Defining the Problem
Our client Marianne Barner, Business Area Manager for Carpets for IKEA is faced with a
renewed accusation of child labor exploitation in part from a German documentary
producer. The challenge IKEA faces with the regard to child labor is affecting their brand
image, and IKEA needs to act immediately. IKEA has been informed that a German
television station intends to broadcast a documentary that implicates Rangan Exports of
child labor exploitation.
The producer has provided pictures as evidence of child labor and has invited IKEA to
comment. IKEA has, in the past, controlled environmental issues in a steadfast manner
dating back to the formaldehyde fiasco in the 1980s.
Rangan Exports has been one of IKEAs major suppliers of rugs/carpets for many years in
India. In the given the circumstances, and IKEAs relationship with Rangan Exports, it is
necessary for IKEA to respond. These circumstances impose a big threat for Marianne
Barner success in IKEA. She must decide on the following strategic solutions to resolve
this external social ethical issue:
1. Discontinue the sourcing of carpets from India and other suppliers from Southeast Asia,
whom are susceptible of child labor exploitation.
2. Renew supplier relation with Rangan Exports, with IKEAs own monitoring program
3. Renew supplier relation with Rangan Exports, with Rugmark program
Possible Strategic Solutions
1. Discontinue the sourcing of rugs from India. This is a short-term strategy to remove
IKEA
from current situation.
PROS:
– It immediately removes IKEA from the accusation of child labor.
– Terminating all rug suppliers in India realizing that their efforts to avoid child labor
practices from their suppliers are a systematic problem plaguing the Southeast Asian
region of the world. Since rug presents a tiny part of IKEA, the loss will be minimal.
– It can save IKEA additional compliance costs to remove suppliers that participate in child
labor exploitation.
CONS:
– Rug is not the only product that IKEA imports from India. This decision will create a bad
precedent for other products.
– Potentially losing carpet sector of IKEAs business, because IKEA cannot maintain the
low price of carpets after terminating the low cost suppliers in India.
– This solution entails a willful abandonment of a key cornerstone for IKEA success, that is
IKEA takes responsibility. IKEA does not walk away, and leave the problem behind.
– While looking for other low cost supplier, there is a chance that IKEA will run into the
