120050-Ikea Global Sourcing Challenge

Running Head: IK IKEA: GLOBAL SOURCING CHALLENGE

IKEA: Global Sourcing Challenge [Name of Student] [Name of University]

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IKEA: Global Sourcing Challenge IKEA is a world beloved Swedish furniture company that started in 1943 as a mailorder business that offered goods purchased from low-priced suppliers. Its founder, Ingvar  Kamprad helped grew IKEA into a multi-billion manufacturer and producer of self-assembled furniture as it is known today (IKEA, 2011). Key to why IKEA products are embraced by people beside quality that can be bought at an unmatched prices are that they are produced in a socially responsible and environmentally friendly way. IKEA’s sourcing strategy is usually credited for maintaining these standards, especially on how well it keeps its relationship with its suppliers from developing countries. It is also said that IKEA has put some manufacturing Code of Conduct for its suppliers called "The IKEA Way on Purchasing Home Furnishing Products" (IWAY). Through the years, IKEA has been constantly evolving its approach to business and its compliance to government regulations. Realizing that adherence to quality standards and being socially committed are vital to its business, IKEA requires manufacturers and suppliers to ensure compliance in terms legal issues, working conditions, prevention of child labor, external environment and forestry management.

Labor and environmental responsibility issues The success that IKEA was enjoying encountered a setback in 1994 when a German television aired a documentary that directly aimed at tarnishing the brand’s reputation. In the report, it investigation the use of children in the production of carpets by IKEA’s suppliers. For IKEA, reputation is important. The negative publicity generated by the t elevision report immediately impacted IKEA’s financial health as it deals with public and regulatory pressures not only from its home country but also from other nations (Bartlett, Dessain, & Djoman,

2006).

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The use of child labor in some developing countries like India remains a societal dilemma despite efforts to abolish bonded labor. Even with laws in place to stop the practice, laws were poorly enforced and prosecution rarely severe. For its part, IKEA is faced with the the enormous challenge of keeping true with its social responsibility commitment and ensure that anything that it sells uses labor fairly. Even compelling suppliers to commit to contracts that would forbid the use of child labor is not enough. Even the company is not a public entity and carpets not taking huge chunks of its investments and profit chart, IKEA must address reputation management (Bartlett, Dessain, & Djoman, 2006 ). On the environmental front, the setback came in the form IKEA’s emission of  environmentally-damaging materials in its production of its products first in 1982 and then 1992. The latter was brought up by a large German newspaper and television network who assailed IKEA for surpassing the limit permissible to use for its bookshelves product. The company also uses woods which can create huge forest denudation when unregulated, and advocacy groups and government regulators are already taking advantage of the publicity to promote their advocacies and causes ( Bartlett, Dessain, & Djoman, 2006 ).

Recommendations It is not only IKEA that is accused of contracting suppliers that use children as labor. Other big brand names like Apple Inc has been receiving negative publicity out of these problems. Given that big brands can be dragged for public scrutiny even for very small issues, majority of the people who patronize company are more understanding so long as they will continue to enjoy unique and quality products or services from such companies who have the unique position of providing the market with unique and unmatched product. As such, managing the press would be light. The bigger challenge though would come from some social activists, disgruntled consumers or haters who can threaten the company by mounting viral campaigns through

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social networking websites like Facebook, Twitter and Youtube. To deal with these publics, it would be best to launch a campaign that would give assurance that all products by IKEA passed through numerous regulatory standards. These are best provided through the press who can be invited and given access to major suppliers’ factories to give them free reign to inspect the working conditions and documents. IKEA can also release disclaimer statements on its corporate website assuring the public about its strict compliance to all terms of labor  regulations. Non-government organizations and advocacy groups would be approached by IKEA to initiate talks, getting their inputs and contributions in developing best practice policies about their cause that would benefit both parties. Meanwhile, fears that IKEA is causing more harm than good in the environmental can be allayed by mounting strategic campaigns that will feature its commitment to the environment and sustainability efforts by the government and advocacy groups. Internally, the company can invest on research and development to discover materials with less environmental hazards and other alternatives that will be useful for its production not only in the short-term but can last. IKEA must also readily submit to requests for transparency that it is ensuring sustainability as a corporate social responsibility. In these areas, IKEA can very freely undertake since competition is less of an issue to the company, besides its not being a publicly-listed company.

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References

Bartlett, C.A., Dessain, V., and Djoman, A. (2006, May 3)."IKEA's Global Sourcing Challenge: Indian Rugs and Child Labor (A).

Harvard Business Review.

Massachusetts: Harvard Press.

IKEA. (2011). Corporate Information. Ikea.com. Retrieved from http://www.ikea.com/ms/en_US/about_ikea/index.html