CROSS CULTURE

MANAGEMENT
IKEA SHANGAI CASE STUDY

CH SAI VARUN
SEC-C- 191146
The purpose of this report is intending to understand how the diverse culture
impacts on the operation of the company in the global business. Meanwhile, it
is also aiming to come up with an effective solution of dealing with the cultural
differences for managing the cross-national activities. In this report, it analyses
the case of IKEA’s cultural management, a Swedish furniture company, and
understand how IKEA successfully conducts its business operation in China
market, where has the significant difference culture with western countries.

DIFFERENCE BETWEEN CHINESE AND WESTERN CULTURE:

There is a significant difference between the key philosophies of Chinese and

western life. China is an ethnically and culturally diverse country, and its
dominant cultural tradition has been heavily influenced by Confucianism and
Taoism, which is entirely different from western heritage.

There are at least three major differences between western culture and
Chinese culture, setting forth as the following:

 Westerners believe in individualism, while Chinese are more incline on

collectivism.

 The western culture encourages expressing the affection freely, and

Chinese culture express the emotion puritanically.

 The western culture believes in a materialistic approach, with a

pragmatic and emotional attitude, whereas the Chinese believe in
relationships, and searching for inner happiness through mediation

THE DEVELOPMENT OF IKEA

IKEA, based on south of Sweden, was set up in year 1943 by Ingvar Kamprad, in
his 17 years old. IKEA is only global-scale furniture Distributor, its furniture’s
are widely acknowledged as the international, low-cost and good -quality
home products and IKEA’s furniture’s are also known for its modern design
.Currently, the Group has established more than 292 IKEA stores in thirty-six
countries and the other stores are run by franchisees which are out of the IKEA
Group in 16 countries.

One of IKEA’s business principal is to provide a wide mix product, and

functional right furnishing articles, with the lowest price possible to attract as
many as possible people to purchase them
IKEA’S CULTURAL MANAGEMENT IN CHINA

As the real-stated of commercial and residential establishments boosted, it

also increased the sales of home decoration and furnishings.

To fill the increasing demands of decoration market, especially the high quality
furniture products. IKEA started its retailing operations in China and set up its
first store in Shanghai in year 1998. The decision of IKEA to enter Chinese
market stems from supporting political, social and economic conditions that
allow IKEA to beneficially acquire advantages in the Chinese market (Pan,
2005).

IKEA needs to face various challenges in terms of business practices, socio-

economic and political conditions, as well as its unique culture in Chinese
market. Chinese people from different regions may exhibit distinct
characteristics as well. Taking the language for example, the spoken language
varies greatly from region to region. It is not surprised that someone from
Shanghai cannot understand residents of Guangdong province, if without
special study of Cantonese.

In China, IKEA’s products have the image of catering to high-end consumers,

whereas the perception of IKEA’s products is regarded as a ‘good value’ buy
elsewhere in world. In order to attract larger number customers and maintain
the company in reasonable profit, IKEA continues to implement the effective
strategy both from external and internal cultural management.

External culture management of IKEA:

From the external cultural management perspective, to help Chinese

customers deeply understand the IKEA concept, the company also posts in-
house instructions and design suggestion, publishes brochures, which is
distributed in the stores and through the mail, and operates a completed
company website.

Meanwhile, in order to better understand Chinese people’s lifestyles and their

home aspirations and frustrations, IKEA performs a large number of home
visits, surveys, and focus group meetings. In additional, IKEA also study the
customers’ comments on IKEA’S product range, price and service levels, and it
provide the useful information for the company to position its target
consumers.

At the very beginning, most of IKEA’s China customers are range from 20 to 35
years old. As a result of the market repositioning strategy, the stores are now
attractive an increasing customer with age closing to 45. Among these
customers, many are generally well-educated couples and earn higher double-
income with no children

In terms of housing, the average square meters per person in Sweden is much
large than in China. Until recently, now Beijing and Shanghai apartments
average 80 m2. To suit the specified needs of Chinese consumers, IKEA needs
to design and provide more storage containers and facilities.

In additional, with keeping up-to-date study on Chinese home-life, IKEA alters

products to meet the local customers need. For example, IKEA sold standard
size beds in mainland China, while the consumers in the Sweden generally
prefer larger items.

In additional, the value of “the customer is kings” is also deeply acknowledged

in the Chinese people minds, and the Chinese customers prefer to enjoy the
completed services in the whole process in their furniture purchasing activities.
Normally, the Chinese customers would like to shop accompany with the store
staff to introduce the products to them. Meanwhile, for most of the Chinese
customers, it is perfectly that the store staff to distribute the products directly
to their house and install all the furniture as well

Nevertheless, IKEA creates the unique shopping environment in China, and

teaches customers of the concept of self-services. It encourages the customers
coming to personal if they have any question or need for any assistance.
Nowadays, Chinese people would use IKEA Beijing Store as the theme part,
hanging out in the store and directly experience the furniture.

Moreover, IKEA also adapt its do-it-yourself assembly concept to the Chinese
consumers, which are very appreciated in the West. As the labour costs in west
are much higher than in China, the western people prefer the assembling
product for saving money and some of them enjoy install the furniture. In
China, the people prefer to the ready products and use the IKEA’s assembly
services more than in other countries

INTERNAL CULTURE MANAGEMENT OF IKEA

From IKEA’s internal culture management aspect, there are differences among
the working culture in every country. The western culture and Chinese culture
is significant difference in some aspects, therefore the business culture of
Sweden and China is also obvious diverse.
The theories mentioned that western culture is more inclined to the individual
way, in this regard and the managers of IKEA Sweden are pretty good at
marking contact and build up teamwork, and they often want to jump into
projects and participate. In the same time, the communication in IKEA Sweden
works vertical and the employees are not afraid to disagree with their
superiors. The management style is informal, for example they address each
another with their first name. The management style is also based a lot on
delegations. Meanwhile, IKEA Sweden has an open-door policy, every
employee is welcome to directly go and speak to their superiors if there are
some ideas on their mind. In the end, the atmosphere around the store
managers in Sweden is quite open and friendly and the employees all seems to
be comfortable to talk and make jokes with their boss. This kind of
management style and the working environment is very important in IKEA’s
culture

As mentioned earlier, the Chinese culture is prone to more connotations, and

Chinese prefer to express their own emotion and idea in the puritanical way.

The unique characters of Chinese culture lead the traditional Chinese

corporate culture tending to emphasize the relationship and respect their
seniors

The traditional Chinese corporate culture tends to emphasize seniority and

relationships more than responsibility and accountability which is contrast with
the Western emphasis on personal accountability and demonstrated merit and
ability

The values of caution make the store managers in China taking a long time to
decide and unwilling to make the risky decision. What’s more, if the store
managers in China under this conservative management style, the employees
in IKEA China, who most directly people connective with customers, would not
create the new ideas and express the useful information for their supervisors.

In another hand, due to the rapid economic development in China in the

recent decades, the value of “time is money” is deeply caved into China
business culture, in the residents who living in big cities in China. Hence, the
time is also as a furthermore environment factor to manage in majorities of
companies in China, and it is used thoroughly, budgeted properly and should
not be wasted. However, this is not how IKEA works when they are making
their decisions, IKEA allows the mistake to be made in the working, and
something that would cost time.
In order to make sure that important values are spread throughout the entire
organization, even out among the customers, IKEA has implemented team-
building activities throughout the entire store in IKEA China.

To avoid the store managers unwilling to take risk in general would do in

Chinese companies, IKEA provide the internal in-house or oversea training to
the store managers and the general employees in IKEA China, with a view to
enhance the management understanding the values of IKEA and every
member in IKEA make their points. After putting lots of the efforts in cultivating
the open and free working environment, currently, IKEA China is well
organized on how to take care of the new hires. As soon as a new employee
step into the companies, he or she needs to take the short-term or median
terms of orientation training, and they would be taught of the values of “IKEA
way”.

Meanwhile, with willing to be in consistence with the human orientated

culture, IKEA organize the annual outing, the big kick-off parties when IKEA
catalogues launch and sport activities occasionally for the entire stores in
China, and this helps to create the happy working environment for everyone in
IKEA. Through building up this internal company culture, it is helpful for the
store managers to take their own responsibilities and initiate the innovative
ideas in the management. Meanwhile, it is obviously improving the employees’
feeling of belonging of “IKEA” and the employee feel more casual to express
the own ideas and suggestion to their boss. In IKEA China, the employees are
also come up with the difference opinions on some essential and valuable
ideas, which are useful for running the business (Miller, 2010).

Based on the implementing effective cultural management strategies in China,

IKEA overcome the barriers of western and Chinese culture and significant
gains the diverse cultures in China.

CONCLUSION
The above analysis about cross-cultural management has shown that there are
highly distinguished differences in the attitudes and behaviour of managers
and employees from different countries/regions which worked in the
multinational companies or global organizations. In this regard, the cross
national companies and organizations shall make the great efforts to
understand and document cultural differences when they step into a new
situation, including the deeply understand the people’s characteristic, their
ways of things, lifestyle, belief and so on. From the case of IKEA’s business
operation in China market, noted that the communications, particularly in the
process of integration the dissimilar companies is an effective approach in the
cross-cultural management. In this regard, the management of the
multinational companies shall be clearly awareness of the important of the
communication. Effective communications can establish a friendly
understanding of the difference values and beliefs of people in the diverse
culture

In the end, the managers shall build up a common strategy and clearly mission
for to articulate the local culture, including the specific responsibilities and
roles of employees in each level.

The multinational companies must recognize of the advantages and

disadvantages of the cultural difference in the business activities, establishing
the suitable cross-cultural management, and build up the competitive edges in
the international market.