IKEA's global sourcing challenge - Essay Example

During the video program the company representative will come prepare with information about the good deeds of the company to demonstrate the high level of corporate socially responsibility the company applies. Social corporate responsibility can be defined as the economic, legal, ethical, and discretionary expectations that society has of organizations and its members (Referenceforbusiness). b. What actions should she take regarding the IKEA supply contract with Rangan Exports? IKEA has to take a strong stance against Rangan Exports.

A simple yet effective solution is to cancel the contract of the supplier. This decision would push away the critics that claim that IKEA supported suppliers that used child labor. The strategy behind such a move is to deny knowledge of the existence and child labor. The business move is a reactive strategy. One of the cons with this alternative solution is that the exploited children are not benefiting from the move. A second alternative for IKEA is to fine Rangan exports and to implement a process improvement plan to eliminate child labor and to find other ways to reduce costs.

Rangan Exports would agree to immediately eliminate all child laborers and would accept termination of contract if a future violation occurs. IKEA would negotiate a deal in which Rangan Exports would publicly apologize for their actions and they would certify that IKEA had no knowledge of their actions. To compensate the exploited children IKEA will pay a full scholarship to the children to be effective from the grade the student is enrolled until college graduation. The scholarship will pay the child $300 a month, books, educational materials, and tuition to private school.

The company should also invest money in hiring a law firm to consult on the possible collateral damage associated with continuing the relations with Rangan Exports. IKEA should also implement an audit system that would mandate four yearly visits to the facilities of Rangan Exports. 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 a decision and how you would manage it) Leaving India would be a simply way to push away a problematic region and minimize the risk to the reputation of the company of doing business with contractors that rely on child labor.

IKEA should attack the problem head on and leaving India is the coward’s way out. IKEA should stay in India to take advantage of the low labor costs available in the Indian marketplace. By staying the company can continue to offer low cost items particularly rugs imported from India. The company must hire an Indian accounting consulting firm. This firm will be responsible of performing audits in all IKEA Indian suppliers. The company must perform at least two audits per supplier yearly. Staying in India will help IKEA keep its cost structure low which can help the company pass off the savings to its customers to continue to offer very low prices.

IKEA would decrease its sales in the rugs marketplace in the short term if it exited the Indian marketplace. The labor cost advantage in India should be further exploited by IKEA by expanding its supply chain operations in India. IKEA also has to improve its relations with the governmental agencies and non-profit organizations in