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Bussiness Ethics - Essay Example

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After doing small time business, it was only in 1948, Kamprad included furniture to his selling range and it had a big impact leading to big success. However, there was a cartel of furniture…
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Download file "Bussiness Ethics" to see previous pages... Although, some manufacturers made deliveries to IKEA, mostly at night to avoid being seen, IKEA thought of other strategic options to counter this problem, and one among them is outsourcing.
This made IKEA to go scouting abroad for manufacturers and Kamprad entered into contracts with number of factories in Poland,
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thus ‘seeding’ more outsourcing. It was this early decision of Kamprad to seek least expensive alternatives to domestic manufacturing of the products turned out to be a more profitable avenue for IKEA to take. As, this outsourcing strategy reduced the costs of production, it is able to offer affordable or cheap prices to the customer, thereby bringing in more customers. “IKEA currently works with 1,300 suppliers in 53 countries, but Kamprad made the pioneering decision to source furniture from communist Poland as early as 1961. Since manufacturing costs were 50% lower in Poland than in Sweden, his decision looks brilliant in hindsight.” (Barthelemy 2006). Importantly, IKEA continued as well as extended its outsourcing strategy to other countries particularly 1980’s and 90’s, particularly to Asian countries like India, China, Pakistan, Philippines, etc, where they can access cheap labour. Although, outsourcing to these countries gave IKEA a cost-effective option, it also led to the rise of ethical issues and controversies, both from the economic as well as political perspectives, thereby making or even forcing IKEA to come up with Corporate Social Responsibility (CSR) based activities.
IKEA outsourced to the Asian countries many of its manufacturing processes including making of carpet, rugs, wicker baskets, etc. That is, in starting from 1970s and more prominently from 1990’s, they found many local manufacturers cum suppliers, who would manufacture the products and supply to them with IKEA label. This turned out to be a productive and profitable option, as IKEA was able to get good productivity for cheaper prices, when compared to the ...Download file "Bussiness Ethics" to see next pagesRead More
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