IKEA Human Resource Management in Chinese Market
When the art of business management has been concerned by IKEA, the concept “Simplicity is beauty” is popular in IKEA’s company culture. For an international enterprise, IKEA have to seek global expansion and entry foreign market. It has founded that IKEA is perfect in every aspect when it is reported or researched. For instance, IKEA makes some complicated enterprise management into simple principles: according to the consumption demand to design product, or created low price but do not spare significant efforts in reducing costs, created experiencing-style sales terminal and make the global supply chain running smoothly.
This paper will focus on the human resource management of IKEA in Chinese market based on the case study of internalizing a brand across cultures: the case of IKEA. (Veronika V and Leslie, 2011). In the early 1980s, human resource management has been proposed by Beer and his colleagues at Harvard Business School. It is stated that departure from the previous views of the nature and purpose of personal management, with a set of prescription for managers to connect the effective human resource management, mostly, with the condition of corporate success and broader positive consequences for society (Beer et al. 984).
With the increasing speed of retail internationalization, the issue of brand identify across borders becomes more and more important. IKEA should communicate their brand visions, values and brand promise to all employees in different locations of stores and ensure among all stores or internal store of employees share the brand understanding (Burt and Sparks, 2002).
This paper we argue that human resource management of IKEA in Chinese market. Firstly, he factors which cause problems in Chinese market will be discussed, meanwhile, how IKEA improve its capacity of control those problems through supplier and customer relationship management will be discussed as well. Secondly, IKEA has its own human resource management theories which focus on employee performance and individual ability evaluation. This paper will display those performance methods and express how the performance evaluation used by IKEA for specialized individual characteristic. Finally, conclusion and suggestions are discussed. Own problems and solution
Chinese market is one of foreign markets of IKEA. In 1998, IKEA entered Chinese market and opened only two stores in Shanghai and Beijing but it has brought tremendous influence. People like to go shopping in IKEA because the fashion factor, even if for people living in cities other than Shanghai and Beijing (IKEA History). However, IKEA has its own problems in Chinese market (IKEA Global Marketing). The first problem is price. IKEA household products got prevailed market reflection in European market by the low price strategy, while this strategy is not suitable in Chinese market. Read also about methods of resource allocation
For example, most of Chinese do not willing spend several hundred yuan on a small wooded table or around a hundred yuan on a paper lampshade. It has reported that IKEA’s purchase volume in Chinese market occupied 18% of the global amount. It greater exceeded all other countries of IKEA’s foreign market volume. That is, Chinese market is a great potential market for IKEA. The second trouble is related to the different culture between Sweden where IKEA has been founded and China, which is position of IKEA.
It is remarkable and not easily compared with the similar brands. There are five aspects can simply demonstrate IKEA position. Firstly, raw materials used to make product is drawn from something people “might be missing” like paper, wood and figuline instead of stainless steel or plastic. It is clearly close to the IKEA core gist of “simplistic is beauty” but more fashion, environmental friendly and lower price furniture products, make people, at least in European market, IKEA product is a popular and low price household product that suit for low-income people group.
However, the position changed in Chinese market due to the income differentiation and cultural factors, IKEA becomes middle-class to top furniture brand chosen by the white-collar people or someone like top brands. Secondly, different location of IKEA store in European market and Chinese market. For example, majority of European families have private car and enjoying shopping to a leisure environment. Whereas, IKEA had to choose store located in city center in Chinese market in order to convenient to people go shopping instead of located in city edge in European market.
Thirdly is service problem. IKEA in European market run as self-service store but it is not working well in China because Chinese are much like some salesclerks give them introduction or guidance when shopping, especially, IKEA is a foreign brand for them(Lewis, 2005). Faced the problems displayed above, IKEA in order to make their product can sale well reflect the problems with two main solutions are focus on add human actions to adopt the cultural differentiation and employee performance to meet their customer requirement (Edvardsson et al. 2006).
IKEA’s price in Chinese market is the lowest among its stores in the world as a whole, but still considered to be higher than that of domestic similar product. IKEA found that even the “relatively low price” in European society is high for Chinese consumer. Compare with Western market, IKEA can successful cut down its cost by large-scale purchase, own logistic network, instruction books and DIY assembling. In this condition, IKEA had to build its own research group in China and try to find the cheapest raw material to make much practical product.
Firstly, contract with manufactures to ensure the cost leadership strategy. IKEA take much care to match manufactures with product to meet its mission. In the long term contract condition, supplier manufactures of IKEA can work together, for example, the designers and suppliers, to build saving-generating features into production. Secondly, to build customer relationship through DIY (do it yourself) assembling and finally, lead customers becomes a resource of company. It is a Pro-sumer model of IKEA.
For instance, IKEA offer assembling instructions for customer, while customers become the supplier of labor information, time and transportation of IKEA in the process of DIY assembling. DIY concept not only save installation fees to consumer but also reduced cost for IKEA (Edverdsson and Enquist, 2002). But, when IKEA pay attention to provide customer with low price and good quality product by reduce cost, its do not realized Chinese people also IKEA offer free door-to-door delivery and installation services. (IKEA, Business News). Employee performance evaluation
IKEA’s vision is to create a better everyday life for many people (IKEA Official Website). IKEA human resource teams make care at co-workers inspiring, creating passion and enjoyable work environment. Depends on the continual development of IKEA co-worker teams, IKEA’s business gained continued success. IKEA employees are through recruitment and training, benefits management and succession planning. The human resource management method safeguarded and strengthened IKEA culture, and help IKEA transform IKEA vision into reality (Charles W. L. Hill and Gareth R. Jones, 2010).
According to Chang Yang, the regional human resource manger of IKEA Chinese market said that IKEA’s fundamental belief of chose co-worker is the one who can be trust and like to share more between co-workers. The belief closely combines employees’ work and willingness with their own interest. IKEA ordered clear requirements for candidates on different positions and different levels, but does not mean the candidates must fully meet the requirements in each aspect, while focus on the degree of the requirements candidate achieved, and how the candidate to achieve.
For instance, when IKEA to recruit leader, IKEA will consider much of the leadership of the candidate whether suit for IKEA’s value theory. As head of position in management, though the position determined by the top manager, leadership is gained direct by co-worker’s approval. In addition, IKEA also considering the candidates ability of on long-term marketing planning, strategy making, project planning and manage changes approaches and so on. Besides, IKEA adopt employee performance evaluation combine with employee private development approach.