Intercultural Business Competencies

Executive summary
This study has been based upon the Swedish furniture manufacturing company, IKEA which
failed to set up its business in the US market. It has been found out that there are significant
cultural differences which are affecting the reliability of the company in the US market. Analysis
has been made with the help of the Hofstede model of cultural dimensions and found out that the
major differences lie within the components, masculinity and long term orientation.
Cultural theory of Hofstede has been discussed in the report. The theory is based on six
dimensions that have been discussed. Organisational culture of IKEA has been explained as it
reflects the areas where the company can implement change to succeed in a market with different
cultural aspects. The unique culture of the company is creating problems in the host markets as
requirements of people are different in the different markets. Employees are being treated well in
the organisation. Employees are being provided with several benefits but the company does train
its employees according to the Swedish culture.
IKEA has witnessed major losses in its revenue from 2017-2019 due to struggling with various
issues regarding its intercultural communication. The company has faced challenges in various
dimensions of the Hofstede during their expansion in countries like Saudi Arabia or Japan. The
company will have to strategize their expansion by considering the model of intercultural
competence.
 Table of Contents

Introduction.................................................................................................................................. 4
Findings....................................................................................................................................... 4
Organisational culture of IKEA.....................................................................................................6
Conflicting values, beliefs, and behaviours..................................................................................8
Impact of cultural difference in the performance of IKEA in the US market..................................9
A model of intercultural competence..........................................................................................11
Conclusion................................................................................................................................. 13
Reference List........................................................................................................................... 15
Introduction
Globalisation has provided immense opportunities for business organisations to expand their
businesses in international markets. Understanding of culture is essential for business
organisations for avoiding hassles in the expanding country. Culture of every country is different
from one another. In order to succeed and survive in the different markets it is important for
business organisations to understand the cross-cultural aspects (Boussebaa, 2020). Cross-cultural
competence refers to the ability to effectively interact, understand, and communicate with other
individuals across cultures. Working in an internationally expanding country can be tricky as the
market is totally different. Choices, preferences, and culture are different to which business
organisations are not familiar (Tietze, 2021). Culture is an important element when operating in
an international market. The companies have to change their strategies according to the culture to
survive and succeed. Before entering into a market the business organisations have to examine
the market. Examining the cultural value, behaviour, and beliefs holds importance for
understanding the market. Often successful companies fail to understand the cultural adaptation
concept. As stated by Dudin et al., (2019), businesses fail as they consider that contemplating
cultural value is just what they need to follow and do not emphasise on the other aspects for
capturing the market. When business organisations fail to understand the culture of the ghost
country then they fail in the market.
In this report, theory related to corporate culture will be discussed along with the organisational
culture of IKEA. in this report the cross cultural mistake made by IKEA in the US market will be
presented. Being a successful company how IKEA failed in the US market due to cross-cultural
aspects will be showcased in the report. An intercultural competence model will also be
highlighted. Along with these, suitable recommendations for IKEA will be provided on the
cross-cultural aspect.

Findings
Theory related to corporate culture
Hofstede’s cultural dimension theory was introduced in 1980 by Geert Hofstede. The theory
explains the cultural difference across the countries. It also explains the ways businesses should
be done across different cultures. Six categories are involved in the Hofstede theory such as
power distance index, collective vs individualism, uncertainty avoidance index, femininity vs
masculinity, short-term vs long-term orientation, and restraint vs indulgence.

Figure 1: Categories in Hofstede theory

(Source: corporatefinanceinstitute.com)
● Power distance index: Power distance index reflects the extent of power and inequality
tolerance. High power distance index shows that the culture is capable of accepting
differences in power and inequality (Corporate Finance Institute, 2021). Whereas, low
power distance index shows that the culture motivates structure of organisation that
follows decentralised decision making, proper power distribution, use of participative
style.
● Individualism vs collectivism: This dimension shows the level of degree to which
societies are integrated into groups along with dependence and obligations. Individualism
reflects that personal objectives are emphasised more. Whereas, collectivism reflects that
group objectives are emphasised much more compared to individual objectives.
● Uncertainty avoidance index: This dimension of hofstede reflects the level of tolerance
related to uncertainty and ambiguity. It reflects the way uncertainty is being handled.
Higher index in the dimension shows lower tolerance level for risk, uncertainty, and
ambiguity (Ijtsrd.com, 2021). Whereas, lower index shows higher tolerance level of risks,
uncertainty, and ambiguity.
● Femininity vs masculinity: This dimension showcases society’s preference related to
behaviour, achievement, gender equality, and others. Femininity reflects nature such as
 nurturing, quality of life, fluid gender roles, and others. Whereas, masculinity shows
materialistic achievements, assertiveness, wealth, and distant roles.
● Short-term orientation vs long-term orientation: These dimensions show the extent to
which society views timescale. The short-term orientation is related to the society’s focus
on short-term aspects. Whereas, long-term shows that the society is more focused on
long-term aspects neglecting the short-term aspects.
● Restraint vs indulgence: this dimension shows the tendency as well as extent to which
society moves for fulfilling the desires. Restraint shows that the society controls or
suppresses its desires. Whereas, indulgence shows that society enjoys its life and can do
everything for fulfilling their desires.

Organisational culture of IKEA

The global expansion strategy of IKEA is “one design suits all” and it is followed in most of the
markets. IKEA is one of the largest retailers of furniture and has been operating since 1990. The
company provides well designed furniture at affordable rates. IKEA follows a standardised
marketing strategy for accomplishing its business idea of offering affordable products at high-
quality around the world. Once the CEO of the company commented that “they do not adapt
according to the local market”. The company provides the same type of product in every market.
The company expands in different markets with a combination of vision, leadership, and
effective principles of business which are subtly enforced by Swedish culture (Beugelsdijk and
Welzel, 2018). To maintain the unique culture of IKEA especially when the company expands in
the international market, the company has utilised work as an essential tool for disseminating the
unique culture throughout the expanded organisation. Swedish managers operate as ambassadors
of the company in different markets with the non-Swedish workforces. The managers are being
first trained then they are allocated in different markets to spread the cultural values among the
non-Swedish workers. Gender equality is a challenge which is present in the company. Women
employees are more within the company compared to men. In the sales department, the number
of women is higher compared to men employees.
One more culture of IKEA is to wear casual or the same uniform rather than suits. The position
titles are not used in the organisation. Every employee is denoted as co-workers. To evaluate the
performance of employees, an evaluation system is utilised which is based on annual goals along
with wider guidelines. Internal employees are given first preference whenever positions in the
organisation are vacant. The employees can apply for vacant positions and after the interview
they are being hired for the position (Ericsson, A., 2018). The organisational culture is
represented as Ingvar personality, it is utilised for developing the cultural values in cost, simple
lifestyle, and humbleness. Every employee in the organisation is treated equally. The way IKEA
communicates with its workforce strongly reflects the Swedish culture. The employees are being
motivated, respected, and delegated responsibilities. Rather than academic scores and
qualification, IKEA places higher importance on communication skills, positive attitude, and
openness among its employees.
Employees within the organisation are motivated to be independent, share their views and
knowledge, listening, and learning. Employees are motivated for the mentioned things without a
superiority complex. Employees are being provided with a secure, pleasant, caring working
environment. The company believes that every individual has the ability to grow and develop
(Barroso, 2018).
Diversity and inclusion is an important aspect in the success of the company in terms of
development of employees, customers, and cooperation with the international partners.
Togetherness is being promoted, as it is believed that it adds value in the team. The company
values the background of the employees from which they belong but also adds the company’s
unique perspective. The employees of the company come from a diversified background. Around
131000 employees are associated with the company in different nations. 40% of the managers in
the company are women among 200 managers at the top level.
The organisational culture of the company is different across the globe. The company has a
culture of trusting their employees and treating them equally irrespective of their gender (Module
and Morsi, 2020). The policies of the company are standardised in every market as they believe
every customer buys the same type of product. According to the requirement they apply for
diversification. Centralised strategic decisions are practised by the company. Employees are
being trained according to their requirement purposes. Through effective communication they
overcome the challenges related to culture, language, and law.
Conflicting values, beliefs, and behaviours

Figure 1: Comparison of Sweden and United States with six cultural dimension model of
Hofstede
(Source: hofstede-insights.com, 2021)
According to the differences that can be seen on the basis of the comparison made by the
Hofstede model of six cultural dimensions, there are significant differences that can be seen
between these countries. Eventually it led to significant challenges that IKEA faced while they
operated in the US market. One of the major differences can be seen in the aspect of Masculinity
vs Femininity (Beugelsdijk and Welzel, 2018). It can be seen that Sweden has a low score under
this dimension which depicts that the society prevailing within the nation is feminine in nature
while the US provides more of a masculine culture. Based on this fact, it can be considered that
the workforce would have to face partiality, especially the women segment at the workplace.
In the aspect of long term orientation, it can be seen that the score of Sweden has been
significantly high compared to that of the US. Therefore, it portrays a clear picture that the home
country of IKEA supports more of a modernistic approach for dealing with the changes rather
than considering the past experiences in order to make necessary improvements (Huang and
Crotts, 2019). On the other hand, in the US, it is practiced to consider both the past experiences
as well as the upcoming challenges that can be emerging in the market. Hence, it creates an urge
for the Swedish furniture manufacturing company to adopt such culture and operate in the US
market so that it can be able to synchronise with the corporate culture existing in the concerned
region. Apart from these two dimensions, there is no such difference regarding the scores
obtained by these two companies (Kristjánsdóttir et al. 2017). Therefore, these are the factors
that can be taken into consideration by IKEA which are responsible for affecting its
performance, stability and operability in the US market.

Impact of cultural difference in the performance of IKEA in the US

market
Various differences in the beliefs, thoughts and attitudes of the people have a strong influence
over the international marketing of various businesses which is why selection of proper strategies
or adopting a certain marketing mix needs to be done carefully. In the case of IKEA, the
furniture sold by the company in China is significantly different from the furniture desired in the
United Kingdom.The hofstede dimensions of culture work as a framework which is beneficial
for various businesses in understanding the major differences that exist in between the cultures
aur different countries where they wish to expand. The various dimensions include the masculine
vs femininity along with uncertainty avoidance, indulgence vs restraint, individualism vs
collectivism, power distance, as well as long term orientation. IKEA has encountered various
problems in relation to dimension in Saudi Arabia since they had to remove all the ladies from
their catalogues because the Government of the country as well as the consumers were not very
pleased with such things (Dumetz et al., 2020).
 Figure 1: Revenue of IKEA in North America, 2017-2019
(Source: Statista, 2021)

The revenue of IKEA in North America has seen significant fluctuations from 2017 to 2019 in
North America, and the cultural differences were one of the main factors causing these
fluctuations. The overall revenue went up from 5.86 to 6.05 billion US dollars. Still, it again
came down to 5.3 billion US dollars in 2019 since the company was coming up with various
issues related to cultural differences. Even though the founders of IKEA were always able to
recognize the multiple changes in society and accordingly adapt the company window changes,
recent years have witnessed the company be lagging in that aspect (Process Model of
Intercultural Competence, 2021). IKEA also underestimated the differences between the
corporate culture of Sweden and America since both countries are significantly different in terms
of individualism, power distance, and masculinity. The decision-making process is different in
both countries. American employees are primarily dependent on their managers regarding the
decision making while in Sweden, they adopt a consensus-based decision-making model. Also,
the American culture is more masculine, as stated by Hofstede, in contrast to Sweden, where the
culture is rather feminine, which explains the reason behind IKEA's focus on caring for everyone
within the office environment (diversities, 2021). Another reason for IKEA's failure in the US is
that the company is collectivistic and an individualistic approach. Still, the collectivistic
approach does not align with the work culture of the US. This was another primary reason for its
revenue going down in 2019. The company also was unaware of the differences among the
customers of Sweden and America, and the various culturally specific requirements for the home
furnishings are different in the US and European markets (Roy, 2020). Due to this, the company
will have to consider the consumer's taste and accordingly adjust the floor plans and furniture for
the American market, which will help them take their revenues higher. This has led to the
company struggling with failure in their expansion strategy in various countries such as Japan,
where the organization was devoid of the cultural knowledge of Japan and needed the
expectations of the local people (Ikea 's Failure Of Japan - 1354 Words | Bartleby, 2021). The
country's customers were habituated to higher levels of customer service and were not familiar
with the DIY concept of assembling the products.

A model of intercultural competence

The intercultural competence model can frame various identifiable elements that can be
developed within an organization to enhance its intercultural communications (Process Model of
Intercultural Competence, 2021). The proper understanding and adoption of this model can help
IKEA get better results in their global expansion.
● Attitude and feelings
● IKEA will need to notice the various identities of the employees from other
countries and accept their insights and values. The organization will be required
to take the multiple complexities of reality and the people dealing with a
culturally diverse workforce having contradictory opinions.
● The Swedish company has a mix of collectivistic and individualized approaches,
according to Hofstede. At the same time, the Americans emphasize the
individualistic approach, and the company will have to respect this fact and adapt
their policies accordingly for their US market.
● The company will need to understand the employees' positive and negative
attitudes and emotions towards their work environment and their policies since a
 culturally diverse workforce will have a different set of opinions regarding the
procedures.
● Behaviours
● It will have to be flexible and swiftly adapt to the new market's behaviour and
adequately understand the various dimensions of Hofstede.
● The company will have to be sensitive in their communication, recognize the
various ways of communication in the US market, and understand the different
verbal and non-verbal conventions (Dass et al., 2019). They will also have to
negotiate multiple rules which are appropriate to intercultural communication.
● Actions
● It will have to undertake various activities involving a diverse workforce to
contribute towards the company's common good.
● Such activities can also be beneficial for reducing the cultural gap between the
employees, which will result in better productivity and can significantly help
increase the revenue of IKEA.
● Knowledge and Skills
● The company will have to gain knowledge regarding its employees belonging to
other countries. This will help them better distribute job roles and create a better
communication network within the employees.
● IKEA will have to critically analyze the various practices perspectives and the
product in other countries in which they plan to expand (Khukhlaev et al., 2020).
This will include general knowledge regarding their values and taking an absolute
position and the values that will be acknowledging the respect for the dignity of
the employees and abiding by the various human rights.
Conclusion
In this study, IKEA has been taken into consideration which has presently become a
multinational organisation manufacturing and supplying diverse furniture to different precincts
all over the world. However, it has been observed that the company faced failure to operate its
business in the US borders so that it can generate greater revenue along with time. The major
issue was related to the difference of corporate culture which was different from that of the US
economy. Eventually, it decreased the profitability of the company in the US market and
hampered its expectations to grow in the international market. The major factors that have
affected its business within the US economy include two distinct components from Hofstede
model of six cultural dimensions which include masculinity and long term orientation.
It is the duty of the company to adopt the cultural aspects that are prevailing in the US so that
their recognition among the customers as well as the workforce can increase along with time. In
order to do so, appropriate recommendations have been provided on the basis of the cultural
challenges that have been identified and eventually increase its potential to earn higher revenue.
In this way, it can be said that the failure of the company in the US market will be taken care of
with the highest level of efficiency.
Recommendations
According to the findings that have been retrieved from several sources, it can be seen that there
are major cultural issues associated with the operations of IKEA in the US market. On the basis
of these facts, it can be said that significant measures can be taken by IKEA so that it can be able
to capture the majority share of the US market and eventually lead among the other furniture
manufacturers. These can be provided as follows:
● If the possibility exists, it would always be useful to obtain cultural knowledge from
future counterparts or business partners. As the necessity of cultural information rises, the
essence of cultural awareness also increases in multicultural or cross-cultural meetings.
This can assist businesses in rapidly understanding and acting on cultural differences.
Cultural understanding also contributes to confidence in foreign commerce and to the
efficiency of customer service (Beugelsdijk et al. 2017). Moreover, two key foundations
for an economy's existence are globalised in the 21st century where multicultural groups
and worldwide business.
● People from various cultures usually act in a different manner. Sometimes it can be tough
to accept or notice such distinctions. However, mutual knowledge of one another's
culture is a requirement for commercial success in an international corporate setting.
Moreover, if you are a seller, you are more likely to accept, recognise and bridge the gulf
between these disparities (Andrijauskienė and Dumčiuvienė, 2017). Strong interest and
effort in knowing and studying a culture can create a capacity for readily addressing
international business cultural differences.
● Cultural diversity denotes confidence in cultural pluralism. Cultural diversity, the
fundamental component of cultural variety, states that every individual is different from
each other, especially in the international market. Based on regional disposition, ethnic
groups, religious membership or linguistic affinity, a national culture may differ. National
cultures have been categorised on the basis of Hofstede cultural dimensions including
power distance; individualism; masculinity versus femininity; and uncertainty avoidance.
Basi-typologies of organisational culture are paternalist, bureaucratic and synergistic
(Bissessar, 2018). A feeling of cultural variability can help maximise advantages and
drawbacks in cross-cultural meetings. Therefore IKEA might consider adopting cultural
heterogeneity and integrate it with its business operations in the US market.
● When cultural diversity has been recognised, entrepreneurs should supervise the
company' job and purpose and subordinate their cultural differences. Ethnocentricity
avoidance may be essential if cultural diversity is to be subdued. Ethnocentric attitudes
placed themselves at the centre of others. In addition to ethnocentrism, prejudice in
international operations can also affect the direction of tasks or purposes, as prejudice
shows an adverse or negligent approach to other groups (Dihl et al. 2017). In the absence
of ethnocentricity and prejudice, everyone may work equally for the tasks and the goal of
the company.
● Another important aspect that can be considered by IKEA in order to improve its
performance in the US market is to remain flexible with the market trend. Since it is
operating on the international market, therefore, it will require flexibility to be provided
to the employees working for the organisation and also to the potential customers so that
their satisfaction level increases with time and eventually enhance its potential to
generate higher revenue.
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