Augusto Manuel Legaspi Delfin

12/30/2023

Assembling Success: A Business Diplomacy Analysis of

IKEA's Global Operations

I. Introduction

In the dynamic realm of global business, some companies stand out not just for
what they sell, but for how they navigate the complexities of our interconnected
world. IKEA, born in Sweden in 1943, is one such company. It's not just a furniture
store; it's a global force known for its affordable, well-designed products that have
found a place in homes worldwide.

Ikea's Mission and Objectives

IKEA's mission goes beyond selling furniture. They want to make life better for
everyone—customers, employees, and communities alike. But achieving this mission
on a global scale isn't just about designing trendy sofas. It involves a unique form of
diplomacy, a way of doing business that adapts to different cultures, markets, and
the expectations of the people they serve.

Significance of Diplomacy
This paper will take a closer look at IKEA's behind-the-scenes diplomatic strategy. It's
about how they organize themselves internally and how they deal with everyone from
local communities to global leaders. In a world where what happens in one part of
the globe can affect us all, understanding how IKEA diplomatically handles its
business is key to appreciating why it's a giant in the furniture retail world.

This paper will outline IKEA’s organizational structure, how they engage with people
(both inside and outside the company), what markets they're in, and how their way of
doing business influences not just their bottom line but also the world around them.
IKEA’s business strategy entails not only providing trendy designs and assembling
furniture; it's about understanding how IKEA puts together success on a global scale.

II. Organizational Structure and Strategic Stakeholder Diplomacy Analysis

IKEA is owned and operated by a complicated array of not-for-profit and for-profit

corporations. The corporate structure is divided into two main parts: operations and
franchising.
INGKA Holding B.V., based in the Netherlands, owns the Ingka Group, which takes
care of the centers, retails, customer fulfillment, and all the other services related to
IKEA products. The IKEA brand is owned and managed by Inter IKEA Systems B.V.,
based in the Netherlands, owned by Inter IKEA Holding B.V. Inter IKEA Holding is also
in charge of design, manufacturing and supply of IKEA products.

For the purpose of this analysis, this paper will focus on the role of the Inter IKEA
Group, as it is responsible for the company’s brand and as such is the main entity in
charge of engaging with IKEA’s stakeholders.

Figure 1: Inter IKEA Group Management Structure. Data taken from

https://www.inter.ikea.com/

As seen in Figure 1, the organizational structure of Inter IKEA Group is centered

around the Inter IKEA Group Management Team, which holds a pivotal role in making
holistic decisions that impact all entities within the Inter IKEA Group. The team is
specifically tasked with transforming IKEA and ensuring the realization of ambitions
outlined in the IKEA Direction. This involves taking on the responsibility for critical
business development and innovation portfolios, particularly in the digital realm, with
a focus on alignment with the IKEA Direction and connected strategies.

The overarching assignment of the Inter IKEA Group Management Team

encompasses leading IKEA beyond its current business model. This includes
spearheading innovation efforts, supporting the long-term development of the IKEA
franchise systems, and enhancing the value chain. The team also governs formal
responsibilities, providing common strategies, tools, and plans of action to guide the
organization in its strategic endeavors.

In practice, the organizational structure reflects IKEA's interconnected

decision-making, ensuring decisions are aligned with the broader IKEA Direction. The
implementation of the franchise offer is a key aspect, emphasizing the team's role in
translating strategic plans into tangible actions. Notably, a strong emphasis is placed
on digital projects, reflecting the organization's recognition of the importance of
digital innovation in today's business landscape. The structure underscores a
collaborative and forward-looking approach, aiming for sustained growth and
development in the long term.

Areas of Stakeholder Diplomacy

As a global corporation catering to consumers' furniture needs worldwide, IKEA
recognizes the essential need for a strategic stakeholder diplomacy framework.
Efficiently managing relations with various stakeholders across its operations is
crucial for sustained success. To develop a robust strategy for stakeholder
engagement, it is crucial for IKEA to identify and address issues in the diverse areas
where the company operates. With a commitment to transparency and
responsiveness, IKEA is actively involved in the following key areas:

1. Sustainability and Environmental Stewardship :

IKEA as a furniture company needs to have access to certain raw materials to
initiate its production of goods. In light of this, and in order to build trust with
its various stakeholders, IKEA must demonstrate a commitment to
sustainability. It can continue to advocate for environmental conservation,
renewable energy, and responsible sourcing of materials. This could include
initiatives to reduce carbon emissions, promote circular economy practices,
and minimize waste.
2. Affordable Housing and Social Responsibility :
Given its mission to create a better everyday life for the many people, IKEA
can advocate for affordable housing solutions. This could involve supporting
housing projects, partnering with NGOs, or contributing to initiatives that
address homelessness and inadequate housing globally.
3. Ethical Labor Practices :
As a multinational corporation engaged in large-scale production, IKEA relies
on access to global labor markets. With this expansive reach comes a crucial
responsibility for the equitable treatment of all employees involved in its
operations. In light of this, IKEA has a unique opportunity and obligation to
champion fair and ethical labor practices on a global scale. This advocacy
encompasses a commitment to ensuring fair wages, promoting safe working
conditions, and upholding human rights standards throughout the entirety of
its extensive supply chain.

IKEA’s dedication to these key areas can clearly be seen when looking at its
management structure. As seen in Figure 1, it has dedicated roles for
communication with stakeholders and assessing the corporation’s progress towards
the implementation of sustainability measures. The communication manager and
sustainability manager are put in charge in order to make sure that the company
meets the goals outlined above. In addition, IKEA’s appointment of a people and
culture manager highlights their commitment to establishing positive relationships
with foreign governments, institutions, and other entities that are involved in or
affected by their operations.

III. Defining IKEA’s Market

IKEA operates on a global scale, serving diverse markets across continents. The
company's mission is to offer well-designed, affordable furniture to people
worldwide. From established markets in North America and Europe to emerging
markets in Asia and Latin America, IKEA's expansive reach is designed to cater to a
broad and varied customer base.

In navigating diverse regions, IKEA encounters a spectrum of political, economic, and

cultural landscapes. Adapting to regulatory frameworks, economic conditions, and
cultural nuances is crucial. Political stability, economic dynamics, and cultural
preferences all play into the strategy of ensuring IKEA's products resonate with
customers and comply with regional expectations.

IKEA is presented with numerous opportunities, including expanding into new

markets, embracing e-commerce trends, and taking advantage of the increasing
demand for sustainability. However, challenges such as regulatory compliance,
cultural adaptation, and managing a complex global supply chain must be navigated
adeptly. Striking the right balance between leveraging opportunities and mitigating
challenges is pivotal for IKEA's sustained success in the global marketplace.

IV. Stakeholder Identification and Engagement

Figure 2: Stakeholder Map

In engaging with stakeholders, it is essential for IKEA to be able to effectively map

out the parties most relevant to its operations. As seen in Figure 2, IKEA’s primary
stakeholders are composed of its employees, customers, suppliers, communities
(most importantly local communities, government, and civil society), and
shareholders. Additionally, the areas of interest in which each stakeholder is
concerned are specified. The impact of each category is also explained. Using this
data, supplemented by robust communication, IKEA can effectively determine which
initiatives to pursue with respect to each of the concerned parties in order to foster
positive relationships with its stakeholders.

Figure 3: IKEA’s ESG Initiatives

Using the data collected as shown in Figure 2 enables IKEA to come up with the
appropriate initiatives in order to address the concerns of its stakeholders. ESG
(Environmental, Social, and Governance) metrics were used to determine the
appropriate measures to implement in order to build trust with IKEA and its
stakeholders.

As shown in Figure 3, special attention must be given to implementing ethical

business practices, corporate responsibility, product safety and ethical sourcing, and
ethical leadership and anti-corruption efforts, as these concern the majority of IKEA’s
stakeholders. Furthermore, IKEA must look into implementing policies to ensure
sustainable sourcing and supply chain practices, employee welfare and labor
practices, safe working conditions, and transparent financial reporting and
governance.

V. IKEA in the Retail Industry

IKEA holds a distinctive position as a leading player in the global retail industry,
specializing in DIY and affordable furniture. Operating in diverse markets, both
established and emerging, IKEA competes to address varied consumer needs. To
enhance its strategic diplomacy, IKEA leverages sustainability, committing to
eco-friendly practices, responsible sourcing, and reducing its environmental
footprint.

This focus not only differentiates IKEA in the retail space but also aligns with
increasing consumer demand for environmentally conscious products. Recognizing
the shift in consumer behavior, IKEA has adeptly integrated e-commerce into its
operations, ensuring a comprehensive presence in both physical and digital retail
realms.

Strategic Diplomacy Tools used by IKEA

In addressing the needs and interests of its various stakeholders, it is important for
IKEA to understand which measures or tools can be taken in order to implement the
initiatives described in Figure 3.

1. Implementing Ethical Business Practices

- Implementing a robust Code of Conduct is fundamental, outlining
ethical expectations and principles for all stakeholders. Regular ethical
audits, conducted through a structured and independent review
process, allow IKEA to assess compliance levels and identify areas for
improvement. Ongoing training programs on ethical standards ensure
that employees remain informed and aligned with IKEA's ethical
guidelines.
2. Corporate Responsibility and Product Safety
- Ensuring corporate responsibility and product safety involves a
proactive approach. Employing a risk management methodology
allows IKEA to systematically identify, assess, and mitigate risks
related to corporate responsibility and product safety. Implementing a
product life cycle methodology ensures continuous monitoring of
products, assessing and addressing safety concerns throughout the
entire lifecycle, from design to disposal.
 3. Ethical Sourcing and Supply Chain Practices
- To address ethical sourcing and supply chain practices, IKEA can utilize
supply chain visibility tools. These tools provide real-time insights into
the entire supply chain, enabling proactive identification of ethical
concerns and facilitating swift corrective measures. Blockchain
technology, integrated into the supply chain, adds an extra layer of
transparency, allowing stakeholders to trace the origin and journey of
products.
4. Ethical Leadership and Anti-Corruption Efforts
- Promoting ethical leadership and anti-corruption involves a cultural and
systemic methodology. IKEA can establish a culture of transparency
and accountability through an Ethical Leadership Development
Program. Implementing an Anti-Corruption Program, guided by ESG
standards, involves risk assessments, ongoing monitoring, and
reporting mechanisms to detect and prevent corruption within the
organization. Furthermore, IKEA can implement whistleblower
protection platforms. These tools offer secure channels for employees
to report ethical violations without fear of retaliation. Additionally,
anti-corruption software aids in monitoring financial transactions and
identifying irregularities, reinforcing IKEA's commitment to ethical
leadership.
5. Sustainable Sourcing, Employee Welfare, and Transparent Governance
- To address sustainable sourcing, employee welfare, and transparent
governance, IKEA can embrace a sustainability-driven methodology.
Conducting regular Sustainability Impact Assessments enables IKEA to
gauge and manage its environmental and social impact. Prioritizing
employee welfare involves implementing a Fair Labor Practices
methodology, ensuring compliance with labor standards and promoting
a safe and supportive working environment.

VI. IKEA’s Commitment to Sustainability

IKEA is deeply committed to sustainability, integrating eco-friendly materials and
energy-efficient practices across its operations. Embracing circular design principles,
the company prioritizes product longevity, repairability, and recyclability to minimize
waste and promote sustainability. Encouraging ethical consumption, IKEA inspires
customers to make environmentally conscious choices and empowers individuals
through educational initiatives.

Beyond operations, IKEA's sustainability commitment extends to community impact,

engaging in local environmental projects for a healthier and more sustainable world.
In essence, IKEA's stand on sustainability is reflected in its practices, products, and
contributions to a responsible future.
How does this affect global progress towards sustainability?
IKEA's sustainability initiatives may have a notable impact on a global scale. By
prioritizing eco-friendly materials, energy-efficient practices, and circular design
principles, IKEA contributes to reducing the environmental footprint associated with
its products. This commitment influences global sustainability by setting a
precedent for responsible business practices within the retail industry.

The embrace of circular design principles, emphasizing product longevity and

recyclability, plays a crucial role in global waste reduction efforts. IKEA's efforts to
minimize waste align with broader sustainability goals, positively influencing how
businesses around the world approach product lifecycle management. IKEA's
promotion of ethical consumption fosters a global culture of sustainability. By
encouraging customers to make environmentally conscious choices, the company
contributes to a shift in consumer behavior, influencing purchasing patterns and
creating demand for more sustainable products on a global scale.

In summary, IKEA's reach, influence, and commitment to sustainability position the

company as a catalyst for change on a global scale. Its actions and initiatives have
the potential to inspire industry standards, consumer choices, and corporate
responsibility practices, contributing to a more sustainable future worldwide.