IKEA's Environmental Practices: Making Good Business Sense

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Case Details:

Case Code : BECG065
Case Length : 20 Pages
Period : 1992-2006
Pub. Date : 2006
Teaching Note : Available
Organization : IKEA
Industry : Furniture Retailing
Countries : Sweden

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

The majority of IKEA furniture was made from wood, which the company sourced from different countries. IKEA's business had earlier involved the large-scale cutting of trees, which had resulted in an environmental imbalance. There was also a widespread use of chemicals in the manufacture of furniture. In its efforts to minimize the harmful impact it was having on the environment and to conserve forests, IKEA introduced stringent rules for business partners regarding procurement of wood and forest management.

IKEA's suppliers who were spread across the world were required to adhere to a set of environmental and social standards that the company had established. The standards included requirements specified for procuring wood, bamboo, and rattan, maintaining environmental balance, and waste disposal.

IKEA also issued a set of directives regarding forestry, where the details regarding procuring wood from well-managed forests were specified. Commenting on IKEA's environmental practices, Rene Hausler (Hausler), Partner in IKEA San Diego franchise, said, "I think we're all beginning to see that there is no longer an endless supply of natural raw materials on our planet...

Background Note

IKEA was established in 1943 by a youngster of 17 called Ingvar Kamprad (Kamprad). Kamprad came up with the name IKEA by combining the first letters of his name (Ingvar Kamprad with the first letters of the farm and village in which he grew up (Elmtaryd and Agunnaryd). IKEA began in a shed that was just two square meters in size.

Kamprad started his business by buying pens, Christmas cards, matches, cigarette lighters, nylon stockings and other items in bulk. He sold these items to the residents of Smaland5 at a reasonable price, but still made healthy profits. To save more money, Kamprad used the trucks that delivered milk to transport his packages. IKEA soon started making money. In 1945, Kamprad started promoting his business through mail order catalogs as conducting individual sales calls had become impossible because of the volume of business. Furniture was introduced in IKEA's product portfolio in 1947. By 1951, the furniture sales had increased so much that Kamprad decided to discontinue all other products and to concentrate solely on selling furniture that was stylish, yet low priced...

Excerpts >>

5] Smaland literally means 'Small Country.' It is a province in southern Sweden.


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