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AGENDA

01 Intro & Problem


02 Case analysis
03 Alternatives
04 Decision criteria
05 Analyze, evaluate, & select alternative
06 Action plan
WHO IS IKEA?
➢ Founded by Ingvar Kamprad in 1943
➢ First store in 1951
➢ Cartel led IKEA to look abroad for new suppliers
○ Poland
➢ Ingvar stepped down in 1986
○ Still served as “self-appointed guardian” of
IKEA’S culture and values
➢ Anders Moberg became CEO in 1986
➢ Mid 1990’s IKEA was the world's largest
specialized furniture retailer
IKEA’S CULTURAL WEB
Symbols Open-plan office landscape, Ingvar Kamprad

Organizational Hierarchical
Structure

Stories The origin story of IKEA

Routines & “Anti-bureaucrat week”


Rituals

Vision statement: To create a better everyday life for the many people
A well-known German documentary
maker notified IKEA that a film he had
made was about to be broadcast on
PROBLEM
German television showing children
working at looms at Rangan Exports, one STATEMENT
of IKEA’s major suppliers.

1. Should IKEA participate in the program or


decline the invitation?

2. What to do about the relationship with


Rangan Exports?

3. Is the overall approach IKEA is taking to


the issue of child labor appropriate?
CASE ANALYSIS
Increasing political Social pressure mounting Past relationships with
pressure and the UN after past scandals, IKEA environmental issues
image at risk

P S E S T E L

Loss of income and Televised hit pieces Indian laws and


relationships and live debates regulations against child
labour
ALTERNATIVES
Dropping Rangan Exports and Utilizing
1 Rugmark

Dropping Rangan Exports as a supplier and


immediately cleansing IKEA of any child labour
regarding that supplier.

2 Work with Rangan Exports

Help Rangan to elevate their labour practices


and adhere to the UN Convention on the Rights
of the Child
DECISION CRITERIA

Suitability Acceptability Feasibility

Will the alternative leverage the What are the Risks and Returns of each Does IKEA possess the resources and
Opportunities IKEA may realize, and alternative, and will it produce the capabilities required to implement the
address the threats imposed as a result desired Reaction from customers, Alternative?
of this challenge? owners, employees and suppliers?
Does IKEA have the staff required, in
Address the potential loss of revenue Address the loss of sales if the supply of terms of time and skills, to take on the
from a consumer backlash rugs is interrupted project?

Employ existing capabilities of IKEA, Meets Corporate Social Responsibility Does IKEA have the capacity to
including forging strong partnerships Expectations support the capital investments
with suppliers, trade unions and required to support the project?
organisations Aligns with “A Furniture Dealer's
Testament,” the 9 statements IKEA’s
Continue to lead industry standard founder believed is the basis of their
success

The Alternative produces the best


outcomes for the children involved
ANALYSIS & EVALUATION
Dropping Rangan Exports and Utilizing Rugmark
Suitability Acceptability Feasibility
➢ Immediately cleansing IKEA of ➢ Cost conscious. ➢ Low resource requirement.
child labour concerns. ➢ IKEA rids itself of Child Labour. ➢ Presents an immediate stance
➢ Our addendum in supplier ➢ Joining Rugmark to certify non on a large issue.
contracts forbids child labour. Child Labour carpets. ➢ Going forward, joining
➢ Follows what was stated at ➢ Easy Implementation. Organizations like Rugmark for
Geneva. ➢ Taking Responsibility - A better CSR.
➢ Similar approach to Furniture Dealer's Testament.
Formaldehyde problem in 1980’s.
➢ Joining Rugmark to cleanse itself
of Child Labour.
ANALYSIS & EVALUATION Working With Rangan Exports
Suitability Acceptability Feasibility
This alternative addresses child This option puts the needs of the This alternative will require a large
labour head on rather than simply children already working in factories number of resources, both in terms of
walking away from it and hoping it first. Walking away from this supplier funding and expertise. IKEA’s
won’t happen again next time. would not help these kids. estimated loss dealing the with the
It is risky to continue to employ child bookcases was ~$7M - Their estimated
labour since it is hard to ensure that the profit for 1995 was ~$5B.
IKEA has a history of working with outline standards are upheld, but
suppliers to improve their processes. walking away would mean no one is
While this is more complex that IKEA has build strong partnerships
looking out for them.
with organizations like WWF to
refitting a factory with new
implement change in the past. They
machines, it is in line with their This will impact short term profit, but
will be able to work with Save the
existing capabilities of creating not as much as a reputation of harming
Children and other NGO’s to build
strong partnerships. children would impact long term profit.
expertise in policy formation and
This is especially true if it happens again.
monitoring capability.
Elevating an entire workforce to
meet the standards of developed Aligns well with IKEA’s mission and
values.: This is especially true regarding:
countries shows industry leadership
and will set a new standard. IKEA can
● Doing it a Different Way,
do it - why can you?
● Taking Responsibility, and
● Most things still remain to be
done. A Glorious Future!
SELECTION
7 pt scale Suitability Acceptability Feasibility

Drop Supplier 4 3 6

Elevate Supplier 6 6 5

By choosing to work with Rangan Exports’ to elevate their labour practices and set
a new industry standard for ethical labour, IKEA will be able to:
● Explain the effort already put into ensuring that child labour is not used,
● The shortcoming and challenges of that program, and
● Announce how it will be putting the needs of the child first during the live
television broadcast of the German documentary.

Facing this issue head on will show the public that IKEA plans to be open and
transparent in addressing these very serious issues.
ACTION PLAN
01
Attend the live
discussion

02
Meet with our board and
Rangan’s management to
develop a plan

03 Implement the newly developed


plan

Monitor and ensure compliance


or terminate and drop Rangan
Exports
04
THANK YOU!
Questions?