World Resources Institute
Sustainable Enterprise Program
A program of the World Resources Institute
IKEA AND THE NATURAL STEP
Teaching Note Synopsis and Objectives
For more than a decade, WRI's Sustainable Enterprise Program (SEP) has harnessed the power of business to create profitable solutions to environment and development challenges. BELL, a project of SEP, is focused on working with managers and academics to make companies more competitive by approaching social and environmental challenges as unmet market needs that provide business growth opportunities through entrepreneurship, innovation, and organizational change. Permission to reprint this case is available at the BELL case store. Additional information on the Case Series, BELL, and WRI is available at: www.BELLinnovation.org.
In the fall of 1995, Jan Kjellman formally took over the reins of IKEA’s North American operations from Gorän Carstedt, who had been promoted to take responsibility for IKEA’s worldwide marketing and all European retail stores. Kjellman inherited a partially implemented strategy to incorporate the parent organization’s environmental policy into all operations and extend it into the firm’s network of suppliers. The case describes the company’s growth, entrepreneurial culture, and the upcoming challenge to the furniture-retailing industry’s practices. IKEA is the world’s leading furniture retailer and has set new standards for competitiveness in household furnishings. The company has achieved this position by redefining the roles and interactions between the firm and its customers and suppliers. Since 1991, corporate policies about the company’s impact on the natural environment have been integrated into the parent organization. Carstedt extended this strategy into the North American subsidiary. Concepts guiding this strategy had their origins in an alliance IKEA formed with an environmental educational foundation in Stockholm, Sweden, called The Natural Step.
This teaching note was prepared by Andrea Larson, assistant professor of business administration, Darden Graduate School of Business Administration, University of Virginia. Special thanks is given to the World Resources Institute for its support in this ongoing process. Copyright ©1998 World Resources Institute.
This case can serve a number of educational purposes, depending on the emphasis in discussion and the guidelines for student preparation. This note deals primarily with teaching the case in a course that highlights environmental concerns in business and the links between (1) leading through values and (2) achieving innovation and competitive advantage in turbulent environments. Students should discuss the differences between North American and European markets in environmental awareness and definitions of corporate responsibility. This conversation will help them better understand why IKEA’s environmental policies were significantly motivated by Scandinavian and European environmental regulations and consumer concerns. In addition, the principles of The Natural Step adopted and expanded upon by IKEA are a dramatic departure from typical U.S. corporate reactions to regulations and environmental pressures, which tend to be adversarial and defensive. IKEA’s success at turning environmental issues into competitive opportunities internationally offers students the chance to discuss creative responses to government policy and explore the possibilities for corporate innovation when values, culture, and competitive strategy are aligned. IKEA’s entrepreneurial initiatives in its industry need highlighting as well, which means that the case could also be used in a course on corporate entrepreneurship. The firm’s progressive environmental policies can be framed within the well-established leadership role IKEA has forged in household-goods retailing. IKEA is an example of a large, yet highly entrepreneurial firm, and the case offers insights into how large companies can...
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