Regents Business School London

HRM 7100 Managing

HR in Global Business Environment

Case Study on IKEA

Prepared for: Mr A Paul C Coldwell

Prepared by: Amol Mittal HRM 7100 1

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& Mr Adrian Thornley

Ikea
I. Question 1: Benefits and problems likely to arise when operating a joint venture partnership .3 A. Benefits of joint venture partnership .3 B. Problems likely to arise during joint venture partnership 4 C. Advisory to IKEA .4 II. Question 2: typical situations where the Swedish way of managing conflicts with local national managerial styles in various countries.5 III. Question 3: polycentric staffing at IKEA .7 IV. Question 4: Repatriation programme for Swedish missionaries returning to Sweden following several years abroad ..8

V. References ..10

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IKEA Benefits and problems likely to arise when operating a joint venture partnership There can be many business reasons or diversified opportunity for a business entity to enter into Joint Venture. Generally business house enter into partnership for the mutual advantage against there competitors. Entering into partnership with a business house can add additional capabilities, resources, financial backgrounds, vast and effective supply chain and technological benefits to a firm. In case of IKEA, the generally core objective of company is to distribute both risk and benefits with foreign company, distribution of technology, working together on different products and service development and for ensuring compliance with foreign governments law. Benefits of joint venture partnership One of the major benefits to IKEA in joint venture partnership is they can utilize the resources and different facilities of other company that can contribute in production of more cost effective and competitive products that can be place in market. It also adds to IKEAs benefit that a large capital and technological back can be utilized. Joint venture partnership means less capital investment from individual as both companies share capital and technology with each other. It offers IKEA a additional window to bigger capacity and skills. With joint venture partnership IKEA will be considered as insider in its target market of the host country. It is a business advantage as compared to its business rivals in the market. This sort of partnership enables IKEA to overcome the restriction and limitation in direct investment and ownership issues. These benefits can be utilized in depth for business strategies to meet the demand of market.

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Other benefits to IKEA when operating in joint venture is that the risk is shared and resources can be utilized. Even later IKEA can buy the companies in total as part of there expansion planning or can grow with the network of the following company in other companies.

Problems likely to arise during joint venture partnership Constraints that are likely to arise when engaged in a joint venture partnership in a host country is due to the lack of support from the head office due to the fact that shared operations similar to the aspect of joint executive management and property rights usually tend to reduce organizational support and collaboration from the head office. There are also cases were mistrust regarding proprietary knowledge and cultural difference has also been a very common reason. At time improper balance of expertise and investment between two partnering companies is also like to effect their relations. Advisory to IKEA Engaging in a joint venture partnership can reconstruct the business although it is a strategy for business growth in a competitor environment, implying it should be in line with the business level strategies of the firm. This implies that it is important for IKEA to review its business level strategies prior to engaging in joint venture partnerships (Hill & Jones, 2007). Many companies entering joint venture had been benefited with respect to certain conditions (but not all). If IKEA works in this pattern should be aware of facts and limitations of this structure as if it does not goes in favor will tern out to be a big disaster and huge time and money loss. In general this type of working patterns are not suggested until and unless the gains are extra ordinary and growth is folds.

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Typical situations where the Swedish way of managing conflicts with local national managerial styles in various countries With the increasing trends associated with global business, it is important to take into consideration the value of cultural differences. Different cultural attributes imply different management styles across different countries. There are various ways through which the Swedish management style conflicts with most local managerial styles in various countries. It is arguably evident that the Swedish management approach is more people-oriented, based on empowerment and less hierarchical organizational structure. It means that approaches of Swedish managers are friendlier and loose management approach as compared to any other focused management style. Swedish managers are more dynamic in risk taking and are ready to implement untested results. This shows that Swedish managers are more instinctive than being analyzer of the given data and it consequences. They believe in practical approach to reach the business goals and objectives. Swedish management style is also people-oriented, meaning that Swedish managers are mostly informal, friendly and flexible. The Swedish management style is more a team oriented and decision-making. Work task are performed by enlistment of individual talents to achieve objectives and that encourages people to perform best. Unique characteristic of Swedish management style is they does not sell aim to sell products, items or ideas. But, they offer information to individual based on need to know approach rather then getting informed all time. The USA management style can be said as more effective as compared to the Swedish style of management. The American management approach is also a loose approach but emphasis on the establishment of performance targets that are much specific and can be measured. The American management model makes use of the core leadership styles including direction, participation, people empowerment and charisma. This results in less S 00503787 HRM 7100 5

freedom in work structure just like Swedish style of management.

Polycentric staffing at IKEA The choice of host country management and staff is usually referred to as polycentric staffing. There are various advantages associated with the polycentric staffing policy during global strategic expansion. Polycentric staffing policy is effective in elimination of the cultural barriers, which plays an important role in enhancing the adaptability of the business within the host country. Host country managers usually know more about the taste and conditions of market than home country managers. There are no issues relating cultural difference and language problems. This is because local mangers understand more and possesses deeper knowledge about the growth potential of company. Even local managers generally have local relation and links that can support companies growth. All this reasons avoid general problems to arise like language problem, culture reasons in host country. It can even add to benefit of organization that the staff working in company may think they have better chances to grow in company with home country manager. This can really improve staff moral and result in more efficient working style. This is contrast with ethnocentric staffing policy where the business environment of the host country and a low morale on the staff are a significant constraint because of the perception that there are limited chances to promotions. Even there are financial benefits associated with home country staffing as the cost of hiring is quite low and low involved in establishing expatriate is always more or higher than of home country nation. Despite the benefits, there are also various setbacks associated with the selection of host country management during the adoption of a polycentric staffing policy. The most notable challenge that polycentric staffing policy has is the relationships between them and head office. It can be said in terms of national loyalty or working ethics. Like in America and Germany there can be difference in understand and concept working of IKEA. IKEA should make sure the control over the subsidiaries so that the control and system is maintained and is questionable. S 00503787 HRM 7100 6

The choice of the host country manager can also be constrained by lack of the required international management experience in managing the business franchise situated in foreign countries. The selection of host country management is also constrained if the IKEA

does not have an established system used to facilitate the selection of foreign employers (Thill & Courtland, 2011).

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Repatriation programme for Swedish missionaries returning to Sweden following several years abroad Adjusting to a new cultural environment tends to take a lot of time depending on the flexible mindset of the managers and the pace of transition. The cycle of cultural shock is usually repeated when manager returns to their country of origin. When such repatriation programs for Swedish missionaries returning to Sweden after several years of foreign work requires a very careful planning and analysis in order to make it successful. If this happens that means Swedish missionaries have undertaken proper training before coming back to home country and are able to perform their work task more effectively. In other sense re entry of the Swedish missionaries should be given equal importance and even their families should be involved in this process same as when they were deployed to make them adjust the cultural magnitude. This involves a vital role of HR in the strategic planning of re entry of the home managers. There should be programs of the manager along with its family and should address the issues related to the problems. Continual support and evaluation also is the key for rehabilitating a manager back to home country. Induction and training is a vital process when preparing the Swedish missionaries to return home. In this context, the managers are taken through an induction program whereby they have a chance to meet the employees that they will be working with when they return home. In addition, they are shown the skills that they must have in order to work in subsidiaries that are within the reach of the head office. This means that the managers should be familiarized with the internal procedures, corporate values and the organizational mission and vision, to serve as a guideline when working for the organization in subsidiaries that are located in the home country (Hill & Cronk, 2010). Observational learning is important during this stage in order to ensure that the returning managers are more informed of what is required at organizational level prior to adapting to the business environment in the home country. Organizational learning and training will entail outlining the norms of behavior, the shared terminology and the reporting procedures, and dominant organizational values. This S 00503787 HRM 7100 8

is important in drawing the boundary between what is expected from the organization and the expectations of the business environment of the home country such as government

policies and regulation, cultural requirements that affect the business (Haar & Bardoel, 2008). Studies have reported that there is a positive relationship between pre-departure preparation and overall adjustment and effectual functioning of the managers returning to their home countries. It is important to take into account during overseas assignments; the mangers are not only changing jobs, but also experience significant changes in their way of lives. This implies that the needs of the family members should be addressed as part of the issue when preparing them to return to home countries. As such, the preparation should entail cross-cultural training, awareness, family orientation and briefing. Addressing program serves to provide the fundamental information to manager in relation to social cultural environment issues is helpful. This briefing will include the companys home transfer policy, benefit packages and any compensation required. Crosscultural trainings are essential for them to handle over home country as they are here after long foreign exposure. This enables manage to acquire additional skills that are necessary for him to absorb this cultural shock that he is going to face after he arrives back to home country. After arrive is always a very crucial part of this programs as thats the time when they are really going through the changes and in this period even family should be involved in training program and it ensure that they adapt the surroundings quickly and are comfortable in this new environment after long period of time from foreign assignments.

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References Hill, C. & Cronk, T., 2010. Global Business. New York: McGraw Hill/Irwin. Klarsfeld, A., 2010. International handbook on diversity management at work: country perspectives on diversity and equal treatment. Washington, DC: Edward Elgar Publishing. Duane, I. & Hoskisson, R., 2008. Understanding Business Strategy: Concepts and Cases. New York: Cengage Learning. Alkhafaji, A., 2003. Strategic management: formulation, implementation, and control in a dynamic environment. London: Routledge. Briscoe, D. & Schuler, R., 2004. International Human Resource Management. London: Routledge. Dowling, P. & Welch, D., 2004. International Human Resource Management. New York: Thomson Learning. Hill, C. & Jones, G., 2007. Strategic Management: An Integrative Approach. Boston: Houghton Mifflin Co. Peng, M., 2008. Global strategy. New York: Cengage Learning. Thill, J. & Courtland, L., 2011. Excellence in Business Communication. New Jersey: Prentice Hall. Haar, J. & Bardoel, A., 2008. Work-life in Australia. Asia Pacific Journal of Human Resources, 46(3), pp.258-71.

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