Ikea Children Labour

keas spheric Sourcing quarrel Indian Rugs and churl promote (A) In May 1995, Marianne Barner faced a tough close. After just devil stratums with IKEA, the worlds largest piece of article of article of article of furniture retailer, and less than a year into her teleph one(a) circuit as business bea theater director for covers, she was faced with the decision of cutting off one of the associations study suppliers of Indian rugs. While such a bunk would disrupt supply and par clutch sales, she found the reasons to do so quite compelling.A German TV displace had just broadcast an investigative bailiwick naming the supplier as one that apply boor labor in the intersectionion of rugs do for IKEA. What frustrated Barner was that, like full-length other IKEA suppliers, this large, thoroughly-regarded comp either had tardily gestural an addendum to its supply contract explicitly forbidding the commit of child labor on pain of termination. Even much difficult than this short-term decision was the long-term action Barner knew IKEA must take on this identification number. On one hand, she was being urged to sign up to an sedulousness-wide reply to growing c oncerns just ab place the empower on of child labor in the Indian carpet industry.A recently formed partnership of manufacturers, importers, retailers, and Indian nongovernmental presidential terms (NGOs) was proposing to reveal and monitor the riding habit of Rugmark, a label to be attri nonwithstandinge on carpets certifying that they were do with bug appear child labor. Simultaneously, Barner had been conversing with wad at the Swedish Save the Children organization who were urging IKEA to meet that its retort to the situation was in the high hat avocation of the childwhatever that readiness imply. Finally, there were some who wondered if IKEA should non just leave this hornets nest.Indian rugs accounted for a tiny part of IKEAs foldover, and to these observers, the time, repre displace, and reputation risk posed by continuing this product pains seemed non worth the boodle potential. The kind and Maturing of a orbicular Company1 To beneathstand IKEAs trading operations, one had to on a lower floorstand the doctrine and beliefs of its 70year- gaga founder, Ingvar Kamprad. Despite stepping d cause as CEO in 1986, some a decade afterward, Kamprad retained the title of honorary chairman and was placid truly(prenominal) involved in the companys activities. yet perhaps even to a greater extent powerful than his ongoing presence were his strongly held values and beliefs, which long agone had been deeply embedded in IKEAs acculturation. Kamprad was 17 years old when he started the mail-order company he called IKEA, a name that combined his initials with those of his family farm, Elmtaryd, and parish, Agunnaryd, primed(p) in the ____________________________________________________________ _______________________________________________ _____ Professor Christopher A.Bartlett, Executive Director of the HBS Europe Research core Vincent Dessain, and Research Associate Anders Sjoman prepared this case. HBS cases are bringed solely as the basis for anatomy discussion. Certain details permit been disguised. Cases are not intended to serve as endorsements, themes of primary data, or illustrations of effective or ineffective counseling. Copy well(p) 2006 President and Fellows of Harvard College. To order copies or request authority to reproduce veridicals, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http//www. bsp. harvard. edu. No part of this publication may be reproduced, warehousingd in a retrieval system, pulmonary tuberculosisd in a spreadsheet, or catching in any form or by any meanselectronic, mechanical, photocopying, recording, or otherwisewithout the permission of Harvard Business School. 906-414 IKEAs Global Sourcing quarrel Indian Rugs and Child Labor (A) forests of southern Sweden. Working out of the family kitchen, he sold goods such as fountain pens, cigarette lighters, and binders he purchased from cheap artificial lakes and consequently advertised in a newssheet to local shopkeepers.When Kamprad matched his competitors by adding furniture to his newsletter in 1948, the immediate achievement of the new line led him to give up the small items. In 1951, to veer product returns, he opened a display install in near Almhult colonization to allow customers to inspect products in the stolon buying. It was an immediate success, with customers traveling septenary hours from the capital Stockholm by train to visit. Based on the stores success, IKEA stopped accepting mail orders. Later Kamprad reflected, The basis of the modern-day IKEA sentiment was created at this time and in principle it unagitated applies.First and foremost, we use a compose to tempt pile to visit an exhibition, which today is our store. . . . Then, catalog in hand, customers contri ande see simple insides for themselves, touch the furniture they want to buy and then write out an order. 2 As Kamprad bursted and refined his furniture retailing business model he became increasingly frustrated with the panache a tightly knit cartel of furniture manufacturers controlled the Swedish industry to keep prices high. He began to view the situation not just as a business opportunity scarcely in like manner as an inconceivable social problem that he wanted to correct.Foreshadowing a view for IKEA that would later be articulated as creating a better life for the umpteen people, he wrote A disproportionately large part of all resources is used to satisfy a small part of the population. . . . IKEAs aim is to castrate this situation. We shall offer a wide operate of home furnishing items of good rule and function at prices so low that the majority of people burn down afford to buy them. . . . We have great ambitions. 3 The small n ewsletter in the first place long expanded into a full catalog. The 1953 break through introduced what would become other key IKEA feature self-assembled furniture.Instead of buying complete pieces of furniture, customers bought them in flat packages and put them together themselves at home. Soon, the knockdown concept was fully systemized, saving transport and storage costs. In typical fashion, Kamprad turned the savings into unflustered lour prices for his customers, gaining an even larger following among young postwar householders carrying for well-designed but inexpensive furniture. Between 1953 and 1955, the companys sales doubled from SEK 3 jillion to SEK 6 million. 4Managing Suppliers Developing Sourcing Principles As its sales overlyk off in the late 1950s, IKEAs radically new concepts began to encounter stiff ohmic resistance from Swedens large furniture retailers. So threatened were they that when IKEA began exhibiting at distribute fairs, they colluded to stop the company from taking orders at the fairs and eventually even from covering its prices. The cartel also pressured manufacturers not to sell to IKEA, and the few that continue to do so oft made their deliveries at night in unasterisked vans.Unable to meet demand with such cons clever local supply, Kamprad was forced to look abroad for new sources. In 1961, he contracted with several furniture factories in Poland, a country still in the Communist east bloc. To assure quality output and reliable delivery, IKEA brought its knowhow, taught its processes, and even provided machinery to the new suppliers, revitalizing Polands furniture industry as it did so. Poland soon became IKEAs largest source and, to Kamprads delight, at much lower costsonce once more allowing him to reduce his prices.Following its success in Poland, IKEA adopted a general procurance principle that it should not own its means of production but should want to develop close ties by supporting its suppliers in a 2 IKEAs Global Sourcing quarrel Indian Rugs and Child Labor (A) 906-414 long-term relationship. a Beyond supply contracts and technology transfer, the relationship led IKEA to move over loans to its suppliers at reasonable rates, re founderable through future shipments. Our objective is to develop long-term business partners, explained a senior purchasing manager. We commit to doing all we can to keep them competitiveas long as they run equally committed to us. We are in this for the long run. Although the relationship surrounded by IKEA and its suppliers was often described as one of mutual dependency, suppliers also knew that they had to take a breather competitive to keep their contract. From the outset they silent 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. In its constant quest to lower prices, the company substantial an peculiar focussing of identifying new sources.A s a veteran IKEA manager explained We do not buy products from our suppliers. We buy unused production capacity. It was a philosophy that often led its purchasing managers to seek out seasonal manufacturers with spare off-season capacity. at that place were many another(prenominal) an(prenominal) classic examples of how IKEA matched products to supplier capabilities they had sail makers make seat cushions, windowpane factories produce circumvent frames, and ski manufacturers build chairs in their off-season. The manager added, Weve ever worried more well-nigh finding the right commission at our suppliers than finding high-tech facilities.We will always help good wariness to develop their capacity. Growing Retail Expanding Abroad Building on the success of his premiere off store, Kamprad self-financed a store in Stockholm in 1965. Recognizing a growing use of automobiles in Sweden, he bucked the practice of having a business district showroom and opted for a suburban locat ion with ample parking space. When customers horde home with their furniture in flat packed boxes, they assumed 2 of the costliest parts of traditional furniture retailinghome delivery and assembly. In 1963, even before the Stockholm store had opened, IKEA had expanded into capital of Norway, Norway.A decade later, Switzerland became its world-class non-Scandinavian market, and in 1974 IKEA entered Germany, which soon became its largest market. (See exhibit 1 for IKEAs worldwide expansion. ) At each new store the same simple Scandinavian-design products were backed up with a catalog and offbeat advertising, presenting the company as those impossible Swedes with fantastic ideas. And reflecting the companys conservative values, each new entry was financed by previous successes. b During this expansion, the IKEA concept evolved and became increasingly formalized. (Exhibit 2 summarizes important events in IKEAs corporate history. It still built large, suburban stores with knockdow n furniture in flat packages the customers brought home to assemble themselves. But as the concept was refined, the company required that each store follow a preset design, set up to maximize customers exposure to the product range. The concept mandated, for instance, that the lively room interiors should follow immediately after the entrance. IKEA also serviced customers with features such as a playroom for children, a low-priced restaurant, and a Sweden Shop for groceries that had made IKEA Swedens leading food exporter. At the same time, the range little by little This policy was modified after a number of East European suppliers broke their contracts with IKEA after the fall of the Berlin Wall opened new markets for them. IKEAs subsequent supply chain problems and loss of substantial investments led concern to develop an internal production company, Swed forests, to ensure delivery stability. However, it was decided that only(prenominal) a limited amount of IKEAs purchases (perhaps 10%) should be sourced from Swedwood. b By 2005, company lore had it that IKEA had only taken one marge loan in its corporate historywhich it had paid back as soon as the cash flow allowed. 906-414 IKEAs Global Sourcing Challenge Indian Rugs and Child Labor (A) expanded beyond furniture to acknowledge a full line of home furnishing products such as textiles, kitchen utensils, flooring, rugs and carpets, lamps, and plants. The acclivitous Culture and Values5 As Kamprads evolving business philosophy was formalized into the IKEA good deal statement, To create a better everyday life for the many people, it became the alkali of the companys strategy of selling affordable, good-quality furniture to mass-market consumers around the world.The heathen norms and values that developed to support the strategys follow upation were also, in many ways, an extension of Kamprads own(prenominal) beliefs and style. The true IKEA spirit, he remarked, is founded on our enthusiasm, our c onstant will to renew, on our cost-consciousness, on our willingness to assume responsibility and to help, on our unimportance before the task, and on the simplicity of our behavior. As well as a summary of his aspiration for the companys behavioral norms, it was also a good statement of Kamprads own personal charge style.Over the years a very distinct organizational culture and management style emerged in IKEA reflecting these values. For example, the company operated very informally as prove by the open-plan office landscape, where even the CEO did not have a separate office, and the familiar and personal way all employees intercommunicate one another. But that informality often masked an intensity that derived from the organizations high self-imposed standards. As one senior executive director explained, Because there is no security available behind status or closed doors, this environment actually puts pressure on people to perform. The IKEA management process also stressed simplicity and attention to detail. Complicated rules inactivate said Kamprad. The company organized anti-bureaucrat week every year, requiring all managers to overlook time operative in a store to reestablish satisfy with the front line and the consumer. The flexpace was such that executives joked that IKEA believed in management by running play around. Cost consciousness was another strong part of the management culture. take in of resources, said Kamprad, is a mortal sin at IKEA. Expensive solutions are often signs of mediocrity, and an idea without a price tag is never accep circumvent. Although cost consciousness extended into all aspects of the operation, travel and entertainment expenses were particularly sensitive. We do not set any price on time, remarked an executive, recalling that he had once phoned Kamprad to get approval to fly prototypical class. He explained that economy class was full and that he had an urgent appointment to keep. There is no first of al l class in IKEA, Kamprad had replied. Perhaps you should go by car. The executive consummate the 350-mile trip by taxi. The search for creative solutions was also highly prized with IKEA. Kamprad had written, but while sleeping one makes no mistakes.The fear of making mistakes is the bag of bureaucracy and the enemy of all evolution. Though readiness for the future was encouraged, overanalysis was not. misinform planning can be fatal, Kamprad advised his executives. Let simplicity and popular sense characterize your planning. In 1976, Kamprad mat up the need to commit to stem the values that had developed in IKEA during the previous decades. His thesis, Testament of a article of furniture Dealer, became an important means for spreading the IKEA philosophy, particularly during its period of rapid globalistic expansion. (Extracts of the Testament are given in Exhibit 3. Specially trained IKEA ambassadors were assigned to key positions in all units to spread the companys p hilosophy and values by educating their subordinates and by acting as subprogram models. 4 IKEAs Global Sourcing Challenge Indian Rugs and Child Labor (A) 906-414 In 1986, when Kamprad stepped down, Anders Moberg, a company veteran who had once been Kamprads personal assistant, took over as president and CEO. But Kamprad remained intimately involved as chairman, and his influence extended well beyond the ongoing daily operations he was the self- plant guardian of IKEAs deeply embedded culture and values.Waking up to Environmental and Social Issues By the mid-1990s, IKEA was the worlds largest specialized furniture retailer. gross revenue for the IKEA Group for the financial year ending August 1994 totaled SEK 35 billion (about $4. 5 billion). In the previous year, more than 116 million people had visited one of the 98 IKEA stores in 17 countries, most of them drawn there by the companys product catalog, which was printed yearly in 72 million copies in 34 languages. The privately held company did not report profit levels, but one estimate put its net allowance at 8. 4% in 1994, yielding a net profit of SEK 2. billion (about $375 million). 6 After decades of seeking new sources, in the mid-1990s IKEA worked with almost 2,300 suppliers in 70 countries, sourcing a range of around 11,200 products. Its relationship with its suppliers was dominate by commercial issues, and its 24 trading service offices in 19 countries primarily monitored production, tested new product ideas, negotiated prices, and checked quality. (See Exhibit 4 for selected IKEA figures in 1994. ) That relationship began to change during the 1980s, however, when environmental problems emerged with some of its products.And it was even more severely challenged in the mid-1990s when accusations of IKEA suppliers using child labor surfaced. The Environmental Wake-Up methanal In the early 1980s, Danish authorities passed regulations to define limits for methanal emissions allowable in building prod ucts. The chemical substance compound was used as backrest glue in materials such as plywood and particleboard and often seeped out as gas. At concentrations above 0. 1 mg/kg in air, it could cause watery eyes, headaches, a burning sensation in the throat, and difficulty breathing.With IKEAs profile as a leading local furniture retailer using particleboard in many of its products, it became a prime behind for regulators wanting to publicize the new standards. So when tests showed that some IKEA products emitted more formaldehyde than was allowed by legislation, the case was widely publicized and the company was fined. More significantlyand the factual lesson for IKEAwas that due to the publicity, its sales dropped 20% in Denmark. In response to this situation, the company quickly establish stringent requirements regarding formaldehyde emissions but soon found that suppliers were failing to meet its standards.The problem was that most of its suppliers bought from subsuppliers, who in turn bought the binding materials from glue manufacturers. Eventually, IKEA decided it would have to work directly with the glue-producing chemical companies and, with the collaboration of companies such as ICI and BASF, soon found ways to reduce the formaldehyde off-gassing in its products. 7 A decade later, however, the formaldehyde problem returned. In 1992, an investigative team from a large German newsprint and TV company found that IKEAs best-selling bookcase series, Billy, had emissions higher than German legislation allowed.This time, however, the source of the problem was not the glue but the lacquer on the bookshelves. In the wake of headlines describing deadly poisoned bookshelves, IKEA immediately stopped both the production and sales of Billy bookcases worldwide and corrected the problem before resuming distribution. Not counting the cost of lost sales and production or the damage to goodwill, the Billy incident was estimated to have cost IKEA $6 million to $7 m illion. 8 5 906-414 IKEAs Global Sourcing Challenge Indian Rugs and Child Labor (A)These events prompted IKEA to speech communication broader environmental concerns more directly. Since wood was the maven material in about half of all IKEA products, forestry became a rude(a) starting point. Following discussions with both Greenpeace and realism Wide Fund for reputation (WWF, formerly World Wildlife Fund) and using standards set by the Forest Stewardship Council, IKEA established a forestry policy stating that IKEA would not accept any timber, veneer, plywood, or layer-glued wood from intact natural forests or from forests with a high conservation value.This meant that IKEA had to be willing to take on the task of tracing all wood used in IKEA products back to its source. 9 To monitor compliance, the company appointed forest managers to carry out random checks of wood suppliers and run projects on responsible forestry around the world. In addition to forestry, IKEA identified fo ur other areas where environmental criteria were to be applied to its business operations adapting the product range working with suppliers transport and distribution and ensuring environmentally conscious stores.For instance, in 1992, the company began using chlorine-free recycled paper in its catalogs it redesigned the best-selling OGLA chair originally fabricate from beechso it could be made using waste material from yogurt cup production and it redefined its packaging principles to eliminate any use of PVC. The company also maintained its partnership with WWF, resulting in numerous projects on global conservation, and funded a global forest watch program to typify intact natural forests worldwide. In addition, it engaged in an ongoing converse with Greenpeace on forestry. 10 The Social Wake-Up Child LaborIn 1994, as IKEA was still working to resolve the formaldehyde problems, a Swedish television documentary showed children in Pakistan working at weaving looms. Among the seve ral Swedish companies mentioned in the fool as importers of carpets from Pakistan, IKEA was the only highprofile name on the list. Just two months into her job as business area manager for carpets, Marianne Barner recalled the shockwaves that the TV program sent through the company The use of child labor was not a high-profile public issue at the time. In fact, the U. N. Convention on the Rights of the Child had only been published in December 1989.So, media attention like this TV program had an important role to play in raising sense on a topic not well known and understoodincluding at IKEA. . . . We were caught completely unaware. It was not something we had been paying attention to. For example, I had pass a couple of months in India learning about trading but got no exposure to child labor. Our buyers met suppliers in their city offices and rarely got out to where production took place. . . . Our immediate response to the program was to apologize for our ignorance and acknowl edge that we were not in full control of this problem.But we also committed to do something about it. As part of its response, IKEA sent a ratified team to geneva to seek input and advice from the International Labor Organization (ILO) on how to peck with the problem. They learned that Convention 138, adopted by the ILO in 1973 and ratified by 120 countries, committed ratifying countries to working for the abolition of labor by children under 15 or the age of compulsory schooling in that country. India, Pakistan, and Nepal were not signatories to the convention. 1 Following these discussions with the ILO, IKEA added a clause to all supply contractsa black-andwhite clause, as Barner put itstating simply that if the supplier employed children under legal working age, the contract would be cancelled. To take the load off stadium trading managers and to provide some independence to the monitor process, the company appointed a third-party agent to monitor child labor practices at its suppliers in India and Pakistan. Because this type of external monitoring was very unusual, IKEA had some difficulty jam a reputable and competent company to perform the task. Finally, they appointed a 6IKEAs Global Sourcing Challenge Indian Rugs and Child Labor (A) 906-414 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. earlier Lessons A Deeply Embedded Problem With India being the biggest purchasing source for carpets and rugs, Barner contacted Swedish Save the Children, UNICEF, and the ILO to expand her understanding and to get advice about the issue of child labor, especially in South Asia.She soon found that profound data was often elusive. While estimates of child labor in India vary from the governments 1991 census figure of 11. 3 million children und er 15 working12 to Human Rights Watchs estimate of between 60 million and 115 million child laborers,13 it was clear that a very large number of Indian children as young as tailfin years old worked in agriculture, mining, quarrying, and manufacturing, as well as acting as household servants, street vendors, or beggars.Of this total, an estimated 200,000 were employed in the carpet industry, working on looms in large factories, for small subcontractors, and in homes where whole families worked on looms to earn extra income. 14 Children could be bondedessentially place in servitudein order to pay off debts incurred by their parents, typically in the range of 1,000 to 10,000 rupees ($30 to $300). But due to the astronomical interest rates and the very low wages offered to children, it could take years to pay off such loans. Indeed, some indentured child laborers eventually passed on the debt to their own children.The Indian government stated that it was committed to the abolition of bonded labor, which had been smuggled since the Children (Pledging of Labour) piece passed under British rule in 1933. The practice continued to be widespread, however, and to reinforce the earlier law, the government passed the Bonded Labour System (Abolition) Act in 1976. 15 But the government took a less arbitrary stand on unbonded child labor, which it characterized as a socioeconomic phenomenon arising out of poverty and the lack of development. The Child Labour (Prohibition and Regulation) Act of 1986 prohibited the use of child labor (applying to those under 14) in certain defined doubtful industries and regulated childrens 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 transit of speciali zed handicraft skills from generation to generation. 16 Critics charged that even with these laws on the books, exploitive child laborincluding bonded laborwas widespread because laws were poorly enforced and prosecution rarely severe. 17 Action Required ripe Issues, New Options In the fall of 1994, after managing the initial response to the crisis, Barner and her direct manager traveled to India, Nepal, and Pakistan to learn more. Barner recalled the trip We felt the need to educate ourselves, so we met with our suppliers. But we also met with unions, politicians, activists, NGOs, U. N. rganizations, and carpet export organizations. We even went out on unannounced carpet factory raids with local NGOs we saw child labor, and we were impel out of some places. On the trip, Barner also learned of the formation of the Rugmark Foundation, a recently initiated industry response to the child labor problem in the Indian carpet industry. Triggered by a consumer awareness program started by human rights organizations, consumer activists, and trade unions in Germany in the early 1990s, the Indo-German Export forwarding Council had joined up with key 906-414 IKEAs Global Sourcing Challenge Indian Rugs and Child Labor (A) Indian carpet manufacturers and exporters and some Indian NGOs to develop a label certifying that the hand-knotted carpets to which it was attached were made without the use of child labor. To implement this idea, the Rugmark Foundation was organized to supervise the use of the label. It expected to begin exportation rugs carrying a unique identifying number in early 1995.As a major purchaser of Indian rugs, IKEA was invited to sign up with Rugmark as a way of sleep withing with the ongoing potential for child labor problems on products sourced from India. On her return to Sweden, Barner again met frequently with the Swedish Save the Childrens secure on child labor. The people there had a very forward-looking view on the issue and taught us a lot, said Barner. supra all, they emphasized the need to ensure you always do what is in the best interests of the child. This was the principle set at the heart of the U. N.Convention on the Rights of the Child (1989), a document with which Barner was now quite familiar. (See Exhibit 5 for Article 32 from the U. N. Convention on the Rights of the Child. ) The more Barner learned, the more complex the situation became. As a business area manager with full profit-and-loss responsibility for carpets, she knew she had to cheer not only her business but also the IKEA brand and image. Yet she viewed her responsibility as broader than this She felt the company should do something that would make a difference in the lives of the children she had seen.It was a view that was not universally held at bottom IKEA, where many were concerned that a very proactive stand could put the business at a significant cost disadvantage to its competitors. A New Crisis Then, in the spring of 1995, a year aft er IKEA began to address this issue, a well-known German documentary maker notified the company that a film he had made was about to be broadcast on German television showing children working at looms at Rangan Exports, one of IKEAs major suppliers.While refusing to let the company preview the video, the filmmaker produced still shots taken directly from the video. The producer then invited IKEA to send someone to take part in a live discussion during the airing of the program. tell Barner, Compared to the Swedish program, which documented the use of child labor in Pakistan as a serious report about an important issue without targeting any single company, it was immediately clear that this German-produced program planned to take a confrontational and aggressive approach aimed directly at IKEA and one of its suppliers. For Barner, the first question was whether to recommend that IKEA participate in the program or spurn the invitation. Beyond the immediate public relations issue, sh e also had to decide how to deal with Rangan Exports apparent violation of the contractual commitment it had made not to use child labor. And finally, this crisis raised the issue of whether the overall approach IKEA had been taking to the issue of child labor was enamor. Should the company continue to try to deal with the issue through its own relationships with its suppliers?Should it step back and allow Rugmark to monitor the use of child labor on its behalf? Or should it distinguish that the problem was too deeply embedded in the culture of these countries for it to have any real impact and simply withdraw? 8 IKEAs Global Sourcing Challenge Indian Rugs and Child Labor (A) 906-414 Exhibit 1 IKEA repositings, Fiscal twelvemonth Ending August 1994 a. Historical Store Growth 1954 Number of Stores 0 1964 2 1974 9 1984 52 1994 114 b. Countrys First StoreFirst Store (with city) Country Sweden Norway Denmark Switzerland Germany Australia Canada Austria Netherlands Singapore Spain Ice land France Saudi Arabia Belgium capital of Kuwait united States United landed estate Hong Kong Italy Hungary Poland Czech Republic United Arab Emirates Slovakia Taiwan Year 1958 1963 1969 1973 1974 1975 1976 1977 1978 1978 1980 1981 1981 1983 1984 1984 1985 1987 1988 1989 1990 1991 1991 1991 1992 1994 City Almhult Oslo Copenhagen Zurich Munich Artamon Vancouver Vienna Rotterdam Singapore Gran Canaria Reykjavik Paris Jeddah Brussels Kuwait City Philadelphia Manchester Hong Kong Milan Budapest Platan Prague Dubai Bratislava TaipeiSource IKEA website, http//franchisor. ikea. com/txtfacts. html, accessed October 15, 2004. 9 906-414 IKEAs Global Sourcing Challenge Indian Rugs and Child Labor (A) Exhibit 2 IKEA accounting Selected Events Year 1943 1945 1948 1951 1955 1956 1958 1961 1963 1965 1965 1973 1974 1978 1980 1980 1985 1985 1991 Event IKEA is founded. Ingvar Kamprad constructs the company name from his initials (Ingvar Kamprad), his home farm (Elmtaryd), and its parish (Agunnar yd). The first IKEA ad appears in press, advertising mail-order products. Furniture is introduced into the IKEA product range.Products are still only advertised through ads. The first IKEA catalogue is distributed. IKEA starts to design its own furniture. Self-assembly furniture in flat packs is introduced. The first IKEA store opens in Almhult, Sweden. cut down with Polish sources, IKEAs first non-Scandinavian suppliers. First delivery is 20,000 chairs. The first IKEA store outside Sweden opens in Norway. IKEA opens in Stockholm, introducing the self-serve concept to furniture retailing. IKEA stores add a section called The Cook Shop, offering quality utensils at low prices.The first IKEA store outside Scandinavia opens in Spreitenbach, Switzerland. A plastic chair is developed at a supplier that usually makes buckets. The BILLY bookcase is introduced to the range, becoming an jiffy top seller. One of IKEAs best-sellers, the KLIPPAN lounge with removable, washable covers, is int roduced. Introduction of escape coffee table, made from a strong, light material by an interior door factory. The first IKEA Group store opens in the U. S. MOMENT sofa with frame built by a supermarket trolley factory is introduced. Wins a design prize. IKEA establishes its own industrial group, Swedwood.Source Adapted from IKEA Facts and Figures, 2003 and 2004 editions, and IKEA internal documents. 10 IKEAs Global Sourcing Challenge Indian Rugs and Child Labor (A) 906-414 Exhibit 3 A Furniture Dealers TestamentA Summarized Overview In 1976, Ingvar Kamprad listed nine aspects of IKEA that he believed formed the basis of the IKEA culture together with the vision statement To create a better everyday life for the many people. These aspects are given to all new employees through a cusp titled A Furniture Dealers Testament. The following table summarizes the major points Cornerstone 1.The Product RangeOur Identity 2. The IKEA SpiritA Strong and Living Reality 3. Profit Gives Us Reso urces Summarize verbal description IKEA sells well-designed, functional home furnishing products at prices so low that as many people as possible can afford them. IKEA is about enthusiasm, renewal, thrift, responsibility, humbleness toward the task and simplicity. IKEA will achieve profit (which Kamprad describes as a terrific word) through the lowest prices, good quality, economical development of products, improve purchasing processes and cost savings. Waste is a deadly sin. 4.Reaching Good Results with smallish Means 5. Simplicity is a Virtue Complex regulations and exaggerated planning paralyze. IKEA people stay simple in style and habits as well as in their organizational approach. IKEA is run from a small village in the woods. IKEA asks shirt factories to make seat cushions and window factories to make table frames. IKEA discounts its umbrellas when it rains. IKEA does things differently. We can never do everything everywhere, all at the same time. At IKEA, you choose the most important thing to do and finish that before starting a new project. The fear of making mistakes is the root of bureaucracy. Everyone has the right to make mistakes in fact, everyone has an obligation to make mistakes. 6. Doing it a Different elbow room 7. ConcentrationImportant to Our Success 8. Taking ResponsibilityA prerogative 9. Most Things Still Remain to be IKEA is only at the beginning of what it might become. 200 stores is Done. A Glorious Future nothing. We are still a small company at heart. Source Adapted by casewriters from IKEAs A Furniture Dealers Testament Bertil Torekull, prima(p) by Design The IKEA Story (New York Harper Business, 1998, p. 12) and interviews. 11 906-414 IKEAs Global Sourcing Challenge Indian Rugs and Child Labor (A) Exhibit 4 a. gross revenue IKEA in Figures, 19931994 (fiscal year ending August 31, 1994) Country/region Germany Sweden Austria, France, Italy, Switzerland Belgium, Netherlands, United Kingdom, Norway North America (U. S. and Canada) Czech Republic, Hungary, Poland, Slovakia Australia SEK billion 10. 4 3. 9 7. 7 7. 3 4. 9 0. 5 0. 4 35. 0 Percentage 29. 70% 11. 20% 21. 90% 20. 80% 13. 90% 1. 50% 1. 00% b. PurchasingCountry/region Nordic Countries East and Central Europe Rest of Europe Rest of the World Percentage 33. 4% 14. 3% 29. 6% 22. 7% Source IKEA Facts and Figures, 1994. Exhibit 5 The U. N. Convention on the Rights of the Child Article 32 1. States Parties recognize the right of the child to be protected from economic exploitation and from playacting any work that is likely to be hazardous or to hinder with the childs education, or to be harmful to the childs health or physical, mental, spiritual, moral, or social development. . States Parties shall take legislative, administrative, social, and educational measures to ensure the implementation of the present article. To this end, and having regard to the relevant provisions of other international instruments, States Parties shall in particular (a ) (b) (c) Provide for a minimum age for approach to employment Provide for appropriate regulation of hours and conditions of employment Provide for appropriate or other sanctions to ensure the effective enforcement of the present article.