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IKEA's Global Sourcing Team Case Analysis
Cross-Cultural Management (MGT 400)
Arizona State University
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IKEA’s Global Sourcing Challenge: Indian Rugs and Child
Labor Team Case Analysis
By: Bryce Jenkins, Nita Thirza, Julian Bauerle, Deborah Amuli, and Josh Jones
● How should Marianne Barner respond to the invitation for IKEA to have a representative
appear on the upcoming broadcast of the German video program?
The documentary made at Rangan Exports showing how one of IKEA’s largest suppliers performing child labor was clearly a threat to IKEA’s reputation. With more than 100 stores open in 1994, millions of dollars of sales would be affected by this negative publication about the company. IKEA has been working actively in combating every issue brought up by external parties, and for decades people have seen its commitment to create a better life for people. While an immediate answer for this documentary is critical, accepting the invitation to send a representative to the German video program will not be the wisest decision. Knowing the motive of the documentary maker, it is predicted that he has prepared some aggressive questions for IKEA and will try to push them in the corner. Furthermore, the fact that the German documenter was not willing to show the documentary beforehand shows that the purpose of this documentary was not to help companies to reflect and take action to the issue of child labor, but to create scandals. By sending a representative, it is possible for them to further elaborate their negative questions deeper and mislead the conversation to a position where IKEA’s image is left in bad shape. Therefore, it is recommended that IKEA would give an official answer shortly after the release of the documentary with the proof of contracts made between them and the suppliers that explicitly forbids the use of child labor. Adding to that, IKEA could also give an explanation about the actions they undertook in their pursuit to combat the issues of child labor in the production of furniture goods as a whole. Showing footage of their travel to India and meetings with unions, activists, NGO’s (Non- governmental organizations), the UN and carpet export organizations in an effort to educate themselves on the issues they were blindsided by.
poverty line would make it harder for IKEA to ensure child labor practice to be eliminated completely. Taking the words “in the best interest of the child” as a guideline for decision making, it is clear that with such a big company exiting the market, the number of unemployment and poverty rate would increase. While IKEA could have successfully saved their image as a company, no one could guarantee that those children won’t work for other companies. Finding a new supplier will require a whole new supply chain strategy as well as building new relationships that would take time and money. It is very important for IKEA to aim for a lower price, and moving the production to another country might result in higher production cost. On the other hand, continuing its operation in India would mean that they have to increase their supervision and management control. With the help from organizations such as Swedish Save the Children, UNICEF and ILO, IKEA could be a role model by sponsoring children’s education or other actions and take this as an opportunity to show corporate philanthropy while limiting community outrage over the company’s departure. As stated in the case, suppliers will mask their use of child laborers when parent companies are visiting. If IKEA wants to avoid a potential scandal in the future it must leave India altogether. While this goes against IKEA’s vision of using the most cost-effective suppliers, utilizing a more expensive supplier that is moral might be more cost-effective in the long run when accounting for the losses that scandals present and stays true to the image IKEA has built for the brand.
IKEA's Global Sourcing Team Case Analysis
Course: Cross-Cultural Management (MGT 400)
University: Arizona State University
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