Corporate Social Responsibility of IKEA Company - Case Study Example

CORPORATE SOCIAL RESPONSIBILITY OF IKEA COMPANY Corporate Social Responsibility of IKEA Company The idea of being socially responsible as an organization is the trend of the day or a necessity in doing business in the contemporary business world. With the rise of the ideologies such as sustainable growth and world business citizenship, increasing pressure and demands by different stakeholders together help in explaining the major role of social corporate responsibility in the past ten years. As consumers continue to abide by specific ethical principles or rather a given cause, they look for germane data on different companies, their services and products, inclusive of the social, employee and environmental concerns (Porter and Kramer, 2006: p. 47). Consumption rate is expressed in terms of preference to the products and services and the way customers feel and perceive they can associate with the values of the organization or its cause. Pressure to be the best corporate citizen also emerges from the business consumers who buy the components as well as raw materials from the dealers and desire them to act in an ethically acceptable way and environmentally sound manner. This study analyses the case of IKEA’s corporate social responsibility initiatives, devotions and communications and relation to various stakeholders in the Soviet Union. IKEA as a company provides an amazingly rich case for analyzing CSR. IKEA is the biggest global firm dealing in furniture retail chains. The company has enjoyed the privilege of high profile marketing achievements. The retail turnover of the organization has risen up by about 400% in the past ten years (Porter and Kramer, 2006; p. 57). The business model of the firm is based on the concept of getting the control over tactical resources especially via logistical management of a network that consists of 1,500 dealers in 50 emerging and developing nations. The dealers assume the mediators and supply the materials straight to IKEA, which reduces the costs associated with retailers to enable the company to provide low cost furniture to the consumers. Nonetheless, the seeming elimination of the globe’s natural forest has led to a piling pressure on IKEA from various advocates of environment and its global outlook which has made it a spotlight of protesters of anti-globalization. Hence IKEA has included concerns of sustainability, in particular the CSR principles (Economist, 2005: p. 13). With approximately 298 retail stores in about 26 country outlets and 139, 000 employees across the globe, IKEA Group has continued to grow its services in wood sourcing, value chain sales to over 700 million customers. The material use by IKEA has a considerable influence on the resources of the planet where 0.7% of the planet’s total wood is consumed commercially (Burke, Martin & Cooper, 2011: p. 67). Approximately 0.8% of cotton and vast amounts of palm oil, food products and leather are sold in the company’s store restaurants. Currently, the company has refocused its sustainability issues in the form of global and people positive plans for 2020. The strategies target driving a safe life on Planet earth, achieving energy autonomous and a better life for the communities and its people (Crane & Matten, 2007: p. 39). Like most companies in the world, IKEA want to be in Russia. The market is growing and probably extensively profitable market. Nonetheless, the cost of doing business is high or rather accepting because of the widespread corruption. IKEA has been active in opening new stores in Russia which have been widely received. According to various stories, IKEA has shunned the practice of seeking bribes or giving bribes every time it has to open up a new utility firm in the company. For this IKEA is proud and responsible company. In particular, acquisition of generators is normally at very high costs hence there are those who seek bribes to offer various businesses a big surplus but IKEA has managed to acquire generators without giving bribes. IKEA also succeeded in a case where a contractor was accused and sued for infringement of contract; the court found the company not guilty of the offense (Worthington & Britton, 2009; p. 11). These are some of the illustrations that have left most individuals wondering how IKEA has managed to navigate through given that everyone has accepted this as a normal way of doing business in Russia. Many people are of the opinion that IKEA should stand its grounds. Moreover, the rest of the business gaining entry into Russia is encouraged to deal with such challenges in the same way as IKEA. Every firm operating in Russia has to issue a CSR report of how it has managed to resist the temptation of giving bribes (Burke, Martin & Cooper, 2011: p. 73). This is because everyone expects every company to be asked bribes to receive any given favor or services. Other companies that have followed step in saying no bribes is Tata Group of companies which has demonstrated much prowess in standing to its ground and growing to greater heights within a community that is addicted to bribery while saying no to bribe taking. The notion that is well cemented among the citizens of Russia “bribery is inevitable” can now be resisted by some companies in an effort to promoting CSR. IKEA believes that when doing business in Russia, even if it has to suffer, even if the courts have to revenge by punishing one for not taking bribes because they do take bribes, it has to stand its grounds (Brink, 2011: p. 12). The management of the company believes that the prevalence of bribe taking as well as any other form of corruption is very corrosive to any sound economy. The NGOs can act as whistle blowers for negative corporate behaviors in some industries, so that the firm can deal with corruption when they experience it. Even the competitors of the company have continued to benefit in the short term for many years the company has continued to grow surpassing them in expansion and growth index. In many cases a community full of corruption performs poorly as many individuals become lazier. This is because the performance credit can be purchased as opposed to being earned (Crane, 2008; p. 41). Therefore this still presents an honest company with a competitive edge even though the company takes more courage and shows the way things must be done by setting the pace of honest business dealings. Even though IKEA’s major aim has been for many years being cost effective the firm has added to its objectives an aspect of altruism such that its guiding ideology is to establish a better daily life for most individuals. At the same time the company has an objective to provide an extensive range of home furniture and furnishings with better design and uses at prices so low that most customers will find them very affordable. Besides the company’s ambitions is to take into account and incorporate environmental and social environmental issues into its routine operations hence manufacturing items that have least impact on the environment as well as make them in a socially dependable manner. These are some of the CSR principles of the company which IKEA aims to position for itself, draw from the current standards and institutional association which common in most of Scandinavian countries that naturally seem to perceive that ethical principles, economics and politics are components of virtuous ring. Hence the company believes it has the ability to reduce or minimize the antagonism between the profit functions and CSR through the virtuous circle (West, Ford & Ibrahim, 2010: p. 93). Due to pressure from the external bodies, IKEA has also incorporated CSR objectives more categorically into the company’s management culture and business functions. For instance, the company made a decision to take on a response to social claims from communal regulators such as trade unions, NGOs and media. It has also been noted that the company response more fast when its reputation is at stake. For instance, at the start of 1980s, there were claims of highly toxic substances which were detected in the particleboards distributed in Denmark (Rendtorff, 2009: p. 23). The same year the management of the company created an extensive testing and verification of its goods and initiated a new provision for its suppliers and dealers. Based on the achievement of the company in reaction to external outcry, the company has been labeled as "Teflon Company". CSR Communication From the analysis of the company, it has been established that its advertisement through the media to the public shows that the company rarely makes inclusions of straight reference to its commitment to CSR. The company does not include its CSR nine key values that the company passes to the consumers which include; the company’s wide product range, IKEA concept, low price, home furnishing expert, precise quality, function, a day out for the entire family and Swedish. On the contrary the company emphasizes on the environment and family as well as its roots in Sweden which solidifies its origin and commitments (Horrigan, 2010: p. 59). From this case study it is evident that there is some key connotation for the IKEA Company and other firms interested in the CSR principles. The efficient power of the stakeholders in the creation of CSR process and the modifications of their goals and visions as far as CSR activities are concerned as well as communication must force researchers and economists to assess the issues of developing CSR values. This will help in conducting thorough analyses in a more extensive way compared to the current initiatives. The critical duty of the different perceptions of stakeholders on issues of transparency, credibility of data and information on the company’s initiatives on CSR must be the major point for efforts of research. The identification of the various contribution of IKEA Company to CSR efforts offers an exceptional view on significance contribution of the company in Russia and other Soviet Union nations. Bibliography Brink, A. (2011). Corporate governance and business ethics. Dordrecht: Springer Verlag. Burke, R. J., Martin, G., & Cooper, C. L. (2011). Corporate reputation: Managing opportunities and threats. Farnham, Surrey: Gower. Crane, A. (2008). The Oxford handbook of corporate social responsibility. Oxford: Oxford University Press. Crane, A., & Matten, D. (2007). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford [u.a.: Oxford Univ. Press. Economist. (2005). The good company: A survey of corporate social responsibility. London: The Economist. Horrigan, B. (2010). Corporate social responsibility in the 21st century: Debates, models and practices across government, law and business. Cheltenham, U.K: Edward Elgar. Porter M.E. and M. Kramer. 2006. Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility, Harvard Business Review, December, 2-15 Rendtorff, J. D. (2009). Responsibility, ethics, and legitimacy of corporations. Frederiksberg, Denmark: Copenhagen Business School Press. West, D. C., Ford, J. B., & Ibrahim, E. (2010). Strategic marketing: Creating competitive advantage. Oxford: Oxford University Press. Worthington, I., & Britton, C. (2009). The business environment. Harlow, England: FT Prentice Hall. Read More