Ikea Poland Case Study

1. Please develop an argument supporting or alternatively not supporting each of the three options described in the last paragraph of the case:

1.  Deal itself with this issue through its own relationships with its suppliers?

Following its success in Poland, IKEA adopted a general procurement principle that it should not own its means of production but should seek to develop close ties by supporting its suppliers in a long-term relationship. Beyond supply contracts and technology transfer, the relationship led IKEA to make loans to its suppliers at reasonable rates, repayable through future shipments. Although the relationship between IKEA and its suppliers was often described as one of mutual dependency, suppliers also knew that they had to remain competitive to keep their contract. From the outset, they understood that if a more cost-effective alternative appeared, IKEA would try to help them respond, but if they could not do so, it would move production.  

1. Step back and allow Rugmark to monitor the use of child labor on its behalf?

To take the load off field trading managers and to provide some independence to the monitoring process, the company appointed a third-party agent t monitor child labor practices at its suppliers in India and Pakistan.  Because this type of external monitoring was very unusual, IKEA had some difficulty locating a reputable and competent company to perform the task. Finally, they appointed a well-known Scandinavian company with extensive experience in providing external monitoring of companies’ quality assurance programs and gave them   the   mandate not only to investigate complaints but also to undertake random audits of child labor practices at suppliers’ factories.  

1. Recognize this problem as too deeply imbedded in the culture and simply withdraw from India?

the government took a less absolute stand on unbonded child labor, which it characterized as

“a socioeconomic phenomenon arising out of poverty and the lack of development.” The Child  

Labor (Prohibition and Regulation) Act of 1986 prohibited the use of child labor (applying to those under 14) in certain defined “hazardous industries” and regulated children’s hours and working conditions in others.  But the government felt that the majority of child labor involved “children working alongside and under the supervision of their parents” in agriculture, cottage industries, and service roles. Indeed, the law specifically permitted children to work in craft industries “in order not to outlaw the passage of specialized handicraft skills from generation to generation.” 16 Critics charged that even with these laws on the books, exploitive child labor—including bonded labor—was widespread because laws were poorly enforced and prosecution rarely severe.