IKEAs Global Sourcing Challenge: Indian Rugs and Child Labor (A) Harvard Case Solution & Analysis

IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A

Identify major problems/themes

The case “IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A)” basically explains the issue which the company IKEA faces because of the increasing environmental and social issues with the suppliers. The problems identified and outlined in the case are all related to one another. The major problem faced by the company was firstly the environmental wake up with Formaldehyde emission by the suppliers of IKEA was found to be in excess of the allowed limit. This was the first issue where IKEA because of being a low cost manufacturer of furniture outsourced its manufacturing. The issue was identified by a German TV and the newspaper company that IKEA’s bookcase series Billy emitted higher amount of formaldehyde than the German legislation permission.

ikea child labor case solution

ikea child labor case solution

Another problem identified in the case is when IKEA faced the social wake up Child Labor issue were a Swedish television documentary identified that IKEA was involved in manufacturing rugs in Pakistan was using child labor to produce its rugs in India and Pakistan. The issue was raised publicly because child labor was banned internationally. IKEA had to face the issue because the rugs were being manufactured by the suppliers and the company was unaware of the fact that child labor was involved.

As discussed above both the issues are interrelated to the social and environmental factor where IKEA faced the issue because of the dependency on suppliers to manufacture low cost products. This is the main reason of the problem because IKEA was over relying on its suppliers and it did not keep a check and balance how they manufactured goods for the brand IKEA.

Identify potential solutions

To the above problem discussed in the case, IKEA can select out of the below possible solutions from which the company can make a recommendation for the future strategy.

  • Manage the relationship with suppliers
  • Give authority to Rug Mark to monitor the issue
  • Should the company withdraw its operations from India, Pakistan and Nepal

Decision Criteria

Decision Criteria

Manage the relationship with suppliers

Give authority to Rug mark to monitor the issue

Should the company withdraw

Improve Profitability

01

01

00

Maintain corporate image

00

00

01

Align it with the company mission

01

01

01

Increase Sales

01

00

01

Environmentally friendly

00

01

01

Score

03

03

04

Legend: 01: yes, 00: no

Evaluate Alternatives

Manage the relationship with suppliers:

If IKEA continues to manage the relationship with its suppliers and make them aligned with the company policies it will help in increasing the profitability for the company. It will also align itself with the company that is to offer customers with low cost products. Having a relationship with suppliers will help the company in maintaining the low cost attribute that has been associated with the company for a long period of time. This will also increase the sales because the general public comes to the IKEA store because it offers customers with cheaper ranged products. However, managing relationship with the suppliers will not support the company in maintaining the image of being environmentally friendly?

Give authority to Rug Mark to monitor the issue

By choosing to give authority to the Rug mark to monitor the issue, it will obviously increase the profitability of the company because this will develop the image of being an environmentally friendly company. Secondly the option will help the company to align itself with the company mission that is to offer customers a product that is manufactured with utmost quality and completeness along with innovative ideas. Having a Rug mark to monitor the issue the standards of being environmentally friendly will also be maintained.

Should the company withdraw?

The third option for the company is to withdraw its operations from South Asian countries such as India, Nepal and Pakistan. This will help the company IKEA in maintaining the corporate image, and it will also align the company with its mission of keeping itself as a company that does not sacrifice quality and social factors over sales. This will also increase sales because many customers are conscious of the fact that child labor is used therefore, they might prefer the idea of preventing from manufacturing goods through child labor..............

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Traces the response IKEA on TV report that its Indian carpet suppliers use child labor. Describes the growth of IKEA, including the importance of finding a strategy based on strong relationships with suppliers in developing countries. Details of the development of a strong culture and IKEA values, which include the obligation "to create a better everyday life for many people." Describes how to respond to regulatory and public pressure, IKEA developed a set of environmental policy, which has grown to encompass the relationship with Greenpeace and the WWF management and conservation. Then, in 1994, Marianne Barner, newly appointed product manager for IKEA, the Swedish surprises television documentary on the use of child labor, Indian suppliers of carpets, rugs, including that supply IKEA. She immediately implements a strict policy which provides for termination of the contract, if any IKEA supplier uses child labor. Barner then faced with a German television producer, who tells her that he is going to broadcast the trial program to document the use of child labor in one of the largest suppliers. How should it respond to the crisis? How the company has to deal with the ongoing problem of child labor in the supply chain? "Hide
by Christopher A. Bartlett, Vincent Dessain, Anders Sjoman Source: HBS Premier Case Collection 13 pages. Publication Date: May 3, 2006. Prod. # : 906414-PDF-ENG

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IKEAs Global Sourcing Challenge: Indian Rugs and Child Labor (A)

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