The Downsides of IKEA and Huge Retail

Almost all large retail corporations were once much smaller companies, or even one-person endeavors. The IKEA retail globalization is a prime example of massive expansion from an originally modest beginning. If, like many small business owners, your long-term ambitions include extensive company growth, you may believe that big businesses represent the "ideal" for every entrepreneur, but before making huge expansion plans, it can be wise to consider the downsides of developing into an enormous corporate entity.

Expansive corporations can be compared to river mouths flowing into a sea of global commerce. Every corporation—like every river—is different. However, every corporation has comparatively tiny origins, just like those rivers. Rivers begin as mountain springs, headstreams, or flow from even smaller sources. As these sources join with one another; the river gets steadily bigger until, finally, it reaches the ocean. Huge rivers, like corporations, are very powerful.

Retail analysis has shown that gigantic companies such as the IKEA Retail Corporation usually form in one of two ways. The first is simple: A single small business—like yours, perhaps—expands over a period of time. The second way is both more complex and more common: A small company expands by acquiring other small companies until it is a medium-sized company. Then, further mergers and acquisitions turn the medium-sized company into a huge organization. For IKEA, retail catalog sales and constant innovation led to the company's gradual transformation from a small Swedish furniture showroom into a worldwide housewares legend.

As a small business owner, you have a limited number of people, possessions, and funds to keep track of. As companies grow, management hierarchies develop and responsibilities are increasingly delegated to other people. Company owners inevitably become less involved in financial issues, hiring decisions, and other matters. The type of control you have as a small business owner will diminish considerably as your company's size increases.

Despite their considerable profit potential, sizable establishments such as the IKEA retail brand typically experience a number of noteworthy challenges:

• Changes of any kind start to take a long time to implement. New materials have to be installed in a vast number of locations and policy changes need to be communicated to thousands of employees.
  
   
• Big businesses have a greater number of employees to monitor. When task delegation is taken into account, ensuring total compliance with company policy in every member of a large workforce can be nearly impossible.
  
   
• The bigger the company, the more complex the tax situation will become. State and federal employee taxes get more complicated, too, and as a result, many corporations outsource their payroll systems.
  
   
• Retail analysis procedures—including inventory-tracking processes—are much more convoluted in a large business than a small one.
  
   
• Expenses increase across the board as businesses grow. The IKEA retail corporation, for example, spent 8,423 million Euros on operating costs—including 190 million on property taxes—in 2012.
  
   
• A controversy in one location will affect the entire company; scandal within a large company is likely to attract media attention.

If you backtrack to the beginning of every large corporation's history, you'll find much smaller origins. Increases in power and profit may be tempting, but they come with responsibility. Company wide changes, taxes, and expenses become more complex and the potential for human error grows as businesses get larger. There are, of course, benefits to company development: the IKEA retail corporation, for example, has attained an impressive global reputation. As the company owner, you can elect to keep your business small and local, to grow the firm gradually, or to drive toward corporate status as quickly as possible. In the end, the decision is entirely yours.

(photo courtesy of Freedigitalphotos.net)