Week 2 – Compensation Management
The company I further explored was Ikea and it was clear that they are a company that values its employees. Ikea operates on a low-cost structure by providing home furnishing products at the most affordable (lowest) price possible for consumers. Compared to other competitors such as Crate and Barrel, Restoration Hardware product prices are significantly cheaper.
Not only, Ikea thrives because of the lower costs in combination to providing quality, sustainable, diverse products that hold onto the traditional Swedish furniture style which helps set them apart from competitors.
To keep costs down Ikea chooses a set price they want to sell a product at, and designers and suppliers work together to see it through with a minimalistic design (Tyler, 2018). By doing this, it helps reduce the chance of extra expenses in the design and manufacturing process which would raise product prices.
To add, a large cost break comes to their “flat packing” in which all their products are in flat boxes while being transported and stored (Tyler, 2018). This method of packaging is less expensive because it requires customers to manually assemble their products on their own and storing of products takes less room.
Ikea’s compensation can include maternity/parental leave, discounts on merchandise, health insurance, pet insurance, in-store meal discounts, paid time off, retirement funds. As well, a loyalty program that gives extra contributions to employee pension funds regardless of salary and position when company goals are reached (Samuel, 2021).
As a whole, I would say that Ikea’s approach to compensation does support their competitive strategy because they want to be inclusive to all. Similar, to producing products that are affordable to all people. To add, a large reason why they can provide extensive compensation to their workers is due to keeping their company costs down. Which better, allows them to invest in their workers who bring value to their company and keep them leading in the industry.
Furthermore, Ikea’s product market and labor practice changes in supply and demand which can influence the availability of products and costs compensation remains the same within the company. A large reason for this can stem from the companies’ values of togetherness, caring for people and the planet, cost – consciousness, simplicity, renewal, and improvement, different with meaning, giving and taking responsibility, and leading by example (Ikea, 2022).
Ikea focuses on retaining their employees by keeping them happy and wanting to be a part of the positive company culture through their values. Along with, recognizing workers’ hard work and dedication in the company. Despite facing adversity within their supply chain and the influx of products in the market they take an emphasis on caring for their workers as they are key players in keeping the company successful.
References
IKEA business strategy and competitive advantage: Capitalising on IKEA concept. (2019, November 2). Research-Methodology. https://research-methodology.net/ikea-business-strategy-competitive-advantage-capitalising-ikea-concept/
IKEA culture and values. (2022). Ikea.Com. https://about.ikea.com/en/about-us/ikea-culture-and-values
Samuel. (2021, October 14). IKEA Employee Benefits- IKEA overview. How I Got The Job. https://howigotjob.com/employee-benefits/ikea-employee-benefits-ikea-overview/
Tyler, J. (2018, October 12). Here are IKEA’s secrets to keeping its prices so low. Insider. https://www.businessinsider.com/why-ikea-is-so-cheap-2018-10
