Critical thinking concepts

Select 2 articles of different disciplines from HBR or MIT Sloan Management Review or Academy of Management Perspective. Provide article name, author(s) name, year, journal, vol, issue, # of pages. For instance (Panicker, A., Agrawal, R.K. and Khandelwal, U. (2018), “Inclusive workplace and organizational citizenship behavior”, Equality, Diversity, and Inclusion: An International Journal, Vol.37 No.6, pp.530-550)

Write 4-5 page report:

Don't use plagiarized sources. Get Your Custom Essay on

Just from $13/Page

Order Essay

Summarize both the articles

Identify how critical thinking is applied. Is there any variance for different disciplines?

Identify which stage of critical thinking the article/author is. Provide your justification for the same

Which structure/form is more relevant for the selected article?

What are the main arguments in each article? What are the assumptions behind each argument? Evaluate the assumptions (Strong/Weak)

Provide Recommendations & conclusion

W18030

APPLE’S IPHONE IN INDIA: RINGING IN NEW FORTUNES?1

Tulsi Jayakumar wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective
or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to
protect confidentiality.

This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.

On September 7, 2016, Tim Cook, chief executive officer (CEO) of Apple Inc. (Apple), prepared to deliver
his keynote address at the launch of the new version of Apple’s flagship product, the iPhone 7. The new
product was being launched two years after its predecessor models, the iPhone 6 and iPhone 6S. Apple had
termed it “the best, most advanced iPhone ever”2 and priced it at three times its cost.3 However, Cook was
worried. Amid a global slowdown in the smartphone market, Apple witnessed an 18 per cent year-on-year
dip in iPhone revenue in the first calendar quarter (Q1) of 2016.4 Consequently, Apple’s revenues declined
for the first time in 13 years. The company had leapfrogged to become the market leader in the smartphone
market in Q4 of 2014 with the launch of the iPhone 6 and 6 Plus. However, it trailed to second position in
fiscal year (FY) 2016 with a 14.4 per cent market share.5 This number was way behind the Samsung Group’s
20.5 per cent share of the smartphone market in 2016.

A multitude of factors had caused a dip in iPhone sales in the United States and China—Apple’s key
markets. Apple was now eyeing India, the world’s third largest smartphone market, to replicate its China
growth story.7 The India launch of the iPhone 7 was planned for a month later, on October 7, 2016. The
base model would be priced at ₹60,0008 (over US$9009), about 39 per cent greater than the iPhone price in
the United States.10

Would Apple’s pricing strategy be effective in a market like India? Did Apple have the pricing power11 to
charge more than three times the cost of the iPhone in the Indian market? How could Apple grow its
revenues and profits in one of the world’s fastest growing smartphone markets?

GLOBAL MARKET FOR SMARTPHONES

The global market for smartphones was experiencing a slowdown in 2016, with growth predicted to drop
to 7 per cent from the 14.4 per cent rate experienced in FY 2015.12 The reasons for this slowdown included
a saturation in the mature, developed markets of North America, Western Europe, Japan, and the Asia
Pacific, with a penetration of 90 per cent achieved in these markets.13 At the same time, the replacement
demand in these markets was weak, with even premium consumers choosing to postpone upgrades and
extend the lifecycle of their existing phones to 2.5 years.14

For the exclusive use of A. Szwarc, 2020.

This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://years.1

https://markets.1

https://States.10

www.iveycases.com

mailto:cases@ivey.ca

Page 2 9B18M013

In 2016, the Chinese economy—one of the world’s largest smartphone markets—slowed down
considerably from its double-digit growth figures in the previous three decades. Chinese gross domestic
product grew at 6.7 per cent in each of the first three quarters of 2016–17, which was the slowest growth
rate in China in seven years.15 China, with a strong middle class of more than 100 million, offered significant
opportunities for iPhones when Apple entered the country in 2009.16 However, Chinese smartphone sales
plateaued in 201517 and declined by 5 per cent year-on-year in Q1 of 2016.1

Despite this decline in the smartphone market, domestic Chinese manufacturers of premium Android-based
phones used value pricing to grow their market shares in China. Two companies that grew their market
shares significantly were OPPO Electronics Corp. and Vivo, both owned by Guangzhou-based BBK
Electronics Corporation Ltd. (BBK). Well-designed phones using the latest technology such as AMOLED
screens,19 advanced camera technology, and hi-fi audio components, but priced below iPhones, helped the
two companies capture market share not only in China but also in India and Southeast Asia. The
promotional strategy included aggressive advertising campaigns using celebrities for marketing and offline
sales channels to reach prospective customers. The phones were targeted mainly at Tier 2 cities and rural
areas.20 BBK also manufactured and sold a third smartphone under the brand name OnePlus, comprising
phones with attractive designs and 90 per cent of the features of top phones like Samsung, at half the price.21

The rise in the combined market share of Oppo and Vivo to about 31.6 per cent in 2016 in China—the
world’s largest smartphone market in terms of sales—had a negative effect on Apple’s market share in
China. Apple’s share was reduced to 9.6 per cent in 2016 compared to 13.6 per cent in 2015.22 More
importantly, iPhone revenues from China—Apple’s key and fastest growing market—were down 26 per
cent in Q1 of 2016.23

In addition, Apple was facing significant intellectual property challenges in China. In May 2016, a Beijing
court ruled that a small Chinese manufacturer, Xintong Tiandi Technology, could continue to use the brand
name “iPhone” on a variety of leather mobile accessories, including phone cases and wallets. The Chinese
manufacturer had registered its trademark in China in 2007 about two years before Apple started selling its
iconic brand in China and held the trademark in China to sell these products. Apple had tried to prevent the
use of the iPhone brand name since 2012 but failed.24 In June 2016, to add to Apple’s woes in China,
Shenzhen-based company, Shenzen Baili Marketing Services Co., claimed that Apple copied the look of
its 100C smartphone. Consequently, a local court ordered Apple to stop selling the iPhone 6 and iPhone 6
Plus in Beijing.2

INDIA’S MARKET FOR SMARTPHONES

In 2016, India had 20 per cent of all mobile phone subscribers in the world and was expected to be the
fastest-growing market for mobiles until 2020.26 Most of the growth in the mobile market was expected to
be in the smartphone segment, with India predicted to be one of the major growth markets for
smartphones.27 In Q1 of 2016, it was predicted that by 2017 India would overtake the United States to
become the second-largest smartphone market behind China.28 India was also expected to grow five times
faster than China in its demand for smartphones.2

In 2016, the Indian market for smartphones resembled the Chinese smartphone market five to six years
earlier, during its growth phase. The shipment to India in 2015 of 104 million smartphones was comparable
to the shipment to China in 2011 of 92 million smartphones. A market survey found that 4 per cent of
Indians owned a smartphone in January 2016, compared to the 4.6 per cent of Chinese consumers who

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://smartphones.2

https://China.28

https://smartphones.2

https://Beijing.2

https://failed.24

https://price.2

https://areas.20

https://years.15

Page 3 9B18M013

owned an iPhone in 2009.30 Apple grew its market share of $400-plus smartphones in China from 30 per
cent in 2010 to 74 per cent in 2015. It was predicted that India could be the next China for Apple.31

Drivers of the Smartphone Market in India

India appeared to be on the cusp of a smartphone revolution led by several factors.

Large Proportion of Non-Users

Of the overall Indian population of 1.324 billion in 2016, the number of mobile phone users was estimated
to be 650 million. Of these, only about 300 million owned smartphones. These figures meant there was a
large proportion of Indians who did not own a smartphone.3

Large Youth Population

India, with its large population of youth and people in the working age groups, posed lucrative options for
smartphone manufacturers. The 2011 census put the proportion of India’s youth (15–24 years) at 19.1 per
cent of the total population.33 Around 41 per cent of India’s population was in the less-than-20 age group,
while half of India’s population was in the 20–59 age group.34

Internet Use in India

Smartphones provided a point of entry to the internet, the use of which was growing in India. In September
2016, 31 per cent of the Indian population—an estimated 420 million—were internet users. Looking at
internet penetration in a disaggregated manner, almost 60 per cent of India’s urban population were internet
users, while internet penetration in rural India was only 17 per cent of the 906 million rural population.35
Thus, there was a potential of approximately 750 million users in rural India who could be transformed into
Internet users.

Indians, across all demographics, preferred smartphones over devices such as a desktops or laptops to access
the internet. In fact, 77 per cent of urban users and 92 per cent of rural users relied on their mobiles for
internet access. Urban consumers used the internet for email, online communication, and social networking,
while rural Indians used it primarily to access online entertainment. The increased use of the internet in
urban India for casual use, rather than official purposes, was likely to drive increased smartphone use. Rural
India, where penetration of desktops and laptops was historically low, was also expected to further adopt
mobiles for internet use.36

Increasing Growth in the Market for Apps and Gaming

In 2016, India’s mobile application (app) market grew faster than the U.S. app market. The United States
was the long-standing market leader in mobile apps and ranked first in terms of Google Play downloads.
Indians downloaded over 6 billion Android-based apps in 2016, for 71 per cent growth over 2015.37 The
growth in app downloads around the world over the same period was much lower, at only 15 per cent.38

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://population.35

https://group.34

https://population.

https://smartphone.32

https://Apple.31

Page 4 9B18M013

Globally, a smartphone user was found to use about 30 apps per month. India, Brazil, and China ranked as
the three top users of apps, based on monthly usage patterns.39 Indians, despite the high data costs and poor
connectivity, not only downloaded the most apps in 2016 but also spent the maximum time on their Android
devices. An average Indian user spent about 155 minutes per day on apps.40 Further, in 2016, Indians spent
the maximum time (145 billion hours) on their Android devices, leaving the Brazilians in second spot at
110 billion hours. However, most of the downloaded apps were Android-based. India did not feature in the
top 10 countries in the world for iOS downloads or time spent on iPhones.41

The video streaming app Netflix topped the revenue-generating apps, followed by the online dating app
Tinder and the professional networking app LinkedIn.42 From July to December 2016, the total time spent
by Indians on the top 10 video streaming apps, including Hotstar and Netflix on Android phones, increased
by 600 per cent, compared to July to December 2015.43

The mobile gaming industry was another big driver for app downloads and revenues. The $200 million
mobile gaming market in India in 2016 was expected to grow to $3 billion by 2019. In 2016, the CEO of a
top gaming company commented on the growth of India’s gaming industry: “Mobile gaming has taken off
in India with 2.5 billion game downloads over the last 12 months. Of the 20 apps that are downloaded by
smartphone users within the first month of purchase, five are games.”44

Features of the Indian Smartphone Market

Challenging and Growing Competition

The barriers to entry in the Indian smartphone market were low. Small players who could differentiate
themselves on price or non-price features had a good chance to grow. The Indian smartphone market
consisted of more than 100 brands, with stiff competition among them.45 From January to March 2016,
Samsung was the top player in the market, with a 29 per cent market share; Micromax Informatics Limited
(Micromax), with a 17 per cent market share, was second. Other players included Intex Technologies Ltd.
(Intex), Lava International Limited, and Lenovo Group Limited, with 10 per cent, 6.8 per cent, and 5 per
cent market shares, respectively.46Apple, with a 1.9 per cent market share, was not even among the top
five.4

By June 2016, Chinese smartphone brands—including OPPO, Vivo, and Gionee—had gained significant
market share in India through aggressive marketing and retail strategies. These strategies included 5–6 per
cent higher margin payouts to retailers than other mainstream brands, and higher payments to stores for
display space and branding. These Chinese brands made significant investments in product service and
offered a cheaper product price for comparable quality, which had a positive impact on their revenues.
Thus, the April–June quarter of 2016 witnessed a growth of 42 per cent for OPPO, 201 per cent for Vivo,
and 99 per cent for Gionee. Meanwhile, during the quarter ending June 2016, Samsung’s share slipped to
25.6 per cent, Micromax’s share slipped to 14.1 per cent, and Intex’s share slipped to 8.5 per cent.48

Languages and Smartphone Adoption

One major challenge to the growth in smartphone adoption was that most phones sold in India came with
English-language operating system software. It was true that with 125 million English speakers, India was
second only to the United States as an English-speaking nation. However, only one in every 10 Indians
considered English as their first, second, or third language. India was a nation with over 1,600 dialects in

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://LinkedIn.42

https://iPhones.41

https://patterns.39

Page 5 9B18M013

30 languages, spoken by more than a million native speakers each. The Indian constitution recognized 22
languages as official Indian languages. It was these local language speakers who represented the present
and future of both internet use and smartphone adoption in India.49

A KPMG-Google report pointed out that Indian language internet users grew from 42 million in 2011 to
234 million in 2016. The number of English internet users, on the other hand, was only 175 million in 2016.
Indian language internet users were likely to grow at a compound annual growth rate (CAGR) of 18 per
cent to reach 536 million in 2021, as opposed to a 3 per cent CAGR in English users. Further, nine out of
10 new internet users in India in the next five years were likely to be Indian language users.50

The report found that nearly 70 per cent of Indians, including both urban and rural Indians, considered local
language digital content more reliable than English content. Most Indian language internet users preferred
Hindi, the national language of India. However, by 2021, only 38 per cent of the Indian language internet
user base was likely to be Hindi-speaking. The remaining percentage would comprise internet users using
multiple Indian local regional languages such as Marathi, Bengali, Tamil, and Telugu.51

The report also pointed out that apps and web categories—including payments, government services, news,
and classifieds—were expected to grow at a CAGR of 26–34 per cent between 2016 to 2021, as local
language integration improved. Of the shoppers who preferred traditional offline channels, 50 per cent were
willing to shift online if provided with an end-to-end Indian language experience.52 Indian companies like
Indus OS were using this opportunity to create operating systems in multiple Indian languages. These
systems were being used by top Indian brands such as Micromax.53

Low Per Capita Income and High Price Sensitivity of Indians

The average annual per capita income in India in 2016, at $1,570.00, was far lower than China’s $6,894.50
per capita income.54 Indians were price sensitive, with a high price elasticity of demand.55 This price
sensitivity was partly cultural. People were less willing to spend on expensive phones because of their desire
to switch phones regularly, given the wear and tear associated with the pollution and humidity in India.
Such price sensitivity would impact the price that could be charged through the price elasticity of demand.56

The average price of an iPhone in India in 2016 was $612. In contrast, the average price of a Samsung
phone— the market leader—was $173, and Micromax was $86. According to an analyst, 86.5 per cent of
all smartphones shipped to India in 2015 retailed for under $200.57 Apple’s competitors offered better
functionality at lower prices.

Low Internet Penetration and Limited Availability of LTE and 4G58

India was characterized by low internet penetration and the limited availability of LTE and/or 4G
technology.59 In 2016, over 66 per cent of the 1.3 billion population did not have access to the internet. The
challenge for mobile devices connecting to the internet was the lack of real-time connectivity. This lack of
connectivity could be attributed to the lack of power needed to charge mobiles frequently, together with the
high price of mobile data and lack of quality service.60 Because of these issues, customers were reluctant to
buy premium smartphones.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://service.60

https://technology.59

https://demand.5

https://demand.55

https://income.54

https://6,894.50

https://1,570.00

https://Micromax.53

https://experience.52

https://Telugu.51

https://users.50

https://India.49

Page 6 9B18M013

Preference for Android Phones

The Indian smartphone market was largely a market for Android phones. In Q2 of 2016, Androids
accounted for 97 per cent of the Indian smartphone operating system market share, compared to Apple
iOS’s share of 2.4 per cent and 0.5 per cent for others. The comparable shares in Q2 of 2015 were 90 per
cent Android, 5.5 per cent Apple iOS, and 4.5 per cent others. This change in the market share was also
reflected in the Indian smartphone operating system shipments between Q2 of 2015 and Q2 of 2016. Thus,
Android smartphone shipments to India grew 28 per cent annually to reach a figure of 29.8 million in Q2
of 2016, compared to a 35 per cent fall in Apple iOS shipments to 0.8 million in Q2 of 2016.61

The Android dominance was explained by an analyst: “Android dominates the India smartphone market
and looks unbeatable right now, due to its deep portfolio of hardware partners, extensive distribution
channels, and a wide range of low-cost apps like Gmail.”62

Smartphone Brand Awareness and Satisfaction

Brand awareness and satisfaction were the key factors affecting purchases in a growing market. A brand
awareness survey of 2,626 smartphone buyers in India by Morgan Stanley in April 2016 revealed that nearly
half of the respondents were unfamiliar with the Apple brand. Out of 12 smartphone companies in India,
Apple ranked 10th in brand awareness, just ahead of Motorola Mobility and HTC Corporation.63 Such brand
awareness was to be distinguished from brand satisfaction for a product. The latter would affect the
purchase intentions of smartphones and be critical in a market with low smartphone penetration and high
potential for growth. Globally, camera quality, screen size, and resolution were the key purchase drivers.
However, smartphone sellers in India needed to understand whether these drivers were indeed the critical
factors affecting brand satisfaction in a country like India.

Policies Affecting Smartphones

The Indian government’s “Make in India” campaign, launched in 2014, was aimed at encouraging national
and multinational companies to manufacture their products in India, and to transform India into a global
design and manufacturing hub.64 The government sought to boost the indigenous manufacture of mobile
handsets, including smartphones. In the Union Budget 2015–16, it imposed a 12.5 per cent countervailing
duty on mobile phone imports, while fixing a 1.0 per cent excise duty on domestic mobile manufacturers
without an input tax credit (or 12.5 per cent with an input tax credit65). Such a differential excise duty was
aimed at providing a level playing field to domestic mobile manufacturers—who faced stiff price
competition from imported mobile components or finished goods players—and to encourage the assembly,
programming, testing, and packaging of mobile phones in India.

As a result of such policies, there was a sharp increase in mobile manufacturing facilities in India, to almost
50, with a combined production output of 180 million units in 2016. Simultaneously, the value of handset
manufacturing in India grew almost three times between 2014–15 and 2015–16.

Locally manufactured mobile phones in India grew their market share from 14 per cent in 2014 to 67 per cent
in 2016, at the cost of imported mobile phones. This market share was estimated to reach 96 per cent by
2020.66

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://Corporation.63

Page 7 9B18M013

One policy initiative that was likely to clash with the smartphone makers’ mission/vision statements,
especially that of Apple, was the Aadhar initiative. The initiative was introduced in July 2016 as mandatory
under the Aadhar Act, 2016.67 It sought to assign every registered Indian citizen a unique identification
number, called Aadhar, based on the collection of biometric information—including fingerprints and iris
scans. Increasingly, access to various government services such as subsidies, health care, education, opening
a bank account, and possessing a mobile phone was to be linked to the allotment of an Aadhar number.

The government wanted smartphone makers to create devices for the domestic market that supported iris-
based authentication technology. Samsung had integrated such technology into its smartphone sold in
India—the Galaxy Tab Iris. However, the stance of U.S. technology companies regarding the government
demands was not as positive. Apple, in particular, had a clear stance on customer privacy issues. It
demonstrated this stance in February 2016 when it refused to build a universal backdoor to the iPhone,
despite federal law enforcement requests to do so.68 Thus, in July 2016, when the Unique Identification
Authority of India, the statutory authority administering Aadhar, called a meeting with top smartphone
makers to discuss developing Aadhar-compliant devices, Apple did not attend the meeting.69

IPHONE: PRICING AND COSTS

In January 2007, Apple’s CEO at the time, Steve Jobs, announced the iPhone launch. It was available in two
models—a 4 gigabyte (GB) model and an 8 GB model, priced at $499 and $599 respectively. The iPhone
combined “a revolutionary mobile phone, a widescreen iPod® with touch controls, and a breakthrough Internet
communications device with desktop-class email, web browsing, searching and maps—into one small and
lightweight handheld device.”70 It completely redefined what users could do on their mobile phones.71 From
2007 on, Apple launched a new version of the iPhone annually (see Exhibit 1). The iPhone 7, the latest model,
was launched in September 2016 by Apple’s CEO, Tim Cook, Jobs’ successor.

Technology firms such as isuppli and IHS Markit regularly calculated the teardown costs of the iPhone by
actually tearing down a newly launched phone into its component parts and estimating the cost of each
component, based on the manufacturer and the volume. Such estimates did not represent the actual costs
borne by Apple. However, since Apple still had the power to negotiate costs with each manufacturer, they
were considered fairly reliable estimates of the phones’ overall manufacturing costs.72 The costs did not
include Apple’s expenses on shipping, advertising and marketing, software research and development, and
patent licensing.73

The pricing and teardown costs were available for the various iPhone models starting in 2007 (see
Exhibit 2). The incorporation of different materials and components in different models accounted for
differences in the bill of material costs for the iPhones. Together with the assembly costs, they represented
the manufacturing costs per unit.

Apple’s Overheads

Apple’s overhead expenses had been going up over the years, even as its revenues and profits increased
(see Exhibit 3). Apple’s advertising expenses amounted to $467 million in 2007, $486 million in 2008, and
$501 million in 2009. After 2010, advertising expenses exploded, with Apple reaching the $1 billion mark
on advertising spending in 2012.74 In 2015, Apple increased its global advertising spend by about 50 per
cent, to 1.8 billion.75 In 2016, Apple stopped disclosing its advertising expenses. It chose to state in its
annual report, “Advertising costs are expensed as incurred and included in selling, general and

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://billion.75

https://licensing.73

https://costs.72

https://phones.71

https://meeting.69

Page 8 9B18M013

administrative (SG&A) expenses”.76 However, the advertising spending as a proportion of revenue
continuously declined from 2008 up to 2014, before it increased in 2015.77 It was not only the company’s
advertising costs that went up; Apple’s SG&A expenses also increased (see Exhibit 3).

Apple had also been ramping up its spending on research and development (R & D) over the years. Analysts
estimated that Apple’s R & D spending increased from $4.77 billion in 2013 to $10.39 billion in 2016. Such
spending was expected to increase to $12 billion in 2017 (see Exhibit 3).78 The increase in R & D spending
happened even as revenues from the iPhone business slid 18 per cent year-over-year to $32.9 billion in the
quarter ending March 2016. With iPad and Mac sales also falling, Apple’s overall revenue was down 13
per cent year-over-year in the same quarter. Analysts suggested that Apple was incurring increased R & D
spending with a view to coming up with a new product to complement the iPhone as its “main growth
engine.”79 However, there was no clarity as to what the R & D spending was intended for.80

iPhone Pricing

Apple followed a premium pricing strategy for the iPhone. The premiums were higher—not just for higher
memory configurations, but also for the larger “phablet-sized” displays introduced in 2014. Thus, the 16 GB
iPhone 6 Plus, introduced in 2014, was priced at $100 more than the iPhone 6, although the cost difference
per unit between the two worked out to only $19.50.

In September 2016, Apple launched the iPhone 7 and iPhone 7 Plus. The 32 GB iPhone 7 incorporated
components costing $219.80. Together with $5 of assembly costs, the overall cost of the iPhone 7, which
was priced at $649 in the United States, worked out to $224.80. Part of the higher material costs could be
attributed to the higher 32 GB storage as the base level, costing $16.40 per iPhone sold. Other costs
contributing to the increased material cost included the chip, estimated at $26.90; the display, estimated at
$43; and the device’s two cameras, at approximately $19.90 per phone.81

There were global disparities in iPhone prices, with consumers in most countries having to pay far more
than the price of an iPhone in the United States. As explained by an analyst, such price differentials
depended on “exchange rates, import taxes, regional taxes and, in some cases, even seemingly unconnected
rules like private copying levies.”82

Apple planned to launch the iPhone 7 and iPhone 7 Plus in India on October 7, 2016. It announced the price
of its base model (the 32 GB version) at ₹60,000, which (at an exchange rate of ₹66.62 per US$1 in October
2016) worked out to over $900 per unit for the base model.83 A study by research and advisory firm Gartner
Inc. indicated that the average selling price of a smartphone in India was $120 or less.84 The top 20 cheapest
Android phones in India in 2016 cost anywhere from ₹1,749 (for the Swipe Konnect 3) to ₹2,999 (for the
Karbonn A1 Plus Champ).85

APPLE’S PROFITS

By 2016, Apple’s revenues, net profits, and net margins had all fallen (see Exhibit 4). A large part of this
decline could be attributed to the fall in iPhone sales and revenue (see Exhibit 5). The year-on-year growth
rates of both iPhone revenue and units sold had also fallen dramatically (see Exhibit 6).

Yet, in 2016, while the total operating profits of the global smartphone industry stood at $53.7 billion,
Apple’s operating profits alone amounted to $45.7 billion—79.2 per cent of global smartphone profits. In

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://Champ).85

https://model.83

https://phone.81

https://expensesﬂ.76

Page 9 9B18M013

comparison, Samsung posted an operating profit of $8.3 billion—14.6 per cent of global profits. Samsung’s
operating profit margin was 11.6 per cent, compared to Apple’s operating profit margin of 32.4 per cent.
Compared to Apple, Chinese smartphone makers experienced lower profitability, despite growing market
shares. The share of Huawei Technologies, Co., Ltd., OPPO, and Vivo in 2016 in global profits were 1.6
per cent, 1.5 per cent, and 1.3 per cent, respectively.86

Analysts believed that the global smartphone market, while experiencing a low annual growth rate of only
2.5 per cent in 2016, would increase by 3 per cent to 1.5 billion units in 2017, buoyed by growth in emerging
markets.87 However, of the 1.5 billion units of smartphones expected to be sold in 2017, 85 per cent were
expected to be Android powered.88 Cook was aware that in Q2 of 2016, iPhone revenue from China—
Apple’s key and fastest growing market—were down 26 per cent year-on-year.89 Meanwhile, iPhone sales
in the price-sensitive Indian market had dipped by 33 per cent year-on-year.90 This drop was against a 28
per cent annual growth in Android phone sales in India, from 23.2 million units in Q2 of 2015 to 29.8
million units in Q2 of 2016, with the Android market share increasing from 90 per cent to 97 per cent over
the period. Correspondingly, Apple’s smartphone market share in India almost halved from 4.5 per cent to
2.4 per cent between Q2 of 2015 and Q2 of 2016.91 Yet, Cook was hopeful that India would prove to be
“another giant market” for the iPhone.92

Would India bite into a relatively expensive Apple? Did Apple have the monopoly power to charge a price
more than three times the cost of manufacturing the iPhone? What pricing strategy would Apple need to
use in India for its iPhones to maximize its revenues and profits?

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://iPhone.92

https://year-on-year.90

https://year-on-year.89

https://powered.88

https://markets.87

https://respectively.86

Page 10 9B18M013

EXHIBIT 1: TIMELINE OF IPHONE MODELS

JUNE 30, 2007—IPHONE

JULY 2008—IPHONE 3G

JUNE 2009—IPHONE 3GS

JUNE 2010—IPHONE 4

OCTOBER 2011—IPHONE 4S

SEPTEMBER 2012—IPHONE 5

SEPTEMBER 2013—IPHONE 5C and IPHONE 5S

SEPTEMBER 2014—IPHONE 6 AND 6 PLUS

SEPTEMBER 2015—IPHONE 6S AND 6S PLUS

MARCH 2016—IPHONE SE

SEPTEMBER 2016—IPHONE 7

Source: Created by the author based on Dan Graham, “History of the iPhone 2007–2017,” T3, September 7, 2016, accessed
August 2, 2017, www.t3.com/features/a-brief-history-of-the-iphone.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

www.t3.com/features/a-brief-history-of-the-iphone

Page 11 9B18M013

EXHIBIT 2: IPHONE PRICING AND TEARDOWN COSTS (IN US$)

Year Model Full Price (Price/Unit in $)
Bill of Material

(BOM) Cost

($/Unit)

Assembly
Cost

($/Unit)

Total BOM +
Assembly Cost
Per Unit ($/Unit)

2007 iPhone 4 GB 499 200.00 7.00 207.00
iPhone 8 GB 599 220.00 7.00 227.00

2008 iPhone 3G 8 GB 599 174.33 6.50 180.83

2009 iPhone 3 GS 16 GB 599 172.46 6.50 178.96

2010 iPhone 4 16 GB 599 187.51 8.00 195.51

2011
iPhone 4S 16 GB 649 188.00 8.00 196.00
iPhone 4S 32 GB 749 207.00 8.00 215.00
iPhone 4S 64 GB 849 245.00 8.00 254.00

2012

iPhone 5 16 GB 649 199.00 8.00 207.00
iPhone 5 32 GB 749 201.00 8.00 209.00

iPhone 5 64 GB 849 222.00 8.00 230.00
2013 iPhone 5S 16 GB 649 190.70 8.00 198.70

iPhone 5S 32 GB 749 200.10 8.00 208.10

iPhone 5S 64 GB 849 210.30 8.00 218.30

2014
iPhone 6 16 GB 649 196.10 4.50 200.60
iPhone 6 Plus
16 GB 749 215.60 4.50 220.10

2015
iPhone 6S 16 GB 650 211.50 4.50 216.00
iPhone 6S Plus 16
GB 749 231.50 4.50 236.00

2016
iPhone SE 16 GB 399 NA NA 160.00
iPhone SE 64 GB 499 NA NA 170.00
iPhone 7 32 GB 649 219.80 5.00 224.80

Source: Created by the author based on: Michael Arrington, “That $599 iPhone Costs $220 to Make,” Tech Crunch, July 2,
2007, accessed July 7, 2017, https://techcrunch.com/2007/07/02/that-599-iphone-costs-220-to-make/; Sean Fallon, “iSuppli
Official Estimate: The iPhone 3G Build Price is $174.33,” Gizmodo, July 15, 2008, accessed July 21, 2017,
http://gizmodo.com/5025546/isuppli-official-estimate-the-iphone-3g-build-price-is-17433; Josh Ong, “iPhone 4S Breakdown
Estimates Same $188 Cost as iPhone 4,” Appleinsider, October 19, 2011, accessed June 23, 2017,
http://appleinsider.com/articles/11/10/19/iphone_4s_breakdown_estimates_same_188_cost_as_iphone_4; Erica Ogg,
“iPhone 4 Teardown Reveals $188 Cost to Build,” C Net, June 28, 2010, accessed July 23, 2017, www.cnet.com/news/iphone-
4-teardown-reveals-188-cost-to-build/; IHS Markit, “iPhone 3G S Carries $178.96 BOM and Manufacturing Cost, iSuppli
Teardown Reveals,” press release, accessed July 23, 2017, https://technology.ihs.com/389273/iphone-3g-s-carries-17896-
bom-and-manufacturing-cost-isuppli-teardown-reveals; Joshua Topolsky, “AT&T Announces iPhone 3G Pricing Plans,”
Engadget, July 1, 2008, accessed July 17, 2017, www.engadget.com/2008/07/01/atandt-announces-iphone-3g-pricing-
plans/; Wilson Rothman, “Real Cost of iPhone 3GS: About $218 More than You Think,” Gizmodo, June 8, 2009, accessed
July 1, 2017, http://gizmodo.com/5283568/real-cost-of-iphone-3gs-about-218-more-than-you-think; IHS Markit, “iPhone 4
Carries Bill of Materials of $187.51, According to iSuppli,” press release, June 28, 2010, accessed July 5, 2017,
https://technology.ihs.com/388916/iphone-4-carries-bill-of-materials-of-18751-according-to-isuppli.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://technology.ihs.com/388916/iphone-4-carries-bill-of-materials-of-18751-according-to-isuppli

http://gizmodo.com/5283568/real-cost-of-iphone-3gs-about-218-more-than-you-think

www.engadget.com/2008/07/01/atandt-announces-iphone-3g-pricing

https://technology.ihs.com/389273/iphone-3g-s-carries-17896

www.cnet.com/news/iphone

http://appleinsider.com/articles/11/10/19/iphone_4s_breakdown_estimates_same_188_cost_as_iphone_4

http://gizmodo.com/5025546/isuppli-official-estimate-the-iphone-3g-build-price-is-17433

That $599 iPhone Costs $220 To Make

Page 12 9B18M013

EXHIBIT 3: APPLE’S OVERHEAD EXPENSES (IN US$ BILLION), 2007–2016
0.

78 1.
11 1.
33 1.
78 2.

43 3.
38 4

7 6.

8.
07

10
.0

0.
46

0.
48

0.
50

0.
69

0.
93

1 1.
1

1.
2 1.

82
.9

6 3.
76 4.
15 5

2 7

10
.0
4

10
.8

11
.9

9 1
4.

14
.1

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

R & D Expense Advertising Expenses SG&A Expenses

Note: The SG&A expenses refer to selling, general, and administrative expenses, and include advertising expenses.
Source: Created by the author based on: Erik Sherman, “Apple’s Ad Budget Hits $1 Billion,” CBS News, January 7, 2013, accessed July
26, 2017, www.cbsnews.com/news/apples-ad-budget-hits-1-billion/; Gideon Spanier, “Apple Ad Spend Rises 50% to Record $1.8
Billion,” Campaign US, October 30, 2015, accessed July 12, 2017, www.campaignlive.com/article/apple-ad-spend-rises-50-record-18-
billion/1370742; Lara O’ Reilly, “Apple Mysteriously Stopped Disclosing How Much It Spends on Ads,” Business Insider, November 24,
2016, accessed July 23, 2017, www.businessinsider.in/Apple-mysteriously-stopped-disclosing-how-much-it-spends-on-ads/articleshow
/55603459.cms; “Apple Inc.,” MarketWatch, accessed July 12, 2017, www.marketwatch.com/investing/stock/aapl/financials.

EXHIBIT 4: APPLE’S REVENUES, NET PROFITS, AND NET MARGINS

24
.6 37

42
.9 6

5.
2

10
8.

15
6.

17
0.

18
2.

23
3.

21
5.

3.
5

6.
1

8.
2 14

25
.9 41

37 3
9.

53
.4

45
.7

14
.2

19
.2

21
.5

23
.9

26
.7

21
.7

21
.6

21
.1

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Revenues (in US $ Billion) Net Profit (in US $ Billion) Apple Net Margin (in %)

Source: Created by the author based on: Jitender Miglani, “Apple Revenues and Profits 2000 to 2015: Pre- and Post- iPhone,” R&P
Research, January 4, 2016, accessed July 29, 2017, https://revenuesandprofits.com/apple-revenues-and-profits-2000-to-2015-pre-and-
post-iphone/; Rupert Neate, “Apple’s Annual Profits Fall for First Time in 15 Years As iPhone Sales Decline,” Guardian, October 25,
2016, www.theguardian.com/technology/2016/oct/25/apple-profits-sales-decline-2016-iphone-7; “Apple Inc.,” Stock Analysis on Net,
accessed July 29, 2017, www.stock-analysis-on.net/NASDAQ/Company/Apple-Inc/Ratios/Profitability#Net-Profit-Margin.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

www.stock-analysis-on.net/NASDAQ/Company/Apple-Inc/Ratios/Profitability#Net-Profit-Margin

www.theguardian.com/technology/2016/oct/25/apple-profits-sales-decline-2016-iphone-7

https://revenuesandprofits.com/apple-revenues-and-profits-2000-to-2015-pre-and

www.marketwatch.com/investing/stock/aapl/financials

www.businessinsider.in/Apple-mysteriously-stopped-disclosing-how-much-it-spends-on-ads/articleshow

www.campaignlive.com/article/apple-ad-spend-rises-50-record-18

www.cbsnews.com/news/apples-ad-budget-hits-1-billion

Page 13 9B18M013

EXHIBIT 5: IPHONE REVENUE AND UNIT SALES
0.

6 6.
7 13

25
.2 4

78
.7 91

.3 10
2

15
5

13
6.

2.
6 1

8 3
0.

38
.6

42
.5 50
.3

53
.4

55
.8 66

63
.4

1.
39 11

.6
3

20
.7

3 39
.9

9 7
2.

12
5.

05 15
0.

26 16
9.

23
1.

21
1.

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

iPhone revenues (in billions)

iPhone revenues (as a % of total Apple revenues)

iPhone unit sales (in millions)

Source: Created by the author based on: “Financial Information: 10-K Annual Report,” Apple Inc. Investor Relations, accessed July
29, 2017, http://investor.apple.com/financials.cfm; Jitender Miglani; “Apple Revenues and Profits 2000 to 2015: Pre- and Post-
iPhone,” R&P Research, January 4, 2016, accessed July 29, 2017, https://revenuesandprofits.com/apple-revenues-and-profits-
2000-to-2015-pre-and-post-iphone/.

EXHIBIT 6: IPHONE REVENUE AND UNIT SALES YEAR-ON-YEAR (Y-O-Y) GROWTH

10
16

94
.0

93
.8

82
.5

71
.1

16
.0

11
.7 52
.0

-1
1.

73
6.

78
.2

92
.9

80
.8

73
.0

20
.2

12
.6

36
.6

-8
.4

2007 2008 2009 2010 2011 2012 2013 2014 2015

iPhone revenues (y-o-y growth) iPhone unit sales (y-o-y growth)

Source: Created by the author based on “Financial Information: 10-K Annual Report,” Apple Inc. Investor Relations, accessed
July 29, 2017, http://investor.apple.com/financials.cfm.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

http://investor.apple.com/financials.cfm

https://revenuesandprofits.com/apple-revenues-and-profits

http://investor.apple.com/financials.cfm

Page 14 9B18M013

ENDNOTES

1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in the case are not necessarily those of Apple Inc. or any of its employees.
2 “Apple Introduces iPhone 7 and iPhone 7 Plus, the Best, the Most Advanced iPhone Ever,” Apple Newsroom, September 7,
2016, accessed July 2, 2017, https://www.apple.com/newsroom/2016/09/apple-introduces-iphone-7-iphone-7-plus/.
3 Alicia Adamczyk, “The iPhone 7 Costs You 3x More than It Costs Apple to Make,” Money, September 26, 2016, accessed
July 5, 2017, http://time.com/money/4508221/iphone-7-mark-up-profit-margins/.
4 Elad Natanson, “2016: A Pivotal Year for the Smartphone Industry,” Forbes, September 12, 2016, accessed July 2, 2017,
https://www.forbes.com/sites/eladnatanson/2016/09/12/2016-a-pivot.
5 Chance Miller, “Latest Gartner Data Shows Apple Edge Out Samsung in Market Share During Q4 2016,” 9To5Mac,
February 15, 2017, accessed July 12, 2017, https://9to5mac.com/2017/02/15/samsung-loses-market-share-to-apple-in-q4-
2016/.
6 Ibid.
7 Hope King, “Tim Cook Visits India for the First Time as Apple CEO,” CNN Tech, May 18, 2016, accessed October 30, 2017,
http://money.cnn.com/2016/05/17/technology/tim-cook-india/index.html; Thomas K. Thomas, “Apple Poised for Big Steps in
India,” Hindu, August 8, 2017, accessed October 31, 2017, www.thehindu.com/sci-tech/technology/apple-poised-for-big-
steps-in-india-tim-cook/article19452491.ece.
8 ₹ = INR = Indian rupee; US$1 = ₹66.62 on October 7, 2016.
9 All currency amounts are in US$ unless otherwise specified.
10 “Apple iPhone 7, iPhone 7 Plus to Launch in India on October 7, Price Starts at Rs 60,000,” Gadgets Now, September 8,
2016, accessed November 5, 2017, https://www.gadgetsnow.com/tech-news/Apple-iPhone-7-iPhone-7-Plus-to-launch-in-
India-on-October-7-price-starts-at-Rs-60000/articleshow/54162947.cms.
11 Pricing power is what constitutes a firm’s monopoly power in an imperfectly competitive market. Monopoly power refers to
the extent to which a firm can charge a profit-maximizing price that is greater than its marginal cost of production. A measure
of such monopoly power is the Lerner index of monopoly power, given by L = (P – MC) ÷ P = –1 ÷ Ed, where P = price, MC =
marginal cost, and Ed = elasticity of demand facing the firm. The larger the value of L, the greater is the degree of monopoly
power. The value of L lies between 0 and 1. For a perfectly competitive firm, since price equals the marginal cost, L= 0; on the
other hand, when MC = 0 and the firm enjoys pure monopoly, L = 1. There are three factors that determine a firm’s elasticity
of demand and hence emerge as sources of monopoly power: the elasticity of market demand, the number of firms in the
market, and the interaction among firms. Robert S. Pindyck, Daniel L. Rubinfeld, and Prem L. Mehta, Microeconomics,
7th edition (New Delhi: Pearson, 2012), Chapter 9, 305–306.
12 Natanson, op. cit.
13 “Gartner Says Worldwide Smartphone Sales to Slow in 2016,” Gartner Newsroom, June 7, 2016, accessed July 21, 2017,
www.gartner.com/newsroom/id/3339019.
14 Gartner Newsroom, op. cit.
15 PTI, “World Worried over China’s Economic Slowdown,” Hindu, April 18, 2016, accessed July 21, 2017,
www.thehindu.com/business/Economy/World-worried-over-China’s-economic-slowdown/article14242411.ece; “China’s
Economy Grows 6.7% in 2016,” BBC News, January 20, 2017, accessed July 5, 2017, www.bbc.com/news/business-
38686568.
16 Josh Horwitz, “Now Comes the Hard Part for Apple in China,” Quartz, April 26, 2016, accessed July 22, 2017,
https://qz.com/670460/now-comes-the-hard-part-for-apple-in-china/.
17 Ibid.
18 Natanson, op. cit.
19 AMOLED refers to active-matrix organic light-emitting diode. AMOLED screens are different from LCD displays. Robert
Triggs, “AMOLED vs LCD: Differences Explained,” Android Authority, February 8, 2016, accessed July 22, 2017,
www.androidauthority.com/amoled-vs-lcd-differences-572859/.
20 Jon Russell, “Oppo Topped China’s Smartphone Market in 2016, as Apple Recorded First Annual Decline,” Tech Crunch,
February 5, 2017, accessed July 2, 2017, https://techcrunch.com/2017/02/05/oppo-topped-chinas-smartphone-market-in-
2016/; Natanson, op. cit.
21 Natanson, op. cit.; Luis D., “Did You Know—Smartphone Makers OnePlus, Oppo, and Vivo Are All Owned by the Same
Company,” PhoneArena, June 21, 2016, accessed July 3, 2017, https://www.phonearena.com/news/Did-you-know—
smartphone-makers-OnePlus-Oppo-and-Vivo-are-all-owned-by-the-same-company_id82439.
22 Russell, op. cit.
23 Natanson, op. cit. In Q3 2016, China was displaced as Apple’s second largest market in the world by Europe. Alison
Griswold, “China Already Lost Its Title as Apple’s Second-Biggest Market,” Quartz, July 26, 2016, accessed July 5, 2017,
https://qz.com/742760/china-already-lost-its-title-as-apples-second-biggest-market/.
24 Sophia Yan and Serena Dong, “Apple Loses ‘iPhone’ Wallets Lawsuit in China,” CNN Tech, May 4, 2016, accessed July 7,
2017, http://money.cnn.com/2016/05/04/technology/apple-trademark-lawsuit-china/.
25 Selina Cheng, “After Losing “iPhone” and “iPad,” Apple’s Losing Its Grip on the iPhone 6 Design in China,” Quartz, June 17,
2016, accessed July 5, 2017, https://qz.com/710245/after-losing-iphone-and-ipad-apples-losing-its-grip-on-the-iphone-6-
design-in-china/.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://qz.com/710245/after-losing-iphone-and-ipad-apples-losing-its-grip-on-the-iphone-6

http://money.cnn.com/2016/05/04/technology/apple-trademark-lawsuit-china

https://qz.com/742760/china-already-lost-its-title-as-apples-second-biggest-market

https://www.phonearena.com/news/Did-you-know

https://techcrunch.com/2017/02/05/oppo-topped-chinas-smartphone-market-in

www.androidauthority.com/amoled-vs-lcd-differences-572859

https://qz.com/670460/now-comes-the-hard-part-for-apple-in-china

www.bbc.com/news/business

www.thehindu.com/business/Economy/World-worried-over-China™s-economic-slowdown/article14242411.ece

www.gartner.com/newsroom/id/3339019

https://www.gadgetsnow.com/tech-news/Apple-iPhone-7-iPhone-7-Plus-to-launch-in

www.thehindu.com/sci-tech/technology/apple-poised-for-big

http://money.cnn.com/2016/05/17/technology/tim-cook-india/index.html

https://9to5mac.com/2017/02/15/samsung-loses-market-share-to-apple-in-q4

https://www.forbes.com/sites/eladnatanson/2016/09/12/2016-a-pivot

http://time.com/money/4508221/iphone-7-mark-up-profit-margins

https://www.apple.com/newsroom/2016/09/apple-introduces-iphone-7-iphone-7-plus

Page 15 9B18M013

26 “10 Things You Need to Know about India’s Mobile Market,” Mobile Ecosytem Forum Blog, June 7, 2016, accessed
November 1, 2017, https://mobileecosystemforum.com/2016/06/07/10-things-you-need-to-know-about-indias-mobile-
market/.
27 Natanson, op. cit.
28 Alice Truong, “India Could Be Apple’s Next China,” Quartz, April 24, 2016, accessed June 30, 2017,
https://qz.com/668505/india-could-be-apples-next-china/.
29 Seema Mody, “Why Apple Might Not Find Huge Success in India,” CNBC, May 5, 2016, accessed July 21, 2017,
https://www.cnbc.com/2016/05/05/why-apple-might-not-find-huge-success-in-india.html.
30 Truong, op cit.
31 Ibid.
32 Rishi Iyengar, “India Poised for a Smartphone Revolution,” CNN Tech, September 28, 2017, accessed November 4, 2017,
http://money.cnn.com/2017/09/26/technology/india-mobile-congress-market-numbers/index.html.
33 Government of India, Ministry of Statistics and Programme Implementation, Youth in India: 2017, March 2017, accessed
November 4, 2017, http://mospi.nic.in/sites/default/files/publication_reports/Youth_in_India-2017 .
34 “Latest Census Data Shows Youth Surge: Nearly 41% of India’s Population Is below the Age of 20,” Firstpost, January 13,
2016, accessed November 4, 2017, www.firstpost.com/india/latest-census-data-shows-youth-surge-nearly-41-of-indias-
population-is-below-the-age-of-20-2581730.html.
35 IAMAI & Kantar IMRB Report, Internet in India—2016, March 2017, accessed November 1, 2017,
http://bestmediainfo.com/wp-content/uploads/2017/03/Internet-in-India-2016 .
36 Ibid.
37 However, with Apple capturing less than 3 per cent of the Indian smartphone market, India did not feature in the top 10
countries for iOS downloads or time spent on the devices. Ananya Bhattacharya,
“More Android Apps Are downloaded in India than Anywhere Else in the world,” Quartz, January 17, 2017, accessed November
4, 2017, https://qz.com/886985/india-logged-the-most-android-app-downloads-and-usage-in-2016/.
38 Vidhi Choudhary, “India Beats US in 2016 Mobile App Market Growth, Sees Most Google Play Downloads,” Live Mint,
January 17, 2017, accessed November 4, 2017, www.livemint.com/Consumer/IXEa9lR07ZAx7yROaRcarK/India-beats-US-
in-2016-mobile-app-market-growth-sees-most-G.html.
39 Ibid.
40 Mohul Ghosh, “App Stats: Indians Are 5th Biggest User Base of Apps; Globally 1 Trillion Hours of App Usage Recorded in
2016,” Trak.in, May 4, 2017, accessed November 4, 2017, http://trak.in/tags/business/2017/05/04/indian-mobile-app-usage-
statistics/.
41 Bhattacharya, op cit.
42 Choudhary, op. cit.
43 Ibid.
44 Mobile Ecosystem Forum, op. cit.
45 Iyengar, op. cit.
46 Gulveen Aulakh and Writankar Mukherjee, “Oppo, Vivo & Gionee Gain Significant Market Share at the Cost of Samsung,
Micromax & Intex,” Economic Times, August 5, 2016, accessed July 23, 2017,
http://economictimes.indiatimes.com/tech/hardware/oppo-vivo-gionee-gain-significant-market-share-at-the-cost-of-samsung-
micromax-intex/articleshow/53549573.cms.
47 Mody, op.cit.
48 Gulveen Aulakh and Writankar Mukherjee, “Oppo, Vivo & Gionee Gain Significant Market Share at the Cost of Samsung,
Micromax & Intex,” Economic Times, August 5, 2016, accessed July 23, 2017,
http://economictimes.indiatimes.com/tech/hardware/oppo-vivo-gionee-gain-significant-market-share-at-the-cost-of-samsung-
micromax-intex/articleshow/53549573.cms.
49 Leo Mirani, “Why Language Is the Key to Winning India’s Mobile Market,” Quartz, February 26, 2013, accessed November 4,
2017, https://qz.com/56259/language-is-the-key-to-winning-indias-mobile-market/. One out of four Indians, in fact, can neither
read nor write.
50 A Study by KPMG in India and Google, Indian Languages—Defining India’s Internet, April 2017, accessed November 4,
2017, https://assets.kpmg.com/content/dam/kpmg/in/pdf/2017/04/Indian-languages-Defining-Indias-Internet .
51 Ibid.
52 Ananya Bhattacharya, “India’s Internet Users Have More Faith in Content That’s Not in English,” Quartz, May 2, 2017,
accessed November 1, 2017, https://qz.com/972844/indias-internet-users-have-more-faith-in-content-thats-not-in-english-
study-says/.
53 Iyengar, op. cit.
54 Horwitz, op. cit.; “China GDP Per Capita,” Trading Economics, accessed November 1, 2017,
https://tradingeconomics.com/china/gdp-per-capita.
55 Price elasticity of demand refers to the responsiveness of the quantity demanded of a commodity to a change in its price,
all other things remaining constant. A high price elasticity (value > 1) means that any increase in the price of the commodity
will lead to a more than proportionate fall in the quantity demanded of the commodity, all other things remaining the same.
56 The rule of thumb for pricing is P = MC ÷ [1 + (1 ÷ Ed)]. Thus, the price that can be charged depends on the elasticity of
demand faced by the firm. Three key factors determine a firm’s elasticity of demand and hence emerge as the source of
monopoly power: the elasticity of market demand, the number of firms in the market, and the interaction among firms. The
elasticity of market demand limits the potential monopoly power of individual firms since a firm’s Ed will always be greater than

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://tradingeconomics.com/china/gdp-per-capita

https://qz.com/972844/indias-internet-users-have-more-faith-in-content-thats-not-in-english

https://assets.kpmg.com/content/dam/kpmg/in/pdf/2017/04/Indian-languages-Defining-Indias-Internet

https://qz.com/56259/language-is-the-key-to-winning-indias-mobile-market

http://economictimes.indiatimes.com/tech/hardware/oppo-vivo-gionee-gain-significant-market-share-at-the-cost-of-samsung

http://trak.in/tags/business/2017/05/04/indian-mobile-app-usage

www.livemint.com/Consumer/IXEa9lR07ZAx7yROaRcarK/India-beats-US

https://qz.com/886985/india-logged-the-most-android-app-downloads-and-usage-in-2016

http://bestmediainfo.com/wp-content/uploads/2017/03/Internet-in-India-2016

www.firstpost.com/india/latest-census-data-shows-youth-surge-nearly-41-of-indias

http://mospi.nic.in/sites/default/files/publication_reports/Youth_in_India-2017

http://money.cnn.com/2017/09/26/technology/india-mobile-congress-market-numbers/index.html

https://www.cnbc.com/2016/05/05/why-apple-might-not-find-huge-success-in-india.html

https://qz.com/668505/india-could-be-apples-next-china

https://mobileecosystemforum.com/2016/06/07/10-things-you-need-to-know-about-indias-mobile

Page 16 9B18M013

the elasticity of market demand. The more firms, the greater the closeness of substitutes available and hence the more elastic
the firm’s demand. Finally, the keener the competition among existing firms and the more aggressive the pricing strategies,
the more elastic the firm demand is and the lower the firm’s monopoly power. Students can also revise the concept of elasticity
of demand, which refers to the responsiveness of quantity demanded of a commodity to changes in its price. Elasticity of
demand, as calculated using the Arc method, is given by Ed = [(Q2 – Q1) ÷ (P2 – P1)] ÷ [(P1 + P2) ÷ (Q1 + Q2)]. Pindyck,
Rubinfeld, and Mehta, op. cit.
57 Mody, op. cit.
58 LTE stands for long-term evolution and refers to the path followed to achieve 4G speeds. Unlike 4G technology, which
adheres to a set of speed and connection standards, the regulating body ITU-R decided that LTE, the name given to the
technology used in pursuit of those standards, could be labelled 4G if it provided a substantial improvement over the 3G
technology. Brad Bourque, “What’s the Difference between 4G and LTE?” Digital Trends, April 5, 2017, accessed July 23,
2017, https://www.digitaltrends.com/mobile/4g-vs-lte/.
59 Mody, op. cit.
60 IAMAI & Kantar IMRB Report, op. cit.
61 Neil Mawston, Rajeev Nair, and Woody Oh, “Strategy Analytics: Android Captures Record 97 Percent Smartphone
Marketshare in India in Q2 2016,” Strategy Analytics, August 5, 2016, accessed August 2, 2017,
https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press-
release/2016/08/05/strategy-analytics-android-captures-record-97-percent-smartphone-marketshare-in-india-in-q2-
2016#.WYVVtMaB28W.
62 Ibid.
63 Truong, op. cit.
64 “About Us,” Make in India, accessed November 4, 2017, www.makeinindia.com/about.
65 Input tax credit refers to the provision that manufacturers can benefit from a reduction in the taxes to be paid on output
based on the taxes paid on inputs. “Input Tax Credit (ITC),” Profitbooks, accessed November 5, 2017,
www.profitbooks.net/input-tax-credit-under-gst/.
66 Sudeshna Das, “Are Mobile Phones Truly Being ‘Made in India’?” ElectronicsB2B.com, June 16, 2017, accessed
November 5, 2017, www.electronicsb2b.com/eb-specials/industry-report/mobile-phones-truly-made-india/.
67 “About UIDAI,” Unique Identification Authority of India, Government of India, accessed November 5, 2017,
https://uidai.gov.in/about-uidai/about-uidai.html.
68 Brendan Trembath, “Apple Rejects FBI Request to Unlock Shooter’s iPhone,” ABC: The World Today, February 18, 2016,
accessed November 5, 2017, www.abc.net.au/worldtoday/content/2016/s4409043.htm.
69 Harriet Taylor, “How India Is Shaping the Global Smartphone Market,” CNBC, September 21, 2016, accessed November 5,
2017, https://www.cnbc.com/2016/09/21/how-india-is-shaping-the-global-smartphone-market.html.
70 “Apple Reinvents the Phone with iPhone,” Apple Newsroom, January 9, 2007, accessed June 28, 2017,
https://www.apple.com/newsroom/2007/01/09Apple-Reinvents-the-Phone-with-iPhone/.
71 Ibid.
72 However, Apple itself derided the credibility of such analyses involving third party bill-of-material costs. In fact, Apple’s chief
financial officer, when asked about the cost structure of the iPhone 4, stated, “Let me begin by suggesting that you don’t put
a lot of credence in these third-party reports that you see. It’s always amazing to me the cost categories and the components
that never seem to make it into the reports.” Josh Ong, “iPhone 4S Breakdown Estimates Same $188 Cost as iPhone 4,”
Appleinsider, October 19, 2011, accessed June 23, 2017,
http://appleinsider.com/articles/11/10/19/iphone_4s_breakdown_estimates_same_188_cost_as_iphone_4.
73 Erica Ogg, “iPhone 4 Teardown Reveals $188 Cost to Build,” CNet, June 28, 2010, accessed July 23, 2017,
https://www.cnet.com/news/iphone-4-teardown-reveals-188-cost-to-build/.
74 Erik Sherman, “Apple’s Ad Budget Hits $1 Billion,” CBS News, January 7, 2013, accessed July 26, 2017,
www.cbsnews.com/news/apples-ad-budget-hits-1-billion/.
75 Gideon Spanier, “Apple Ad Spend Rises 50% to Record $1.8 Billion,”
Campaign US, October 30, 2015, accessed July 12, 2017, www.campaignlive.com/article/apple-ad-spend-rises-50-record-18-
billion/1370742.
76 Companies can show their advertising spends as merged with the selling, general, and administrative expenses figure. Most
companies prefer not to share advertising spend data with competitors. Lara O’ Reilly, “Apple Mysteriously Stopped Disclosing
How Much It Spends on Ads,” Business Insider, November 24, 2016, accessed July 23, 2017, www.businessinsider.in/Apple-
mysteriously-stopped-disclosing-how-much-it-spends-on-ads/articleshow/55603459.cms.
77 Christian Zibreg, “Apple Has Stopped Disclosing How Much It Spends on Advertising,” iDB, November 25, 2016, accessed
July 23, 2017, www.idownloadblog.com/2016/11/25/apple-has-stopped-disclosing-how-much-it-spends-on-advertising/.
78 Don Reisinger, “Analyst Says Apple Is ‘Building a New Company’,” Fortune, May 12, 2016, accessed July 25, 2017,
https://in.finance.yahoo.com/news/analyst-says-apple-building-company-164759588.html.
79 Kif Leswing, “Apple Is Spending Billions on Secret R&D Projects—and It Keeps Spending More,” Business Insider,
February 1, 2017, accessed July 29, 2017, www.businessinsider.in/Apple-is-spending-billions-on-secret-RD-projects-and-it-
keeps-spending-more/articleshow/56921023.cms.
80 Mikey Campbell, “Apple R&D Spend Breaks $10 B Barrier in 2016 after $350 M Increase in Q4,” AppleInsider, October 26,
2016, accessed July 23, 2017, http://appleinsider.com/articles/16/10/26/apple-rd-spend-breaks-10b-barrier-in-2016-after-
350m-increase-in-q4.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

http://appleinsider.com/articles/16/10/26/apple-rd-spend-breaks-10b-barrier-in-2016-after

www.businessinsider.in/Apple-is-spending-billions-on-secret-RD-projects-and-it

https://in.finance.yahoo.com/news/analyst-says-apple-building-company-164759588.html

www.idownloadblog.com/2016/11/25/apple-has-stopped-disclosing-how-much-it-spends-on-advertising

www.businessinsider.in/Apple

www.campaignlive.com/article/apple-ad-spend-rises-50-record-18

www.cbsnews.com/news/apples-ad-budget-hits-1-billion

https://www.cnet.com/news/iphone-4-teardown-reveals-188-cost-to-build

http://appleinsider.com/articles/11/10/19/iphone_4s_breakdown_estimates_same_188_cost_as_iphone_4

https://www.apple.com/newsroom/2007/01/09Apple-Reinvents-the-Phone-with-iPhone

https://www.cnbc.com/2016/09/21/how-india-is-shaping-the-global-smartphone-market.html

www.abc.net.au/worldtoday/content/2016/s4409043.htm

https://uidai.gov.in/about-uidai/about-uidai.html

www.electronicsb2b.com/eb-specials/industry-report/mobile-phones-truly-made-india

https://ElectronicsB2B.com

www.profitbooks.net/input-tax-credit-under-gst

www.makeinindia.com/about

https://www.strategyanalytics.com/strategy-analytics/news/strategy-analytics-press-releases/strategy-analytics-press

https://www.digitaltrends.com/mobile/4g-vs-lte

Page 17 9B18M013

81 Kif Leswing, “The Parts in an iPhone 7 Only Cost $224, According to a New Estimate,” Business Insider, September 21,
2016, accessed July 24, 2017, www.businessinsider.in/The-parts-in-an-iPhone-7-only-cost-224-according-to-a-new-
estimate/articleshow/54435487.cms.
82 Chris Hutchins, “Apple’s iPhone and Global Price Disparities,” Motion Point, September 7, 2016, accessed November 3,
2017, https://www.motionpoint.com/blog/apples-iphone-and-global-price-disparities/; Luke Dormehl, “Here’s How Much the
iPhone Costs around the World,” Cult of Mac, May 20, 2016, accessed November 3, 2017,
https://www.cultofmac.com/429302/heres-how-much-the-iphone-costs-around-the-world/.
83 Tim Cook explained the higher iPhone prices in India compared to the United States as being caused by higher duties and
taxes on imported phones. Buster Hein, “Tim Cook Admits iPhone Is Too Damn Expensive,” Cult of Mac, May 23, 2016,
accessed November 2, 2017, https://www.cultofmac.com/429674/tim-cook-admits-iphone-is-too-damn-expensive/.
84 Megha Bahree, “As Sales of Smartphones Slow, India Remains One Bright Spot,” Forbes, June 11, 2016, accessed
November 5, 2017, https://www.forbes.com/sites/meghabahree/2016/06/11/as-sales-of-smartphones-slow-india-remains-
one-bright-spot/#1c08b96566ce.
85 Arun Prabhudesai, “Top 20 Cheapest Android Phones in India [2016],” Trak.in, January 18, 2017, accessed November 1,
2017, http://trak.in/tags/business/2010/09/29/cheapest-android-phones-india/.
86 “Apple Captures 79% of Global Smartphone Profits Last Year,” Korea Herald, March 8, 2016, accessed July 13, 2017,
www.koreaherald.com/view.php?ud=20170308000345.
87 Shekhar Thakran, “Worldwide Smartphone Shipments Expected to Grow by 3 Percent in 2017: IDC,” Gadgets 360, May 31,
2017, accessed July 16, 2017, http://gadgets.ndtv.com/mobiles/news/idc-worldwide-smartphone-shipments-3-percent-yoy-
growth-2017-expected-1706318.
88 Ibid.
89 Everett Rosenfeld and Anita Balakrishnan, “Blame 26% Decline in China’s Sales for Lion’s Share of Apple’s loss,” CNBC,
April 26, 2016, accessed July 3, 2017, https://www.cnbc.com/2016/04/26/apples-china-softness-comes-to-light-sales-decline-
26-percent.html.
90 Aaron Pressman, “Why Apple Is Having So Much Trouble in India, “Fortune, August 5, 2016, accessed July 2, 2017,
http://fortune.com/2016/08/05/why-apple-needs-india/.
91 Mawston, Nair, and Oh, op. cit.
92 Robert McMillan, “What Did Apple’s Tim Cook Say about India?” Wall Street Journal, October 26, 2016, accessed August 4,
2017, https://blogs.wsj.com/indiarealtime/2016/10/26/what-did-apples-tim-cook-say-about-india/.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

https://blogs.wsj.com/indiarealtime/2016/10/26/what-did-apples-tim-cook-say-about-india

http://fortune.com/2016/08/05/why-apple-needs-india

https://www.cnbc.com/2016/04/26/apples-china-softness-comes-to-light-sales-decline

http://gadgets.ndtv.com/mobiles/news/idc-worldwide-smartphone-shipments-3-percent-yoy

www.koreaherald.com/view.php?ud=20170308000345

http://trak.in/tags/business/2010/09/29/cheapest-android-phones-india

https://www.forbes.com/sites/meghabahree/2016/06/11/as-sales-of-smartphones-slow-india-remains

Tim Cook admits iPhone is too damn expensive

Here’s how much the iPhone costs around the world

https://www.motionpoint.com/blog/apples-iphone-and-global-price-disparities

www.businessinsider.in/The-parts-in-an-iPhone-7-only-cost-224-according-to-a-new

Structure Bookmarks

APPLE’S IPHONE IN INDIA: RINGING IN NEW FORTUNES?1
GLOBAL MARKET FOR SMARTPHONES
INDIA’S MARKET FOR SMARTPHONES
Drivers of the Smartphone Market in India
Features of the Indian Smartphone Market
IPHONE: PRICING AND COSTS
Apple’s Overheads
iPhone Pricing
APPLE’S PROFITS
EXHIBIT 1: TIMELINE OF IPHONE MODELS
EXHIBIT 2: IPHONE PRICING AND TEARDOWN COSTS (IN US$)
EXHIBIT 3: APPLE’S OVERHEAD EXPENSES (IN US$ BILLION), 2007–2016
EXHIBIT 4: APPLE’S REVENUES, NET PROFITS, AND NET MARGINS
EXHIBIT 5: IPHONE REVENUE AND UNIT SALES
EXHIBIT 6: IPHONE REVENUE AND UNIT SALES YEAR-ON-YEAR (Y-O-Y) GROWTH
ENDNOTES

9 – 1 1 6 – 0 1 5

R E V : M A Y 3 , 2 0 1 6

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.

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.”

Moreover, some consumers in its key home markets in Northern Europe and in the U.S. were even
threatening a boycott.8

For the exclusive use of A. Szwarc, 2020.

This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)

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.1

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

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

IKEA in Saudi Arabia (A) 116-015

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

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)

meters and employing 290 employees. The third IKEA store in Saudi Arabia opened in November 200

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

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

IKEA in Saudi Arabia (A) 116-015
5

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)

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 20

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

IKEA in Saudi Arabia (A) 116-015
7

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

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)
8

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.”7

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

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

IKEA in Saudi Arabia (A) 116-015
9

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

IKEA in Saudi Arabia (A) 116-015

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)
12

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

IKEA in Saudi Arabia (A) 116-015

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)

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

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

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

11
6-

01
5

-1

E
xh

ib
it

3
a

K
E

A
S

to
re

s
by

C
ou

nt
ry

, W
or

ld
w

id
e,

b
y

A
ug

us
t 2

01
2

(i
nc

lu
d

in
g

al
l I

K
E

A
F

ra
nc

hi
se

es
)

S
ou

rc
e:

tp
:/

/
su

pp
lie

rp
or

ta
l.i

ke
a.

co
m

/
fa

ct
sf

ig
ur

es
/

D
oc

um
en

ts
/

Fa
ct

an
d

%
20

fi
gu

re
s%

20
20

12
.p

d
f,

ac
ce

ss
ed

Ju
ly

2
01

N
ot

St
or

es
o

pe
ne

d
b

et
w

ee
n

Se
pt

em
be

r
20

11
a

nd
A

ug
us

t 2
01

2
ar

e
in

b
lu

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)

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 , accessed July 2015.

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

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

IKEA in Saudi Arabia (A) 116-015

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 2,5

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

IKEA in Saudi Arabia (A) 116-015

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 , 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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

More Censorship

116-015 IKEA in Saudi Arabia (A)
20

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

IKEA in Saudi Arabia (A) 116-015

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 , 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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

116-015 IKEA in Saudi Arabia (A)

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

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

http://www.lw.com/upload/pubContent/_pdf/pub3507_1

http://www.oxforddictionaries.com/definition/english/sharia

http://science.jrank.org/pages/7816/Law-Islamic.html

http://www2.ohchr.org/english/bodies/hrcouncil/docs/11session/A.HRC.11.6.Add.3_en

IKEA in Saudi Arabia (A) 116-015
23

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 ?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 , 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 , 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 , 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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

http://unpan1.un.org/intradoc/groups/public/documents/un/unpan023178 ?q=kuwait

Missing the Picture: IKEA’s Women-free Catalogue in Saudi Arabia Fails to Protect Company Values and Reputation

http://www3.weforum.org/docs/WEF_GenderGap_Report_2012

http://news.bbc.co.uk/2/hi/middle_east/2399885.stm

http://saudialchemist.org/2009/12/08/jeddah-is-different/

http://www3.weforum.org/docs/WEF_GenderGap_Report_2012

http://edition.cnn.ccom/2012/06/25/sport/saudia-arabia-olympic-women/index.html?on.cnn=1

http://www.info.gov.sa/

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%20kingdom&f=false

https://www.saudiembassy.net/about/country-information/laws/Law_of_Printing_and_Publication.aspx

https://books.google.com.tr/books?id=bunHURgi7FcC&pg=PA494&hl=en#v=onepage&q&f=false

http://www.sagia.gov.sa/en/SAGIA/What-We-Do/

http://www.doingbusiness.org/%7E/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB13-full-report

116-015 IKEA in Saudi Arabia (A)

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,

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.

For the exclusive use of A. Szwarc, 2020.
This document is authorized for use only by Axel Szwarc in MGT 5641 taught by Aimee Fernandez, Nova Southeastern University from Jan 2020 to Mar 2020.

STAGES OF DEVELOPMENT IN CRITICAL THINKING
SELF MANAGEMENT
PARTS OF THINKING

CHAPTERS 2, 3, 4

STAGES OF CRITICAL THINKING

STAGES of Critical Thinking
1. Unreflective thinker Features:
Make assumptions
Unaware of intellectual traits
Create illusions
Egocentric/Self-centered
Stereotype others
Prefer not to change the behavior as it’s comfortable.
2. Challenged thinker Features:
Individuals realize normal thinkers often think poorly move into the second stage
Aware about role thinking plays in their lives
Understand the basic elements of reasoning (concepts, assumptions, questions at issue, purpose, point of view, information, implications and consequences, etc.)
Apply standards for the assessment of thinking (clarity, accuracy, relevance, etc.)
But have only a superficial understanding of these concepts

STAGES OF CRITICAL THINKING
3. Beginning thinker Features:
Control their thinking process
Realize it’s common to experience difficulty in reasoning/problem solving – take deliberate measures to monitor and improve thinking.
Efforts are hit and miss.
Understand egocentric situations
Encourage critic of self thinking
Understand the role of self-monitoring, but sporadic at the same.
4. Practicing thinker Features:
Understand how thinking flaws sometimes
Understand the importance of self-monitoring
Challenge self thinking otherwise become egocentric
Understand human minds are self-deceptive, hence critic their own conclusions, beliefs, & opinions
Limited insight into deeper level of thoughts

STAGES OF CRITICAL THINKING
5. Advanced Thinker Features:
Actively analyze, assess, & critique own thinking in the significant areas of lives.
Have insight and understanding of problems at deeper levels of thought.
Well- developed sense of their own egocentric nature, strive to be fair-minded.
If identified bias/double standard, quickly correct the thinking to be fair.
Develop understanding of the relationships between thoughts, desires, emotional needs, and feelings.
Able to control the extent of egocentrism through careful monitoring of thoughts.
6. Accomplished Thinker Features:
Establish a systematic plan to assess & correct their own thinking.
Continuous critiquing self thinking for improvement
Extensively practiced critical thinking traits and skills, able to develop new insight into deeper levels of thought
Fair-minded, regularly recognize and control their own egocentric nature.
Recognize relationships between thoughts, desires, feelings, and emotional needs, and correct their thinking when motivated by irrelevant emotions.

SELF UNDERSTANDING
“ If you’re actively working on increasing your self-awareness then you’re familiar with critical thinking”
The difference between an individual who doesn’t think critically and one who does:
Person 1
Someone says something to this person that scares her. She can’t figure out what to do and doesn’t know how to assess what’s true or false about what she’s being told. Because she doesn’t understand the topic at hand, she draws conclusions based on visceral feelings, suppositions, or hunches rather than facts. Unable to ascertain what’s really going on, she remains uninformed and fearful.
Person 2
This person has been told the same thing, initially feels scared, but has the presence of mind to evaluate the topic. She does some research to determine what is true or false about what she’s been told based on demonstrable and verifiable facts. She is able to view the issue in context and asses its likely impact on her life. She reacts appropriately based on the information she’s collected.

EGOCENTRIC THINKING
Our family, country, region, religion, feelings, & values are specially privileged in our egocentric mind.
Egocentric thinkers not consider:
The rights & needs of others
Do not appreciate others point of view
Do not identify self limitations
The most commonly used psychological standards in human thinking:
It’s true because I believe it
It’s true because we believe it
It’s true because I want to believe it
It’s true because I always have believed it
It is true because it is in my selfish interest to believe it

FUNDAMENTAL MOTIVES BEHIND EGOCENTRIC THINKING

RECOGNIZING THE MIND’S THREE DISTINCTIVE FUNCTIONS

RECOGNIZING THE MIND’S THREE DISTINCTIVE FUNCTIONS
Thinking – create meaning
Feeling – Monitor & evaluate meaning created by thinking function
Wanting – allocates energy

RELATIONSHIP TO YOUR MIND
WHAT ARE THE CONSEQUENCES OF POSITIVE & NEGATIVE THOUGHT IN MIND?

EMOTIONAL INTELLIGENCE (EI)
Emotional intelligence is a simple concept: It’s the ability to make emotions work
for,
instead of against you
.
Emotional intelligence comes in all different packages, shapes, and sizes
Our emotions influence practically everything about our lives.
Emotions determine how we choose our leaders and how our leaders choose us.
Emotional intelligence manifests itself in various ways
The best way to protect yourself from harmful uses of emotional intelligence is by striving to increase your own.
Emotions are beautiful. They make us human. Enjoy them. Love them. Embrace them. But never underestimate their power, and their potential to do harm.

CRITICAL THINKERS DISTINGUISH BETWEEN INFERENCES & ASSUMPTIONS
Assumption: It is an unstated premise, cannot be logically derived from any existing information.
It cannot stand on its own.
Assumptions are generally given to present some new information. These can also be part of some beliefs.
Inference: It is that piece of information which can be logically deducted from the one or more statements.
Combination of an assumption (valid/true) and a fact results in an inference (correct/valid).
Assumption + Fact → Inference

INFERENCES
Important part of critical thinking – bringing what is subconscious in our thought to the level of conscious realization.
This includes – experiences are shaped by the inferences we make during those experiences.
We separate our experiences into two categories: the raw data & interpretation to our data.
We make inferences based on the people & situation
Different people make different inferences because they bring to situations different viewpoints & see data differently.
Examples:
Person One Situation:
A man is lying in the gutter.
Inference: That man’s a bum.
Assumption: Only bums lie in gutters.
Person Two Situation:
A man is lying in the gutter.
Inference: That man is in need of help.
Assumption: Anyone lying in the gutter is in need of help

SITUATIONAL ANALYSIS
1. Consider the features & characteristics of each stage of critical thinking development. What stage describes how you reasoned when you were in early stage of your career? Share specific experiences from your life which reflect the stage of thinking
2. Did you begin to change/develop as a critical thinker in growth stage of your career? How? Share specific experiences which demonstrate these changes?
3. Assess your own recent development as a critical thinker. Do you think you have advanced through any of these stages? Why or why not?
4. If you have not, what are some barriers to advancing & making through these stages? If you have, what has enabled you to advance in or develop your skills a a critical thinker?
5. What are your personal goals for yourself in the area of critical thinking? Be specific.

What Will You Get?

We provide professional writing services to help you score straight A’s by submitting custom written assignments that mirror your guidelines.

Premium Quality

Get result-oriented writing and never worry about grades anymore. We follow the highest quality standards to make sure that you get perfect assignments.

Experienced Writers

Our writers have experience in dealing with papers of every educational level. You can surely rely on the expertise of our qualified professionals.

On-Time Delivery

Your deadline is our threshold for success and we take it very seriously. We make sure you receive your papers before your predefined time.

24/7 Customer Support

Someone from our customer support team is always here to respond to your questions. So, hit us up if you have got any ambiguity or concern.

Complete Confidentiality

Sit back and relax while we help you out with writing your papers. We have an ultimate policy for keeping your personal and order-related details a secret.

Authentic Sources

We assure you that your document will be thoroughly checked for plagiarism and grammatical errors as we use highly authentic and licit sources.

Moneyback Guarantee

Still reluctant about placing an order? Our 100% Moneyback Guarantee backs you up on rare occasions where you aren’t satisfied with the writing.

Order Tracking

You don’t have to wait for an update for hours; you can track the progress of your order any time you want. We share the status after each step.

Order Now Talk to Us

Areas of Expertise

Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.

Essay

Thesis

Presentation

Dissertation

Term Paper

Research Paper

Book Review

Assignment

Report

Case Study

Letter

Article

Coursework

Speech

Q & A

Critical Thinking

Areas of Expertise

Although you can leverage our expertise for any writing task, we have a knack for creating flawless papers for the following document types.

Essay

Thesis

Presentation

Dissertation

Term Paper

Research Paper

Book Review

Assignment

Report

Case Study

Letter

Article

Coursework

Speech

Q & A

Critical Thinking

Trusted Partner of 9650+ Students for Writing

From brainstorming your paper's outline to perfecting its grammar, we perform every step carefully to make your paper worthy of A grade.

Preferred Writer

Hire your preferred writer anytime. Simply specify if you want your preferred expert to write your paper and we’ll make that happen.

Grammar Check Report

Get an elaborate and authentic grammar check report with your work to have the grammar goodness sealed in your document.

One Page Summary

You can purchase this feature if you want our writers to sum up your paper in the form of a concise and well-articulated summary.

Plagiarism Report

You don’t have to worry about plagiarism anymore. Get a plagiarism report to certify the uniqueness of your work.

Free Features $66FREE

Most Qualified Writer $10FREE
Plagiarism Scan Report $10FREE
Unlimited Revisions $08FREE
Paper Formatting $05FREE
Cover Page $05FREE
Referencing & Bibliography $10FREE
Dedicated User Area $08FREE
24/7 Order Tracking $05FREE
Periodic Email Alerts $05FREE

Our Services

Join us for the best experience while seeking writing assistance in your college life. A good grade is all you need to boost up your academic excellence and we are all about it.

On-time Delivery
24/7 Order Tracking
Access to Authentic Sources

Academic Writing

We create perfect papers according to the guidelines.

Professional Editing

We seamlessly edit out errors from your papers.

Thorough Proofreading

We thoroughly read your final draft to identify errors.

Thorough Proofreading

We thoroughly read your final draft to identify errors.

Delegate Your Challenging Writing Tasks to Experienced Professionals

Work with ultimate peace of mind because we ensure that your academic work is our responsibility and your grades are a top concern for us!

Check Out Our Sample Work

Dedication. Quality. Commitment. Punctuality

It May Not Be Much, but It’s Honest Work!

Here is what we have achieved so far. These numbers are evidence that we go the extra mile to make your college journey successful.

0+

Happy Clients

0+

Words Written This Week

0+

Ongoing Orders

0%

Customer Satisfaction Rate

Process as Fine as Brewed Coffee

We have the most intuitive and minimalistic process so that you can easily place an order. Just follow a few steps to unlock success.

Call Us +1 (877) 657-8180 Discuss Order Details Now

See How We Helped 9000+ Students Achieve Success

We Analyze Your Problem and Offer Customized Writing

We understand your guidelines first before delivering any writing service. You can discuss your writing needs and we will have them evaluated by our dedicated team.

Clear elicitation of your requirements.
Customized writing as per your needs.

We Mirror Your Guidelines to Deliver Quality Services

We write your papers in a standardized way. We complete your work in such a way that it turns out to be a perfect description of your guidelines.

Proactive analysis of your writing.
Active communication to understand requirements.

We Handle Your Writing Tasks to Ensure Excellent Grades

We promise you excellent grades and academic excellence that you always longed for. Our writers stay in touch with you via email.

Thorough research and analysis for every order.
Deliverance of reliable writing service to improve your grades.

Place an Order Start Chat Now

Critical thinking concepts

What Will You Get?

Premium Quality

Experienced Writers

On-Time Delivery

24/7 Customer Support

Complete Confidentiality

Authentic Sources

Moneyback Guarantee

Order Tracking

Areas of Expertise

Essay

Thesis

Presentation

Dissertation

Term Paper

Research Paper

Book Review

Assignment

Report

Case Study

Letter

Article

Coursework

Speech

Q & A

Critical Thinking

Areas of Expertise

Essay

Thesis

Presentation

Dissertation

Term Paper

Research Paper

Book Review

Assignment

Report

Case Study

Letter

Article

Coursework

Speech

Q & A

Critical Thinking

Trusted Partner of 9650+ Students for Writing

Preferred Writer

Grammar Check Report

One Page Summary

Plagiarism Report

Free Features $66FREE

Our Services

Academic Writing

Professional Editing

Thorough Proofreading

Thorough Proofreading

Delegate Your Challenging Writing Tasks to Experienced Professionals

Check Out Our Sample Work

It May Not Be Much, but It’s Honest Work!

0+

Happy Clients

0+

Words Written This Week

0+

Ongoing Orders

0%

Customer Satisfaction Rate

Process as Fine as Brewed Coffee

Share Your Requirements

Place Order & Deposit Funds

Release Payment to Your Writer

See How We Helped 9000+ Students Achieve Success

We Analyze Your Problem and Offer Customized Writing

We Mirror Your Guidelines to Deliver Quality Services

We Handle Your Writing Tasks to Ensure Excellent Grades