IKEA’s 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 world’s 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; 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 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 “IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor ” is about IKEA’s development from a backyard company to one of the world’s largest furniture retailers, which has to deal with the issues of child labor and how they should behave considering economical issues and the company’s policy (Bartlett et al 8).
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 organization’s interest. IKEA’s 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 IKEA’s 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...
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