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Structure and Control System
The roles of Value Creation Functions in achieving superior efficiency in IKEA:Infrastructure (leadership):
Provide company-wide commitment to efficiency
Creativity among employees is highly valued in IKEA and the company is full of stories of
individuals taking the initiatives; from Gillis Lundgren’s pioneering of the self
-assemble conceptto the store manager who let customers go into the warehouse to pick up their own furniture. Allthese improve the efficiency of the company. Kamprad, the founder and head of IKEA, is a takesthe subway to work, drives a 10-year-old Volvo and avoids suits of many. This is his form of commitment to efficiency and this form has become a part of the IKEA DNA. Managers do notfly first class and share hotel rooms. This is their company-wide commitment to efficiency.
Facilitate cooperation among functions
IKEA’s organizational culture facilitates cooperation among functions.
Kamprad
’s management
style is informal and nonhierarchical. The offices do not have an open plan and private officesare rare. The culture is egalitarian and everyone is called a co-worker, and first names are usedthroughout. Everyone is treated equally in the company. IKEA regularly stages anti-bureaucracyweeks during which executives work on the store floor or tend to registers. All these helpemployees to cooperate among the functions.
Production:
Global sourcing decision
IKEA designs the price tag first, and then the product. Once the price tag is set, designers work with a network of suppliers to drive down the cost of producing the unit. The goal is to identifythe appropriate suppliers and the least-costly materials. IKEA devotes considerable attention tofinding the right supplier for each item. It makes sense to work with suppliers in each of the
company’s big markets to avoid the costs associated with shipping the product all over the world.For example, for the company’s best
-selling Klippan love seat, today there are five suppliers of the frames in Europe, three in USA and two in China. O reduce the cost of the cotton slipovers,IKEA concentrates production in four core suppliers in Europe and China. The resultingefficiencies from these global sourcing decisions enabled IKEA to reduce the price of theKlippan by some 40%