The “Staircase Model” Of IKEA Company

IKEA was first founded in 1941 as a one-man mailing business in a small farming village in the southern part of Sweden. The founder of IKEA, only being a 17-year-old boy at the time transported his goods using a van to a local train station. Today IKEA has over 70 thousand employees 335 stores in 41 different countries and generates over 11 billion euros. IKEA’s concept first started in 1950’s where the combination of a catalogue market and a showroom where customers are able to interact with products. The most distinctive features of the products of IKEA being quality, functionality and low price, always trying to cut cost through utilizing and optimizing their resources. Further pushing themselves to provide better products for customers in a way to take the environment into account.

IKEA is a high-volume retailer that purchases its products from more than 1800 suppliers in 50 countries and understanding the power of communication and management of relationships with suppliers. IKEA has demonstrated CSR work within the operations in their global supply chain management with several years of experience in working systematically with CSR in the global supply chain, IKEA is recognised as one of the most proactive companies in this specific field that also holds a dominant position in its supply chain, like a lot of the larger companies in which it can influence its suppliers and has been increasingly engaging in building long term relationships with fewer suppliers. They have been increaingly becoming more proactive in setting a standard by which manufacturers must meet to be one of IKEA’s potential suppliers, demanding a certain level of quality, price, service, environmental and social responsibilities. This is IKEA’s “staircase model”.

This approach looks at three areas in which IKEA needs to focus on to improve the performance of their suppliers. These include outside the environment, social and working conditions and wooden merchandise (only relevant to those manufacturers that produces wooden products) it has made the selection process more tough. Which may be a key reason to why IKEA chose to build long term relationships with their outstanding suppliers. IKEA has taken actions and initiatives towards providing children educations, protection and awareness campaigns relating to woman empowerment, they have also geared themselves in the direction of creating environmentally friendly products that utilises as much renewable and recyclable materials as possible. Given the size of IKEA, it is very possible for them to play suppliers against each other by creating competition between the parties, but IKEA has chosen a route that utilises CSR, this includes them forming long term business relationships with its suppliers by signing long term contracts. It’s also evident that because of IKEA’s tough selection process, they are running into issues in regard to the pool of suppliers they are able to choose from, this in turn raises the question to whether this act from IKEA goes beyond simple philanthropy or are they steering themselves in this direction due to the lack of suppliers they can get a hold of?

Based on the information provided, it can be viewed that IKEA is conducting these acts of reinsurance towards their suppliers as simple philanthropy which benefits IKEA more than anyone else since it minimises the chances the suppliers will stop supplying and possibly causing issues regarding their sales. These types of actions towards companies supply chains are widespread within large scale companies because they have more power to manipulate the chains. Therefore, they are more susceptible to negative publicity about social or environmental conducts in their supply chain which raises more questions to whether IKEA is doing everything purely for philanthropy, taking Carroll’s pyramid of corporate social responsibility into account. This concept looks at 4 different areas to social responsibility, one being “philanthropic responsibilities” this entices organisations to be good corporate citizens and to contribute resources to the community such as educations, arts etc. although IKEA has contributed to the education of those children in third world countries, there has been claims before this that one of IKEA’s supplies have been utilising child labour in sweatshops, a major supplier in India that supplies carpets. Due to this, IKEA was placed into a position where they had to cut off that major supplier which heavily effected the operations of IKEA as well was giving IKEA a bad name. When asked, their justification towards the question “So, first of all, why children?” is that they are a “family-oriented company” and that “children are very important to IKEA as a company”.

Child labor and sweatshops may come off as negatives at first glance, but they are arguably beneficial to the workers and not only the factory owners, one may argue that taking away these sweatshops will deprive workers of income and increase the total cost of factory owners. Regarding their woman empowerment acts, IKEA proposed a framework that had the three elements, process, dimensions of empowerment and intervention required at each level. Process refers to the transform of power between men and woman among different social groups, dimensions of empowerment is the encompassing of woman’s multiple roles and interests.

Finally, interventions required at each level whether its an individual, household or community etc. stating that these have an accumulated effect on the position of woman. Suggesting that the empowerment along with the inclusion in society, political and legal actions will help women prioritise their needs and interests. But, with the layout of events, it seems that IKEA is doing so to save face and clear their tarnished name. Purely an act of philanthropy. Although some of IKEA’s CSR movements are just for philanthropy, they are still very resolute on CSR, and their environmental awareness also considers IKEA as one of the most proactive companies regarding CSR. By reducing the amounts of resources used in their products during manufacturing without jeopardizing the quality of their products. IKEA’s suppliers are expected to develop environmentally friendly products and follow ethical conducts throughout the production process. This act has contributed towards the minimising of harm to the environment. This movement takes is seen as beneficial to multiple parties as well as IKEA themselves and from this IKEA has gone above and beyond simple philanthropy as it greatly reduces the total damage done to the environment, keeping suppliers in check from conducting immoral activities such as sweatshops or child labor, while also making themselves out to be hero’s in the realm of CSR.