Ikea and the Natural Step

In 1996, IKEA's $5 billion in revenues made it the world's largest retailer of home furnishings. This case uses IKEA to analyze how large companies can retain their entrepreneurial roots and innovative capacities through various means, including the management of global networks of alliances, internal systems that encourage innovation, and a strong corporate culture. IKEA has extended its activities as an innovator through its incorporation of the Natural Step framework for assessing the ecological and social sustainability of commercial activity. The case lends itself to class discussions on entrepreneurship and innovation in large firms, environmentally responsible strategies and network ties, leadership, and corporate culture/values. Excerpt UVA-ENT-0030 IKEA AND THE NATURAL STEP In September 1995, Jan Kjellman took over as president of IKEA North America, the U.S. and Canadian subsidiary of the Swedish furniture giant. At IKEA's headquarters outside Philadelphia, Pennsylvania, Kjellman sat at his desk, located in an open, brightly sunlit bay. His assistant, also the service center office manager, sat at a desk a few feet away. Co-workers walked through one side of the bay, heading for the coffee room. On the landing below the president's office was a pedestal bearing a large gray rock. It was from the rocky and poor land in Älmhult, a small village in the province of Småland, Sweden, where IKEA's founder was born and where the design and production core of IKEA's business was still located. Kjellman pondered the success of his predecessor, Gorän Carstedt, who had moved back to Sweden to take responsibility for worldwide marketing and the European retail stores. Carstedt had turned the subsidiary around since 1991, increasing sales to over $ 700 million and moving the company to number three in the U.S. market. Kjellman was developing an agenda to build on that success. One important piece of that agenda was the company's environmental stance in North America. Over the past several years IKEA had articulated a strong environmental policy and was well into its implementation in the parent company. By incorporating environmental principles provided by the Natural Step (TNS) organization in Stockholm, IKEA had developed its own environmental statement, policies for product design, supplier relations, and operations, as well as educational materials for consumers in the retail stores. TNS was an educational organization that offered a practical guide to companies wishing to limit their adverse effects on the natural environment (see Appendix). The three co-workers trained by TNS had returned to North America and trained people in the retail stores, and discussions had begun with certain North American suppliers about the company's environmental values and TNS principles. . . .