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GLOBAL BUSINESS STRATEGY [MG6032]: Spring 2016
In-term Assignment 3 (Spring 2016)
(30% of Total Module Grade)
International Strategy in Emerging Markets and CSR strategy
We hereby state that; this submitted assignment is our work alone
and that due recognition has been given to any external content
through the use of referencing.
Names, Student ID Numbers and Signatures:
Name Student ID Number Signature
Wantong Dong 15072487
Charul Singh 15012247](https://image.slidesharecdn.com/84d081c5-12fc-41fb-a6a1-e0db507f1e13-170110123427/85/Strategy-3-Assignment-1-320.jpg)
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IKEA needs to improve the communication towards customers, employees and suppliers as
many of them are still in ‘I don’t know’ category. Internal and External Communication
strategy needs to be improved with chemical and textile department. (Please Refer Appendix
D for communication strategy towards customers and employees.)
Reference
Reference of Q1
Baraldi, E. (2008) ‘Strategy in Industrial Networks: Experiences from IKEA’, California
Management Review, 50(4), 99-125.
Boström,M., Gilek, M., Jönsson, A.M. and Karlsson, M. (2013) ‘ IKEA and the Responsible
Governance of Supply Chains: IKEA’s work on chemicals in textiles’, Working Paper, No.
2013:1.
Christopher, M. and Raynard, M. (2015) “Institutional Strategies in Emerging Markets.”
Academy of Management Annals, 9(1), 291-335.
IKEA (2015) ‘IKEA Dynamic list’, Dynamic list[online], available:
http://www.IKEA.com/us/en/ts_dynamic/dynamiclist/filt_nel_glob?filter=-1[accessed 21
April 2016].
Inter IKEA (2015), Sustainability Report, Inter IKEA Systems, B.V.
Koza, M.P. and Lewin, A. Y. ‘Managing Partnerships and Strategic Alliances’, Organisation
Science, 9,3 (1998), 255-264.
Tarun, K., Palepu, K.G., and Sinha, G. (2005) "Strategies That Fit Emerging
Markets." Harvard Business Review, 83(6), 63-74.
Velikova, SS & Alvarez, JL 2015, 'Network Perspective'. in M Jenkins, V Ambrosini & N
Mowbray (eds), Advanced Strategic Management: A Multi-Perspective Approach. 3. edn,
Palgrave Macmillan, New York, pp. 247-261.
Reference of Q2
Banerjee, S. B., 2009. Corporate Social Responsibility: The Good, the Bad and the Ugly.
s.l.:Edward Elgar Publishing.
El-Hajj, N., 2008. Business Ethics and Corporate Social Responsiblity, s.l.: UNIVERSITY
OF OSLO.
Gronvius, P. & Lernborg, C. M., 2009. IKEA and CSR: Like Hand in Glove, Stockholm:
Stockholm School of Economics.](https://image.slidesharecdn.com/84d081c5-12fc-41fb-a6a1-e0db507f1e13-170110123427/85/Strategy-3-Assignment-19-320.jpg)
Strategy 3 Assignment
- 1. 1 GLOBAL BUSINESS STRATEGY [MG6032]: Spring 2016 In-term Assignment 3 (Spring 2016) (30% of Total Module Grade) International Strategy in Emerging Markets and CSR strategy We hereby state that; this submitted assignment is our work alone and that due recognition has been given to any external content through the use of referencing. Names, Student ID Numbers and Signatures: Name Student ID Number Signature Wantong Dong 15072487 Charul Singh 15012247
- 2. 2 Project Meetings: Group Meeting #1 … Friday 14/04/16 6pm. Present: - Charul - Wantong Meeting room: KBG-20 Agenda: 1. Group kick-off 2. Based on Criteria: Q1 --discuss and critique how the chosen organisation manages strategy in (an) emerging market(s), giving consideration to network-level strategy. Q2 -- discuss and critique the chosen organisation’s CSR strategy. 3. Clarify new deadline: 30/04/2016 4. Allocation: Wantong—Q1 Charul------Q2 5. Schedule next meeting: 23/02/2016 6pm Tasks for Completion Pre- Next meeting: Charul and Wantong—Think about the content that we need to include in our assignment & generate a list of content Wantong----keep meeting minutes and put it on our Goole docs Next meeting Agenda: (Library group meeting room, Wednesday 27/04/16) Charul and Wantong use Google docs as a means to share our progress, comment on each one’s parts and make modifications to better our assignment. We had 3 drafts in total and we use the criteria as a benchmark to see whether we cover all the points listed in the criteria. For the Q1 Critique of how the organisation manages strategy in (an) emerging market (s). Critique of how the organisation engages in network-level strategy. For the Q2 Discussing and critiquing how the organisation internationally manages CSR Discussion of international CSR strategy. Critique of CSR Strategy using course theories, concepts and frameworks. Group Meeting #2 … Thursday 28/04/16 10 am. Present: - Charul -Wantong Meeting room: Library group meeting room Agenda: Make our final draft and print it out.
- 3. 3 Individual Project Contributions (to be filled in by respective student): Name Student ID Number Individual Project Contribution Charul Singh 15012247 50% Wantong Dong 15072487 50% We hereby attest that the above information accurately reflects our respective and collective contributions to this assignment: Signatures:
- 4. 4 Table of Contents Manage strategy in emerging markets...................................................................................................6 What Emerging Markets.....................................................................................................................6 Location Strategy ................................................................................................................................6 Customers Focused.............................................................................................................................6 Strategies of entering emerging markets ...........................................................................................7 China ...............................................................................................................................................7 India ................................................................................................................................................7 Risk Profile...........................................................................................................................................7 Threats of competitors .......................................................................................................................8 React to Changes ................................................................................................................................8 Innovation...........................................................................................................................................9 Network-level Strategy Engagement......................................................................................................9 Inside the IKEA boundaries...............................................................................................................11 Outside the IKEA boundaries ............................................................................................................11 Suppliers........................................................................................................................................11 Partners.........................................................................................................................................12 Competitors ..................................................................................................................................12 International CSR strategy ....................................................................................................................13 People and Planet Positive International Sustainable Strategy........................................................13 Generic Strategies of Social Responsiveness....................................................................................14 IKEA’s Stakeholder Theory................................................................................................................16 CSR Policy Towards Employees.....................................................................................................16 CSR Policy Towards Customers.....................................................................................................16 NGO Stakeholders.........................................................................................................................17 CSR Policy Towards Suppliers .......................................................................................................17 Mirvis and Googins IKEA’s CSR Stances .......................................................................................17 Strategic CSR Communication ..........................................................................................................18 Reference..............................................................................................................................................19 Reference of Q2....................................................................................................................................19 Appendices............................................................................................................................................20 Appendix A:.......................................................................................................................................20 Table 1: Criticism faced by IKEA....................................................................................................20 Appendix B: CSR policy towards environmental and social issues...................................................21 Table 1: CSR policy towards environmental issues.......................................................................21 Table 2: CSR policy towards social issues......................................................................................21
- 5. 5 Appendix C: NGO Stakeholders ........................................................................................................22 Table 1:Key partnerships ..............................................................................................................22 Table 2: IKEA’s official NGO stakeholders and partners ...............................................................22 Appendix D:......................................................................................................................................23 Table 1: CSR communication Methods and advantages...............................................................23
- 6. 6 Manage strategy in emerging markets Multinational corporations usually develop strategies for doing business in emerging markets that are different from those they use at domestic market and in order to fit emerging markets and cater the local customers’ needs and expectations, they need to find innovated ways to implement these localised strategies (Tarun et al, 2005). What Emerging Markets IKEA chooses fast-growing markets in emerging economics, which are characterized by rapid industrialization, economic liberation and increased integration into the global economy, such as China and India, to well position itself in order to capitalize on a rapid growing middle class in those emerging markets (Christopher and Raynard, 2015). IKEA could get much more profits in emerging markets as they are experiencing positive economic development, which means there would be dramatic rise in income levels and people’s consuming structure and living standards will be gradually upgraded. Moreover, the real estate industries are developing significantly in most emerging markets, which in turn, boosts the furniture industry as with the development of real estate companies, there will be more demand in the home furniture in developing countries. Location Strategy IKEA is usually located in the suburbs in the Europe and the US as most customers have their personal cars. However, the location strategy is not a good fit in emerging markets as emerging markets have lower industrial level than those western countries thus less personal vehicles and use more public transportation. Therefore, IKEA sets up its outlets on the outskirts of big cities which are near public transportation lines. IKEA also offers local home delivery and long-distance delivery to major cities in China for a fee to cater to Chinese customers’ behavious and their demands. Customers Focused IKEA is famous for providing low-priced furniture in the Europe and the US, but when it enters emerging markets, China and India, for instance, IKEA is seen as an aspirational brand by customers. Lost cost pricing is a motive for IKEA to internationalise and it does well in Europe and Northern America, but it is not realised in emerging economies. Although IKEA is positioned as a cost leader in developed markets, relative to the emerging markets,
- 7. 7 consumers, they are still quite high and regarded as luxury products. As a result, most customers coming to IKEA are young professionals, well-educated with higher incomes, and DINK (Dual Income, No Kids), as they are not so sensitive of higher pricing for great quality furniture and they are more aware of western styles. Strategies of entering emerging markets China IKEA formed a joint venture with Beijing Northern Sweden Limited Company to open the first IKEA store in Shanghai in 1998 since Chinese government did not permit foreign companies to build wholly owned subsidiaries at that time. The joint venture provided a good platform for IKEA to test the local market and acquire market knowledge to better understand customers’ needs. This partnership helped IKEA to get over trade barriers, reduce uncertainties if they had entered on their own and fulfil legal requirements of market entry (Christopher and Raynard, 2015). There are, however, some disadvantages. The form of joint venture prevented IKEA from maximising its expansion in China to some extent and IKEA had to make some compromise in their store design. India Indian economic environment and customer preferences are similar to the Chinese market. However, every market has its unique characteristics, some strategies cannot be replicated when IKEA enter India. In India, IKEA faces India-specific challenges, varying laws and regulations in different states that are ruled by different political parties make IKEA challenging in terms of operation, distribution and logistics (IKEA, 2015). In addition, IKEA has waited a long time to get permission to expand into Indian market due to the strict legal systems and trade barriers. Risk Profile For IKEA, it is vital to take transaction risks into consideration when enter emerging markets as there are a lack of reliable financial intermediaries like credit-rating agencies, investment analysts, merchant bankers or venture capital firms. Additionally, it is riskier to raise debt or equity capital in emerging markets to finance their operations as there are still a large potential for emerging markets to make advances in their financial behaviours.
- 8. 8 Furthermore, as emerging markets may favour their domestic companies, less intellectual property protection would lead to more local firm copy IKEA’s design and products thus increasing IKEA’s operating risks in emerging markets. Threats of competitors IKEA’s novel designed furniture and store experience is not hard to copy, therefore, many manufacturers in emerging markets, such as Chengdu, China, a furniture producer imitated IKEA’ s store layout professionally and its lower price attracts loads of young customers to wander around here. IKEA is forced to look for ways to lower its prices in all areas which in turn would cause a chain reaction within the value chain (Boström et al, 2013). React to Changes After joining the WTO, Chinese government becomes more welcome for foreign direct investment which benefits for IKEA to continue its expansion in China. Furthermore, the loose policies give more freedom to foreign companies and allow them to build wholly owned stores in Chinese markets. Therefore, IKEA redesigned and built its retail store in Shanghai in 2003 to obtain full control. The economic developments within emerging markets lead to an increase in the department’s average. Thus more and more storage containers and facilities would be demanded in emerging markets. IKEA rises, its level of supply to react the increasing changes in demand. The concept of eco-friendly has already inserted in IKEA since the “Waste Management Manual” was established in 1999 to charge for plastic bags, ask suppliers for green products and increase the use of renewable energy in its stores (IKEA, 2015). However, it could be hard to require IKEA stores in emerging economies to be eco-friendly to implement these without increasing prices most of the emerging economies do not possess the necessary technologies to provide green products that meet IKEA’s standards. Moreover, most customers in emerging markets do not have a habit to bring their own shopping bags and may find it unpleasant when asking to pay extra for plastic bags.
- 9. 9 Innovation In order to satisfy customers’ demand and expectations in different emerging markets, IKEA keeps its home-life study up-to-date and make appropriate innovation based on what it learned from the specific national economic and cultural conditions. IKEA maintains the standardised layout of stores and presentation of products in all countries, but after IKEA’ s market experiment of China, it found Chinese departments are not so big as those in Europe and America and Chinese markets demand more functional and modular solutions. Therefore, IKEA made small modifications to its furniture to fit local needs rather than offering the same range of products in financially developed countries. In addition, as the cultural differences between emerging markets and developed economies, customers’ favourable level of living rooms, dining rooms and kitchen are different. For example, IKEA includes a balcony section when it enters Chinese market and pays more attention on living rooms as Chinese people regard living room as the heart of the room and with the “show off psychology”, they spend most in decorating their living rooms (IKEA, 2015). Network-level Strategy Engagement According to the network theory, companies should be operated in an interdependent relationship and use the inside and outside network to build their strategy, achieve and sustain their competitive advantages. One company’s position within its network and its partners’ resources and reputation, as well as its experience in partnering and its ability to integrate and exploit the resources of its partners are extremely vital to the company’s survival and value generation both in economic and in social (Svejenova and Alvarez,2015).
- 10. 10 In this section, in order to link the network theory to IKEA’s strategic management, the three characteristics that would lead to relational advantage and rents for IKEA will be illustrated separately: IKEA’s network structure, its tie modality and the network’ membership. As suggested by Svejenova and Alvarez (2015), there are four essential factors within the network structure. The overall size of a firm’s network The number of relationships that exist among its partners The gaps or lacks of connections that exist between parts of the networks The distinction between core and peripheral firms in the network Tie modality illustrates how strong the relationships between each participant, how stable their networks, their intent of exploration or exploitation and their nature within connections. In addition, the network’s membership is showcased in the status, resource possessed within the company’s network.
- 11. 11 Inside the IKEA boundaries IKEA of Sweden in the central of the network plays an extremely critical role in the whole IKEA network. It has the overall responsibility to control and supervise the product range and develop the business strategies for the IKEA corporation in terms of marketing, logistics and purchasing. According to the annual report of the IKEA group at the end of Financial Year of 2015, IKEA has 328 retail stores operating in 28 countries around the world, and 27 Trading Service Offices in 23 countries, 33 Distribution Centres and 15 Customer Distribution Centres in 17 countries, and 43 IKEA Industry production units in 11 countries around the world (IKEA, 2015). The participants outside the boundaries, including suppliers, competitors, partners, customers, community groups, media, governments and regulatory bodies have different level of strong or weak ties with IKEA which would be showcased in the following part. Outside the IKEA boundaries Suppliers IKEA has 978 home furniture suppliers cross 50 countries until the end of 2015 and the long term relationship with some suppliers up to 11 years (IKEA, 2015). IKEA strives to develop its relationships with suppliers as far upstream as possible in the network to maintain its cost- lead competitive advantage. IKEA has strong ties with its long-lasting relationship suppliers and IKEA attempts to build deeper relationship based on mutuality instead of use its strong purchasing power as a large buyer to demand them to cut down prices but maintain good quality simultaneously. In order to build a long-term relationship with suppliers who provide good quality raw materials that meet IKEA’s environmentally-friendly standards, IKEA embarks on exploration and exploitation partnerships with its suppliers. According to Koza and Lewin (1998), exploitative relationships happen when partners put their complementary resources together as they are not interested in or capable of developing on their own. This showcase in the project-partnership between IKEA and its highly trusted suppliers. IKEA invites greater
- 12. 12 competence suppliers to take part in complex technical development projects which would enhance the strong ties with them consequently (Boström et al, 2013). IKEA establishes a unique interaction mechanism with them, which takes their interest and future development into consideration so that they would not lose motivation to co-operate with IKEA. Furthermore, IKEA makes investments, such as buying machines for their long- lasting relationship suppliers to facilitate them in developing and upgrading their technologies, which in turn would lower the price of the materials and improve the suppliers’ productivity, thus achieving mutual benefits and commitment between them. In addition, IKEA delegates tasks to long-term suppliers extensively and continuous to maintain their supply chain and establish mutual trust with them. However, if the materials or products that are not technically complex and can be interchanged easily, then short-term relationship approach would be adopted by IKEA. Partners IKEA needs partners to co-operate with and co-develop their products and technologies not only to meet its cool designed and innovated—furniture goals, but also to ensure its product are manufactured and distributed in line with its cost-conscious but with good quality standards. AS Koza and Lewin explained, exploration partnerships are defined as a means for probing or co-developing new markets, products or technological opportunities and have rather open- ended performance goals. IKEA enters emerging markets with the help of key international logistics partners. Strong ties with partners are extremely important, so IKEA makes lots of efforts to establish close cooperation with them. Maersk, for instance, as a large group encompassing thousands of trucks and employees, is not easily impacted by IKEA. Hence, IKEA needs to fit Maersk’s logistic routine. Another large counterpart, such as Akzo-Nobel, it will comply with IKEA’s orders only when they realise they can obtain specific advantages (learning new technology, for instance) through cooperation with IKEA. Competitors IKEA maintains a weak tie with its competitors, especially in emerging markets. Due to the easy imitated nature of the furniture, IKEA’s store layout is copied by many local furniture retail stores, even their innovated showroom mode. However, IKEA adopts a non-reactive
- 13. 13 attitude to its competitors. Therefore, in order to expand into and protect its operating style and intellectual property, IKEA needs to react to these events and establish a strong relationship with them. International CSR strategy IKEA has effectively exported its Swedish political culture to the emerging economies, which focuses on social and economic welfare by collaborating with customers, co-workers and supplier network. IKEA has integrated social and environmental duties in the daily business operations to produce the product in the socially responsible way (Gronvius & Lernborg, 2009). IKEA has been successful in combining a cost focus and CSR together, whereas many other companies like ‘Body Shop’ which charge the premium for CSR. The vision of the company is to provide a better life for the people and to strengthen its niche/emerging markets by providing affordable, durable products (ikeagroup, 2016). People and Planet Positive International Sustainable Strategy Sustainability strategy at IKEA ensures ecological, social, economic wellbeing, and consist of many long term goals to be achieved by 2020. To ensure the process is on the right track, the company uses small milestone goals which helps in tracking the performance. The key drivers that are transforming the business of IKEA are: - 1. Creating a sustainable life at home for millions of customers – IKEA is producing and promoting the products and services which are sustainable, and affordable to all, and helps the customers to create sustainable lifestyles by saving and generating electricity, recycling of water, reduce/sort waste at the cheapest price. For e.g. IKEA has shifted to energy saving LED’s which uses 80% less energy, save customers money, provides better functionality (IKEA, 2015). 2. Creating resource and energy independence –IKEA is obtaining long term security of raw material, converts waste into a resource, promoting renewable energy and creating and using as much is required in the operations. The company has taken a step towards 100% renewable energy by 2020 and committed to invest euro 1billion to take actions against climate change (ikeagroup, 2016).
- 14. 14 3.Creating better lives for people and the community- IKEA has made its value chain more efficient by investing in improving the lives of people and communities, by implementing code of conduct, responsible support for human rights, good working environment for the employees, children education, forests, water and farms in emerging countries (IKEA, 2014). IKEA sources all its cotton, wood from sustainable sources. IKEA foundations have collaborated with various organisations such as NGO’s, schools, universities, suppliers. For e.g. IKEA foundation has donated EUR21 million to improve the life of children and the society in the poor countries by its campaigns (Kiefer, 2013). Generic Strategies of Social Responsiveness Carroll’s CSR model focuses on legal, economic, moral and philanthropic responsibilities which are the integral elements of sustainable strategy. IKEA falls under ‘Accommodation’ and ‘Pro-action’ generic strategies of social responsiveness as identified by Carroll (1979) as IKEA accepts the responsibility and tries to deliver value to all the stakeholders. IKEA also exceeds the expectations by doing more than what is expected and by applying various industry norms such as ‘code of conducts’ (W. Timothy Coombs, 2011). IKEA has been focussed on sustainability from the time of its inception, but due to some criticism’s (Refer Appendix A), the company has brought more focus into its CSR by concentrating on reducing social and environmental impacts by transforming its product life cycle. IKEA always had a pure intention towards CSR and the company is working towards creating shared value for all by handling various CSR issues (Gronvius & Lernborg, 2009). (Please Refer Appendix B: for CSR policy towards social and environmental issues.) Figure 2: Carroll’s 4 generic social responsibilities
- 15. 15 Adapted from: (PIEDADE & THOMAS, 2006) IKEA is involved in both strategic and reactive and proactive responsive CSR initiatives. Table 1 shows Responsive and Strategic CSR initiatives at IKEA, adapted from Porter & Kramer’s theoretical framework (2006). Table 1: Responsive and strategic CSR initiatives at IKEA. Strategic and Responsive CSR Initiatives at IKEA Generic Social Issues UNICEF projects – building schools, Greenpeace, WWF, Save the children Allan Project Sponsorship to sports teams Donation of emergency relief aid and furniture during tsunami and earthquakes Value Chain Transformation and its Social Impact Strategic: Implementation of code of conduct and quality standards “IKEA goes Renewable” and “Better Cotton Initiative” Projects like BCI, BWI and BSR. Reduction in resources and energy. IKEA Rail for transportation Responsive: IWAY that regulates working conditions and child labour. Partnering with International labour Organisation. Social Dimensions of Competitive Context Close co-operation with suppliers Creating good conditions for the supplier’s operations in the countries where human right is still not implemented properly. Building schools and preschools next to supplier’s factories to promote education, eradicate child labor in emerging nations
- 16. 16 Benefits: - cost reduction, global sourcing, social and economic, environmental benefits Adapted from: (Gronvius & Lernborg, 2009). IKEA’s Stakeholder Theory IKEA has well integrated social issues in its global business strategy which we can realise from its focus towards a citizenship strategy which is aligned with freeman’s stakeholder theory rather than on an altruistic strategy (shareholder’s perspective) (Gronvius & Lernborg, 2009). IKEA focuses on making life better for all its stakeholders which is achieved by applying the core values, strong vision and code of conduct (Banerjee, 2009). CSR Policy Towards Employees IKEA offers good salary, healthy and safe work environment to the co-workers, training and development opportunities, conducts surveys to collect feedback to know what motivates them and what they are dissatisfied with However, still there is a low awareness of CSR amongst the employees as the company follows a top-down approach as the top management decides about the local projects, the focus should be on bottom-up approach. IKEA is now appointing a contact person in every division who will educate employees at all levels (Gronvius & Lernborg, 2009). CSR Policy Towards Customers IKEA product meet Health and safety legislation and standards, IKEA use the co-creation process which empowers customers and delivers shared value and contributes to reducing GHG emission. “Brand Capital” and “Customer Satisfaction Index” (CSI) survey ensures the customer satisfaction issues are addressed regularly. This is consistent with the company’s requirements for legal, ethical and philanthropic responsibility. In the spirit of social contribution, by integrating sustainability, co-creation and CSR, IKEA is involved in unsustainable promotion such as ‘buy more for less’, ‘buy more give more’, ‘buy more recycled more’. For e.g. In the soft toy campaign – The more product sold, the more money is donated which results in excessive over consumption (Knudsen, et al., 2014).
- 17. 17 NGO Stakeholders IKEA is the major manufacturer of furniture so the major stakeholders are NGO’s and IKEA receives social responsibility knowledge and experience and also establishes its reputation of being green (Gronvius & Lernborg, 2009). IKEA is being transparent, regular reporting and disclosure to the stakeholders is being made. Some NGO stakeholders have criticised IKEA as passive and not indulging in dialogue, but from IKEA’s perspective, it is not feasible to involve in dialogue with all the stakeholders as the company only involves in projects which creates shared value (Gronvius & Lernborg, 2009). Limited partnerships help the company to select the right project and to actively participate. IKEA runs ‘IKEA Social Initiative’ within the IKEA group which regulates global partnerships and broadens the cooperation with the partner NGO’S to eradicate child labour, cotton and wood production, illegal logging and climate change project in emerging markets like China and India. (Please refer to appendix C for IKEA’s NGO stakeholders) CSR Policy Towards Suppliers IKEA’s strategic model is all about co-ordinating local networks to win control of the resources, which consists of 1500 suppliers in emerging nations. The rising deforestation has caused high pressure on IKEA from environmentalists (Gronvius & Lernborg, 2009). In 2000 IKEA established IWAY, a suppliers’ code of conduct. IWAY defines the IKEA’s minimum requirement related to working conditions, minimal wages and overtime pay, ban on child labor, prohibited discrimination and illegal logging. IKEA auditors make sure that the suppliers comply with IWAY standards (IKEAsupply, 2008). IKEA gives another chance to the suppliers if non-compliance is found by training them. There is still a lot of room for improvement as only 17% of the vendors in Asia are IWAY certified in comparison to 80% in developed countries. IKEA conducts unannounced audits because of the low number of certified suppliers in Asia (Gronvius & Lernborg, 2009). Mirvis and Googins IKEA’s CSR Stances Mirvis and Goggin’s has characterized CSR into various stances and common to all those stances are the reason and motivation for which companies involve in CSR. IKEA falls under
- 18. 18 ‘Enlighted self-interest’ and the ‘forum for stakeholder’s interaction’ stance as IKEA is generating profits as well as actively engaged in sustainability motives towards social, environment and community which strategically matches with its long term vision, dynamic capabilities, core competencies, resources and intellectual property. The management team is actively involved in taking various necessary actions to strengthen CSR policies and are ensuring good practices and meeting expectations of internal and external stakeholders and is also proactive in handling ethical pressures, but still there is a lot of gap to be filled, on which the IKEA is focused on (Sinha, et al., 2015). IKEA is now moving towards the ‘shaper of the society’ stance as societal desires of the company exceed beyond the shared value concept between the company and the society, so IKEA in the future should focus on creating value only for societal benefits (Sinha, et al., 2015). Figure 3: Mirvis and Googins IKEA’s CSR Stance position Strategic CSR Communication An international brand can differentiate itself by effective CSR communication to its audiences to gain legitimacy. IKEA used Stakeholder involvement strategy for communication with the stakeholders, which alone is not sufficient so now IKEA uses it along with the traditional PR activities. The company like IKEA, which is based on low costs has a high legitimacy need to show to the world that the low cost is not achieved by compromising environmental and societal safety (Kiefer, 2013). Moving towards stance 4IKEA position in stance2 and 3.
- 19. 19 IKEA needs to improve the communication towards customers, employees and suppliers as many of them are still in ‘I don’t know’ category. Internal and External Communication strategy needs to be improved with chemical and textile department. (Please Refer Appendix D for communication strategy towards customers and employees.) Reference Reference of Q1 Baraldi, E. (2008) ‘Strategy in Industrial Networks: Experiences from IKEA’, California Management Review, 50(4), 99-125. Boström,M., Gilek, M., Jönsson, A.M. and Karlsson, M. (2013) ‘ IKEA and the Responsible Governance of Supply Chains: IKEA’s work on chemicals in textiles’, Working Paper, No. 2013:1. Christopher, M. and Raynard, M. (2015) “Institutional Strategies in Emerging Markets.” Academy of Management Annals, 9(1), 291-335. IKEA (2015) ‘IKEA Dynamic list’, Dynamic list[online], available: http://www.IKEA.com/us/en/ts_dynamic/dynamiclist/filt_nel_glob?filter=-1[accessed 21 April 2016]. Inter IKEA (2015), Sustainability Report, Inter IKEA Systems, B.V. Koza, M.P. and Lewin, A. Y. ‘Managing Partnerships and Strategic Alliances’, Organisation Science, 9,3 (1998), 255-264. Tarun, K., Palepu, K.G., and Sinha, G. (2005) "Strategies That Fit Emerging Markets." Harvard Business Review, 83(6), 63-74. Velikova, SS & Alvarez, JL 2015, 'Network Perspective'. in M Jenkins, V Ambrosini & N Mowbray (eds), Advanced Strategic Management: A Multi-Perspective Approach. 3. edn, Palgrave Macmillan, New York, pp. 247-261. Reference of Q2 Banerjee, S. B., 2009. Corporate Social Responsibility: The Good, the Bad and the Ugly. s.l.:Edward Elgar Publishing. El-Hajj, N., 2008. Business Ethics and Corporate Social Responsiblity, s.l.: UNIVERSITY OF OSLO. Gronvius, P. & Lernborg, C. M., 2009. IKEA and CSR: Like Hand in Glove, Stockholm: Stockholm School of Economics.
- 20. 20 IKEA, 2014. People & Planet IKEA Group Sustainability for 2020, s.l.: IKEA. IKEA, 2015. IKEA GROUP FY15 Sustainability Report, s.l.: IKEA. IKEA, 2015. IKEA group sustainability report, s.l.: IKEA. IKEA, 2015. Social and Environmental Responsibility, s.l.: IKEA. IKEAgroup, 2016. Design for everyone, s.l.: IKEA. IKEAsupply, 2008. IWAY Standard, s.l.: IKEA Supply AG. Kiefer, A., 2013. From compliance to CSR as business strategy – the case of IKEA, s.l.: Embassy of Sweden. Knudsen, B. T., Refslund Christensen, D. & Blenker, P., 2014. Enterprising Initiatives in the Experience Economy: Transforming Social Worlds. s.l.:Routledge. PIEDADE, L. D. & THOMAS, A., 2006. THE CASE FOR CORPORATE RESPONSIBILITY: Arguement from the literature, s.l.: SA Journal of Human Resource Management. Sinha, M., Nandan, S. & Monica, N., 2015. Strategic Corporate Social Responsibility: A Perspective from India and China, s.l.: icainstitute. Smith, N. C., 2010. Global Challenges in Responsible Business, s.l.: Cambridge University Press. Thiengnoi, P., 2013. A COMPARATIVE ANALYSIS OF CSR strategy and Implementation and Outcomes, s.l.: s.n. ukessays, 2015. Overview of IKEA and Its Corporate Strategy, s.l.: ukessays. W. Timothy Coombs, S. J. H., 2011. Managing Corporate Social Responsibility: A Communication Approach. New York: John Wiley & Sons. Appendices Appendix A: Table 1: Criticism faced by IKEA 1981-1992 Product safety, environmental issues in Europe. 92-97 Child labor in Pakistan, India, Vietnam and Philippines. 98 Bad working conditions in IKEA supply chain. 98-99 Pressures from environmental groups related to child labor. 1999- Criticisms on the code of conduct applied in suppliers ‘factories (wages levels, freedom of association, work hours…) Adapted from: (Thiengnoi, 2013)
- 21. 21 Appendix B: CSR policy towards environmental and social issues Table 1: CSR policy towards environmental issues At Global Level Environmental Benefits Projects like “IKEA Goes Renewable” to reduce climate change, Forest Stewardship Council. With WWF supports projects for responsible forestry like ‘sow a seed’ in India and China. Sustainable cotton production by “Better Cotton Initiative” (BCI). Reduction of toxins and water usage required to produce the raw material. Benefits the farmers in providing training to improve crop production (ukessays, 2015). At Local Store Level Customer service division is responsible for CSR. CSR coordinator organizes CSR events. ‘Save energy weekend’ for promoting low energy lamps, bicycle riding. For e.g. In Singapore, a fee was levied on plastic bags to reduce the usage (Gronvius & Lernborg, 2009). Table 2: CSR policy towards social issues At Global Level IKEA franchises in different parts of the world in cooperation with “Save the children’ and UNICEF. IKEA’s division for social initiatives donates blankets, soft toys and various necessities ‘In-kind’ assistance. International projects are mainly concentrated in south Asia and are focused on women and children by providing education, microfinance, health checkups and vaccination, and nutrition (IKEA, 2014).
- 22. 22 At Local Level The Store manager is responsible for deciding the major local CSR issues. Local projects should focus on children, adolescents and the environment, according to the instructions from IKEA headquarters (IKEA, 2014). Adapted from: (Gronvius & Lernborg, 2009) Appendix C: NGO Stakeholders Table 1:Key partnerships BWI (Global Union Federation) Protects IKEA in wood, building and forest industries. Helps improve CSR in emerging markets (IKEAsupply, 2008). BSR (A non-profit) Helps in gaining progress by respecting community, society, ethics and the environment. Provides tools, training and consulting services. Improves CSR in emerging markets (IKEAsupply, 2008). Adapted from: (IKEAsupply, 2008). Table 2: IKEA’s official NGO stakeholders and partners Adapted from: (Gronvius & Lernborg, 2009)
- 23. 23 Appendix D: Table 1: CSR communication Methods and advantages Communication to Customers Communication Methods Issues Perceived as not a very proactive organization when it comes to communicating CSR activities. There is a general feeling by customer of not being informed on IKEA ‘s CSR policies. Generally, there is a positive perception regarding IKEA ‘s CSR policies and commitments among consumers, and has no influence on buying behavior of customers. Clear communication to customers improves brand image Increases competitive advantage Advertising, IKEA Family Club, magazines, IKEA catalogue, stores, product range and low prices, website, blogs. Customer feedback on individual products I documented to take immediate actions. For e.g. Replaced Doors of the frame cupboards with the honeycomb fiber,which is a strong material and uses 40% less material and reduces the production cost, reducing the price for customers and give value proposition to the customer. Communication to Employees Communication Method Creates a positive workplace environment Increases functioning by reducing redundancy Leads to effective co-ordination of various projects across subsidiaries Meeting and Intranet, in-store magazines, e-learning projects, auto- communication method. Adapted from: (Gronvius & Lernborg, 2009)
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