Introduction of IKEA
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 285 stores in 2008 in 36 countries with an additional 26 stores to be opened in 2009 welcoming a total of 522 million visitors. IKEA’s success story is the result of its founders opening store in 1951 to allow customers to inspect products before buying them, using a catalog to tempt people to visit an exhibition. Its key feature of providing self-assembled furniture starting from 1953 significantly cut transport and storage costs. In 1956, IKEA began testing the concept of flat pack to reduce costs through lowered storage space requirements, reduced transportation expenses, decreased transportation damage and reductions in labor costs.
IKEA and its mission
IKEA’s mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them. The company targets the customer who is looking for value and is willing to do a little bit of work serving themselves, transporting the items home and assembling the furniture for a better price. The typical IKEA customer is young, low to middle income family.
Ethical Issues Related to IKEA’s Position on Child Labor
Besides its success stories, in regard to social issues, the company confronted the child labor problem, which this paper mainly discusses about. In 1994, a Swedish television 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.
As a company whose operations are international, IKEA needs to get the cheapest supplies and therefore go to countries that offer cheap labor. However, these developing countries such as India, Pakistan and Nepal are facing a lot of social issues about human rights. When IKEA set its foot in these countries, it could not avoid these problems. For example in India, estimates of child labor in India vary from the government’s 1991 census figure of 11.3 million children under 15 working to Human Rights Watch’s estimate of between 60 million and 115 millions child laborers and about 200,000 were employed in the carpet industry. Its corporate strategy style partly exacerbates, instead of helps the situation. The fact that IKEA does not have its own manufacturing facilities; instead it uses subcontracted manufacturers all over the world for supplies makes it more complex and difficult to keep track of the company’s suppliers and sub-suppliers. It is even more difficult to keep track of children working in homes where whole families worked on looms from the sub-suppliers’ level. However, on the positive side, this corporate strategy gives IKEA’s the advantage of being able to change its suppliers without much cost. IKEA realizes the challenge and questions itself how deeply the company wants to engage and to help eliminate local social issues of child labor. At the initial period, the way that IKEA dealt with Formaldehyde and forestry issues showed its engagement in social responsibility still remained at the reactive step but not yet at the proactive step or interactive step. This inadequate engagement explains why the company keeps undergoing social and environmental issues pushed by the public. IKEA is outstanding at new ideas for marketing but the company is still passive in social...
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