Ikea Case Analysis

Main Problem

Being an international well-known brand based in Sweden, IKEA faces difficulties in solving the child labor problem, which lies within its Indian suppliers. A German documentary is about to reveal that one of IKEA’s main suppliers of carpets harbors child labor. This directly harms IKEA’s reputation and threatens its market sales in both short term and long term basis. In fact, IKEA grew aware of the issue in 1994. It reacted by investigating the situation and took several measures, like employing a third party to monitor suppliers. However, the recent documentary in turn reveals IKEA’s ignorance and ineffective supervision towards its suppliers, which resulted in the scandal on child labor.

Underlying Causes

First, the child labor problem is deeply embedded in India, which mismatches IKEA’s corporate culture. It is challenging for IKEA to eradicate the involvement of child labor in its production because of the common practice in exploitation of child laborers in India. This is further affirmed by government’s attitude and legislation, as “the law specifically permitted children to work in craft industries.” To fight child labor means going against the norm in Indian society, a norm that is shaped by economic, historical and other factors. This practice violates IKEA’s corporate culture and vision in terms of creating a better life for the world population and abandoning waste of resource. Children will lose their opportunities to receive proper education becoming advanced human capital by engagement in labor work in such a young age.

Another cause of destruction of IKEA’s image is their problematic relationship with their suppliers. IKEA’s philosophy in co-operating with its suppliers focuses on maximization of their unused production capacities. However they did not monitor or intervene into other decisions done by the suppliers