IKEA is an international privately owned company that deals with home products. Its products include ready assembled products, such as beds, chairs and desks and home appliances. It was founded in Sweden in 1943 by Ingvar Kamprad from Smalad, one of the poorest regions in southern Sweden (O'Mahony, 2008). The people in this region were renowned for their hard work. Kamprad became an entrepreneur and decided to form the commercial company. The company has since expanded to other parts of the world and has become one of the leading furniture retailers in the world. The major company’s stores are Stockholm in Sweden, Shanghai Shenyang and Tianjin in China and Berlin Lichtenberg in Germany. Other stores are distributed in other parts of the world. Its products are well designed and are ecosystem friendly (Henley, 2008).
IKEA mission aims at offering a wide range of products to its customers that are of good quality and durable. These products are offered at low prices that the majority of people can afford to buy them in countries, where the company operates. It also gives people an opportunity to grow as individuals and professionals and, at the same time, creating a better life for customers and the company (Collins, 2011).
Apart from selling furniture products, IKEA stores are well designed with restaurants included in them. These restaurants offer various types of foods and drinks. The food that is offered in these restaurants differs from one country to another though the major type of food and includes traditional Swedish food, boiled potatoes among others. Most of IKEA’s food products are based on Swedish traditional foods. The company has made it easier to purchase its products by labeling all its food products and drinks. Food production mostly takes place in Sweden, and it is carried out by small, medium and large manufacturers. Other products that are offered by IKEA include curtain accessories, bathroom articles, kitchen articles, appliances, children accessories and carpets. These products are well designed with high quality, durable and with fair prices (Armitstead, 2010).
The company’s expansion started in 1965, when Kamprad opened a store outside the major city in Stockholm. He showed the designing and selling of furniture in low prices. This was the largest store to be constructed by the company. This store offered various customer services, which included parking, baby carriage, hire services, children nursery and restaurant. Kamprad later expanded into new markets and in 1973 moved to Denmark, which offered a central location for Europe expansion. Later he opened more stores in other parts of the world (Henley, 2008).
This expansion provided the company with more stability and it did not have to rely on Swedish market that was saturated with its products. This expansion also helped to tackle the supply problems. The main idea that Kamprad had was to replace craftsman philosophy with engineering philosophy. Since the IKEA’s operations are situated all over the world, there is a great problem of management that may face the company. To tackle this problem, the management has organized the company into four areas that relate to each other functionally (Owens, 1998)
These areas include product range and development. This was first carried out in Sweden. The company introduced new products and developed new ones and this brought success of the company. This work was carried out by different groups in Sweden. This enabled the tasks of product to be more centralized and then dispersed to other areas, where IKEA operated.
The second management tactic was purchasing of materials for production. This was carried out by agents, who were responsible for placing orders to specifications that were laid by the IKEA in Sweden and the development teams. The purchase of materials was done from other European countries. Though IKEA’s products are designed in Sweden, most of its products are manufactured in the developing countries. This enables to reduce production costs (Roth, 2005).
The third management function of IKEA is the distribution service. This aims at transporting and distributing finished products to all stores in the world. The fourth function is retailing function. This function was carried out by those, who operate under the same retail concept. Their main aim is to ensure that methods of selling products and services were the same in all IKEA stores across the world. Also, the company carried extensive advertisement and sales promotion all over the world alongside its expansion (Collins, 2011).
The company used catalogs to advertise its products. These catalogs helped to emphasize on quality of the products as well as efficiency of these products. When the company was expanding its premises, it provided every household near the store with a catalog. This was a key factor in attracting new customers in the newly built stores. Other advertisement modes included direct mail order sales. These advertisements were very effective and had a very big impact on the company’s sales. The IKEA has long opening hours, whereby they operate 24 hours within a day. Maintenance and restocking is usually carried out during the night. The customer operating hours are usually long with store opening at night. This increases efficiency in purchasing of IKEA’s products (Henley, 2008).
The company continued to advertise its products, and in 1997, it joined other companies online. It opened a world wide web called World Wide Living Room Web Site. This web site offered customers with information about the company. It made it possible for customers to see their products in their comfort at home. It also included the placement of the company’s catalog on the website together with pictures of items that were present in the company. This advertisement was meant to keep the customers aware of their products as well as boosting their sales. These strategies have enabled the company to maintain a competitive edge as well as improving public image (Owens, 1998).
The company has created better daily life for the majority of the people, where it operates. It has achieved harmony between the market laws and has supplied a wide range of products that are offered at affordable prices that a great number of people can purchase (Collins, 2011). The prices that are offered by the company are due to its approach to product development, distribution and good relationships with suppliers and retail sales. The main focus of keeping the cost of production as low as possible, at the same time, improving the quality and efficiency of product sold to the customer. In every type of activity that is undertaken by the company, the main focus is on the cost reduction. For example, IKEA’s managers will use public means rather than using taxis. The spread of such information to the customers improves the company’s image and then characterizes the company as one that is most economical in its business (Henley, 2008).
Due to its strive for cost effective production, the company negotiates for cheap conditions with most of its supplies coming from eastern Europe and Asia, where these materials are cheap. It negotiates for supply of its materials at the best price and, at the same time, trying to maintain a good relationship with its suppliers. The company’s low cost policy is based on economies of scale and transport. It also operates at running the stores at the lowest cost. For example, the use of buildings, which are easy to construct and manage. When the customers purchase their products, they assemble them in home as they pay transport costs. This helps to reduce transport costs for the company (Armitstead, 2010).
The company has continued to practice environmental conservation measures. This has been carried out since the company was established. In 1990, the company invited the founder of the Natural Step to address conditions of sustainable development and strategies that can be taken to improve the company’s environmental performance. This led to the adoption of the natural step framework, which focused on structural changes of the company to invest its resources on environmental conservation measures (Owens, 1998).
Some of the environmental measures that were taken included eliminating the use of polyvinyl chloride material. Reducing the use of chromium for metal surface treatment and using recyclable materials among others. Later in the year 2000, IKEA introduced code of conduct for supplies called IKEA’s way of purchasing (IWAY). The company has employed more than 60 audits to ensure that its suppliers follow the law of each country (Wainwright, 2005).
IKEA’s environmental code of conduct indicates that the suppliers must ensure and demonstrate improvements in the environment as the company production increases. The areas that require continued improvement include reducing emissions in air, ground discharges, noise pollution, hazardous and non hazardous wastes and use of natural resources, such as energy. The IKEA’s supplier must also work to ensure that there is continued improvement in health and safety. These improvements include reducing the cases of accidents, workers’ rights of awareness as well as increasing involvement of workers in improving environment (Owens, 1998).
The company trains all of its employees on environmental and social responsibility. Their products are environmental friendly and are more sustainable at home. Their stores are fitted with light bulbs that ensure that they are recycled. It is also working in a way that it can take back on used sofas and recycling them so that they can reach their own end of life. This reveals the company’s great interest to conserve the environment.
The IKEA’s employees are paid wages according to the laid contract. This includes compensation for overtime and working hours according to legal requirements. The employees are also supposed to be provided with obligations that are required. These obligations may include medical insurance, social insurance and pensions. Also, every employee is supposed to be provided with time off in conditions, such as medical leave, maternity leave and national holidays (Collins, 2011). These are according to traditions and applicable legislation. Apart from these regulations, the company shall not make use of child labor. This is because child labor denies them their rights.
The code of conduct for suppliers stated that each IKEA’s supplier must comply with the applicable laws, legislation and regulations that govern environmental conservation of each country. These laws may be pertaining to noise pollution, air pollution, ground and water discharges. The IKEA is supposed to report to the authorities any suspected ground contamination for review and assessment. There must also be compliance to the permits that are required by a particular country on matters regarding use, storage and importation of all chemicals.
The company has shown commitments in this code of conduct. Recently, the company stopped providing customers with plastic bags. Instead, they use re-usable bags for sale. Also, the company’s restaurants offer reusable plates, knives forks and spoons. Some of the toilets have been fitted with dual function flushers. It has also introduced energy saving bulbs and batteries to conserve energy. All these efforts are aimed at conserving environment.
Apart from child labor, the company is supposed to protect young workers. These young workers are of legal working age, but they have not attained 18 years. They are protected from work and circumstances that may be against their health, safety or moral standards. Also, the employees must be protected from forced and bonded labor. The company’s employees are free to leave premises when their shifts end. The employees are also not liable to any kind of discrimination that regards to race, color, sex, marital, maternal status, origin or age. The employees are employed and work under general principal of hiring, salary, fringe benefits, promotion, termination and retirement of workers. When evaluating the prevailing conditions, local culture and religions shall be put into consideration (Armitstead, 2010).
IKEA’s employees are also not prevented from freedom of association. They are free to associate with each other as well as exercising collective bargaining. The employees are also not supposed to be harassed or abused. If an employee faces discrimination, he can appeal to reprimands that he may be subjected to by the employer. These are various concerns that the company has on the environment and its employees.
The company is owned and operated by profit and nonprofit corporations. In 1982, Kamprad established Stitching Ingka Foundation. The foundation is highly dedicated in architecture and interior design. It is one of the leading charitable organizations in the word and works in partnership with other world charitable organizations (Roth, 2005).
The company adopted code of ethics that it aimed to be moral and ethical. Most of the social responsibilities that are undertaken by IKEA have great concern for the environment. It pays great attention to forest and timber. This is an essential raw material in manufacturing for the manufacturing and sale of its products. IKEA has had commitments to make the world a better place. This is achieved through environmental conservation, good use of energy, fair trade and ethical standards in workplace (Armitstead, 2010).
Apart from pursuing profits, IKEA is highly dedicated in corporate social responsibility. Some of the social responsibilities that the company undertakes include supporting survivors of conflicts and natural disasters. Every year most children lose their homes, belongings and families. Most of these children seek refuge in humanitarian camps, where they get food, clean water, security and shelter. Some of them live in these camps for many years without any hope of returning to their homes. IKEA foundation addresses these critical needs for these children by offering them a safer place they can call home. A good example is earthquake that occurred in Haiti and flooding in Pakistan. The company is undertaking projects that improve live and education in the refugee camps and reconnecting displaced families (Armitstead, 2010).
Another concern for society is education for the children. IKEA provides education scholarship for young girls. The company works in partnership with other organizations, such as UNICEF and saves the children organization to promote this program. IKEA also offers another program called sustainable family income. The company understands that women play a key role in change for their children. It also understands that women have great power to influence the community. IKEA foundation supports program that help women gain education. The program is aimed at giving women a chance to contribute to family income. It also ensures that children stay in school instead of dropping out to help their parents feed the family (Roth, 2005).
Other social concerns that the company has undertaken include providing soft toys to children, who were affected by a cyclone in Burma. It also pledged to help Somali refugees living in Kenya with a donation of 62 million dollars.
The company was recently named among the most ethical companies by Ethisphere institute. This was due to research that was carried on 10,000 companies to determine the winners. The company has upheld high ethical standards hence, making a good standout industry. The businesses with unethical decisions and actions usually have a bad reputation, hence they do not maintain competitive advantage (Orange, 2011). The firm has reviewed its business ethics litigation and regulatory infractions. It has undertaken activities that help to improve its corporate citizenships hence, improving public image. This has contributed to the company maintaining its competitive edge.
The company has earned this honor since its main goals are not to pursue profits only, but to benefit the community as well. It has good business ethics and corporate social responsibility. The company has also addressed anti corruption and sustainability as well as undertaking environmental conservation measures. This is ethical business operation.
The Swedish companies and business have proven that when pursuing profits, one does not have to exploit people or the environment. Swedish companies were ranked to be among the most ethical companies in the world with great advocate on corporate social responsibility. They have a concern for climate change equality, human rights and anti corruption (Orange, 2011). The companies observe several regulations and conventions that have been laid down to protect human rights and conserve the environment. Some of these include UN’s Convention on the Rights of the Child and regulations stipulated in International Labor Organization.
Many companies have been unable to operate in the Middle East. This is because there are great variations in culture and religion. Some advertisements are against religion and culture of these countries. There is a strict approach on some advertisement and some product that these multinational companies may be offering. For example, some types of videos or advertisement that have nudity expressions or sexual situations are highly shunned. These factors have not hindered IKEA to operate in Saudi Arabia. This is because its social concerns and ethics do not violate the customer’s freedom (Orange, 2011).
In the year 2000, there was the issuance of the united global compact, an initiative, whereby companies were supposed to uphold human rights standards. IKEA joined this initiative in 2004. The company has shown commitments’ on this initiative by recognizing the rights of women. It outlaws all forms of discriminations against women. This has made the company thrive well in Saudi Arabia (Orange, 2011).
The products offered by IKEA have respect to cultural sensitivities. IKEA has a great tolerance in public perception. There are no misunderstandings of culture and religion in the areas that it operates hence, it is able to thrive well. These misunderstandings bring enmity and violence. In some of these countries, women are rendered powerless and invisible. The company has taken into consideration all these factors and maintained its existence in Saudi Arabia. This tolerance of cultural differences is an ethical responsibility (Orange, 2011)
Though the company has seen tremendous growth and expansion, there are few criticisms that it faces. Some of these critics are based from one country to another. For example, Canada criticized the company for offering more price on its products than they are offered in America. In 1980s, the company was criticized for using political prisoners as workforce in their production. In the year 2012, the company admitted that it was aware that there was the use of forced labor at that time. This is against human rights. Also, in 2012, it was also criticized for airbrushing women out of pictures in catalogues in Saudi Arabia (IKEA mulls joint venture with Bosnia furniture maker, 2008).
Though there are some few critics about the company’s conduct, its overall performance has contributed to the welfare of the community and the environment. Its products are of high quality and of affordable prices. It has created a balance in pursuing economics as well as great concern for the environment. Few companies are able to operate in these extremes. To a large extent, the company is of great importance to the environment and the community than it is to the owner.