Ikea's Global Sourcing Challenge: Indian Rugs and Child Labor - Essay Example

?CASE STUDY: IKEA’S GLOBAL SOURCING CHALLENGE: INDIAN RUGS AND CHILD LABOR (A) PROBLEMS FACED BY IKEA IKEA a global furniture retailer had to sign a decision for cutting off one of the company’s major supplier of Indian rugs. This decision was based on an investigative report presented by German TV which showed the use of child labor by the supplier. IKEA had an addendum signed with the supplier explicitly forbidding them from using child labor for production. IKEA being a global retailer in the furniture market was forced by the NGO’s and other associations for stopping the use of children in producing such products. The goals and vision of the company shows the reason behind the measures which it took and how it apologized to its customers for its ignorance of the issue of child labor (Bartlett, Dessain, and Sjoman, 1-12). COMPREHENSIVE ANALYSIS Child labor has always been the focus of attention for different NGO’s. The retailers and other businesses associate themselves with producers working in the developing countries so that the cost of production can be reduced. The producers operating in such areas do not follow the laws or protect the rights of the children. The development of IKEA exhibits the sheer hard work of its founder. From a small mail order organization the company developed into a global retailer over the years. The company set some basic sourcing principles and outsourced its production processes for meeting the demand. This also allowed IKEA in reducing the cost of the products and expanding their sales prominently. IKEA also took continuous measure for expanding the business. With the evolving business the culture and the values of the business expanded. This developed strong ground for the business allowing it to expand in different industries. The management emphasized on simplicity and focused on paying attention to the minor details (Bartlett, Dessain, and Sjoman, 1-12). The success of the business led the ideology towards addressing the environmental and the societal issues. The environmental measures for using the chemicals like Formaldehyde were stopped so that more efficient systems could be developed. This protected the environment and was also beneficial to the natural habitat. While dealing with the problems the business faced a social wake up about the problems associated to the child labor. The shockwave of this problem created hurdles for the business. Facing this problem and understanding that India, Pakistan and Nepal were not the signatories of this clause the business added a new clause in the supply contract. This stopped the suppliers from using labor for the production of goods. This type of monitoring was difficult so services of a Scandinavian company were hired for the purpose of quality assurance. The early lesson associated to the organization was that deeply imbedded to the problem the management had to take actions for the process. Different NGO’s, UN organizations and the carpet export organizations took measures for highlighting such issues so that the problems could be dealt with. While the organization was on the verge of dealing with this problem the business realized that a new issue took place. The German television made an investigative documentary which showed that Rangan exports one of the major suppliers of IKEA as using child labor for the production process. This created new problems for the company as it was the only company amongst the large retailers facing such problem. From the suggestions the company acted in cutting off the deal with the supplier. The measures which were analyzed showed that IKEA apologized to the industry and its customers for its ignorance and failing to acknowledge that they were unaware of the fact. This showed the social responsiveness of the business and prescribed that the organization gives heed to the social issues even at the opportunity cost of business profits (Bartlett, Dessain, and Sjoman, 1-12). The summary of the testaments which the business has made for defining the core values of the business shows the vision statements of the organization. In this testament the business has ensured to taking the measures which enhance the business performance and its core values. Few points of the testaments which form the vision of the company are following SUMMARY OF IKEA VISION 1. The product range (Identity) The design and the structure which the business has promised in its products are based on the low prices so that a wide range of customers can benefit from such products. 2. Spirit of the business Enthusiastically and responsibly promoting the products for promoting the tasks with simplicity. 3. Profits of the business gives resources By offering low priced, quality products through economic development of the products will improve the purchasing process and save the cost. 4. Reaching good results Wastage is a sin and hence optimum use of the available resources is made. 5. Virtue of simplicity Complexly regulating the internal processes the organization enhances its approach towards dealing with the problems. 6. Differentiating the processes IKEA operated from a small village located in the woods. Utilizing the seasonal industries and its resources which are left idle the firm acquires cost advantage and operates the thing in a different way. 7. Own the process for ensuring responsibility The ideology of IKEA is to strive at what they do and perform with the best results. 8. Taking responsibility Own the mistakes which have been made and improve the process for the future growth of the organization. 9. Looking ahead for a glorious future IKEA always see itself as being at the beginning and it sees to grow with a glorious and bright future. The measures which IKEA took were based on the UN convention on the rights of the child, Article 32 (Bartlett, Dessain, and Sjoman, 1-12). This includes that the rights of the children must be protected from all sorts of economic exploitation. This law protects the rights of the children from any sort of damage on the physical, mental or spiritual health of the children which relates to the social development. This law proposed by the UN enforces the social and the administrative measures by providing a minimum age of admission to employment. This also provides the hours and the conditions of the employment. One of the clauses from the vision of IKEA is protecting the environmental and social hazards which the business faces. IKEA had signed an addendum agreement with the suppliers that they will refrain from using the children for labor. This issue showed discrepancies of the business as they overlooked this fact and were ignorant about the practices which the suppliers were using. Acknowledging this mistake IKEA showed that it can bear little damage to the operations but it can’t risk on the value and the vision which the company works on. RECOMMENDATIONS The recommendations for IKEA so that it can improve the performance of the business and overcome the hurdles which come in the way of it prosperity are the following, 1. For ensuring that this problem does not arise again, IKEA must use strong monitory practices on the suppliers. This will keep them aware of the actions of the suppliers and provide proactive measures for dealing with the problems. 2. IKEA can initiate operating its own manufacturing units in such areas so that the compliance of all such legal measures can take place. 3. Measures must be taken for improving the production practices so that the environment friendly methods can be promoted. 4. Prepare monitoring teams for ensuring the compliance during the entire business operations. If all the measures are appropriately implemented then the operational excellence can be acquired by IKEA. The entire study shows the inspiring success of the business by acquiring operational excellence. The entire identification of the problem, critical analysis of the business and the recommendations show the importance of being socially responsive. This promotes the value and the entire organization strives through this. Work Cited Bartlett, Christopher A., Vincent Dessain, and Anders Sjoman. IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A). Harvard Business School, 2006 Read More