Circular Economy: Theoretical and Practical Perspectives with IKEA as a Case Study

Running Head: CIRCULAR ECONOMY 1
Managing Operations and the Supply
Chain

CIRCULAR ECONOMY 2
Table of Contents
1.0 INTRODUCTION.....................................................................................................................3
2.0 THE COMPANY.......................................................................................................................3
2.1 PRODUCTS AND SERVICES.............................................................................................4
2.2 MAIN CUSTOMERS............................................................................................................4
3.0 THEORETICAL PERSPECTIVES - CIRCULAR ECONOMY - CONCEPTS AND
OPERATIONS................................................................................................................................4
3.1 CONCEPTS AND CHARACTERISTICS OF CIRCULAR ECONOMY...........................4
4.0 MAIN DRIVERS OF CIRCULAR ECONOMY......................................................................6
5.0 ECONOMIC, SOCIAL AND ENVIRONMENTAL BENEFITS.............................................7
5.1 ENVIRONMENTAL BENEFITS.........................................................................................7
5.2 SOCIAL AND ECONOMIC BENEFITS.............................................................................7
6.0 CIRCULAR SUPPLY CHAIN IN BUSINESS OPERATIONS...............................................7
7.0 PRACTICAL PERSPECTIVES- IKEA’s BUSINESS MODEL..............................................9
7.1 IKEA’S CIRCULAR SUPPLY CHAIN AND OPERATIONS STRATEGY....................11
7.2 ECONOMIC, SOCIAL AND ENVIRONMENTAL BENEFITS.......................................13
8.0 CONCLUSION........................................................................................................................14
9.0 REFERENCES........................................................................................................................15

CIRCULAR ECONOMY 3
1.0 INTRODUCTION
As poverty and population are set to increase, there will be impact on the environment and
natural resources. Circular economy is considered by the businesses as a possible solution to
detach these effects from profits. Still, there are various companies left which are seeking
transition towards circular economy. Circular economy is an economic framework that is
focused on manufacturing the goods, raw materials and part for remanufacturing, recycling and
reuse. Using this business model can offer many opportunities for private firms to attain better
growth and implement innovation in operations. Considering the benefits and trends, today’s
companies are transitioning to circular economy.
The major purpose of this report is to discuss the circular economy concept in context of chosen
organization i.e. IKEA. This report evaluates both conceptual and practical aspects of the circular
economy model. Under theoretical perspective, concepts and characteristics of circular economy
are identified. Moreover, it describes the major drivers and their social, economic and
environmental benefits. Next section of the report covers the practical aspect of circular
economy. It discusses the role and significance of circular economy at IKEA. Further, concepts
and theories of circular economy are applied to the chosen organization. In the final section, the
paper includes social, economic and environment benefits by using this economic model.
2.0 THE COMPANY
IKEA is a multinational corporation that is founded in Sweden and it offers different designs and
sells ready to assemble furniture, home accessories and kitchen appliances. The organization was
established by Ingvar Kamprad in southern Sweden, developing from a mail-order business
providing general products into worldwide, exclusive home furnishing concept. IKEA is popular
as one of the largest furniture retailers all over the world. The company has expanded its
business operations in various international markets. Currently, it has more than 400 stores in 50
nations worldwide (IKEA, 2018). The vision statement of company is to develop and provide a
better life to its customers. IKEA is operating its business with the idea of providing different
variety of furniture and home appliances on low cost. Additionally, IKEA is famous for its
consideration to operational details, cost control, product development and corporate powers

CIRCULAR ECONOMY 4
which enabled IKEA to decrease the prices by 2 to 3% over the decade to the year 2010 during
its international expansion.
2.1 PRODUCTS AND SERVICES
The major products and services of IKEA are ready to assemble furniture, home accessories and
kitchen appliances. It is well-known for its modern design for different types of furniture and
appliances and its manufacturing and interior designing is related with the environment friendly
simplicity.
2.2 MAIN CUSTOMERS
The targeted market of IKEA primarily covers cost-conscious people who prefer to purchase
furniture and home appliances on affordable prices (IKEA, 2018).
3.0 THEORETICAL PERSPECTIVES - CIRCULAR ECONOMY - CONCEPTS
AND OPERATIONS
It is very important to understand the theoretical perspective of any concept. Theoretical
perspective is a significant part of the strategic methods that can be applied to manage different
situations in external and internal environment of organization. It includes many assumptions
about any specific concept. These assumptions answer the associated questions to attain final
results. The theoretical perspective of circular economy and its characteristics are given below:
3.1 CONCEPTS AND CHARACTERISTICS OF CIRCULAR ECONOMY
Circular economy is a new and innovative concept that has gained global popularity among
modern businesses. Circular economy is the concept which is regenerative and restorative by
design and purposes to keep the materials, products and components at maximum value and
utility at all the times. It makes differences between biological and technical cycles. This model
seeks to decouple the international economic development from fixed resource consumption. If
an organization adopts circular economy in its operations, it will be able to address resource
related threats for economies and business and to produce growth, generate jobs and eliminate
environmental effects (ACCA, 2016).