The modern world requires many national and transnational companies to adopt the best organizational structure and the most efficient management strategies to succeed in sales. The companies choose their structures according to their long-term and short-term goals. These two components’ importance is undoubtful as they affect the workplace environment, corporate sales, and authority. IKEA, the Swedish furniture company and the most valuable retailer in the world, implements a functional structure with mechanistic elements to maintain its value proposition.
IKEA is a multinational corporation that aims to provide well-designed and affordable furnishings at lower prices to attract as many customers as possible. Therefore, its concern with affordability provides a competitive advantage, allowing it to manage more than 350 stores worldwide (Dudovskiy, 2022). The Swedish-founded company needs to establish a suitable organizational structure to successfully manipulate its work in retailing, logistics, and marketing. Thus, the company is functionally organized, meaning that its structure comprises levels of authority based on specific skills and knowledge from top to bottom (Dudovskiy, 2022). This long chain of command provides managers narrow control range, ensuring their practical and corporate-oriented goals.
The choice of functional structure is associated with the fact that IKEA’s work integrates a wide geographic area where the company should accurately manage work with apparent authority, employee responsibilities, and necessary skills. Thus, the company has three primary operating structure levels. Inter IKEA Systems is responsible for the furniture retailer’s franchises in 500 locations. Range and Supply develop furnishing chain while IKEA Industry “manufactures about 10-12% of the total range” of products (Dudovskiy, 2022, para. 5). For such a prominent and successful company as IKEA, functionally organizing its work means controlling every managerial level and employee’s roles.
The elements of an organizational structure determine the relationships between the organizational levels and employees. Although many researchers believe that IKEA implements organic elements because of its employee-friendly environment, the company attains more significant global expansion by mechanistic structure with its highly specialized and centralized nature (Bychkova & Belyaeva, 2021). The reason for choosing such organic elements is the need to control large businesses with many stores, functions, and franchises. Considering that the company is organized functionally, it is evident that mechanistic elements ensure that all company’s regulations are followed. A long chain of command and many departments regulate high job specialization created by mechanistic elements. Employees know their duties and manage their time effectively to cope with them. The mechanistic structure segregation helps IKEA control its many managerial levels.
IKEA’s organizational structure tries to integrate its massive business into a successful organizational system. However, controlling “11 franchisees operating in more than 500 locations in 63 countries” is not the most straightforward task (Dudovskiy, 2022, para.3). Therefore, it faces low business flexibility, slow decision-making, and poor communication. The major problem is that the IKEA stores are so big that they permit meeting with all managers every morning (Chaussée & Foray, 2018). According to IKEA’s managers, their subordinates lack autonomy as their tasks are always the same and cannot be altered. Consequently, managers and employees cannot address the problems simultaneously due to their lack of communication.
The company’s low flexibility is justified because the top of a functional organization makes all the decisions later diffused to the lower levels and employees. Managers are not even allowed to choose the shelves for the products in a critical situation (Chaussée & Foray, 2018). To change any operations, the managers should report to senior managers, which slows down the whole decision-making process. Therefore, creating innovative and modern products is challenging when the company has a strict governing structure that limits an organization’s problem-solving abilities and flexibility.
IKEA should react quickly to market conditions since the modern market is volatile and competitive. It is recommended that this retailer company have broader employee duties, more autonomy, and developed information flow between the franchises. If the company had more trust in employees and cohesion with them, it would better cooperate and unite all the layers when they try to resolve existing problems (Bychkova & Belyaeva, 2021). For example, the managers can allow the employees to evaluate their work to strengthen IKEA’s corporate culture. To speed up the company’s ability to resolve existing problems, employees should have opportunities to negotiate with the managers about the work objectives. Even the lower-level managers follow goals and principles set by the higher managers, which limits their perspective on the company’s success (Chaussée & Foray, 2018). If workers communicate directly to the top of the managerial levels, they better understand the business environment and daily problems. Thus, improving the management system guarantees better cooperation among workers to make goal-oriented decisions in its functional structure.
To conclude, the multinational company, IKEA, operates in many countries, providing high-quality furnishings to customers worldwide. The company needs to make profitable decisions to address clients’ needs from a wide geographical range. One such decision is a functional organizational structure with mechanistic elements providing top-to-bottom authority at different managerial levels where employees have no right to affect the company’s decisions. IKEA faces low flexibility and slow decision-making due to its long chain command, which can be changed by the staff’s unity and developed information flow.
References
Bychkova, M. & Belyaeva, Z. (2021). How organizational structure fits in corporate culture: Theory and case studies. The New Normal International Economics and Business, 2(1). Web.
Dudovskiy, J. (2022). IKEA organization structure: Overview. Business Research Methodology. Web.
Chaussée, L. & Foray, M. (2018). Undestanding the management control system used by hybrid companies. Linköping University. Web.