Management and Organisation ‘MANAGING AT IKEA IN TURBULENT TIMES’ IKEA is the focus of this case study. Read this case s

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Management and Organisation
‘MANAGING AT IKEA IN TURBULENT TIMES’
IKEA is the focus of this case study.
Read this case study. Think about it with reference to
the topics of the external environment, planning, and decision
making. Reflect on the issues and information included in this case
study (with more detail included in websites below the case study
for background information, but not to be cited in the case study).
There are three questions at the conclusion of the case study,
which address issues relating to IKEA due to Covid-19, and how to
survive successfully in an environment that considers people,
planet, and profit. You are expected to answer all questions (and
sub-questions).
CASE STUDY
IKEA is part of the Ingka Group of businesses. Their core
business is IKEA Retail which has a global reach of more than 445
stores over 32 countries. In-store visits are estimated at around
657 million per year, with a yearly figure in excess of 4.3 billion
e-visits to IKEA.com.
IKEA is operating in a changing business landscape. A key
unplanned-for business impact for IKEA has been Covid-19. Most of
IKEA’s global retail locations were forced to close without hardly
any warning in different countries at different times in 2019, as
Covid-19 became more a more widespread reality in IKEA’s countries
of operation. With approximately 200,000 staff globally, and an
estimated 800 million customers, the implications for health and
safety and for ongoing business operations have been massive. The
logistics of getting and delivering orders has also been extremely
challenging. Stores have mostly reopened face-to-face, but it has
not been always business as it used to be.
The sudden and unanticipated shift to predominantly e-commerce
operating since 2019, with an expansion of online sales by 45% in
2020 since the Covid-19 pandemic, has had a significant impact on
the IKEA business model, along with associated planning and related
decisions that need to be made.
There has been a massive demand for IKEA to provide different
types of schooling and office-related furniture and home
enhancements, as people spend more time at home working and
living.
IKEA has faced, and continues to face, ongoing supply chain
issues and costs in raw materials and transport since the advent of
Covid-19. This included having to lease ships and reroute
deliveries since Covid-19, and these issues have resulted in
passing on price rises to customers. Staff needing to go into
quarantine has also presented serious service delivery challenges.
There is no predicted end date to these issues.
In 2021 there was a net profit of $7.89m compared to a loss of
$8.66m in 2020. The CEO (Brodin) explained this shift as being
driven by household consumers investing in IKEA office furniture
and other home improvements as more time was spent at home, and in
IKEA re-establishing more store openings and more consumer
confidence to purchase. Clearly the strategies in reading external
environmental forces and making quality decisions and plans driven
by Brodin would have played an important role in this recovery.
IKEA has been proactive in reading the external environment by
shifting to a digital focus through their e-catalogues and home
delivery services. This transition was led by IKEA’s appointment of
a Chief Digital Officer: Barbara Coppola. However, IKEA is only one
provider of online sales, and in the US, they have lost customers
to Amazon, Walmart, and Target, who have also moved into the online
platform for the types of products offered by IKEA. These companies
aggressively focus on convincing IKEA customers to move across to
their online retail space, since the traditional and attractive
IKEA total in-store experience has diminished during the time of
Covid-19.
IKEA has been proactive in transforming stores to serve also as
storing and despatch fulfilment units, whilst also expanding their
online site: IKEA.com, and accelerating their rollout of the IKEA
app. So far, there has been an increase in the share of online
sales from 18 percent to 30 percent. Extra services advertised on
IKEA websites include regular updates on face-to-face shopping,
Covid-19 safety requirements, Covid-19 injection sites at IKEA
parking spaces, and assistance to the disadvantaged affected by
Covid.
IKEA is committed to not just making a profit, but also to
supporting workers financially, the wider community and society,
and in supporting financially some of its suppliers impacted by the
Covid epidemic.
This health crisis from Covid-19 has changed how IKEA customers
shop and conduct their lives. It is not clear whether some of these
changes to customer behavioursin shifting to online shopping and
investing in home office and leisure time at home (even trends to
healthier foods), will be permanent, post Covid-19. IKEA, like
other major retailers, has introduced safer ways to shop including
click and collect, home delivery services, and online planning
services. The benefits of these new business strategies are also of
benefit to customers who are busy working, unable to leave their
homes, or prefer this type of interaction and retail
experience.
There are temperature checks, and capacity limits. IKEA
acknowledges that these decisions are often not perfect, that there
are not always guarantees that goods will have been delivered for
customers to click and collect as planned due to supply chain
issues. Customers may not always comply with IKEA decisions and may
not have properly checked in as required, so decisions are not
totally predictable as planned. Plans may not always be carried out
as desired by IKEA, due to rapid government changes in legal
compliance re numbers and rules, and sudden shutdowns as happened
during 2020-21. So decisions are often made with often limited
information or changing government requirements regarding store
capacity numbers. IKEA also has decided in Australia for the time
being to only allow customers who are fully vaccinated against
Covid-19 or have recovered from Covid-19 to enter their
restaurants, with proof required.
The Covid-19 response by IKEA to government orders and laws is
only one area of external environmental change that IKEA has had to
respond to and anticipate in its planning and decision making. IKEA
publicly states they are focussed on proactively addressing climate
change, unsustainable consumption, and inequality. They aim to be a
climate positive business by 2030.
The bigger world picture relating to the climate crisis impacts
not just on IKEA being a responsible business, but also in
rethinking how IKEA will operate into the future to ensure its
survival. It is possible (as has started happening in India) and
other countries, that large football field size stores may be
replaced by smaller and more compact stores, supported by large
warehouses for the increasingly expanding online shopping
preference. IKEA has also shifted to more sustainable ways of
operating in alignment with meeting UN Sustainability Development
Goals (UNSDG). These goals are addressed through needing to make
decisions about impacts from customer demands, types of furniture
and products IKEA sells, energy usage, waste management and
reduction, how people are treated both as workers and customers,
and many other related aspects. IKEA is starting to also meet its
human commitment to UNSDG by building into their strategic focus,
assisting vulnerable people, providing social relief and
environmental preservation.
IKEA, along with addressing wider world issues publicly, state
their top priority is to consider health and safety of workers,
customers and communities which underpin all their decisions and
areas of direction. IKEA is aware in this dynamic operating
environment that they are continually needing to re-evaluate their
actions to ensure they continue to make a profit and to expand.
However, plans may need to be changed as the external environment
changes.
Questions:
1. Define and discuss how various factors in the general
external environment have impacted on IKEA (including COVID 19) in
a country of your choice. Explain, which two of these general
external forces have had the most impact, citing specific examples
from the case to support your selection?
2. With reference to the case study and the types of
decisions made, and that might be made in the future at IKEA to
deal with Covid-19 initially, and ongoing challenges since
Covid-19, which decisions can be explained as rational, and which
of these do you believe are informed by bounded rationality. Cite
examples from the case study and justify reasons for your
answers.
3. If you were the country manager of IKEA, how would
you apply the six-step strategic management process to plan a way
for IKEA to address the many external environmental challenges and
changes created by COVID 19 and how that will help IKEA in
maintaining and further strengthening its market share in the
country of your choice while still meeting the obligations of a
responsible corporate citizen / market leader.