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Inhe added furniture to his newsletter and had an immediate success. Inthe Swedish company opened the first display store in order to reduce the return rate. The success of the store led Kamprad to stop accepting mail-orders to concentrate his efforts on opening stores: He thus concentrated all his efforts on trying to offer the best price of the industry so that more people can afford well designed furniture.
IKEA introduced on the market in the self-assembled furniture which permitted a reduction of costs that was transferred to the customers in getting lower prices. The company kept a few manufacturers who were often delivering during the night to avoid being seen.
That is the reason why IKEA had to look abroad for manufacturers because it Ikea global sourcing essay impossible to meet demand with their actual situation. Kamprad contracted with factories in Poland and he soon realized that is was even more profitable to do so. As he was reducing the costs, once again he reduced his prices.
Building long term relationships with manufacturer, IKEA brought his know-how in other countries to ensure a certain level of quality. Then, during the expansion of the stores and the propagation of the concept in many countries, the IKEA image and concept became formalized and uniformed.
IKEA has a distinctive way of managing people in an informal manner and constantly search for creative and cheap solution to keep the lowest prices possible. IKEA got involved in the elaboration of environmental plan for the company.
We must say that India is the biggest purchasing source for carpets and rugs. This is precisely where began the problem that IKEA have to face also in with Rangan Export, one of his major suppliers, situated in India.
Problem definition There are a few related problems to solve but the main problem that could join everything would be that IKEA is facing a problem of Child Labor with his suppliers of India and Pakistan, indicating a general challenge of global sourcing for the company.
First, the situation of IKEA about this subject is difficult since when a Swedish television declared that one of their suppliers in Pakistan was using children in their factories.
The company was unaware of this fact so they had to admit their ignorance and they declared that they would do something to solve the problem as fast as possible. The solution found for the problem of Child labor was to add a clause to the contracts with suppliers saying that if they were employing children under legal working age, the contract would be cancelled.
Now, to have a better idea of the situation of child labor in South Asia, we will make an overview of the major facts that IKEA as to take into account. From this number, if we take only those who work in the carpet industry, the number is of child.
In those countries, the children are even often used to help to pay the debts of their parents.
On the government side, sincewith the Children Act, bounded labor is illegal and then inthe law was reinforced with the Bounded Labour System Act. Also, inanother law is stated, which is the Child labor Act.
However, even if there is laws regulating the issue of child labor, the problem persist because there is no severe punishment related to offence. Moreover, the work of children in craft industries is permitted to allow the passage of specialized handicraft skills in a family.
In the carpet industry, to encourage firms to resolve the problem, the Rugmark Foundation is in charge of the supervision and the development of a label certifying that a carpet has been made without the use of child labor. This foundation expected to begin exporting the socially conscious carpets in and invited IKEA to sign up with them to help to solve the problem in India.
The implications for IKEA in this debate are that, in the decisions taken, the company has to considerate the impact on brand and image. Alternatives Ikea faces a few alternatives in order to solve this problem.
They could first try to deal with the child labor problem trough its relationships with his suppliers or let Rugmark in charge of monitoring child labor on its behalf. Since the problem is really deeply embedded in the culture of those countries, they could also withdraw form the rug market to avoid being associate to child labor or, as it is always an option, Ikea could choose the option to do nothing concerning this issue.
Evaluation of alternatives All the proposed alternatives brings out some pros and cons that will be described in the next paragraphs in order to choose the best option for Ikea in this situation. The first alternative, where Ikea would continue to try to deal with the child labor problem through its relationships with his suppliers is interesting because it allows Ikea to stay in the rug market without neglecting the child labor problem.
This alternative is the only one where Ikea try to do something to improve the children life conditions in those countries. They could work along with their suppliers to educate them towards the bad effect work on young children and aware them of the consequences of their actions. By doing that, Ikea could regain its popularity and erase the damages that all those controversies concerning child labor have done to the brand image.
The company has also always been concern about environmental and social issues and had never hesitate to take the appropriate measures improve their standards in those areas. On the other hand, to stay in the rug market and try to deal this issue with the suppliers can be unsafe for the company and its image because it is almost impossible to be totally sure that suppliers are not using child labor or that they will never do it in the future.IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor (A) Case Synopsis IKEA is a “privately held, international home products company that designs and sells ready-to-assemble furniture such as beds and desks, appliances and home accessories” (plombier-nemours.com).
IKEA S Global Sourcing Challenge Essay IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor Ikea is a multinational global leader in the home furnishing industry. Founded as a family enterprise in Sweden in , it now operates stores in 43 countries. IKEA Global Sourcing Case Study Essay Sample.
IKEA is being forced to make a difficult decision after a German documentary maker announced the prevalence of children working at looms at Rangan Exports, a major supplier of the furniture company. IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor Executive Summary Ingvar Kamprad founded IKEA in the early s and served as CEO until By the mids the company was the world’s largest specialized furniture retailer.
1. How should Marianne Barner respond to the invitation for IKEA to have a representative appear on the upcoming broadcast of the German video program? Ikea Global Sourcing Challenge Essay Words | 9 Pages.
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.