IKEA In Saudi Arabia

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Professor Karthik Ramanna, Research Associate Jérôme Lenhardt (Europe Research Center), and Senior Associate Marc Homsy prepared this case. This case was developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2016 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

K A R T H I K R A M A N N A

J É R Ô M E L E N H A R D T

M A R C H O M S Y

IKEA in Saudi Arabia (A)

On October 1, 2012, the Swedish newspaper Metro revealed on its front page that Inter IKEA Systems B.V. (hereafter Inter IKEA Systems) – one of Sweden’s most iconic companies and the world’s largest furniture retailer – had erased all images of women from its fall 2012 catalog for Saudi Arabia.1 The Metro article compared pages depicting women models from Inter IKEA System’s Swedish catalog to the equivalent pages in its Saudi catalog from which the women had been removed (see Exhibit 1a for a picture of the Metro front page and Exhibit 1b for further pictures of the differences between the Swedish and Saudi catalogs). The newspaper article immediately sparked additional media attention and criticism directed against the IKEA brand. In Sweden, government officials raised questions about how Inter IKEA Systems was living up to its own values and commitments to human rights and gender equality. Worldwide, news outlets and social media platforms like Twitter were abuzz, with some critics accusing Inter IKEA Systems of betraying the company’s Scandinavian values and yielding instead to pressure from the conservative Islamic state.2 (Saudi law and culture was generally considered very strict towards women, barring them, for instance, from driving and requiring them to have the consent of a male “guardian” to travel abroad or work.3)

Faced with the growing backlash, the company considered its potential responses. It could reissue its catalog with women included, but this approach risked running afoul of Saudi censors who could impose harsh penalties against organizations considered violating local laws.4 Three IKEA stores had been opened since 1983 in Saudi Arabia, through a local franchisee, Ghassan Alsulaiman Furniture Co.5 It was wary of putting this operation in jeopardy. Alternatively, Inter IKEA Systems could do nothing at all, hoping for the crisis to blow over. But the company was known internationally for its commitment to social and economic development and to human rights. It was even a signatory to a United Nations compact to this effect.6 So much of its brand identity was tied into its progressive social image, as marketing journalist Rob Gray explained, “This is the same company that in the 1990s ran one of the first TV commercials in the U.S. to feature a gay couple – and received bomb threats in response. Obliterating women in an act of censorship certainly didn’t look good to many IKEA customers in markets around the world more used to a liberal, inclusive stance from the brand.”7 Moreover, some consumers in its key home markets in Northern Europe and in the U.S. were even threatening a boycott.8

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IKEA

The IKEA brand’s origins dated to 1943, when, at the age of 17, Ingvar Kamprad started his own company in Sweden selling fish, vegetable seeds, and magazines by bicycle. He called the company IKEA, which combined his initials with those of his family farm, Elmtaryd, and parish, Agunnaryd, located in southern Sweden. Four years later he started a mail-order catalog.9 In 1948, Kamprad added furniture and house wares to his mail-order products, and in 1951, opened a display store in nearby village of Älmhult to allow customers to preview products before buying. The first IKEA store outside Sweden opened in 1963 in Norway. Two years later the company opened its flagship store in Stockholm. In 1974, IKEA opened its first store in Germany. By the late 1970s, the company had expanded to Asia and Canada. IKEA opened its first store in the U.S. in 1985 and in Great Britain in 1987.10 In 1983, IKEA decided to create Inter IKEA Systems, the franchisor of the IKEA brand and concept, which licensed its intellectual capital to several different franchisees, and in return received an annual fee of 3% of their sales.11 The company maintained that franchising was established to secure longevity and independence for the IKEA brand and concept and to expand the business and maintain an entrepreneurial spirit. Some alleged that this somewhat obfuscating corporate structure was effected to lower the company’s tax obligations.12 By 2012, Inter IKEA Systems was the leading furniture retailer, manufacturer, and franchisor in the world – with a 5% global market share – and the only one with a global footprint. U.S.-based Ashley Furniture Industries Inc., its nearest competitor, had a 1.2% market share and was present only in the U.S. and Canada.13

Company Values

From the start, Kamprad sought “to create a better everyday life for the many people” by selling affordable, quality furniture to mass-market consumers around the world.14 He believed his company would succeed if it operated according to a particular set of values, “The true IKEA spirit is still built on our enthusiasm, from our constant striving for renewal, from our cost consciousness, from our readiness to take responsibility and help, from our humbleness in approaching our task and on the simplicity of our way of doing things.”15

In 2000, IKEA Group, the largest franchisee of Inter IKEA Systems, developed its code of conduct— the IKEA Way on Purchasing Products, Materials and Services (IWAY)— to specify minimum acceptable standards for working conditions and environmental standards at its manufacturing suppliers.16 In 2004 IKEA Group became a participant in the United Nations (UN) Global Compact, an initiative for companies to follow standards and best practices globally, by taking the responsibility of universally upholding human right standards (see Exhibit 2a for the Compact principles and their location in IKEA Group’s 2012 Sustainability report). IKEA Group also signed the UN Guiding Principles on Business and Human Rights launched in 2011 (see Exhibit 2b for a selection of the general and founding principles) and the Children’s Rights and Business Principles launched by UNICEF, Save the Children, and the UN Global Compact in 2012.17

The same year, IKEA Group outlined the company values in its “People and Planet Positive” strategy, which focused on three areas: (1) a more sustainable life at home for consumers; (2) resource and energy independence for the company; and (3) a better life for people and the communities touched by IKEA Group, by producing a positive effect on people’s daily lives, through supporting and respecting human rights where the company had influence through its business.18 In addition, the owner of IKEA Group, the Stitching INGKA Foundation, funded the IKEA Foundation, a charity registered in the Netherlands, which donated money to organizations focused on protecting children from child labor and empowering girls and women.19 In February 2012, the IKEA Foundation donated

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EUR 700,000 to the Half the Sky movement, a global group of NGOs using stories, videos, and social media to support women rights in developing countries.20

Operations and Financial Results

By 2012, Inter IKEA Systems franchised 338 IKEA stores in 40 countries, the large majority of them (298 in 26 countries) to IKEA Group and the rest to eleven local franchisees worldwide.21 Between September 2011 and August 2012, eleven new IKEA stores had opened and seven IKEA stores had been relocated worldwide (see Exhibit 3a for the number and location of IKEA stores by August 2012 and Exhibit 3b for the breakdown of sales per region by August 2012). IKEA Group also operated and managed several company-owned furniture factories and was responsible for all new product design and development and for supply chain management.

The IKEA Group employed 139,000 workers and recorded 690 million store visits in the year 2012. From September 2011 to August 2012, it recorded sales of EUR 27.6 billion (up 9.5% from 2010-2011), representing 94% of all IKEA franchisees’ retail sales,22 and profits of EUR 3.2 billion (up 8% from 2010- 2011). (See Exhibit 4 for key financial data about IKEA Group from September 2010 to August 2012.) IKEA Group’s sales were dominated by Europe (70%), followed by North America (16%), Asia and Australia (8%), and Russia (6%). Germany was IKEA Group’s main market, with 14% of sales, 23 while Sweden was IKEA Group’s sixth largest market, with 5% of global sales.24

By August 2012, the IKEA brand offered a range of 9,500 home furnishing solutions and products, showcased in their IKEA catalog. The company printed 212 million catalogs in 29 languages and 62 editions.25 From year to year, the catalog was updated based on feedback from the previous year. Inter IKEA Systems indicated that the catalog needed to be relevant in all of IKEA’s markets and at the same time reflect what the brand stood for. Inter IKEA Systems had the overall responsibility for the content of the IKEA catalog.26 The company reported that the catalog’s content varied only slightly between markets, mostly due to differences in the local product range and service offerings. Some products differed due to local size, function, comfort and cultural preferences. For instance, the mattress product range featured larger-sized beds in the U.S., whereas in Russia, multi-generational living in small spaces led to a wider range of sofa beds.27

IKEA in Saudi Arabia and in the Middle East

IKEA’s History and Operations in Saudi Arabia and the Region

Of the eleven non-IKEA Group companies that owned and operated IKEA stores worldwide in 2012, four were in the Middle East region: One franchisee was responsible for the United Arab Emirates (UAE) market, one for Kuwait, one for Israel, and one for Saudi Arabia, Ghassan Alsulaiman Furniture Co.28

The first IKEA store in Saudi Arabia opened in 1983 in Jeddah. Saudi Arabia was the first country in the Middle East in which IKEA sold its products.29 IKEA stores then opened in Kuwait (1984), Dubai (1991), and Israel (2001).30 According to observers, IKEA chose its new locations generally based on certain criteria such as population density, market growth potential, and brand awareness.31 However, IKEA’s first store in Saudi Arabia was established in 1983 as a pilot project to test the market, long before the brand had any recognition within the local community.32

In 1990, a second IKEA Saudi store opened in Riyadh. In 2004 IKEA closed down the two existing stores and opened two IKEA “concept stores” in the same cities, each measuring about 28,000 square

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meters and employing 290 employees. The third IKEA store in Saudi Arabia opened in November 2008 on the east coast of the city of Dhahran (22,000 square meters and 245 employees).33 All three stores featured an array of design and home improvement solutions, all of which helped to cement the company’s position as market leaders, with sales increasing at a double-digit rate for each year between 2007 and 2011.34

As of 2012, IKEA sales in the Middle East represented about 2% of IKEA’s sales globally (see Exhibit 3b for Inter IKEA sales by region). 35

IKEA’s Strategy in Saudi Arabia and the Region

Inter IKEA Systems had a tradition of abiding by local norms in the Middle East. For instance, IKEA’s world-renowned meatballs were Halal in the UAE and Saudi Arabia (see Exhibit 5 for a picture of the meatballs in Sweden and in Saudi Arabia). In accordance with local customs, restaurants in the Saudi IKEA stores were split into two areas separated by a partition: one section for families and women, the other area for single men. Inter IKEA Systems also allocated rooms in its Saudi stores to be mosques, usually used for prayer several times a day. During prayer time, IKEA stores closed their doors for new customers for around 25 minutes, while allowing customers in the store to continue shopping, a practice prevalent among all other retail stores in Saudi Arabia.36 Unlike IKEA stores in several other countries around the world, there was no music in the IKEA stores in Saudi Arabia, in line with local customs.

On most occasions, Inter IKEA Systems kept the same model nomenclature in its Saudi stores as in its other stores globally. For example, it kept the Swedish product names Karlstad and Ektorp, instead of tailoring them to the local Arabic language. However, part of IKEA’s offering was also tailored to suit local demand. The company for instance developed special collections during the month of Ramadan (see Exhibit 6 for a picture of the Ramadan collection). Moreover, its wine glasses were simply called “glasses,” given alcohol was prohibited in the country. According to the IKEA range manager in Saudi Arabia, some product ranges were removed altogether from IKEA’s Saudi offerings since they were not aligned with Saudi preferences: Christmas-themed products for instance were taken out from the product range.37

In line with local traditions, Inter IKEA Systems in Saudi Arabia targeted the entire family with its advertisements. The company’s Saudi stores displayed women dressed in traditional local clothes and wearing a headscarf, while men in its online ads wore the traditional long white dress. Similar advertisement customizations were prevalent in other stores in the Middle East, such as in Dubai, Abu Dhabi, and Kuwait.38 In 2010, the marketing manager of the IKEA store in Jeddah commented on the difference between IKEA ads in Saudi Arabia and elsewhere. “We asked Inter IKEA Systems to replace the women with men in the catalog in order to be able to get the declaration from authorities to let the catalog enter the country,” he said. “In our Riyadh store we have received some complaints from some customers asking us to replace or remove the pictures of the women who are without a full traditional dress and headscarf so we replaced the ads with fully covered women,” he added.39

IKEA store employees in Saudi Arabia were of various nationalities: while some employees were Saudi citizens, several others were Yemenis, Dutch, British, Swedish, Jordanian, and Pakistani, among other nationalities. Moreover, most employees were men, with exceptions made for employees working in the children’s sections.40

Inter IKEA Systems’s localization ground strategy in Saudi Arabia had appeared to have succeeded in increasing the brand’s popularity and store footfall. In fact, the 2004 reopening of its Jeddah store

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witnessed a long waiting line of more than 8,000 customers some of whom camped overnight to claim their credit vouchers and buy IKEA products.41

Other Western companies also adapted their practices to Saudi Arabia, where Booz & Co estimated the local retail market at $84.8 billion in 2012.42 When U.S. coffee company Starbucks opened its coffee shops in Saudi Arabia in early 2011, it removed the long-haired woman from its logo, keeping solely her crown.43 British retailer Marks & Spencer hired exclusively female sales staff for its female lingerie store in Saudi Arabia.44 Spanish cloth brand Zara did not play music in its Saudi stores, and also blurred the images of female models on video screens in their stores to abide by Saudi customs.45

Saudi Society

Political Context

The Kingdom of Saudi Arabia was an independent monarchy. The king, also custodian of the Two Holy Mosques of Mecca and Medina, Islam’s holiest sites, was head of the state and governed the country through a council of ministers on which he served as president.

Following the Iraqi invasion of Kuwait in 1990 and the resulting uncertainties in the Arabian Peninsula, the Basic Law of Saudi Arabiaa was issued by a royal decree in 1992. It reaffirmed the kingdom’s status as an Islamic Monarchy and formalized its system of government:

The Kingdom of Saudi Arabia is a sovereign Arab Islamic State. Its religion is Islam. Its constitution is Almighty God’s Book, The Holy Qur’an [Holy Book in Islam], and the Sunna (Traditions) of the Prophet (Peace Be Upon Him).46

This “constitution” left some room for interpretation, leading to variations in implementation from one king to another. Late King Fahd, king of Saudi Arabia from June 1982 until his death in 2005, commented on criticism he received from Western media upon the issuance of the Basic laws. He stated that there is no harm in benefiting from knowledge emerging from Western democracies, but he added that Western values as a whole were not suitable for Saudis.47

Part of the reforms of King Abdullah bin Abdul Aziz (hereafter King Abdullah), who ascended the throne in 2005, was to establish the new Law of Judiciary, giving the judicial system more independence and establishing the Supreme Judicial Council to oversee the judicial system.48 Still, Sharia law remained the overarching basis for the legal system, and arbitral award, local or international, was not enforceable if it was non-compliant with Sharia law and public policy.49

Sharia law was derived from the Qur’an, considered by Muslims to be a revelation from God, and the Hadith, which included reports and narratives of the life of Prophet Muhammad. Sharia law prescribed both religious and secular duties.50 Sharia judicial proceedings had significant differences from other legal traditions. For instance, in Sharia courts, judges’ verdicts did not set binding precedents.51 The law was mostly unwritten, leaving judges with significant discretionary power, which they often exercised in favor of tribal traditions.52

Adoption and application of Sharia law varied from one Muslim-majority country to another.53 For instance, Turkey had a secular system where Sharia law played no role in the nation’s legal framework.54 Other countries such as Kuwait adopted a mixed legal system with some reliance on

a The Basic Law of Saudi Arabia formalized several aspects of the constitutional framework of the country.

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Sharia.55 Saudi Arabia’s legal framework was based entirely on Sharia and was interpreted according to a strict form of Islam known as the way of the Salaf (righteous predecessors) or Wahhabism.

Women in Saudi Arabia

Saudi Arabia was a signatory country (with reservationsb) to the UN Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW).56 At the same time, Saudi Arabia in 2012 ranked 131st out of 135 countries on the Global Gender Gap Index. The kingdom ranked better on some of the sub-indices of that index than on others: while it ranked 55th in terms of gender equality in health and survival and 91st for gender equality in educational attainment, it ranked 133rd in both equality in political empowerment and on economic participation and opportunity57 (see Exhibit 7 for the Gender Gap reports for Saudi Arabia from 2006 to 2012).

The Commission for the Promotion of Virtue and Prevention of Vice (Mutaween), sometimes called the “religious police,” was a special committee of around 3,500 Saudi men that handled the enforcement of the kingdom’s strict moral code, including the ban on women driving, the public dress- code requirements for women, and the separation of the sexes in public spaces.58

Enforcement of restrictions on women varied by region, due to variations in local traditions dating to before the advent of Islam. For instance, the west coast city of Jeddah was relatively permissive due to its historical interaction with other regional civilizations, while Riyadh and the surrounding central region, which had been isolated from the outside world for much of Arabian history, had stricter traditions.59

King Abdullah was seen as a reformer and pro-woman, at least in a relative sense. Since he became king in 2005, the kingdom’s Global Gender Gap Index improved from 0.52 to 0.57 (on a scale of zero to one, with one being the best score for gender equality), considered the 13th most improved country globally on that index in 2012. In a first for the country, in 2009, King Abdullah named a woman to the council of ministers, appointing Noor Al-Fayez as deputy minister for women’s education.60 In September 2011, the king announced the right for women to vote in the 2015 municipal elections.61

In June 2012, although the decision was strongly opposed by hard-liner clerics, the kingdom announced that it would allow women to compete in the Olympics, while stating that the Saudi female competitors would be dressed to “preserve their dignity.”62

Women in Saudi Media

The Saudi Ministry of Culture and Information oversaw the kingdom’s media policy (including advertising). Saudi citizens were provided freedom of expression consistent with Islamic values. This included spreading ethical virtues and Islamic teachings.63

Prior to 1979, women regularly appeared in Saudi television and newspaper ads. On November 20th 1979, a group of 500 Islamic-extremist insurgents calling for the overthrow of the king and the royal family seized the Grand Mosque of Mecca. Two weeks later the Saudi Army ended the siege, captured the insurgents and released the hostages. In the aftermath of the insurgency, King Khaled, Saudi Arabia’s king at the time, followed an approach of appeasement of hardliners, choosing to give more power to religious conservatives. Photographs of women in newspapers were banned, then women in

b One reservation was that Saudi Arabia would not follow terms of the convention that contradicted Islamic Law.

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television. Gender segregation became more prevalent and the religious police became more assertive.64

Later on, in the wake of hardliner criticism of the kingdom’s support for U.S. military operations in the region, the Saudi Law of Printing and Publication issued by a Royal Decree in 2003 required all printed material to go through the Ministry of Culture and Information before being published. The stated purpose was to ensure that the material was free from content insulting to Islam or the interest of the state. In case the material violated the laws, the Ministry could, depending on the violation, levy a range of penalties. These included, requiring the material be withdrawn from circulation, a financial penalty, and shutting down the offending business.65

Direct censorship was prevalent in Saudi Arabia: “offending” articles imported into the country were excised or blackened, or pages were glued together. Offenses ranged from news critical of the administration to pictures in fashion magazines of bare legs and couples kissing or embracing66 (see Exhibit 8 for an example).

Doing Business in Saudi Arabia

As part of the country’s economic reform process, the Saudi Arabian General Investment Authority was established in 2000 with the objective of promoting investment in the kingdom and encouraging a robust business environment.67 In 2012, Saudi Arabia ranked 22nd on Ease of Doing Business out of 185 countries according to the World Bank. As a comparison, the United Arab Emirates ranked 26th, Qatar 40th and Kuwait 82nd.68 At the same time, businesses in Saudi Arabia faced problems they would usually not otherwise face in other countries in the Middle East. According to some businessmen working in the kingdom, Saudi laws and regulations were not well-documented, and efforts to try to find relevant laws sometimes proved challenging. Moreover the subjective nature of the judicial system as well as the occasional crackdowns on media outlets and bloggers added ambiguity and caused fear among the business community.69

One entrepreneur recalled an instance when his company, which operated children’s play areas in malls, was choosing new mascots. When his designers suggested animations of a boy and a girl, a heated debate broke out among his managers, with some thinking the mascots would bring scrutiny from the religious police given that the characters would appear together in ads. The entrepreneur eventually decided to use animated animals as mascots, after failing to receive guidance from the relevant authorities.70

Discussions with business managers operating in Saudi Arabia revealed that just as the censorship rules governing businesses were unclear so too were the possible penalties. Some businesses found in violation of censorship rules were fined while others were forced to shut down entirely. In the event of being shut down, a business’ ability to reopen depended in part on the owner’s relationships with the establishment.71 Moreover, standards of vigilance by government and religious authorities varied across different media channels. What was usually acceptable on the Internet was not necessarily permissible in print magazines.72

Foreign executives in the country reported that multinational corporations were generally expected to adhere to the same rules as local companies. In fact, several multinational companies operating in the country had adopted strategies that embraced the conservative local culture. For instance, Tide, a U.S.-based detergent brand, owned by Proctor and Gamble, had launched a product specially formulated to clean Saudi women’s black robes (Abayas). To market the product, Tide had chosen the slogan “Proud of my black Abaya,” which was seen by some as a double entendre: in addition to

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celebrating the product’s coloring abilities, the slogan was meant to affirm the conservative principles that dictated that women be fully covered (see Exhibit 9 for picture of Tide Abaya campaign).

The IKEA Saudi Catalog Scandal

On October 1, 2012, an article titled “Women Cannot be Retouched Away” in the issue of the free Swedish newspaper Metro revealed that the fall 2012 catalog of Inter IKEA Systems for Saudi Arabia had erased women out of the catalog (see Exhibit 1). While in other non-Saudi versions of that catalog there were women around the IKEA furniture, they had been airbrushed out of its pages in the Saudi Arabian version. Even a photo of one of IKEA’s female designers had been removed.73 The IKEA Saudi catalog, which was also available online, otherwise looked exactly the same as other editions. Observers noted that the main content of the 62 editions of the 2012 IKEA catalog was the same in most markets, although Inter IKEA Systems said that in the past it may have adapted the images to please fashion-related tastes of local markets (and in at least some cases seemed to align them with cultural standards).74

A spokeswoman for IKEA Group, which produced the catalogs on behalf of Inter IKEA Systems, indicated that IKEA had airbrushed women out of several Saudi catalogs since its first store opening there in the 1980s.75 The Metro newspaper noted that it was not forbidden to depict women in advertising or print in Saudi Arabia and that Inter IKEA Systems had self-censored its catalogs distributed in the Middle East for 20 years (alleging that during the 1990s pictures of women completing chores were left in catalogs while one of a women lounging on a couch reading a book was eliminated).76

The Reaction in Sweden

The Metro publication immediately sparked criticism against the IKEA brand in Sweden, including from Swedish government officials raising questions about how the IKEA brand was living up to its own values. Sweden’s European Union Minister Birgitta Ohlsson called the move “medieval” on Twitter. Sweden’s trade Minister, Eva Björling said, “You cannot remove or retouch women out of reality. If women aren’t allowed to be seen or work, then Saudi Arabia is losing half of its intellectual capital.”77 Former Director of the Swedish Gender Equality Agency, Claes Borgström, added, “I think that Swedish industry must adhere to the ethical rules. One should not contribute to market and sell its products in a way which discriminates against women.”78

Swedish Gender Equality Minister Nyamko Sabuni said that Inter IKEA Systems was a private company that made its own decisions, but added that it also projected an image of Sweden around the world: “For IKEA to remove an important part of Sweden’s image and an important part of its values in a country that more than any other needs to know about IKEA’s principles and values—that’s completely wrong,” adding, “Therefore it is a pity that it is there they choose to abandon part of their values, in this case equality.”79

A Swedish IKEA store customer was also quoted as saying, “I simply think it is silly. We exist in a society with women and men. You can’t just remove women. I’m Arab, I’m Muslim but I simply think women exist in society and should take part.”80

The Global Reaction

The outcry quickly spread around the world, picked up by news outlets and social media platforms like Twitter, with editors arguing about whether Inter IKEA Systems was bowing to pressure from

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censors in Saudi Arabia or adapting to the country’s cultural sensibilities.81 Jacqui Hunt, a director in the London office of Equality Now, a global non-governmental organization fighting discrimination against woman around the world, indicated: “Women are equal and integral members of society and cannot just be airbrushed out. The IKEA Group has to take responsibility for the messages it is sending and take extra care, particularly as a global corporation, to promote messages of equality and non- discrimination of all peoples.”82

Observers also wondered if IKEA‘s brand image and sales could be affected.83 In August 2012, Inter IKEA Systems said it estimated the value of its brand at EUR 9 billion, or just over $11 billion, – the 31st most valuable brand in the world according to advertising company WPP PLC’s Millward Brown. Political analyst Dee Madigan added, “A visit to IKEA is a quasi-visit to Sweden. Their values are akin. IKEA is a brand that prides itself on inclusiveness and social decency. And Sweden is a country that prides itself on its strict gender equality protections.”84 Madigan estimated that the issue therefore caused a fair bit of brand damage in Inter IKEA Systems’s home and global markets.85 Ardi Kolah, a brand marketing lecturer in London echoed that thought, “What IKEA failed to recognize was that they are a Swedish, not Saudi Arabian brand, and that people regarded it as a ‘global brand ambassador’ and representative of Swedish culture globally.”86

Ann Elizabeth Mayer, a professor of legal studies and business ethics at Wharton added, “IKEA has gone out of its way to advertise its support for [NGOs defending women rights]. Where do things stand now that IKEA has taken an ill-considered step that leaves it open to criticism for becoming an active collaborator in official Saudi strategies to render women invisible and powerless?”

As a result, individual comments about boycotting IKEA products appeared on several websites and social media. NGO Human Rights Watch Executive Director Kenneth Roth for instance received on his Twitter page several calls from the U.S. and Northern Europe to boycott IKEA products.87

Reaction of Saudi Media

Saudi media did not show much interest in the news. The media, largely regulated, simply channeled the news from Metro magazine without providing opinions. Al-Arabiya, a major pro-Saudi News Channel, reported the news with the headline: “A vanishing act? IKEA ‘erases’ women from Saudi catalog.”88

Some Saudi bloggers and activists provided their opinions on the matter: “We’re beyond that right now in Saudi Arabia,” blogger Eman Al Nafjan, famous for defying traditions by driving a car in June 2011, told CNN. “With Internet and satellite TV, there’s really no such thing anymore as blacking out women or airbrushing out women. I would be upset if something like Google was doing it, but for IKEA to do it, that’s just marketing – it’s not such a big deal.”89 She later tweeted that people should be more upset at car companies, such as GMC, for marketing their cars in a country where women are not allowed to drive.90

The Decision As the worldwide media coverage of its activities in Saudi Arabia grew, and as experts and

consumers started to weigh in on social media, Inter IKEA Systems had to consider how to respond.

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Exhibit 1a Metro Front Page on October 1, 2012

Source: http://www.reuters.com/article/2012/10/02/us-ikea-saudiarabia-idUSBRE8910O320121002 and Copyright:

Reuters/Henrik Montgomery/Scanpix/Files, accessed July 2015.

 

Note for Description: A person holds a copy of the Metro daily newspaper in Stockholm October 1, 2012, with its front page comparing images for the IKEA catalogs in Sweden (L) and Saudi Arabia (R) for next year. The Saudi version of the otherwise identical photos does not show a woman.

 

 

 

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Exhibit 1b Other Pictures of IKEA Saudi Catalog Compared with IKEA Swedish Catalog of 2012

i. IKEA Var Nya Collection in Swedish catalog (above) and Saudi Catalog (below), 2012

Source: http://knowyourmeme.com/photos/412717-ikea-catalogue-photoshop-controversy#media-title, accessed July 2015.

 

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ii. IKEA Table Collection in Swedish catalog (left) and Saudi Catalog (right), 2012

Source: http://knowyourmeme.com/photos/412717-ikea-catalogue-photoshop-controversy#media-title, accessed July 2015.

 

 

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IKEA in Saudi Arabia (A) 116-015

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Exhibit 2a UN Compact Reference Table and Principles, and Location in IKEA Group Sustainability Report FY2012

Source: IKEA Group Annual Sustainability Report, 2012, page 94, accessed July 2015.

 

 

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Exhibit 2b UN Guiding Principles on Business and Human Rights (2011), Extracts

 

 

Source: www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf, accessed July 2015.

 

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Exhibit 3b IKEA Sales, from all Franchisees, by Region, by August 2012

Source: Inter IKEA Systems 2012 Facts and Figures, accessed July 2015,

http://inter.ikea.com/Global/Page%20files/FactsandFigures_2011.pdf, accessed July 2015.

Note: Based on the pie chart, casewriters’ analysis led to estimate sales from Middle East to 2% of global sales.

 

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IKEA in Saudi Arabia (A) 116-015

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Exhibit 4 IKEA Group Financial Figures from 2010 to 2012 (in euro million), FY ending August of each year

Income Statement 2010 2011 2012 Revenue 23,539 25,173 27,628

Cost of sales 12,454 13,773 15,723 Gross Profit 11,085 11,400 11,905

Operating Cost 7,888 7,808 8,423 Operating Income 3,197 3,592 3,482

Total financial income and expense 76 165 427 Income before minority interests and taxes 3,273 3,757 3,909

Tax 781 781 695 Income before minority interests 2,976 2,976 3,214

Minority interests -10 -10 -12 Net income 2,688 2,966 3,202

 

Balance Sheet 2010 2011 2012 Property, plant and equipment 15,982 16,173 17,264 Other fixed assets 2,683 2,416 2,672

Total fixed assets 18,665 18,589 19,936 Inventory 3,415 4,387 4,664 Receivables 2,238 2,077 2,270 Cash and securities 16,955 16,828 17,878

Total current assets 22,608 23,292 24,812 Total assets 41,273 41,881 44,748

Group equity 22,841 25,411 29,072 Long-term liabilities 4,296 3,123 2,523 Other non-current liabilities 1,325 1,469 1,625

Total non-current liabilities 5,621 4,592 4,148 Short-term liabilities 7,724 7,107 6,814 Other payables 5,087 4,771 4,714

Total current liabilities 12,811 11,878 11,528 Total equity and liabilities 41,273 41,881 44,748

Source: Casewriters, based on IKEA Group 2011 and 2012 annual reports.

 

 

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Exhibit 5 IKEA Swedish Meatballs: Sweden (left) vs. Saudi Arabia (right)

Source: David Eskander, Mohamed Kotaiba Abdul Aal, “Does IKEA Culture Apply Abroad,”Karltstad University, October

2010, http://nwc.co/blog/2008/10/tweetup-ikea-trip-swedish-meatballs/, accessed July 2015.

 

 

Exhibit 6 Ramadan collection – IKEA Saudi Arabia

Source: IKEA Saudi Arabia Website, http://ar.ikea.com/sa/ar/, accessed July 2015.

 

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Exhibit 7 Global Gender Gap Report – Saudi Arabia (2006-2012)

Source: Global Gender Gap Report, 2012, Saudi Arabia,

http://www3.weforum.org/docs/WEF_GenderGap_Report_2012.pdf, accessed July 2015.

Exhibit 8 Censored Advertisement in Saudi Arabia

Source: Jeddah Daily Photo, May 23, 2009, https://susieofarabia.wordpress.com/2009/05/23/more-censorship/, accessed

July 2015.

 

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Exhibit 9 Tide Abaya Campaign

Source: Roland Younes, “Tide Abaya”, Youtube, Published April 2nd, 2013,

https://www.youtube.com/watch?v=IxlBMbJzq3E, accessed August 2015.

 

 

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Endnotes

1 Metro. (2012, October 1). Retrieved June 23, 2015, from Factiva: http://www.metro.se/nyheter/kvinnor-gar-inte-att- retuschera-bort/EVHlja!2mPseJ6LPTrK2/.

2 Anna Ringstrom, “Swedes slam IKEA for its female-free Saudi catalogue, Reuters, October 2, 2012.

3 Missing the Picture: IKEA’s Women-free Catalogue in Saudi Arabia Fails to Protect Company Values and Reputation, Wharton Knowledge at Wharton, October 16, 2012, http://knowledge.wharton.upenn.edu/article/missing-the-picture-ikeas- women-free-catalogue-in-saudi-arabia-fails-to-protect-company-values-and-reputation/.

4 Missing the Picture: IKEA’s Women-free Catalogue in Saudi Arabia Fails to Protect Company Values and Reputation, Wharton Knowledge at Wharton, October 16, 2012, http://knowledge.wharton.upenn.edu/article/missing-the-picture-ikeas- women-free-catalogue-in-saudi-arabia-fails-to-protect-company-values-and-reputation/.

5 Ghassanco Subsidiaries. (n.d.). Retrieved June 22, 2015, from Ghassanco: http://www.ghassanco.com/Subsidiaries.html.

6 Private Media Partners Pty Ltd. (2012, November 5). Missing the Picture: IKEA’s women-free catalogue disaster. Retrieved Jne 22, 2015, from Factiva: https://global.factiva.com/ha/default.aspx#./!?&_suid=143498183484305132276790682226.

7 Ardi Kolah, “Why culture matters and how brands get this so wrong!” Linkedin Pulse, May 1, 2014, https://www.linkedin.com/pulse/20140501081538-5423737-why-culture-matters-and-how-brands-get-this-so-wrong.

8 Twitter, “Ikea saudi catalog boycott search,”https://twitter.com/search?q=ikea%20saudi%20catalog%20boycott&src=typd.

9 Hoovers, “Inter IKEA Systems B.V. Profile,” accessed July 2015.

10 Hoovers, “Inter IKEA Systems B.V. Profile,” accessed July 2015. 11 Inter IKEA Systems 2012 annual report, page 8, accessed July 2015.

12 The Economist, “Flat -pack accounting,” May 11, 2006, accessed August 2015.

13 Passport, “Inter IKEA Systems Home and garden, Euromonitor International, June 2012.

14 Ingvar Kamprad, “The testament of a furniture dealer,”Inter IKEA B.V., page 2, accessed July 2015.

15 Ingvar Kamprad, “The testament of a furniture dealer,”Inter IKEA B.V., page 6, accessed July 2015.

16 IKEA Group Sustainability Report 2012, accessed July 2015.

17 Private Media Partners Pty Ltd. (2012, November 5). Missing the Picture: IKEA’s women-free catalogue disaster. Retrieved Jne 22, 2015, from Factiva: https://global.factiva.com/ha/default.aspx#./!?&_suid=143498183484305132276790682226.

18 IKEA Group Sustainability Report 2012, p. 73, accessed July 2015.

19 IKEA Group Sustainability Report 2012, p. 85, accessed July 2015.

20 IKEA Joins Half the Sky Movement, IKEA Foundation, accessed July 2015, http://www.ikeafoundation.org/ikea- foundation-joins-the-growing-half-the-sky-movement/.

21 Inter IKEA Systems, 2012 & 2013 Facts and Figures, http://supplierportal.ikea.com/factsfigures/Documents/Facts%20and%20figures%202012.pdf, accessed July 2015.

22 Inter IKEA Systems 2012 annual report, page 9, accessed July 2015.

23 IKEA Group Annual Report 2012, accessed July 2015.

24 Passport, “Inter IKEA Systems Home and garden, Euromonitor International, June 2012.

25 IKEA Group Annual Report 2012, accessed July 2015.

26 Inter IKEA Systems, “What we offer to IKEA retailers,” Inter IKEA Systems B.V. website http://franchisor.ikea.com/what- we-offer-to-ikea-reailers/accessed November 2015.

27 Inter IKEA Systems, “Where the IKEA concept comes to life,” Inter IKEA Systems B.V. website, http://franchisor.ikea.com/where-the-ikea-concept-comes-to-life/ accessed November 2015.

 

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28 Inter IKEA Systems, 2012 Facts and Figures, p.15, http://supplierportal.ikea.com/factsfigures/Documents/Facts%20and%20figures%202012.pdf, accessed July 2015.

29 Ghassanco Subsidiaries. (n.d.). Retrieved June 22, 2015, from Ghassanco: http://www.ghassanco.com/Subsidiaries.html.

30 Ghassanco Subsidiaries. (n.d.). Retrieved June 22, 2015, from Ghassanco: http://www.ghassanco.com/Subsidiaries.html.

31 Passport, “Inter IKEA Systems Home and garden, Euromonitor International, June 2012.

32 Ikea History, “1980s,” Company website, http://www.ikea.com/ms/en_IE/about_ikea/the_ikea_way/history/1980.html.

33 Ghassanco Subsidiaries. (n.d.). Retrieved June 22, 2015, from Ghassanco: http://www.ghassanco.com/Subsidiaries.html.

34 Ghassanco Subsidiaries. (n.d.). Retrieved June 22, 2015, from Ghassanco: http://www.ghassanco.com/Subsidiaries.html.

35 IKEA, 2012 Facts and Figures, p.15, http://supplierportal.ikea.com/factsfigures/Documents/Facts%20and%20figures%202012.pdf, accessed July 2015.

36 Abdulateef Al-Mulhim, “Sorry! Closed for Prayer,” Arab News, December 2, 2013, http://www.arabnews.com/news/486146, accessed August 2015.

37 David Eskander and Mohamed Kotaiba Abdul Al, “Does IKEA culture apply abroad?”, February 5, 2010, http://www.diva- portal.org/smash/get/diva2:403657/FULLTEXT01.pdf, accessed July 2015.

38 Food menu, IKEA Kuwait, http://www.ikea.com/ms/en_KW/ikea_food/ikea_restaurant.html, accessed July 2015.

39 David Eskander and Mohamed Kotaiba Abdul Al, “Does IKEA culture apply abroad?”, February 5, 2010, http://www.diva- portal.org/smash/get/diva2:403657/FULLTEXT01.pdf, page 68, accessed July 2015.

40 David Eskander and Mohamed Kotaiba Abdul Al, “Does IKEA culture apply abroad?”, February 5, 2010, http://www.diva- portal.org/smash/get/diva2:403657/FULLTEXT01.pdf, page 68, accessed July 2015.

41 “Three die in Saudi shop stampede”, BBC News, September 1, 2004, http://news.bbc.co.uk/2/hi/middle_east/3618190.stm, accessed July 2015.

42 Camilla Hall, “Mideast poses marketing minefield,” Financial Times, October 6, 2012, accessed via Factiva August 2015.

43 Zoe Fox, “Without its name, Starbucks is naked in Saudi Arabia, Time, January 8, 2011, http://newsfeed.time.com/2011/01/08/without-its-name-starbucks-is-naked-in-saudi-arabia/.

44 Rory Jones, Saudi retailer takes lead on hiring women for lingerie stores, The National, March 21, 2012, http://www.thenational.ae/business/industry-insights/retail/saudi-retailer-takes-lead-on-hiring-women-for-lingerie-stores.

45 Rory Jones, “Foreign Retailers Bend to Conform to Saudi Religious Rules,” Wall Street Journal, June 16, 2015, accessed July 2015.

46 Royal Embassy of Saudi Arabia in Washington D.C., “The Basic Law of Governance”, https://www.saudiembassy.net/about/country-information/laws/The_Basic_Law_Of_Governance.aspx, accessed July 2015.

47 Youssef Ibrahim, Saudi King Rules Out Free Elections, The New York Times, March 30th, 1992, http://www.nytimes.com/1992/03/30/world/saudi-king-rules-out-free-elections.html, accessed August 2015.

48 World International Property Organization, “Law of the Judiciary of KSA” (PDF file), downloaded from WIPO website, http://www.wipo.int/edocs/lexdocs/laws/en/sa/sa052en.pdf, accessed July 2015.

49 Latham & Watkins LLP, “Doing Business in Saudi Arabia” (PDF flie), downloaded from LW website, http://www.lw.com/upload/pubContent/_pdf/pub3507_1.pdf, accessed July 2015.

50 Oxford Dictionaries, Sharia, http://www.oxforddictionaries.com/definition/english/sharia, accessed July 2015.

51 JRank, Islamic Law – Legal Literature and Institutions, Jurisprudence: The “sources” of the Law, the Modern Period, http://science.jrank.org/pages/7816/Law-Islamic.html, accessed July 2015.

52 United Nations Human Rights Council, “Report on the special rapporteur on violence against women” http://www2.ohchr.org/english/bodies/hrcouncil/docs/11session/A.HRC.11.6.Add.3_en.pdf, accessed July 2015.

 

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53 BBC World Service, Case Study: Sharia Law, http://www.bbc.co.uk/worldservice/people/features/ihavearightto/four_b/casestudy_art07.shtml, accessed July 2015.

54 Ioannis Grigoriadis, Instilling Religion in Greek and Turkish Nationalism: A “Sacred Synthesis”, (Palgrave Macmillan 2012), Google Books, p. 63.

55 United Nations Department of Economic and Social Affairs, Sate of Kuwait Country Profile, September 2004, http://unpan1.un.org/intradoc/groups/public/documents/un/unpan023178.pdf?q=kuwait, accessed July 2015.

56 Missing the Picture: IKEA’s Women-free Catalogue in Saudi Arabia Fails to Protect Company Values and Reputation, Wharton Knowledge at Wharton, October 16, 2012, http://knowledge.wharton.upenn.edu/article/missing-the-picture-ikeas- women-free-catalogue-in-saudi-arabia-fails-to-protect-company-values-and-reputation/.

57 World Economic Forum, “The Global Gender Gap Report 2012”, p.305 http://www3.weforum.org/docs/WEF_GenderGap_Report_2012.pdf, accessed July 2015.

58 Saudi Minister Rebukes Religious Police, BBC News, November 4th, 2002, http://news.bbc.co.uk/2/hi/middle_east/2399885.stm, accessed August 2015.

59 “Is Jeddah Really Different?”, The Saudi Alchemist, December 8, 2009, http://saudialchemist.org/2009/12/08/jeddah-is- different/, accessed July 2015.

60 “Saudi King appoints first woman to council,” CNN, February 14, 2009, http://www.cnn.com/2009/WORLD/meast/02/14/saudi.arabia.woman.minister/index.html?_s=PM:WORLD.

61 World Economic Forum, “The Global Gender Gap Report 2012”, p.305 http://www3.weforum.org/docs/WEF_GenderGap_Report_2012.pdf, accessed July 2015.

62 CNN Wire Staff, “Saudi Arabia to let women compete in Olympics for first time”, CNN, June 26, 2012, http://edition.cnn.Ccom/2012/06/25/sport/saudia-arabia-olympic-women/index.html?on.cnn=1, accessed July 2015.

63 Saudi Ministry of Information and Culture, About Us, http://www.info.gov.sa/ , accessed July 2015.

64 Robert Lacey, Inside the Kingdom: Kings, Clerics, Modernists, Terrorists and the Struggle for Saudi Arabia, (Viking, 2009), Google Books, p. 48, https://books.google.com.tr/books?id=8fOGh87Zrr0C&printsec=frontcover&dq=robert+lacey+inside+the+kingdom&hl=en& sa=X&ved=0CBoQ6AEwAGoVChMI3LHtyO_DxwIVzAUsCh0QIQMY#v=onepage&q=robert%20lacey%20inside%20the%20k ingdom&f=false.

65 Royal Embassy of Saudi Arabia Washington D.C., Law of Printing and Publication (2003), https://www.saudiembassy.net/about/country-information/laws/Law_of_Printing_and_Publication.aspx, accessed July 2015.

66 Jonathan Green and Nicholas Karolides, Encyclopedia of Censorship (Infobase publishing 2009), Google Books, https://books.google.com.tr/books?id=bunHURgi7FcC&pg=PA494&hl=en#v=onepage&q&f=false, p. 494.

67 SAGIA, “What We Do”, http://www.sagia.gov.sa/en/SAGIA/What-We-Do/, accessed August 2015.

68 Doing Business, The World Bank, http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB13-full- report.pdf, accessed August 2012.

69 Anonymous, interviewed by Professor Karthik Ramanna, August 2015.

70 Anonymous, interviewed by Professor Karthik Ramanna, August 2015.

71 Anonymous, interviewed by Professor Karthik Ramanna, August 2015.

72 Internet filtering in Saudi Arabia in 2004, OpenNet Initiative, accessed August 2015.

73 Metro. (2012, October 1). Retrieved June 23, 2015, from Factiva: http://www.metro.se/nyheter/kvinnor-gar-inte-att- retuschera-bort/EVHlja!2mPseJ6LPTrK2/.

74 Anna Molin, “IKEA Regrets Cutting Women From Saudi Ad,” Wall Street Journal Europe. October 1, 2012.

75 Anna Ringstrom, “Swedes slam IKEA for its female-free Saudi catalogue, Reuters, October 2, 2012.

 

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76 Leon Kaye, “IKEA Airbrushed Out Women in Saudi Arabian Catalog,” triple Pundit, October 3rd, 2012.

77 Anna Molin, IKEA Regrets Cutting Women From Saudi Ad, Wall Street Journal, October 1, 2012, accessed July 2015.

78 Av Erik Högström, “Ikea raderad kvinnor I ktatalog I Saudiarabien,” Expressen, October 1, 2012, http://www.expressen.se/nyheter/ikea-raderade-kvinnor-i-katalog-i-saudiarabien/.

79 The Telegraph, “Ikea criticized for airbrushing women out of Saudi catalogue,” October 1, 2012, accessed July 2015.

80 Anna Ringstrom, “Swedes slam IKEA for its female-free Saudi catalogue, Reuters, October 2, 2012.

81 Jennifer Preston, “Ikea Apologizes for Removing Women From Saudi Catalogue,” The New York Times, October 2, 2012, http://thelede.blogs.nytimes.com/2012/10/02/ikea-apologizes-for-removing-women-from-saudi-catalog/?_r=0.

82 The Telegraph, “Ikea criticized for airbrushing women out of Saudi catalogue,” October 1, 2012, accessed July 2015.

83 Missing the Picture: IKEA’s Women-free Catalogue in Saudi Arabia Fails to Protect Company Values and Reputation, Wharton Knowledge at Wharton, October 16, 2012.

84 Dee Madigan, Lost in translation: the pitfalls of global branding,” ABC Net, October 3, 2012, accessed July 2015.

85 Dee Madigan, Lost in translation: the pitfalls of global branding,” ABC Net, October 3, 2012, accessed July 2015.

86 Ardi Kolah, “Why culture matters and how brands get this so wrong!” Linkedin Pulse, May 1, 2014, https://www.linkedin.com/pulse/20140501081538-5423737-why-culture-matters-and-how-brands-get-this-so-wrong.

87 Kenneth Roth Twitter page, status October 1, 2012, https://twitter.com/kenroth/status/252777780318703617.

88 “A Vanishing Act? IKEA ‘Erases’ Women from Saudi Catalogue”, Alarabiya English, October 1, 2012.

89 Joe Sterling, “Images of Women Shelved in IKEA’s Saudi Catalog”, CNN, October 10, 2012, accessed July 2015.

90 Eman AlNajfan (@Saudiwoman), “For ppl upset at #IKEA for cropping women out of their Saudi catalogs, the principle is much more applicable if you wld be upset at #GMC,” Twitter Post, October 2, 2012, 8:06 AM.

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