Tuesday, July 21, 2015

Ikea and Human Capital – The Coherence Premium.

Paul Leinwand and Cesare Mainardi wrote the article “The Coherence Premium.” The article discusses how a company must be “disciplined enough to focus intensely on what it does best” and if it does just that it will see great results. Companies that align their differentiating internal capabilities with the right external market positions are called “coherent” (pg. 2).  The authors suggest that a company should develop those capabilities until they’re “best-in-class and interlocking”. “From there, strategy becomes a matter of aligning that distinctive capabilities system with the right marketplace opportunities – and the market rewards them with outsize returns”, (p.2). This is called “coherence premium.”  Does the modern, inexpensive, furniture giant known as Ikea have a coherence premium?  

Ikea was founded in 1943 by a Swedish man named Ingvar Kamprad. The name “Ikea” comes from Ingvar Kamprad’s initials “IK” and the initials of the town he was from “EA”.  Ikea’s revenue is roughly 29.3 billion and the company has 147,000 co-workers. Of these 147,000 co-workers, 111,000 are in retail and expansion. 16,100 are in range in supply, which includes customer distribution centers and 20,100 co-workers are in production.  The company has 315 stores in 27 countries.  North America has 51 stores. Some major US cities do not have an IKEA; however, planned store openings include Las Vegas, NV, in the summer of 2016 and Memphis, TN, in fall of 2016. Ikea’s growth is obvious. It may seem that the company is only focused on expansion; however in order to successfully grow, Ikea built their strategy on what they do well which helped create opportunities.  The company’s success is due to its capabilities-driven strategy. One key capability is human capital.  This quote is on the Ikea website “We believe in people! It takes a dream to create a successful business idea. It takes people to make dreams a reality.” Human Capital is one component that Ikea is really good at. They have created a culture that includes a strong commitment to values, growth opportunities, and benefits and rewards. They are competitive, aware of the ever changing market and are adaptable. By focusing and caring about human capital, Ikea employees are more willing and able to support their company and want to see it succeed. Ikea is a coherent company.

Leinwand, Paul, and Cesare Mainardi. The Coherence Premium. Boston, Mass.: Harvard Business Review, 2010. Print. 
"Ikea Group Yearly Summary FY14." Web. July 2015.
"Welcome to IKEA.com - IKEA." Welcome to IKEA.com - IKEA. Web. July 2015. 
"Working at the IKEA Group - IKEA." IKEA /US/EN. Web. July 2015.

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