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IKEA's Global Sourcing Challenge- Indian Rugs and Child Labor (A) Case Solution
IKEA recital reflects a story of success of an individual starting off from the backyard to the biggest retailer of furniture in the world. IKEA has the story of success was backed up with continuous strides towards improvement and its people oriented approach and cultural values. IKEA, within these strides came under consideration of violating ethics and laws as they were found guilty on various occasions; for instance, usage of glue causing, emission of hazardous gas, where, IKEA decided to work with suppliers. Other time, they were caught usage of dangerous wood, where IKEA signed agreements with usage of different woods. This time, they were found guilty of dealing with products that were made with the participation of child labour. IKEA was notified before with child labour issue in Pakistan. Although, this time IKEA was called up by on television to defend them. IKEA is faced with the decision either to appear at the program, defend issue as part of internal problem; moreover, how to deal with Rangan issue of contract violation. Last, but, not the least, how should it deal with the issue of child labour.
Following questions are answered in this case study solution:
IKEA s Global Sourcing Challenge Indian Rugs and Child Labor A Case Analysis
1. First option
Firstly, the organization is faced whether to make this issue an internal problem and deal with this issue by themselves. There are certain pros and cons with making it an internal issue.
To start with, this was a violation done on behalf of supplier; it means that the retailer was not directly involved. If the company makes it an internal issue, German TV program, which already is targeting IKEA, will get more juice to extract and present problems for IKEA. Other way round, Rangan is a major supplier, business to business relations are a long term and dependent on each other, so IKEA also carries a bargaining power. With this bargaining power, IKEA can make them do certain acts or working on their child labour policy.
If the company is making it an internal issue, IKEA can be a direct victim of the whole campaign that can result in huge losses. Being an internal problem, it will get more control over the situation.
2. Second option
Secondly, IKEA is faced with the decision whether to defend their stance or leave it on Rugmark.
This German TV program seems to take a very aggressive approach on violation of promises and it’s directly targeting IKEA. If they won’t be attending the show, it will be very hard for the organization to put forth their point of view as the breach was from a supplier, not directly from IKEA. Secondly, if IKEA was attacked directly as a guilty party, it’s their own issue, and IKEA should defend their own issue not leaving on others.
Putting the issue on Rugmark will allow IKEA to focus on their core business, not directly getting involved in controversies. Since Rugmark specialize in these issues, it can handle this problem quite effectively.
3. Third option
Third option is, to blame developing countries and back off from supplier.
Just giving up and running away can cost the company with short term and long term losses. With this approach, company will get a name of credibility and strict rules and policy follower with high ethical and moral values. Backing off will result in positive media campaign and perceptions about IKEA, especially in programs. This can enhance their marketing and corporate social responsibility efforts.
Other way, it will lose a major supplier, and it takes time to build a long term business to business relation. Leaving suppliers can result in the short term losses, and also long term, since the developing countries have cheap labour and raw material. This can cause major deviation from its aim of providing low cost furniture to its customers.
There is no reason for IKEA to leave one of their major suppliers that can result in huge losses. Public Relation campaigns from both parties can cover over these issues, by providing upon the action plan to stakeholders. It should not just put Rugmark to deal with the issue; IKEA has been targeted directly, so IKEA should respond making it an internal issue. In other words IKEA should deal it internally in relation with stakeholders (IT MEANS AVAIL OPTION 1). They should attend the TV program and present their plans to deal with the situation (AS ITS THIR INTERNAL ISSUE AND PART OF PRESS RELEASE RELATING TO ACTION PLAN, ITS NOT WITHIN 3 OPTIONS). One thinks that in business to business relations, businesses always consider a win-win situation. In one’s view, business to business relations are highly characterized with acme level of dependency and heed for relation building. As a result, backing off of IKEA can hurt both stakeholders. IKEA can suffer short term and long term losses, while, Rangan can be a black listed supplier. (REASON BEING, IKEA WILL INVEST TIME AND MONEY IN FINDING SUPPLIERS. WHILE, RANGAN CAN BE BLACK LISTED OR SANCTIONS CAN BE APPLIED, EVEN OPERATION ABONDONED). IKEA should educate Rangan with the potential threats. Being a major supplier, and because of current situation, IKEA carries a huge bargaining power. IKEA can discuss this issue and situation with Rangan; where Rangan can ensure enforcement of child labour policies through press conference and public apology. IKEA should advise Rangan to hold a press conference declaring it to be a major issue, with a public apology and ensuring the implementation of child labour policy.
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