Case Study on Ikea Ethics For Managers

Question: Discuss about theCase Study on Ikeafor Ethics For Managers. Answer: Introduction Business ethics is an integration of the core components of the philosophy of ethics with the various business activities and the functioning of the organization. It includes the various decisions made in production as well as the distribution of the services and physical commodities being sold by the company. The effective utilization of the goods and service too comes under the purview of the code of ethics that is essential to generate good will and ensure the continued success of the business entity. IKEA has a tradition of appearing to follow a decentralized management style. However, appearances tend to be deceptive and the final decisions are all made by Ingvar Kamprad, the founder of the company (Milne, 2013). Objective The primary objective of the study is to identify the various ethical issues being faced by IKEA in order of priority and identify how the most significant among them has been addressed by the company. The Most Significant Ethical Issues IKEA has Faced in the Past Among the list of ethical issues faced by IKEA in the past, the one that stands out is the ability to maintain its strong sense of identity and culture that has been part f the company image since its inception more than 70 years ago. The significant changes in the manner of conducting business as well as the various socio-cultural differences that it needs to tactically handle as part of its international growth are issues that have been at the forefront of the organizations ethical dilemma. Key decision makers in any business, managers regardless of their level in an organization need to ensure that they need to function within the parameters set by law as well as ensure that the interests of all stakeholders are honored to the best possible manner (Iqbal, et al. 2012). Managers, by virtue of their role in the organization are the interface between management and staff as well as between company and stakeholders (Scandelius and Cohen, 2016). This unique position often puts them in position where they need to be held accountable for their various decisions made on behalf of the company or for enforcing decisions made by the top management. The manager in any organization is thus in a position to ensure that he continues to be the face of the company by advocating the expected code of ethical conduct, but also in ensuring that the same is reflected in all levels of the organization. The code of business ethics thus needs to be applied not just to the organization but also to each and every individual member who is part of the company regardless of his role in the functioning of the business. Thus, the company has always operated on a uncompromising code of conduct as laid down by Kamprad, who despite his advancing years and the passive role in the day to day functioning of IKEA has always ensured that the ethical code of conducting business be adhered to at all times. While the organization has had to deal with matters like poor quality of merchandise as well as shortfalls in customer service, the genius and thinking of Kamprad has stood the business in good stead, in all their expansion and growth plans. He has ensured that while the baton has been passed on and each of his sons' is serving in a position of power, the final word always remains his. Despite his rather laid back approach, Kamprad has been able to correct many of the mistakes made through measures like a surge in the opening of new stores without adequate time and effort put in to ensure its economic viability. He has been able to tone down the aggressive approach and push IKEA into an expansion- consolidation-growth-consolidation expansion strategy instead of the exclusive importance given to expansion alone. Impact of Vision, Mission and Code of Practice on Business Ethics at IKEA IKEA has a strong foundation and a clearly laid out vision and mission. The code of business ethics in the organization has been followed since its inception and is well defined. By communicating these to all stakeholders, particularly newer employees, the company would be able to ensure that the business does not have to face issues similar to that faced by it in the past (Jonikas, 2012). This includes the sudden surge of expansion and new stores that have been a significant dent on finances, without being able to substantiate the investment through returns. Furthermore, the loss of brand image bought about through concerns with regards to poor merchandise and the quality of customer care are also equally important. All Swedish companies including IKEA are committed to ensuring that the business uses the best of raw materials and practices to ensure consistency and durability in the product line, thus ensuring that the business continues to flourish at all times. When considering this disclosure from an ethical perspective, it seems obvious that business ethics is what sets apart the giants from the masses. Just as each society makes and enforces its own laws and regulations, so too do all successful organizations. The only difference being that the laws of the organization are subject to the laws of the host country but not vice versa. Thus, any organization like IKEA which operates in several countries always faces a moral dilemma since its business ethics may not be consistent with the laws of each host country. Management is thus faced with the primary responsibility to understand as well as implement ethical behavior as per the companys code of conduct but also ensure that it remains within the legal boundaries of the host country. For instance, companies operating in the Middle East would ensure that their employees respect the code of conduct of the local host country and not conduct business as it would be done in Europe or America. IKEA and Carrolls Four Part Model of Corporate Social Responsibility The four part model refers to the legal, economic, discretionary and ethical expectations that society places on business organizations, which lays the foundation to frame the responsibilities of the organization to the society at large (Carroll, 1991). The economic responsibilities refer to economic considerations like creation of jobs and timely payment of taxes that society expects from all business entities. Profits are rewards given to the business for fulfilling its economic responsibilities. Legal responsibilities refer to the legal framework of a country within which business entities operate. This includes compliance with state, federal and local regulations and fulfilling all legal obligations to society. Ethical responsibilities include embracing practice and standards not laid out in the letter of low. For instance, the Arabian countries are not extremely keen on negotiating with women and all companies operating there respect this despite there being no laws in this rega rd. Discretionary responsibilities include corporate philanthropy through various measure that help give back to the local community that natures the business. This could be through medical drives, medical camps, community service and so on. At IKEA, the company takes its social responsibility seriously and the economic responsibilities are fulfilled by ensuring that natives form host countries are employed in all stores across the world. On the legal front, IKEA is committed to ensuring that it does not trespass or violate the legal norms set in place b the host governments. It continues to honor all legally binding regulations and local laws in all countries of operations. The ethical initiatives include the measures put in place to reduce carbon footprints, initiatives to protect the environment and so on that are not mandated by several governments but continue to be part of the ethical practices followed at IKEA. The discretionary responsibility at IKEA refers to the various initiatives like the building of a Syrian home in its flagship store so as to spread awareness and build up a sizable collection for refugees in war torn Syria (Garfield, 2016). Classification of IKEAs Key Stakeholders According to the Stakeholder salience theory by Mitchell, Agle and Wood; IKEAs key stakeholders may be classified on the basis of their relationships attributes. The three key attributes that are considered are urgency, legitimacy and power (Mitchell et al, 1997). They state that since it is not possible to satisfy all stakeholders simultaneously, the crisis type based on the above classification would help crisis managers give appropriate weight age to each stakeholder. At IKEA the key stakeholder would be the shareholder, the employees, the suppliers and the end customers. Based on the Stakeholder Salience Theory, urgency must be accorded to suppliers without whose support production lines would dry up. However, power rests with employees and they must be provided for as well as included in all important decision making to ensure that the smooth functioning of the company are not affected. The legitimacy, on the other hand, remains with the stakeholders and the top management who m ake the financial and other major decisions for the company. Crisis management is an important aspect of business management and continues to influence the working of organizations since this core skill is needed to ensure smooth functioning at all times (Iqbal, et al. 2012). The crisis management group would evaluate the weight age to be accorded to each group listed above and fulfill their aspirations in the order of priority. Generally the maximum priority is given to suppliers and employees since their co-operation is essential for the smooth functioning of the organization (Iqbal, et al. 2012). IKEA and Sustainability Sustainability at IKEA is intrinsically linked to the manner in which the age old traditions and ideology can be comfortably lined to the modern methods of doing business. Trust is the primary factor that is essential in all dealing with customers, both internal and external. The management must ensure that it is transparent and follows a more participative management style, while continuing to espouse the ideology of Kamprad. Managers are tasked with the responsibility to understand the business ethics of the organization and practice ethical behavior in line with organizational philosophy. Their responsibilities include leading by example and eliminating ambiguity that is part of the ethical practices for multinationals. Sustainability is a key consideration with all Swedish brands and IKEA is no exception (Gad and Moss, 2008). They look forward to the strategic advantages that sustainable practices help them achieve as well as the methods by which this advantage can be converted i nto profits and goodwill (Neville, 2016). Social responsibility, ethical behavior, conformance to local laws and regulations as well as ethical practices, is just some of the commonly seen traits with all Swedish brands including IKEA (The IKEA group approach to sustainability, 2016). IKEA has reaped several benefits from the various sustainability initiatives in place including the high standards of quality that are intrinsic to the company image and brand name. The furniture style is bold with classical and timeless lines that ensure that the furniture stays in fashion even after countless years. The durability and the timeless nature of its products are just one of the advantages of IKEA furniture. The same is reflected in the sustainability practices at IKEA and includes its commitment to be relying completely on only renewable sources of energy by 2020 (Holder, 2016). The company has made significant investments in solar panels and wind farms worldwide to ensure that its meets this commitment on time. In addition, this initiative by IKEA also helps place it away from the vulgarizes of being at the mercy of electric companies to improve its production schedules. The ideology is inculcated in employees who are also adopting the measures to ensure that the compa ny achieves its objectives on time and thus fulfils its commitments to society and environment (Kelly-Detwiler, P. 2016). Ethical Communication and Practices at IKEA The negative or positive impact on stakeholders in any business is personified by the behavior of the managers. Activities, policies and objectives of any business organization would have a positive or negative impact on its stakeholders, including owners, employees suppliers customers, retailers, distributors, shareholders ad the local community. Civil rights groups, civic authorities, local and state governments, labor unions, special interest groups and environmental groups are also impacted by the working of the business. Unethical practices tend to have far reaching implications on all stakeholders regardless of the depth of their association. The saving grace is limited to the depth of the association and therefore its impact. Organizations like IKEA need to be ethical in all its communications and practices to ensure that such a potentially dangerous situation does not arise (Scandelius and Cohen, 2016). Being in the business of furniture, IKEA is known for its solid, classica l lines and strength of furniture. Thus, any issues regarding lack of quality would impact the international image of the company and not just a local store where the issues have come to light. The major issues that have been seen at IKEA have occurred when communication lines within the organization were flawed. Thus, it goes without saying that ethical communications and polices are the key factors to be considered when looking at business ethics at IKEA. While ethical dilemmas continue to be a matter of concern, the open and transparent two way communication being enforced in the company lately is a positive step towards ensuring that the framework for dealing with the various issues that may arise is in place. Recommendation for Future Business Practices Based on the analysis of previous issues faced by the company as well as the possibility of potential problems that may arise in the coming years the following recommendations have been made for IKEA The company must communicate its mission, vision, objectives and code of ethical practices to all employees. This practice must be completed as part of the HR training and included in all refresher training modules as well. Thus, the negative fallouts of following practices that are not in line with company policies, missions, vision and objectives is eliminated. The expansion and growth must adhere to company standards and policies. There should be no attempt to chase numbers without consolidating the position of the company at all times. Thus, it means that regardless of the urge to show a higher figure, the company must follow its tried and tested success formulae of gradual expansion rather than running to capture markets without consolidating its position in established markets. The same ideology and vision must be depicted by all employees of IKEA regardless of the length of their association with the company or the role that they play within the organization. By ensuring that the company is able to ensure consistency in the rand image of the organizational across all verticals as well as all areas of operations, IKEA is ensuring that there is no possibility of errors or fallouts like poor customer service or product supply. While factors like health benefits and pension plans have certain mandatory levels set by various host countries, IKEA would be better placed by ensuring that it follows a universal plan for all its employees regardless of the country of operations. This would ensure that the organization is able to retain employees who would have the best interests of the company at heart. This would not only eliminate several redundancies like shrinking employee loyalty and high attrition ratio, but also ensure that the company enjoys a high employability index globally. This simple initiative would help signal that IKEA believes in practicing ethical practices and expects the same from all employees across the board. Conclusion An efficient manager needs to ensure that he is acting ethically and legally. There exist several parallels between business ethics and the legal framework that they tend to complement each other beautifully. While some of the ethical practices include respecting human rights and avoiding the use of child labor; other not so clear cut decisions include the impact on various key stakeholders, level of corporate social responsibility to the practice and the cost-benefit analysis for stakeholders as well as the business. The success of IKEA is linked to its ability to ensure that the organizational philosophy and code of business ethics reflects the company ideology, vision, mission, objectives and philosophy as well as by being in line with the laws and regulations of the host country. References Anon, (2016).The IKEA group approach to sustainability. [online] Available at: https://www.ikea.com/ms/en_KW/pdf/sustainability_report/group_approach_sustainability_fy11.pdf [Accessed 21 Dec. 2016]. Carroll, A. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders.Business Horizons, 34(4), pp.39-48. Gad, T. and Moss, S. (2008). 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