FinalGlobalManagementStrategies
To: Marianne Barner (Business Area Manager for Carpets)
From: Alyssa Fukumoto
Date: 9/16/2014
Re: IKEA Global Sourcing Challenge
Marianne, I understand IKEA encountered an issue with Rangan Exports, one of IKEA’s major suppliers, being exposed as using child labor. This was after Rangan Exports had just signed a contract forbidding the use of child labor. The German television that aired the documentary did so in attempts to accuse child labor exploitation and tarnish the brand’s reputation. For IKEA, reputation is important and the negative publicity immediately impacted the financial health of the company as it dealt with public and regulatory pressures.
The use of child labor in some developing countries such as India remains a societal dilemma despite efforts to abolish child labor. Even with laws put in place to stop the practice, the laws were inadequately enforced and prosecution, if any, is rarely harsh. IKEA is faced with the challenge of keeping true to its social responsibility commitment and ensuring that its products are child labor free. This challenge affects their brand image. You must decide whether to discontinue the sourcing of carpets from India and other suppliers that are suspected of child labor exploitation, renew Rangan Exports with IKEA’s own monitoring program, or renew Rangan Exports with the Rugmark program.
IKEA has had in the past controlled environmental issues with the formaldehyde fiasco in the 1980’s. The first setback was with the IKEA products that emitted more formaldehyde than was allowed by legislation. The company quickly established strict requirements but soon found suppliers were failing to meet the standards. IKEA had to work directly with the glue-producing chemical companies and soon found ways to reduce formaldehyde off gassing in its products. Then IKEA’s best selling bookcase series was found to have higher emission than German legislation allowed. This was not due to the glue but to the lacquer on the
From: Alyssa Fukumoto
Date: 9/16/2014
Re: IKEA Global Sourcing Challenge
Marianne, I understand IKEA encountered an issue with Rangan Exports, one of IKEA’s major suppliers, being exposed as using child labor. This was after Rangan Exports had just signed a contract forbidding the use of child labor. The German television that aired the documentary did so in attempts to accuse child labor exploitation and tarnish the brand’s reputation. For IKEA, reputation is important and the negative publicity immediately impacted the financial health of the company as it dealt with public and regulatory pressures.
The use of child labor in some developing countries such as India remains a societal dilemma despite efforts to abolish child labor. Even with laws put in place to stop the practice, the laws were inadequately enforced and prosecution, if any, is rarely harsh. IKEA is faced with the challenge of keeping true to its social responsibility commitment and ensuring that its products are child labor free. This challenge affects their brand image. You must decide whether to discontinue the sourcing of carpets from India and other suppliers that are suspected of child labor exploitation, renew Rangan Exports with IKEA’s own monitoring program, or renew Rangan Exports with the Rugmark program.
IKEA has had in the past controlled environmental issues with the formaldehyde fiasco in the 1980’s. The first setback was with the IKEA products that emitted more formaldehyde than was allowed by legislation. The company quickly established strict requirements but soon found suppliers were failing to meet the standards. IKEA had to work directly with the glue-producing chemical companies and soon found ways to reduce formaldehyde off gassing in its products. Then IKEA’s best selling bookcase series was found to have higher emission than German legislation allowed. This was not due to the glue but to the lacquer on the