Responsible Business: IKEA Stakeholder Analysis and Ethical Dilemmas

This report provides a comprehensive analysis of IKEA's business ethics, focusing on stakeholder relationships, ethical dilemmas, and sustainable practices. It examines the company's operations, including its expansion into Russia and its procurement practices. The report highlights the ethical challenges IKEA faced, such as bribery, environmental concerns, and supply chain issues. It explores the impact of these issues on the company's reputation and financial performance. The report also analyzes IKEA's responses to these challenges, including measures taken to address ethical concerns and improve its practices. Furthermore, it offers recommendations for enhancing IKEA's ethical performance and promoting responsible business conduct, emphasizing the importance of aligning business goals with ethical principles and stakeholder interests. The report provides insights into the challenges and opportunities facing IKEA in maintaining its commitment to ethical business practices.

RESPONSIBLE
BUSINESS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1) Stakeholder analysis of the IKEA company......................................................................3
2). Critical Analysis and Evaluation.......................................................................................5
CONCLUSION................................................................................................................................9
RECOMMENDATIONS...............................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business ethics is the form of applied ethics that helps to examine and analyses the
principles and moral values that arise out of a business environment. Various types of ethical
issues followed by the company and its employee, suppliers, customer. In short it can be said that
ethical issues are the issues including rules and policies between the company and its
stakeholders. IKEA is a multinational group of company headquarters in Delfty, Netherlands.
The company deals in various types of ready to assemble furniture, appliances, home accessories
and motor vehicles. It was founded in Sweden by the 17 years old boy in 1943, who has been
listed as world's one of the richest people in the year 2013. The company is known for its modern
architectural designs used in various types of furniture and appliances. Interior design of the
company is highly associated with the eco-friendly simplicity. The following report is going to
depict about the various issues faced by the company at the time of manufacture and sale of the
product. It also shows how various issues affected the company working and reputation and what
are the necessary measures considered by the company in order to overcome the various issues
that arises during the manufacture and sale of the product. At last, various necessary suggestion
are also provide which can assist the company to overcome the various problems and achieve the
high growth rate. The main purpose of this report is to implement the business ethics principle in
the organization in order to analyses and monitor the working of the organization. It also aim at
implementing the moral principles and moral value in the organization in order to maintain the
healthy relation within the organization among employee and employer, manager and staff,
workers and supervisors and so on.
MAIN BODY
1) Stakeholder analysis of the IKEA company
There are number of stakeholders of the company which affects the day to day working of the
organization. Some of them are:-
Employees:- Employees are one of the major stakeholders of the company. Companies working
and profitability all depends upon the employees (Brookes, Altinay and Ringham, 2014).
Employees simple want job security, healthy working environment, commission and incentives
on regular basis for the work performed by them. Therefore, IKEA company has taken into

consideration all responsible and sustainable measures in order to satisfy the employees by
fulfilling there demands.
Managers:- Managers are another important stakeholders of the company. Managers want that
there objective should be achieved on time for which they are responsible (Audi, 2012). They
also want profitability and growth of the company. Therefore, IKEA has taking into
consideration all the responsible and sustainable measure to fulfill there managers want.
Company is making an efforts to increase its profitability by producing eco-friendly products to
its customers at low rate.
Customers:- Customers are the external stakeholders of the company who want value for there
money spend. They simple want better quality products at low price (George, 2011). They also
want that company should supply ethical products and provides after sale services. Therefore,
after considering all responsible and sustainable factors company has started manufacturing eco-
friendly products of high quality at low price.
Suppliers:- They are one of the valuable assets of the company. Without the supply of raw
material the working of the company will be badly affected. Suppliers simple wants orders from
the company on regular basis. They also want that company should make them timely payment.
Therefore, IKEA used to purchase raw material from the supplier as an when demand arises by
making advance payment.
Power interest analysis matrix of the shareholders
high
Keep satisfied(Customers)
Customers of the company high power
control but rate of interest is low.
Encourage and influence(Shareholders)
Shareholders are the person who invest
capital in the organization. Therefore,
there power and interest level both are
high.
Monitor(Suppliers)
Suppliers are the person who supply
raw material to the company. Therefore,
power of them towards the company is
high but interest is low.
Keep informed(Employees)
Employee are the person who work for
the betterment of the company. Employee
power and interest towards the company
is low.
Low interest high

2). Critical Analysis and Evaluation
Business ethics are the moral principles and moral values which are followed by the company
in order to maintain the friendly environment among the organization. It is applied by all
business organization and is relevant to individual and entire organization. It is made up of two
types of dimensions i.e. normative and descriptive. It reflects the philosophy of business which
aims at determining the fundamental purpose of the business organization. Business ethics is
made up of three perspective which aid the company to work in a balanced and a healthy
manner. Thus, three perspective from which ethics is made up of are as follows:-
Deontology:- This perspective was given by Bowie in 1999. According to him principle of
Deontology suggests that an organization should not harm anyone, it should consider the
universality for the business, organization should respect the employee available, no democracy
should be made at the workplace.
Teleology:- This perspective says that an organization should take into account the long term
consequences for the prosperity and welfare of the society, it also suggest the company should
focus on moral education by developing the social concern in every individual mind.
Virtue Ethics :- This perspective say that company should focus on strengthening the
individuals. It say that company should follow the virtue of wisdom & knowledge, courage,
humanity, justice, temperance and transcendence.
1.1 IKEA in Russia- Ethical Dilemmas
Summary
The following case study describes about the various problems faced by the company at the time
of expansion of its business in Russia. Company faces problems of ethical dilemmas. The case
study says that company is facing various problem from government in order to open its stores in
Russia. They are facing problems related to health and safety, electricity, tax, customs and other
related departments. Company needs to pay bribe to the various government in order to get
permission/ certificate from the various departments. Due to this company finance position of
also lacking. Due to this reason former head of IKEA' s Russian Subsidiary 'Okan Yunalan' was
imprison for five year in order to give bribe.
According to the IKEA's Ethical Procurement Practices. (2015) Lennart Dahlgren was the first
person to set up an store in Russia. IKEA's attempt to start its business in the Russia due to the

collapse of the Soviet union in1991. But later on the attempt to enter into the Russian market
failed due to the constitutional crisis of Russia in 1993. But after making various effects IKEA
was available to again open its stores in Russia in March 2000. it opened its store in Khimki,
Russia. On the day of inaugural around 40000 shoppers went to the store for the purchase of the
products. But at the same time it was not easy for IKEA to expand its business in Russia. They
faced many problem related to business ethics and government rules and policies.
The main objective of the company to expand its business in Russia are as follows-
 According to Fassin, Rossem and Buelens, (2011) Company need to analyze the
economic condition of the market before making its market entry strategies. Advance
analysis of the economic conditions of the market specially the emerging market will
assist the company to prepare its market entry strategies in such a way which in turn will
be going to prove successful for the business. Economic analysis also assist the company
to know the demand and taste of the customers and the number of competitors available
in the market.
 Company wants to recognize the various market policies in order to face tough business
ethics. According to Ferrell and Fraedrich, (2014) recognize of various market policies in
assist the company to overcome the various problem faced by them due to availability of
large number of competitors. Recognize of the policies will also assist the company to
plan its expansion strategies in order to flourish its business in the emerging market like
Russia. Company want to understand the difficulties in order to guarantee support to the
corporate culture in different geographical market. Before, entering into the new market
company should understand the difficulties faced by them. Understanding the various
difficulties which company can face will assist the company to understand the taste,
preference and wants of the customers. This will also help the company to understand the
various rules and policies if are imposed by the government on the entry of new
company.
Problems faced by the company
According to Forray, Leigh and Kenworthy, (2015) the various problem which was faced by
the company at the time of entering into the market. Company has to face the situation of ethical
dilemmas. Company was not able to decide whether they should follow the ethical principles at

the time of entering into the emerging market like Russia or to follow a wrong practices in order
to enter into the market. At the time of expanding its business to the Russia company faced many
problem but the main problem which was faced by the company was of bribe. In order to
expand its business company was facing various problems from government officials in the fire,
health and safety, tax, customs and other related departments.
east of Moscow called 'Mega Kazan'. This store was built up as a partnership firm with Ram
store supermarket. Slowly and gradually Mega Kazan become the worlds one of the largest
regional mall in the Russia. Moreover, company has started developing various strategies after
analysis the economic culture and environment condition and understanding the various rules
and policies formed by the government on the entry of new company's and products. IKEA has
also started manufacture eco-friendly products taking into consideration various standards of the
business ethics.
Necessary measures taken by the company
According to Hawkins and Bohdanowicz, (2012) company has taken into consideration the
various necessary steps in order to overcome this problem of expansion in the emerging markets
of the Russia. Company has opened another store in Kazan 500 miles away from east of
Moscow called 'Mega Kazan'. This store was built up as a partnership firm with Ram store
supermarket. Slowly and gradually Mega Kazan become the worlds one of the largest regional
mall in the Russia. Moreover, company has started developing various strategies after analysis
the economic culture and environment condition and understanding the various rules and policies
formed by the government on the entry of new company's and products. IKEA has also started
manufacture eco-friendly products taking into consideration various standards of the business
ethics. Company has also started recognize various market policies and rules imposed by the
government in order to form various strategies in order to beat its competitors.
1.2 IKEA's Ethical Procurement Practices
Summary
According to Holley, 2012 the following case describes how IKEA is not following business
standards and government rules and policies imposed by government on the cutting of the trees
and manufacturing of the products. IKEA in order to collect more wood have started cutting old
traditional tree which were band by the government. In lieu of which company also started using
various chemical substance and plastic boards in order to manufacture its products and expand its

business. After knowing his government imposed a band on the company for cutting trees from
the particular place. This in turn badly affects the working of the company and also affects the
goodwill of the company. Customers have stop purchasing the products of the company because
they are not good for there health. Therefore, after which company make an efforts to improve its
operation and process by minimizing the use of chemical, cutting only those trees which were
free to cut by the government. They have also started manufacturing various eco-friendly
products by stop using the use of the plastic boards and various chemicals.
Objective
 To understand the Ethical procurement practices- Company one of the main objective is
to understand the various Ethical procurement practices imposed by the government on
the collect of raw material and manufacture of the product. According to Potocan and
Mulej, (2009) Understanding the ethical procurement practices will assist the company
top build up its various strategies for the manufacture and sale of the product taking into
consideration the various ethical practices. This in turn will also aid the company to built
up its brand image by manufacturing the eco-friendly products.
 Studying the concept of IWAY code of conduct that the suppliers of the raw materials
need to be followed- According to Bazin, (2013) IKEA has makes an efforts to study and
examine the concept of IWAY in order to build up its brand image in the mind of the
customers by providing various healthy and eco-friendly products. The concept of IWAY
that company need to follow environmental practices and social standards in order to
manufacture there products.
 Analyzing the various factors which are required for the establishment of the IWAY- In
order to again use various raw materials on which government imposed brand and to
again build the company brand image in the mind of customers which was lost due to the
use of chemicals in the manufacture of the product.
 Studying the IKEA's relationship with its customers and suppliers- in order to establish
company's brand image IKEA aims to study the relationship between customers and the
suppliers. Studying the relationship between the two assist the company to the brand
awareness of the company in the mind of the customers and the suppliers. It also aid the
company to know whether the supplier are enough capable of delivering the raw material

on time or not. It also assist the company to know whether the customers and suppliers
are happy with the company or not.
Problem faced by the company
According to Janta, (2012) there are various problem faced by the company at the manufacturing
of its products due to the impose of various band by the government on the cutting of the trees.
Government claims that company is cutting old traditional trees for manufacturing of there
products which are band by the government. Government also claim that company is using
plastic boards in the manufacture of the product which are harmful for the health of customers.
After the claim of the government company brand images, profitability margin and working of
the company was badly affected. Supplier of the company has stop delivering the raw material
which in turn company need to face shortage of supply.
Necessary measures taken by the company
According to MacDonald, (2013) IKEA has now became one of the largest manufacture of the
furniture after the partnership made with Ram store supermarket. The reason behind this is that
company has started following various standards of IWAY in order to overcome various
problems faced by the company due to the impose of various claims by government. Company
has started manufacturing its products by following the various standards of IWAY. IWAY is a
set of environmental and social standards launched by the IKEA. Company have started using
various set of directives which was supplied by the supplier of the company. Those suppliers
who where not able to follow the set standards of IWAY was terminated by the company due to
non-compliance of IWAY standards. According to Taylor, (2014) Company has also started
manufacturing eco-friendly products taking into consideration the health and safety of the
individual customers. Company has stop using plastic boards and various chemicals which they
were using before for the manufacturing of the there products. Company has also started taking
into consideration the advantages , disadvantages and ways in order to strengthen the relationship
of the company with its customers and suppliers.
CONCLUSION
The following report emphasis on the different responsibility of the company towards its
stakeholders. The report also conclude above the various issues faced by the company at the time
of the expanding its business to the Russia. Company has faced ethical dilemmas. It was not able
to decide whether to expand the business by follow the ethical principles or to expand by using

wrong practices. IKEA was facing problem from various government departments related to
electricity, tax, customs, health and safety. In order get the permission form various departments
company need to pay bribe to the various which in a crime in the eye of the law. Therefore, in
order to overcome this problem company has made the partnership with the Ram store
supermarket in order to expand its business in the Russia. Similarly, another problem which was
faced by the company was the band imposed by the government on the cutting of various
traditional trees. And another claim was that company was using plastic boards and various
chemical in manufacturing of the products. Therefore, in order to overcome this problem
company has started following various set standards of IWAY. Therefore, at last it can be
conclude that before expanding its business in the emerging market like Russia company should
closely examine the various rule and regulations imposed by the government on the entry of new
product and company in the market. Company should also closely analyses the economic market
condition in order to find out the need and wants of the customers and number of competitors
available in the market.
RECOMMENDATIONS
On the basis of above discussion it is concluded that firms face a lots of difficulties while
entering in to new market. In order to reduce such problems company should consider the
following suggestion:-
1. Companies must enter in to strategic partnership with other company. Due to this newly
entrant firm will receive a lots of guidance from other firm that is already present in the
that geographic area. In order to grow business it is necessary for the firm to satisfy
expectations of the stakeholders. Customer, employed and suppliers are the important
stakeholders of the firm. Without their support no firm can grow in the relevant industry.
2. Firm must prepare a strategy by following which it can satisfy needs of its stakeholders.
It is responsibility of the firm to make timely payment of debt to them. Hence, in order to
do so firm can prepare a cash management strategy. By preparing this strategy firm can
control cash inflow and outflow. In other words, it can also be said that by employing this
strategy firm can boost cash inflow and can curb cash outflow.
3. It is also recommended that when company face ethical dilemma then it must instead of
taking any illegal actions must formulate strategy that open an alternative route for itself.
By doing this can prevent itself from choosing an illegal path for growing a business.

While operating a business company has to follow many laws. Many times these laws
negatively affects firm in terms of cost. In such a situation firm must make an attempt to
find a way that it can follow in order to reduce its loss. Means that a tactic must be
formulated in such a way that lead to compliance of law and fulfillment of the company
interest.

REFERENCES
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Online