Social sustainability - Assignment Example

? Report Table of Contents Executive Summary 3 Introduction 3 Social Sustainability 5 Economical Sustainability 6 Porter’s Five Force Model 6 Environmental Sustainability 9 Offsetting and Carbon Neutral 12 IKEA Strategy 13 SWOT Analysis 13 Findings 16 IKEA Stakeholders 18 Recommendations 19 Conclusion 20 References 22 Appendixes 24 Executive Summary The leading organizations around the globe are trying to capitalize on the advantages that have been created due to globalization. The global market has become much more competitive after the Second World War. All the leading organizations have implemented advanced technology, strategic tools in their business process (Lancaster and Withey, 2012, p.38). Now-a-days people are much more concern about the quality of products as they have several options and substitutes for a product. In terms of organization, several firms are trying to bring sustainability in the business by focusing on the social, economic and environment sustainability as these will increase the brand reputation in this global competitive market (Bidgoli, 2006, p.173). The study is all about the analysis and evaluation of the social, economic and environment sustainability of leading home furniture retail IKEA. The organization has promoted and planned several sustainability projects and programmes in order to improve the situation of global economy, community and environment. The study will reveal all the hidden aspects thoroughly. Introduction Sustainability can be defined as fulfilling needs without compromising the capability of the fulfilling of needs of future generation (Moore, 2010, p.20). It improves the quality of life. There are certain aspects that should be contained, such as social, economic and environmental. In the business practices it is known as 3BL or Triple Bottom Line. Sustainable business can be defined as an enterprise who has limited negative impact on local or global environment, society, community or economy. Habitually sustainable business firms have progressive human rights and environmental policies. Generally the business can be determined as green business when that enterprise fulfils the following criteria. It manufactures and supplies environment friendly goods and services and the enterprise is greener comparing to the traditional competition. It has made commitment to the environment policies in the business operations. It includes sustainability principles into business decisions. Any enterprise that practices green and environment friendly activities in order to ensure all the processes and manufacturing activities are current environmental concerned can be termed as sustainable business. IKEA is a leading global home furnishing retailer. The growth story of the organization since 1943 is very much eventful and effectual. Presently the organization is leading the global market place and the organization is popular for its Scandinavian style. Major of the furniture of IKEA are flat-pack and prepared to be assembled by the buyers. The organization carries almost a range of more than 9,500 products. Online purchasing facilities have increased the core competency of IKEA. Till date there are 20 IKEA stores in UK (Boone and Kurtz, 2009, p.219). The study will determine the actions and strategies of IKEA towards social, economical and environmental sustainability. Moreover, the study will highlight the Green House Gas Management Programme of IKEA. After evaluation, the study will draw the findings and will provide some recommendation plan. Finally the study will articulate a brief and clear conclusion. Social Sustainability The aim and objective of IKEA states that they want to provide better life for the community and people through the business practices. Moreover, the organization always focuses on establishing healthy and better place to work for the employees and the suppliers. Supporting children and vulnerable communities and commitment to supporting human rights is a path of promoting social sustainability through the business. Suppliers The organization has expanded their partnership and collaboration with the other suppliers in order to positively sustain the people and planet. The organization has estimated that by the end of financial year 2015, suppliers of IKEA may obey the code of conduct of the organization. Moreover, it is estimated that almost 95% suppliers of the organization will take the responsibility of environment and social sustainability by the end of 2015. People and Employee The employees of IKEA believe that they are the part of prestigious organization. Moreover, IKEA always give value to the women employees as according to sustainability report of 2012, 47% of the managers are the women employees. The organization always takes care of their employees as IKEA believe that the employees are the strongest asset of an organization (Abbing, E., 2010, p.9). Moreover, they always ensure that, whatever business objectives and aims they set up cannot be achieved without effective employee retention and employee satisfaction. In terms of customers and community, the organization has always tried to provide greener or eco-friendly product. As it is evidenced that day by day the environment of whole world is getting more polluted, therefore, the organization from the starting days has implemented several strategies and recently they have implemented green strategy in order to bring sustainability in the society, environment and economy (Figure 1). Economical Sustainability IKEA have appreciably concerned about the future generation situation. They should have similar potential and significant opportunities as the present generation have. This is also concern about the growth of the organization, maximum revenue generation and profit maximization. Generally, the market structure beside of the strategy of organization decides the economic stability of the business. Global furniture retail industry is very much potential as well as competitive. In order to determine the external opportunity and threat factors for IKEA, Porter’s Five Force Analysis Model has outlined below. Porter’s Five Force Model Michael Porter has introduced an effective marketing strategy in order to evaluate the organization performance in terms of organization’s competitive advantages, supplier-buyer control and threats pretended by the new entrants can be defined as porter’s five force model (Figure 2). Industry Rivalry IKEA has to face competition within the retail furniture industry from Galiform, Wal-Mart, Ashley Furniture, Homebase and John Lewis. The brand popularity and trust in the mind of customers about the quality of furniture, attractive popular design and brand effectiveness has provided IKEA a competitive edge. Immerging market has made IKEA to diversify their business into textile and food industry. The food industry of IKEA is being ruled by the supermarket giants Tesco, Sainsbury and H&M. Achieving market share among these established organization is a big challenge. The organization has also entered in mobile service industry. They used to offer flexible and low price mobile service for the customers. Global mobile sector is very much competitive with Vodafone, Virgin and O2 used to offer unlimited free minutes for the contract period. Therefore, it is feasible that IKEA has to face huge competition from its competitors in these specific industries. Bargaining Power of Suppliers The suppliers of IKEA do not possess considerable bargaining power because there are various factories around the globe with the resources and capabilities to shape partnership with IKEA. At the same point of time IKEA implement the strategy of long-term strategic forming relationships with the suppliers. IKEA is a strong brand name around the globe. Suppliers tend to achieve more by coming into the relationship with IKEA. Looking into these factors it can be state that the suppliers have limited bargaining power over IKEA. Bargaining Power of Buyers There are several potential competitors of IKEA within the retail industry. Therefore there are various options and substitute for the buyers to consume products. The customers consume product basis on service, design and price. Current economic recession has hugely impacted on the industries as well as the purchasing power of buyers. The recession has forced the retailers like IKEA to implement competitive pricing strategy in order to attract people and to sustain in this difficult economic situation. Threat of New Entrants IKEA has to face limited threat from the new entrants. IKEA is one of the leading organizations within the global industry. Huge customer loyalty and several implementations of green strategies have increased the brand reputation of IKEA. People of low and medium income level always stick with IKEA due to the cost effectiveness. The organization has a huge market presence over Asia, UK, Australia and US. It is impossible for the new entrants to pretend threat to a well-establish organization. Moreover, the new entrants have to face several legal and environmental barriers in order to enter in this industry. Threat of Substitutes There are several substitutes of home furnishing industry, such as, Wickes, Homebase, B&Q and John Lewis. However, the people of medium and low income level always stick with IKEA due to cost effectiveness. Several critics and buyers have criticised the organization for inadequate customer service, guarantee of products, limited variety and stock ability. Therefore, major of the target customers have shifted towards other brands due to these reasons. All-in-one-shop strategy of IKEA is very much effective. It reduces time and burden of customers. This concept is not available in the substitute retail houses like DFS, Wickes and B&Q. Here, the customers just have to enter in the outlet, order the products and purchase completely innovative and designed in-house furniture. After analysing all the aspects it is feasible that threat of substitute is moderate for IKEA. Environmental Sustainability Here the environmental sustainability has been has been described by the following aspects of GHG Management. GHG Management; Risk and Opportunities The organization is hiring new managers in order to train the employees about the sustainability of business. It can negatively impact as the economic situation is not favourable for the organization. Moreover, IKEA used to spend huge cost for the purpose of the salary of employees as it might affects the organization during another economic recession. There are several opportunities of these strategies as it develops the skills of employees. Moreover, it boosts the motivation and performance level of employees. Goal of GHG Management The organization has also committed that they will implement new ideas in order to reduce the emission level in the supply chain. IKEA is trying to implement a pilot programme in order to help its suppliers to reduce the usage of energy by 30%. For an example, in China the glass suppliers of IKEA have already reduced their energy consumption level and carbon foot print by 40%. The organization is also trying to act with the new climate change collaborating with WWF in order to maintain the environment sustainability (McKay, 2009, p.92). These types of projects and activities will be focusing on supply chain emission level measurement, helping the clients by addressing the climate change projects through several transport initiatives, reduction of food production transport emission level of IKEA and improvement of reusing and recycling of solid wastes and water. These environmental sustainability programmes will help to increase the brand reputation and brand loyalty of IKEA. Moreover, if the organization tries to implement global expansion strategy in near future, these programmes and activities will help the organizations in many ways. Firstly, they do not have to face much legal and environmental barrier in order to enter in the new international market. Secondly, huge brand reputation and high brand image will bring more competitive advantage for IKEA in that particular market. Lastly, by these sustainability projects the organization will help to reduce the emission and pollution level of the environment. It will be beneficial for the mankind in near future. Mapping Boundaries and Defining Scopes Entire scope 3 emission of IKEA accounted for more than 80 percent of the total emission. In the year 2011 the organization had emitted almost 34.4 kg of CO2 (Scopes 1 and Scopes 2), as IKEA has significantly reduced the level to 27 kg of CO2 (Figure 5). IKEA’s long term goal is to recycle the woods that have been generally used for the product or goods manufacturing. Investment in the sustainable energy resolution will distinguish significant cost saving and short-pay-back periods. IKEA has decided that they will not pay high price for the lattice electricity. The organization is currently working on the improvement of the total energy efficiency. Emissions Inventory The organization has reduced CO2 emissions from the aspects of the operation of the company including extraction of raw materials, usage of energy in the buildings of IKEA, transportation of finished goods and the usage of products in the houses of customers. It is a huge challenge to make a progress. In the year 2011 the organization had emitted almost 34.4 kg of CO2 (Scopes 1 and Scopes 2), while the organization has able to reduce the level to 27 kg of CO2. The GHG Inventory of IKEA has confirmed the activity as the huge source of emission. Entire scope 3 emission of IKEA accounted for more than 80 percent of the total emission. The organization has presently informed the customers about several travel options by online customer listing. Reducing GHG Emissions IKEA has undertaken several effective steps for the environmental sustainability. IKEA has able to reduce the carbon-dioxide emission by 5%. Moreover, according to the sustainability report of IKEA in the year 2009; the organization has reduced the carbon-dioxide emission level from the goods transport by 10% (Cramer and Karabell, 2010, 2010, p.258). In the year 2010, the organization has participated in Greenhouse Gas Protocol programme. It comes under the new global framework for Greenhouse Gas Measurement Emissions (Lingl, 2010, p.66). Offsetting and Carbon Neutral According to the new sustainability report of IKEA, in the financial year 2012, IKEA group has able to cut the carbon emission point by 21.5 percent (Figure 3). In the year 2011 the organization had emitted almost 34.4 kg of CO2 (Scopes 1 and Scopes 2), while the organization has able to reduce the level to 27 kg of CO2. In the financial year 2011, the organization’s store, offices, distribution centre and several facilities have emitted near about 9,00,000 metric tons of CO2. Communicating Effectively The organization has strived for efficient and innovative transport solution for the goods since 1950s. The products of IKEA are highly demanding and purchased both regionally and globally in order to secure high quality with low prices. In this organization, effective distribution of products from the suppliers to the customers is a key aspect of minimizing environmental impact and achieving low prices. The organization’s Greenhouse Gas Management Programmes has able to boost the awareness beside with the value chain. IKEA’s long-term goal is to use 100% renewable energy. The organization has decided that they will not pay high price for the grid electricity for the renewable sources. The organization is currently working on the improvement of the total energy efficiency. Investment in the sustainable energy solution will characterize significant cost saving and short-pay-back periods. The national management teams are being supported by the facilitators, experts and coordinators at every local unit. Moreover, reduction of water consumption and minimization of water use in the organization has bought few amount of sustainability. Wood is an important and valuable resource. Resource effectiveness is of enormous importance not only from the environmental viewpoint but also from the cost perspective. Suppliers of IKEA have struggled with limited ability of registered and certified wood (Robinson, 2012, p.229). The organization has able to operate under these regions that is the part of global sourcing loom. IKEA’s long term goal is to recycle the woods that have been generally used for the product or goods manufacturing. Presently the Forest Management, Chain of Custody and Forest Stewardship Council standards are the only certification scheme that has been identified by IKEA (Ikea, 2013, p. 26). Several approaches and initiatives towards Greenhouse Gas Management Programme and Environment Sustainability have increased the brand value of the organization. IKEA Strategy IKEA’s goal of environmental design and sustainability are central to the business strategy of the organization. The organization has introduced several sustainability plans to take the organization through the year 2015. These are combined of social, economic and environmental issues. SWOT Analysis IKEA have implemented the SWOT analysis in order to achieve its objectives. SWOT analysis is a strategic planning tool. This strategic planning tool helps an enterprise to focus on the major issues. In this study SWOT analysis will determine strengths weaknesses, opportunities and threats that involves in a business in a business venture. Strengths and weaknesses of an organization are the internal aspects (Baldegger, 2012, p.32). On the other hand, opportunities and threats for an organization are the external factors. Internal aspects include finance, marketing and manufacturing of a company, while economic situation, environment and market condition and social changes are treated as the external aspects. Strengths Strengths include an organization’s marketing or location expertise. The strengths of IKEA have listed below: It is strong and leading global brand that has able to create huge customer base across the globe. IKEA is a popular and leading organization that offers vast range of attractive designed functional products at low price level (Dijkman, 2008, p.10). They used to offer domestic designed products that maintain a balance between quality, function, price and design. They used to focus on low pricing strategy. They have effectively sources raw materials close up to the supply chain in order to reduce the transportation and other operational costs. IKEA have effectively implemented advanced technology in their business process in order to reduce the needed amount of raw materials (Slack, Chambers and Johnston, 2007, p.321). Weaknesses Though it is one of the leading organizations in global market, but IKEA should acknowledge the weaknesses within the organization in order to manage and overcome them. The necessity for low priced products needs to be balanced against the quality of goods. They also need to differentiate their products comparing to the goods of competitors. The communication between the customers and other stakeholders are inadequate in IKEA. The organization generally used to promote its environmental and social activities in online and print media (MacLennan, 2010, p.113). Therefore, it is necessary for the organization to make the communication process better. In some countries IKEA do not implement the laws and legislation while producing a product. It can affect the supply chain management process of the organization. Therefore, the managers and employees need to be provided training and monitoring in order to avoid several legal challenges (Smelser and Reed, 2012, p. 171). Opportunities A business implements its strengths in order to take the advantage of several opportunities that have been raised. The organization believes that its environment friendly business conduct will bring favourable output for the organization. The opportunities of IKEA have been listed below. Demand for greener goods is significantly growing globally (Mansvelt, 2010, p.418). The organization used to offer low priced products. The demand for this kind of products is effectively increasing in global market. Economic slowdown will force the people to consume low priced product in near future. Demand for low carbon footprints and reduced water usage is increasing. Now-a-days the consumers are becoming very much environment concern (Wackernagel and Rees, 1996, p.79). Moreover, the organization has already implemented several environment sustainability programmes. These things and campaigning will significantly increase the brand image of IKEA in global market. Threats IKEA can implement little particular effective strength in order to defend against the market threats. The possible external threats for IKEA have listed below. Unfavourable social trends like slowdown in the housing market may affect the organization. The market competition is increasing rapidly day by day. The organization needs to reinforce the qualities and competencies in order to compete within the market place. Unfavourable economic factors, such as recession, financial crisis, low disposable income of people is preventing people to buy several commodities (Siebert, 2005, p.54). Findings Basis on the analysis, the study can determine several aspects on how the sustainability can improve the stability of an organization. It is evidenced that if the sustainability of an organization is impressive, then they can attract the shareholders to invest more capital. IKEA have failed to fulfil its promises to provide the products in low prices with various design and supreme quality. Major of the customers, who have bought the products of IKEA, are not satisfied with the quality of product and designs. Employees are the most important assets for an organization. Skills and determination of employees show the organization road to success. The work place should be safe enough and employees should be always motivated in order to provide their 100%. In terms of IKEA the significant motivator are the morals and ethics of the organization. The journey of a product of an organization sets off from the resource of manufacturing to the waste on consumption. Generally and traditionally major of the organizations do not think about giving back something to the environment and society against the business profit. Environment and social sustainability is very much important for an organization as it determines the growth and reputation of an organization. IKEA always looks to sustain its business by organizing several social and environmental sustainability programmes along with the leading NGOs like WWF globally. They effectively use the renewed energy sources in order to reduce the energy consumption. Moreover, they have significantly reduced the carbon emission level from their several business operations, such as, extraction of sources, manufacturing process and finished goods transportation to the customer. In an addition, IKEA have motivated its suppliers to reduce the emission level while transporting the goods and materials (Brown, 2004, p.122). Recycling and reusing water and solid waste is an effective example of corporate and social responsibility of IKEA. IKEA Stakeholders The sustainability of IKEA has satisfied and encouraged the investors to invest more capital in the organization. This is due to the power of the sustainability of IKEA. The organization has continuously informed about the plans and programmes about the social and environmental sustainability through their CSR reports. It has motivated the investors to invest (Figure 4). Moreover, the potential and target customers of IKEA have satisfied through the promotional campaigning of the green and eco-friendly products of IKEA. They have effectively managed and controlled the carbon emission level of environment. Environment sustainability programmes have helped the organization to overcome several legal and environmental challenges. The top level management of the organization have continuously motivated the organization to perform well. The satisfaction and motivation factor of the employees have been taken care of as the organization believes that employees are the strongest assets of an organization. Giving back to the community and recycling water and solid wastes have increased the brand reputation of IKEA around the globe. The organization has planned for the sustainability of future generation economy. They are trying to provide similar potential and significant opportunities to them as the present generation have. All the internal stakeholders like employees, investors, management and the external stakeholders like consumers, society, environment and economy has been taken care of by IKEA. For this reason, the business of IKEA has significantly stabilized. Recommendations IKEA should implement direct and pull marketing strategy. This strategy will aggressively attract the customers globally. As the organization is implementing Greenhouse Gas Management Programmes and they are providing the greener products with low price, it will automatically pull huge number of customers. IKEA is a popular and strong global brand name. They should organize Green and Sustainability programmes all around the globe. This will increase their brand reputation globally (Kapferer, 2008, 162). They should be positively focused on the increasing carbon emission level in the environment. Several business organizations are only focusing about the business profit without considering the sustainability of environment, but it is very much true that a business can only sustain when the firm takes an initiative for the environment or social sustainability. Therefore, it is recommended that, IKEA should promote environment sustainability programme through the help of several NGO firms and governments of the operating countries. Giving something back to the community will be an effective promotional activity of IKEA. Use of renewable energy sources, reuse and recycling of water and solid wastes will make the business process operation of IKEA much more significant. The CSR reports of IKEA should highlight both the threats and weakness along with the strength and opportunity. An effective implementation of corporate governance will help the organization to measure the firm’s financial and economic stability. Therefore, they can prepare effective strategies in order to overcome the financial and economic problems within the organization. The CSR reports of the organization need to be audit in every year for the betterment of the organization as it will help the organization to forecast adequate and appropriate strategy for the future basis on the current situation. The products of IKEA have been criticised that, several products are not of good quality. Moreover, the organization has limited variety of product in store. IKEA should control the operational cost in order to increase the quality of the products (Sommer, 2012, p.218). Moreover, they should change the product design and bring variety within a short period of time. Otherwise, the customers can switch towards other substitute products or the competitors of IKEA. Conclusion IKEA is one of the leading global home furniture retailer aimed to provide eco-friendly and greener goods for the community. From the starting days of business practices they are focusing on the business sustainability (Esty and Wnston, 2009, p.256). Major of the business organizations are only focusing on the profits but it is highly important to sustain a business. Reuse and recycling of water and solid wastes, usage of renewable energy can sustain a business enterprise. It is evidenced that day by day the level of carbon emission is increasing. It is important for the organization to reduce this emission level to avoid several legislative challenges. IKEA have effectively reduced the carbon emission level from all the process of its business operation. The organization is planning to use the renewable energy sources in order to reduce the consumption level of grid electric energy. It is a significant example of cost control activities of IKEA. The top level management of the organization have continuously motivated the employees of the organization to perform well. The satisfaction and motivation factor of the employees have been taken care of as IKEA believes that employees are the strongest assets of an organization (Ariely, 2009, p.271). Giving back to the community and recycling water and solid wastes have increased the brand reputation of IKEA around the globe. Therefore, it is feasible that organizations like IKEA who are focusing on the sustainability of business need to organize and promote more number of sustainability programmes to win the trust of the internal and external stakeholders. References Abbing, E., 2010. Brand Driven Innovation. Manchester: AVA Publishing. Ariely, D., 2009. Predictable Irrational. London: Harper Collins. Baldegger, R., 2012. Strategy, Structure and Culture. New York: Springer. Bidgoli, H., 2006. Handbook of Information Security, Key Concepts, Infrastructure, Standards, and Protocols. New Jersey: John Wiley and Sons. Boone, L., and Kurtz, D., 2009. Contemporary Marketing. Stamford: Cengage Learning. Brown, L., 2004. Plan B: Rescuing A Planet Under Stress and Civilization in Trouble. London: Orient Blackswan. Cramer, A., and Karabell, Z., 2010. Sustainable Execellence. New York: Rodale. Dijkman, J., 2008. Germany Real Estate Yearbook. Berlin: Real Estate Publication. Esty, D., and Wnston, A., 2009. 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Slack, N., Chambers, S., and Johnston, P., 2007. Operations Management. New York: Prentice Hall. Smelser, N., and Reed, J., 2012. Usable Social Science. California: University of California Press. Sommer, A., 2012. Managing Green Business Model Transformations. New York: Springer. Wackernagel, M., and Rees, W., 1996. Our Ecological Footprint: Reducing Human Impact on Earth. Canada: New Society publishers. Appendixes Figure 1: IKEA 3BL or Triple Bottom Line Figure 2: Porter’s Five Force Analysis Figure 3: IKEA Carbon Footprint Figure 4: IKEA Stakeholder Mapping Figure 5: Mapping Boundaries and Defining Scopes Read More