Professional Documents
Culture Documents
about IKEAs development from a backyard company to one of the worlds largest
furniture retailers, which has to deal with the issues of child labor and how they
should behave considering economical issues and the companys policy!
Conclusions made in this study are only based on the facts given in the case,
considering pros and cons of an action.
How should Marianne Barner respond to the invitation for IKEA to have a
representative appear on the upcoming broadcast of the German video program?
A live discussion would give IKEA the possibility to explain themselves and their
intention concerning their engagement in India. Especially Marianne Barner could
make her intentions clear as she is feeling that IKEAs responsibility is much broader
than just trying to abolish child labor by stopping business relationships with
partners who employ children in their companies. This would provide IKEA a positive
image and might strengthen their engagement.
As the Filmmaker just provided IKEA with several still shots taken from the movie,
though the whole film was requested to be viewed, leaves too many unpredictable
options that the cutting of the movie would provide an image which wouldnt leave
any space for explanations concerning IKEA's engagement in India but defending
itself against accusation which might be made through the movie.
Movies have the power to suggest a certain image especially if negative scenes are
shown. There for it is indispensable to IKEA to review the movie before attending
the discussion. The refusal to show the movie to IKEA implicit shows that their
intention is not to hear about IKEAs engagement but having someone to blame.
The discussion might have an aggressive and confrontational attitude towards IKEA
for using a supplier, which employs children and suggesting IKEA a reckless
company just caring about profit.
For these reasons I would suggest Marianne Barner not to attend the discussion but
to release an official note which explains the refuse in participating in the discussion
and includes a short agenda in IKEAs engagement in India which might be linked to
a webpage with further information concerning their plans and engagement in India.
What actions should she take regarding the IKEA supply contract with Rangan?
What long-term strategy would you suggest she take regarding IKEAs continued
operation in India? Should the company stay or should they exit?
IKEA aims for long-term relationships with its suppliers and also supports them in
order to get a reliable but competitive supplier. The same attempt could be done in
India as they did in Poland several years before. Of course at first sight it seems as
if IKEA would risk to lose some of its reputation and sales power for continuing
relationship with the Indian supplier but it would have an even more positive effect
on its reputation if IKEA will maintain its connections and help them developing new
systems, involving the public. Involving the public by marketing actions helps them
to understand IKEAs intentions so it wont be misunderstood and will also have a
marketing effect itself.
To continue their engagement would also match the companys policy and
Kamprads view create a better everyday life for many people. This was originally
meant to insure affordable sales to customers but they also havent had the
problem of child labor at that time. So by the time values change and should be
extended to broader meanings. As it is a question of moral IKEA can also use this as
a marketing strategy to bolster its image. Regarding the philosophy in the best
interest of the child it is necessary to continue and even improve IKEAs
engagement in India. It is obvious that child labor is deeply implemented in Indias
culture as many people are poor and a childs loan is inevitable to ensure the life of
the whole family. This shows that pulling out would not abolish child labor but
threaten Indian people even more as a resource of earning money would disappear.
In return a negative image could be established towards IKEA for not taking further
actions in the Indian market.
Braking up relations with its supplier could cause tremendous public disagreement
as a lot of people think that companies such as IKEA, the worlds largest furniture
retailer, is just interested in earning profit. Many people share a common view, that
these types of company also owe responsibility not only to the shareholders but also
to the society. By refusing help an image could be created which would cause not
just the loss of sales but also of IKEA's value. Not just sales create the value of a
company also its reputation is a valuable good which can cause a huge loss if it is
damaged!
To ensure that child labor is not exploited and that its labor is in the best interest of
the child so that one day child labor can be abolished, which wont happen in a
couple of years, IKEA should implement a system which allows monitoring the whole
process. IKEA could urge its supplier to provide the children with education, so that
the children are also able to learn something. This aim could be reached by cutting
working hours and the implement of classes. As its supplier wont have the financial
means to establish this kind of system IKEA needs to give financial aid to its supplier
which he pays off by future deliveries. Because IKEA has not enough experience in
the field of child labor and would need to hire new staff it should cooperate with
Rugman, which already has experiences in the field of child labor and there for is
able to monitor the processes suggested and implemented by IKEA. IKEA should still
do random monitoring to ensure that regulations adhered.
Another option is to establish a own manufacturing company combined with a
school which finances itself by the production of rugs so that children can earn
money to support their families and finance their own education. In a long-term
view this would lead to the abolishment of new child labor. This kind of institution
should be run by IKEA itself and to proof that it is in the best interest of the child
monitored by an institute like Rugman.
IKEA doesnt have to be concerned about competitors, which will sell the rugs
cheaper than IKEA. Other competitors dont have such a huge production volume to
offer prices that low. If they will use child labor, they will experience the same issues
as IKEA already did. Besides the part of turnover for the rugs is so small that it wont
have an effect on IKEA that much, even if the rugs would be a bit more expensive as
its competitor ones. It is the reputation issue, which would have a bigger impact.
Values of customers are changing. People are willing to pay a bit more for products
if it proofs them a pure conscience.
Jordan de Jong
Case Study
_
The case I will analyze and discuss in this case study is IKEAs Global
Sourcing Challenge: Indian Rugs and Child Labor. I will begin with the vision,
values, and strategy of IKEA and an internal analysis of the issues that they have
faced as of the time of the case. Next, I will detail the issues IKEA faced in the years
prior to the Indian rugs and child labor challenge. Then I will describe the Indian rug
and child labor problem that IKEA faced and the management issues surrounding it.
Following a description of the issues I will describe the strategies that I believe IKEA
management can use to overcome the challenges. Finally, I will conclude with what
IKEA did choose to do and the results.
The IKEA story begins with the founder Ingvar Kamprad and a dream to
provide people with necessary goods. He began selling various items via mail order
as IKEA in 1943. In 1948 IKEA started to sell furniture and the company as we know
it today started to take shape. In 1951 IKEA published their first catalogue to draw
a picture for customers as to how the products would look in their homes. This was
followed by IKEA beginning to design their own furniture in 1995 and opening the
first store in 1958. The store was Stockholm but not in the traditional down town
area but instead in the suburbs where ample customer parking and more floor
space allowed IKEA to display their products in a new style. By 1956 IKEA had
started using the flat pack technique, selling furniture in flat boxes with assembly
required by the customer, and began sourcing furniture outside of Sweden. IKEAs
success via non-traditional techniques was not popular with other furniture dealers
in Sweden. Competitors were trying to arrange for a boycott of IKEA by suppliers.
The pressure was enormous and IKEA had to have trucks deliver supplies to stores
in the middle of the night. It was at this point that IKEA decided to look outside of
Sweden for their furniture. The first batch of foreign produced furniture was a batch
of plastic chairs from Poland . With lower cost of labor and factor cost from Poland
IKEA lowered its prices. This is significant because it shows that IKEA believes in
their vision and business idea and live it every day.
The IKEA vision is, To create a better everyday life for the many people. and the
business idea is, To offer a wide range of well designed, functional home furnishing
products at prices so low that as many people as possible will be able to afford
them. When IKEA cut labor and other factor costs by sourcing from Poland as
opposed to Sweden they had an opportunity to increase margin and profits. The
fact that they instead lowered the price of their products and passed the savings
onto the customer demonstrates that IKEA lives their vision and business idea.
In 1963 IKEA began internationalizing by opening a store in Norway. The pace of
expansion was vastly increased in the 1970s with additional expansion into
Switzerland and many other European countries. The expansion continued in the
1980s and 1990s. IKEA went from just 2 stores in 1964 to 114 stores in 1994.
With this expansion they had many challenges to overcome to maintain their
competitive advantage and dedication to low prices. To ensure that high quality,
low price, and a customer focus was maintained in all IKEA products and practices
IKEA began looking for innovative ways to produce furniture and distribute it to the
customer. In 1980 IKEA introduced the LACK coffee table. The table was made
from wood that came from an interior door manufacturer and this kick started
IKEAs drive for low cost manufacturing via alternative sources. IKEA was not just
looking for the best furniture supplier and material manufacturer but instead they
were scouring the planet for the best quality and lowest price materials and
manufacturing regardless of industry or country. Another example came in 1985
when IKEA introduced the MOMENT sofa. The MOMENT sofa had a metal frame
that was manufactured by a supermarket cart factory.
As the company grew through the 1960s and 1970s the culture of the company
was starting to solidify. Kamprad had a very strong idea of how he wanted the
company to operate and be managed. He was eager to share his ideas on
management with his staff and thus authored the document, A Furniture Dealers
Testament in 1976. The document described the nine cornerstones of IKEA culture
and his vision statement, To create a better everyday life for the many people.
The testament nine cornerstones were as follows:
1.
2.
3.
4.
5.
Simplicity is virtue
6.
7.
8.
9.
While the company, CEO, and staff were all dedicated to the nine cornerstones of
the business there were still some issues that IKEA would have to deal with,
suppliers and sub-suppliers. IKEA ran into trouble in 1981 in Denmark when
government regulation was changed with regards to formaldehyde emissions for
building products. When wood or other building products burn the permissible
formaldehyde emission was set at 0.1 mg/kg. One of the main components in IKEA
products was particle board and therefore subject to the new regulation. Many
products did not meet the new regulatory standards and IKEA was fined by the
Danish government for non-compliance. The case was widely publicized and IKEA
was blasted in the press for their environmental ignorance and sales in Denmark
dropped by 20%.
Considering IKEAs commitment to their customers and quality products they could
not let this continue. They worked with their suppliers to ensure that their products
were up to Danish government standards but they were not able to ensure that all
of the particle board met the formaldehyde emission standards. The suppliers
contended that the glue in the particle board was causing the high emissions and
that the suppliers could not fix it themselves. IKEA then worked with ICI and BASF
to reduce the emissions in their glue that goes into particle board. From the way
that IKEA not only worked with suppliers to resolve the issue but with sub-suppliers
as well we can see that this company takes a great deal of responsibility for their
actions.
Several years later in Germany IKEA was once again lambasted in the press for
using large amounts of polyvinylchloride (PVC) in packing after it was found that
dioxins were dispersed when PVC is burned. The environmental concerns were
becoming more and more relevant to IKEA with the formaldehyde issue from 1981
reappeared in 1992, this time in Germany. The new case of the formaldehyde
emissions was with the IKEA BILLY bookcase, a best seller. Learning a lesson from
the Denmark incident IKEA this time stopped distribution and sales of the BILLY
bookcase until the cause and a solution could be found. It turned out that the
lacquer on the bookcase was the cause of the problem. The investigation and
logistics around a world wide stoppage of distribution and sales cost IKEA $6 - $7
million.
In true IKEA style in reaction to the Germany incident IKEA established a
forestry policy. Working with the World Wildlife Fun (WWF) the forestry policy IKEA
established started with identifying the source of every piece of wood that went into
furniture, veneer, and plywood. They know that all of the wood that goes into IKEA
products is from commercial forests that practice responsible forestry. In addition,
they run projects to facilitate responsible forestry world wide. They also began
using chlorine free recycled paper in the catalogue to emphasize their commitment
to the environment and responsible forestry.
With these examples of issues that IKEA has faced with environmental issues and
the socially responsible way in which they handled them it is clear that IKEA is a
company that believes in the vision statement and has a long range plan and
relationship with customers and suppliers.
In 1994, while IKEA was still working on a solution to the BILLY bookcase
formaldehyde issue, there was a report that some of IKEAs Pakistani suppliers were
using child labor to weave rugs. They were surprised to hear this as they thought
child labor was not common place in these countries. Given the way that IKEA
reacted to the environmental issues it faced in the past on thing is certain, IKEA
would act responsibly and work towards a last resolution to the issue.
Their first reaction was to meet with Swedish Save the Children, United Nations
International Childrens Emergency Fund (UNICEF), and the International Labor
Organization (ILO) to find an appropriate response. Swedish Save the Children
advised them to think about not only the IKEA reputation but also of the children.
IKEA added a black and white clause into their contracts in India and Pakistan that
stated that if children were used in the manufacturing of goods for IKEA the
contracted would be cancelled effective immediately. IKEA decided to visit their
suppliers in India without giving prior notice of their visit to see if they were in fact
using child labor. They were surprised to find that some of the factories they visited
were in fact using child labor and other factories threw them out of the building
presumably to hide the fact that they were using child labor. India had outlawed
child labor but had not signed Convention 138 drafted by the ILO in 1973. Given the
fact that India had outlawed child labor but it seemed to occurring on a regular
basis not only in India but with IKEAs suppliers, IKEA had a tough decision to make.
How to effectively enforce their anti-child labor policies while keeping the best
interest of the child in mind? Additionally, Indian rugs are inexpensive to produce
and high quality, two very important qualities for IKEA, but the social cost to Indian
children and the reputation cost to IKEA make it a difficult value proposition to
calculate. IKEA has to wonder, is it worth it to continue to produce rugs in India with
all of the child labor issues that they may face for year and years to come?
Along with these management issues is the deeper issue of whether or not
corporations are responsible for enforcing effective social programs that facilitate
development and sustainability or if the government is responsible for this task.
When weighing the options available to IKEA they seems to fall into two categories
with 2 approaches, Corporate Social Responsibility and Government Social
Responsibility. The table below, table 1.1, shows the actions that IKEA can take
staying in line with the two categories.
Table 1.1
Corporate Social Responsibility Government Social Responsibility
Fund social infrastructure Exit Market
Participate in NGO Social Lobby for Tighter Labor Regulation
Intervention in Foreign Social Affairs
With these actions and approaches in mind there are 3 strategies that should be
analyzed. IKEA can fight Indian child labor head on, resolve the root cause of Indian
child labor, or exit the Indian rug market to stop child labor in their company.
Fighting the Indian labor market head on would mean that IKEA continues their
black and white child labor clause with Indian contract manufacturers, exhibit zero
tolerance when suppliers are found to be non-compliant, and implement a strict
audit and compliance monitoring program. Suppliers and retails that wanted to
take this approach created a foundation called Rugmark to assist with the auditing
and monitoring of child labor ILO policy and compliance. Any rugs produced by a
company that is certified as not using child labor will have a Rugmark. This type of
approach was not recommended by the Swedish Save the Children foundation
because it did not have the best interest of the child in mind. Instead there is a
possibility that many children would move to more dangerous jobs or prostitution if
they were summarily dismissed from rug manufacturing jobs. This is in fact what
happened in 1993 when Bangladeshi garment factories were forced by the US to
crack down on child labor or face import restrictions. An estimated 50,000 child
laborers were fired and it was suspected that most went into more dangerous jobs
or were exploited in human trafficking. Another difficulty with this strategy is the
shear size of the manufacturing area that would need to be monitored and audited.
There are an estimated 175,000 in one of Indias carpet producing clusters that
would make auditing, monitoring, and compliance a costly proposition. IKEA has
such a strong commitment to low costs being passed on to the consumer that this
would be a difficult strategy for them to peruse long term. Next lets look at
resolving the root cause of Indian child labor.
To achieve this goal IKEA would have to promote child welfare and education,
engage their suppliers as partners, provide incentives for compliance, and maintain
a policy of continuous engagement with both suppliers and any programs they put
in place. This is not a short term solution or one that could be performed by IKEA
alone but it is in fact the strategy that they decided to pursue. IKEAs approach was
multifaceted. They partnered with UNICEF to ensure that all children in the carpet
producing cluster in India had a chance to receive an education. They did this in
some cases by building schools for those that were not allowed to attend public
schools; they were called alternative learning centers. The program also inoculated
infants and promoted welfare in the community. In addition to this partnership with
UNICEF IKEA also worked to create a tight relationship with their suppliers and
engage them to create solutions to eradicate child labor practices. They
implemented a program with suppliers that would audit them on a regular basis. If
child labor was discovered during the audit the supplier would have to write a
corrective action plan. The corrective action plan would not just fire the child
laborer but the supplier would be responsible for ensuring the education of the child
and welfare were taken care of to ensure a repeat of Bangladesh did not occur.
IKEA would then follow up with the supplier and the school of the child to ensure
that they corrective action plan was actually being followed. If the supplier did not
follow through on the corrective action plan then the contract was broken and IKEA
would no longer transact any business with them.
The third strategy is to exit the India rug market. This would be the simplest of the
three strategies but would also have a good deal of effort required by IKEA to find a
new cluster to manufacture rugs without child labor at an affordable cost and high
quality. The threat of exit alone would put pressure on the Indian government to
take a more active role in compliance of the labor laws and the laws dealing with
child labor in particular.
Knowing the commitment that IKEA has to its suppliers, customers, low prices, and
high quality I feel confident that their decision to actively engage suppliers and
work together for a positive future with no child labor will be successful. I do not
feel that this is the best use of resources by a company from a shareholders point of
view. In the future if IKEA had to chose between returns to shareholders or
continued involvement with UNICEF and Indian social responsibility programs they
would have a very tough choice to make. Either choice would have a negative
impact; furthermore the choice to side with shareholders would in my mind
effectively undo all of the positive work that IKEA has performed to date. Pursuing
the strategy of exiting the Indian rug market would translate into a higher cost for
consumers but it would also remove any conflict of interest for management and
society. A customer purchasing a rug from IKEA today may not feel comfortable
knowing that a child may have woven the rug but is now being educated by an IKEA
supplier. On the other hand, a customer paying a slightly higher price with the
knowledge that no children were used in the weaving of the rug may be appealing
for socially conscious consumers, myself included.
_____________________________________________________________IKEAs Global Sourcing Challenge
In regards to accepting the invitation to take part in the live discussion during the
airing of the German-produced program, you accept, because to decline is
equivalent to admitting guilt. In terms of your business relationship with Rangan
Exports, you terminate the remainder of the contract due to their blatant violation
and lack of integrity. Additionally, IKEAs approach to the issue of child labor needs
to be a hybrid between using Rugmark and its own sources of monitoring, while
simultaneously staying aware of other potential sources for rugs.
Rangan Exports
____________________________________________________________IKEAs Global Sourcing Challenge: Indian Rugs and Child Labor (A)
Case Synopsis
IKEA is a privately held, international home products company that designs and
sells ready-to-assemble furniture such as beds and desks, appliances and home
accessories (www.worldisyouroyster.com). The company was established in 1943
by Ingvar Kamprad in Sweden when he was just 17 years old. Kamprad himself,
who still owns the private company, is rumored to be the worlds richest man. IKEA
is currently the world's largest furniture retailer and arguably the most successful
global retailer. Being one of the biggest global retailers, IKEA benefited a lot by the
globalization of its business; IKEAs target market is the global middle class who is
looking for low-priced but attractively designed furniture and household items.
The company started as a home-furniture retailer in Sweden over 50 years ago.
Throughout the years with the use of effective globalization, IKEA managed to
increase its business revenue and profit by selling and making home-furniture in
different countries all over the world, and it has over 300 retail stores in more than
30 countries (www.ikea.com). Other than that, they sell roughly 10,000 different
products, which attract customers from different places all over the world. The
basic assumption behind IKEA's global strategy was one-design-suits-all, which
meant that the company did not adapt to the local markets (www.salon.com).
The case IKEAs Global Sourcing Challenge: Indian Rugs and Child Labor is about
IKEAs development from a backyard company to one of the worlds largest furniture
retailers, which has to deal with the issues of child labor and how they should
behave considering economical issues and the companys policy (Bartlett et al 8).
Case Questions
1. How should Marriana Barner respond to the question of IKEA to have a
representative appear on the upcoming broadcast of the German video program?
Being an organization with such principles and values, IKEA should address the
concerns during the broadcast by sending a representative to clarify any issues and
stand by the organizations interest. IKEAs philosophy and vision statement to
create a better everyday life for the many people was an indicator that this
organization is committed to sell affordable, good quality furniture products around
the world (Bartlett et al 4). Their rapid international expansion and the need to
supply the demand may have caused IKEA to run into these different outsourcing
issues. The leadership at IKEA got involved with different ONGs to discuss what
areas needed improvement, and requested the input from the International Labor
Organization (ILO) in order to guarantee all its vendors were abiding the labor laws
accordingly (Bartlett et al 6).
IKEA was committed to track down its product sources and hired an independent
agent to monitor and assist with such complicated task. They seem to have all
bases covered; however it is necessary to do something similar to what they did for
the Swedish television documentary, where IKEA was again the focus of accusations
involving the use of child labor to get products made in Pakistan and India. With the
assistance of their legal team, Marriana Barner, should prepare a statement to the
public and IKEAs customers, reassuring their commitment to get to the bottom of
the case and promote their initiative to fight child labor and exploitation.
By not sending a representative to the broadcast, the organization would openly
take the risk of being the target of the public opinion. Leaving an audience with
unanswered questions and putting in jeopardy the reputation and creditability
earned over the years by its funder and honorary CEO Inguar Kamprad.
2. What actions should she take regarding the IKEA supply contract with Ragan
exports?
During the spring of 1995, a well-known German documentary maker notified IKEA
about a film he made was about to be broadcasted on German television showing
children working at looms at Rangan Exports, one of IKEAs major suppliers. He
refused to let the IKEA preview the video; however he invited them to send
someone to take part in a live discussion during the airing of the program.
According to Barner, it was immediately clear that this German-produced program
planned to take a confrontational and aggressive approach aimed directly at IKEA
and one of its suppliers (Bartlett et al 8). The refusal to show the movie to IKEA
implicit shows that their intention is not to hear about IKEAs engagement but
having someone to blame. The discussion might have an aggressive and
confrontational attitude towards IKEA for using a supplier, which employs children
and suggesting IKEA a reckless company just caring about profit.
Barner should first of all understand the situation thoroughly before taking any
steps against Rangan Exports. The Global sourcing always brings with it the social,
cultural and regulatory differences which should be dealt with effectively to ensure
success in global supply chain. She should help Rangan Exports to avoid using child
labor in production of rugs by bringing awareness about such social issues and how
it impacts the life of child in physical, mental, spiritual, moral, and social terms. She
should even pressurize the supplier for avoiding child labor in production.
A live discussion would give IKEA the possibility to explain themselves and their
intention concerning their engagement in India. Barner could make her intentions
clear as she is feeling that IKEAs responsibility is much broader than just trying to
abolish child labor by stopping business relationships with partners who employ
children in their companies. This would provide IKEA a positive image and might
strengthen their engagement.
3. What long term strategy would you suggest she take regarding IKEAS
continued operation in India? Should the company stay or exit?
IKEA needs to think in a long term strategy regarding its continued operations. They
need to seriously consider the damaging and tarnishing effects a child labor could
have on their company. I believe that IKEA can continue to outsource with India,
however, they need to be stricter and more effective checks and balances. They
also need to be put into place and make sure that the contracts will not be violated
in any way. IKEA is a huge company that has grown over the years. And to maintain
in that way they need to be strict with the child labor laws. For example, there
should be routine checkups at all the suppliers to ensure that they are within the
bounds of their contract. Even though it might seem like an expensive operation,
IKEA needs to maintain a good image worldwide. In addition, IKEA would hurt their
image in the long term if a major publicity slam like a child labor law would take
place.
There could not only be a huge loss in trust in IKEA from such a circumstance, but
also a major drop in sales, which as previously mentioned would be costlier than
putting in a strategic system of checks and balances. Overall, I believe that IKEA
can achieve goals of being cost effective in its outsourcing endeavors to India,
nevertheless, new levels of caution need to be taken to make sure the suppliers are
behaving in the ethical manner as predetermined and agreed upon by the contract
signed between both parties. Many companies have been affected by child labor
laws and if IKEA wants to keep the proper image, then they would need to create a
system where suppliers are going to follow these contracts.
4. Do you think IKEA should continue to source carpets in India, would you
suggest that she:
a) Continue IKEASs own monitoring and control processes or sign-up to Rugmark?
b) Continue to focus only on eliminating the use of child labor in IKEAs supply
chain or engage in broader action to address the root causes of child labor as Save
the Children is urging?
With India being the biggest purchasing source of carpets and rugs IKEA should
continue to source carpets from them (Bartlett et al 7). The companys experience
and hard work will enable IKEA to come up with a solution that applies to their
beliefs and values. IKEAs own monitoring and control processes would be the best
option when it comes to avoiding the child labor issue in manufacturing. When IKEA
began its globalization in India, Barner spent a couple of months in India learning
about trading but got no exposure to child labor (Bartlett et al 6). This incident
comes to show the dysfunctional culture and management practiced in India. IKEA
should act upon its own interest because nobody but IKEA is as interested for its
own reputation. With the self-monitoring technique the company will have complete
assurance of the procedures taking place and will not be able to be unfairly
accused.
Save the Children, taught IKEA a lot regarding the child labor and shared their
concern of childrens rights. After the experience of being accused for child labor on
the media, IKEA should sign up to an industry-wide response to growing concerns
about the use of child labor in the Indian carpet industry (Bartlett et al 1). After all,
IKEA is very concerned of its name and has strong beliefs. A big part of IKEAs
profits come from India. Therefore, if they protect and they stand by their beliefs by
not allowing child labor they will be able to continue to profit from India and at the
same time prove the media wrong of all mislead accusations. By just focusing on
eliminating the use of child labor in IKEAs supply chain would not be successful, for
they have already been accused directly as a company of such an issue. In order to
prove their unawareness they must take drastic measures and try to make a
difference for the companys sake as well as to protect the childrens rights.
conflict of the practice and would continue to carry on its business values no matter
the effects it would have to face.
6. What is your evaluation of the IWAY policies and practices that have refine
IKEAs relationships with the suppliers? What benefits do you see? What concerns
do you have?
IKEA focused on developing a long-term relationship with its supplier, by supporting
them. This relationship allowed IKEA to make loans to their suppliers at reasonable
rates, and suppliers would pay these loans through future shipments. IKEA saw the
big picture, when committing to their suppliers, because they would commit to
them as well. Even though suppliers were aware of this commitment, they did not
want to take that for granted, therefore they had to always stay competitive to
bring the best and affordable designs to IKEA (Bartlett et al 2). IKEA was driven by
a desire to improve the quality of life of the different agents involved in these
networks, and not only by profit maximization.
The benefits we see is that IKEA will always have a great supply team that will
provide them with innovative and unique furniture at a lower cost. On the negative
side, this can create barriers of entry to other suppliers that are interested in
gaining business with IKEA, limiting IKEAs opportunity for development of new
markets.
Works Cited
Bartlett, Christopher A., Vincent Dessain, and Anders Sjoman. IKEA's Global Sourcing
Challenge: Indian Rugs and Child Labor (A). Boston, MA: Harvard Business School,
2006.
Culture, Pop. Ikea's Third World Outsourcing Adventure -- in the U.S. - The Labor
Movement - Salon.com. Salon.com - Salon.com. Web. 25 Apr. 2011.
<http://www.salon.com/news/the_labor_movement/?
story=/tech/htww/2011/04/11/ikea_s
_third_world_outsourcing_adventure_in_the_united_states>.
"FAQ." Welcome to IKEA.com. Web. 25 Apr. 2011.
<http://www.ikea.com/us/en/customerservices/faq>.
Samy, L.A. ,and Vijayabascar, M. Codes of Conduct and Supplier Response in the
IKEA Value
Chain. October 3, 2006.
http://www.inmotionmagazine.com/global/lasamy_ikea.html#Anchor-Key-11481
they do not and IKEA finds that they are still participating in child labor, then IKEA
will automatically cancel the contract between them and issue a significant fine for
a breach in contract. Associating a large fine to the suppliers will deter them from
being part of child labor and keep them on tract. IKEA should also try to work with
governmental laws to ban the supplier from being able to supply their products to
other business forcing their business to close if they do not fix their ways. Seeing
how serious and strict IKEAs policies are will set a president within all suppliers who
want to keep their business running. Since there were issues in suppliers following
through with this in the past, I feel it is important to pull out of those areas with the
most serious child labor issues. Sometimes, no matter what a company does to take
a stand on social issues, it still will not change the way of life in a poverty stricken
country. These families are desperate and willing to take the risks in order to
survive or pay off debt. Sadly, some families that live under these conditions dont
have a choice. The suppliers will still save money and keep overhead cost down by
having children manufacture the products, and companies will still use them who
may not necessarily care about any social issues. Unfortunately, for those locations
just one company cannot change the situation. But hopefully by pulling out other
companies can follow in IKEAs footsteps. It is essential to show that IKEA is taking
this issue very seriously and also keeping their mission statement intact and being
able to conduct their business the way Kamprad intended. IKEA can use their large
size as bargaining power to their suppliers to get them to do what they want. I feel
that this is the best strategic move for IKEA to solve the issue of child labor.
[Name of Student]
[Name of University]
Key to why IKEA products are embraced by people beside quality that can be
bought at an unmatched prices are that they are produced in a socially responsible
and environmentally friendly way. IKEAs sourcing strategy is usually credited for
maintaining these standards, especially on how well it keeps its relationship with its
suppliers from developing countries. It is also said that IKEA has put some
manufacturing Code of Conduct for its suppliers called "The IKEA Way on Purchasing
Home Furnishing Products" (IWAY).
Through the years, IKEA has been constantly evolving its approach to business
and its compliance to government regulations. Realizing that adherence to quality
standards and being socially committed are vital to its business, IKEA requires
manufacturers and suppliers to ensure compliance in terms legal issues, working
conditions, prevention of child labor, external environment and forestry
management.
Recommendations
It is not only IKEA that is accused of contracting suppliers that use children as
labor. Other big brand names like Apple Inc has been receiving negative publicity
out of these problems. Given that big brands can be dragged for public scrutiny
even for very small issues, majority of the people who patronize company are more
understanding so long as they will continue to enjoy unique and quality products or
services from such companies who have the unique position of providing the market
with unique and unmatched product. As such, managing the press would be light.
The bigger challenge though would come from some social activists, disgruntled
consumers or haters who can threaten the company by mounting viral campaigns
through social networking websites like Facebook, Twitter and Youtube. To deal with
these publics, it would be best to launch a campaign that would give assurance that
all products by IKEA passed through numerous regulatory standards. These are best
provided through the press who can be invited and given access to major suppliers
factories to give them free reign to inspect the working conditions and documents.
IKEA can also release disclaimer statements on its corporate website assuring the
public about its strict compliance to all terms of labor regulations. Non-government
organizations and advocacy groups would be approached by IKEA to initiate talks,
getting their inputs and contributions in developing best practice policies about
their cause that would benefit both parties.
Meanwhile, fears that IKEA is causing more harm than good in the
environmental can be allayed by mounting strategic campaigns that will feature its
commitment to the environment and sustainability efforts by the government and
advocacy groups. Internally, the company can invest on research and development
to discover materials with less environmental hazards and other alternatives that
will be useful for its production not only in the short-term but can last. IKEA must
also readily submit to requests for transparency that it is ensuring sustainability as
a corporate social responsibility. In these areas, IKEA can very freely undertake
since competition is less of an issue to the company, besides its not being a
publicly-listed company.
References
Bartlett, C.A., Dessain, V., and Djoman, A. (2006, May 3)."IKEA's Global Sourcing
Challenge: Indian Rugs and Child Labor (A). Harvard Business Review.
Massachusetts: Harvard Press.