Mengyao Wang
Prof. J. Salmon
International Business
September 23rd, 2014

Evaluating Strategies for Combating Child Labor in India Found by Ingvar Kamprad in 1943, IKEA is now the world’s largest specialized furniture retailer. One of the key factors for IKEA’s success is offering affordable prices for the majority of people. To sustain its low-pricing strategy, IKEA managers decided to outsource its producing tasks to factories in other countries with relatively lower labor cost. However, this decision pushed IKEA into the accusations of using child labor. In the mid-1990s, when child labor issue arouse for the first time, IKEA promised that “if the supplier employed children under legal working age, the contract would be cancelled” (6) and appointed a third party to monitor its suppliers’ factories. However, in the spring of 1995, a German film maker documented how one of IKEA’s major suppliers used child labor and invited IKEA to participate in an living discussion. This essay evaluates the possible strategies for IKEA in respond to the invitation and the child labor issue.
Do Not Participate in the Discussion Program I would recommend that Marianne Barner, as a business area manager for carpets, do not participate in the program. This documentary aimed directly at IKEA and one of its suppliers, so it is highly possibly that the question lists prepared by the Germany documentary maker are used to mislead audiences and the evidences provided are weighted against the IKEA. Therefore, it is better for Barner to decline the invitation at first, conduct a investigation simultaneously and publish the results as soon as possible. Furthermore, in public, Barner should thank the German Video production company to notify this issue and express IKEA’s deeply apologies to mishandle the child labor issue and IKEA’s urgent desires to solve this issue.
Terminate Rangan Export’s contract and investigate all of the IKEA suppliers In 1994, when child labor issue first arouse, IKEA promised that “if the supplier employed children under legal working age, the contract would be cancelled” (6). Therefore the only option for IKEA right now is to terminate the contract with Rangan Exports. Furthermore, a worldwide investigation on all of IKEA’s suppliers should be conducted with a third party involved to ensure that no other IKEA suppliers’ factories are using child labor.
Evaluate IKEA’s Long-term Strategies for The Child Labor Issue. With the analysis above, 3 strategies could be taken to solve this crisis: 1. Invite third party to monitor the Indian suppliers’ factories. 2. Solve the root cause of Indian child labor by providing education opportunities and promoting children’s working condition if the using of child labor is unavoidable in certain countries. 3. Quit the Indian carpet market and transfer IKEA’s contracts with other countries’ factories, in which child labor is tightly forbidden and well monitored. Rugmark Foundation was found on the basis of a consumer awareness program and able to use labels to certify whether carpets are produced with child labor involvement. If IKEA could sigh up with Rugmark, the strong and convincing background of Rugmark Foundation would significantly improve IKEA’s overall image in the local area. Moreover, the local background of Rugmark can help IKEA eliminate language and cultural barriers to some extent, and gain trust eventually. Besides third party monitoring program, IKEA should also exhibit its zero tolerance to violations. The “black-and-white” clause applied in 1994 will effectively prevent the suppliers from using child labor, stating that if the supplier use child labor, the contract would be stopped immediately, . However, the first approach may not be recommended by Swedish Save, the Children's expert on child labor, who insisted that company should “always do what is in the best interests of the child” (8). Barner should consider the possibility that if Indian children were forced to leave IKEA’s factories, they would move to other more dangerous and worse jobs. As we know, Hinduism is the dominant religion of the Indian subcontinent and consists of many diverse traditions, including the caste system, which is a system of social stratification. Indian society is characterized by a high degree of social stratification and low mobility between strata. Therefore children from lower-strata have rare chance to receive education and must work even if they are under 15 years old. As a responsible global enterprise, IKEA could make a difference in the lives of those children and promote their welfare. To achieve this goal, for example, IKEA can collaborate with its own suppliers to provide education opportunities for children who are working in IKEA suppliers’ factories and “provide for appropriate regulation of hours and conditions of employment.” (12) Those measures might increase the costs of human resources, but they help IKEA maintain a positive public images and show IKEA’s urgent desires to solve the issue of child labor. The simplest approach to solve child labor problem would be exit the Indian carpet market and outsource its production to other developing countries like China, where has similar low salary level compared to India’s and regulations on child labor are much more effective. Moreover, the quit of big companies, like IKEA, might alarm the India government to take more actions to combat with the using of child labor. However, the potential risks of this strategy might be significant. For example, the stability of China’s financial system and the salary level are uncertain in the future.
Overall, from the shareholders’ point of view, Barner should select the first strategy, invite third party to monitor the Indian suppliers’ factories, because compared to other two strategies, collaborating with Rugmark Foundation costs less but is equally efficient in maintaining IKEA’s public images, because it does show that IKEA is working hard on preventing the child labor issue.

Work Cited
Bartlett, Christopher A. "IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (TN) (A) and (B)." Harvard Business School Teaching Note 907-407, November 2006. (Revised December 2012.)