Ikea's Global Sourcing Challenge Case Analysis

Case Analysis 1: IKEA’s Global Sourcing Challenge

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

Barner should decline the invitation and not take part in the live discussion of their program. The idea of being able to plea their case to the public and educate all on their efforts to fight child labor is not all that terrible. The problem lies in that the producers of the program won’t allow IKEA to preview the show before it is broadcasted. At this point the program obviously “planned to take a confrontational and aggressive approach aimed directly at IKEA”. Therefore, IKEA would be misportrayed and thus adding more fuel to fire which is the complete opposite of what needs to be done.

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

Assuming that the evidence is accurate and does in fact prove that child labor is being used at Rangan Exports, then it is the supplier that is in direct violation of IKEA’s no child labor clause. At this point there are two options in dealing with the situation at hand.

Option one: Because the supplier breached their contract of the no child labor provision, this is legal grounds, as well as consistent to the policies IKEA has in place, for Barner to terminate the contract. The downfall to this option is that it could harm the supplier relationship that IKEA has which then could mean that they be cut off from having accesses to Indian rug sources. If their sources are cut off, then IKEA’s bottom line could potentially be impacted very badly.

Option two: Barner can give the supplier the stipulation to stop employing child labor and continue on with the contract. Essentially only giving them a warning or a slap on the wrist. This option allows IKEA to maintain its relations and not jeopardize them like option one. The downfall to this option is that it would make IKEA look hypocritical to its own policies. It also makes it seem as though IKEA, in a way, condones child labor. This could then really hurt IKEA’s reputation because of the potential negative publicity that would then follow – and again still hurt their bottom line.

With either option IKEA has the opportunity to educate the public and its suppliers on the hazards of child labor. However, option one would be the direction Barner/IKEA need to take. Option two sends the wrong message to the public and its suppliers, but most importantly it completely goes against their own policies and opens the door to unethical behavior charges. (Why have policies if you aren’t going to abide by them?) All in all, IKEA should immediately cut relations with Rangan Exports. They should also make this as public as possible by issuing a press release to announce its decision and why behind their decision. This would also be a great opportunity to publically show where they stand on child labor.

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