IKEA’s Global Challenges: Indian Rugs and child labor Harvard Case Solution & Analysis

 IKEA’s Global Challenges: Indian Rugs and child labor  Case Solution

Introduction:

IKEA Company was founded in 1943 by Ingvar  Kamprad. The company initially produced pens, lighters, and binders; but in 1948, the company added furniture in its business product line. The immediate success in the new line led the company to give up on other items . IKEA became the leading global furniture retailer with a successful business model of selling high quality products to its customers with affordable furniture prices. The sales of the company were increasing, so the company decided to expand its business all over the world and achieve more profit. At the meantime, in order to support the sustainable expansion,the reliable supply chain became very important for IKEA. The company supports its supplies by establishing long-term relationships and working actively with its 2300 suppliers in 70 countries.

ikea child labor case solution

ikea child labor case solution

Problem statement

One of the big challenges faced by IKEA in mid 1990 was the use of the child labor, which is quite common in the some South Asian countries like India, Pakistan, Bangladesh, and Nepal, IKEA”s suppliers used child labor in their operations and when it was reported by media,it greatly affected the sales of the company. Since the company was the world’s largest furniture retailer, most of the people shared the common view that these type of the companies only focus on the earning profit, this had an adverse effect on the image of the company. Sales is not only the factor that can create the value of the company,but, the reputation is also an important factor in creating a company’s value. Therefore,IKEA’s reputation was damaged because one its supplier used child labors in its operations.

Polices made by Marianne Barner

IKEA faced this problem because Indian suppliers were using child labor in their operations.This had an effect on the sales and the reputation of the company. In order to face this problem effectively, the company appointed Marianne Barner in 1994, she made strict policies and immediately implement them in order to face this problem.

The 1st step she took to resolve this issue was that Barner recalled the shock waves that the TV program sent through the company.At. that time, child labor was not the high profile public issue so the media took attention from this TV program as the program was about providing awareness on the topic of child labor. The main reason for IKEA to do this TV program was to apologize for its ignorance,acknowledgement of its mistake and to make a commitment to do something about it.

Along with that,since India was the biggest purchasing source for carpets and rugs, the company made a contract with UNICEF and ILO to save the children and expand understanding and awareness on the issue of child labor, especially in South Asian countries.

International Child Labor (ILO) sent a legal team to these countries, which provided knowledge to the suppliers that they will take legal action if any company used child labor in its business operation. In addition to this, the company made a contract with its suppliers that if any supplier employed children under the legal working age, then their contract would be cancelled.

After taking these actions, Barner personally traveled to India, Pakistan, and Nepal in order to learn more about this issue. Barner met with IKEA’s suppliers and saw that child labor was working in the factories, she also met with unions, politicians, NGOs, and carpet export organization.She then found the Rug mark foundation as a response to the child labor problem in India. However,the problem with Rugmark foundation was that it was only able to monitor small investment but was unable to monitor the whole market in order to control child labor problem........................

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IKEA’s Global Challenges: Indian Rugs and child labor

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