Ikea Global Sourcing Challenge: Indian Rugs and Child Labor IKEA and Marianne Barner are facing a very challenging issue. Because they were blind sided by the child labor issues with their supplier, they had to scramble to respond to the issues in a quick and appropriate manner. IKEA sent a legal team to Geneva to seek input and advice from the International Labor Organization on how to deal with the problem and to find out more about the child labor issues. They also hired a third party agent to monitor child labor practices in India and Pakistan and to conduct random audits to ensure there were no children working. They had all their suppliers sign a legal document stating that if a supplier employed children under legal working …show more content…
Because their employees understand the culture they will be more comfortable in ambiguous situations and know how to choose the right decision and even if it is a difficult social or ethical decision they know the company will support them. IKEA also needs to teach employees to follow the business goals as well as the organization goals; they need to learn how to make sure they are tied together in the best possible way. Without the companies guidelines on code of conduct and possible limitations, the employee can end up being confused and not know how to make the best possible decisions. IKEA's corporate strategy comes directly from their vision statement "To create a better everyday life for the many people". There strategy was to provide a low cost product for their customer. In order to achieve this goal they had a management process that stressed simplicity and attention to detail, a willingness to assume responsibility and to help as evidenced by the formaldehyde and the child labor issues. Because of their willingness to admit fault, IKEA stepped up to the plate to try to monitor and maintain the relationship with their supplier. India is the largest purchasing source for carpets and rugs, because of this Barner did not initially feel she should just cancel the contract with the offending supplier. She researched the issue
Child labor is a serious problem that affects children from third-world countries all over the world. These children are exploited by multinational corporations ,for their cheap labor all over the world. People, then buy products that come at a cheaper price, from these multinational corporations.These children are often overworked and treated unfairly. People need to stop buying items from countries that endorse child labor.
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,
When the United States passed the bill that banned the importation of goods made by child labor, Americans thought that it was a victory for children in third world countries. What Americans neglected to consider was the possible negative side effects that the children were to face. Due to the ban, millions of children have lost their jobs and have been left to starve. Prohibiting theses imported materials is not an effective way to make the lives of working children better. When confronting the controversial issue of child labor, one needs to step into the shoes of the children, diminish child labor stereotypes, and focus on regulations and goals to improve working conditions.
This paper aims to demonstrate a detailed description of the elements of ‘IKEA’ company based on its famous name in the furniture industry.
IKEA is one of the largest multinational companies in the world dealing with several products. The company sells and designs furniture appliances and home accessories at an affordable price. Ikea has over three hundred stores worldwide enjoying the good name it has created for itself. While they are one of the most profitable furniture companies in the world there are significant challenges and threats that have been overcome and are still needed to be tackled.
4. What is IKEA’s strategy toward suppliers? How important is this strategy to IKEA’s success?
In PEST analysis, we will look into what will be affect by the business environment. It includes political environment, economical environment, social environment and technological environment.
The stores have restaurant, childcare facilities and plenty of parking. Customers can drop off their kids at the playroom and have delicious meal when they are tired. All of these not only provide customer with a comfortable shopping environment but also let them make an ‘IKEA trip’ and enjoy the fun of buying. Besides, IKEA’s distinctive show rooms help creating differentiation. Products are strategically placed in different small spaces like rooms which allow customers imaging this furniture in their own home. This makes everything looks more attractive.
To correctly represent the company’s interest during the broadcast, the representative should be briefed about the delicate points to touch on. The representative should state all the actions IKEA has taken to inform themselves, react, and respond to child labor within their supply chain. Back in 1994, IKEA was first aware of child labor in their sub-contracting suppliers through a Swedish television documentary showing children in Pakistan working at weaving looms. Pakistan was a large importer of IKEA carpets at the time. Since this moment of awareness, IKEA had been dealing with this issue
IKEA is the largest furniture chain in the world, and in 2011 the Swedish company operated over 270 stores in 25 countries. In 2011 IKEA sales soared to over $35 billion, or over 20% of the global furniture market. Most of its stuffs believed IKEA will massive growth throughout the world in the coming decade because IKEA could provide what customer wanted: good design, and good made contemporary furniture with an affordable price. In one word, IKEA’s global approach focuses on simplicity, attention to detail, cost consciousness, and responsiveness in every aspect of its operations and behavior. (Jones, 2013)
The problem was the company’s not paying attention to local needs and preferences. US market, IKEA’s management realized that a standardized product strategy should be flexible to respond to demands, and has adopted a more balanced strategic focus by giving priority to global and domestic concerns.The current approach emphasizes on global market coordination to reduce standardization of activities and acquire both economies of scale and scope. While overall its subsidiaries follow instructions from the corporate head office in Sweden, subsidiaries in the US are given more autonomy, to respond effectively to the local business
Global sourcing is an important sourcing strategy for IKEA Company. According to Hultman, Hertz and Johnsen (2012), in 2008, IKEA has 54 different sourcing countries and 30 purchasing departments which were located all over the world. With the expansion of its market, IKEA was not satisfied with selling its product only in domestic and Nordic market instead it put its higher goal in global market. Therefore the sourcing market also expanded with the growing market. There were 64% of its products were sourced from European countries which were mainly in eastern part like Czechoslovakia, Rumania and Hungary; China with a 22% share of the supply was the largest single supply market, and Poland with a 16% share (IKEA 2007). However, IKEA also trades off the cost of raw materials and cost of transportation, hence IKEA combined the Global sourcing with local sourcing strategy to lower the total cost.
At this point I believe it is critical that IKEA takes a bold stance against child labor to
IKEA does a lot of effort to implement their new company’s strategy for 2020, so called, Positive & Planet Positive Strategy. In spite of IKEA’s commitment to human rights, it is difficult for them to control their entire global supply chain. IKEA with other of retailers, were lighted on having suppliers in India which employ labor. However, IKEA declares that those proves were found in carpets producer from India from only four suppliers. (Max Ebnother, 2014)
The IKEA Group, one of the world’s top furniture retailers, has emerged as the fastest-growing furniture retailer in the US. Its unique business strategy has given it its strengths for its success today. However, like all strategies, IKEA’s strategy has its own flaws that can pose as weaknesses. IKEA also has a lot of opportunities in the marketplace such as expansions of their company and threats such as competitors in the same industry.