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IKEA's CSR Journey

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by

Hild Strømme

on 29 October 2013

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Transcript of IKEA's CSR Journey

What to do?
What strategy would you recommend Ikea to pursue in dealing with the child labor issue?

- Dealing with it directly and its own suppliers

- Leaving control to Rugmark

- Withdraw from contract?
IKEA's CSR Journey
Stage of Ethical Development


"... our willingness to assume responsibility and to help,..."
open-plan office landscape
"anti bureaucrat week"
"Waste of resources is a mortal sin at IKEA".



Strategy Tripod
Proactive Strategy
- Firm focus on engagement in CSR
- Anticipate responsibility
- In CSR perspective, the best firms; - The star companies!
Accommodative Strategy
- Accommodate CSR considerations into their decision making processes
- Formal regulations AND informal social and environmental pressure
- Motive behind

Defensive Strategy
- Firm admits, but fights it
- Focus on regulatory compliance
Reactive Strategy
- Passive about CSR
- Deny if anything arise
So which one applies for IKEA before the -94 child labor crisis...?
Plan for addressing Environmental concerns
- Cooperate with WWF and Greenpeace
- Start using the standards set by the Forest Stewardship Council
- Appoint forest managers to carry our random checks
Adapting the product range
Working with suppliers
Transport and Distribution
Ensuring environmentally conscious stores
The Triple Bottom Line
“pursue a more balanced set consisting of economic, social, and environmental performance, by simultaneously satisfying the demands of all stakeholder groups" (Peng, 2012)
Economic perspective
Social perspective
strengths
competitors and cartels --> complications
"Creating a better life"
"The IKEA spirit"
IKEA foundation (change after 1994)
vulnerable to public attacks by media (1994: Child labour)
not enough control of suppliers; introduction of additional clauses not successful
Environmental perspective
strengths
"flat packs"
main areas: Climate; Forest; Cotton; Water; Waste
regulations
vulnerable to public attacks by authorities (1980s: Glue)
weaknesses
weaknesses
Ingvar Kamprad
Ikea's "business model"
Ikea's business model
display stores - inspect products before buying
large suburban stores

flat packaging

catalogues
"We use a catalog to tempt people to visit an exhibition, which today is our store"
"creating a better life for the many people"
"a wide range of home furnishing items ...at prices so low that the majority of people can afford to buy them"
Suppliers
- contracted factories in Poland
- do not own but support
technology transfer
supply contracts
loans
help &
knowledge
low cost
production
Main principles
simplicity + attention to details
constant will to renew
cost-consciousness
willingness to assume responsibility
Resource-based view
Institution-based view
- Label certifying and supervision led by bigger institutions

- Franchise-system

- Good relationship with governments
The child labor crisis
• In 1994 Ikea was named in a film showing child work ---->media spread the work causing a wave of critics inside and outside of Ikea
1. Ikea apologized and promised to do something about it
2. Asked International Labour Organization for help
3. Ikea found third-party company to find information about child labor and to audit Ikea's suppliers for child labor

Consequences
• Indian government passed laws for child labor protection but those were not enforced sufficiently
• Rugmark, a label to be put on carpets certifying that they were made without child labor (background are NGOs, manufacturer, retailer and importers)
• Rugmark foundation supervises the use of the label


BUT: In 1995, Rangan exports, one of Ikea's major suppliers is involved in child labor
Growth in number of stores, revenue and employees
self-financed expansion strategy by previous success
strengths:
weaknesses:
Industry-Based View
External Opportunties and Threats
External Threats
- Rising energy and material costs
External Opportunities
- Tendency in smart home energy management

- Standardizing processes

Strategy Tripod
Physical: More than 313 stores
and more than 30 stores
franchised

Financial: Cost consciousness
Economize with resources

HRM: Skilled staff/motivation
based on reward system
Applicable working
schedules

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