L2. Long-Term orientation and Sustainability

Question 1

Ikea Opening

Answer 1

2018: Opening of the first Indian Ikea, after 12 years of negotiations. Full foreign ownership, provided that products are sourced at least 30% of from local sites (“Buy Indian”; currently 19%).

Question 2

India’s household items market

Answer 2

is expected to be €30 billion by 2022. Ikea has already invested €4.5 billion in India.

Question 3

Adaptation

Answer 3

• In-house team of 150 people to help customers put products together.
• Chicken and vegetarian variations of its meatballs to account for religious beliefs. The restaurant (1,000 places) is the largest in the world.
• Textiles have brighter colours and busier patterns.
• Focus on value-for-money items and lower prices than elsewhere. (e.g. 200 products priced at less than 2.50 euros)
• Separate pricing for product, delivery, and assembly/installation.

Question 4

Future plans:

Answer 4

• Openings in Mumbai (2019), Bangalore, and Dheli (2020) and a total of 25 new stores by 2025, including city stores in small format.
• Introducing e-commerce in 2019.
• Hiring over 20,000 people by 2025.

Question 5

Stakeholder Theory

Main claim

Answer 5

companies are not solely managed in the interests of their shareholders, as a range of groups - stakeholders - have a legitimate interest in the company; mostly strategical
• CSR: about the what of social issues (the company decides which are its responsibilities).
• Stakeholder theory: about the who of social issues (the company answers requests by stakeholders).

Question 6

Who are the stakeholders?

Answer 6

Freeman (1984): A stakeholder “can affect or is affected by the achievement of the organization’s objectives”.
Hill & Jones (1993): Stakeholders are “constituents who have a legitimate claim on the firm”.

Question 7

Three forms of the stakeholder theory

Answer 7

• Normative: the interests of stakeholders should be respected for their own sake (moral reasons).
• Descriptive: whether and how companies take into account the interests of stakeholders (e.g. which stakeholders are more influential)
• Instrumental: taking into account the interests of stakeholders is beneficial for the company (business reasons)

Question 8

Corporate Citizenship

Answer 8

Extended view: a company’s intervention in social issues alongside governments and civil society; mostly political, complementary roles of companies and governments.
Or, a synonym of philanthropy (giving back to society) or CSR (being a good neighbour).

Question 9

Why social issues are not only an issue for governments

Answer 9

• Governments are retreating from some public services (e.g. transportation, water provision, telecommunications).
• Some governments do not address social needs, due to lack of resources or state failures (e.g. building roads, infrastructure, schools).
• Certain social problems are not within the reach of single governments (climate change, financial markets, internet privacy).

Question 10

Areas of CC: Social Rights

Answer 10

The positive rights that should allow individuals to participate in society (e.g. right to education).
Role of CC: provider/ignorer. (e.g. companies providing education, health care, welfare..)

Question 11

Areas of CC: Civil Rights

Answer 11

The negative rights that give individuals freedom from abuses and interferences from the government or others (e.g. freedom of speech)
Role of CC: enabler/disabler. (e.g. companies that refuse to help governments spy on citizens)

Question 12

Areas of CC: Political rights

Answer 12

The right to vote, hold office, and participate in the process of public governance.
Role of CC: channel/blockage. (e.g. Citizens asking a company to act (e.g. against climate change) when the government does not intervene.)

Question 13

Implications of CC: Corporate accountability

Answer 13

A company is accountable (answers for its actions) to stakeholders, similarly to government’s accountability to citizens.
Stakeholders themselves can make a company accountable by reacting to its decisions (e.g. consumers through purchasing).

Question 14

Implications of CC: Corporate transparency

Answer 14

The extent to which a company makes its decisions, policies, activities, and impacts visible to stakeholders.
Tools: reporting, external auditing, stakeholder dialogue, stakeholder partnerships.
Measurement: disclosure, clarity, and accuracy.

Question 15

Sustainability definition

Answer 15

Origin: “sustainable development”: strategy of social development that meets the needs of the present generations without compromising the ability of future generations to meet their own needs (Brundtland Report, 1987). Crucial idea: Intergenerational equity.

Question 16

Roots of sustainability: environmental management

Typical problems:

Answer 16

• climate change
• planetary boundaries
• depletion of natural resources (e.g. fisheries, forests, etc.)
• dependence on non-renewable resources (e.g. oil).

Question 17

Broader view: Triple Bottom Line

Answer 17

Environmental performance (Planet)
Economic performance (Profit)
Social performance (People)

Question 18

Environmental performance (Planet):

Answer 18

The effective management of physical resources so that they are conserved for the future. Thus, finding ways of limiting pollution, emissions, waste, and excessive use of resources.

Question 19

Economic performance (Profit):

Answer 19

Develop, make, and market products in ways that:

• secure long-term economic performance of the firm (e.g. avoid excessive risk)
• preserve the long-term functioning of markets (e.g. paying taxes or avoiding paying bribes)

Question 20

Social performance (People):

Answer 20

The preservation of long-term stability of social and political institutions. (e.g. social justice)