life style. Lifestyle of the Chinese people virtually affects everything including what they purchase. Secondly, there is the issue of communication because of language difference. Lastly, there is the issue of preferences and taste. Different people prefer certain products varying from one culture to another culture (Brislin, 2008)

Cultural differences affect business operations and investment in many ways. First, it affects investment preferences. People have different tastes, and this may vary according to cultural attitude, values, and beliefs. Because of this, a company may be in dilemma on what to invest. Secondly, difference in culture may affect employees’ performance and t in turn affects the output (Cornelius, 2002). This is because certain cultural practices may motivate or de-motivate employees. For instance, the tradition of giving presents to Chinese people motivates their employees. To overcome Cross-cultural issues, an organization can work towards improving levels of cultural awareness. This concept is important because it can help companies to develop international competencies or cultural tolerance. As such, organizations can provide mentors cross-culturally, offer cultural training courses to encourage cultural diversity, organize cultural events, and practice a uniform corporate culture (Cornelius, 2002).

Due to the emerging cultural differences, it is very risky to ignore the most likely influences that can occur because of the unique Chinese culture (Cornelius, 2002). Such cultural differences may affect market outcome. Because of this, it was important for IKEA to maintain global market standards while trying to adapt to the local needs.

Resolving the cultural issues

IKEA adapted new policies. IKEA Shanghai had to adapt a management style that would combat issue of child labor. IKEA management joined forces with the United Nations Children’s Fund (UNICEF) to help in curbing the issue of child labor in their organization (IKEA systems, 1999). This was praised by the local community as they so the organization to be socially responsible.

To capture customers’ interest, IKEA Shanghai adopted customer-centered style of management (Pan, 2005). Customer-centered style enables an organization to address the needs of the customer directly. In this style, customers’ needs are prioritized. This was adopted to meet customers’ preferences. IKEA Shanghai also began services of supplying and delivering products for its customers (Pan, 2005).

On the other hand, the company modified its structure to overcome cultural issues like language barrier. The management was appointed from the local community to help in sensitive issues of management. In the cafeterias, the guards and other staff were selected from the locals (IKEA systems, 1999).

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Resolving the cultural issues.
Resolving the cultural issues.

Background information: IKEA Shanghai

IKEA shanghai is the largest IKEA shop in Asia (IKEA systems, 1999). It has a big parking space that can accommodate about 2000 vehicles. Indeed, IKEA Shanghai is a superstore. IKEA shanghai has more than 50 show rooms with about 95 percent of these rooms being fully furnished with IKEA products (Pan, 2005). Varieties of furniture found at IKEA Shanghai include mattress, sofas, kitchen cabinets, children items, storage, glassware, office furniture, and storage solutions for bedroom and bathroom (Pan, 2005).

IKEA first established a new branch in China (IKEA Shanghai) in the year 1998 and the management has been planning to expand the Chinese market by opening other branches (Pan, 2005). IKEA decided to expand its international market to China because the Scandinavian furniture market was stagnating. As such, IKEA Company needed to expand and look for new markets to extend “the growth stage of its lifestyle” (Pan, 2005).

One factor that attracted IKEA to expand to Shanghai is because of the large population. Shanghai has a large population and therefore it offers a wide market for IKEA products. In addition, China has the fastest growing economy, which is averaging at 9.5 % economic growth (Fan, 2000). In addition to this, Shanghai is the largest and fastest growing city in the world. This means that, Shanghai attracts many foreign investors and hence IKEA can acquire bigger market and earn more foreign income (Pan, 2005). The Shanghai’s economical growth is reported to have increased from15 percent to 25.5 percent between 2002 and 2003 (Fan, 2000). Apart from this, IKEA invested in Shanghai city because of security reasons. Shanghai is safe with less crime record considering that the dwellers are friendly to foreigners.

Specific cultural issues

IKEA Company faced major cultural differences when it opened a branch in Shanghai, China. The first cultural difference is language. The Chinese people use Chinese language as the means of communication. Secondly, the Chinese mode of cooking and eating is very different from the Swedish style (Pan, 2005). For instance, Chinese people use chopsticks for eating compared to people from Swedish origin who use forks, knives and spoons (IKEA systems, 1999).

Thirdly, China has different festivals. The most important Chinese festival is the New Year festival also called the spring festival. During New Year festival, families get together just like Christmas in Sweden and other western countries (Fan, 2000). In addition, color red is highly valued by the Chinese people because it is associated with good luck. Red color is used during the Chinese New Year (Pan, 2005). Gifts wrapped in red are given to friends and relatives to wish them good luck during New Year festival.

Furthermore, Chinese people associate different years with birds or animals. The year 2006 was named the rooster year celebrated with a red rooster while 2007 was the year of the pig that was celebrated by having a red pig at the beginning of the year (Fan, 2000). As well, the Chinese cultures use dark colors, carvings and many decorations on furniture while Swedish people prefer light colors and simple patterns on furniture (Pan, 2005).

Lastly, the Chinese people believe that a couple has to sleep very closely to symbolize good relationship (Fan, 2000). As such, the use of double and big beds is not common in China. However, people of Swedish origin believe, double sized beds offer nice sleep with less disturbance from your partner (Fan, 2000). The use of two single beds to form one double bed is common in Sweden while the Chinese people do not believe in a couple sleeping on single beds (Fan, 2000). Sleeping separately is a symbol of bad luck for the couple (Fan, 2000). Generally, the cultural differences between the two countries China and Sweden is because of different lifestyle and socialization. Indeed, our values and beliefs influence our choices and preferences (Lewis, 1999).

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How IKEA solved cultural issues

Because of these cultural differences, IKEA Shanghai had to modify their products to fit the local market (IKEA systems, 1999). As a result, IKEA Company was able to blend into the Chinese culture with their products. For instance, in IKEA’s restaurants, they provided chopsticks, forks, and spoons (IKEA systems, 1999). The company also began providing furniture with dark colors and fancy carvings to fit the Chinese home (IKEA systems, 1999).

To cater for the Chinese New Year festival, the company developed products that were in line with the theme of New Year festival (Fan, 2000). For instance, year 2006 that was known as the year of the red rooster in China, the company had a red rooster in all its products in Shanghai (Pan, 2005). In 2007, which was named the red pig year, the company developed a series of products with a red pig to mark the New Year (Pan, 2005). This modification enabled customers to acknowledge the company as part of their culture. In addition, the company was able to provide for different preferences without compromising the quality of products and the price (Hall and Welch, 2008).

Taking the example of Sultan Hogbo mattresses, the company developed the single, standard double, and big doubles to fit the Chinese market (Pan, 2005). The sizes are based on the Chinese cultural value that emphasizes on the closeness between couples (Pan, 2005). Lastly, the Chinese culture states that a wrapping should match the product inside. The company changed from packaging style to meet the needs of Chinese (IKEA systems, 1999). The solution employed by IKEA shanghai was very effective. This is evident due to the kind of response received from Chinese people. During the New Year festival, IKEA Shanghai sold over 5000 items in a single day just because they were decorated with red (Pan, 2005).

Recommendations

For IKEA shanghai to overcome Cross-cultural issues, the management must play its role in this issue. Foremost, the structure of the management should be balanced (French, 2010). The company should ensure that, most of the workers are locals. Considering that IKEA Company is a foreign organization, the employees including leaders and subordinates should be selected from the local community (Henderson, 1994). This way, the community members will be at ease when purchasing products from IKEA. The best management style that can work for IKEA Shanghai is permissive form of leadership. Permissive form of leadership is the kind of management where all employees are part of the decision-making (French, 2010). IKEA shanghai leaders should allow their subordinates to participate in decision-making.

Considering that, subordinates are locals; they are aware about customers’ expectations. As such, the subordinates can suggest ways of improving customer services and products (Ward, 1999). However, since the power index is high in China, IKEA Shanghai should train its employees to create a balance so that the democratic form of leadership can work effectively (French, 2010). The company should focus it attention in promoting cultural awareness to encourage diversity (Marx, 1999).

Hofstede cultural dimensions

For IKEA Company to succeed in dealing with cultural issues in China they need to identify specific cultural differences that exist between China and Sweden. The company can apply the Hofstede theory of cultural dimensions used in cross- cultural management. According to Schneider and Barsoux (2003), culture can be differentiated through several dimensions at the national level. These dimensions are power distance index, collectivism versus individualism, masculinity-femininity, long-term orientation versus short-term orientation, Indulgence, versus restraint and uncertainty versus avoidance (Reynolds and Valentine, 2004).

Power distance index is the level at which individuals relate with people in positions of power or authority (Deresky, 2001). Some cultures encourage high power distance while others encourage equality of all people regardless of position. In IKEA Shanghai’s case, China has a high power index compared to Sweden.

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Individualism collectiveness index refers to the level of cohesiveness in a country or culture. Countries that encourage individualism like Sweden, people are encouraged to work hard to accumulate material possession (Schneider and Barsoux, 2003). Countries with collectiveness focus on group objectives. Individuals in collective societies like China require members to work towards common objectives. The Chinese emphasize on long-lasting relationship.

The third dimension is the uncertainty avoidance index. It refers to the level at which societies socialize its members to accept new ideas and adapt to foreign cultures (Deresky, 2001). Sweden scores high but China scores low in the UAI. This is because China is rigid and conservative in cultural beliefs and practices. Because of these factors, IKEA Company should modify their products to blend the Chinese values and traditions (French, 2010).

Masculinity and femininity is another cultural dimension that differentiates cultures. Some societies put men at the centre of the society (Warner and Joynt, 2002). Male dominance is highly encouraged in such societies. Femininity society encourages people to care and value each other as well as practice equality across genders (Dean and Leung, 2003). Masculinity is extremely high in China and extremely low in Sweden (Hopkins, 2009).

Long-term versus short-term orientation refers to the value attached to time horizons by a society (Deresky, 2001). Sweden has short-term orientation and it attaches importance to the future. It encourage saving, persistence and the ability to adapt to new cultures. On the other hand, China has long- term orientation. China encourages stability and value for traditional practices and beliefs.China has high levels of orientation compared to Sweden that emphasize on short term orientation (Kirton, and Greene, 2000). Individuals in this type of society are encouraged to work for the benefit of the whole society.

Cultural dimensions.
Cultural dimensions.

Indulgence, vs. restraint. Societies with high rates of indulgence such as Sweden allow individuals to satisfy their needs when they want. People can do what they want to meet their basic needs. On the other hand, restraint societies have strict social norms, traditional values, and practices (Deresky, 2001). Individuals in such societies are encouraged to suppress individual needs. China can be categorized as a restraint society (Hopkins, 2009). In China Social norms and traditional practices are considered important than individual needs. While Sweden has low levels of restraint, hence individual needs and desires are considered more important (Kirton, and Greene, 2000).

Hofstede theory can help IKEA shanghai to understand cross-cultural communication. This will enable the company to understand the importance of communication as powerful tool in business and resolving cultural issues (D’Almeida, 2007). In marketing IKEA, company should add details that are specific to the Chinese market. Understanding cross-cultural issues will help in developing management and leadership of the company to fit the needs of the Chinese people (IKEA systems, 1999).

Conclusion

In summary, IKEA Shanghai is the largest furniture shop in Asia. Owing to the fact that IKEA Mother Company is in Sweden, IKEA Shanghai faces cross-cultural issues because of cultural differences between the two countries. The main differences are pronounced in areas of communication, lifestyles, and customer preference. To overcome such issues, IKEA Shanghai did modification to the management. The company appointed a manager from the locals. It also joined forces with UNICEF to overcome problem of child labor. The company acquired new suppliers and adapted customer-centered style to meet the needs of the customers.

As a branch, IKEA Shanghai was established in 1998 and it has been doing well in the market. For this reason, the management is planning to expand and have many more shops in China by the 2015. Notably, IKEA Company targeted Shanghai market because of its large population considering that it is among the fastest growing cities in the world. In addition to this, China has the fastest growing economy, which means that many investors are also here. Because of these reasons, IKEA Company perceived shanghai as a potential market for its products. Despite of the good market opportunities in China, IKEA shanghai faced many cultural issues.

As such, the company had to modify its products to meet customers’ expectation. Generally, cross-cultural issues pose a big challenge in the international business. In case of IKEA Shanghai, the management style should be directed towards promoting cultural diversity. The opinion is that, the IKEA Company should focus in promoting cultural awareness. This can be achieved by making changes in management style, providing mentors cross-culturally, offering cultural training courses, and practicing a uniform corporate culture. This will plays a major role in social change.

Lesson learned

Working with people from diverse cultural backgrounds in a team, during presentation was interesting for me but rather challenging. Effective communication is the single most important apparatus I used to pass information to others. I discovered that there exist linguistic barriers, different communication patterns and styles, aspirations and expectations, approaches, understandings and ideologies that different peoples hold. I forthwith learnt that there exist various dynamics within teams.

I learnt that great teamwork calls for great interpersonal skills if people have to achieve any successes.

Thus harmonizing individual’s line of thought becomes tricky. Nonetheless, as people interact more, they get acquainted to each other, and therefore they can communicate freely as they understand each other more accurately.

I also learnt that breaking a big group into small sub groups helps in focusing and concentrating people’s thoughts and facilitating effective communication. In fact, I learnt that a group of 2-5 persons is ideal, 5-10 is workable, 10-15 is hard and more than 15 is a crowd and may be impossible to work with. To this effect, I learnt that small groups are easy to work with since they are focused as opposed to big groups where effects of over socialization as well as social loafing may prevail.

For success in a teamwork setting, the participants must share the team spirit and all should be guided by similar goals and objectives. They also have to share in team philosophy and every participant must show commitment to the overall goal. Thus I learnt how to instill a team philosophy in individual and making them share in the overall goal.

Leadership is critical in teamwork. I learnt that without proper leadership skills, a team is bound to fail in fulfilling its mandate. On the contrary, proper leadership and management skills promote timely delivery and achievement of objectives. In addition, individuals must set away their cultural differences and focus on achieving the team goal. This calls for focused leadership to facilitate understanding between and among team members.

I learnt that acknowledging others, giving credit where it is due, respecting one another irrespective of age, gender, political affiliations, nationality, and race are major aspects in building successful teamwork. Moreover, working in this team environment gave me courage to freely speak out my thought. Through this, I got to know that people view the same issue from various dimensions. I would also see other people’s point of view from another angle. Through this, I developed objectivity to help me when working in a multi-cultural setting.

I also learnt that lack of trust can lead to low output in a group situation. If people do not trust each other, they become reserved, cold, and shy away from sharing information. However, through advocating free communication and cooperation, these problems can be averted. Thus, I gained advocacy skills. I developed coordination and leadership skills as a leader of one of the sub groups developed. I also gained conflict resolution skills where I would resolve issues of unwillingness to open up among some individuals. Proper time management as a tool of success is a skill I learnt since strict timelines had to be observed.

In summary, I learnt that irrespective of age, gender, race, and other social traits, different individuals have different talents, skills, resources, and areas of expertise. These need to be coordinated so as to be fully harnessed. Thus everyone is special and has something to share. Unless this fact is appreciated, one may never be objective enough to accept constructive criticism when working in a multi-cultural team.

Reference List

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Cornelius, N., 2002. Building Workplace Equality. Ethics, Diversity and Inclusion. London: Thomson learning. Web.

D’Almeida, M., 2007. The effects of cultural diversity in the workplace. Michigan: ProQuest. Web.

Dean. T., & Leung, K., 2003. Cross-cultural management: foundations and future. Farmham: Ashgate Publishing, Ltd. Web.

Deresky, H., 2001. International Management: Managing across Borders and Cultures. London: Prentice. Web.

Fan, Y., 2000. A Classification of Chinese Culture. Cross Cultural Management-An International Journal 7 (2) pp 3-10. Web.

French, R., 2010. Cross- Cultural Management in Work Organizations. (2nd ed.). London: The Chartered Institute Of Personnel and Development. Web.

Hall, P. J., & Welch, D. E., 2008. International Human Resources Management: Managing People in a Multinational Context. (5th Ed.). London: Thomas Learning. Web.

Henderson, G., 1994. Cultural diversity in the workplace: issues and strategies. Westport: Quorum Books. Web.

Hopkins, B., 2009. Cultural Differences and Improving Performance: How Values and Beliefs Influence Organizational Performance. London: Gower Publishing, Ltd. Web.

IKEA systems. 1999. IKEA Shanghai. Web.

Kirton, G., & Greene, A., 2000. The Dynamics of Managing Diversity. Oxford: Butterworth Heinemann. Web.

Lewis, R. D., 1999. When Cultures Collide – Managing Successfully Across Cultures London: Nicholas Brealey Publishing. Web.

Marx, E., 1999. Breaking Through Culture Shock. London: Nicholas Brealey Publishing. Web.

Pan, Y., 2005. Marketing Across cultures: A Case Study of IKEA Shanghai. Center for East and south Asia studies: Lund’s University. Web.

Reynolds, S., & Valentine, D., 2004. Guide to Cross-Cultural Communication. (2nd ed.). New Jersey: Prentice Hall. Web.

Schneider, S., & Barsoux, J., 2003. Managing Across Cultures. London: Prentice Hall. Web.

Ward, C., 1999. Cross Cultural theory. Cross-cultural Comparisons and Methodological Issues1 (1) pp 3-8. Web.

Warner, M., & Joynt, P., 2002. Managing Across Cultures: Issues and Perspectives (2nd Ed.). London: Thomson learning. Web.

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