Such department should be made a mix of the ForeignExpatriateand the local players both to keep the balance of understandingthestance, culture, values, working situation and other operation complexities effectively. Moreover, since the Rangan Exports is a huge supplier to the company, the company should revise the terms and conditions with thesupplier.
The company was founded in by Ingvar Kamprad and kept growing tremendously from 2 stores in to stores in to stores in in 24 countries welcoming a total of million visitors.
Its key feature of providing self-assembled furniture starting from significantly cut transport and storage costs. Besides its success stories, the company has faced environmental and social issues. The environmental issue in the early s was raised as IKEA products were proved to emit more Formaldehyde than was allowed by legislation.
The reason is that most of its suppliers bought from subsuppliers, who collected materials from glue manufacturers. Afterward, the company worked directly with glue companies and reduced the formaldehyde off-gassing in its products.
IKEA learned a lesson; publicity can bring a great loss in sales, not counting the damage to the brand image. In regard to social issues, the company confronted the child labor problem, which this paper mainly discusses about.
In the spring ofanother film is threaten to be shown on German television about children working at looms at Rangan Exports, a company used by IKEA and the producer then invited IKEA to send someone to take part in a live discussion during the airing of the program.
These events urged the company to consider environmental and social issues more seriously. Environmental and Social Issues: Cost of Globalization On the process of globalization, IKEA needs to get the cheapest supplies and therefore go to countries that offer cheap labor.
However, these developing countries such as India, Pakistan and Nepal are facing a lot of social issues about human rights. When IKEA set its foot in these countries, it could not avoid these problems. Its corporate strategy style partly exacerbates, instead of helps the situation.
IKEA realizes the challenge and questions itself how deeply the company wants to engage and to help eliminate local social issues of child labor. At the initial period, the way that IKEA dealt with Formaldehyde and forestry issues showed its engagement in social responsibility still remained at the reactive step but not yet at the proactive step or interactive step.
This inadequate engagement explains why the company keeps undergoing social and environmental issues pushed by the public. IKEA is outstanding at new ideas for marketing but the company is still passive in social responsibility action. To fix this weakness, IKEA needs to be more aware of social responsibility and potential upcoming social issues.
Moreover, those issues lead to a big damage to brand image. In the case the company confronts child labor issue and customers perceive that the low price they benefit is by child labor exploitation in India, customers will react by avoiding products from IKEA which results in a drop in sales.
However, if IKEA withdraws from India market, it will restrain itself from a big opportunity of cheap labor and put the company at disadvantage position as other competitors like Wal-Mart is accessing the same opportunities to compete for lower product prices.
IKEA therefore should not look for a new business opportunity by withdrawing from India but keep up with the trend and get ahead of the issue and its rivals. Some people may argue that if the company is actively involved with the issue, it may undergo a drop in profit compared to its competitors.
The threat may hold true in the short run. However, IKEA can turn the threat into an opportunity in the long run by actively involving and publicizing its achievement to let customers appreciate the effort. Afterward, IKEA will soon be better off, with better profit and better brand image.Rangan Exports Ikea s objective to develop long-term business partners is only possible if certain standards are met.
forever engraining the value of social responsibility in . IKEA 4 Introduction The dilemma that faced IKEA’s business manager for carpets Marianne Barner was significantly in terms of how a decision left up to her to cease business alliances or not based upon a breach of promise made by one of the of the company’s Indian rug manufactures (Rangan Exports) would affect the company’s .
IKEA can remove Rangan Exports as one of IKEA supplier by using the violation of child labor and look for another supplier that manufactured the same products as Rangan Exports with a reasonable price%(6).
The Alternative Responses Acts Ethical Dilemma Purpose Principle People Accept the invitation Rule-Based Thinking Terminate Rangan Exports contract End-Based Thinking Exit India Rugmark Solo Monitorship Care-Based Thinking End-Based Thinking 24 Source: the heart of Leadership, PLC , Ethics-Oklahoma State University-Student Union Ikea.
Transcript of IKEA Case Study. IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor Possible solutions The Problem MKT - Dr. Spencer Kamprad founded IKEA at the age of 17 in ' Introduced furniture to the product list in ' Rangan Exports, involved with child labor.
If the evidence of child labor being used at Rangan Exports is accurate, the supplier is in direct violation of IKEA’s no child labor clause. Barner has two clear alternative choices in dealing with this situation%(85).