REV: NOVEMBER 14, 2006
CHRISTOPHER A. BARTLETT VINCENT DESSAIN ANDERS SJÖMAN
IKEA’s Global 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 its response to the situation was “in the best interest of the child”—whatever that might imply. Finally, there were some who wondered if IKEA should not just leave this hornet’s nest. Indian rugs accounted for a tiny part of IKEA’s turnover, and to these observers, the time, cost, and reputation risk posed by continuing this product line seemed not worth the profit potential.
The Birth and Maturing of a Global Company1
To understand IKEA’s operations, one had to understand the philosophy and beliefs of its 70year-old founder, Ingvar Kamprad. Despite stepping down as CEO in 1986, almost a decade later, Kamprad retained the title of honorary chairman and was still very involved in the company’s activities. Yet perhaps even more powerful than his ongoing presence were his strongly held values and beliefs, which long ago had been deeply embedded in IKEA’s culture. Kamprad was 17 years old when he started the mail-order company he called IKEA, a name that combined his initials with those of his family farm, Elmtaryd, and parish, Agunnaryd, located in the ____________________________________________________________
Professor Christopher A. Bartlett, Executive Director of the HBS Europe Research Center Vincent Dessain, and Research Associate Anders Sjöman prepared this case. HBS cases are developed solely as the basis for class discussion. Certain details have been disguised. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2006 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.
IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor (A)
forests of southern Sweden. Working out of the family kitchen, he sold goods such as fountain pens, cigarette lighters, and binders he purchased from low-priced sources and then advertised in a newsletter to local shopkeepers. When...
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