ikea supply chain case study

A) How should Marianne Barner respond to the invitation for IKEA to have a representative appear on the upcoming broadcast of the German video program? If Marianne Barner completely denied the request of attending the discussion, IKEA will presumably be viewed to be guilty and also aware of the child labor practices within Rangan Exports. Marianne Barner should respond by agreeing to send a representative for the discussion. This would provide the opportunity for IKEA to have their representative to clear up any questions and explain any problems in a manner that is in the best interest for the company.

The representative could discuss how IKEA has previously taken action during the company’s rapid expansion by getting involved with several different NGO’s like Greenpeace and WWF to continually address broader environmental concerns more directly. Also the representative can discuss how IKEA reached out to the International Labor Organization to establish their “black-and-white” clause to assure that they would only engage in business with suppliers who strictly abide by the labor laws of not employing children under the legal age.

In addition to agreeing to take part in the discussion, Marianne Barner should also personally organize a press conference and provide a speech or a clear message targeting their customers, suppliers, competitors, along with the general public. This statement should remind the viewer’s about the actions taken regarding the Swedish television documentary issue. IKEA presented a strong determination to solve this problem that rooted from their supplier’s subsuppliers and hired a well-known third-party agent to monitor these subsuppliers to assist IKEA with quality assurance programs, external monitoring, and random audits at the factories.

Marianne Barner’s statement to the public should promote their broad responsibility of not only terminating business contracts with suppliers who use child labor, but also make a difference in the lives of the children by “…always doing what is in the best interests of the child. ” (U. N. Convention on the Rights of the Child 1989 document). Barner’s statement will make it clear to the public that IKEA was not aware of this act and since learning about it, they are determined to make the necessary actions to resolve this issue with the supplier.

B) What actions should she take regarding the IKEA supply contract with Rangan Exports? Before taking any further action regarding the contract, Marianne Barner should thoroughly examine the situation. IKEA being a global organization and dealing with many suppliers in different countries, global sourcing can provide a lot of uncertainty regarding other countries cultures. By understanding India’s culture, governmental laws and regulations, and social communications, IKEA overcome this challenge of global sourcing.

Moreover, understanding the environment that Rangan Exports operates in, Marianne Barner could handle the situation with Rangan Exports in the best way possible. The case mentioned that the Indian government has a law in place prohibiting the use of child labor, but poorly enforces the law or regulates it. It would be a waste of time and money to approach the Indian government about strictly enforcing the law, and should instead provide Rangan Exports with reasons and understandings of the negative impact that child labor has to a child.

Barner should also make sure that she makes Rangan Exports aware of the issues regarding child labor by strategically tailoring her reasoning’s that are suitable for the Indian culture. This would make it easier for Barner to force Rangan Exports to avoid the use of child labor because they would have a better understanding. By educating Rangan Exports of IKEAS values and their production standards, it would build up loyalty and provide transparency to the supply chain. This increased visibility among the two parties will guarantee a long-term relationship.

Rangan Exports will be able to understand IKEA’s supply chain. IKEA’s efforts to sustaining an effective supplier relationship with Rangan Exports will also increase IKEA’s attractiveness to other potential suppliers and stakeholders as well. C) What long term strategy would you suggest she take regarding IKEA’s continued operation in India? Should the company stay or should it exit? (Be prepared to describe the impact of such decision and how you would manage it) To continue their operations in India for the long-term, IKEA must strategize accordingly.

IKEA must take into account the ramifications that child labor has to their company’s brand image which can severely hurt them in the long run. In order to effectively continue operations in India, IKEA should be stricter about informing their suppliers of the company value and mission and operate with a firm hand. They should make sure to take the necessary measures of ensuring that nobody will violate their contract and abide by the child labor laws by all means. To maintain their supplier’s compliance to these terms, they should also reform routinely audits to confirm that they are following the contract. Having these regular checkups to monitor their supplier’s performance would come at a cost to IKEA, but without them, IKEA’s brand image would be in danger and could weaken them against future public criticism. IKEA has already dealt with the Swedish television issue which lowered their sales by 20% in Denmark once the information went public, and now they currently face issues with the German documentary maker.

Getting any more negative publicity would reduce the amount of trust and ruin the company’s image substantially, especially after agreeing to discuss with the German video program and making a public service announcement. This could result in being costlier than implementing the long-term strategy stated earlier which is why it would be beneficial for IKEA to stay in India and continue their operations. IKEA must make sure that they have a strict system to ensure that their suppliers are being ethical and staying within the contractual agreement to prolong their operations.

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