I need help with my Operation Management Analysis Paper

The homework requirement outline in Word doc and article reading for this assignment is attached.

Assignment 2: LASA 1—IKEA Analysis Report

What is values-based service? How can a company create value for customers and other stakeholders?

Values-based service is defined as service that is firmly based on the core company values as well as social and environmental responsibility. When the core company values and the social and environmental values are in accordance with the values of customers and other stakeholders, resonance (rather than dissonance) occurs. To be successful, a values-based service business must seek resonance with its customers and other stakeholders in terms of values and avoid any suggestion of dissonance. Companies, such as IKEA, nurture and communicate values in their customer relationships.

Read the article “Values-Based Service Brands: Narratives from IKEA” by Edvardsson from the readings for this module. Using IKEA as the company in point, conduct research, using the Argosy University online library and the Internet, to better understand the “IKEA environment.”

Based on your research, write a report addressing the following points:

· IKEA’s Marketing (1 page)
Corporate strategy begins with marketing and understanding the key elements of the marketing plan. For IKEA, describe the following elements of its marketing strategy:

· How do IKEA’s products, services, and related attributes satisfy the wants and needs known as its value proposition?

· How does IKEA create a well-defined market position that appeals to customer wants and needs and differentiates its offering from competitive offerings in a process known as positioning and differentiation?

· Assess IKEA’s strategy using the criteria listed below:

· Value Chain (1 page)
Analyze the three sources of value (economic, social, and environmental) in IKEA’s value chain.

· Explain sources of value as they relate to the wants and needs of IKEA’s core customer.

· Explain how IKEA’s supply chain supports its value proposition.

· Explain how IKEA’s focus on customer value (economic, social, and environmental) is reflected in its supply chain.

· Intangible Products (1 page)

· Explain IKEA’s intangible products and benefits.

· Explain how other firms employ this concept of intangibles to erect barriers to entry for competitors.

· Explain how the concept of intangible benefits is used to increase profits.

· Customers (1 page)
IKEA considers the customer to be a critical stakeholder. The IKEA message is directed to the majority of people and what they can afford, and its pricing is dependent on the economic values that serve a majority of its customers.

· Explain how this approach may or may not maximize profits for IKEA.

· Explain if this premise is at odds with supply and demand economics. Give reasons for your answer.

· Performance Measures (1 page)
Suppose you are a vice-president of manufacturing for IKEA and are responsible for establishing operating performance measures.

· For all of the performance factors other than quality and cost, create a set of 4–6 performance measures for evaluating your managers that integrates IKEA’s values (economic, social, and environmental) as discussed in the article written by Edvardsson.

· For each performance measure, identify one specific process measure that demonstrates how well these values are being upheld in the manufacturing activities including suppliers of the company.

· Recommend how you would develop the workforce to live these values in the workplace. Suggest types of hiring, training, and performance management criteria that you will apply to the workforce.

Write a 6–8-page paper in Word format. Please use 3–7 scholarly articles in your research. Apply APA standards to citation of sources. Use the following file naming convention: LastnameFirstInitial_M3_A2 .

Then, develop a short 6–8-slide Power Point presentation (not including the title and reference slides) covering the same information. Include headings for each slide, and provide your talking points in the notes section to explain the content if the presentation is given verbally. Use the following file naming convention: LastnameFirstInitial_M3_A2.ppt.

SERVICE LEADERS

Values-based service brands:
narratives from

IKEA

Bo Edvardsson and Bo Enquist
Service Research Center, Karlstad University, Karlstad, Sweden, and

Michael Hay
IKEA North America

Abstract
Purpose – The purpose of this paper is to present a model for values-based service brands grounded
in values-based service management. In undertaking this task, the paper addresses two research
questions: “What is the role of values in creating customer value and corporate identity?” and “How
can values and corporate identity be communicated to customers and thus contribute to
customer-perceived service value?”.

Design/methodology/approach – Based on five narratives from a value-driven company, IKEA,
the paper proposes a model of values-based service brands in action. The model is based on
interpretations of how IKEA manages and communicates values in practising values-based service
management.

Findings – The study distinguishes four types of “values” in the example of IKEA: economic, social,
environmental, and communication-based. These are incorporated into the model.

Originality/value – This is the first study of the role of values-based service brands in creating
value in use for customers.

Keywords Value added, Brands, Customer service management, Corporate identity

Paper type Research paper

1. Introduction
Brands are among the most fundamental and enduring assets of a firm (Martin et al.,
2005). However, in services-management research, little attention has been devoted to
the question of how a perception of value-in-use can be communicated to customers
through values-based service brands. The importance of communicating values in
business is illustrated in the contemporary utilisation of such approaches as “corporate
social responsibility” (CSR) (Zadek, 2004; Kotler and Lee, 2005) and “triple bottom-line
thinking” (Elkington, 1997, 2001) to create stakeholder value (Post et al., 2002). In
accordance with these approaches, companies try to avoid aligning themselves with
negative values – for example, environmental pollution or exploitation of cheap labour
(especially child labour) –which can result in negative publicity and value being
destroyed. Rather, companies strive to be associated with attractive values – for
example, high ethical standards in dealing with employees and customers,
contributing to society, and applying recycling principles whenever possible.

Vargo and Lusch (2004a, b) stressed value-in-use for the customer. In accordance
with a service-centred view, Vargo and Lusch (2004a) argued that value is defined by
and co-created with the customers, rather than being embedded in output, in defined
products or service attributes. According to this view, value is perceived by the

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0960-4529.htm

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Managing Service Quality
Vol. 16 No. 3, 2006
pp. 230-

246

q Emerald Group Publishing Limited
0960-4529
DOI 10.1108/09604520610663471

file://localhost/Users/Home/Downloads/www.emeraldinsight.com/0960-4529.htm

customer on the basis of value-in-use, and value creation through service is described
in terms of linked activities and interactions provided as solutions to customer
problems (Edvardsson et al., 2005a, b).

The present paper argues that corporate values also bring value-in-use to
customers. Excellent companies are distinguished from average companies by values,
and not merely by logical, value-for-money outcomes and cognitive assessments
(Johnston and Clark, 2001).

The aim of the paper is thus to present a framework for values-based service brands
grounded in values-based services management. The focus is on how values are
communicated and bring value-in-use to customers. The new model is based on a
literature review and an interpretation of how one particular values-based firm, IKEA,
nurtures and communicates values in its customer relationships. IKEA is the largest
furniture retailer in the world (Kotler, 1999), and has a growing global business. IKEA
corporate identity is determined by a strong culture based on well-defined company
values.

In pursuing the aim described above, the paper addresses two research questions:

(1) What is the role of values in creating customer value and corporate identity?

(2) How can values and corporate identity be communicated to customers and thus
contribute to customer-perceived service value?

The paper is structured as follows. First, the study presents a literature review and
theoretical framework for describing and understanding values-based service brands.
Second, the study presents five narratives describing how IKEA communicates
company values in creating total customer value. The paper then relates its empirical
findings to previous research and suggests a model for values-based service brands,
values-based management, and corporate image. Finally, the paper discusses the
research contribution, managerial implications, and suggestions for future research.

2. Theoretical framework
To attract and retain customers, and thus make a profit, companies are constantly
searching for new and better ways of creating value for customers and differentiating
their market offerings (Shaw and Ivens, 2002; Bendapudi and Leone, 2003). However, it
has been argued that technical and functional qualities are not enough; attractive
values also form part of a favourable customer experience (Cronin, 2003; Sherry, 1998).
This view is in accordance with Mano and Oliver’s (1993) study of utilitarian
consumption judgments and hedonic consumption judgments. In a similar vein, the
concept of “value-in-use” (Vargo and Lusch, 2004a, b) has been extended from a
traditional focus on cognitive evaluations to include evaluations of values and service
experiences. Brands are used to communicate these values to the customer.

Brands and service brands
The essential role of brands is to differentiate a product or service from others in
satisfying a given customer need. As Kotler and Keller (2005, p. 274) observed:

These differences may be functional, rational, or tangible – related to product performance of
the brand. They may also be more symbolic, emotional or intangible –related to what the
brand represents.

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Keller (2000) identified ten attributes in the world’s strongest brands – for example,
that the brand excels at delivering the benefits consumers truly desire; that the pricing
is based on consumers’ perceptions of value; that the brand is consistent; and that the
brand is given proper and sustained support.

“Brand equity” is the value added to products and services by a brand, and is
reflected in the way that consumers think, feel, and act with respect to the brand. As
Kotler and Keller (2005, p. 276) observed:

Brand equity is an important intangible asset that has psychological and financial value to
the firm.

According to Aaker (1991), brand identity is particularly important for building brand
equity. Ind (2004) stress the importance of “living” the brand – which has to do with
“living up to” norms and values in various ways – for example, how employees
interact with customers, how internal relationships are conducted, and how
relationships with suppliers and partners are maintained. According to this view,
the culture forms a basis for the “living brand”.

Brands thus communicate the values of an organisation to customers to create a
distinct and favourable image. A service brand can often equate with the whole
company, which implies that the service becomes the corporate image (Rindell and
Strandvik, 2005).

Hatch and Schultz (2001) have argued that the three essential elements of vision,
culture, and image must be aligned in a successful branding strategy. Vision
represents senior management’s aspirations for the company; culture refers to the
values, behaviours, and attitudes that reflect how employees feel about the company
they are working for; and image is the outside world’s impression of the company –
not only the impression of customers, but also that of other stakeholders (including the
media and the shareholders).

Values, value-creation, and total customer value
Ramı́rez (1999) has noted that the concept of “value” has been studied since at least the
time of the ancient Greeks. Moreover, “moral value” and “economic value” were part of
the curriculum of moral philosophy until the eighteenth century, when economics
became a field of study in its own right. Since then, a division has arisen between the
economic aspects of value and the ethical aspects of value. On the economic side, value
is usually expressed in terms of utility. On the ethical side, it is essentially about
individual judgment. As Ramı́rez (1999, p. 50) has observed:

Judgments of what is true, beautiful, and/or good, and the values these supposedly express,
led to notions like “scale of values” and “values system”, differentiating one culture from
another.

The present study argues that it is important for a “value-driven firm” (Gummesson,
1999) to create meanings. These meanings are concerned with collective identity
(Castell, 1997). To create meaning among customers, it is also important for firms to
co-create, assess, and communicate value in association with their customers (Ramı́rez,
1999; Prahalad and Ramaswamy, 2004). Ramı́rez (1999) argued for “value
co-production”. He claimed that a value co-production framework provides a helpful

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vocabulary for understanding the organisational and inter-organisational systems that
can make competitive offerings available.

Gummesson (1999, pp. 99, 104) discussed the concept of a “green relationship” and
the fact that firms that subscribe to “green values” can be seen as “value-driven firms”.
Gummesson (1999) provided the example of the retailer “Bodyshop”, whose founder in
the UK, Anita Roddick, has spoken about societal responsibilities (in which she
included environmental improvements).

Berry (1999) studied service companies that had been successful in the long term,
and concluded that values and employee commitment provide energy and direction to
such organisations. Value and values are co-produced with the customers as well as
with the other stakeholders.

The differences between the economic “logic of value” and the ethical “logic of
values” can be summarised as shown in Table I – which is based on a case study of
IKEA (Edvardsson and Enquist, 2002).

In their case study of IKEA, Edvardsson and Enquist (2002) demonstrated that a
strong service culture – based on the “logic of values” – made sense inside the
company and created meaning outside it. This culture was a driving force in creating
value for customers. The case study showed that an economic logic of value-creation –
focused on quality, time, and price – should be supported by an ethical logic of values
if corporate strategy and competitive advantage are to be established and maintained.
As a former chief executive officer (CEO) of IKEA observed: “IKEA is a commercial
company, but there is a social side to our vision and our business idea” (Edvardsson
and Enquist, 2002).

The concept of “value” thus has both a moral dimension and an economic
dimension.

Values-based management, corporate identity, and service brand
In the complex contemporary environment, it can be counter-productive to attempt to
control a business from a financial perspective alone. For this reason, values-based
management (Pruzan, 1998; Elkington, 2001) has been discussed for some years, and
Pruzan (1998), in particular, has argued for a move from “management control” to
values-based management and values-based accountability.

The value logic The logic of values

Homo economicus Homo sociologicus
Economic calculations Ethical and social calculations
Focus on economic utility Focus on ethical and social benefits
Commercial and financial focus Social and human focus
Quality, time, and price Ideals and trust
Focus on the structural and process aspects of the
formal organization

Focus on values and meanings as cultural
expressions

Focus on business and service production
processes

Focus on cultural processes and sensemaking

Table I.
The value creation logic
and the logic of values of

IKEA
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Values-based management is premised on a stakeholder perspective of leadership,
responsibility, and ethics (Pruzan, 1998) incorporating the concept of a “triple bottom
line” (Elkington, 1997). The notion of a “triple bottom line” includes three aspects of
sustainability: economic, social, and environmental (Zadek, 2001). In this context,
Elkington (2001, p. 50) has argued that:

Successful companies tend to: have strong, positive, values-driven cultures; make lasting
commitment to learning and self-renewal; continually adapt, using both internal and external
feedback; build strategic alliances with internal and external partners, customers and
suppliers; be willing to take risks and experiment; and have a balanced, values-based
approach to targeting and measuring performance.

Service brands can also benefit from being values-based. Berry (1999) developed a
service-branding model, which differed from a goods-branding model in that human
performance was seen to play a critical role in building the brand in labour-intensive
businesses such as services. In this context, Simones et al. (2005) focused on corporate
identity and argue that identity forms the basis for brands and that values are a key
component of corporate identity. As Simones et al. (2005, p. 153) observed:

Creating a strong corporate identity and image is a way for companies to encourage positive
attitudes towards their organization.

Such an identity can be viewed as a vehicle by which a company’s character is
conveyed to customers and other stakeholders. Brand identity has thus been referred to
as the brand’s distinctive “fingerprint” (Upshaw, 1995). Aaker (1996, p. 68) defined
brand identity as:

[. . .] a unique set of brand associations that the brand strategist aspires to create or maintain.

Simones et al. (2005, p. 156) emphasised that the core component of brand identity is
“[. . .] its ‘soul’, brand values and underpinning beliefs”. In a similar vein, Ind (2004,
p. 13) argued that:

[. . .] a corporate brand is more than just the outward manifestation of an organization – its
name, logo, visual presentation. Rather it is the core of values that defines it.

The same values are also vital when it comes to directing a company’s activities (de
Chernatony, 1999). In service organisations, brand can play an important role in
making the service tangible. As Berry (2000, p. 18) noted:

Strong brands enable customers to better visualize and understand intangible products. They
reduce customers’ perceived monetary, social, or safety risk in buying services, which are
difficult to evaluate prior to purchase.

Keller (1999) emphasised that the way in which a brand is communicated and
explained is critical to the employees’ internalisation of the brand. Corporate
communication can be orchestrated by a sustainable corporate story (Van Riel, 2000).
Berry and Bendapudi (2003) talked about “clueing-in customers” and demonstrated
how the corporate story of the Mayo Clinic in the USA involved sending the right
signals through “clues in people”, “clues in collaboration”, and “clues in tangible”.
Haeckel et al. (2003) also observed that delivering the brand is connected with
communicating the core values of the company.

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In summary, three categories of “values” emerge from the literature:

(1) economic values that are related to quality, price, and cost (that is, “value for
money” from the perspective of the customer);

(2) environmental values that are connected with ecological protection,
improvements, and responsibility; and

(3) social values that are connected with ethical and community responsibilities
and benefits.

To analyse value-in-use for the customer, the present paper utilises a dialectic between
the logic of value creation and the logic of values (Edvardsson and Enquist, 2002). In
what follows, corporate stories are used to illustrate values-based management –
which is taken to include the creation of corporate identity and integrated marketing
communication.

3. Values-based narratives
Research design
The empirical context for the narratives that follow is the large furniture retailer,
IKEA, whose culture, concept, and approach to business are documented elsewhere
(Edvardsson and Enquist, 2002; Normann and Ramirez, 1998; Kling and Goteman,
2003; Brown-Humes, 2003).

Five narratives were selected for presentation here:

(1) “Democratic design” (narrated by Michael Hay, co-author of the present paper);

(2) “Chuck out the chintz” (narrated by Michael Hay, co-author of the present
paper);

(3) “Outlooking” (narrated by Michael Hay, co-author of the present paper);

(4) “Code of conduct (IWAY)” (derived from The IKEA Way – Social and
Environmental Responsibility (IKEA, 2003)); and

(5) “Boycotts are not the solution” (derived from The IKEA Way – Social and
Environmental Responsibility (IKEA, 2003)).

Taken together, these narratives reveal how IKEA builds a values-based service brand
and maintains values-based service management. The first two narratives describe
external marketing activities whereas the other three are directed towards employees
and partners forming the basis for the service culture and corporate identity.

Narrative 1: “Democratic design”
The narrative. In 1995, outside the Milan Design Fair, which is the most prestigious
exhibition fair in the world for élite furniture designers, a sign proclaimed: “Il design
democratico” [“Democratic Design”]. The sign pointed to a building that housed the
IKEA exhibition outside the fair.

In developing the notion of “democratic design”, Ingvar Kamprad, the founder of
IKEA, had asked: “Why must well-designed furniture always be so expensive? Why do
the most famous designers always fail to reach the majority of people with their ideas?”
In his view, well-designed products were only for the rich and privileged; the multitude

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of people with less money, were excluded. Furniture was no exception. Kamprad’s idea
with IKEA is to offer a wide range of home furnishings of good design and
functionality at a price low enough to be affordable to most people. This is a
“democratic idea” that had originated from IKEA’s roots in the poor farming
communities of the County of Småland in Sweden.

The three dimensions of “democratic design” are form, functionality, and

low price.

No other furniture manufacturer is producing designed home furnishings that featured
all three of these elements. With respect to the third dimension – low price – IKEA
designers are always asked to use design to decrease prices, not increase them. In
effect, the price tag is “designed” first, beginning with a decision on what price the
majority of people can afford to pay. A production line is then designed to produce
furnishings that satisfied the other two dimensions. To achieve this, designers work on
the factory floor with production staff, rather than in a prestigious office in a distant
city.

The proclamation of “democratic design” at the Milan Design Fair in 1995 provoked
outrage among organisers of the fair, designers, and furniture companies. In contrast,
members of the public flocked to the IKEA exhibition, the Italian media provided much
publicity, and consumers visited IKEA’s stores in unprecedented number to buy
“democratically designed” furnishings.

Interpretation. This narrative reveals that the notion of “democratic design” was
driven by a combination of social values (reaching out to the majority of people); and
economic values (low price relative to good functional quality).

The values of IKEA revealed in this narrative are:
. a “down-to-earth” approach: as exemplified by the designer working on the

factory floor, rather than being located in a prestigious office in a distant city;
. respect and responsibility: as exemplified in its “democratic approach” to the

majority of people; and
. innovative thinking: as exemplified by its integration of form, functionality, and

low price.

Narrative 2: “Chuck out the chintz”
The narrative. In 1997, St Luke’s was a small (but energetic) advertising agency in
London (UK). St Luke’s was asked by IKEA to undertake a radical change in IKEA’s
image in the UK. The agency’s marketing analysis revealed that 60 per cent of the
market was traditionally minded and disliked anything foreign and new, including
IKEA. A smaller proportion (30 per cent) of the market was more innovative, and
might like IKEA. The remaining 10 per cent were undecided. St Luke’s strategy was to
induce the “traditional” 60 per cent of the market to dislike IKEA to an even greater
degree, induce the 30 per cent to like IKEA to a greater degree, and induce the 10 per
cent of undecided to make a decision.

The main barrier was style. Many people who lived in small terraced homes covered
their walls and floors (and even their toilet seats and toilet-paper holders) with
flowery-patterned coverings – commonly referred to as “chintz”. Many people also
filled their already crowded homes with fake antiques – another form of “chintz”. St
Luke’s launched a television advertising campaign with the slogan: “Chuck out the

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chintz”. This advocated a more “modern” style that would give people a new identity
and change the homes of Britain. Blue-and-yellow waste-disposal “skips” were placed
in the streets for people to discard their “chintz”.

The campaign had the desired effect. IKEA was transformed from being a strange
foreign company to being a fashionable name that reached into the private lives of
Britons in their homes. The television commercials ran only once, but for years
afterwards people referred to the slogan “chuck out the chintz”, and associated it with
IKEA.

Interpretation. This narrative again reveals that IKEA is driven by social values.
The values of IKEA revealed in this narrative are:

. informality: that IKEA represents a modern and casual style; and

. respect: providing people with a new identity and changing the homes of Britain.

It should also be observed that these values were communicated in a particular manner
that challenged the established views and habits of the people. There seems to be
distinct set of values behind the way in which the values were communicated.

Narrative 3: “Outlooking”
The narrative. As noted above, IKEA “designs” the price tag first. The company
decides how much a product should cost to make it affordable the most consumers.
The product is then designed to achieve this low price while maintaining excellent
function and good quality. The designer works on the factory floor to find the best
solution at the best price.

An example of this process was the company’s “LACK” range, which was initially a
door produced by a manufacturer in Poland. The door was placed horizontally on a
trestle to become a table. It was then cut into pieces to produce shelves. These were then
subdivided into coffee tables. The pieces were then placed horizontally and vertically to
become bookshelves. The resulting “board-on-frame” construction used only 30 per cent
of the energy and materials required to produce tables. Moreover, it could be packed flat,
was light, and saved space in transport. This combination of qualities was considered
environmentally friendly, and the product was placed in IKEA stores.

The price to the consumer of a “LACK” table is now only about 30 per cent of its
original price in 1990. The production volume in the past 15 years has increased
approximately ten-fold.

Interpretation. This narrative again reveals that IKEA is driven by a combination of
economic values (low price in relation to quality) and environmental values (saving
resources). This narrative also reveals the company’s willingness to challenge
established views.

The values of IKEA revealed in this narrative are:
. cost consciousness: by emphasising resource saving;
. simplicity: in manufacturing, distribution, and use (which is a driver of low

costs);
. innovative thinking: with the low price posing a challenge that provokes smart

solutions; and
. responsibility: for the environment.

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Narrative 4: “Code of conduct (IWAY)”
The narrative. In 2000 IKEA established a code of conduct (known as “IWAY”) for the
manufacture of its products. The code of conduct requires its producers to manufacture
products under acceptable working conditions utilising suppliers who, themselves,
take responsibility for the environment.

The experience of Nicolae Borsos, an IKEA supplier in Romania, demonstrates the
way in which the code of conduct operates. In 1999, with IKEA’s help, Borsos bought a
run-down furniture factory in the town of Nehoiu. Since then, an investment program
has increased profitability and improved conditions for the factory’s 680 employees.
All new investments were required to meet IKEA criteria for product quality, working
conditions, and care for the external environment. In addition, Borsos was responsible
for ensuring that his suppliers also respected the code of conduct. According to Borsos:
“The IWAY has led to a general improvement in standards at the factory”.

Interpretation. The essence of the code of conduct is about sustainable management.
In this regard, Ehrenfeldt (2005) has observed:

Eco-efficiency or delivering more value for less environmental burden, has been touted as the
primary instrument for achieving sustainability [. . .] The problem is that none of this exposed
benevolence creates true sustainability [. . .] The problem really stems from management’s
failure to see “unsustainable” as a deep-seated systems failure and to appreciate the extent to
which radical thinking and action are required to embark upon a sustainable trajectory [. . .]
The simple word “sustainability”, however, implies no presumption of economic
development. It implies that the roots of sustainability may be found outside the realms of
economic development and may, in fact, preclude them.

According to Ehrenfeldt (2005), reducing unsustainably is not the same as creating
sustainability; however, it is possible to “steer” towards ethical behaviour – as
exemplified in the above narrative.

The narrative reveals that IKEA is driven by a combination of economic values
(wise investments), social values (acceptable working conditions), and environmental
values (responsibility for the environment).

The values of IKEA revealed in this narrative are:
. cost consciousness: all units in the company or value chain have to be

cost-effective and have to meet quality standards;
. shared development: a development contract between IKEA and the supplier;
. leadership: Borsos, as an IKEA supplier, assumed a leadership role in the general

improvement in the standard of the plant, product quality, working conditions,
and the external environment; and

. responsibility: Borsos was accountable for social and environmental conditions
in accordance with the IKEA code of conduct.

Narrative 5: “Boycotts are not the solution”
The issue of child labour has become so notorious that many international companies
are leaving South Asia. Susan Bissell, who is in charge of the child-protection activities
of UNICEF (the United Nations Children’s Fund) in South Asia observed:

The risk of falling into disrepute and becoming the victim of consumer boycotts has driven
many companies to move production from South Asia to areas which are easier to control.

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Those companies which stay on do everything they can to conceal their presence. I wish more
companies had the courage to follow IKEA’s example: stay on and actively work on the
problems and take genuine social responsibility. IKEA is a sponsor of UNICEF [. . .] but we
regard IKEA as a cooperation partner rather than a contributor [. . .] By being present in
South Asia, IKEA creates jobs and contributes to the economical growth in the region. But the
most important effort made by IKEA may be involving its local suppliers in the project and
making them sense as well as take on more social responsibility. Some of them are proud to
be able to contribute to a positive development of the community [. . .] IKEA has shown that it
actually is possible to make money and do something good for the community at the same
time.

Interpretation. This narrative illustrates that IKEA is driven by social values (no child
labour). The values of IKEA revealed in this narrative are:

. responsibility: social responsibility and environmental responsibility are
expressed in managerial and strategic action;

. development: positive development of the community, especially with respect to
child labour; and

. leadership: civil leadership.

Summary of the five narratives
Although the stories are different, a pattern of words, concepts, and language can be
discerned in communicating economic, social, and environmental values. The words
and themes that are used express values in themselves, rather than merely being a
communication tool. The present study refers to this as a fourth set of values –
communication values.

The IKEA message is directed towards the majority of people and what they can
afford. By challenging established views and market actors, IKEA communicates that
its philosophy is to be in partnership with the mass of the people. This is especially
expressed in the notion of so-called “democratic design”. The low prices of IKEA and a
“down-to-earth” approach are economic values related to this philosophy.

The innovative approach of IKEA is an important theme. This applies not only to
design, but also to its attitude to leadership – in which individuals are encouraged to
take responsibility for their actions in accordance with the IKEA code of conduct.

4. Discussion and model
The present study demonstrates that IKEA’s values can be categorised as economic,
social, and environmental. These values form the basis for and differentiate the IKEA
brand – not only in terms of the sentiments expressed, but also in the words and styles
that are used to communicate them to customers. The narratives show that IKEA
challenges the established order and ways of thinking, and in doing so, communication
is more than a tool for transmitting values; rather, the communication is a “value” in
itself.

As previously noted, Table I summarises the differences between the economic
“logic of value” and the ethical “logic of values” (Edvardsson and Enquist, 2002). The
“logic of value” focuses on economic utility for the customer in the form of price,
functional quality, and time. The “logic of values” is about a values-based culture

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focusing on ethical, environmental, and social benefits, as well as the communication of
ideals and trust.

The “logic of value” is instrumental in nature (Post et al., 2002); it emphasises the
mechanics of value-in-use for the customer by focusing on business and service
processes. In contrast, the “logic of values” is normative in nature (Post et al., 2002); it is
grounded in learning processes, cultural processes, and shared meaning. In the case of
values-based brands, this “shared meaning” refers to the sharing of meaning with
customers and other stakeholders.

In the five narratives considered in the present paper, value-in-use for customers is
mainly of an instrumental nature. However, there is also communication beyond the
instrumental level – in that there is evidence of strong bonds between the brand and
customers, and between the brand and various other actors/stakeholders (such as
co-workers and suppliers of IKEA). The narratives reflect a sustainable corporate story
(Van Riel, 2000) incorporating a successful branding strategy (Hatch and Schultz, 2001)
in which vision, culture, and image support one another.

In service businesses, it is important to train, empower, and reward employees such
that they are able and willing to “live the brand” when interacting with customers,
suppliers, other partners, the mass media, and owners (Ind, 2004; Benapudi and
Benapudi, 2005). Human performance plays a crucial role in building a service brand,
and there must be a good fit between a firm’s internal perspective and its external
perspective (Berry, 1999; Grönroos, 2000; Ind, 2004). In this regard, core values are
extremely important in sustaining the brand.

The present study therefore argues for the importance of values-based service
brands. Figure 1 shows a proposed model for such a values-based service brand. At the
centre of the model are the core values of the company. In the case of IKEA, the core
values can be categorised as “3Ps” (Elkington, 1997, 2001):

(1) price (economics);

(2) planet (environment); and

(3) people (social perspective).

These core values interact and provide direction for brand meaning during the
co-producing and co-creating learning process with customers and other stakeholders.
As shown in the model in Figure 1, the core values lead to “low price”, “innovation”,
responsibility’, and leadership’. This process is referred to here as “values-based
service brands in action”.

For a values-based company, “values-based management” (Pruzan, 1998) is built on
a stakeholder perspective on leadership, responsibility, and ethics. As Pruzan (1998)
observed:

It is only when stakeholder values and ethical responsibility become more than instruments
and when legitimacy becomes more than compliance that we can seriously begin to speak
about a new perspective on corporate, social, and ethical responsibility and accountability.

In this regard, value is created and co-invented (Normann and Ramirez, 1998) through
IKEA’s distinctive corporate and service culture to strengthen IKEA’s service brand
identity around the world. The present study of IKEA has demonstrated that the
values communicated to customers and other stakeholders are deeply rooted in IKEA’s

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organisational culture. Moreover, the values are understood and communicated by
employees and through marketing communication. The values thus form the basis for
the brand, and also guide management and strategy in action.

The model presented here has four pillars – economic values, social values;
environmental values; and communication of these values to stakeholders. Without
low and competitive prices, it is impossible to sell solutions to real-life domestic
problems to the majority of people. Consequently, the price tag comes first. At the same
time, solutions must be designed, produced, and delivered in accordance with
environmental responsibilities, and must live up to high ethical standards and
corporate social responsibilities. If these values are not communicated to customers,
co-workers, and other stakeholders, the values will not exist and will not contribute to
perceived customer value. Thus, it is important to communicate the right message in
the right way. Provocation is often used by IKEA to reach out to customers, to
challenge them, and to encourage them to respond.

Words and expressions that are loaded with values are often used (for example,
“co-workers”, “democratic design”, and “trade with responsibility”). The values
expressed during communication play an important role in forming the corporate
identity and the service brand. The values are communicated through advertising,

Figure 1.
A model of values-based
service brands in action

Value-based
service brands

241

publicity, the internet, an IKEA “customer club”, and directly in the IKEA stores with
customer placement and by co-workers interact with customers (Edvardsson et al.,
2005a).

5. Research contribution, managerial implications, and suggestions for
future research
Research contribution
The main contribution of the present paper is the model of Figure 1 which describes
four categories of values constituting the basis for a values-based service brand and
corporate identity. In addition to the established values (economic, social, and
environmental), the present study adds communication-based values that build the
service brand and form part of developing values-based service management. These
communication-based values require employees (co-workers) to “live the values” when
interacting with the customers.

The second contribution is connected with how values contribute to “value-in-use”
for customers. Values cannot easily be linked to individual products, services, or
customer solutions; rather, they are reliant on service, corporate identity, and
customers’ broader perceptions of the company. The values function as a compass for
the customers, helping them to make decisions and reduce risks. The brand contains
and expresses values which add value when customers use “the solutions to real life
problems at home”.

A third contribution is connected with the notion of “value destroyers”. If companies
are linked to negative values (such as child labour, pollution, and unethical conduct),
this will reduce value-in-use for the customers. Customers have expectations when it
comes to values and they take many values for granted. Not meeting these
expectations will result in a negative impact on customers’ perceptions of total value,
having implications for loyalty and profitability.

Managerial implications
The managerial implications are:

. avoid value destroyers;

. understand and manage customers, employees, and other stakeholders’ values
and expectations;

. develop values-based service management in which economic, environmental,
social, and communication-based values are used in building and living strong
brands; and

. develop a clear company identity.

Suggestions for future research
Future research in this field could study other companies in different service industries
to develop this tentative framework. In particular, research could focus on issues linked
to “living the brand” the financial implications of values and value destroyers. Further
study could be undertaken of the interaction between the “logic of values” and the
“logic of value”.

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	LASA 1 Grading Criteria
Assignment Component	Proficiency	Maximum Points
Content Knowledge: Understanding Communicates understanding of how to synthesize IKEA’s marketing function to explain its target customers, products/services, market position, etc. CO 1 MSM PO: 2, 4, 5 MBA PO: 1.1, 1.2, 1.3, 2.1, 2.2, 2.3 ILO 1, 3, 6	Response incorporates analysis and synthesis of central concepts of the assigned topic. Response reflects understanding of the nature of the specific topic within the discipline and its applications in contemporary times. Response provides necessary details and specific examples.			36
Content Knowledge: Application Component 1 Communicates the ability to synthesize IKEA’s three sources of value in its value chain to explain its relation to wants and needs of customers, value proposition, and focus of customer value in its supply chain. CO: 3 MSM PO: 2, 4 MBA PO: 2.1, 2.2, 2.3, 3.3 ILO: 1, 2, 3, 6		Response demonstrates a working command of the disciplinary content knowledge. Response examines the specific issue within the context of the topic area using relevant details and examples. Response analyzes the specific aspect of the issue to applicable areas within the discipline and their relevance to real-world contexts. Response is adequately supported by current and relevant literature.
Content Knowledge: Application Component 2 Communicates the ability to synthesize data to explain IKEA’s intangible products and benefits, how other firms employ intangibles and how it might be used to increase profits. CO: 3 MSM PO: 2, 4 MBA PO: 2.1, 2.2, 2.3, 3.3 ILO: 1, 2, 3, 6		Response demonstrates a working command of the disciplinary content knowledge. Response examines the specific issue within the context of the topic area using relevant details and examples. Response analyzes the specific aspect of the issue to applicable areas within the discipline and their relevance to real-world contexts. Response is supported by current and relevant literature.
Content Knowledge: Application Component 3 Communicates the ability to synthesize data to explain IKEA’s approach of how customers are stakeholders, how this may maximize profits, how it is at odds with supply and demand economics, and why. CO: 3 MSM PO: 2, 4 MBA PO: 2.1, 2.2, 2.3, 3.3 ILO: 1, 2, 3, 6	24
Content Knowledge: Application Component 4 Communicates the ability to synthesize data to create a set of 4–6 performance measures for evaluating mangers that integrate with IKEA’s values, and explain how you would implement them in the workplace. CO 1 MSM PO: 2, 4, 5 MBA PO: 1.1, 1.2, 1.3, 2.1, 2.2, 2.3 ILO 1, 3, 6	48
Written Communication/ Personal Effectiveness Conveys through written word understanding and application of an understanding and application by delivery of a report identifying the three most promising avenues for achieving best practices within the company. CO 2 MSM PO: 2, 3, 5 MBA PO: 1.1, 1.2, 1.3, 2.1, 2.2, 2.3, 3.3 ILO: 1, 3, 5, 6	Writing is concise and clear in content, language use, grammar, organization, and sentence structure. Writing is free of major grammatical and usage errors.		10
Oral Communication/ Personal Effectiveness Conveys through oral communication, such as a PowerPoint presentation, an understanding and application delivery of a report identifying the three most promising avenues for achieving best practices within the company. CO 2 MSM PO: 2, 3, 5 MBA PO: 1.1, 1.2, 1.3, 2.1, 2.2, 2.3, 3.3 ILO: 1, 3, 5, 6	Presentation is concise with a logical flow of thought. Content includes clearly articulated key points that are free of major errors. Presentation is visually appealing and addresses audience considerations adequately.
Total:	200