Ikea's Global Sourcing Challenge: Indian Rugs

The case “IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor (A)” is about IKEA’s development from a backyard company to one of the world’s largest furniture retailers, which has to deal with the issues of child labor and how they should behave considering economical issues and the company’s policy!

Conclusions made in this study are only based on the facts given in the case, considering pros and cons of an action.

How should Marianne Barner respond to the invitation for IKEA to have a representative appear on the upcoming broadcast of the German video program?

A live discussion would give IKEA the possibility to explain themselves and their intention concerning their engagement in India. Especially Marianne Barner could make her intentions clear as she is feeling that IKEA’s responsibility is much broader than just trying to abolish child labor by stopping business relationships with partners who employ children in their companies. This would provide IKEA a positive image and might strengthen their engagement.

As the Filmmaker just provided IKEA with several still shots taken from the movie, though the whole film was requested to be viewed, leaves too many unpredictable options that the cutting of the movie would provide an image which wouldn’t leave any space for explanations concerning IKEA's engagement in India but defending itself against accusation which might be made through the movie.

Movies have the power to suggest a certain image especially if negative scenes are shown. There for it is indispensable to IKEA to review the movie before attending the discussion. The refusal to show the movie to IKEA implicit shows that their intention is not to hear about IKEA’s engagement but having someone to blame. The discussion might have an aggressive and confrontational attitude towards IKEA for using a supplier, which employs children and suggesting IKEA a reckless company just caring about profit.

For these reasons I would suggest Marianne Barner not to attend the discussion but to release an official note which explains the refuse in participating in the discussion and includes a short agenda in IKEA’s engagement in India which might be linked to a webpage with further information concerning their plans and engagement in India.

What actions should she take regarding the IKEA supply contract with Rangan?

What long-term strategy would you suggest she take regarding IKEA’s continued operation in India? Should the company stay or should they exit?

IKEA aims for long-term relationships with its suppliers and also supports them in order to get a reliable but competitive supplier. The same attempt could be done in India as they did in Poland several years before. Of course at first sight it seems as if IKEA would risk to lose some of its reputation and sales power for continuing relationship with the Indian supplier but it would have an even more positive effect on its reputation if IKEA will maintain its connections and help them developing new systems, involving the public. Involving the public by marketing actions helps them to understand IKEA’s intentions so it won’t be misunderstood and will also have a marketing effect itself.

To continue their engagement would also match the company’s policy and Kamprad’s view “create a better everyday life for many people”. This was originally meant to insure affordable sales to customers but they also haven’t had the problem of child labor at that time. So by the time values change and should be extended to broader meanings. As it is a question of moral IKEA can also use this as a marketing strategy to bolster its image. Regarding the philosophy “in the best interest of the child” it is necessary to continue and even improve IKEA’s engagement in India. It is obvious that child labor is deeply implemented in India’s culture as many people are poor and a child’s loan is inevitable to ensure the life of the whole family. This shows that pulling out would not abolish child labor but threaten Indian people even more as a resource of earning money would disappear. In return a negative image could be established towards IKEA for not taking further actions in the Indian market.

Braking up relations with its supplier could cause tremendous