Ikea

IKEA’s Global Sourcing Challenge: Indian Rugs and Child Labor

June 19th, 2012

One of the most common issues companies face in outsourcing and doing business across borders is the differences between the cultures and values. In IKEA’s case, Marianne Barner faces a difficult decision of whether to have the organization attend the broadcast of the German video program. Because cultures differ in values, there is no reason to believe then one is better than the other. For the majority, however, child labor beliefs are similar across the globe. Moreover, specific countries don’t necessarily promote or enforce these child labor laws similar to the United States. Therefore, doing business across borders can be problematic when the cultures and values between these countries don’t necessarily align.

Marianne Barner needs to protect the image of IKEA in any way possible. We believe IKEA’s brand image would be viewed negatively if the company didn’t attend the documentary. IKEA could plead ignorance during the process, but the Germans are more likely to bash the brand name at a higher level than they would if there were representatives attending. Since the German-produced program planned to be “confrontational” and “aggressive” it’s imperative Marianne and her teams attend the documentary with multiple corrective actions and plans on how to address this issue.

Barner should terminate the contract with Rangan Exports because they are in direct violation of the black-and-white clause of the contract. This clause mandated that IKEA’s suppliers refrain from using children in the production of their products. The culture and reputation of IKEA could drastically be damaged with the broadcast of this program, especially if Barner fails to terminate the contract with Rangan Exports.

With IKEA’s reputation at stake, we feel that their best long-term strategy would be to discontinue their operations in India. Because Indian rugs only account for a small portion of...