IKEA Case Study.docx

Please download to get full document.

View again

of 6
All materials on our website are shared by users. If you have any questions about copyright issues, please report us to resolve them. We are always happy to assist you.
Information Report



Views: 8 | Pages: 6

Extension: DOCX | Download: 0

Related documents
Calvin White MBA 615DE_16FA Mr. Ingvar Kamprad is the fuel behind the global success of IKEA, his matured mail order company that he started nearly half a century ago. His business model was to create a better life for the many people and to provide a substantial amount of resources to a larger part of the population by keeping costs down and removing the cartel of furniture manufacturers from the industry (not directly). By 1994 IKEA had expanded to 114 stores globally, and with th
  Calvin White MBA 615DE_16FA Mr. Ingvar Kamprad is the fuel behind the global success of IKEA, his matured mail order company that he started nearly half a century ago. His business model was to create a  better life for the many people and to provide a substantial amount of resources to a larger part of the population by keeping costs down and removing the cartel of furniture manufacturers from the industry not directly!. y #$$% IKEA had e&panded to ##% stores globally, and with that came the need for a highly efficient supply chain. IKEA does not own its means of production but rather a close relationship with its suppliers, to the point that IKEA will commit to doing all they can to ensure their suppliers stay competitive. 'his was great for the first few decades but as the retail chain reached ()** suppliers in +* different countries it began to be plagued by commercial issues. In order to monitor all the suppliers and products IKEA maintained (% trading and servicing offices in #$ countries to monitor production, new product ideas, prices and uality. 'hat much of a gap in servicing offices vs. suppliers resulted in environmental and social issues that hurt the bottom line and reputation of IKEA. -ne of the biggest challenges was child labor a common practice in India, /akistan, and 0epal, was being used to create rugs for 1angan E&ports, one of IKEA2s main suppliers in India. Approaching the issue of 3hild 4abor 'he history behind child labor in India is foggy at best, and there is not much data on how many children is part of the labor pool. In India children as young as five years old are working in agriculture, mining, uarrying, and manufacturing. 'he manufacturing industry includes looms for the carpet industry that IKEA is involved in. 'he children are often bonded,  placed in servitude to pay off a debt of the parents. Although the amount owed often ranges  Calvin White MBA 615DE_16FA  between 5)* and 5)**, it takes years for this to be paid off because of high interest rates and very low wages offered to children. 'he issue in India is that lawmakers did take a stance with  bonded child labor but it was not as absolute with unbonded child labor. 'he industry in India could continue to use child labor because the government had said that the children could work alongside the parents in order to not outlaw the passage of speciali6ed handicraft skills from generation to generation. 4eaving India all together it would further deprive those parents and children income needed to get out of debt and poverty. 'here are a couple of paths IKEA can take on this issue creating an education program for the children to attend while their parents worked paid for by the profits of the rugs!. Another option is to work with 1angan E&ports directly in con7unction with 1ugmark to help remove child labor from their suppliers and to be completely transparent about it with the host country. 'he first option I think is the better of the two because it allows the children to pay it forward and e&ceed the e&pectations of their society.8erman 9ocumentary media invitation Ms. arner should not accept the invitation to the upcoming broadcast of the 8erman video documentary on child labor because IKEA hired a third party monitoring service that was detailed to watch out for this sort of thing following the /akistan incident. 'he 8erman video  producer is not out to set the record straight as evidenced by the fact that he refused to send the video for IKEA to review. 'herefore, I believe they are out to be aggressive and confrontational about child labor, 1angan E&ports, and IKEA and it could end up being more disastrous in the long run for IKEA. However, Ms. arner should release a statement to the masses that they are taking the use of child labor very seriously, and IKEA2s culture and 3E- have instilled a very  Calvin White MBA 615DE_16FA high sense of moral duty for all those that work for IKEA. :e will strive to end child labor and  provide a life for those families in need.1angan E&portsIKEA should stay with 1angan e&ports for a myriad of reasons the most important being that Ingvar Kamprand believed that IKEA2s vision is to ;create a better everyday life for the many people<. How could IKEA walk away from being in a position to help stop child labor and  provide a better life for those who are working and providing the rugs that IKEA has been selling= IKEA also developed another principle that allowed it to keep close relationships with all of its suppliers beyond the contracts and technology transfer. It allowed suppliers to use loans at reasonable rates, repayable through future shipments. 'hey want long term business partners and that are able to be competitive in the long run. IKEA can easily provide the same services! or types of services as it did in /oland in the #$>*s. 3hild labor is deeply imbedded in India2s culture as many of its citi6ens are poor and with debts incurred it is inevitable for child labor to e&ist for the families to survive. If IKEA were to leave a lot more poverty and livelihoods of those families would falter and fade away. 'his action alone would damage IKEA2s reputation much more deeply than 7ust having the documentary released. 'his whole situation will hurt the reputation of IKEA but with proper planning and transparency with the public either through media or directly to consumers! it can curb the damage that could have happened. 0ot to mention if you get the public involved in trying to help by donating, it could help IKEA with ending child labor. 'o ensure that the future of 1angan E&ports and the highly valued reputation of IKEA areupheld, arner should implement a process IKEA controls that monitors the entire process from  Calvin White MBA 615DE_16FA raw materials to finished product. Although this will take time to implement and IKEA would need to hire more workers, thankfully there is already a program that was recently started called 1ugmark. It was started by human rights organi6ations, consumer activists, and trade unions in 8ermany in the early #$$*s. 'he Indo?8erman E&port /romotion council 7oined up with key carpet manufactures and e&porters in India to develop a label certifying that the hand?knotted carpets were made without the use of child labor. IKEA should accept the invited from the council and participate heavily in this program until IKEA can create an additional monitoring  program of its own. 3ourse of ActionIKEA had an issue in /akistan with child labor before it became a much larger social issue. In #$@$ the .0 passed the 3onvention on the 1ights of the 3hild that was ratified by #(* countries e&cluding India, 0epal, and /akistan!, and its principles were developed by Bwedish Bave the 3hildren foundation where they follow ;the best interest of the child<. :hen the story  broke in #$$% IKEA sent a legal team over to 8eneva to seek input and advice on how to deal with the problem following that inuiry a clause was added to all supply contracts that stated if the supplier employed children under legal working age, the contract would be cancelled. Although this was a smart move legally, it did not really follow Ingvar2s vision of helping  people. However, it was a step in the right direction to help motivate suppliers in ending the use of child labor so they could continue to prosper under the contracts with IKEA. arner also contacted 0I3EC, Bwedish save the 3hildren, and the I4- to e&pand understanding and advice about why child labor e&isted especially in Bouth Asia. All this being said arner and IKEA took steps to curb any future issues, but in my opinion they did not go far enough. 'he rug import
We Need Your Support
Thank you for visiting our website and your interest in our free products and services. We are nonprofit website to share and download documents. To the running of this website, we need your help to support us.

Thanks to everyone for your continued support.

No, Thanks