IKEA Global Sourcing Challenge

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IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor

Executive Summary
Ingvar Kamprad founded IKEA in the early 1950s and served as CEO until 1986. By the mid-1990s the company was the world’s largest specialized furniture retailer. Kamprad broke the mold of the traditional furniture maker and went outside of the Swedish furniture cartel. He built relationships with outside suppliers and forged a unique business model featuring exhibition retail displays highlighting a broad range of functional, affordable well-designed home furnishings that customers could purchase in flat packages to take home and assemble themselves. Kamprad established IKEA’s mission “to create a better everyday life for the many people” and executed that mission through a strategy of selling affordable, high-quality furniture to mass market consumers.

In 1994 a Swedish television documentary highlighted IKEA’s connections to a Pakistani carpet supplier who used child labor. Child labor was just emerging as a public issue at the time. Although IKEA was caught unawares by the problem, it responded quickly by seeking advice from international organizations involved in children’s rights and then adopting an anti-child labor policy implemented via a clause in all supply contracts that stated that IKEA would cancel any contract with any supplier who employed children. IKEA contracted with a third-party agency to monitor child labor practices at suppliers in India and Pakistan.

About a year after the Swedish TV documentary on child labor aired, Marianne Barner, IKEA’s business area manager for carpets learned that a German TV station would soon air an investigative report naming one of IKEA’s Indian rug suppliers as a major employer of child labor. The supplier in question had signed the agreement with IKEA not to use child labor on pain of termination of its contract. The story was breaking at a time when the issue of child labor was getting more attention in the media. Moreover,

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