This research focuses on understanding the corporate strategy and governance of IKEA. It aims to analyze the impact of corporate governance and strategy on the performance of the organization. The study explores the concept of corporate strategy and governance, factors affecting it, and recommends ways to improve it.
CORPORATE STRATEGY AND GOVERNANCE 1
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Table of Contents Introduction, background and problem review................................................................................4 Introduction..................................................................................................................................4 Background of study....................................................................................................................4 Research Problem........................................................................................................................7 Research Aim...............................................................................................................................7 Research Objectives.....................................................................................................................7 Research Questions......................................................................................................................8 Significance of study....................................................................................................................8 Literature Review............................................................................................................................9 Concept of corporate strategy......................................................................................................9 Concept of corporate governance................................................................................................9 MESA Model...............................................................................................................................9 Business Strategic Transformational Model..............................................................................10 Anglo-Saxon Model for improving corporate governance........................................................12 Impact of corporate governance and strategy on businessperformances................................13 Discussing primary and the secondary research............................................................................14 Research Onion..........................................................................................................................15 Research Philosophy..................................................................................................................16 Research Approach....................................................................................................................16 Research Design.........................................................................................................................16 Data Source................................................................................................................................17 Data Analysis Technique...........................................................................................................18 Ethical Considerations...............................................................................................................18 2
Introduction, background and problem review Introduction Corporate strategy and governance are two important aspects that determine a procedure that is followed by an organisation in order to develop strategic plans. The strategic plans are used in operations and significantly reflect on the structure of authority and the competence of the workforce. In this case, the research is based on the chosen organisation that is IKEA. IKEA is a Swedish multinational company that is headquartered in Leiden, Netherlands (Ikea.com, 2018). The company was founded by Almhult in 1943 and is believed to be the largest suppliers of wooden furniture in the world till 2008. The research will focus on understanding the corporate strategy and its governance in order to identify the prevailing problems in the organisation. The research is aimed at understanding the problems of the organisational corporate governance and their strategy. It will, therefore, provide the aims, objectives and the problem statement of research. It will also propose a literature on the subject to understand the depth of the issue and recommend suitable ways to mitigate problems faced as a result of the prevailing issues. Background of study IKEA is globally known to follow a dynamic structure for both economic and its sales forces. Therefore it invests in ideas that devote its efforts and attention to the management of relational dynamics and its related components. As per the views ofFilatotchev and Stahl (2015),IKEA group is an amalgamation of several companies which are collectively known as INGKA Holding B.V. which follows an ownership structure. Along with the INGKA foundation in the Netherlands it is the owner and provides funds in two different ways is reinvestment in IKEA group or donation for the purpose of charity through its foundation known as Stitching IKEA. The company operates globally by means of value chain system which is parented by the strategy of production, development, distribution and retail (Galpinet al.2015). It also includes its manufacturing units, centres for distribution or customer distribution as well as purchasing offices. It has 328 stores in 28 countries and on the whole, the operations are carried out in 43 countries (Hahn and Kim, 2016). 4
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Figure 1: Ownership structure of IKEA (Source: Highlights.ikea.com, 2018) At present, the company is no longer a multinational company but an integration of enterprises, globally (Lofthouse, 2018). This has resulted in a complete transition in corporate strategies and governance. The organisation is presently aiming at providing value-based services which are in- line with the sustainability of the business. Sustainability is the cornerstone of business strategies of IKEA and the organisation expects of maintaining integration of the daily work of the co- workers (Marques, 2018). Therefore, it believes that through this step the organization can accomplish the purpose of improving lives. As per the opinion ofMurphy and Smolarski (2018), it is for this reason that the organization has to determine by integrating with other organisations to create a deep impact on people or its customers. 5
Figure 2: Corporate governance of IKEA (Source: Inter.ikea.com, 2018) The corporate governance of the chosen organization that is IKEA secures arrangement of the continuous amalgamation of core business sectors. As suggested byNaidoo and Gasparatos (2018), the core sectors of business of IDEA are subdivided into three segments which are: franchise, industry and the supply chain. 6
Figure 3: Corporate structure of IKEA (Source: Inter.ikea.com, 2018) Research Problem The company is facing grave issues in management decisions when they are about to venture into other foreign countries. The corporate strategies that are owed to the conventional business model have led to an increase in its operational costs, slowing down of sales and portrayal of incompetence with respect to other competing organizations in the global market. Among the contemporary issues, the organisation has found that there is a gap in the market communications which is affecting its sales vehemently. The strategy used for marketing communications is too conventional due to which there is a predominance of misinterpretation of information and at decisions of management with the distributors. This results in a lacking in communication with the target audience or consumers. IKEA has issues with the promotion of its products and communication with suppliers and distributors. It has resulted in a delay in supplies to the market and an increase in demand which is usually compensated by the supply rate. Research Aim The aim of the study is to analyse the impact of corporate governance and strategy on the performance of IKEA. Research Objectives 7
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The research study will be conducted in order to accomplish the objectives which are as follows: ●To understand the concept of corporate strategy and governance ●Toanalysetheimpactofcorporategovernanceandstrategyonorganisational performance of IKEA ●To evaluate the factors affecting corporate strategy and governance of IKEA ●To recommend ways for improving corporate strategy and governance of IKEA Research Questions The research questions for this study are given which are as follows: ●What is the concept of corporate strategy and governance? ●What is the impact of strategy and corporate governance on the IKEA performance? ●Which factors are affecting the corporate strategy and governance of IKEA? ●What are ways that can be recommended for improving the strategy and corporate governance of IKEA? Significance of study The study is focussed on understanding the concepts of corporate strategies and their governance on the organisation, IKEA. Corporate governance is a crucial factor that determines the way the organisation can process with the operations. It even dictates the relationship of the management of the organization at its different levels. In addition to this corporate governance also defines the relationship that exists among all the core business models of the organization. However, these entire relationship chains are defined as per the strategies developed for the organisation. Henceforth this sudden will help to understand the corporate governance of IKEA and its subsequent relationship with its core business. The study will induce a better understanding of the prevailing issues with respect to corporate governance and its strategies and the failures associated. In addition to this, the study will concentrate on the necessity of the action plans that are required to combat the risks associated with management of sudden occurrence of events that reflects of massive catastrophic change. 8
Literature Review Concept of corporate strategy CorporateStrategyisimportantineveryorganisationasithelpsindefininggoalsof organisation, besides defining ways for achieving it. According to Rothaermel (2015), corporate strategies of an organisation are focused on implementing and developing ways for satisfying organizational objectives and promote corporate goals. An organization can develop corporate strategy by using different analytical tools like SWOT, VRIO, and PESTLE. For example; corporate (globalisation, pricing, and localization) strategy of IKEA is found to be helpful for determining its competitive advantage and sustainability in future. On the contrary, Formentini and Taticchi (2016) argued that developing corporate strategy in an organisation is always expensive. It is noted that organizations need to hire external consultant for developing effective corporate strategy, which requires cost. Therefore, it can be said that if corporate strategy is beneficial for gaining advantage over competitors in today’s highly competitive market, it also requires huge cost for developing and implementing it. Concept of corporate governance CorporateGovernanceisessentialinorganisationasitfocusesondevelopingpractices, processes and rules for directing and controlling the firm. Based on the viewpoint of Tricker and Tricker (2015), responsibilities of the board of corporate governance is to set strategic aims of theorganization,establishingleadership,supervisingmanagementandreportingitto shareholders. Corporate governance has four different pillars that include leadership, fairness, accountability,andtransparency.Thepillarsaresimplydedicatedtoenhancingthe organizational performances by attracting investors. For example; corporate governance of IKEA is focused on participating in responsibility towards environment and society for bringing sustainability. On the contrary, Klettneret al.(2018) argued that corporate governance provides long-term benefits, instead of immediate benefit. It is not beneficial for aiding organisation during immediate crisis. Thus, it is found that though corporate governance is helpful in increasing organisational profitability, the profit can be gained after a long period. MESA Model 9
The focus of MESA model is to provide the platform that promotes mutual planning and understanding for increasing the performances of organisation. According to Visser and Tolhurst (2017), the MESA model takes into consideration different corporate strategic initiatives that aid an organisation to move towards organisational goals.The different strategic initiatives that are found to be taken by organisations of UK include management of product development, management of asset performances. Different organisations can use MESA model for developing their strategic initiatives in an appropriate manner. The model emphasises that good review of quality of products can help in determining the level of product quality is supplied to the customers. Flammer and Luo (2017) noted that quality products help in attracting new customers and retaining the old ones, which thereby enhance profitability of company. Other initiatives that are highlighted in MESA model are regulatory and quality compliance, meeting demands of customers and employees. For example; it is found that IKEA in UK is offering one-weekend-off initiatives for providing its co-workers with quality, ensuring fairness and improved work-life balances. Other strategic initiatives that can be taken by organisations, include annual bonus, pension-loyalty schemes for motivating employees to move towards goals of company. It is important to note that business operations and strategic initiatives are interlinked with one another. As commented by Aguileraet al.(2018), business operations stand as important step of MESA model, which helps in improving company’s performances. Different operations that are linked with strategic initiatives include customer-focused, financial as well as performances focused.TheMESAmodelemphasizesservicemanagementandCRM(Managementof customer relationship). The organizations can, therefore, be benefitted by MESA model as it has the capacity to improve relationship between company and customers. In addition to this, MESA model is also helpful for organisation as it an make it supply focused, product and asset reliability forces. Larcker and Tayan (2015) noted that operations of production stand as the important part of MESA model. Organisation can make use of MESA model for allocating pop resources at time, tracking products, labor management, focus on logistics and dispatching products. Moreover, MESA model is also helpful for process and quality management operation of company (Refer to Appendix 1). Business Strategic Transformational Model 10
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Figure 4: Business Strategic Transformational Model (Source: Ostergaard, 2018) The model business strategic transformational is aimed towards improving business strategy and enhancing operational excellence for gaining competitive advantage. Dodgson (2018) mentioned thatmodeloftransformationstrategyisfocusedonimprovingthebusinessstrategyof organization.Thementionedmodelisusefulfororganisationsasithelpsbusinessesin developing, aligning, communicating and implementing strategy. The model puts emphasis on effective communication between managers and employee for successful execution of strategy. Organisation can even develop its strategy using the model, which can be helpful for bringing long-term success. Windspergeret al.(2018) added that the strategic transformation model is essential for bringing excellence in operation of business. The companies can be benefited by current model to arrange resources of organisation; such as employees, time and money for delivering values of business and employee, customer satisfaction. However, Ostergaard (2018) argued that offering dynamic leadership is the main concern of present model. Leadership strategy of organisation helps in effectively meeting the goals of study. Any organisation can use model of strategic transformation for improving its leadership strategy governance. It can 11
provide organisation with the understanding of providing training to leaders, which can enhance their skills. Junget al.(2017) noted that change management is also the concern of current mentioned model. The management of change in any organization can be maintained by the model, which can accelerate the performances of company. Anglo-Saxon Model for improving corporate governance The model Anglo-Saxon is focused on controlling and supervising corporation operating in United States, Australia, Canada, and United States. As opined by Junget al.(2017), Anglo- Saxon model simply relies on capital market and control the entire operation. The organizations can use the present model for improving capital market of organisation. The present model emphasizes that banks are only slightly responsible for the operation of the business. The present model Anglo-Saxon is helpful for organisation as it helps makes the managers understand that they are independent of the investment banks. It is noted that companies can use the investment banks rarely, such as in the situation when there is any planned takeover, such as LBO and MBO transactions. The mentioned model is found to be focused on raising the capital of company on liquid and large capital markets. Ostergaard (2018) noted that the model of Anglo-Saxon puts emphasis on results that are achieved by organizations. The current model is therefore helpful for organisation as it aims at measuring the level of success. The Anglo-Saxon model is beneficial to be by different organisations of UK as it has the capacity to measure success by analysing share dividend and price. Contrarily, Viscelliet al. (2017) argued that the role of Anglo-Saxon model is to provide security to the stakeholders of the company. The stakeholders include customers, shareholders, suppliers, employees. Any organisationsofUKcanuseAnglo-Saxonmodelforprovidingsecuritytoitsdifferent stakeholders by providing value to them. For example; IKEA, a well-known furniture company of UK is found to be greatly concerned about the stakeholders of organisation. Epstein (2018) commented that customers stand as the most important stakeholders of any organisation, which gives company a meaning. The model Anglo-Saxon can aid the company, such as IKEA to give prioritytocustomers,alongwithotherstakeholdersforenhancingtheperformanceof organisation. The model is found to be beneficial for providing values to employees (high salaries, respect) of the company so that they work together for meeting demands of customers. 12
Therefore, it can be said that biggest role of Anglo-Saxon model is to implement goals and make steps for meeting it(Refer to Appendix 2). Impact of corporate governance and strategy on businessperformances Figure 5: Impact of corporate strategy and governance on organisational performances (Source: Dodgson, 2018) Improved Reputation The corporate governance of an organisation is beneficial for boosting its reputation. According to Aguileraet al.(2018), publicising the policies of corporate governance develops interest of stakeholders for working with organization. The strongest fiscal policies, as well as internal controls of organization, make lenders become the partner of organisation. It helps organisation to lift the business to a higher level in the highlight competitive market. In addition to this, corporate governance also makes organisation value its other stakeholders, such as customers, 13
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supplier, employees and practice transparency by sharing the internal information. It, therefore, allows key stakeholders to feel confident about products and develop loyalty. Fewer Lawsuits, penalties, and fines It is noted that corporate governance takes into consideration instituting policies, which makes companies remain compliant with state, federal and local regulations. For example; while hiring employees, the organization considering corporate governance makes review of company that whether the hiring practices are falling under Commission of Equal opportunity of employment. In addition to this, corporate governance makes organization practice fair actions by making accountingdepartmentfocusonexternalaudit.Moreover,corporategovernancealsois beneficial for limiting fraud and conflicts to a greater level. Discussing primary and the secondary research Research methodsTools used Research philosophyPositivism Research ApproachDeductive Research DesignDescriptive Research Strategy Survey Interview Data collection method Quantitative (Employees) Qualitative (Managers) Data sources Primary (Survey, Interview) Secondary (Books, journals and websites) Probability (survey) 14
Sampling methodNon-probability (interviews) Sample Size 3 Managers 100 Employees Tools usedResearch methods Table 1: Description of research methods for data collection and analysis (Source: Self-developed) Research Onion Figure 6: Research Onion (Source: Saunderset al.2009) Research Philosophy 15
The research philosophy that is chosen for the study is that of positivism. As opined byPenget al.(2018), the philosophy for the research refers to the mode in which the research is to be conducted. This includes both the mode of data collection and the way the data is to be used. As the research philosophy that is chosen is positivism it will involve using the theories which are existent in relation to the subject. The positivist philosophy of research will help to test the proceedings of the research prices. This means that as per Strand (2017), positivism is such a research philosophy that believed in the concept that science is the ways to understand sing the truth.Thereareseveralwaysby whichresearchersperceivetheapplicationofresearch philosophy that is of positivism. Therefore in the context of the study of the corporate governance of the chosen organization, IKEA positivism will lead to a collection of valid data which may be both qualitative and quantitative data. Since positivism denotes presentation of factual data by means of observation, therefore, data that will be collected through observation from relevant sources in case of secondary data. Research Approach The research approach that will be used to conduct the study is that of a deductive approach. This approach will help to analyze data that is collected along with documentation which is related to the research topic. As per the views ofRothaermel (2015), the deductive approach helps to develop hypothetical situations which will analyse a situation that has occurred in real time very closely. This approach is chosen as it gives a definite pattern that will be followed for the research data. Similarly, in the case of this research study, the data that will be collected relevant to corporate governance will be assessed on the basis of the existing theories. Research Design Research design defines the research strategies which are incorporated to integrate various components of research topic in an efficient manner. The design, therefore, will help to address all the stated research problems or issues. As per the views of Roux and Pree (2018), there are three basic types of research but this research study will use descriptive design. Descriptive design will help in analysing the case study of IKEA and present all the relevant observation in the form of data collected. The data that will concede will help to understand the situation 16
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pertaining to corporate and the strategies of IKEA. This may involve collection of data from the south cells which may be newspaper articles, documentaries, public review top comments. Data Source The data that will be collected for conducting the research may be from different and valid sources. In case of a research study that the data that is collected to substantiate the purpose of the research is mainly classified as primary or secondary data. Primary data The data that is collected by first hand experiences that is from the field of study is known as primary data. This data that is collected by using a primary data source can be n the form of surveys or interviews. Survey The survey is one of the widely used ways to collect primary data. It involves a questionnaire that is a set of questions which are constructed in a way that is relevant to the subject. The questions are framed in a way that they solve the purpose of the study. In this study, 100 employees or the respondents will be selected to obtain appropriate responses. Interview Interview is a constituent of the research strategy that is used to obtain data that is considered to be qualitative data. In this case, the managers of IKEA will be subjected to an interview wherein they will be accountable to respond to the set of questions which are open-ended in nature. In this case, 3 managers will be considered for conducting the interview at IKEA. Secondary data Secondary data refers to the information that is collected from several sources which are already documented as well as published by valid entities. This means such data are usually collected by others other than individuals who are conducting the research. Sources from which the secondary data for this research study can be collected may be journals, articles or magazines. Data Analysis Technique 17
The data that is to be collected from various sources need to be analysed using appropriate tools. The tools used for data collection and for further analysis may be broadly classified into basic segments. These will be quantitative and qualitative data collection. In this research work, both the tools that are qualitative and quantitative tool will be used. For the purpose of analysing information that is collected from respondents of the interviews, qualitative techniques are used. For the analysing the data that is collected from surveys will be applicable for quantitative analysis. The quantitative analysis will involve the use of graphs and charts using Excel spreadsheets to make the data more visibly presentable at the same time more comprehensive. Figure 7:Data Analysis Technique (Source: Self developed) Ethical Considerations The research will be conducted, adhering to the applicable code of ethics with respect to conduct of a research project. The data that will be collected and later presented for further analysis of its to make it globally accepted will be done so as per the Act of Data Protection of 1998. The data that will be conducted from the primary sources will not be utilised for any commercial use. 18 Dataanlaysis
Therefore, it can be said that the research will be conducted by mandating privacy as well as confidentiality regarding the details presented by the managers of the chosen organization, IKEA. Apart from this, this research work will significantly focus on anonymity of the respondents. In this respect, the research will be conducted involving the employees as the managers of IKEA after obtaining approval of permitting the researcher for both interviews and surveys. Critical review SMART objective SMART objective 1 SpecificTo understand the concept of corporate strategy and governance MeasurableThe present objective will be effective in present case as it can help readers understand the concept of the research topic. The first objective will clear the pros as well as cons of corporate governance and strategy in business operation. AttainableIn order to attain the first objective, secondary source, such as different journals, books as well as online articles will be studied. Furthermore, the researcher will make use of company’s website for deriving statistical information for completing the study with satiety. RealisticThe current objective will be realistic as it will provide information on research topic. The present researcher will study the previous study and find it effective in giving the study a meaningful ending. Time bound 1 week to 2 week Table 2: SMART Objective 1 19
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SMART objective 2 SpecificTo analyze the impact of corporate governance and strategy on organizational performance of IKEA MeasurableThe second objective will be effective in analyzing the impact of corporate strategy as well as governance on the performances of the present company, IKEA. The current objectives will aim to show that if corporate strategy and governance can help IKEA to enhance organizational productivity, it also can increase the cost of company. Moreover, present objective, therefore, will highlight the link between dependent variable (organisational productivity) and independent variables (corporate governance and strategy) of study, thereby bringing satisfactory outcome. AttainableIn order to meet the second objective of present study, the researcher will use primary source. Managers, as well as employees of IKEA, will be interviewed and survey respectively for analyzing the impact IKEA corporate strategy and governance is feeling on company's performances in UK. RealisticIt will be realistic as it will make reader understand the proper link between dependent as well as independent variable. Time bound 2 week to 4 week Table 3: SMART Objective 2 SMART objective 3 SpecificTo evaluate the factors affecting corporate strategy and governance of IKEA MeasurableThe third objective will be focused on evaluating different factors that affect the corporate strategy and corporate governance, in context of IKEA. It will help in 20
analysingtheindustrylife-cycle,besidesknowingtheexistingcorporate strategy. AttainableThe present objective will be attainable by using primary sources. Interviewing the managers of IKEA can help in getting in-depth information from perspective of managers while surveying employees will provide information on current topic from employee’s perspective. RealisticThe objective will be found realistic as it will draw the real issues faced by IKEA based on corporate strategy and governance. Time bound 2 week to 4 week Table 4: SMART Objective 3 SMART objective 4 SpecificTo recommend ways for improving corporate strategy and governance of IKEA MeasurableThe fourth objective will be found effective in current study as it can help in drawing proper recommendations for eradicating the loopholes in IKEA’s corporate governance and strategy. Moreover, the present objective will also be beneficial for IKEA, as it can aid company to enhance its organisational performances by improving corporate strategy. AttainableThe last objective will be achieved by using sense and humour of researcher. The current study will make use of Positivism philosophy, which will give researcher the space to use own senses by analysing loopholes in corporate governance and strategy of IKEA. RealisticThe fifth objective will draw out real-methods which will make IKEA overcome 21
its corporate issues and gain competitive advantage. Time bound 5 week to 6 week Table 5: SMART Objective 4 GANTT chart (Refer to Appendix 3) Critically reviewing results It is noted that organisations need to focus on corporate strategy as it helps in defining corporate objectives, besides helping company to enhance organisational productivity. As opined by Windspergeret al.(018), corporate governance is helpful in developing confidence of investors. It is found that corporate governance of IKEA is aimed towards carefully managing interest of several parties, including customers, suppliers, customers as well as shareholders. In the present context, it is found that managers of IKEA are focused on environmental as well as social responsibility for supporting their businesses. On the contrary, Larcker and Tayan(2015) argued that corporate governance in organization increases the cost of company. It is noted that corporate governance requires greater administrative. Moreover, corporate boards are provided with responsibility to meet for creating resolutions, so as to get into contractual agreements and financial agreements. In the present case, it is noted that IKEA is focusing on conventional method of promoting products. Digitalization requires a lot of costs, which makes the company stick to the traditional method. Communication plays a major role in enhancing the performances of organisation and bringing profitability. Based on the viewpoint of Visser and Tolhurst (2017), corporate governance is focused on ensuring economic growth as well as corporate success. It is noted that corporate success can be gained by including a good leadership strategy and good communication. Furthermore, it is also known from the results that corporate governance provides inducement for enhancing the performances of employees within the organisation. In the present case, it is seen 22
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that poor communication among employees of IKEA is the result of improper corporate governance. Poor leadership strategy is, therefore, the result of poor communication within the workplace,whichdisruptsthefunctionalityofcompany.Itisalsonotedthatcorporate governance of IKEA has shielded liabilities of shareholders of company. It is therefore seen in the result that IKEA is ailing to put focus on raising the capital, which is thereby stressing its position in the competitive UK market. On the contrary, Flammer and Luo (2017) argued the above author and said that corporate governance makes the company comply with regulations. It is thereby found that costs of administration are much higher in IKEA, which is thereby increasing the extra cost of company. The result is that IKEA is failing to provide proper training to the employees for enhancing their skills for meeting the expectations of customers. Increasing cost of administration is, therefore, resulting in dropping profit of IKEA by 10% in the year 2015 (IKEA, 2018). It is also noted that IKEA is focusing on pricing strategy for meeting customer’s interest. The result has therefore reduced the sales rate of company to a greater extent. Corporate Governance makes the organizations follow numerous formalities, which includes documentingandholdingannualmeetingsofshareholders.TrickerandTricker(2015) mentioned that corporate strategy and governance makes an organisation record the big decision taken in the annual meetings with shareholders and approve it by director’s board. It is noted that it creates stress on IKEA as failing to follow the formalities of corporate governance, UK court can pierce corporate veil against the company. In addition to this, shareholders of IKEA can be liable for all the debts of company. Klettneret al. (2014) commented that new products and customization is essential in today’s market for meeting demands of customers and adapting to market change. It is found that IKEA is capable of performing product customisation as the company preliminarily makes proper analysis of its customers. The result is that the customers are highly attracted towards the products of company and even are making repurchasing decision. It is thereby improving the profit rate of company, which can in turn aid company to gain sustainability. Furthermore, customization of product is also resulting in brand development and formation. Contrarily, Formentini and Taticchi (2016) argued that corporate strategy and governance mainly aims at analysing process and procedures of business which makes company move towards goals. It is noted that equality needs to be focused while hiring employees within the organisation. As per the record 2018, it is seen that 23
there is 6.1% gender pay-gap among employees of IKEA, which is demotivating females to carry forward with their job roles (retail sector). On the other hand, it is also found that men are demotivated in distribution channels, as women earn more than men in mentioned sector. It is resultingin poor performancesof employeesand evendisruptingcommunicationamong employee. Poor communication within the workplace results in poor organisational performances as the company fails to attract customers and gain their loyalty for a longer term. Therefore, it is found that corporate governance, as well as corporate strategy, is largely driven towards managing company in a manner that fits interest of very stakeholders of organisation. Flammer and Luo (2017) opined that product differentiation strategyaims at differentiating products of one brand from another. Corporate strategy, therefore, includes strategy of product differentiation for helping company to make the brand different from its competitors. It is known that brand image makes an impressive impression on the minds of customers, which make then make purchasing or re-purchasing decisions. In the case of IKEA, the managers fail to make differentiation in the products, while making the company operate in internationally. It is found that all products of IKEA are same in Chinese and French market. The result that is seen in present case is that the company is facing difficulty while entering into foreign lands and expands its target market. Recommendations and the action plan Recommendations The research will give a detailed explanation of the impact of corporate strategies and their use in governance of the organisation. The research will help to reveal the unknown facts that provide insights into the reason behind the current issue of higher operational costs and lower sales rate. The research will work towards an understanding the prevailing issues in the context of corporate governance and the strategies of IKEA. On the basis of findings that will be retrieved while proceeding with a research study, there will be probable situations that need to be changed for better performances of organisational business. Therefore, along with the process of the research, suitable recommendations will be provided that will work towards better management of the situation and elimination of the unwanted occurrences. As per the situation studied for an 24
improved corporate governance and development of better strategies can be suggested which are as follows: Maintenance of compliance for good governance The board members of IKEA are required of balancing conformance with the aspects of performance. It is for this reason that the board needs to elaborate the information regarding its role and functions compared to the management of the company. In addition to this, the board's role and its relation with governance of the company will help to define a better relationship between the management and the board. Clarification of strategies referring to roles for the board The boards need to play a significant role in formulating as well as adoption of organizational strategies. The strategy relevant to understanding the extent of contribution of board will help to develop and determine the role that is appropriate to undertaking as well as clarifying the understand ability of management. Regular monitoring of organisational performance It is recommended that the organization follows a policy of regular monitoring of organisational performance. This needs to be done maintaining the legal compliance and for monitoring the trial of the organisation. This means that corporate decisions are made with the maintenance of consistency with organisational strategies and expectations of the owner. This can be the best by identifying the criteria of key performance of the organisation and establishing measures for the determination of success in the process. In case of the board, it is required by the directors to establish an agreed format for submission of reports in this case. Recognition of business risks The organisation needs to establish a sound system that reciprocates of sound management of risk management along with internal control of fundamental roles of boards. Risk management techniques need to be effective and ensure better decision making process in more to develop a deep insight trade-off regarding risk rewards. Ensuring better ways of retrieving data 25
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Regular collection of board papers needs to be ensured that includes the decision s of the CEO. Different departments may require different form of information as fact information in the forms of the project briefing, development programs, and site visits will help directories with additional sets of information. Evaluating competency of managers The board is responsible for managing all the action as well as decisions of the organization to have policies to guide organisational behaviour. For ensuring keeping a relationship of boards' responsibility with the management it is important that it is required to develop policies of delegation. The processes which are tab fault like that of the internal processes may lead to poor communication and an uninformed process of decision making. Therefore enhancement by the board has to be exercise soon with the emergency board meetings and meetings agendas. This is to make a difference in order to showcase a probable difference between high performing and mediocre boards. Evaluating the skills of the board For better governance of the boards, it requires to be gauged regarding assessing the performance of the individual directors. It is recommended that qualities of the board are assessed to understand the level of competency. This is because it influences the relationship of the board with the management. It also includes stakeholders and managers as well. Evaluating performance of the board It is recommended that board needs to be aware of both strengths and weaknesses. In this respect, the board has to implement an agreed mode of actions for the evaluation of all the directorial programs for enhancing the progress of IKEA's governance. Actions Plan An action plan helps to define the set of actions that need to be followed to improve the performance of the organization, IKEA. The following action plan is given address the corporate governance and better development of strategies in the context of the given topic of research topic. 26
IKEA Group Action Plan for Corporate Governance Sl. No.ActionTarget deadlineHow to meet 1Maintenanceof compliance for good governance 2 monthsElaborating functional duty of each board member 2Clarificationof strategies referring to roles for the board 2 weeksClear demonstration of board's role 3Regularmonitoring oforganisational performance 2 monthsIdentifying the organisational KPIs 4Ensuring better ways of retrieving data 2 weeksDevelopment of communication plan and regular updation of the plan 5Evaluating competencyof managers 3 weeksAssessment of leadership quality of board members and assessing their capability of handling sudden unforseen events 6Evaluatingtheskills of the board 2 monthsConsidering factors like behavioural 27
competencies to determine the relationship between corporate relationships 7Evaluating performanceofthe board 3 monthsImprovement of the processes of board by motivational speech and training sessions in board meetings Table 1: Action plan for corporate governance of IKEA (Source: Self developed) 28
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Appendices: Appendix 1: MESA model (Source:https://www.google.co.in/url? sa=i&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwjjj9qN_efeAhXBT30KHUyqDs0 QjRx6BAgBEAU&url=http%3A%2F%2Fwww.mesa.org%2Fen%2Fmodelstrategicinitiatives %2FMESAModel.asp&psig=AOvVaw02Qrfv-FVCXwb2LU2yjN9H&ust=1542975312608074) 34
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Appendix 2: Anglo-Saxon Model (Source:https://www.google.co.in/url? sa=i&source=images&cd=&cad=rja&uact=8&ved=2ahUKEwiMicTE_efeAhWUTn0KHccHD3 kQjRx6BAgBEAU&url=https%3A%2F%2Fslideplayer.com%2Fslide %2F12916112%2F&psig=AOvVaw2lWFs2cxRf5tnOzxstTfhg&ust=1542975400225079) 35
Appendix 3: Gantt Chart Main activities/ stagesWeek 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Topic Selection● Data collection from primary source●● Data collection from secondary sources●● Creating layout● Literature review●●● Formation of the research Plan●● SelectionoftheAppropriateResearch Techniques ●● Primary data collection●● Analysis&InterpretationofData Collection ●● Findings of the Data● Conclusion of the Study● Formation of Rough Draft●● Submission of Final Work●● 36