Cross-cultural management challenges for IKEA's U.S. operations

Cross-Cultural Management at IKEA

Business across borders has presented significant challenges for multinational organisations. Due to cultural differences between countries, a multinational organisation is compelled to take the differences into account during important processes such as human resource management (HRM). IKEA, a Swedish multinational firm faces the challenge of cross-cultural management owing to its global operations and employees from multicultural backgrounds. Significant cultural differences between the U.S. and Sweden may make Swedish practices inappropriate in the U.S. It is crucial for the organisation to be aware of cross-cultural management concepts if it is to achieve its goals and objectives in the U.S. The organisation must be conscious to the cultural differences between the two countries. It must recognise the unique cultural aspects of the U.S., familiarise its workforce with those aspects, and adapt its HR practices to suit local practices. Cross-cultural training and education offered by an external cross-cultural management consultant is particularly important for overcoming cultural barriers. The program, which would take the form of planned seminars and workshops towards cross-cultural awareness, would equip employees with the knowledge and ability to work effectively in a cross-cultural environment. Implementing the training program would obviously involve a substantial amount of time and financial resources, but the long-term benefits would be worthwhile. Moreover, the organisation must properly motivate and empower expatriates, understand U.S.\'s perceptions of corporate social responsibility, and pay attention to country\'s unique political, ethical, and legal issues. With a better understanding of these concepts, IKEA is more likely to be successful in its U.S. operations.

Running head: CROSS-CULTURAL Management i

Table of Contents

Introduction 1

Culture Shock 2

Cultural Identity 2

Human Resources and the Cross-Cultural Organisation 3

Management across Cultures Relative to Expatriates 5

Politics, Ethics, and Legal Issues in Management across Cultures 5

Cross-Cultural Organisations and the Social Mission 6

Future Challenges and Trends 6

Conclusion 7

References 10

Running head: CROSS-CULTURAL Management

Introduction

Today, owing to factors such as technology, globalisation, as well as worldwide political and socioeconomic exchanges, business organisations have operations in different countries across the world. While this has been beneficial for businesses in terms of expanding their global presence, and enhancing their performance, it has presented significant challenges. Different countries tend to have different cultures. Literature on Culture extensively demonstrates that both individual and group behaviour are dictated by the underlying national or societal culture (Lucas, Lupton & Mathieson, 2006; Browaeys & Price, 2008; Bhattacharyya, 2010). Without due consideration and cognizance of these differences, management across cultures can be a challenging endeavour. A particular style of management, for instance, may be appropriate for one country, but inappropriate in another. It is, therefore, imperative for a multinational organisation to be aware of cross-cultural management concepts if it is to achieve its goals and objectives in foreign markets.

This paper highlights a number of cross-cultural management concepts relevant for IKEA. IKEA is a Swedish furniture and home appliances firm, has operations in over 40 countries across the world, including Europe, North America, and Asia Pacific. Therefore, the topic of cross-cultural management is particularly relevant for the organisation. Without adequate cross-cultural knowledge, the organisation may not effectively manage its multinational operations. Though the organisation has operations in many countries across the world, focus is specifically on the U.S., which is one of its largest markets. Taking into account cultural differences between the U.S. (host country) and Sweden (country of origin), attention is specifically paid to the following areas: culture shock; cultural identity; human resource management across cultures; strategies for overcoming cultural barriers; management across cultures relative to expatriates in an international setting; politics, ethics, and legal issues associated with management across cultures; value management across cultures; as well as future challenges and trends. Taking into account cultural differences between the U.S. (host country) and Sweden (country of origin), the paper seeks to identify specific issues and provide suggestions to improve the working conditions.

Culture Shock

One of the outcomes of coming across different cultures is \'culture shock\'. Culture shock essentially describes the disorientation an individual may experience upon coming into contact with an alien culture (Bhattacharyya, 2010). The disorientation often occurs when the individual moves to a foreign country. Behaviours and norms in the host country may cause the individual to experience discomfort, boredom, withdrawal, homesickness, as well as psychological distress (Browaeys & Price, 2008). The individual may resort to stereotyping or hostility toward nationals of the host country. Whereas culture clash may be a significant source of stress for some individuals, others readily assimilate into the host culture by making compromises and adjustments in their original mannerisms and orientations (Bhattacharyya, 2010). Other individuals adopt cultural aspects of the host country they perceive as positive, while maintaining their own identity. Though there are a number of similarities between the American and Swedish cultures, significant differences exist, making culture shock a relevant concept for IKEA. Aspects of the American culture that may shock Swedish nationals include obsession with cars, over-friendliness, fixation with body weight and image, widespread gun ownership, a fast lifestyle, abusive language, censorship, expensive healthcare, extensive use of credit cards, as well as giving tips virtually for every service offered.

Cultural Identity

Cultural identity is also a relevant concept for IKEA. In essence, it denotes the extent to which an individual identifies with or feels part of a group (Bhattacharyya, 2010). Identity is informed by factors such as nationality, race, ethnicity, language, historical background, religious beliefs, gender, and sexual orientation. Cultural identity makes an individual or a group of individuals to perceive themselves as unique from the rest (Browaeys & Price, 2008). Whereas a number of aspects may define Americans, one major aspect that defines them is their determination to achieve their fullest potential and pursue individual happiness. Americans desire to be self-reliant and independent, they are adventurous, and strongly believe that one\'s success or failure is directly related to their deliberate choices and actions. For Swedish individuals, the lack of a uniform cultural identity is evident. This may be due to the rich ethnic diversity of Sweden. Swedish people tend to be characterised by acceptance of differences and tolerance for diversity. Owing to the impact of cultural identity on organisations, it is vital for IKEA to consider this aspect. Each cultural group may bring their identities to the workplace, and may want them acknowledged.

Human Resources and the Cross-Cultural Organisation

The implications of cultural differences on an organisation tend to be particularly evident within the realm of human resource (HR) practice. Managing recruitment and hiring, training and development, team building, compensation and benefits, employee recognition and empowerment, performance measurement, and other HR aspects can be quite challenging in a cross-cultural environment. Due to cultural differences, HR practices prevalent in one country may not be universally applicable to all cultures (Lucas, Lupton & Mathieson, 2006). Indeed, some practices may be appropriate within the Swedish context, but may be inappropriate within the American context. For example, Americans tend to be goal-oriented, while Swedish people tend to be process-oriented, meaning HR practices in each culture would ordinarily reflect the orientation of each culture. Typically, American nationals would expect HR practices that compensate and reward them for their accomplishments, while Swedish nationals would be more concerned about consensus, involvement, equality, solidarity, and diversity. Failure to acknowledge cultural differences may be detrimental to employee retention, employee engagement, employee loyalty, and employee satisfaction. Therefore, it is important for IKEA to adjust its HR practices in the U.S. to suit the American culture.

Strategies for Overcoming Cultural Barriers

To overcome cultural barriers, it is crucial for IKEA to design, develop, and implement a cross-cultural education and training program for its employees. Indeed, cross-cultural education and training has increasingly become a common practice for organisations with multinational operations (Chebium, 2015). The initiatives are generally aimed at enhancing the ability and effectiveness of employees to work in a multicultural environment. Multinational organisations want individuals who can communicate and negotiate effectively irrespective of the underlying cultural differences. IKEA can overcome cultural barriers by implementing workshops and seminars, especially for individuals assigned international assignments. The seminars and workshops should focus on aspects such as the value of cultural diversity, cross-cultural communication, cultural sensitivity, cultural differences (both visible and invisible), as well as leadership and management across cultures. It is important to note that the motive of cultural education and training is not necessarily to assimilate individuals into the foreign culture. Indeed, the focus of a cultural training program should be to teach employees cultural differentiation as opposed to cultural congruence (Chebium, 2015). In other words, individuals should be taught ways of maintaining their own culture while acknowledging the value other cultures can bring to the organisation.

Like any other education and training initiative, the cultural education and training program would involve a significant amount of time, effort, and resources. The organisation must create time and incentives for employees to participate in the program. In addition, it may be necessary to hire an external consultant to conduct the training. The program is likely to be more effective if delivered by an expert in the area of cross-cultural management. Bringing in external expertise would mean more resources. Whereas the undertaking may be costly, the associated benefits are likely to outweigh the costs.

Management across Cultures Relative to Expatriates

Managing expatriates can be a challenge for HR practitioners in the international setting. It is essential to focus on not only cross-cultural training, but also orientation, performance expectations, motivation, and compensation (Lucas, Lupton & Mathieson, 2006). Expatriates must be equipped with adequate information on what to expect in the foreign environment. They must also have or be aware of important performance aspects, particularly in terms of roles and responsibilities as well as skills, experience, knowledge, competencies, and attitudes (Woods, Barker & Troth, 2012). Most importantly, an appropriate compensation method should be used to ensure expatriates are properly motivated (Lucas, Lupton & Mathieson, 2006). Effective compensation ensures expatriates do not suffer due to foreign assignments. It considers the cost of living in the foreign country and even takes the expatriate\'s immediate family (spouse and children) into consideration. The aspect of compensation is particularly important in this case given the high cost of living in the U.S. Attention to these aspects can minimise the stress associated with being in a foreign environment.

Politics, Ethics, and Legal Issues in Management across Cultures

Management across cultures in an international setting raises vital political, ethical, and legal issues that need consideration. These issues differ between countries. For instance, countries exhibit differences in terms of environmental standards, health and safety regulations, civil and political rights, employment rights, bribery perceptions, and trade regulations. When in a foreign country, organisations may be uncertain over how to approach these issues. Basing his argument on the theory of cultural relativism, Donaldson (1996) asserts that it is important to do what the Romans do when one goes to Rome. In this case, for instance, some ethical standards may be unacceptable in Sweden but tolerable in the U.S., and vice versa. Accordingly, IKEA should focus on abiding by America\'s ethical standards, whether they conform to Sweden\'s or not. At times, however, it may be critical to consider the possible damage even if some things are tolerable in the host country.

Cross-Cultural Organisations and the Social Mission

Involvement in social responsibility provides an important source of value for organisations with cross-border operations. By participating in social causes in the host country, multinational organisations can establish good relationships with communities and the society. It is crucial to note that the perception of corporate social responsibility (CSR) tends to differ across countries (Forte, 2012). For instance, Americans tend to be less mindful of CSR compared to Europeans. This means IKEA may not be under as much pressure to be involved in social missions as it is in Sweden.

Further, selecting the social causes to focus on in the host cost country may not be as straightforward as often thought. A firm must consider the causes that matter to the host country, as there may be different priority areas across countries (Bird & Smucker, 2007). In developing countries, for instance, IKEA would most likely focus on issues such as poverty reduction, sanitation, health, and education. In a developed country like the U.S., however, the organisation\'s social responsibility focus may be quite different; such issues may not be as pressing as they are in developing countries. Instead, the organisation would focus on prevalent issues such as drug and substance abuse, the rights of the LGBT community (lesbian, gay, bisexual, and transgender), homelessness, obesity, and equality. In essence, it is important to understand the social needs of the host country so as to select the most appropriate social objectives to pursue.

Future Challenges and Trends

With increased globalisation, coupled with greater worldwide economic integration, businesses between different countries will be even greater in the future. Governments are increasingly opening up their economies by adopting policies that favour foreign investment as well as inter-country cooperation. Furthermore, developing countries are ever more presenting significant growth opportunities for multinational firms. These emerging scenarios imply that the future workplace will be culturally diverse more than ever before. This presents further challenges to strategic planning, HR practice, and organisational processes as a whole. Organisations must start preparing for a global, culturally diverse workforce if they are to succeed in the future.