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IKEA Global Sourcing Essay

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? a. Marianne Barner, business manager for IKEA’s carpets, should respond with a firm “no” to the invitation. Barlett, Dessain, & Sjöman (2006) stated that the German video program would only bring detriment to the company, rather than relief or support for the issue at hand. In comparison to the Swedish program, which did not target a specific company, this German-produced program planned to take a confrontational and aggressive approach targeted directly at IKEA and one of its suppliers (Barlett, Dessain, & Sjöman (2006). Moreover, Germany currently brings in the most sales for IKEA with $10.4 and 29.7% (Barlett, Dessain, & Sjöman (2006). Since Marianne Barner’s goal was to stop the issue, accepting this invitation would only bring fuel to the fire.

2. What actions should she take regarding the IKEA supply contract with Rangan Exports? a. Marianne Barner knew that IKEA must take on this issue and sign up to an industry-wide response to growing concerns about child labor in the Indian Carpet industry (Barlett, Dessain, & Sjöman (2006). It would be in IKEA’s best interest to force Rangan Exports to comply with the addendum which explicitly forbade the use of child labor on pain of termination (Barlett, Dessain, & Sjöman (2006). Rangan Exports is one of IKEA’s major suppliers, so cutting them off would cost them millions of dollars and hurt sales. Because IKEA began addressing this issue in 1994, there should be policies set in place for termination of suppliers that decide they don’t want to comply with said addendum. Marianne’s ideal solution would entail IKEA figuring out a way to keep its contract with Rangan Exports while making sure children were no longer working at the looms.

3. What long-term strategy would you suggest she take regarding IKEA’s continued operation in India? Should the company stay or should it exit? (Be prepared to describe the impact of such a decision and how you would manage it.) a. Marianne Barner knew that the long-term strategies for IKEA would need to make differences in the lives of the children and taking a very proactive stand (Barlett, Dessain, & Sjöman (2006). Many others within the company felt that this proactive stance would put IKEA at a significant cost disadvantage to its competitors (Barlett, Dessain, & Sjöman (2006).

Getting involved with Rugmark or Save the Children would be the great long-term strategies for Barner and IKEA. Also, continuing to stay active and semi-micro-managing its manufacturing plants in India would provide IKEA with results and knowledge. Visiting the plants often, unannounced, might scare away some manufacturers, but that is the cost that must be paid if IKEA wants to avoid child labor issues. The company should stay and source from India because the people need jobs and money. Additionally, since India is the biggest purchasing source for carpets and rugs, exiting from the country would result in major losses (Barlett, Dessain, & Sjöman (2006).

4. For those recommending that IKEA continue to source carpets in India, would you suggest that she: a. Continue IKEA’s own monitoring and control processes or sign-up to Rugmark? i. Although maintaining a monitoring and control process is imperative for IKEA, the sign-up to Rugmark would results in more sales. Rugmark, a recently initiated industry response to the child labor problem in the Indian carpet industry, certifies whether a carpet was made with or without the use of child labor (Barlett, Dessain, & Sjöman (2006). IKEA was invited to sign up with Rugmark as a way of dealing with its ongoing potential problem for child labor problems on products from India (Barlett, Dessain, & Sjöman (2006). This would be the better solution because this creates a level of transparency for the consumers and IKEA.

Seeing the Rugmark label on a carpet or rug would communicate that IKEA was not dealing with child labor anymore and that these products wouldn’t conflict with their consumers’ morals and beliefs. Thus, the consumers would become aware and make more purchases based upon this new visible label. b. Continue to focus only on eliminating the use of child labor in IKEA’s supply chain or engage in broader action to address the root causes of child labor as Save the Children is urging? i. Eliminating the use of child labor in IKEA’s supply chain is necessary for the company’s success, but only focusing on this matter will be wasteful of time and money. There are many other issues that arise whilst focusing on the issue of child labor.

Engaging in a broader action addressing the root causes of child labor and teaming with Save the Children would expand IKEA’s public interests and fix more issues. Doing what’s best for the children will include the issue of child labor, so broadening its actions will also broaden its efforts and results. However, Barner realized that the more she learned about the issue, the more complex the situation became (Barlett, Dessain, & Sjöman (2006). Therefore, engaging in efforts to do what’s ultimately best for the child would simplify the issues. Barner also stated that the Swedish Save the Children’s expert taught IKEA much about the issue and emphasized that they must do what’s in the best interests of the child (Barlett, Dessain, & Sjöman (2006). Since the Save the Children is such a large organization, getting to the root of the problems IKEA face on a daily basis will be slightly easier than doing it on its own.

References
Barlett, C., Dessain, V. & Sjöman, A. (2006). Ikea’s global sourcing challenge: Indian rugs and child labor. Harvard Business School. Retrieved from
https://learn.unt.edu/bbcswebdav/pid-338330-dt-content-rid-1517326_1/courses/MDSE_4660_001_11235W2/IKEA%27s%20Global%20Sourcing%20Challenge%20-%20Indian%20Rugs%20and%20Child%20Labor.pdf


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