Decision Making and Challenges Faced by IKEA in Global Business

This report analyzes IKEA's decision-making and challenges within the global business environment. It begins with an introduction to IKEA's establishment and global presence, highlighting its business model of offering affordable home furnishings. The report then explores IKEA's strategies, including transactional and international issues, diversification, and quality control. It emphasizes the significance of corporate social responsibility (CSR) for IKEA's success, detailing its effectiveness in winning new business, enhancing customer relations, improving efficiency, and building a strong market image. The report also examines IKEA's response to the Indian rug issue, addressing child labor concerns and the strategies employed to mitigate the negative impacts. In conclusion, the report provides a comprehensive overview of IKEA's global business practices, the challenges it faces, and the importance of CSR in maintaining its market position and ethical standards.

DECISION MAKING AND CHALLENGES IN GLOBAL BUSINESS |
DECISION MAKING AND CHALLENGES
IN GLOBAL BUSINESS

DECISION MAKING AND CHALLENGES IN GLOBAL BUSINESS |
Table of Contents
INTRODUCTION...........................................................................................................................1
Strategy used by IKEA for the business environment.................................................................1
Brief explanation regarding the effectiveness of IKEA's CSR stance.........................................3
Brief explanation of the strategy used to deal with the Indian rug issue.....................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business organizations enter the global market facing new challenges go through
environmental, political, and social issues as the opinion and requirements of the customer vary
from each country. The achievements of the organization depend on how successful the manager
achieve to solve global issues. IKEA Founded by Ingvar Kamprad established in 1943 in
Sweden. IKEA Company runs 422 stores in 50 markets around the world. IKEA has 22 Pick-up
and Order Points in 11 countries, 41 Shopping Centres in 15 countries, and 38 Distribution sites
in 18 countries. IKEA offers a wide range of home furnishing items, kitchen and dealing with
home accessories of good design and function, excellent quality, and durability, at low prices so
that most people can afford to buy them. The aim of this report to explain global issues IKEA
face when they enter the international market, as well as the importance of corporate social
responsibility towards the success of the organization. This report explains how IKEA deal with
problem arises regarding child labor while trading with south Asian countries.
The strategy used by IKEA for the business environment.
IKEA is considered as one the most popular organization in Sweden which operates its
business all over the world. IKEA spread its market shares in very large areas within a short
period. However, IKEA faces many issues regarding with environment.
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Transactional issue: IKEA build a strong position in the market within a short period.
1951, the demand for furniture and products offered by IKEA has been increasing, to fulfill the
requirement of the order management department of IKEA not have sufficient resources, to solve
issues by using outsourcing strategy. In which to fulfill the requirement of their customers
outsources material or furniture parts which help in saving time for the organization. They can
easily provide products or furniture to customers (Van Linden, Young, and Birkey, 2019).
International issue: The main policy is to find out a supplier that provides a source at a
reasonable rate. the management department of IKEA deals with some of the local industries of
Poland, they build a strong relationship with the supplier. Poland becomes the largest source of
providing materials or parts of furniture. IKEA uses an effective strategy by maintaining good
communication with the supplier to control cost and provides a product at a reasonable rate in the
market.
To spread its market, IKEA uses a diversification strategy, open a new showroom in
Norway, Stockholm, Switzerland. The management department of IKEA uses an effective
strategy based on identified requirements and customers' preferences apply different strategy and
provides furniture based on the requirement of their target market customer. They used to offer
low price of furniture; it also introduces the self-surviving concept in this country. IKEA used to
launch new products, chairs, tables, buckets to attract target market customers of Switzerland.
Build the best quality of the product: IKEA able to maintain its position in the world
market and attain top position because of applying the vision is to provide the best quality of
furniture to their customer. The manager set the benchmark and standard target which every
department needs to achieve. also took focus on changing rules on production for customers
Believe in democratic style: The managers of IKEA use democratic leadership style,
they took weakly meeting with their employee and took suggestion regarding how to improve the
sale rate, attract the customer or any problem employee face at workplace, condition of the
market, career issues facing at work premises. This will help in creating a positive working
environment. Which useful to attain target department aims within the given time. This also
advantageous to reduce the cost and control wastage of business activities by taking an idea from
employees (Evers, and Andersson, 2019).
Environment-related issue: IKEA has been focused on spreading its market in
worldwide regions. started business in Mid-Asian regions as well as African continent countries.
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The organization face issue regarding with environment since 1894, penalized for the overuse of
natural resources, which include, timber, wooden, use to prepare furniture, also get penalized for
using materiel which may cause hazards for the environment. The quality of products in
Denmark has been reducing they are not able to reach the standard. IKEA's organization face a
high rate of decline in sales in mid nineteens.
IKEA dealing with this issue regarding with environment focus to improve the quality
and use wastage material to produce furniture. The organization uses chlorine-free recycled
paper. focusing on changing their packaging strategy organization able to solve their issue
regarding with environment.
By using effective principles of management and apply marketing strategies that are
related to promotion, diversification, and cost-cutting able to maintain a position within the
market by using and follow up democratic leadership style.
Brief explanation regarding the effectiveness of IKEA's CSR stance.
Corporate social responsibility to developed business organizations which is useful for
the organization to make socially accountable for potential stakeholder and group of society.
Every organization needs to contribute profit amount in social responsibility. IKEA to maintain
its position in the market for a long time to work effectively. The management department of
IKEA uses this strategy to control the wastage of production material. To control environmental
issue arises due to the use of natural resources. Following are the `effectiveness of IKEA CSR
stance
Help in winning new business: IKEA able to enter a new market and successfully
maintain its position in the regions. Based on using norms of CSR, organizations able to enter a
new market, in Scotland, China, India, Mid Asia, and America.
Enhance relation with customers: The main purpose of IKEA is to maintain a corporate
social responsibility policy that helps in providing the right directions towards achieving aims
and goals to fulfilling customer satisfaction and enhance relations with customers. Managers
analyse market strategies of each country to focus on providing products which fulfill the
requirement of the customer need. manufacture a different kind of furniture in China,
Switzerland, India according to preferences of customer demands that differ from each country.
IKEA focuses on recognizing the problems of their customers which will help to build a strong
connection with the customer. IKEA's communication strategies and fulfill the requirement of
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customers also contribute to various social groups. the organization runs many programs for
child education and works for social benefits. by using these strategies able to build a strong
connection with customers (Li, and Fleyeh, 2018).
Enhance efficiency and production capacity of organization: By using the concept of
CSR, organizations set up their standard and they follow up this standard which helps in
increases their production capacity that able to increase their effectiveness of the organization's
product when facing quality issue arises in Denmark to overcome this problem the organization
focusing on implement norms of CSR so that IKEA can increase sales by providing the best
quality of furniture.
Control and manage internal factors: internal assessment is to detect strategically
crucial strengths and weaknesses on which an organisation should eventually build its strategy.
by finding important internal factors example: delivery networks, cash flows, locations,
technology, and administrative structure and by evaluating these factors. Strengths and
weaknesses are internal factors as they designate how well the company copes with handling its
internal stuffs and what should be the focus of the company’s attention These factors regularly
mention to the stuff related to the numerous departments of the organization such as finance,
marketing, or production
strengths weaknesses
Long term relationships Standardization of products across countries
Helps partner remain competitive Environmental problems
aims to create a better life Locations not always accessible
Low-cost objective IKEA has limited advertising and marketing
strategies.
No tolerance for wastage of resources
Constantly innovating for low cost
Smart marketing
Self-assembled furniture
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opportunities threats
Becoming environment friendly Imitations changing laws
Customer cost-conscious behaviour Growth of competition
Untapped emerging markets Increasing demand for luxury products
Growing demand for green, low priced
products
Increasing DIY culture through the internet
Reduced carbon footprints/water usage The market factors are also one of the most
important threats for all the businesses. The
downturn of the market has slowed down
customer expenditure, slowly income has been
reduced.
Build a strong image in the market: IKEA participating in corporate social
responsibility events and contribute their profit amount for this policy, build a positive image
within the market. This will help in maintaining position even organizations face many issues
regarding their environmental policy. Business organizations working ethically can be able to
manage their position in the market (Mazutis, and Eckardt, 2017).
Fulfill criteria of ethical norms: corporate social responsibility is mandatory for every
organization which fulfils the criteria attaining profit this will help IKEA to work ethically.
IKEA focusing on providing the best quality of work through an ethical manner helped in
attaining goals and maintain a positive image for the organization in the market.
Finding new opportunities: IKEA participating in corporate social responsibilities
IKEA able to build a positive image which helps in promoting the organization in the market this
will be useful to find out new opportunities. finding out new opportunity’s organization can be
able to get new strategies which help to achieve targets and profits.
Control issue arises in international trading: IKEA faces environmental, social-
political, and economical issues on their starting days when entering the international economy.
an organization able to manage their issue or conflicts arises regarding economic policies,
cultural difference, customer duty norms, trade restrictions, all these issues they can face by
implementing corporate social responsibility policy
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Manage social issue: IKEA face an issue when they start dealing in Pakistan or mid-
Asian countries, face issue on child labor to reduce their cost for manufacturing furniture, this
negatively impacts the brand image of the organization. Organizations find opportunities and
work according to the corporate social responsibility norm this will help in management issues
and cover up the brand image for the organization.
Implementing activities of corporate social responsibility IKEA able to maintain its business
position in the market (Deb, Sunny, and Majumdar, 2020).
a brief explanation of the strategy used to deal with the Indian rug issue.
IKEA face an issue related to child labor in 1994 when a Swedish television channel
picture a documentary about the real condition of children in Pakistan and India, the
documentary shows how an organization like IKEA use children for controlling the cost of
manufacturing the products. The management department of IKEA does not even know how
their suppliers work organization not focusing on suppler or subsidiaries of IKEA who work in
other countries. To clear the overall image Barner is the manager of this company at that time.
An organization can find out factors involved in producing or manufacturing rugs for India or
any other product IKEA engaged in working with child labor. These children are live in rooms to
support their parents they work in factoring so they can be able to live their lives and pay debt
liability. the organization found that children who belong of Indian origin are bound to work so
they can pay back the debt liability of their parents. Ikea's manager found there is no legal
provision formulated in India regarding working with children there is no legal law for hire
children according to the Indian government it is safe and legal when children work with their
parents. They are under their parent's supervision. After reporting this situation to South Asian
countries, IKEA tries to solve issues focusing on finding out a solution company took advice
from the International Labour Organization regarding this issue and getting suggestions from
UNICEF.
Following are the strategies used by IKEA
Rug mark or Good Weave: India supply carpets and rugs for IKEA, however, to control
the activities which are related to child labor they are focusing on contracts with Rug mark which
is a non-profitable organization and work according to the norms of corporate social
responsibility.
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Connect with government & media: IKEA does not accept child labor and works
actively against it. IKEA supports the United Nations (U.N.) Convention on the Rights of the
Child (1989) (Barner, n.d.). The IKEA Way on Preventing Child Labour is based on this
Convention, which stipulates. IKEA focus to control issue or activities where children are
engaged to connect with local authorities which helps in spreading the news and get awareness
among people regarding the negative impact of child labor. This will help to build a positive
image of IKEA among people.
Initial reform movement: By fulfilling the norm of corporate social responsibility and
controlling the case of child labor, IKEA invest their profit into establishes schools and focus on
getting awareness regarding children's education. They also engaged in providing activities and
develop children to rehabilitate the essential needs of Children. IKEA also focuses on follows
these rules and norms.
IKEA's effort to stakeholders: IKEA is one of the largest furniture manufacturing
companies in the world. Having a great team of stakeholders. the team of stakeholders from the
ideas works to better to an affordable price for customers. Marianne Barner manager of the
organization made a decision not to use an Indian rug supplier because it could affect IKEA's
publicity. IKEA made a concept that Increasing sales and decreasing the profits of the company.
suppliers of Indian rug. The awareness of child labor through German TV stations involvement of
numerous companies. IKEA is one of the companies among them.
Convention Rights of the Child. The national and global laws were (Pledging of Labour)
Act of the British rule in 1933, Bonded Labour Scheme (Abolition) Act in 1976, which banned the
use of child labor. The U.N. Convention on the Rights of the Child (1989) was because of the age
limit requirements. The main purpose of IKEA is to enhance their goodwill and improve the
image which getting down due to the documentary shows the Swedish channel. Media shows
and telecast all the work which IKEA has done to prevent and control child labor.
Organization ethically works and initializing to prevent child labor in south Asian
countries. The organization also focuses on publishing work companies have done with UNICEF
and other organizations or financial institutions. All these efforts help the organization to create a
positive brand image in the world trade market and based on that they can be able to attain a
competitive business advantage. Which useful to enhance long-term sustainability. Companies
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such as IKEA should refer to the International Labor Organization (ILO), on how to contract with
child labor, because it causes troubles for companies.
These strategies help in focusing on the market as well as useful to complete the
responsibility regarding social groups. This helps in maintaining the strong position of the
organization in the market. to overcome all these issue IKEA work ethically and formulate
strategies through an organization can create a positive brand image which helps in giving the
toughest competition in the rival industries in the market. Their main purpose of solving the
Indian rug case is to build a positive image by taking initiative in controlling and prevent child
labor.
CONCLUSION
From the above analysis, it has been concluded that IKEA to build a strong position in
the international market using effective strategies. today IKEA is a global home furnishing brand
that exists in the hearts of countless people. IKEA’s dream is to make a better daily life for lots
of people. IKEA's achievement originated from its marketing strategy, excellent customer
service, pricing, design and functionality, store location, and a large variety of products.
Managers by taking correct decisions able to overcome issues. Implementation of management
strategies and follow up democratic leadership style IKEA able to overcome problems, the issue
arises. As well by taking initiative in public welfare, children education and safety program
creates a positive ethical work environment which helps in attain competitive advantage this is
the reason IKEA run successfully even facing high competition within the market environment.
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REFERENCES
Books and journals
Van Linden, C., Young, M. and Birkey, R., 2019. IKEA’s Organizational Structures: Evaluating
the Ethics of Tax Avoidance. Journal of Business Ethics Education, 16, pp.275-282.
Evers, N. and Andersson, S., 2019. Predictive and effectual decision-making in high-tech
international new ventures–A matter of sequential ambidexterity. International Business
Review, p.101655.
Li, Y. and Fleyeh, H., 2018, August. Twitter sentiment analysis of new ikea stores using machine
learning. In 2018 International Conference on Computer and Applications (ICCA) (pp.
4-11). IEEE.
Mazutis, D. and Eckardt, A., 2017. Sleepwalking into catastrophe: Cognitive biases and
corporate climate change inertia. California Management Review, 59(3), pp.74-108.
Deb, S., Sunny, A.M. and Majumdar, B., 2020. Slum Children: Innocent Victims of the Social
Reality. In Disadvantaged Children in India (pp. 85-131). Springer, Singapore.
Goswami, K.K., 2018. Developments in handmade carpets: design and manufacture. In
Advances in carpet manufacture (pp. 269-350). Woodhead Publishing.
https://studycorgi.com/internal-and-external-factors-influencing-ikea/
https://www.cram.com/essay/Stakeholders-And-Stakeholders-Of-IKEA/P3ASMZ5KUYKW
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