IKEA’S GLOBAL SOURCING CHALLENGES Harvard Case Solution & Analysis

Problem Analysis

Marianne Barner became the business area manager for carpets in 1995. She started working with IKEA in 1993. IKEA, being the world’s largest retailer of furniture, faces many problems such as managing the supplies and the suppliers, growing retails and expanding abroad.

Most of the suppliers of IKEA are involved in child labor. IKEA has already taken serious action against its suppliers to stop the use of child labor under the age of 15 during work. IKEA works with NGOs and other child labor organizations to counter this problem. A year after identifying the issue with the social activist, IKEA received a notification from German television that they were going to air the documentary in which they would highlight the child labor issue done by IKEA’s rug supplier.

The problem faced by Barner was that she had to cut down the supplies of carpet, which were being manufactured in India. A German TV channel broad casted a report that showed the supplier of IKEA manufacturing carpets uses child labors.

A well regarded firm like IKEA could not sustain with such act. The company terminated the contract with the supplier on a short term notice; however it had to do something to remove the issue attached to such act.

How does the problem connect with the theory?

Child labor is asocial issue, which is highlighted by the social activist and other organizations by time to time. Increase in the child labor not only decreases the literacy rate of the country but it also increases injustice and poverty at same time.

One of the factors behind child labor is low wages earned by the parents due to which they cannot afford the cost of living for their children, as a result of which they take their children to the fields and other work places so that they can earn money to meet their daily life expenses. This can be linked with the theory of ethics of care.

The ethics of care theory include the decision making between the right or the wrong on the basis of morals. This also emphasizes on universal standards and impartiality. In addition, ethics of care focuses on the importance of response.(International Labour Office, 2004)

When IKEA found that in its supply chain work was being done by the children of ages less than 15 years in developing countries, the company took serious action against them and warned them about the cancelation of contracts. IKEA is working with different organizations to counter the Child labor issues. They visited the fields in India, Pakistan and other countries where they found the presence of child labor. IKEA also went to Geneva to look onto this issue.

During 1940s, Ingvar Kamprad founded IKEA when he was only 17 years old. The name of the company has the initials of its founder’s name and the farm and village he lived in. As the business grows, Kamprad faces different problems. The local manufacturers stopped supplying to IKEA which enabled the company to move abroad and start working from Poland.

The market soon became the largest with lower cost, which benefitted the company to reduce the prices. As of 1994, IKEA was having suppliers in 27 countries. Having a proactive strategy, IKEA still continues to innovate. During1980s, IKEAgot into a legislation problem in Denmark in which some of the products emitted formaldehyde. It is a chemical in binding glue that can cause watery eyes, headaches, and a burning sensation in the throat and difficulty in breathing.

In reaction with the problem, IKEA quickly took action to avoid the chemical however; suppliers were unable to complete the requirements. This led Tithe Company’s downfall of 20% sales. While still resolving the problem, a Swedish television documented against IKEA that their suppliers in India are manufacturing rugs and carpets by child labors. The firm was completely unaware of the problem and did not pay attention before this situation was broad casted on the news.

Nonetheless, a high profile company cannot just ignore the issue and move forward. Therefore, it had to do something to evacuate its profile from such problem..................

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