IKEA in Saudi Arabia (A): Case Study

INTRODUCTION

Since the emergence of the global economy, companies/firms/organizations have easy access to new markets, which are lucrative and offer more opportunities. In the last two decades, many companies/firms have gone global in an attempt to swell their profit. In doing so, they have to amend their strategies and alter their policies, so that they could benefit (financially), from their operations. For instance, a company, which intends to operate in the foreign economy or sell products or services in a foreign market, must be aware 1) of its culture, 2) traditions, and 3) law. However, sometimes, it becomes very difficult to alter company policies, when there is a clash between the values of a company and the laws that prevail in that country, where it intends to sell its products or services.

In this given case too, we see that there is a clash of values, which has affected IKEA (Swedish company of origin).

Facts of the Case

1. 1. IKEA is a Swedish company, which sells furniture and other products in different markets (countries/economies) of the world.
   2. The company is known for its support for progressive ideas, such as 1) gender-equality and 2) Gay rights.
   3. IKEA signed the United Nations’ UN Guiding Principles on Business and Human Rights launched in 2011, which asserts that companies will not sell products and services in a manner that undermines human rights that have been recognized by the United Nations.
   4. Saudi Arabia is a conservative society, with stern laws and policies regarding women.
   5. To benefit from the lucrative market of Saudi Arabia, IKEA changed the advertisements, in which women were removed from all those advertisements (printed).
   6. The backlash was severe, and it affected its sales, especially in West.

IDENTIFYING AND UNDERSTANDING THE ETHICAL ISSUES

IKEA sells various kinds of products in international markets. For instance, it sells meatballs, its well-renowned product, in different parts of the world. However, in the Middle East, it sells halal meatballs. It suggests that IKEA changes its policy as per market reality. However, in the case of furniture, IKEA had to compromise on its Swedish values, which was not the case when IKEA was selling halal meatballs. Therefore, its decision, to take women out of the advertisements, became so controversial and sparked a stern reaction.

There are several reasons, which made this decision very controversial. Few of these are,

• • IKEA claims to be a company that believes in progressive ideas. It uses its value as a marketing strategy in Western Europe, which is why when it took women out of those advertisements it became a serious issue.
  • Saudi Arabia remains in the headlines for its policies regarding women. Therefore, when IKEA compromised on its core values, because of profit and pressure, it faced a strong reaction.
  • As IKEA was also a signatory to United Nations’ agenda regarding human rights; therefore, IKEA’s change in policy was a disappointment, and it was considered a betrayal.

1-POTENTIAL ALTERNATIVES

It is true that companies, which operate in international economies and markets, are very sensitive regarding the values and customs of that country. It takes measures to ensure that no such policy it must adopt which may 1) undermine the values of the country in which it is operating, and 2) affects its sales in that country. IKEA is not the only company, which changed its policy and strategy to remain operational in the foreign economy or the market. However, in doing so, it has compromised on the core values of its company, which resonate with Swedish values in particular and Western values in general.

The company could have used local models in their local attires for the advertisement. Removing women from the advertisement was an extreme measure, and there were various options in between.  The other option was to ignore completely any model for the advertisement of the product (furniture). The sole emphasis should have been on furniture. It is true that this would yield challenges from advertisement perspective; however, producing an effective advertisement (print), without models, is not impossible. Another option was to ignore Saudi Arabia’s culture, custom, tradition, norms, and laws completely. IKEA should have produced an advertisement (print) by its Swedish/Western values.

2-RAMIFICATIONS OF THREE POTENTIAL ALTERNATIVES

Local models in their local attires would not have produced any controversy. There are many firms, which advertise their products and services while keeping in consideration, local norms, culture, tradition, and law.

The advertisement is an art and science at the same time. Different techniques and instruments have been developed, which allow companies to produce a very effective advertisement. The company, IKEA, can produce an advertisement that only focuses on the product and features only that product. Such advertisement also would not have put Saudi Censor Board in a difficult position, making it the best option for all the stakeholders; IKEA-Saudi Arabia-Potential-Customers-Right Groups.

If IKEA had produced an advertisement by its Swedish/Western values, it would have faced challenges from Saudi Censor Board and might have incurred heavy penalties. It may have lost a lucrative Saudi market; however, it would have gained more respect in West, and this respect might have translated into higher sales (not certain). The exercise of this option might have only benefited IKEAS, not all the stakeholders.

3-RECOMMENDATIONS & WHY?

It must apologize for taking the extreme measure of removing women from advertisement, as it affects its reputation and sales all around the world. In addition, the company should hire local models, who must be wearing a local dress, for the advertisement. It will mitigate the backlash and facilitate in killing the controversy. Furthermore, if it intends to use an option other than an advertisement with models, then it should produce an advertisement (print), which only focuses on the product.