IKEA Global Sourcing Challenge Essay
IKEA Global Sourcing Challenge
In this case, it is known that IKEA’s procurement model is the mode of global sourcing. IKEA products are shipped to the 26 distribution centres from the trade area after procurement, and then delivered to the shopping malls in the world. IKEA’s procurement philosophy and assessment of suppliers mainly include four aspects: continuous price improvement; strict supplier performance and service levels; good quality and healthy products; and environmental and social responsibility (IKEA Sustainability Report 2011). In the aspect of social responsibility, IKEA does not accept child labour, but also actively prevents the use of child labour when its supplier Indian Rugs is revealed to use child labour (Bartlett et al., 2006).
All IKEA suppliers and subcontractors must comply with the special code of conduct on child labour “The IKEA Way on Preventing Child Labor”. The standard requires that all acts must be done to maximize the protection of the rights and interests of children (Motamed et al., 2010). The code of conduct and monitoring measures must be supplemented by the corresponding program to eliminate the root causes behind child labour. It is for these reasons, the IKEA Foundation actively supports UNICEF and Save the Children Relief Projects designed to protect the rights of children.
Key issues resulted in problems and analysis
In this case, the key cultural management issue is the corporate social responsibility. IKEA, the world’s largest furniture company has a fairly commendable corporate culture, and an important element of its containing: IWAY. In terms of IWAY, there are strict rules on the procurement of products, materials and services, particularly intolerance of IKEA’s suppliers using child labour or forced labour (Maon et al., 2007). Another prominent feature of it is committed to preventing corruption, fraud and illegal activities, and developing the “anti-corruption rules”. The business management researchers can analyse the business grow and even decline and fall from all angles. IKEA fortune in essence is supported by its corporate values. Otherwise, it cannot carry over in numerous fluctuations of economic cycles.
A sustainable development of enterprise is largely determined by the corporate culture. The quality of enterprise could also affect competitiveness. This is not an ideal question for entrepreneur, more than a philosophical question, but a question of competition in the market. In fact, almost all first-class entrepreneurs in the business process carry out first-class corporate culture operations. They use the values, philosophy to show a unique quality in business. And this kind of internal but critical competitiveness is the riche class and managers lack of.
In the production process, the trade office staffs will keep in contact with the IKEA suppliers, they can take an advantage by this opportunity to observe social and working conditions of suppliers and make efforts to prevent the use of child labour (IKEA Group, 2003). IKEA in the supplier organization encourages workers and subcontractors to discuss the problems they encounter every day. This approach strengthens IKEA’s understanding of the causes of child labour.
If IKEA finds child labour, it will require suppliers to take action based on the child’s best interests. The supplier must implement corrective and preventive action plans, including education and training aspects. IKEA will visit the children’s school, and carry out a surprised visit to suppliers. If the supplier does not take action on the scheduled date, or later there’s occurrence of the violations, IKEA will terminate all business relationships with the suppliers.
It can be seen that IKEA’s motivation emphasis on corporate social responsibility is closely related to commercial activities. Its primary motivation includes the legitimacy of the business, brand reputation, reduction in business risks, total quality management and marketing environmental analysis, especially the legitimacy of the business and reduction in business risks are becoming increasingly important.
In addition, the communication of corporate social responsibility is crucial. It can maintain the attractiveness of IKEA for a new generation of partners. IKEA hopes that the partners in dealing with corporate social responsibility can show independence, but the ability to realize this issue will have to depend on the employees’ management level (Maon and Swaen, 2006). Through this initiative, colleagues at all levels can increase the awareness of corporate social responsibility, so as to achieve the purpose of incentives.
Corporate social responsibility is developed since the 1990s, which is a turning point of corporate social responsibility. IKEA is also in accordance with some of the pressure in this community to adjust its operating way on the requirements of the enterprise. IKEA’s business is constructed in the price and quality environment and work environment (Maon et al., 2007). With regard to a supply and demand model of corporate social responsibility (CSR), it’s assumed that a firm’s size, level of diversification, research and development (R&D), advertising, government sales, consumer income, labour market conditions, and stage in the industry life cycle could estimate the firm’s standard of CSR (McWilliams and Siegel, 2001). IKEA as a large multinational Corporation with 26 distribution centres and emphasis on R&D and advertising hopes to establish long-term cooperative relationship with suppliers; looks for more partners who recognize the IKEA culture as the common value; and aim at its development (Maon and Swaen, 2006).
Respect for fundamental human rights and fair treatment of labour are the basic requirements for its suppliers. Therefore, child labour is absolutely not allowed. And the cooperation should be based on frankness and respect and it should be put into a gradual and long-term procedure. Under continuous pressure on price and sub-contractors from developing countries, IKEA is positive to face with the accusation of using child labour. It’s shown that how stakeholders can affect the improvement of CSR policies by showing their societal expectations, by publicly criticizing corporate behaviours considered as irresponsible or by building in a collaborative and constructive relationship with the company. This case study focuses on the CSR practices and communication by a complexity of the corporate decisions and it also reflects the public attitudes have played a key role in enhancing a company’s CSR construction (Maon and Swaen, 2006).
Bartlett, C. A., Dessain, V. & Sjoman, A., 2006, ‘IKEA’s Global Sourcing Challenge Indian Rugs and Child Labor’, Harvard Business School, 9-906-414.
IKEA Group, 2003, ‘IKEA: Social and environmental responsibility report’, viewed 1 May2012, .
IKEA Group, September 1, 2010 – August 31, 2011, ‘IKEA Sustainability Report 2011’, IKEA, viewed 1 May2012, .
Maon, F., Swaen, V. and Lindgreen, A. 2007, ‘Corporate Social Responsibility at IKEA: commitment and communication’, Research Memorandum, F Maon, V Swaen, A Lindgreen.
Maon, F. & Swaen, V. 2006, ‘Integration and communication of CSR principles by IKEA: an analysis of the influence of and on external stakeholders’, LGA Working Paper, Louvain School of Management.
McWilliams, A. & Siegel, D. 2001, ‘Corporate social responsibility: A theory of the firm perspective’, Academy of Management Review, 26(1), p.117-127, viewed 1 May2012, .
Motamed, M., Ozhusrev, N. & Pena, G. 2010, ‘IKEA and the Child Labor Challenge’, BAHR 509 – Group Project Paper.