Student: Name Assignment Grading Course: Name IKEA’s Global Sourcing Challenges Professor’s Name [optional]
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The stakeholders of IKEA-
Stakeholders are groups or individuals (customers, employees, suppliers, communities, and shareholders or other financiers) who can affect or be affected by the successes and failures of a business. In case of IKEA, their customers who bought furniture form them in 70 nations, all the employees who work for IKEA in 70 countries all over the globe, their suppliers all over the world who supply IKEA with the raw-material as well as furnished furniture, and all those who financed the company to open its stores and make primary investments in the 70 countries, for its geographical expansion are the “real stakeholders of IKEA”. IKEA was founded in the early 1950s, but in the mid of the 1960s it became a global furniture manufacturing company. During its expansion all around the globe, Ingvar Kampard (the founder of IKEA) opened multiple stores in different countries, some of them were self-financed by him while others were assumed to be opened as the tie up between the company’s and their stockholders (for finance) in that company, especially, those who financed the company to open the chain of stores on the foreign land. Also, when some problem arises in the indigenous market when Sweden’s local large furniture retailers threatened and all the sourcing and suppliers were blocked and even small retailers were ordered not to sell IKEA’s product, under that circumstance, IKEA has to look abroad for the suppliers. And soon after a decade of seeking new sources, in mid 1990s, IKEA worked with almost 2,300 suppliers in 70 countries, sourcing a range of around 11,200 products. (C. A. Bartlett, V. Dessain & A. Sjoman). So, all those stakeholders who financed the company to open the new chain of stores in different countries and all those suppliers from 70 countries are the stakeholders of the company, with an interest or concern in business and success of IKEA. They have a huge contribution in the business of the company all over the world, although they have some rights and ethical requirements of those stakeholders. As IKEA’s Mr. Kamprad’s has the vision “To create a better everyday life for the many people” which was clearly a sign of the emerging culture and values within the company. Some of the rights and values are as below- a) Value for equality – Evident from the spirit, that all open-plan office landscape, where CEO did not have a separate office and work along with other employees to enhance better understanding and cooperation. b) No first class in IKEA- This was yet again a clear spirit of high values in IKEA for an instance- where executives completed the 350 mile trip by taxi. c) No waste of resources-“Expensive solutions are often signs of mediocrity” (Mr. Kamprad). d) Simplicity and attention to details- IKEA was known for the simplicity in its work and focus on the details of the work only. As said by Mr. Kamprad that “Complicated rules paralyze!” e) No fear of making mistakes- This value was the motivation for the internal work force of the company as they were not given any stress and fear in order to do their jobs. “Only while sleeping one makes no mistakes” (Mr. Kamprad). All the employees and stakeholders of the organization were given right to express their work without fear of mistakes and pressure of workload.
In the given article there were partial competing interests among stakeholders, while all of them were pushing hard in order to escalate their profit shares. But, in the initial phase of the company in Sweden’s (Indigenous market), IKEA had confrontations with local retailers and other large furniture manufacturer. IKEA was threatened and all its sourcing and suppliers were blocked in Sweden. They even colluded to stop the company from taking orders at the fairs and even showing its prices. All small retailers were threatened not to sell IKEA’s products. Under those circumstances, IKEA was bound to search for suppliers in other countries. So the customers had to suffer a lot owing to the competitive dismay in Sweden. Although, the suppliers, investors and the customers of the company worked within ethical boundaries and employees were working hard to escalate the profit for IKEA. During expansion of business, work was shared and from the profit of one store the other store was opened and the series of stores was opened for the company all over the world. The national and global laws abided by IKEA.
During the expansion of the IKEA, they were to abide by various global laws. Some of them are as below. 1. Danish authority regulations to define limits for formaldehyde emissions permissible in the manufacturing of the products and raw-materials. Concentration of formaldehyde above 0.1 mg/kg in air could cause serious health issues. This chemical compound was used in the formation of binding glue used in the assembling of the furniture. Later IKEA, passed a regulation for all the suppliers for meeting the standards, but this didn’t work so they finally decided to monitor the production of the glue in their own supervision. 2. IKEA’s product was mainly manufactured from wood so they have to abide by the standards of WWF (World Wide Fund for Nature) and follow all rules specified by the Forest Stewardship Council. They set the standards to meet the requirements of WWF and this helped them to coordinate in the wildlife ecosystem balance with WWF. 3. IKEA’s suppliers were using labor forces so to ensure that it does not include child labor, it sent a legal team to Geneva to demand for the input and advice from the International Labor Organization (ILO). Eventually, on the trip Barner also learned for the foundation of Rugmark Foundation (Good Weave International, formerly known as “Rugmark”, is a network of nonprofit organizations dedicated to ending illegal child labor in the rug making industry). 4. IKEA identified four other areas where environmental criteria were to be applied to its business conducting- * Adopting the product range * Functioning with suppliers * Transport and distribution system * Ensuring environmentally conscious stores.
The areas of social responsibility or sustainability-
IKEA has to meet various social responsibilities and sustainability concerned with environmental, social and economic fields. They are very important to be addressed because the principles of the company were to give better lives to the people of the world. Since, IKEA was using wood as its main raw-material in making furniture so they must meet the parameters related to environmental protection and conservation laws. Some of such area of social responsibilities is given below- a) Child Labor (Social concern) - The child labor was a high profile issue at that time for the U.N. convention on child labor had been published in Dec. 1989. IKEA was also exposed to the child labor indulgence and they were caught unaware of this crime. In the response, IKEA sends a legal team to Geneva to discuss the matter with International Labor Organization (ILO) and asked for their suggestions to deal with the problem. They applied, Convention 138 of ILO rule 1973 in 120 nations, and unified to abolish child labor and cancelled the contracts with those who do not follow their rules to abolish child labor. b) Forest conservation (Environment concern)- IKEA was using wood as its main raw-material in making furniture so they have to abide by the standards of WWF (World Wide Fund for Nature) and follow all rules specified by the Forest Stewardship Council. They set the standards to meet the requirements of WWF and this helped them to coordinate in the wildlife ecosystem balance with WWF. This helped IKEA to practice ethical business practices while cutting the trees for furniture. In off-seasons they manufacture other products in order to maintain the profit, but didn’t cut down the trees.
My decisions and considerations-
IKEA was a company that started in the early 1950s, but in the mid of the 1960s it became a global furniture manufacturing company. During the problem in Sweden when Sweden’s large furniture retailer opposed the company from every aspect of business processing’s. I would have started searching, the new customers in global markets as done by the CEO of the IKEA. But along with that I would have adopted legal pursuits against such business abuses in the court. Stakeholder’s right and values would have been a biggest concern of mine, because it coordinates with the expansions of the business in the abroad and will help providing a better environment to work. I would have taken all the values to the implementation levels and gives them all rights to coordinate the business in their own style and passion. Although, during the manufacturing process, there were a lot of issues to be looked at and I would have addressed all such issues with full responsibilities. For example- On the issue of the child labor I would have adopted little stricter rules by not just cancelling the contracts upon the violation of child labor rules, but also financially punished them for that, and would have conducted regular assessments of our supplier’s working environments. I would have taken the social responsibilities as the company’s primary motive while processing of the wood from the forest. I would have made a better scanning of the social and environmental issues pertinent to the human benefits and social responsibilities. The laws related to child labors, law related to the standards, use of chemicals for manufacturing purposes, WWF laws, U.N laws, etc. must have been abided by the company in every country and in every circumstance. A proper legal team formation was required to look after the laws and rules implementation globally. IKEA has emerged as the global company and as a much mature business ethics though. They practice all the ethical parameters in order to escalate the sales and customers reach all over the world. They managed suppliers and developed sourcing principles during the conductance of the business. They made a clear waking up to environmental and social issues and addressed all the challenges meticulously. They managed to solve some serious social responsibilities such as child labor, forest conservations etc. They took appropriate action to resolve the critical issues and always opened new options to the business expansions. The CEO of IKEA Ingvar Kamprad led the company to a path of success and glory by following ethical and ideal values of the work principles.
References
C. A. Bartlett, V. Dessain & A. Sjoman, (November, 2006), IKEA’s Global Sourcing Challenges: Harvard business school (e-article), 9-906-414.