IKEAs Global Sourcing Challenge: Indian Rugs and Child Labor A

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IKEAs Global Sourcing Challenge Indian Rugs
and Child Labor (A)

• Jes Snyder
• Mackenzie Fraser
• Brittany Milam
• Chase Lassiter

IKEA
Our Vision To Create a better everyday life
for the Many people.
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HISTORY

• Founded in 1943 by Ingvar Kamprad
• Products include
• Pens
• Watches
• Picture frames
• Table runners

• Sold goods from home and by mail-order
• In 1948
• Added furniture to his newsletter
• Gave up small items

IKEA
Our Vision To Create a better everyday life for
the Many people.
3
HISTORY

• In 1951
• Opened a display store
• Stopped accepting mail-orders
• 1953
• Introduced self-assembled furniture in newsletter
• Lowered prices

• Between 1953 1958
• Sales doubled from 3 million Swedish krona to 6
  million Swedish krona
• Large furniture retailers in Sweden felt
  threatened

IKEA
Our Vision To Create a better everyday life for
the Many people.
4
HISTORY

• Forced to look abroad for new sources
• In 1961, IKEA contracted with several furniture
  factories in Poland
• To assure quality, IKEA
• Brought its know-how
• Taught its processes
• Provided machinery to new suppliers
• In 1965
• Kamprad self-financed a showroom
• Located in the suburbs of Stockholm

IKEA
Our Vision To Create a better everyday life for
the Many people.
5
HISTORYExpanding Abroad

• 1963
• Oslo, Norway
• 1973
• Zurich, Switzerland
• 1974
• Germany
• Became IKEAs largest market

IKEA
Our Vision To Create a better everyday life for
the Many people.
6
HISTORYExpanding Abroad

• Became a larger, more complex company
• Servicing customers with many features
• Playroom for children
• Low-priced restaurant
• Sweden Shop

• Carried more products
• Textiles
• Kitchen utensils
• Flooring
• Rugs Carpets
• Lamps
• Plants

IKEA
Our Vision To Create a better everyday life for
the Many people.
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Critical Issues

• How should the company deal with the ongoing
  issue of child labor in the supply chain?

Our Vision To Create a better everyday life for
the Many people.
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Critical Issues

• Should the company continue to try to deal with
  the issue through its own relationships with its
  suppliers?

Our Vision To Create a better everyday life for
the Many people.
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Critical Issues

• Should it step back and allow Rugmark to monitor
  the use of child labor on its behalf? Or should
  it recognize that the problem was too deeply
  embedded in the culture of these countries for it
  to have any real impact, and simply withdraw?

Our Vision To Create a better everyday life for
the Many people.
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SWOT Analysis

• Weaknesses
• Assemble products yourself
• Store layouts (reminds people of Wal-Mart)
• Reputation, after the formaldehyde incident, and
  child labor accusations

• Strengths
• Low prices
• Advertising (Catalog, website, radio, word of
  mouth)
• Good online presence
• One stop shopping
• A typical IKEA has a grocery store, restaurant,
  and baby care room

IKEA
Our Vision To Create a better everyday life for
the Many people.
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SWOT Analysis (cont.)

• Opportunities
• Have some assembled furniture
• Continue to expand!!

• Threats
• Crate and Barrel
• Wal-Mart
• Pier 1
• Galiform

IKEA
Our Vision To Create a better everyday life for
the Many people.
12
Porters 5 Forces

• Low

• High

IKEA

• High

• High

• High

Our Vision To Create a better everyday life for
the Many people.
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Brief Background and Problems

• IKEA from a mail order company to the giant
  corporation they are today
• Indian rugs
• Formaldehyde
• 1994 Swedish documentary and Pakistan suppliers
• What they did

Our Vision To Create a better everyday life for
the Many people.
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Problems

• 1995 German documentary Rangan Exports
• Business area manager for carpets Marianne
  Barner
• What to do

Our Vision To Create a better everyday life for
the Many people.
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Recommendations

• Rugmark
• Help the children
• Education
• Government
• saving face, eliminating child labor in
  production of Indian rugs, and ultimately helping
  these children.

Our Vision To Create a better everyday life for
the Many people.
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What really happened

• IKEA does not tolerate child labor and works
  actively to prevent it.
• The IKEA Way on Preventing Child Labor.
• Third party auditors
• UNICEF
• Fix the root of the child labor problem by fixing
  debt, poverty, lack of access to education, and
  ill health.

Our Vision To Create a better everyday life for
the Many people.
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Thankyou

• Thank you for your time and attention to our
  presentation on IKEA.

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Questions
IKEA
Our Vision To Create a better everyday life for
the Many people.