Case Study: IKEA
Section 1: Introduction and situational analysis
As a business manager Marianne Barner found herself in a tough situation having to make a decision on whether to counsel one of the suppliers for their Indian rugs due to their violation of children's rights for using child labor, what was even more frustrating was the fact that the supplier had signed in their supply contract forbidding use of child labor.Barner was faced by a very hard decision because of the pressure from all other manufacturers, importers retailers and Indian nongovernmental organizations for them to have the Indian rugs certified that they were made without child labor. To Barner too the Indian rugs made up very little turnover to IKEA for it to risk it reputation .She found herself under pressure from the Swedish Save the Children Organization ,she had to make a long term decision on this matter.
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Ingvar Kamprad as the CEO of IKEA had worked hard to bring the company to where it was so one being the business manager had to be wise in making decisions else they would risk collapsing the company or spoiling its reputation and probably destroying the customer base IKEA had risen had from a small mail-order company to a big Business when he added furniture to his newsletter and that was the beginning of his success which led him to give up selling the small items. Out of the expansion of the business Kamprand opened a store in a small town in the outskirts of Stockholm and this led to increased business and hence the rise of IKEA.
The Swedish furniture industry had a cartel which advocated for high prices for their products and Kamprand had to deal with that, since it was a social problem and it was unacceptable, he therefore put reasonable prices for the products which were of good design and which everyone could afford. He put the customers first and this worked for IKEA. The introduction of self-assembled furniture in 1953 was yet another unique feature for the company, this was good for the customers because they could assemble the furniture as they wished at their homes and it saved on transport and on storage too. This led the company to make large sales which doubled their profits in the years 1953 to 1955.
Section 2: Stakeholder analysis
The competitors in the business were not happy with the work IKEA was doing and they tried to stop the company from participation in trade fairs and they actually tried to stop the manufacturers from supplying to IKEA, this was obviously due to the stand IKEA took, to keep their prices low and to give good designed furniture to their customers. The lack of manufacturers locally Kampland was forced to look for law materials elsewhere, he looked at Poland where he had to rain his own manufacturers and to his advantage even the suppliers from Poland turned out to be cheaper and he therefore reduced his prices further. To be able to get a flow of supply IKEA actually loaned the suppliers for future settlement through their supply. The relationship between IKEA and its suppliers was basically mutual though the suppliers had to maintain their standards since IKEA would move to the next other better chance if any. From the relationship of IKEA and its suppliers we see that the company was more concerned to having good relationship with its suppliers for their mutual benefit and it was not out to exploit.
IKEA went on growing and it expanded and they built a showroom store at the suburbs of Stockholm where there would be ample parking due to the increasing number of people with cars. By the time this store was opened IKEA had opened other showroom stores with their furniture in flat-packed boxes.
With time IKEA had expanded its range of products into other thing besides furniture: textile, kitchen floorings, rugs and carpets and plants.Kamprands personal management style is what made the company rise to these high heights. To create a better life for many people was his vision and this is what the company to grow and outdo its competitors.
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The company has helped so many people economically; it has its branches in over 19 countries and with suppliers from over 70 countries and with arrange of products over 11,200.
In the 1980 the Danish brought environmental policies and IKEA was directly involved being the leading local retailer and since it was releasing these emissions, the company became a prime target for the regulators. A case was filed against the company and it was widely publicized and the company was fined for that, this brought its profits down by 20 % in Denmark.
However IKEA managed to put a stop to the production of supplies with high level of the poisonous emission of formaldehyde. A decade later in 19192 there was a similar problem but this time it was with the bookstores and this cost IKEA some huge losses due to the spoiling of the company's' goodwill by the news that they were poisoned bookshelves. Due to these problems the company decided to get more involved directly with environmental matters since more than half all its products came from wood.
While still dealing with the environmental problem in Sweden, IKEA was faced with another major problem which was child labor. With all the Organizations for against child labor on their case, IKEA had to do something, they hired a third party to ensure that no child was involved in the production of the products they bought from their suppliers in Pakistan and India. Despite all the efforts put by IKEA, child labor was not about to stop and Barner learnt this when she and her direct set out for a trip to India, Nepal and Pakistan to familiarize themselves with the situation on the ground, they were shocked at the rat at which children were involved in the production at the factories. Child labor was the greatest challenge the company was facing and it was not about to stop.
Section 3: Analysis based on ethical theories
From this case we can see that IKEA was very concerned with whatever happened with its clients. They put it as their vision to 'create a better everyday life for many people. We can say that the company had its clients interests at heart which in turn turned to work to the company's advantage and it ended up winning so many people hearts and becoming a major provider of household furniture to many of the people it cared for. To the customers what IKEA was doing was very right since they did not get involved with the cartel of those other manufacturers of furniture who set their prices too high for the people.
Out of the IKEA setting their prices low they ended up being in bad terms with their competitors which resulted to the suppliers being threatened not to supply the company with production materials and in turn this led IKEA to look for alternative sources of production materials which surprisingly worked to their advantage and they ended up with cheaper materials. We also note that at the time IKEA was exporting its production materials it ended up in mutual relationship with its suppliers and they eventually got into some kind of a loaning from IKEA. Here we realize that the company was so determined to create a better life for everyday life for everybody.
It was very disturbing for the company to have to deal with the issue of child labor; the management had to hire third parties to keep track of the suppliers who could be using children for their labor. It is clear that IKEA was determined ton adhere to the set child laws though it was a hard task. So socially we can say that IKEA adhered to the set social rules.
The reaction of IKEA to the environmental rules that were set was appealing, the company actually got more involved and decided to do away with some products that emitted the dangerous emissions to the air. The company actually set rules that it would not accept products from intact natural forests and it redefined its policies from the use of PVC to preserve the environment, clearly we can see the company was very concerned about the environment. Additionally the company out of its will to observe environment, ended up making some new products like the OGLA chair which they made from waste material from yogurt cup Too the case of the bookcase in Germany whereby the bookcases had more formaldehyde than the levels set by the German government we see IKEA was quick to make the correction and stopped the production and sale of the bookcases.
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When we look at the impact IKEA had on the people of Stockholm and the world in general, we can say that it added a lot of value to the lives of the people who depended on their products. The people had good quality furniture and other goods, eventually, at a reasonable price than would have been the case if IKEA would have joined the cartel in Sweden to keep the prices high. We also see the company created jobs for so many people in the countries where it was based, it also created a very mutual relationship with its suppliers and they ended up relying on it for financial support.
The competitors of IKEA kept it on its toes such that they would at every opportunity have something to put the company down and block it from prospering, like when they shut it out on trade fairs, this was a big blow to the company of course but that did not put the dream Kampland had go down, every setback was more of an opportunity to get to better heights.
Section 4: Conclusion and recommendation
In conclusion, IKEA made wise decisions and came up with new ways to handle the problems that were eminent in the company that if they were not handled carefully would have resulted to the collapse of the company or it would have been in big crisis. The fight for children rights and them not being used for labor was very untimely and it was not the fault f the company but the company since it was a high profile company had to portray concern to an extent of hiring private agents to ensure that the sir suppliers did not use child labor. It was also a show of how concerned the company was when it sent Barner and her immediate manager to India, Nepal and Pakistan to learn more and see how they could help solve this social problem.
The interest and vision Kampland had was becoming a reality and every shortcoming was a stepping stone to bigger things, both for the company and for the people who the company had their interests at heart.
We also see how much dedicated the company was to put environmental measures and as much as it was going to cost it some money they opted not to produce and sell products that did not meet the set standards. The company was also very involved in preserving environment and they resolved to not buying products from natural forests timber. We see that they were out to do good for everyone and not just the company.
As we see the competitors of IKEA had to shut it out from trade fairs and to even threaten their suppliers to stop supplying them, I think in such a case the government should have more control, since it is not fair that some companies are not allowed to go about their businesses just because they have better policies than others. As much as the situation was tight for the company and it always had away out of the situation, the governments should also put measures to control such a phenomenon for fair competition.However, in every field of business there is rivalry and this case would not have been any exceptional. Wherever there is competition there is enmity because none of the competitors wants to be outdone in business.
The issue of child labor should also be addressed by the government and not passed on to businesses. In the case of IKEA, just because it was a high profile company, it had to bear a burden which is not really justified. The company had to g to great heights in making sure that its suppliers did not use child labor, as much as child labor is not right, in this case it was carried way too far on the people who were not directly using the child labor. The government in such a case should have put measures such that the suppliers did not have to use this cheap labor irrespective of its availability.
At the same time we can say that IKEA had its clemency .This is so because they should have cancelled the suppliers who violated their contractual commitment of not using child labor. The companies had agreed to not use child labor but yet IKEA did not cancel this contracts.Cancelling the contracts would have been the ultimate solution and this would have solved the problems the company had with the Child welfare associations. From what we see it is clear that the management of IKEA was not as strict with issues probably because they wanted good for all the suppliers, clients and all in general. For any company to succeed it must adhere the set rules and if this was done by IKEA, chances are, the company would not have wasted much time and its suppliers would have stuck to the commitment. Policies set by a company should follow to the letter so as to avoid these types of occurrences.
Too, media should be fair, this is very unlikely because they have to make news, but in the case of IKEA a small problem would be blown out of proportion. There should be set laws whereby the media cannot overstep as much as there should be freedom of expression, some exaggerated news would be very negative to a business.