IKEA’S GLOBAL SOURCING CHALLANGE: INDIAN RUGS AND CHILD LABOUR
Barner, IKEA’s business area manager for carpets, must decide how to handle the child labor issue. She learned that a German television would soon air a documentary showing children working at looms at Rangan Exports, one of IKEA’s major suppliers. Moreover, the producer invited IKEA to send a representative to take part in a live discussion. The first question is whether to recommend that IKEA participate in the program or decline the invitation. A live discussion could give IKEA the opportunity to inform the public about its position and its commitment to fight child labor but, since the filmmaker refused to let the company preview the video and it is clear that the program planned to take an aggressive attitude towards IKEA, it is recommended that IKEA shouldn’t participate in the program. In fact, it is apparent that the only purpose of the TV program is to blame IKEA not letting the company to counter. In addition, the presence of a representative would give credibility to the documentary. Thus, Barner should decline the invitation and do a press release once they’ve had a chance to view the video, verify the evidence and decide the moves to be made. The second practical issue is how to deal with Rangan Export’s apparent violation of IKEA’s no child labor clause. Surely, first IKEA should ensure the veracity of the charge and then, make the decision “in the best interest of child”. IKEA could terminate the contract with Rangan Export and in this way send a message to other suppliers and to the public that IKEA doesn’t accept child labor, but this legal alternative would drain the company to the access to Indian rug market. The child labor is deeply rooted in Indian culture and probably it would difficult to find a supplier who doesn’t use child labor. Maybe, IKEA would suffer higher cost (this would go again its bottom line to minimize costs to keep prices low) due to switching cost and...
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