...directly at IKEA and one of its suppliers. The best defense is to take this opportunity to fight back. • Since IKEA already signed agreement on not using child labor, they can’t ignore the challenge this program may bring. • IKEA has gained some positive accomplishments to the child labor issue and took actions to eradicate child labor. It is a good chance to further publicize their efforts. • Marianne should prepare herself well by analyzing the situation of that year (May 1995) before going to the program; Rangan Exports should be investigated by both independent 3rd party auditors and IKEA before the program. • It is the opportunity to communicate with the public regarding Ikea’s long-term strategy with accurate milestones to prevent child labor, in response to their social responsibility. • If Marianne is not outspoken, an eloquent person from the senior management who is familiar with IKEA’s child labor issue and company’s stand should go to the program. 2. Should IKEA continue to deal with Rangan Exports? • No. Rangan Exports apparently violated the contractual commitment it had made not to use child labor. Legally speaking, IKEA should terminate the contact right away. • In 1994 after the Pakistan child labor issue, IKEA already had a clause to all supply contracts, stating that if the supplier employed children under legal working age, the contract would be cancelled (a “black-and-white” clause). • By halting the contract with Rangan Exports, IKEA sends a clear...
Words: 825 - Pages: 4
...Background: IKEA was founded by Ingvar Kamprad who embedded his strongly held values and beliefs in IKEA’s culture. IKEA was created out of Kamprad’s family kitchen selling goods such as fountain pens, cigarette lighters and binders that later turned into a catalog business operations selling furniture. In developing IKEA’s furniture retailing business model, Kamprad was confronted with a cartel of furniture manufacturers that kept prices high by controlling the Swedish industry. This issue later became the vision of the company “creating a better life for the many people”. IKEA also introduced their key feature of self-assembled furniture where customers bought furniture in flat packages and put them together at home. This was known as the “knockdown” concept that allowed IKEA to save on transportation and storage costs. Conflict with the cartel of furniture manufacturers in Sweden forced IKEA to source materials from abroad. To maintain IKEA’s quality and delivery, IKEA taught their processes and provided machinery to their suppliers in Poland. After expanding their suppliers globally, IKEA created a general procurement principle that that stated IKEA should develop close ties by supporting its suppliers with a long-term relationship. By the mid-1990s IKEA worked with 2,300 suppliers in 70 countries. IKEA has 24 trading service offices in 19 countries that monitor production, test new product ideas, negotiate prices, and check quality. Since 1980’s IKEA has been looked upon...
Words: 1480 - Pages: 6
...Executive Summary 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”. The company was established in Sweden in 1943 by a 17-year-old Ingvar Kamprad, who is one the world's richest people in 2013, the company's name is an acronym that consists of the initials of Ingvar Kamprad, Elmtaryd (the farm where he grew up), and Agunnaryd (his hometown in Southern Sweden). 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; IKEA’s 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 60 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”. 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”. This case “IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor ” is about IKEA’s development from a...
Words: 2411 - Pages: 10
...Sourcing Challenge: Indian Rugs and Child Labor (A) In May 1995, Marianne Barner faced a tough decision. After just two years with IKEA, the world’s largest furniture retailer, and less than a year into her job as business area manager for carpets, she was faced with the decision of cutting off one of the company’s major suppliers of Indian rugs. While such a move would disrupt supply and affect sales, she found the reasons to do so quite compelling. A German TV station had just broadcast an investigative report naming the supplier as one that used child labor in the production of rugs made for IKEA. What frustrated Barner was that, like all other IKEA suppliers, this large, well-regarded company had recently signed an addendum to its supply contract explicitly forbidding the use of child labor on pain of termination. Even more difficult than this short-term decision was the long-term action Barner knew IKEA must take on this issue. On one hand, she was being urged to sign up to an industry-wide response to growing concerns about the use of child labor in the Indian carpet industry. A recently formed partnership of manufacturers, importers, retailers, and Indian nongovernmental organizations (NGOs) was proposing to issue and monitor the use of “Rugmark,” a label to be put on carpets certifying that they were made without child labor. Simultaneously, Barner had been conversing with people at the Swedish Save the Children organization who were urging IKEA to ensure that...
Words: 6420 - Pages: 26
...1995, IKEA met a problem that its main supplier, Indian rugs, used the child labor to produce products, although they had signed an attachment of the contract to ban employing child labor. In addition, a German documentary maker was about to broadcast the problem of child labor on German television and also invited an employee from IKEA to have a live discussion in the TV program. Marianne Barner, the leader of IKEA, must find a great solution to this serious issue to both save her business and the corporation’s brand image. In this issue, IKEA was not the one who produced products, so they might not realize the use of child labor in the process of production. In addition, child labor did not attract lots of attention from the society at that time, so they did not pay attention to the use of child labor when they were finding their suppliers. However, they sold terminal products so they were to blame. As a result, Marianne had to make several decisions, respectively about whether IKEA should accept the invitation to join the TV program, how to deal with the broken contract with Rangan Exports, how to deal with the child labor on the long term and whether IKEA should use Rugmark. To address this problem and make these decisions, IKEA has four choices. One is that IKEA could utilize its own relationship with its suppliers to solve the issue. The second choice for IKEA is to invite Rugmark Foundation on its behalf to monitor the use of child labor. The third one is that IKEA could...
Words: 1445 - Pages: 6
...eaElena Fischer Case: Ikea’s Global Sourcing Challenge 1. Should Ikea dissolve its relationship with its carpet supplier? I think IKEA should in fact, exit the Indian rug market. While it would translate to higher cost for consumers, it would remove any conflict of interest for both society and management in terms of child labor. With the public knowledge that IKEA rugs have in fact been made using child labor, rug sales will decrease and customers will feel uncomfortable purchasing products with the wonder of whether or not child labor was used to create the product they are about to purchase. If IKEA dissolves the relationship, socially conscious consumers will feel ease when buying a rug, with the knowledge that no children were used to weave the rug, even with the slightly higher price. Exiting this market will also put pressure on Indian government to take more efforts in preventing child labor by implementing more labor laws, or better enforcing the current ones. While the Rugmark Foundation programs implemented with suppliers to supervise the use of the label helps regulate child labor, it does not get rid of it all together and is only a short-term fix. The only way I see IKEA saving their image, following their values and ethics, and preventing the use of child labor in the making of their rugs, they need to withdraw because it is the only action that truly shows their seriousness with the issue and zero toleration policy in being a part of their company....
Words: 723 - Pages: 3
...9-906-415 REV: NOVEMBER 14, 2006 CHRISTOPHER A. BARTLETT VINCENT DESSAIN ANDERS SJÖMAN IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor (B) After more than a decade spent struggling with the issue of child labor, Marianne Barner felt good about how IKEA had responded. But occasionally, she found herself wondering whether the progress the global furniture retailer had made was real and durable. Just as it had in the mid-1990s, in 2005 the company could still find itself on the defensive in dealing with the issue. Even more troubling to Barner was that after 10 years of working to prevent child labor among IKEA’s suppliers— introducing a clear code of conduct, developing internal controls and third-party audits, training its suppliers, supporting their corrective actions, and instituting stiff sanctions against offenders—the company was still finding cases of child labor in its supply chain. The latest issue had been drawn to Barner’s attention by Kaisa Mattson, the head of IKEA’s compliance office in south Asia. Like Barner herself a decade before, Mattson was facing the decision of whether to terminate a relationship with a long-standing major supplier. This one, however, had violated not one but several items in IKEA’s detailed code of conduct, known as “The IKEA Way on Purchasing Products”—or IWAY for short. Venkat Industries was a textile mill with over 10,000 workers, and a recent audit had shown that it had stopped using the water treatment plant it had...
Words: 8055 - Pages: 33
...1) How should M. Barner respond to the invitation for IKEA to have a representative? appear on the upcoming broadcast of the German video program? Marianne Barner business manager for IKEA’s carpets should respond with a firm no to the invitation. The German video program would only bring detriment to the company, rather than relief or support for the issue at hand. In comparison to the Swedish program, which did not target a specific company, this German-produced program planned to take a confrontational and aggressive approach targeted directly at IKEA and one of its suppliers. Germany currently brings in the most sales for IKEA with $10.4 and 29.7%. Since Marianne Barner’s goal was to stop the issue, accepting this invitation would only bring fuel to the fire. The producers of the German documentary invited IKEA to send a representative to take part in a live discussion during the airing of the program. The benefit of accepting this invitation is the opportunity for IKEA to educate the producers and the public on their current efforts to fight child labor. However, the fact that the producers won’t allow the company to preview the video and that the program clearly planned to take a confrontational and aggressive approach aimed directly at IKEA raise the possibility that the representative would be blindsided and IKEA’s message not accurately portrayed. Thus, declining the invitation and respond to the allegations in the video would be advantageous only when they’ve had...
Words: 760 - Pages: 4
...IKEA’s Global Sourcing Challenge IKEA, one of the world’s largest specialized furniture retailers, has been presented with a large issue within their operations. In 1995, a German TV station released an investigative report which exposed one of the suppliers for IKEA rugs for exploiting child labor in their factory. A recent addendum was signed by all IKEA suppliers which forbid the use of child labor (Bartlett & Sjoman, p. 1, 2006), so this incident has called the company to make an action based on the accusations at hand. The amount of turnover that is accounted from Indian rugs for IKEA is small on the full scale, and made the company question whether or not the product line was worth the profit potential. The following will be an analysis of the history of IKEA’s manufacturing, external forces related to the presented issue, rising issues, and recommendations for the company’s future moves. History of IKEA’s Manufacturing Though IKEA is one of the largest brands in the furniture industry, the company has been involved with some environmental issues related to their manufacturing. In the 1980s, IKEA’s products were subject to investigation as they were observed to emit more than allowed levels of formaldehyde (Bartlett & Sjoman, p. 5, 2006). The issue occurred from suppliers buying materials from sub suppliers, which resulted in the product not passing the regulations placed by legislation. The company began to change the way they worked with their suppliers...
Words: 1231 - Pages: 5
...IKEA’s view of child labor on the broadcast. Facing the crisis directly rather than escaping the problem is a smart way to solve the crisis. She should use this broadcast to transfer anti child labor message to the public for IKEA and defeat the accusing from the German media face to face. Especially after inspecting India, Nepal and Pakistan, Barner grabbed first hand information to reveal how deep this socioeconomic problem embeds in these countries. She also should announce all the efforts IKEA makes on this issue, such as an anti child labor clause in the supply contract, a third party monitor system to child labor practices at the suppliers in India and Pakistan, and an action of joining the Regmark to deal with the child labor problem on products from India. 2. Barner should stop the business with Rangan Exports according to the anti child labor clause in the contract. This action will be a strong symbol to clarify IKEA’s stand on the child labor issue. It will help IKEA win trusts from the public. Learning from the incidence happened in 1980s, which caused IKEA lost 20% business in Denmark, IKEA should realize how important a positive publicity is to IKEA’s business. A positive social image is the foundation of companies dealing with B2C business. On the other hand, stopping contract with Rangan Exports is also a serious example to educate the other suppliers in India or other countries to focus on the issue of child labor and anti child labor clause in the...
Words: 598 - Pages: 3
...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...
Words: 982 - Pages: 4
...“IKEA Solution” IKEA is a Swedish company producing home furnishing products at low prices to make them affordable to people. The company was founded in 1943 by Ingvar Kamprad and kept growing tremendously from 2 stores in 1964 to 114 stores in 1994 to 231 stores in 2007 in 24 countries welcoming a total of 522 million visitors. Besides its success stories, the company has faced environmental and social issues. IKEA’s Global Sourcing Challenge involving Indian rugs as well as child labor is a complicated case of social issues. Whenever a company founds itself involved in a child labor controversy, it can severely damage the customer’s perception of the company. This impact can prove to be irreversible. In 1994, a Swedish television network showed a documentary film about children working in Pakistan, targeting IKEA. In India, IKEA faced criticism about child labor from various international organizations. In the spring of 1995, another film is threaten to be shown on German television about children working at looms at Rangan Exports, a company used by IKEA and the producer then invited IKEA to send someone to take part in a live discussion during the airing of the program. These events urged the company to consider environmental and social issues more seriously, and therefore, find a solution. Just like any other globalizaed company, IKEA needs to get the cheapest supplies and therefore go to countries that offer cheap labor. However, developing countries involved...
Words: 738 - Pages: 3
...Global Sourcing Challenge: Indian Rugs and Child Labor 1. List and describe the key components of IKEA’s business strategy? * Low price is one of IKEA’s most important components of business strategy. Its low price attracts many people to purchase products there, especially young householders looking for well-designed but inexpensive furniture. It is the low price that helps IKEA stick on its version: “selling affordable, good-quality furniture to mass-market consumers around the world”. To stay constant low price, IKEA matches products to supplier capabilities and also makes cost consciousness a really strong part of the IKEA’s management culture. * Opening display stores is also a key component. Customers can go to the display stores to look around and inspect furniture and other products before buying. This is really helpful for customers to choose the right products they need and also helpful to reduce products returns at the same time. * Self-assembled furniture is a key feature of IKEA. This concept helped IKEA gain so many customers. Customers buy furniture in flat packages and assemble the furniture at home. This idea save IKEA’s transport and also storage costs. With money saved, IKEA could offer constant low prices for its customers. * Advising by issuing catalog is a significant idea. By sending is catalogs to customers, IKEA get the chance to introduce every products to its target market. Many people who go to IKEA to purchase are driven by its...
Words: 804 - Pages: 4
...Marianne Barner respond to the invitation for IKEA to have a representative appear on the upcoming broadcast of the German video program? To tackle this knotty problem, it is highly recommended that IKEA should participate in the program. The first thing should be taken into account is that this documentary was produced by a noted German company, which further meant gaining high credibility and extensive influence too dangerous and can be harmful for Marianne Barner to underestimate or ignore. Consequently, a heads-on response is not merely necessary but also imperative. Further to that point, the company does have gained some positive accomplish ents to the child labor issue since the problem was first raised by Swedish television. IKEA could analyze and discuss the information it had collected so far from UNICEF and the ILO and demonstrate its same attitude as the director of the documentary film as well as pursuing the same goals of eradicating child labor. It could turn the baffling problem around by showing its gratitude to the director for helping spot the child labor at the company’s manufacturing and could never to be too emphasize that the company is going to study the case thoroughly. Furthermore, what Marianne Barner should point out is that as the IKEA’ s philosophy goes: Anyone can make mistake but one should take the responsibility of making a mistake. Taking responsibility has been served as a privilege. Since the IKEA was unaware of making the mistake by acc...
Words: 1393 - Pages: 6
...IKEA in India: An Opportunity for Success James Baskerville, Irina Damianoff, Jacquelynn Mantel, and Teressa Paulus Indiana Wesleyan University Assignment ADM510 Team Project Paper Team Project Paper Rubric: The Team Project report was graded according to the rubric below |Criteria |Points Possible |Point Achieved | |Spelling, grammar and mechanics - Excellent |15 | | |Description of the Organization – good detail |20 | | | Opportunities for Global Expansion – great research |30 | | |Challenges to Global Expansion |30 | | |Expansion Options and Recommendations – team did a great job with the analysis and support |30 | | |APA citations & references page |15 | | |TOTAL |140 | | ...
Words: 3790 - Pages: 16
