IKEA Business Analysis: Strategy, Ethics, and SWOT

Executive Summary

This report provides information on each of the following areas pertaining to IKEA's organization, culture, ethical framework, revenue, and related topics. The following sections provide the relevant data:

1) Organization Background & Benchmarking; 2) Organization Background, Ethics/Legal, and Current Events; 3) Marketing, Financials & Accounting; 4) Organization Culture, People, and Diversity; 5) Strategy and Planning Analysis — Organization Goals; 6) SWOT Analysis; 7) Recommendations, 21st Century, and Moving Forward.

A brief summation of the separate sections is as follows: Section 1 focuses on IKEA's standard store concept and how benchmarking analysis can be used to more effectively harness the firm's potential in development. It also examines internal benchmarking as a factor in the firm's ability to promote progressive ideals. Section 2 focuses on ethical and legal compliance within the organization and how the company has addressed issues such as child labor and equality in the workplace. Section 3 focuses on how the firm differentiates itself from competitors, the strength of its financials, and accounting difficulties it faces in Europe. Section 4 focuses on the company's positive organizational culture and its commitment to people and diversity. Section 5 shows that IKEA has implemented a strong sustainability strategy in order to achieve its organizational goals. Section 6 reveals that IKEA has several strengths that outweigh its weaknesses and that there are opportunities to develop its brand even in the face of e-commerce giants like Alibaba and Amazon. Section 7 provides recommendations to enhance the "experience" aspect of its retail outlets and addresses the need to maintain its progressive platform in the 21st century.

Organization Background and Benchmarking

As Martenson and Servin (2002) point out, IKEA has used a "standard store concept" to facilitate the development of stores across more than 40 different countries around the globe. This standard store concept enables the organization to quickly build stores that are essentially uniform in a way that is efficient, simple to manage, and highly standardized. However, the problem is that retail construction costs vary significantly from one country to the next. A benchmarking analysis can help oversee the continual process of updating the standard store concept in order to make it more efficient where these differences in economies arise.

IKEA has other organizational issues that are not related simply to build-outs and expansion. Human capital is also at stake, and the improvement and development of that human capital — as well as the company's corporate social responsibility across various regions of the world — are essential factors that must be taken into consideration. Benchmarking analysis can be applied in these areas as well.

As an organization, IKEA wants to be recognized around the world as a positive environment where diverse people can come together to achieve a common aim that is reflective of the overall community's values and beliefs. To this end, the organization seeks to promote equality within its workplace and has been recognized and honored as a progressive company by the Human Rights Campaign Foundation's 14th Annual Scorecard on LGBT Workplace Equality.

As IKEA (2017) notes, "the CEI (Corporate Equality Index) is a national benchmarking survey and report on corporate policies and practices related to LGBT workplace equality, administered by the Human Rights Campaign (HRC) Foundation." However, the company does not just focus on equality in the workplace; it also focuses on providing its workers with the opportunity to create a better life for themselves. Benchmarking analysis has led IKEA to offer incentives to its employees so that it retains its 100 percent score on the CEI and remains at the forefront of the more than 1,000 companies worldwide monitored and assessed by the HRC. These incentives include:

Extending benefits coverage to spouses and domestic partners, including health/medical, dental, vision, dependent coverage, COBRA, FMLA, bereavement, relocation and travel assistance, adoption benefits, employee discount, and employee-assistance programs. The employee medical plan also covers gender reassignment surgery and related services. Additionally, IKEA has established a new minimum wage and retirement savings program: the company offers a 401(k) plan and matches a portion of contributions — a 100% match on the first 4% of salary contributed and a 50% match on the next 2% of salary contributed. Further incentives include health benefits, paid time off, and growth and development opportunities via education assistance for workers, including undergraduate and graduate programs plus tuition discounts (Corporate News, 2016).

Ethics, Legal Compliance, and Current Events

IKEA's ethics and legal organizational background is rooted in its corporate social responsibility policy. The guiding principles of the organization are described in the corporation's IWAY Standard (2008): "At IKEA we recognize that our business has an impact on social and environmental issues, in particular people's working conditions, as well as the environment, both locally and globally" (p. 1). The company's desire to do good business is predicated on its desire to be a good business — and to that end it has placed as preconditions for future growth the following principles:

What is in the best interest of the child? What is in the best interest of the worker? What is in the best interest of the environment?

The IKEA Way on Purchasing Products, Materials and Services (IWAY) thus acts as a code of conduct for the organization throughout the world and directly addresses the issue of child labor. The framework for this code of conduct is found in the core conventions defined by the Fundamental Principles of Rights at Work, ILO Declaration (1998), the Rio Declaration on Sustainable Development (1992), the UN Johannesburg Summit on Sustainable Development, and the Ten Principles of the UN Global Compact (2000) (IWAY Standard, 2008).

IKEA's legal compliance and organizational requirements are grounded in the following assertion: IKEA and its suppliers shall always work to comply with all requirements of national laws and regulations, as "the law shall always be complied with and prevail" (IWAY Standard, 2008).

The organization's ethics are based on the values of trust, integrity, and honesty, which the company views as the foundations for relationships and sustainable development. The company states that "it is important that all IKEA co-workers and external business partners understand the IKEA position on corruption and its prevention. This has been established in the IKEA Corruption Prevention Policy and the IKEA Rules on Prevention of Corruption and communicated in the IKEA Way of Doing Business and the vendor letter which shall be signed by all business partners" (IWAY Standard, 2008).

In terms of current events, the company is at the forefront of complying with ethical issues like workplace equality, as evidenced by its 100% CEI score. It continues to advance causes and issues that are important to its stakeholders and to comply with ethical and legal standards regarding labor laws across the world.

References

6Q. (2016). IKEA corporate culture of the heart. Retrieved from https://inside.6q.io/ikea-corporate-culture-of-the-heart/

Corporate News. (2016). IKEA US receives 100 percent on 2016 CEI. Retrieved from

Freedman, D. (2017). Bricks, mortar — and experiences. Wall Street Journal. Retrieved from https://www.wsj.com/articles/bricks-mortarand-experiences

IKEA. (2017). Come be yourself with us. Retrieved from

IKEA Yearly Summary FY15. (2016). IKEA Group. Retrieved from

IWAY Standard. (2008). IKEA. Retrieved from

Martenson, J., & Servin, K. (2002). Internal benchmarking at IKEA. Retrieved from http://lup.lub.lu.se/luur/download?func=downloadFile&recordOId=1345445&fileOId=2433217

People and Planet Positive. (2014). IKEA. Retrieved from

Shen, L. (2016). IKEA has been accused of avoiding 1 billion euros in taxes. Retrieved from http://fortune.com/2016/02/12/ikea-tax-avoidance/

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