GLOBAL BUSINESS

Companies chosen: IKEA and OYO

CIA-1
VIDUSHI SONI
2223579
4BBA FIB A
Table of Contents
Chapter 1........................................................................................................................................1

1.1 Introduction to the MNC’s...........................................................................................................2

1.2 OECD guidelines followed by the IKEA and Oyo.......................................................................6

Chapter 2 ..................................................................................................................................................

2.1 Evaluating Ethical Dilemma’s faced by companies.......................................................................8

2.2 Comparing and contrasting Competitive strategies...............................................................11

Chapter 3 ..................................................................................................................................................

3.1 Expansion to international markets......................................................................................13

Chapter 4..................................................................................................................................16

4.1 Suggested Action plans..............................................................................................................16

4.2 References.............................................................................................................................16

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Chapter 1

1.1 Introduction

IKEA- A foíeign MNC opeíating in India

Inception

• IKEA was founded on July 28, 1943 by Ingvar Kamprad when he was just 17 years
old . Initially, IKEA was a mail-order sales business that sold pens, watches, and
nylon stockings. It wasn’t until 1948 that furniture was added to the range . Today,
IKEA is a global brand with over 450 stores worldwide

History

Founding and Early Years:

• Founded by Ingvar Kamprad in 1943 as a mail-order sales business.

• Started selling furniture in 1948.

• First store opened in Älmhult, Sweden, in 1958 under the name Möbel-IKÉA.

Global Expansion:

• Expanded outside Sweden to Norway (1963) and Denmark (1969).

• Entered other parts of Europe in the 1970s.

• Global expansion continued in the 1980s, including the United States (1985), the
United Kingdom (1987), and Italy (1989).

Market Presence:

• Germany is IKEA's biggest market with 55 stores.

• The United States follows with 52 stores.

Expansion into New Markets:

• Entered Latin America in February 2010 (Dominican Republic).

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 • Opened first store in India
(Hyderabad) in August
2018.

Recent Developments:
• Opened largest store in
the world in the Philippines in
November 2021.
• Closed all 17 stores in
Russia in March 2022 due to
the 2022 Russian invasion of Ukraine.

• Returned to South America with store openings in Chile (August 2022)

and Colombia (September 2023)

Nature of business

• IKEA's business centers on affordable and well-designed furniture and home

furnishings. With a global presence, the company adopts a unique self-service
model, emphasizing flat-packaging and DIY assembly for cost efficiency.
Known for sustainability initiatives, IKEA offers a diverse range of products,
including textiles, lighting, and kitchenware, making it a one-stop-shop for
customers worldwide

Areas of operation

• As of September 2023, there are 462 IKEA stores operating in 59 countries

and 3 territories. IKEA operates globally with a strong presence in
Europe, North America, Asia, the Middle East, Latin America, and
Oceania. The company continually expands into new markets, tailoring
its business model to local preferences

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OYO- An Indian MNC opeíating Inteínationally

Inception

• Ritesh Agarwal launched OYO, or Oravel Stays, in 2013. OYO was founded by a
19-year-old entrepreneur who saw a need to solve India's shortage of reasonably
priced and dependable budget housing. Beginning with a single hotel in Gurugram,
India, Ritesh Agarwal's company grew quickly, using a franchise model to bring
consistent, high-quality low-cost lodging to a number of locations. Since then,
OYO has expanded into a worldwide hospitality brand that provides a variety of
hotel choices in several countries.

History

The history of Oyo has been like the following

• In 2012: Ritesh Agarwal launched Oravel Stays, later renamed OYO in 2013,
initially as an Airbnb equivalent.
• 2013: Ritesh Agarwal received a $100,000 grant as part of the Thiel Fellowship.
• 2019: OYO becomes a global hotel chain with over 17,000 employees, operating
globally. The business model of OYO is that it leases and franchises assets, invests
in capex, and hires general managers for operations.
• April 2019: Launched the OPEN program for partner hotels.
• June 2021: Collaborates with Yatra, Airbnb, and EaseMyTrip to form
CHATT, an industry body for the tourism sector in India.
• October 2021: Appointed paralympian Deepa Malik as an independent director.
• December 2021: Onboards former SBI Chairman Rajnish Kumar as a strategic
group advisor.

Nature of business

• OYO operates as a global hotel chain, specializing in standardized

accommodations, including hotels and homes. The business involves leasing
and franchising properties, utilizing technology to enhance bookings and
customer experiences. OYO invests in capital expenditure for property
improvements and contributes to job creation, particularly in India and South
Asia. Additionally, the company engages in training initiatives for
hospitality

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 enthusiasts and collaborates with partner hotels through programs like OPEN
for mutual growth and success.

Areas of operation

• OYO has a significant footprint in India, expanding into various

international markets to offer affordable and tech-driven lodging options.
OYO operates globally with a presence in several countries across
Asia[China, Japan and Southeast Asia],the Middle East, Europe[United
Kingdom], North America[United States], and Latin America[Mexico].

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1.2 OECD Guidelines

 The OECD Guidelines for Multinational Enterprises on Responsible Business

Conduct (OECD Guidelines) are the most comprehensive international standard on
RBC. The OECD Guidelines reflect the expectation from governments to businesses
on how to act responsibly. They cover all key areas of business responsibility,
including human rights, labour rights, environment, bribery, consumer interests,
as well as information disclosure, science and technology, competition, and
taxation.

IKEA

IKEA is committed to following the OECD Guidelines for Multinational Enterprises . The
company has a code of conduct and internal policies that are aligned with international
standards described in the UN Bill of Rights, the Fundamental ILO Conventions, and the
OECD Guidelines for Multinational Enterprises.

1. Competition-Compliance with Antitrust Laws, IKEA complies with antitrust and

competition laws in the regions where it operates. These laws aim to prevent anti-
competitive practices and ensure fair competition , IKEA also provides clear
information about its business practices, pricing strategies, and relationships with
suppliers and partners.
2. Employee and Industrial relations- Inter IKEA Group underscores the importance and
the growing awareness of human rights risks that has prompted a renewed focus on
the necessity for well-structured and standardized legislation on human rights and
environmental due diligence. In the fiscal year 2021, Inter IKEA Group, along with
11 other companies aligned with the Nordic Business Network for Human Rights
(NBNHR), endorsed a statement advocating for European Union (EU) legislation
mandating human rights due diligence for all businesses operating within the EU.
This collective endorsement signifies a commitment to processes that facilitate
businesses in identifying, preventing, mitigating, and being accountable for the
adverse impacts of their operations. Inter IKEA Group emphasizes that robust
regulation can serve as a catalyst for companies to seamlessly integrate a culture of
respect for human rights into their operations, thereby contributing to the
enhancement of human rights standards across global value chains.

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 3. Anti-bribery- IKEA has developed an anti-corruption policy that includes aspects
connected to the Suppliers’ business relations with IKEA and clearly states that
bribery and corruption are unacceptable.
4. Environment- The outlined environmental standards and procedures reflect a
comprehensive commitment to responsible environmental practices by suppliers
within the IKEA supply chain. Adherence to laws and regulations concerning outdoor
emissions, noise, water discharge, and ground contamination is emphasized. Suppliers
are required to obtain necessary permits and test reports, ensuring compliance with
environmental standards. Waste water treatment is a priority, with an emphasis on
proper on-site treatment or discharge to authorized facilities. Effluent treatment plants
must be appropriately operated and staffed by competent individuals. Immediate
action is mandated for ground contamination, with thorough investigations and
reporting to relevant authorities. Continuous improvement is a key focus, requiring
suppliers to evaluate current environmental impacts, establish reduction plans with
measurable goals, and document results. Transparent reporting is fundamental, with
suppliers obligated to provide IKEA with an annual environmental performance
report, including water and energy consumption details.

OYO

1. Taxation : OYO operates in multiple countries, each with its own tax laws and
regulations. The company has a dedicated team or work with local tax experts to
ensure compliance with all relevant tax laws in each jurisdiction where it operates.
This includes income tax, value-added tax (VAT), and other local taxes. OYO
conducts regular internal audits and reviews of its tax practices to identify any
potential issues or areas for improvement. This proactive approach helps the company
address concerns before they escalate.
2. Science and Technology- OYO often operates on a franchise model where it provides
technology solutions to independent hotel owners. This includes its property
management system, booking engine, and other technological tools.
While encouraging the transfer of technology, OYO ensures the protection of its
intellectual property rights. This involves implementing measures to safeguard
proprietary technology and know-how from unauthorized use or replication.

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Chapter 2

2.1 Ethical Dilemma faced by IKEA and OYO

IKEA

1. Workers’ Rights- IKEA has faced repeated accusations of age discrimination. A

2019 article on the Business and Human Rights website stated that IKEA faced five
lawsuits in just over a year in US courts related to age discrimination. Workers said
they were refused promotion, demoted and discriminated against in terms of pay
based on their age.
A further 2018 UNI website article stated: “IKEA management in the Stoughton,
Massachusetts, store repeatedly misrepresented the economic realities of union
membership—giving workers the impression that their wages and conditions would
be significantly worse if they voted to form a union. The company also told workers’
that their job security “could be worse” if they unionised.”
IKEA was also accused of exploiting Eastern European truck drivers in its supply
chain. An article on the Business and Human Rights website viewed in 2017 said
lorry drivers were living in their cabs for months at a time, and drivers reported that
their salary was less than £3 per hour. A court ruled that this was breaking the law. W
IKEA was marked down for excessive working hours, dangerous work environment
and inadequate pay.
2. Political Dilemma-IKEA's tax strategy has drawn a lot of criticism. In 2016, a study
by European Parliament ministers from the Green Party accused it of dodging up to
$1.1 billion in corporation taxes between 2009 and 2014. According to the research,
IKEA set up its business to use onshore tax havens in Europe as a way to evade taxes.
The company's usage of many holding companies in countries regarded as tax havens
earned it the lowest rating from Ethical Consumer in July 2019 for probable tax
avoidance methods.
The Open Secrets website states that IKEA paid $40,000 for lobbying in 2018. In
addition, it belonged to the World Economic Forum, WBCSD, and Eurocommerce.
Ethical Consumer said these multinational business lobby groups were using their
unfair corporate power.
3. Environment IKEA is the largest buyer of wood on the planet consuming 21 million
cubic metres of wood in 2019. In June 2020 the non-profit organisation Earthsight

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 published a report stating that IKEA was selling products made from wood illegally
felled in the forests of the Ukrainian Carpathians which is home to endangered lynx
and bear. The report also said this was enabled by the corrupt state-owned forestry
enterprises and that failings of FSC allowed the wood to carry the certification label.
4. Animal abuse - In addition to retailing leather, IKEA also sold products containing
feathers. No assurance was provided that the company had adopted a down standard
that would audit the whole supply chain, including parent farms.
Inter IKEA’s Sustainability Report FY18 stated that the company retailed animal and
meat products including sourced from cows, pigs, chicken and fish, and so the
company lost a whole mark under Animal Rights. No policy was found stating that
meat was organic or free range.
5. Product Quality- In 2013, IKEA faced a product quality scandal when it withdrew
Swedish meatballs from European stores due to allegations of horsemeat
contamination. An investigation revealed a Swedish supplier had unknowingly
sourced meat containing horse DNA from Polish slaughterhouses. IKEA promptly
removed the meatballs from shelves, apologized to customers, and emphasized its
commitment to recipe adherence. The company filed a police report against the
supplier, later dropped. After implementing temporary DNA testing to ensure product
safety, Swedish meatballs returned to stores. IKEA aims to enhance traceability
standards, underscoring its dedication to transparency and quality assurance in the
supply chain.

OYO

1. Unethical growth strategies- OYO, as reported by its CEO and several employees,
allegedly lists rooms from unavailable or halted service hotels, including unlicensed
ones, to inflate its room count. To manage legal issues related to unauthorized rooms,
the company is accused of offering free stays to law enforcement. A scheme involving
staff at OYO properties reportedly kept rooms occupied after unmarried couples left,
then cleaned and resold them for cash, pocketing the money. These claims suggest
potential misconduct and raise concerns about the company's practices regarding
unlicensed accommodations and room inventory management.
2. Payment Discrepancies and Non-Transparent Practices- Allegations have
emerged against OYO, claiming the platform charges customers extra for hotel stays

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 while withholding payments owed to hotels. Interviews with hotel owners and
employees, along with legal complaints and emails, reveal disputes over unpaid dues.
Some hotel operators have filed criminal complaints against OYO, accusing the
company of retaining payments. Aditya Ghosh, OYO's head of India operations,
dismissed the concerns, attributing the disagreements to penalties imposed for
customer service failure. These complaints raise questions about OYO's financial
dealings with its hotel partners and potential conflicts over payment practices.
3. Customer Privacy Concerns: Issues related to the handling of customer data,
including privacy concerns and data security lapses. According to a recent article
by Law Insider India, privacy invasion has become an increasingly prevalent concern
in the hospitality industry, with various reports of privacy violations at popular hotel
and lodging platforms like OYO Rooms .
In addition, there have been complaints about OYO on the Indian Consumer
Complaints Forum regarding fake properties and poor customer support . There have
also been reports of a security flaw that left customer data and phone numbers
unprotected . Forbes India has reported on the troubles at OYO, including massive
layoffs and disgruntled hotel partners.
4. Unethical business practices in China- In 2019, OYO Jiudian, the Chinese
subsidiary of SoftBank-backed hospitality chain OYO Hotels & Homes, fired 25
employees and issued warnings to over 100 more for “unethical practices” .
Unfortunately, the exact nature of these practices has not been disclosed by the
company
5. Protest by hotel owners- Independent protests by small-scale hotel owners are
surfacing up in mid-tier towns like Pune, Kota, Manali, Ahmedabad and Jaipur as well
as Delhi and Bengaluru. They claim that OYO has been eluding them of their promised
returns and minimum guarantees by imposing a ream of charges, often without
informing them. Many of these charges are not specified in the contract between the
owner and OYO. The protestors state that OYO’s accounting and auditing process,
and the penalties associated with petty faults and errors, are so heavy that they
sometimes find themselves owing money to OYO at the end of the month.

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Chapter 2

2.2 Competitive Strategies

IKEA
1. Cost leadership Strategy : Cost effectiveness is one of the solid bases of IKEA
competitive advantage. The global furniture retailer is able to offer low prices thanks
to a combination of economies of scale and technological integration into various
business processes. IKEA operates on a global scale, allowing it to benefit from
economies of scale. Mass production and bulk purchasing help reduce per-unit costs,
enabling the company to offer products at lower prices. The flat-packaging concept
reduces transportation and storage costs, as well as assembly expenses. Customers
often assemble products themselves, saving on labor costs and making the overall
process more cost-effective.
2. Increasing variety of products: Great range of products also belongs to the list of
IKEA competitive advantages. There are 12000 products across in IKEA portfolio
and the company renews its product range launching approximately 2000 new
products every year. The company is also increasing its presence in food and
catering industries. Offering a diverse range of products caters to a broad customer
base with varying tastes and needs. This diversity helps attract a wide audience and
encourages repeat business as customers find an array of options for different
purposes.
3. Benefiting from strategic alliances :The global furniture retailer benefits from
strategic alliances to a maximum extent. The formation of strategic alliances is
placed at the core of IKEA business strategy. The list of the most successful
collaborations include partnership with Apple to explore the possibilities
of Augmented Reality as a tool for home-furnishing, partnership with LEGO for
new product development and partnership with Adidas in knowledge sharing about
customer behaviour. Experience and competency in the formation of strategic
alliances can be specified as one of the most important IKEA competitive
advantages.
4. Global Sourcing: The company sources materials and components globally, taking
advantage of regional cost variations. This allows IKEA to find cost-effective
suppliers and adapt to changing market conditions.

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 5. Low-Cost Store Locations:IKEA strategically selects locations for its stores, often
opting for low-cost sites. Large-format stores in suburban areas contribute to lower
real estate expenses compared to prime urban locations.

OYO
1. Franchising and Asset-Light Model: OYO typically operates on an asset-light
model, relying on partnerships and franchise agreements with existing hotels and
property owners. This approach allows OYO to scale quickly without the significant
upfront capital investment associated with owning and managing properties. OYO's
partnership with SoftBank and other investors facilitated its global expansion
without the burden of heavy infrastructure costs
2. Innovation -OYO has diversified its services with innovative business models
beyond traditional hotel accommodations. The introduction of OYO Townhouse,
OYO Vacation Homes, and co-living spaces showcases OYO's ability to adapt and
offer a variety of accommodation options, potentially setting it apart from
competitors with more conventional offerings.
3. Partnerships and collaboration: OYO collaborates with various entities to expand its
distribution channels. Partnerships with travel agencies and other platforms enhance
OYO's visibility and reach, potentially surpassing competitors with fewer or less
diverse partnerships.
4. Localized Approach: OYO adapts its services to local cultures and preferences,
recognizing the importance of localization. OYO properties in different regions may
incorporate local design elements or amenities to cater to the specific tastes of each
market.
5. Adaptability to Market Trends: OYO remains adaptable to evolving market trends
and consumer preferences. Adjusting its offerings based on changing travel and stay
preferences during the COVID-19 pandemic illustrates OYO's flexibility and
responsiveness to market dynamics.

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 Chapter 3
Expansion to International Markets

IKEA’s Global
Presence

• Franchising- To enter the Asian market, IKEA employed a franchising model. In

Japan, the first IKEA store opened in 1974 through a franchise agreement. This
allowed IKEA to leverage local expertise while introducing its unique furniture
concept to the Japanese market.
The primary foreign market entry mode of IKEA is franchising. IKEA’s
organisational structure has also played a role in allowing the company to become
international. As of now, the IKEA structure can be categorised as hierarchical,
reflecting the massive size of the business that integrates 400 IKEA stores in more 52
markets. Vertical hierarchical structures are often characterised by poor
communication and disintegration, which IKEA seeks to overcome by enforcing
corporate culture.
Like any other business model, franchising has its advantages and disadvantages,
franchising helps to overcome the most common barrier to expansion, which is the
lack of capital. Deciding to license its business model to franchisees, a company can
escape the risk of debt or the cost of equity. Further, franchising often means higher
profitability because franchisees have an incentive to generate more revenues. On the
contrary, franchising often means poorer control over outlets: their production, use of
the business model and reputation

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 • Joint Venture-For entry into the Russian market, IKEA formed joint ventures.
IKEA partnered with local investors to establish its presence in Russia, opening the
first store in Moscow in 2000. This collaboration facilitated a smoother entry into a
complex market.
• E-commerce :Recognizing the importance of online retail, IKEA expanded its e-
commerce presence. IKEA invested in its online platform, allowing customers in
various countries to make purchases online. This strategy became particularly crucial
during the COVID-19 pandemic when online shopping surged.

OYO

OYO initially focused on establishing a strong presence in its home country, India.
OYO gained traction by providing budget-friendly and standardized accommodations
across various Indian cities, building a solid foundation for international expansion.

• Joint Ventures and Partnerships: OYO formed joint ventures and strategic
partnerships to facilitate expansion.
Collaborating with SoftBank, OYO initiated its operations in Japan in 2018. The joint
venture allowed OYO to leverage SoftBank's influence and understanding of the
Japanese market.
• Acquisition: OYO expanded into European markets to increase its global footprint.
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 OYO entered the European market in 2019, starting with the acquisition of the
Leisure Group, a vacation home rental company. This move helped OYO establish a
presence in popular European tourist destinations.
• Entry Into the US market- OYO made a significant entry into the U.S. market through
the acquisition of the Hooters Casino Hotel in Las Vegas in 2019.
This move allowed OYO to establish a physical presence in a key global travel
destination and signaled its intention to compete in the competitive U.S. hospitality
market.

Comparison Between IKEA and OYO

IKEA and OYO, despite operating in distinct industries, share strategic similarities in
their international expansion endeavors. IKEA, a furniture retail giant, has built its
competitive advantage on cost leadership, offering standardized, well-designed
products at affordable prices globally. The company has pursued a gradual expansion
approach, initially focusing on Europe, and has leveraged its iconic in-store
experiences and sustainability initiatives to maintain a consistent brand image.

On the other hand, OYO, a hospitality disruptor, has aggressively expanded

worldwide, targeting the budget and mid-scale segments. OYO's strategy involves
rapid entries into diverse markets, utilizing acquisitions, joint ventures, and
partnerships to establish a global footprint. Unlike IKEA's physical product focus,
OYO's services-oriented approach relies on digital transformation, emphasizing
seamless bookings through its app. OYO adapts its business model to suit local
preferences, offering a variety of accommodation options and showcasing flexibility
in its approach.

While IKEA and OYO differ in their industries and product/service offerings, both
exemplify adaptability, technological integration, and strategic partnerships as core
elements of their competitive strategies on the global stage

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Chapter 4
4.1 Suggestions

For IKEA

After Critically evaluating the ethical dilemmas faced by IKEA ,the following should be the
course of action

• Ethical Sourcing Audits: Conduct comprehensive audits throughout the supply chain
to ensure ethical sourcing practices, including the elimination of forced labor.
Establish a robust monitoring system to track and verify compliance.
• Transparency and Accountability: Increase transparency in supply chain operations by
regularly publishing reports on ethical practices. Implement a grievance mechanism
for workers and suppliers to report concerns without fear of reprisals.
• Diversification of Sales Channels and Tech integration: Enhance the online shopping
experience to attract customers who prefer digital channels. Invest in a user-friendly
and efficient e-commerce platform, coupled with innovative technologies like
augmented reality for virtual product experiences.
• Environment friendly practices-Continue and expand sustainability initiatives,
emphasizing the use of eco-friendly materials and promoting energy
efficiency. Communicate these efforts to reinforce IKEA's commitment to
responsible business practices.

For OYO

• Quality Assurance Program: Implement a comprehensive quality assurance program

to ensure consistency in service standards across all OYO properties. Regular
inspections and customer feedback mechanisms can be integral to this initiative.
• Strategic Partnerships: Strengthen partnerships with local businesses, governments,
and travel agencies to enhance market penetration and navigate regulatory challenges
effectively
• Crisis Management: Develop a robust crisis management plan to navigate unforeseen
events, such as pandemics, economic downturns, or regulatory challenges, ensuring
quick and effective responses

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 • Ethical Guidelines and Training: Establish clear ethical guidelines for property
owners and staff, coupled with comprehensive training programs to prevent
fraudulent practices and disputes. Enhance transparency in dealings with
partners.

References

1. IKEA Business Strategy and Competitive Advantage: Capitalising on IKEA Concept

- Research-Methodology
2. IKEA's Internationalization Strategy: Review and Analysis Essay Example [Free]
(business-essay.com)
3. The Inter IKEA Group approach to human rights due diligence
4. Marketing Strategy of OYO: Unlocking Success (startuptalky.com)
5. What Are The Current Problems Being Faced By OYO? (inc42.com)
6. OYO: OYO China fires 25 employees for unethical practices; issues warning to 110
more (indiatimes.com)

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