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IKEA’s Global Sourcing Challenge: Indian Rugs And Child Labor

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IKEA is a Europe based multinational company that sells over 12,000 products worldwide. The company was founded in 1943 in Sweden and specializes in furniture. It was founded by Ingvar Kampand. He was one of the richest persons in the world in 2016. In this paper, I am going to explain the unethical incident occurred in 1994 with IKEA. The paper also discusses the methods to cope with the unethical incidents and what kind of decisions can be taken at that time. It also mentions the risks and problems faced by outsourcing and role NGO and MNC partnerships.

IKEA is a multicultural company. It’s a private European company that designs and sells furniture and other household stuff like kitchen appliances and gadgets. The company was founded in 1943 in Sweden by Ingvar Kampand who was 17 years old at that time. In the present scenario, the company is the biggest furniture retail company. The founder of IKEA was the eighth richest person on the globe in the year 2016. This multinational (MNC) enterprise in 2019, operates in 52 nations and manufactures around 12,000 products worldwide. The company also offers online services.

In the year 1994, the company landed in a controversy, where some children were found working in the factory. The children were making the rugs and other products for one of the suppliers of the company IKEA. UN took urgent action upon this and the incident did lots of damage to the goodwill of the company in those days due to which company had to change in their ongoing policies and strategies.

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This matter was unethical and occurred at the international level and this needed to be solved effectively and efficiently. The company IKEA followed some of the effective methods to cope with this obstacle. At first, the CEO of the enterprise came forward at the news channel and apologized for the mistake and ensure to set a committee to settle down and investigate the reasons and people behind that happening. The company also contracted with all of its suppliers and the responsibility to solve this problem was given to Mr. Millianne Barner, the area manager for the rugs and carpets. The manager called and consulted with all the other persons working for IKEA in India and started selling the rugs under the new label which was the proof that the rugs production does not include the use of child labor. Moreover, to eradicate this arising concern, the company started monitoring all the importing and supplies at international levels to ensure quality and ethical work. IKEA’s carpets business area manager, Mr. Barner, also introduced an organization called ‘Save the Children’ that started dealing and responding to this kind of situation and worked as a watchdog on all the worldwide production operations. Also, the enterprise decided to minimize their production in the areas of India, Nepal, and Pakistan for their profit issues and their ethical image.

Outsourcing is one of the most used policies of manufacturing by companies nowadays. Companies get their products supplied from another nation as they get quality work and less cost. But it also raises some problems.

The biggest risk is uncertainty. The company was sometimes unable to meet the demands on time. Also, delay in the delivery from the outsourcing nation to the numerous marketing places because of environmental factors like heavy rains and floods that cause problems in the shipments through planes and ships and also sometimes the products do not match the expectations of the people. The other factor can be that the control of management is comparatively very less in producing the product from any other country because of cheap factors than manufacturing domestically. Experience also plays a vital role in outsourcing. The workers working in other nations do not know what people in another part of the world need or like and technology they use for production can be outdated sometimes which causes the usual delays. Financial uncertainties are the biggest factor and risk which leads to numerous business situations even to shut down. Some hidden costs in production like machinery repairs and bonuses affect the financial stability of an enterprise and push it towards the loss.

Outsourcing requires proper connections plus management. Though its cheap method to produce its results in heavy losses sometimes. A social enterprise is an organization that works and applies profitable (money-making) strategies and also works for improvements in the society side by side. IKEA as well works with trade unions, NGOs for the development and betterment of the society. IKEA has a partnership for environment conservation with WWF (global conservation organization). The partnership between an organization and the NGOs helps the big MNC’s to sustain in the era of competition. The NGOs keep check on the activities of the company and prevents companies to do unethical activities and it also encourages the businessmen to empower different communities and provides chances to new talents. It also reduces the stress on the company to think about society. Overall, it is the best way to work jointly as new people will come to a company and holistic growth in an ethical way is done but it also has some cons like loss of independence in decision making and policy formation.



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IKEA’s Global Sourcing Challenge: Indian Rugs And Child Labor. (2022, February 17). Edubirdie. Retrieved December 5, 2022, from
“IKEA’s Global Sourcing Challenge: Indian Rugs And Child Labor.” Edubirdie, 17 Feb. 2022,
IKEA’s Global Sourcing Challenge: Indian Rugs And Child Labor. [online]. Available at: <> [Accessed 5 Dec. 2022].
IKEA’s Global Sourcing Challenge: Indian Rugs And Child Labor [Internet]. Edubirdie. 2022 Feb 17 [cited 2022 Dec 5]. Available from:
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