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Leverage for Competitive Advantage

Question:

Discuss about the Dimension of Knowledge Society IKEA.

Knowledge management refers to the efficient handling of information and resources within a context of the commercial organisation. In simpler terms, this refers to the use of right knowledge, in context to the right person at right time. The intention behind these measures is to maintain the work continuity as well as to achieve sustainability with reference to market competitiveness.[1] In the present report, the chosen organisation is IKEA Australia, which is a multinational company and it designs and sells kitchen appliances, ready to assemble furniture and home accessories. IKEA has opened its first store in Australia in Artarmon, near Sydney in the year 1975. In a report by Waluszewski[2], it is s found that on a global basis the store physically receives 771 million of customers and 1.9 billion of visitors as reported in the IKEA.com. While in Australian IKEA stores 11 million of visitors are welcomed and more than 40 million visited IKEA.com.au. Based on the accounts reports of Australian Securities and Investments Commission, the profit margin of IKEA was found to be 1% of $556.6 million which it took from the shoppes in 2010. Thus, this commercial organisation is accurate for discussing the context of knowledge management in terms of leverage for competitive advantage, approach to mitigate ‘obsoledge’, and risk management according to market trends.

“The use of knowledge in society” is one of the popular concepts which describes that the uneven distribution of knowledge among the different members of society is critical to managing, in order to bring sustainability within the organisational performance. The rationale is linked with the fact that the members having the local knowledge, makes the best decision compared to that of the central authority. The same concept is also applicable to IKEA, Australia as its open market is more efficient than any other centrally planned economy. As for example, the company have significant demand in local as well as overseas location and for that company makes decision such as to export smaller parts and then assemble them in target locations, using franchising partners that runs based on brand popularity, and using outsourcing provision to reduce unit price and manage lower product price in market.  

In order to have local knowledge regarding raw material, production, and customer targeting, the company have worked with local suppliers. The local suppliers provide information on the origin of the wood which is intact in the natural forest, the possible outsourcing opportunities, and partner firms available to maintain market requirement. The company also have their own members working in the field as forest specialists, marketing executives, and supplier quality assurance team, with which they can easily manage service provision. Overall, such measures help them to inform, share knowledge related to a requisite solution available within the locality. Additionally, to increase the local knowledge IKEA have worked with WWF and thus increased the accessibility of FSC certified wood and also the problem of illegal logging is also tackled. Apart from this, IKEA also facilitates young people to make a healthy and sensible decision, as they are better efficient in planning, evaluating and delivering the activities.  

Local Knowledge Acquisition

IKEA prime mission is to provide a wide variety of home furnishing goods of excellent quality and affordable price for the people. This is, however, possible with the proper implementation and distribution of knowledge. The company is keen to introduce new stores all over the world by following its core principles and procedures. Thus, knowledge sharing is key to the expansion of IKEA and securing its technique of doing business. Earlier, tacit knowledge sharing is the only focus of the employees which is quite difficult. This knowledge cannot be codified or written as it is primarily based on the experience. Thus, the corporate culture is very crucial for the sharing of tacit knowledge, which was made possible through effective training for running an IKEA store in its own way. To reduce the complexity in sharing the tacit knowledge, some organisations use codified knowledge known as the explicit knowledge. On the other hand, according to IKEA, the codified information does not always provide progress and the effort to codify the tacit knowledge may sometimes result in knowledge sharing and stimulate learning.

There is always the risk of change in an organisation due to economic conditions and the continuously changing business environment. However, the primary risk involved in the change process is the adopting the new systems and practices. If the company employees do not adjust with the newly changed system, then there is a risk of worsening the company than before. Resistance, effective leadership and operational disruption are some of the few common risks of organisational change. Further, according to Costa[3], in order to avoid any such risk of organisational risk, the company has implemented strategic plans in the labour market segmentation theory. The company has fragmented the urban labour and rural labour on the basis of gender, dependency relationships, skill and patronage. IKEA is also involved in the process of outsourcing apart from segmenting the localised labour market. Moreover, the society is becoming more knowledge-based and thus their choices and opinions are changing over the products and services available. The company has to be more quality and cost oriented for sustain customer retention. Word-of-mouth advertising is most common among the today’s knowledgeable customers, so it is the responsibility of the company to frame a good brand image.

According to Kampf[4], is observed that IKEA Australia is highly involved in CSR activities and contributes for social benefits. The Australians prefer IKEA to have an affordable and ready-to-assemble homewares, furniture and appliances. According to the IKEA Australia’s CEO, Richard Wilson, CSR and sustainability is a common concept for them. They are trying to do more with less cost, which is their policy. Some of the sustainability efforts of the company include using LED bulb, as it uses 85% of less energy than the traditional bulbs. It uses water saving taps which have the capability of saving 260 baths in a year. In the kitchen appliances, it proposes to use the induction hobs which uses 40% less energy and heats up to 60% quicker than the ceramic cooktops. To support sustainability, the company has designed and launched a Sustainable studio at the Sydney’s aMBUSH Gallery for representing a specimen of a sustainable home. The home shows how small changes for sustainability can make big difference towards society in terms of energy and cost saving. Even the majority of Aussies are showing more willingness towards sustainability which is clearly reflective in a survey report. The report shows that 79% of them avoids using heaters and air-conditioning at home, 90% of Aussies prefer recycling, and 78% of them have chosen to use LED lighting.

Apart from all these, IKEA Australia is always abiding by the macroeconomic policy which sets rules and regulations for controlling the money supply, national income, interest rate, growth rate and unemployment rate. The policy is framed by the government for the management of the economy and achievement of the economic objectives. Under the impact of globalisation and independent global economy, the context of macroeconomic policy is observed in the global trade activities of IKEA business.[5] The company follows its two major macroeconomic policies viz., monetary policy and fiscal policy. The company has invested AU$6.6 million since 2005, towards the sustainable cotton which in turn helped 110,000 farmers. Following the policy, it is noted that total goods sold have been increased by 43% since the financial year 2012 and since the financial year 2014, it is reported that the number of visitors has substantially increased by 19% to 11 million.

Conclusion

With its immense success in Australia IKEA is all set to open its new e-commerce store in Australia by next two years. The retailer of the company announced to build a supply and logistics centre of 70,000 square meters in the Marsden Park in Sydney west. The launching of new stores will open around 50 job opportunities and thus can employ more than 150 workers. There are all total eight stores of IKEA in Australia and the ninth is also ready to open in the north of Brisbane. Moreover, in order to take a competitive advantage, the company also offers the facility to shop online for 24/7 and provides the home delivery service in Australia. Australian country manager David Hood is expecting a sales rise of 10% after the implementation of this action. Thus, its sustainable and cost efficient products are nowadays the first choice of the customers in Australia and even in the rest of the world.

References

Hislop, D. (2013). Knowledge management in organizations: A critical introduction. Oxford University Press.

Waluszewski, A. (2016). What’s “knowledge management” when resources are unknowable and deals negotiated?. IMP Journal, 10(1), 107-128.

Costa, E., Soares, A. L., & de Sousa, J. P. (2016). Information, knowledge and collaboration management in the internationalisation of SMEs: A systematic literature review. International Journal of Information Management, 36(4), 557-569.

Kampf, C. E. (2015). Conceptualizing Knowledge Communication for Project Management. In CCI Conference on Corporate Communication.

[5] Cekuls, A. (2015). Culture of knowledge sharing in terms of competitive intelligence in organisations. Economic Science for Rural Development, 104.

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