IKEA Case 1) IKEA’s vision to “create a better life for the many people” defined IKEA as a company and separated them from their competitors. In the early years of the company, IKEA faced many hardships from the cartel of furniture manufacturers who controlled the Swedish industry to keep prices high. To counteract these hardships, IKEA created a unique business model that was different from competitors. This model included key features such as the use of a catalog and having self-assembled furniture, which saved the company on transportation and storage costs. Ingvar Kamprad, founder of IKEA, developed the strategy of selling affordable, good-quality furniture to mass-market consumers around the world.

Another important part of IKEA’s vision was their relationship with their suppliers. Kamprad wanted to develop close ties by supporting its suppliers with long-term relationships. A manager in the case states, “We commit to doing all we can to keep them competitive—as long as they remain equally committed to us.” IKEA also serviced customers with features such as a playroom for children, a low-priced restaurant, and grocery store. All of these features were highly beneficial and profitable for IKEA while also helping everyone (suppliers, customers, etc.), as their mission strives for.

Although IKEA had achieved success with their business model and vision, they experienced multiple environmental and social issues that tarnished to company’s image and reputation. The two main situations involved formaldehyde in their products and the use of child labor among their suppliers. Both of these instances had severe negative consequences for the company, drawing a lot of media attention and seeing a drop in sales. Although IKEA did not directly know about the child labor issues in India or the use of formaldehyde in their products, they should still be held fully responsible for the issues. Both of these issues are in conflict with IKEA’s vision of “creating a better life for the many people.”

Despite the environmental and social incidents that had a negative impact on the company, I think that IKEA has “bounced back” and have taken the necessary steps of dealing with these problems and moving forward with their vision. Many companies, especially large global corporations, experience major issues that are often negative, and need to respond in a positive way to overcome these issues. I think IKEA has done this.

2) I think that the IKEA responded well to the formaldehyde problem. IKEA became a prime target for regulators and the results found that the levels of formaldehyde did not meet the standards. IKEA realized that although they established stricter requirements regarding formaldehyde emissions, these standards were still not being met. To address these concerns more directly, IKEA, with the help of a few NGO’s, established a forestry policy stating that the company would only accept wood from forests that met particular environmental standards. I liked this policy and the way IKEA collaborated with NGO’s to accomplish the task. The only issue is now having the responsibility of tracing all wood back to its source. In addition to this, IKEA kept up with its concern for the environment, particularly forestry, and continued to work with WWF and Greenpeace on other projects. This showed IKEA’s concern for environmental issues.

The child labor issue presented IKEA with more challenges. The issue was of greater concern to the general public because it dealt with a much more sensitive topic. Child labor has been a major issue in developing countries. To IKEA’s defense, I do not think they knew that their suppliers were using child labor. However, it did occur and I think IKEA made the appropriate responses to the issue.

The company, with the help of the International Labor Organization (ILO), added a clause in the supply contracts saying that a contract would be terminated if that supplier employed children under the legal working age. IKEA also sent managers to India, Nepal, and Pakistan to learn more about the child labor issue. They met with not only the suppliers, but with unions, politicians, activists, and NGO’s. I think this was an important response because these managers were able to see things first-hand and gain valuable knowledge that they can bring back to the company and help with the child labor issue. Another important action that IKEA took was signing up with the Rugmark Foundation, which developed a label on carpets certifying that it was made without the use of child labor. Even though IKEA responded well (my opinion), there was a dilemma in whether IKEA should take a stronger stance in helping the lives of the children in these countries that experienced child labor hardships.

3) I think the only answer to this question is to terminate the contract with the supplier (Rangan Export’s). I do not, however, think that IKEA should abandon all of its contracts with the carpet making countries. One of that advantages of having suppliers in countries like India and Pakistan is the lower cost of doing business. IKEA is still a business that needs to be concerned with costs and profits in order to survive. I also think that IKEA should allow The Rugbar Foundation to monitor the use of child labor with these suppliers. They have more experience and knowledge in the area of child labor. By allowing The Rugbar Foundation to monitor these suppliers, IKEA can save time and effort that can be used for other important areas or issues with the firm. It is so important to keep tabs on these suppliers and make sure that child labor is eliminated to avoid future problems.

4) The formaldehyde and child labor instances involved IKEA being unaware that both were occurring. The simple explanation is that IKEA did not know the market well enough and the suppliers they were doing business with. In the future, it is a necessity for IKEA to do extensive research and background checks as well as strict monitoring of suppliers. This will take a lot more effort, time, and money, but it is worth it in the long run for IKEA.