ikea operation strategies
TRANSCRIPT
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Presented by:-Team 2J. Prabhat
Paritosh kanwar
Rohit Jain
Rinky Sachdeva
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Flow of presentation
Summary ofthe case
Background
Issues identified
Solutions
Learnings andreferences
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Summary of the Case
Established in the 1940s in Sweden by IngvarKamprad, 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 itsinternational advertising, "Swedish" blue and
gold color scheme for its stores; that is spreading
Swedish culture and lifestyle all over the world.
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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
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Background
Idea of A better life,for many people
Searched for
furniture manufactures
Began to build long term businesspartnerships with manufactures
and distributers
We do not buy products from
our suppliers, we buy unused
production capacity. -- IKEA
Sold small itemsout of families
kitchen.
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Source-Wikipedia.com and IKEA facts and figures, 2003 and 2004 editions & Internal documents
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IKEA in today's world
Source-http://www.ikea.com/ms/en_GB/about-the-ikea-group/company-information/index.html
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Improvement Strategy
Source-Operations strategy by Nigel Slack and Michael Lewis,Pg.189
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Todays marketing strategy
Catalogue distributed world-wide as 191million copies (in 56 different editions and 27different languages).
IKEA has 31 trading service offices in 26countries so production can be monitored,new ideas tested, prices negotiated andquality checked.
All of the companys home furnishing productsare comprised of 71% renewable material andinclude as much recyclable material aspossible.
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TheEnvironmental
Issue
The Social Issue
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1980:
Formaldehyde
scandal in Denmark
ComplicationThe Environmental Issue
1st
Action
Alternative
action
Action
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1992:
Formaldehyde
scandal in Germany
1stAction 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
ComplicationThe Environmental Issue
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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
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ComplicationSocial Issue
1994:
Child labor scandal in
Pakistan
1stAction 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
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ComplicationSocial 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
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Environmental Issue
Child Labor Issue
?
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Acts Ethical Dilemma Purpose Principle People Ikea
Accept
theinvitation
Short vs.
Long-term
Explain what happen
Take the blame
Prove how we do notapprove to child labor
No law obligation
Ethical principles
Our right forexplanation
Haunt them
Make it less
bad Affect on
shareholders
Terminate
Rangan
Exports
contract
Justice vs.
Mercy
Short vs.
Long-term
Truth vs. LoyaltyRugmark
Solo
Monitorship
Exit India
Customers have
the right to know
Shareholders andemployees have
the right to be
protected
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
Some of
Terminante
Rangan
employees will be
fired for their
companys
mistakes.
Lose a good
supplier
Positive public
response
Lesson to other
suppliers
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.
Affect India image
Pull other
companys
Decrease the
standard of living
further
Customers facehigher prices
Lose a good
percentage of
their suppliers
Cheap child-
labor free
countries
dont exist
Child labor and IKEA
never tie again
Our contract was
based on a goal that
was dismissed, give
formal written
warning or fire them.
More pressure on
Rugmark
employees
Send a negative
message to
stakeholders.
Chances of
reoccurrence
The Alternative Responses
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Course of Action
Immediate actions
Work with
RugmarkFoundation
1 2 3 4 5 6
Take full
responsibility
- Fire RanganExports
Find new
supplier that
aligns with
our valuesand
corporate
ethics
Take legalactions
Work with
our CSRdepartment
Monitoring
of the rest
of oursuppliers
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YESAccept taking part in the videoGo public
Explain the situation
Elaborate our course of action
Minimize impact
NODo not acceptTake 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
Debate
Decision!
Accept the interview
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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
Recommendations
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After 1997
By 2009 they had 267 store out which in USAthey came up 37 & in Germany 44 stores
By 2013 they started capturing new emergingmarkets like Latin & middle east
If one is in UK it is better to head to IKEA outletsrather a real estate agent
One can grab a flat-pack house for a fraction ofthe cost.
The BoKlok houses were originally released inSweden in 1996, and have since expanded toIKEA stores across Northern Europe.
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In 2008 IKEA UK launched family mobile a
virtual mobile phone network , that runs on T
mobile
IKEA family loyalty card
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ISSUES FACED BY IKEA
Before 1997
Environmental issues in
1980 (in Denmark)
The lacquer on thebookshelves
Child labour in 1994 in
Pakistan
Child Labor in 1995 inRangan
After 1997
2011 Labor unrest inVirginia , US
Illegal activity of spying on
its employees and clients byillegally accessing Frenchpolice records.
2012, Glendal Foodsamajor supplier to IKEA Store
Restaurants in Australiawas the subject of bullyingallegations by about 50% ofstaff at the company
d
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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, in-
kind assistance and national-level fundraising
By the end of 2012, funding from the IKEA Foundationwill 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
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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 profit-
making are not harming the firms image and
reputation
Exploit unused production capacity
Maintain good relations with business
partners
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Contd..
Fulfillment of performance objectives requires
continuous improvement and innovation.
Global sourcing strategy should be carefully
monitored in order to avoid
issues(environmental, social)
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References
Official website of IKEA group, accessed on 27/10/14 usingthe 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/our_business_idea/our_product_range.html
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Thank you !