IKEA Outsourcing Challenge

Question 2 It is obvious that IKEAs management is completely intolerant of the unethical practices of its suppliers.
Not only because the company is afraid of that would such tolerance affect its public image, but also because the culture of IKEA, which is deeply influenced by its CEO, focuses on creating a better life for many people. Thereby the companys organizational culture does not encourage nor accept unethical behavior. Additionally, according to the contracts black and white clause if a supplier employed children under the legal working age, the contract would be cancelled. Unfortunately IKEA has been involved in a couple of environmental issues that it was still dealing with when the child labor issue emerged. This fact out even more pressure on the company to find a viable solution that would save its public image. One of the immediate responses could involve the company immediately cutting business relationships with Rangan exports. However, we believe, that due to the current image problems that IKEA is facing, this step will only accentuate the tainted image that previous IKEA ethical practices have formed. Therefore we believe that the company should try to advertise itself as trying to contribute in reforming the child labor issue in India. Deciding to stop dealing with the supplier without taking other complementing actions would not allow IKEA to capitalize on the opportunity to advertise itself as socially responsible company, an important concept that was slowly emerging at that point of time. As a result, IKEA should negotiate with its supplier and try to get them to stop their child labor practices. Depending on how important a client IKEA is to the supplier, they might adhere to the companys rules and policies. If IKEA advertises its intentions well enough, it will be able to attract more customers who are getting progressively lured by the images of socially responsible companies. Question 3 Unfortunately, child labor is an issue that is imbedded in the culture of India. In reality no matter how great efforts of any UN, NGO or big companies like IKEA may be able to influence the governments of India to take suitable actions to end this phenomenon, it will be impossible to
completely abolish such a system. In a country where families live under the poverty line, children work, not only because they are forced to but because they want to. Regrettably, children of this part of the world learn to be responsible for the survival of their families at a very young age. They feel they need to assist their parents in their day to day expenses. As a result, to solve the issue of child labor, the bigger issue of poverty and poor education systems need to be addressed first. However, this does not mean that IKEA cannot capitalize on the opportunity to appear more socially responsible by trying to positively contribute to solving this issue. Although the continued monitoring and control processes on its Rug suppliers is a cost that IKEA would not tolerate in its cost effective business model, however, the company can afford to do that in the beginning stages to be able to demonstrate how it is influencing the alteration of this socially unethical issue. On the long term, IKEA should sign up to Rugmark. Although this initiative might force it increase its cost and thereby the price of its rugs, it will allow it to appear as more ethical in its practices. Consumers, back in the days were becoming more and more socially aware and would be more than glad to pay the extra cost if they think they are helping developing countries children and contributing to the overall good of the society. Ikea can also adopt simple marketing tools that would allow it to appear more socially responsible and offer the customer the ability to become a worldwide benefactor. Such initiatives might simply include putting donation boxes with images of children working in India. These donations would fund NGO foundations that are working on solving child labor issues. As a result, IKEA would be actually contributing to solving the issues as well as advertising its good intentions.

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Question 2 It is obvious that IKEAs management is completely intolerant of the unethical practices of its suppliers.

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