...IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor Nathan Johnson Case Analysis MGT 400 – 10/27/09 1) How should Marianne Barner respond to the invitation for IKEA to have a representative appear on the upcoming broadcast of the German Video Production? The offer to have a representative appear on the upcoming broadcast of the German Video Production seems like a total setup. This movie sounds like it is totally geared towards tearing down the corporation’s credibility, etc. If a representative goes, most likely there will be set questions created by the group that made this video in attempt to incriminate IKEA on camera. I would recommend that Marianne Barner thank the German Video Production company for the invitation but to politely decline and say something to the extent that IKEA is currently investigating the operations of its suppliers to ensure compliance with IKEA’s policies. Thereby, as kindly as possible you extend politeness and it is implied that IKEA is now aware of the child labor IKEA is actively seeking to resolve the issue. 2) What actions should she take regarding the IKEA supply contract with Rangan Exports? The most logical approach towards addressing this issue would be to perform some sort of investigation on ALL of IKEA’s suppliers to make sure that all of them are in compliance. If IKEA singles out Rangan Exports, they could risk some sort of discrimination suit. Additionally, if there are more suppliers in violation of their...
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...Grading Course: Name IKEA’s Global Sourcing Challenges Professor’s Name [optional] University The stakeholders of IKEA- Stakeholders are groups or individuals (customers, employees, suppliers, communities, and shareholders or other financiers) who can affect or be affected by the successes and failures of a business. In case of IKEA, their customers who bought furniture form them in 70 nations, all the employees who work for IKEA in 70 countries all over the globe, their suppliers all over the world who supply IKEA with the raw-material as well as furnished furniture, and all those who financed the company to open its stores and make primary investments in the 70 countries, for its geographical expansion are the “real stakeholders of IKEA”. IKEA was founded in the early 1950s, but in the mid of the 1960s it became a global furniture manufacturing company. During its expansion all around the globe, Ingvar Kampard (the founder of IKEA) opened multiple stores in different countries, some of them were self-financed by him while others were assumed to be opened as the tie up between the company’s and their stockholders (for finance) in that company, especially, those who financed the company to open the chain of stores on the foreign land. Also, when some problem arises in the indigenous market when Sweden’s local large furniture retailers threatened and all the sourcing and suppliers were blocked and even small retailers were ordered not to sell IKEA’s product, under that circumstance...
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...eaElena Fischer Case: Ikea’s Global Sourcing Challenge 1. Should Ikea dissolve its relationship with its carpet supplier? I think IKEA should in fact, exit the Indian rug market. While it would translate to higher cost for consumers, it would remove any conflict of interest for both society and management in terms of child labor. With the public knowledge that IKEA rugs have in fact been made using child labor, rug sales will decrease and customers will feel uncomfortable purchasing products with the wonder of whether or not child labor was used to create the product they are about to purchase. If IKEA dissolves the relationship, socially conscious consumers will feel ease when buying a rug, with the knowledge that no children were used to weave the rug, even with the slightly higher price. Exiting this market will also put pressure on Indian government to take more efforts in preventing child labor by implementing more labor laws, or better enforcing the current ones. While the Rugmark Foundation programs implemented with suppliers to supervise the use of the label helps regulate child labor, it does not get rid of it all together and is only a short-term fix. The only way I see IKEA saving their image, following their values and ethics, and preventing the use of child labor in the making of their rugs, they need to withdraw because it is the only action that truly shows their seriousness with the issue and zero toleration policy in being a part of their company....
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...In the business world, unethical practices are wildly used as an easy way to success in a business, but ethical business practices can be used by businesses to maintain their integrity while being successful financially and in other business aspects. An example of a successful company that has had much favourable outcomes from incorporating ethical practices is IKEA. IKEA was founded in 1943, and since then has been striving to implement ethical conduct. IKEA has demonstrated ethical conduct by its efforts in striving to be environmentally friendly, remaining true to its ‘no bribes’ policy, and its strict rules on child labour. IKEA’s success can be a model by other businesses. Many companies involved with unethical conduct usually face the consequences of their actions in the future. Although the company may be fooled by immediate and positive results from their actions, many have failed because of immoral decisions. Some examples of these failures are bankruptcy, or decrease in customers. Ethical business practices can have a more positive and even long-term impact on a company than unethical business practices. As a company, IKEA prides in itself for delivering affordable, sustainable, and environmentally friendly goods. “The company is doing pretty much everything it can to make its products, and stores, as energy-efficient and sustainably produced as possible as part of its program of ‘never-ending improvements’.” IKEA has implemented many strategies to achieve this...
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...8-2 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? I suggest Marianne Barner to refuse to appear on the upcoming broadcast of the German Video Program. Every coin has two sides. Accepting this invitation is the opportunity for IKEA to quickly response the child labor issue in public media. In this way, IKEA could assure that they will be more aware of social responsibility and potential upcoming social issues in the future. However, the German Video Program won’t allow the company to preview the video and that the program clearly “planned to take a confrontational and aggressive approach aimed directly at IKEA”. If they go to the invitation with no preparation of what kinds of issue and questions could probably be faced with, it might potentially mislead by the videos or questions they answered in the show. Therefore, Marianne Barner should politely refuse the invitation and respond the video when they have a chance to review and verify the truth in the video. While, in the meantime, IKEA have time to investigate the truth and assign more policies to against child labor issue for their suppliers. 2. What actions should she take regarding the IKEA supply contract with Rangan Exports? IKEA should sent out the investigation term to figure out the truth whether the Rangan Exports failed in compliance with the ethical standard...
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...Introduction In the television sitcom ‘That 70’s Show’ it is depicted how an appliance store ‘Bargain Bob’ is driven to bankruptcy by the arrival of a large superstore called ‘Price Mart’ in the city of Wisconsin. This superstore provided appliances at a much lower cost than what the small retailers could afford. As a result the small stores had to shut down. While on one hand Price Mart took away some jobs it created many more to compensate for the unemployment created by the closure of a manufacturing plant in the same town. This illustrates a common outcome of the arrival of giant retail companies in otherwise unexplored geographies. This is also touted as the reason why many governments were initially and many still are opposed to the idea of allowing large retail companies to set up shop especially if they are from abroad. One of such large retailer is IKEA which has of late managed to enter the Asian market. IKEA is known all over the world as a low cost high quality provider of ready to assemble furniture. This is about what the company does and not what it stands for. IKEA is a symbol of excellence that serves as an inspiration for entrepreneurs and business houses alike. There are no two views about the successful business model adopted by IKEA which also has a strong value system. There are fewer controversies and lot more accolades for IKEA as compared to other large retail giants. What is more fascinating however is the fact that in spite of being a large and powerful...
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...ANALYSIS REPORT Josephine Apuri Argosy University Atlanta IKEA’S marketing IKEA’s products and services are geared towards the overall satisfaction of the needs and wants of every individual customer that walked through their doors, looks them up on the internet or flips through the pages of their catalog. The founder of Ikea Ingvar Kamprad stated that what is good for their customers is also in the long run good for ikea. Their goal is to create a better everyday life for majority of the people. The starting point for Ikea is always, their customer’s needs and wants. That is why Kamprads idea was to offer a wide range of home furnishings of good design and functionality at a price low enough to be afforded by most people (Edvardsson and Enquist, 2006.) Most customers would want to go shopping and not feel pressured to buy, thus Ikea has very few sales people on the floor, and they are rather more of a help aid in locating the items which are stored at the market hall section, often located at the end of the store. They also have special QR codes in case a customer wants to learn more about a specific product. With Ikea’s concentration on individual marketing rather than mass marketing, also takes into consideration the needs and wants of each country. For instance beds are bigger for the U.S customer (Marketing Week, 1996.) Austria’s taste for seventies corner sofas are satisfied too .A majority of Ikea’s stores are located outside of cities centers primarily because of...
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...IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor 1. List and describe the key components of IKEA’s business strategy? * Low price is one of IKEA’s most important components of business strategy. Its low price attracts many people to purchase products there, especially young householders looking for well-designed but inexpensive furniture. It is the low price that helps IKEA stick on its version: “selling affordable, good-quality furniture to mass-market consumers around the world”. To stay constant low price, IKEA matches products to supplier capabilities and also makes cost consciousness a really strong part of the IKEA’s management culture. * Opening display stores is also a key component. Customers can go to the display stores to look around and inspect furniture and other products before buying. This is really helpful for customers to choose the right products they need and also helpful to reduce products returns at the same time. * Self-assembled furniture is a key feature of IKEA. This concept helped IKEA gain so many customers. Customers buy furniture in flat packages and assemble the furniture at home. This idea save IKEA’s transport and also storage costs. With money saved, IKEA could offer constant low prices for its customers. * Advising by issuing catalog is a significant idea. By sending is catalogs to customers, IKEA get the chance to introduce every products to its target market. Many people who go to IKEA to purchase are driven...
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...good customer relationship management of IKEA is enabling IKEA to cover the demand of powerful customer. 1. Background of the IKEA IKEA was establish in 1943 is the world’s largest furniture retailer which specializes in stylish. IKEA organization takes advantages in strictly management function (internal control) and expertise in superior telecommunication networks (external approaches) which create the competitive advantage for IKEA. Therefore IKEA had expanded its business in 26 countries over 128 fully-owned stores. First and foremost, IKEA use a catalog to tempt people to visit an exhibition then develop it by storing the store among whole world. IKEA spread the business globally by advanced telecommunications networks. IKEA’s attributed to its vast experience in the retail industry, in product differentiation and cost leadership. In addition, IKEA fostering close supplier relations through technology – transfer, large supply contracts and even low interest loans. IKEA soon gained a SCA over its competitors through cost-cutting and close supplier relations while placing an emphasis on the design process. In conclusion, IKEA added value though display store which offered a wide range of home furnishing...
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...9-906-415 REV: NOVEMBER 14, 2006 CHRISTOPHER A. BARTLETT VINCENT DESSAIN ANDERS SJÖMAN IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor (B) After more than a decade spent struggling with the issue of child labor, Marianne Barner felt good about how IKEA had responded. But occasionally, she found herself wondering whether the progress the global furniture retailer had made was real and durable. Just as it had in the mid-1990s, in 2005 the company could still find itself on the defensive in dealing with the issue. Even more troubling to Barner was that after 10 years of working to prevent child labor among IKEA’s suppliers— introducing a clear code of conduct, developing internal controls and third-party audits, training its suppliers, supporting their corrective actions, and instituting stiff sanctions against offenders—the company was still finding cases of child labor in its supply chain. The latest issue had been drawn to Barner’s attention by Kaisa Mattson, the head of IKEA’s compliance office in south Asia. Like Barner herself a decade before, Mattson was facing the decision of whether to terminate a relationship with a long-standing major supplier. This one, however, had violated not one but several items in IKEA’s detailed code of conduct, known as “The IKEA Way on Purchasing Products”—or IWAY for short. Venkat Industries was a textile mill with over 10,000 workers, and a recent audit had shown that it had stopped using the water treatment plant it had...
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...IKEA Analysis Report Many companies and corporations struggle daily to sustain a competitive advantage and build a strong values-based service. The core difficulty that these companies face is how to create value for their customers and stakeholders such as suppliers and coworkers. A values-based service company can be built and be effective, however, the framework has to be set to ensure success. IKEA group has implemented a framework for the international company and has succeeded in sustainability as a values-based service company. Values-based service consists of attracting and retaining customers to make profits while creating value for customers (Edvardsson, 2006). Customers in today’s society need value added to the customer shopping experience through brand and service (Edvardsson, 2006). The key factor in brands is to show the consumer or customer how one brand differentiates from another and how it can meet that customer’s needs (Edvardsson, 2006). For example, IKEA offers top quality furniture at affordable prices, which also does not lack style and design. The market that IKEA targets wants style, and quality without having to break the bank in which IKEA unquestionably provides to its consumers and stakeholders. Furthermore, service is rooted in a customer’s experience and can also add or decrease value to a brand. A firm can create a sound brand by implementing an efficient and sound branding image that caters to the needs of its targeted market. So how does...
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...Dear Mr. Ingvar Kamprand, I am writing to you to make recommendations on the ethics issues referring to the child labor problem raised by both the Swedish and German television documentaries. I think we took the necessary steps in dealing with Swedish documentary that showed children in Pakistan working at weaving looms, by sending a legal team to Geneva to seek input and advice from the International Labor Organization (ILO) on how to deal with the problem. The fact that India, Pakistan, and Nepal were not signatories to the convention implies it is unreasonable to accuse IKEA of violating the law of child labor. However child labor is an ethical issue. That’s why we added a clause to all our supply contracts, stating that if any supplier employed children under legal working age of 14, that contract would be terminated. We also appointed a third-party agent to monitor child labor practices at its suppliers in India and Pakistan. This definitely improved the public’s and media’s perception of the company. Also contacting concerned organizations, such as Swedish Save the Children, UNICEF, and the ILO to get advice on how to handle these labor issues with some of our suppliers was proactive. The trip my team and I took to India, Nepal and Pakistan to investigate the real situation of child labor exposed us to Rugmark Foundation. The foundation developed a label certifying carpets that were made without the use of child labor. We endorsed our name to Rugmark Foundation to show...
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...foreign markets starting with Denmark. IKEA continued to provide its consumers with quality products by utilizing “high-quality materials on the furniture surfaces that were visible and …lower-quality materials on surfaces that were low stress and less visible to the consumer” (Moon, 2008, p. 23). This idea was well received by its consumers and helped IKEA maintain a competitive advantage within the furniture industry. By 1984, IKEA had expanded into 16 different countries with over 167 stores (IKEA Timeline, 1999-2008). IKEA made its debut appearance onto U.S. soil in 1985 with its first store in Philadelphia, PA. From 1997 to 2001, IKEA’s revenue had doubled in the United States from $600 million to $1.27 billion. By 2002, the United States was IKEA’s third largest market and housed 14 of IKEA’s stores (Moon, 2008, p. 27). IKEA’s goal is to have 50 stores in operation in the United States by 2013. SWOT ANALYSIS Strengths • Successful business model – One of the primary strengths of IKEA is in its capability to develop and maintain effective operations management. The operational success is based on several pillars: cost effective production, fast product to market delivery and responsive operations • Strong brand – IKEA heavily invests in the consistent development and securing of specific brand image –...
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...understand the IKEA environment we will look at IKEA’s marketing strategy, beginning with its products, services, and other attributes that contribute to its value proposition. Following, exploring how IKEA creates a well-defined market position, and how they differentiate their offerings from competitor offerings. Included in this report is an assessment of IKEA’s strategy by analyzing its sources of value in its value chain, an explanation of its intangible products and benefits, and why IKEA considers its customers to be critical stakeholders. This report concludes with an establishment of several key performance measures that enables management to integrate IKEA’s values in its operations. Introduction In 1943 Swedish entrepreneur Ingvar Kamprad founded the now furniture giant IKEA. He began by going door to door selling pens, wallets, and watches. When he began selling his low priced furniture, his competitors immediately tried everything to stop him. The local suppliers were banned from selling him raw materials, and he was not allowed to showcase his furniture in industry expeditions. So Ingvar began to innovate, building his own furniture and buying raw materials from other countries. As the company grew globally, IKEA realized the need to adapt to the local needs of each country it was selling in. IKEA has identified and met the strategic barriers through a unique marketing and operational strategy. IKEA Marketing How do IKEA’s products, services, and related attributes...
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...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? Since Marianne Barner was aware that the German filmmaker’s demeanor towards this live discussion was confrontational and aggressive, she should reject the invitation to avoid any further unwarranted negative publicity. It is obvious that the filmmaker would not allow Marianne to peacefully respond to any questions and freely express that both Ikea’s values and her own personal values do not support child labor. By only showing still shots instead of the whole video, it is evident that the German filmmaker is not interested in the overall ethical issue of child labor, but rather in trying to jump start his career by taking down such a huge company like Ikea and their main supplier. However, I would recommend Marianne to make a public statement to show everyone that they do not support child labor. As proof, she can refer to the previous year when Barner and her direct manager immediately travelled to Pakistan, India and Nepal to personally oversee production in those countries. 2. What actions should she take regarding the IKEA supply contract with Rangan Exports?...
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