Ikea - Global Sourcing

Executive Summary:

Ingvar Kamprad started IKEA when he was 17 years old as a mail order company selling goods sourced from low priced sellers. IKEA grew on from there to the world’s largest specialized furniture retailer in the nineties. Kamprad served as the CEO till 1986 and is currently serving as the honorary chairman involving himself in the daily activities. Kamprad shied away from the usual method of selling furniture and created a new business model shaking the Swedish furniture cartel. The company developed a strong tie with suppliers by supporting them in terms of technology, designs and financing. The suppliers in turn provided the best goods at the lowest prices. The model encompassed sending a catalogue of a broad range of affordable and well designed home furnishings to customers who could then come into the store and check the products they are interested in. They could then purchase them in flat packages and assemble themselves at home. The IKEA mission is to “to create a better everyday life for the many people”.

However, the company encountered environmental problems in the 1980’s. It was however very quick to respond by addressing the concerns with inputs from Greenpeace and WWF. In 1994, a documentary by Swedish television highlighted the issue of child labour in IKEA’s Pakistani carpet supplier. The UN had published the rights of the child recently in 1989 and was an emerging public issue. IKEA had not expected this but however responded swiftly. A legal team was formed and sent to Geneva to receive input and advice from the International labour organisation for dealing with the problem. Based on this, IKEA added a black and white clause to all its supply contracts stating termination of the contract with any supplier who employed children. A Scandinavian company with extensive experience was contracted to monitor the same in Pakistan and India to reduce the load of field trading