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Ikea's Global Sourcing Challenge: Indian Rugs and Child Labor

Essay by   •  May 8, 2012  •  Case Study  •  1,823 Words (8 Pages)  •  2,029 Views

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IKEA's Global Soucing Challenge:

Indian Rugs and Child Labor.

Introduction:

In order to understand IKEA operations it is necessary to understand how the company started to operate and its philosophy and beliefs since the beginning; "we study OM because we want to know how goods and services are produced" (Jay Haizer, 2011). Hence, IKEA started from scratch as a small company without a brick and mortar store and selling small items. Soon, Kamprad, IKEA's founder added furniture to the goods the company offered and stopped selling small items. Since the very beginning IKEA was concerned about its social responsibility and that become part of the DNA of the company. IKEA was well known for its self-assembly furniture and therefore the company used this feature as its main core competence.

IKEA has focused on differentiated products, this means that IKEA "distinguished the offering in a way that the customer perceives as adding value" (Jay Haizer, 2011) and on a costs strategy. The company has been a step forward all the time by implementing OM strategies. In 1953, the company introduced self-assembled furniture that not only represented savings to the customers but cost reductions to the company itself because transport and storage became cheaper.

Other of the OM concepts that IKEA has applied to its model has been Layout decisions; "layout establishes and organization's competitive priorities in regard to capacity, processes flexibility, and cost, as well as quality of work life, customer contact, and image". (Jay Haizer, 2011). IKEA decided to have a predesigned design inside its stores in order to maximize customers' exposure. Therefore the company, for instance, displays its living room interiors just after the entrance. IKEA has been one of the most relevant furniture companies at all the time worldwide. The case shows a challenge that the company faced with one of its supplier, the following questions had been answered in a way that pretend to give the very best solution for the company.

1. "How should Barner respond to the invitation for IKEA to have a representative appear on the upcoming broadcast?

Barner should participate in the program and under any circumstances should decline the invitation. It is obvious that the child labor inside Rangan Exports represents a complex problem for IKEA and therefore, it is imperative to face the situation, that's why Barner or any IKEA representative has to show up whenever the live discussion is going to be.

At this point, Barner knows about the intention of the German anchor about broadcasting the film but she doesn't know for sure what his approach would be. In fact, he refused to show her the actual film. However, it results clear that the documentary maker plans to be confrontational an aggressive, for this reason she has to be ready and has to prepare all the possible scenarios in order to give the very best answers.

First of all, once Barner is in the live discussion, she doesn't need to speak unless she is directly asked to do so. Second, she has to be sure to be very polite, able to cooperate and friendly at all the time, without taking into consideration how aggressive the documentary maker could be. Third, If it is pointed out that IKEA is violating the children rights, she has to be emphatic and clear that it has been IKEA's supplier the one that infringed these rights and that IKEA, as an international and social minded company, is fully aware of the relevance of this topic and for that reason they will spare no effort and money to fix the problem and to avoid issues like that in the future.

Finally, it is important that Barner shows and explains all the efforts IKEA has made so far in order to control, supervise and avoid children exploitation: 1) An IKEA's legal team was sent to Geneva to get advices regarding Child labor from the (ILO) International Labor Organization, she also has to explicit says that since then "IKEA added a clause to all supply contracts--a "black-and-white" clause, stating simply that if the supplier employed children under legal working age, the contract would be cancelled" (Christopher A. Bartlett, 2006). Matter of fact, Rangam Exports was part of the suppliers holding this contract. This fact has to be addressed in the television discussion; 2) IKEA hired a third party to monitor child labor in countries like India and Pakistan; 3) there has been a evident interest by IKEA to understand and fight against children labor, that's why the company has been in touch with Swedish Save the Children, Unicef, an ILO; 4) IKEA's managers traveled to India, Nepal and Pakistan to learn about children exploitation and to find solutions.

In summary, Barner or any IKEA representative should go to the live television discussion. IKEA has a long business and social history, has been a company that promulgates a good social environment and therefore needs to face any problem on the path. Barner definitely has brings all the information described above and it is very important that she shows herself as a confident, friendly, kind and responsible person.

2. "What actions should she take regarding the IKEA supply contract with Rangan

Exports?

She should cancel immediately the contract with Rangam Exports. There are several reasons why she should do so. First, there is a clause that states that as an IKEA's supplier Rangan wasn't supposed under any circumstances to use children to manufacture carpets. Since Rangan Exports failed to follow this rule, the contract with them has to be voided and of course, as a result

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