Ikea's Global Sourcing Challenge: Indian Rugs and Child Labor

INTRODUCTION

In May 1995, Marianne Barner, business area manager for carpets at IKEA must decide how the company should respond to child labor accusations directed at the company. A German documentary maker has informed IKEA he has video footage of child labor taking place at Rangan Exports, one of the company’s India-based carpet suppliers. The allegations occur shortly after all IKEA suppliers have signed contract addendums that explicitly prohibit the use of child labor upon pain of termination.

The documentary, soon to be aired, will take a confrontational and aggressive approach aimed directly at IKEA and Rangan Exports. IKEA has been invited to participate in a live discussion with the filmmaker during the airing of the documentary. Barner must decide:

• Whether the company should accept the filmmaker’s invitation to participate in a live discussion during the airing of the documentary.

• How to respond to Rangan Exports’ apparent violation of its contract that prohibited child labor.

• Whether IKEA’s overall approach to child labor issues is appropriate (i.e. should the company continue to try to deal with the issue through its own relationships with its suppliers, or should it allow an external agency to monitor the use of child labor on its behalf?)

• Whether the company should withdraw from India.

RECOMMENDATIONS

I recommend that IKEA take the following actions to address the current crisis and to protect itself from similar issues in the future:

1. Participate in the airing of the documentary.

2. Investigate Rangan Exports to determine if child labor allegations are legitimate and take actions consistent with findings.

3. Reexamine and revise the company’s approach to child labor issues, in part through developing strategic relationships with external organizations and monitoring agencies (e.g. Rugmark and Save the Children).

4. Do not withdraw from India

SUPPORT FOR RECOMMENDATIONS

Recommendation 1: Participate the in...