Describe about the Corporate Social Responsibility for Multinational Conglomerate Corporation.
IKEA is a multinational conglomerate that was incorporated almost seventy years ago that specializes in designing and selling of ready to assemble household furnishing like beds, sofas, desks and chairs, home appliances and accessories. It is the leading furniture retailer in the world as on 2008. The company was founded almost seventy years ago by Ingvar Kamprad in Elmtaryd and Agunnaryd, Sweden. The company is recognized for its innovative designs for different types of furniture and home appliances. The company also specializes in interior design that emphasizes more on environment-friendly simplicity (ikea.com 2016).
IKEA is actively involved in social welfare activities through its foundation IKEA Social Initiative which was established in 2005 with an objective to serve social issues on a global scale. Some of its key partners are “Save the Children” and UNICEF. Through this foundation, the company contributes 1 euro for each of its soft toys sold. It provided soft toys to the children during Cyclone Nargis, in Burma (UNICEF 2016).
IKEA has taken proactive measures towards environmental issues by reducing the usage of formaldehyde in the products. In 2000, the company introduced set of regulations for the suppliers, named IWAY which covers safety, social and ecological issues. Stores run by the company emphasize on recycling of waste and several stores run on sustainable energy by using power saving bulbs. The company also worked for the well-being of refugees in Africa, Asia and the Middle East (ikeafoundation.org. (2016).
Following SWOT analysis will demonstrate some of the internal and external factors that have an effect on the decision making of IKEA and contribute towards its process of strategic planning.
Strengths
It is a leading global brand that attracts important consumer groups. It ensures maintenance of its quality and standard of its products throughout the world.
IKEA has established a concept of autonomous design that entails accomplishing an appealing form, function, quality, and sustainability at an economical price. The company aims to incorporate this concept throughout its entire product portfolio. Steadily growing proceeds of the company is the sign of the success of such endeavors (Chen Yang and Zhang 2013).
The present leadership spot of the company offers considerable barriers to entry for new competitors and gains in terms of economies of scale.
Due to its strong financial position, the corporation has been able to invest considerable amount into research and development in reinforcing its presence globally.
The company has a weak market presence in the Asian markets like India and China which could adversely affect the financial performance of the company.
Due to its huge size of operations of its global business, it becomes difficult for the company to maintain the standard and quality of its products.
The company primarily emphasizes on price leadership due to which, sometimes the product quality is compromised owing to the increasing cost of raw materials which directly impacts the turnover of the business.
The company confronts challenges in communicating and expressing its environmental guidelines to its investors, stakeholders, and customers (Tiwari 2015).
With growing awareness of consumers towards greener products, the company has ample opportunities of attracting consumers through its implementation of the green model.
The company has an immense opportunity for growth in the developing economies like India and China where there is a huge demand for high-quality products at low cost. This would help the company in expanding its business and tap the unexploited customer base.
Due to the growing concern over global warming, the company has the opportunity of reducing its carbon footprint through reducing the use of hazardous chemicals throughout all its processes (Wenzel and Förster 2013).
IKEA faces stiff competition from bigger portfolio dealers like Wal-Mart and Tesco. For example, Tesco sells not just groceries but mobile phones and television sets as well. So it’s just matter of time before it diversifies its business into the furniture segment as well.
Like any multinational conglomerate, the company suffers setbacks due to the global economic conditions as well the prevailing economic conditions of the countries in which they operate (Harapiak 2013).
The economical pricing model and the designs of the products are often imitated by the small scale and local competitors that possess a serious threat to the profitability of the company as the consumers are getting attractive products at a far more reasonable price.
The incorporation of a sustainability plan generates numerous benefits to an organization. By incorporating ecological strategies, the company can boost its brand image on a global level. Further, the implementation of sustainable business strategies may lead to improved productivity and reduction in costs. Switching to renewable energy resources will reduce the overall electrical cost of the company in the long run ((Sebhatu and Enquist 2014)
Sustainable and eco-friendly business practices make an organization more profitable since the consumers have become more conscious towards the environment, and thus making requisite progress will help the company in strengthening its goodwill and reputation. Implementing sustainable strategies may help the company enjoy various tax rebates and subsidies from the government. Sustainable development is a collaborative endeavor. When an organization works towards educating its employees the significance of sustainable initiatives, it initiates a culture of constant improvement and teamwork which can further stir up innovation. Apart from reduction of cost and increasing the profitability of the organization, sustainable initiatives help in reducing its carbon imprints and usage of hazardous chemical and its release into the atmosphere which ultimately benefits the society on a whole (Campus and Jha 2014)
Despite the fact that the incorporation of such plan offers several benefits to the organization, it also creates lots of drawbacks as the execution of such plans leads to growth in the complexity. Execution of a number of irrelevant plans forces to change various functions and process and re-engineer them, which hamper the growth rate of the organization and can further affect the financial performance of the business. The proposed plans demand extensive planning and investigation which involves additional cost and requires precise time management. Sustainable incorporation comprises definite focus and reallocation of activities and executing all of them simultaneously can be burdensome for the organization (Balassa 2013).
Corporate Social Responsibility focuses on establishing business values in the process of promoting affirmative social change is grasping a lot of consideration these days due to good reason. It should be practiced not just because it’s a right thing to do, but due to the fact that it has a key impact on the end results of the business. Sustainable corporations intend to create a balance between the needs of the current generation and the needs of the forthcoming generations with a primary focus on the utilization of all the resources that are naturally available for sustaining of business and society as a whole (Chandler and Werther 2013).
According to Department of the Environment, Government of Australia, sustainability relates to the reduction of environmental imprints while concurrently developing the condition of life that all values. Development of knowledge with respect to sustainability is current as well as future-oriented (environment.gov.au 2016).
In order to create a sustainable plan for the organization, the activities need to be identified, the primary objective for the sustainable plan needs to be determined to generate some exceptional results. Firstly, the organization needs to evaluate the ecological impacts and the legal constraints to establish appropriate aims and objectives. Furthermore, the specific plan should be implemented and the methods to achieve the objectives need to be determined. Moreover, organizations are required to take into consideration the key result areas and monitor the performance of each area and identify the areas of improvement and lastly, the plan should be modified consistently to identify the progress of the plan (MacDonald 2016).
Investment in Research and Development on Orthopedic Solutions
Objective: Caring, Promoting, and Recondition Individual Health
The employees who work on a daily basis are engaged in picking up and carrying furniture that are too heavy, which may lead to many severe health issues like a backache, problems with ligament and tendons, soft tissues or nerves, muscle pull and many life threatening risks. Many times, customers often complain about the excessive weight of the furniture and inappropriate designs of certain furniture like desks or chairs. Therefore, the company aims to bring some advanced orthopedic solutions that would help both the employees as well as the customers on a whole by partnering with some major orthopedic solution providers to develop their product ergonomics which would help in improving the promoting and reconditioning the health of people and overall improvement of their quality of life. Further, this would help the company is improving the company’s brand image (Marchi Maria and Micelli 2013).
Strategy: Concentrating on identification of key areas of improvement
Tactics:
The company aims to reduce the workload by the risk assessment of the material handling techniques used by employees that cause severe back ache and sometimes devastating injuries and thereby introduce automated material handling system that would reduce the physical stress on employees.
Advanced products design strategies that would fit the ergonomic needs of the consumers as well as employees, thereby conveying a message to a greater mass that the company always makes a constant effort towards caring, promoting and reconditioning health of everyone in the society.
Costing: Human capital is the most critical resource that enhances the performance of the organization on a whole; the company should invest more in well-being of its employees and its consumers as well and therefore it should allocate roughly 30 per cent of its environmental budget for the betterment of its employees and advanced research and development of orthopedic solutions.
Objective: Solid Waste Recycling
Strategy: Drawing the attention of customers towards the importance of recycling and associated benefits and encourage them to be a part of the change in helping reduce carbon footprints.
Tactics:
By introducing “Recycling Reward Program”, the company aims to encourage its customers and suppliers to give away its old furniture and woods to IKEA, instead of disposing them on the roads. Through this reward program, the company is taking a step further in helping people to buy new furniture by giving discount vouchers for their next purchase in return of their old furniture, or they may receive reimbursement for the cost of transporting their old furniture to the nearest IKEA store. This would help the company to take their initiative of recycling further to create benefit for the society on a whole and improve company’s brand image (Fragouli 2016).
Costing: IKEA should invest nearly 20 per cent of its environment budget towards the recycling process as it would involve reimbursement of transportation cost to the customers and discount vouchers for next purchase. It would further require funds for the disintegration of furniture and reprocess it.
Objective: The main objective towards investment in creating energy using ocean force is to create sustainable and renewable energy source to become fully independent and focus towards the greener environment.
Strategy: IKEA is looking multiple opportunities of investment the ocean wave energy generation segment.
Tactics:
By setting up windmills placed in-stream to generate the flow of ocean water. Ideal locations would be islands and peninsulas where there are greater chances of generating tidal energy. It is also aiming to set up barrages near the bays and estuaries which use the ascent and descent of oceanic tides to generate electricity.
The company can also invest in salinity gradient techniques which derive energy from osmosis when a natural stream is formed linking fresh water and sea water to pass through a turbine. Such technologies are quite popular in European countries (Jungo 2016).
Costing: The company should invest nearly 30 percent of its environmental budget in setting up projects for ocean force energy generation.
Objective: To conceive an enhanced everyday life for the less deserving people
Strategies: Through IKEA Foundation and IKEA Social Initiative, it aims to encourage several developed nations, business leaders and inter-government organizations to come forward in support of the company towards rehabilitation of the people who are affected by natural disaster in Haiti, Japan, China or stuck in war zones like Syria, Iraq, Somalia, and Afghanistan.
Tactics:
To increase their funding towards the relief efforts by the concerned government authorities in Syria and Iraq.
To work with multi-government bodies like European Union, UNICEF, WHO, BRICS in assisting the concerned government authorities with monetary and technical support for rehabilitation of the people affected in Syria and Somalia due to civil unrest and terrorist activities and offer the better education to the children and better accommodation to the people.
Partner with United Nation Development Program for training the local groups and government agencies in disaster relief activities in earthquake-prone countries like Japan, Haiti, Philippines, Indonesia, Mexico, and Nepal (unhcr.org 2016).
Partnering with government bodies in flood-prone countries like India, Bangladesh, India and China in speeding up the evacuation efforts by the particular countries.
Costing: The company should invest 30 percent of its total environment budget in its efforts towards rehabilitation and relief programs around the world for children’s education, medical supplies, food and accommodation, training and education in the affected areas.
In order to achieve such strategies and make those strategies practical, the company may consider the possibility of going public by the way of initial public offerings in order to raise funds to increase their funding towards environmental efforts. In this manner, the company would be able to continue its ethical practices and improve its reputation. Further, it will help the company to create awareness among the people towards the social and environmental issues the world is facing at present and thus the plan would benefit the communities with exceptional needs, the planet, and society, in general, will get a benefit.
As per the 2015 Sustainability Report of IKEA which is termed as “People and Planet Positive Strategy”, following are some of its strategies currently followed by the company.
Sustainable Living at Home: The company has both opportunity and responsibility towards its loyal set of customers. The company aims to take the command in building and marketing of its products and solutions which would inspire and allow people to live more feasible living at home and accomplish more than four times increase in its sales (com 2016).
Resource and Energy Independence
Responsible Sourcing: By the end, August 2015, the cotton consumed in the products of IKEA are being sourced from more feasible sources and the company consistently engages in inspecting alternative fiber with greater feasibility performance when to compare with cotton.
Sustainable Functions: By the end of August 2015, the company has recycled more than 80 percent of their wastes, recycled their materials at stores by almost 70 percent and more than 80 percent at their distribution centers (com 2016).
Improved Life for People and Community
Better Lives of Employees: The company believes in treating everyone impartially and provide equal opportunities to all its employees irrespective of gender, age, culture, race, ethnicity, country of origin or any other aspect and that is why the company created IKEA LGBT Project to coin a plan for supporting the lesbian, gay, bisexual and transgender community (com 2016).
Supporting Human Rights: In 2015, the company began a project in collaboration with International Organization for Migration to gain knowledge about the procedures and risks involved in employing migrant workers in South East Asia with an objective to develop action strategies and targets for supporting fair employment all through the supply chain process (com 2016).
Conclusion
The following sustainability report recommends certain projects which can be undertaken by IKEA for reducing its carbon footprint and environmental impacts. Each milestone emphasizes on the diverse range of environmental issues wherein the company is involved. Implementing such strategies in their day to day process would help in improving their end results. Every project undertaken by the company is exceptional and different in terms of focus. This sustainability report would help the company in enhancing their brand image and brand awareness and will help the company in gaining a competitive advantage over its competitors.
References
Balassa, B., 2013. The Theory of Economic Integration (Routledge Revivals). Routledge.
Campus, P. and Jha, P., 2014. Sustainable competitive advantages through strategic integration of HRM with Business strategies.
Chandler, D., and Werther Jr, W.B., 2013. Strategic corporate social responsibility: Stakeholders, globalization, and sustainable value creation. Sage Publications.
Chen, X., Yang, L. and Zhang, J., 2013. The Future of IKEA: watch your expansion steps.
environment.gov.au. (2016). system/files/resources/9b2e74ca-c909-4d57-bae3-c515c20957de/files/curriculum-framework.pdf. [online] Available at: https://www.environment.gov.au/system/files/resources/9b2e74ca-c909-4d57-bae3-c515c20957de/files/curriculum-framework.pdf [Accessed 6 Oct. 2016].
Fragouli, E. (2016). RETAIL COMMERCE & BIG RETAIL CHAINS IN GREECE: THE CASE OF DIY (DO IT YOURSELF) SECTOR AND THE EXAMPLE OF” IKEA”. International Journal of Information, Business and Management, 8(2), 259.
Harapiak, C., 2013. IKEA’s International Expansion.
ikea.com. (2016). ms/en_CA/this-is-ikea/about-the-ikea-group/index.html. [online] Available at: https://www.ikea.com/ms/en_CA/this-is-ikea/about-the-ikea-group/index.html [Accessed 6 Oct. 2016].
ikea.com. (2016). ms/en_US/img/ad_content/2015_IKEA_sustainability_report.pdf. [online] Available at: https://www.ikea.com/ms/en_US/img/ad_content/2015_IKEA_sustainability_report.pdf [Accessed 8 Oct. 2016].
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ikeafoundation.org. (2016). pressrelease/ikea-foundation-gives-grants-worth-e9-4-million-medecins-sans-frontieres-msf-save-children-help-children-families-caught-syria-conflict/. [online] Available at: https://www.ikeafoundation.org/pressrelease/ikea-foundation-gives-grants-worth-e9-4-million-medecins-sans-frontieres-msf-save-children-help-children-families-caught-syria-conflict/ [Accessed 6 Oct. 2016].
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Jungo, M., 2016. Utopia or reality? Part 2. MHD Supply Chain Solutions,46(2), p.54.
MacDonald, A., 2016. Multi-Stakeholder Partnerships for Community Sustainability Plan Implementation: Understanding Structures and Outcomes at the Partner and Partnership Levels.
Marchi, V.D., Maria, E.D. and Micelli, S., 2013. Environmental strategies, upgrading and competitive advantage in global value chains. Business strategy and the environment, 22(1), pp.62-72.
Sebhatu, S.P., and Enquist, B., 2014. Are Corporate Governance and Corporate Social Responsibility having a role for sustainable Service Business?: An explorative study of IKEA, Starbucks, and H& M. In The 17th QMOD conference, September 3-5, Prague Tjeckien.
Tiwari, S., 2015. Standardized marketing strategies: a solution to the global competition? A case study of IKEA in Norway, Sweden, France and China.
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Wenzel, H. and Förster, A., 2013. Blue Ocean Strategy. How IKEA created a new market.
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