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Presented by:-Team 2

J. Prabhat
Paritosh kanwar
Rohit Jain
Rinky Sachdeva

Flow of presentation
Summary of
the case
Background
Issues identified
Solutions

Learnings and
references

Summary of the Case


Established in the 1940s in Sweden by Ingvar
Kamprad, and is one of the world's largest
retailers of home furnishings.
IKEAs vision is to: To create a better life for the
majority of people which is the basis of its strategic
orientation

USP is to sell value for money products.


Production oriented, Swedish roots in its
international advertising, "Swedish" blue and
gold color scheme for its stores; that is spreading
Swedish culture and lifestyle all over the world.

A group with 138 stores in 28 countries and


sales of close to $6 billion till 1997
Have a very strong bonding with vendors (as
business partners)
There are about 2500 vendors in 65 countries
They enjoy : long term contracts , technical
advise & leased equipments
11% sales in Sweden, 29.6% from Germany,
42.5% from the rest of Western Europe, 14.4%
from North America.
Source-Exhibit 4, case 2, Operations strategy by Nigel Slack and Michael Lewis

Background

Sold small items


out of families
kitchen.

Idea of A better life,


for many people
Searched for
furniture manufactures

Began to build long term business


partnerships with manufactures
and distributers
We do not buy products from
our suppliers, we buy unused
production capacity. -- IKEA

Source-Wikipedia.com and IKEA facts and figures, 2003 and 2004 editions & Internal documents

IKEA in today's world

Source-http://www.ikea.com/ms/en_GB/about-the-ikea-group/company-information/index.html

Improvement Strategy

Source-Operations strategy by Nigel Slack and Michael Lewis,Pg.189

Todays marketing strategy


Catalogue distributed world-wide as 191
million copies (in 56 different editions and 27
different languages).
IKEA has 31 trading service offices in 26
countries so production can be monitored,
new ideas tested, prices negotiated and
quality checked.
All of the companys home furnishing products
are comprised of 71% renewable material and
include as much recyclable material as
possible.

The
Environmental

Issue

The Social Issue

Complication The Environmental Issue

1980:
Formaldehyde
scandal in Denmark

Action

1st
Action

Alternative
action

Complication The Environmental Issue


1992:
Formaldehyde
scandal in Germany

1st Action

Immediately stopped the production and sales of Billy

bookcases worldwide
Estimated lost: $6-7 million

Alternative Action

Forestry: Forestry policy working with Greenpeace and

World Wide Fund for Nature


Environmental Criteria: working with suppliers, adapting
the product range,transport and distribution, ensuring
environmentally conscious stores

What are action plan taken by IKEA


to prevent Environmental issues?
1.

Replace polyvinylchloride (PVC) in wallpapers, home textiles, shower


curtains, lampshades, and furniture
2.
Minimize the use of formaldehyde in its products, including textiles
3.
Eliminate acid-curing lacquers
4. Produce a model of chair (OGLA) made from 100% pre-consumer plastic
waste
5. Introduce a series of air-inflatable furniture products into the product line to
reduce the use of raw materials and transportation weight and volume
6. Reduce the use of chromium for metal surface treatment
7. Limit the use of substances such as cadmium, lead, PCB, PCP, and AZO
pigments
8. Use wood from responsibly managed forests that replant and maintain
biological diversity
9. Use only recyclable materials for flat packaging and "pure" (non-mixed)
materials for packaging to assist in recycling
10. Introduce rental bicycles with trailers for customers in Denmark

Complication Social Issue

1st Action
Marianne Barner, business area manager,
had to deal with the issue
Apology for ignorance and acknowledge
not being in full control

1994:
Child labor scandal in
Pakistan

Alternative Action
Take advice from International Labor Organization
"Black-and-white Clause"
Monitoring child labor practices with a third-party agent.
Appointed a Scandinavian company for quality assurance program and random
audits of child labor practices at suppliers' factories

Complication Social Issue


Barner's concerns
Child labor issue not universally concerned within IKEA
Proactive stand can bring cost disadvantage
Working with foundations
Rugmark
Swedish Save the Children, UNICEF, ILO
1995:
Child labor scandal reported
by German TV channel at
Rangan Exports

Environmental Issue
Child Labor Issue

The Alternative Responses


Acts

Accept
the
invitation

Terminate
Rangan
Exports
contract

Exit India

Rugmark
Solo
Monitorship

Ethical Dilemma

Short vs.
Long-term

Justice vs.
Mercy

Short vs.
Long-term

Truth vs. Loyalty

Purpose

Principle

Explain what happen


Take the blame
Prove how we do not
approve to child labor

No law obligation
Ethical principles
Our right for
explanation

Maintain order with


social and corporate
rules
Taking clear, quick, and
investigative actions.
Teach by example legal
vs. moral

Policies are clear, if


child labor is
involved, contract is
cancelled.
It is within our rights

Remove any negative


associations with the
brand name
Rebuild the trusted
brand name

Within our rights;


dimensioning India
from our supply
chain will make us
lose our companys
culture.

Child labor and IKEA


never tie again

Our contract was


based on a goal that
was dismissed, give
formal written
warning or fire them.

People
Customers have
the right to know
Shareholders and
employees have
the right to be
protected

Ikea

Haunt them
Make it less
bad
Affect on
shareholders

Some of
Terminante
Rangan
employees will be
fired for their
companys
mistakes.

Affect India image


Pull other
companys
Decrease the
standard of living
further
Customers face
higher prices

More pressure on
Rugmark
employees
Send a negative
message to
stakeholders.

Chances of
reoccurrence

Lose a good
supplier
Positive public
response
Lesson to other
suppliers
Lose a good
percentage of
their suppliers
Cheap childlabor free
countries
dont exist

Course of Action
Immediate actions
1

Take full
responsibility
- Fire Rangan
Exports

Find new
supplier that
aligns with
our values
and
corporate
ethics

Take legal
actions

Work with
our CSR
department

Monitoring
of the rest
of our
suppliers

Work with
Rugmark
Foundation

Debate
NO

YES

Do not accept
Take all the measurements
Do not fall in his trap
Do not allow him to use us
Be proactive and prepare
Take advantage of his mistake

Accept taking part in the video


Go public
Explain the situation
Elaborate our course of action
Minimize impact

Decision!
Accept the interview

Recommendations
Rugmark Foundation
Financial assistance
Staffing
Improve quality of services

Monitoring controls
Community based rehabilitation
Community development programs
Health care services
Expansion plans

IKEA
Monitoring
IKEA CSR department
Avoid same mistakes
Become part of any community we enter

After 1997
By 2009 they had 267 store out which in USA
they came up 37 & in Germany 44 stores
By 2013 they started capturing new emerging
markets like Latin & middle east
If one is in UK it is better to head to IKEA outlets
rather a real estate agent
One can grab a flat-pack house for a fraction of
the cost.
The BoKlok houses were originally released in
Sweden in 1996, and have since expanded to
IKEA stores across Northern Europe.

In 2008 IKEA UK launched family mobile a


virtual mobile phone network , that runs on T
mobile
IKEA family loyalty card

ISSUES FACED BY IKEA


Before 1997
Environmental issues in
1980 (in Denmark)
The lacquer on the
bookshelves
Child labour in 1994 in
Pakistan
Child Labor in 1995 in
Rangan

After 1997
2011 Labor unrest in
Virginia , US
Illegal activity of spying on
its employees and clients by
illegally accessing French
police records.
2012, Glendal Foods a
major supplier to IKEA Store
Restaurants in Australia
was the subject of bullying
allegations by about 50% of
staff at the company

IKEA and UNICEF


The largest corporate cash donor to UNICEF - IKEA
Foundation
More than $200 million in both cash and in-kind
donations to UNICEFs programs to save and improve
the lives of children and their families
For more than 10 years, IKEA has been a key supporter,
contributing to UNICEFs work like sales of UNICEF
Greeting Cards, cause-related marketing promotions, inkind assistance and national-level fundraising
By the end of 2012, funding from the IKEA Foundation
will have enabled UNICEF to help over 74 million
children in India create a better future for themselves
and their families
Source: http://www.unicef.org/corporate_partners/index_25092.html

Key Learnings
Never compromise with the core values and
beliefs embedded in the firms culture
Avoid myopic view: Evaluate long-term
consequences of short-term decisions
Ensure that excessive attention to profitmaking are not harming the firms image and
reputation
Exploit unused production capacity
Maintain good relations with business
partners

Contd..
Fulfillment of performance objectives requires
continuous improvement and innovation.
Global sourcing strategy should be carefully
monitored in order to avoid
issues(environmental, social)

References
Official website of IKEA group, accessed on 27/10/14 using
the link:-http://www.ikea.com/gb/en/
IKEA logo taken from google images.

About IKEA group-http://en.wikipedia.org/wiki/IKEA


Environment friendly solutions taken from the official IKEA
website link:http://www.ikea.com/ms/en_SG/about_ikea/the_ikea_way/o
ur_business_idea/our_product_range.html

Thank you !