IKEA 's Strengths and Weaknesses Term Paper

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Total Length: 3257 words ( 11 double-spaced pages)

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Executive Summary

This report provides information on each of the following areas pertaining to IKEA’s organization, culture, ethical framework, revenue and so on. 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: 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 that is a factor in the firm’s ability to promote progressive ideals; 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; 3) focuses on how the firm differentiates itself from competitors, the strength of its financials, and accounting difficulties it is having in Europe; 4) focuses on the company’s positive organizational culture, and its commitment to people and diversity; 5) shows that IKEA has implemented a strong sustainability strategy in order to obtain its organizational goals; 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 engines like Alibaba and Amazon; 7) provides recommendations to enhance to the “experience” aspect of its retail outlets and the need to maintain its progressive platform in the 21st century.

Organization Background & Benchmarking

As Martenson and Servin (2002) point out, IKEA has used a “standard store concept” to facilitate the development of IKEA stores across 40+ different countries all over the globe. This standard store concept enables the organization to quickly build stores that are essentially all the same 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 to 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 as other organizational issues that are not related simply to build-outs and expansion. There is human capital at stake as well and the improvement and development of its human capital as well as its corporate social responsibility in the various regions around the world are essential factors that must be taken into consideration. Benchmarking analysis can be applied here as well.

As an organization, IKEA wants to be recognized around the world as a good and 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 environment 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 but also on providing its workers with the opportunity to create a better life for themselves. A number of points can be mentioned to this end to show how benchmarking analysis has led IKEA to offer incentives to its employees so that it retains its 100 percent score on the CEI and at the forefront of the more than 1000 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/travel assistance, adoption benefits, employee discount, employee-assistance program.

· Including in the employee medical plan gender reassignment surgery and other services.

· New minimum wage, retirement savings (401k)— IKEA offers a 401K plan and matches a portion of contributions. IKEA offers a 100% match on the first 4% of salary contributed, and a 50% match on the next 2% of salary contributed.

· 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).

Organization Background, Ethics/Legal, 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 a pre-condition for future growth certain 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 specifically.

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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) and the Rio Declaration on Sustainable Development (1992) as well as 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 situated 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 is evidenced by its 100% CEI score. It continues to advances causes and issues that are important to its nations’ peoples and to comply with ethical and legal standards regarding labor laws across the world.

Marketing, Financials & Accounting

IKEA markets itself according to the marketing mix formula and focuses on what differentiates the organization from its competitors—namely, its ability to provide “great design, quality and affordability for all” (IKEA Yearly Summary FY15, 2016, p. 2). Differentiation is one of the primary tools of a marketer to help bring consumers to its brand in a crowded industry: as Trout and Rivkin (2006) state, the marketer must “differentiate or die” (p. 2). IKEA has been able to do this exceptionally well by providing a unique shopping experience to consumers that is unlike any other in the furniture retail sector.

IKEA’s accounting policies have not always been as equally embraced as its marketing, however. Shen (2016) reports that in Europe, IKEA is under fire for seeking tax havens for its sales profit: “The Swedish furniture company has been accused of avoiding more than €1 billion in taxes over the past six years by Ministers of the European Parliament. The ministers are demanding an official probe into the companies tax practices.” IKEA’s accounting shows that it transferred billions of Euros from countries with high taxation rates (for instance, France, Germany, UK) into tax havens, where low or even no tax would have to be paid. IKEA reported a 2016 profit of nearly $4 billion and paid 822 million Euros in corporate taxes for that financial year on top of another 700 million Euros in property-levied taxes (Shen, 2016).

IKEA’s financials show that the fiscal year 2015 saw “strong sales, continued expansion and a 3.5 billion Euro net profit” (IKEA Yearly Summary FY15, 2016, p. 31). IKEA’s finances have benefitted from a strategy that focuses more on seeing returns from rental income on top of its core business. This has led to improved returns year over year for the organization: “In FY15, total sales translated into Euro increased by 11.2% compared with FY14, to €31.9 billion. Adjusted for currency impact, total sales increased by 8.9% and sales in comparable stores grew by 5.1%” (IKEA Yearly Summary FY15, 2016, p. 31). This increase has enabled the….....

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