IKEA

GROUP-A5KAPIL MAKHIJA

BHAVIK THAKKARSAGAR SAWANT

MEHBOOB BHATTIANIKET KATDARE

ITM SIONBATCH-91

Summary of the case study • Established in the 1940s in Sweden by Ingvar

Kamprad, and is one of the world's largest retailers of home furnishings.

• IKEA’s 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 country • 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.

Background

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

Sold small items out of families kitchen.

IKEA in today's world

Today’s 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 company’s home furnishing products are comprised of 71% renewable material and include as much recyclable material as possible.

• They were the first company to feature a GAY relationships in a commercial.

The Environmental

Issue

The Social Issue

1980:Formaldehyde scandal in Denmark

Complication – The Environmental Issue

1st Environmental Issueo Danish regulations in the early 1980o Formaldehyde emissions from the chemical

compoundo IKEA sales dropped 20% in Denmark

1st Action

Alternative action

Action

1992:Formaldehyde scandal in Germany

2nd Envrionmental Issue• German media investigated the

formaldehyde problem• The lacquer on the bookshelves

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

Complication – The Environmental Issue

1st Child Labor Issue• Swedish documentary showed child labor used at weaving carpets in Pakistan• IKEA: the most blamed due to its high profile• IEKA had no awareness of child labor problem

Complication – Social Issue

1994:Child labor scandal in Pakistan

1st Action • Marianne Barner, business area manager,

had to deal with the issue• Apology for ignorance and acknowledge

not being in full control

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

2nd Child Labor Issue• A well-known German documentary

maker will broadcast children working at looms on German TV

• Barner and her manager tried to learn about the situation.

Complication – Social Issue

1995:Child labor scandal reported by German TV channel at Rangan Exports

• 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

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

Culture adaptation of IKEA

• Culture and lifestyle clash with America(1991)• Failure in Japan (1974) > re-entry (1984)• Pre adaptation of culture in China• Created Guidelines for Thialand

FACTS & FILES • The founder is dyslexic person :- IKEA have a very specific way of naming products.E.g. : tables and chairs generally are named after places

in Finland. Carpets are named after places in Denmark

• Founder was also directly involved with fund raising & recruitment for the New Swedish Movement (still has out lets in Israel as well as Islamic countries)

• In 1994 he apologized to all his Jewish employees in writing

• For tax benefits it claims as a charity body

IKEA & INDIA

IKEA and UNICEF• IKEA has worked for UNICEF for more than 10

years.• IKEA has been funding UNICEF projects that

help:– Improve children education– Keep children out of work– Provide health start of life for children• IKEA has donated $ 2 billion• IKEA has impacted more than 84 million children in

INDIA alone.• Soft toys for Education- So far IKEA has donated

$90 million through UNICEF

?• 1)How can it work with international

stakeholder’s to prevent any future likelihood of child labor or labor issue?

• 2)What cultural differences that IKEA needs to adapt in order to increase organizational effectiveness?

3)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 textiles3. Eliminate acid-curing lacquers4. Produce a model of chair (OGLA) made from 100% pre-consumer plastic

waste5. Introduce a series of air-inflatable furniture products into the product line to

reduce the use of raw materials and transportation weight and volume6. Reduce the use of chromium for metal surface treatment7. Limit the use of substances such as cadmium, lead, PCB, PCP, and AZO

pigments8. Use wood from responsibly managed forests that replant and maintain

biological diversity9. Use only recyclable materials for flat packaging and "pure" (non-mixed)

materials for packaging to assist in recycling10. Introduce rental bicycles with trailers for customers in Denmark