Economics Harvard Case Solution

Home >> Finance >> Economics

Economics Case Study Solution & Analysis


IKEA is a worldwide company in Sweden. He called the company at the age of 17 when he initiated his very first mail-order business. It was named as Economics Case Study Solution by a mix of terms relating to his personal life from his personalizes to his family farm i.e. Ignvar Kamprad Elmtaryd Agunnaryd.

The competitors due to decreased sale threatened the suppliers of IKEA to not take orders at low rates. In 1961, IKEA contracted with numerous of the factories producing furnishings and therefore it again came up with low costs. On the other hand, Economics Case Study Help divided its store in a number of departments like cheap price snack bar, kids play-area, as well as a Sweden Shop for the foods making it a popular exporter of food.

The motive of the company was to sale quality products with sensible rates with variation in items worldwide based on a vision to create a much better lifestyle for nearly everybody. Every year, the company celebrates an anti-bureaucrat week to establish better contact in between the customers and suppliers.

In the mid period of 1990s, IKEA has a broad working connecting with about 70 nations finding its products about 11,200. It worked with practically a bigger variety of suppliers around 2300 internationally (see Display 2). When there were ecological issues emerging about IKEA's items all at once the issuance on the kid labor emerged. This has led the company to face the challenging scenario in the maintenance of their relation with suppliers. Due to this reason, IKEA's popularity decreased dropping the 20% of its sale in Denmark. .

Key Players.

There are two key players in this case one is IKEA Company and other is its providers. IKEA's strategy is to outsource its product making to providers. These suppliers are usually 3rd party and based throughout the world.


There is unfavorable effect of these issues on revenue of the company and also reputation of the company. They desired Economics Case Study Help to be socially accountable and wanted that it did not have any connection with kid labour or any other environment issue. IKEA strategies likewise did not work well adequate to resolve this concern (see Display 3).

Approaching Issue of Child Labour.

IKEA method is to maintain high level of social duty since it is among the considerable catalyst in success of business. Economics Case Study Analysis is concerned on child labour concern and other environmental concerns to support this strategy. There was element of social obligation which was engrained in the culture of IKEA's creator Ingvar Kamprad (Exhibit 2). People from India had conflicting views concerning child labour and social obligation. According to Indian people kid labour is okay if it is enabled by moms and dads or if children are working under guidance of their moms and dads. There is common practice of kid work in India and federal government is likewise unwinded over this matter if it is unbounded child labour or if their parents are agreed and enabled their kids to work. Children are likewise allowed to operate in craft industries to ensure that skills from earlier generation are not lost.( Naidu & Ramaiah, 2006) Furthermore, IKEA was likewise encouraged by Swedish Conserve the Kid organization to act "in the best interest of kid".( Odenbring, 2018) According to this they would be doing only that work which is in the best interest of children. They would not be involved in any deal in which kid labour is used or there is any possibility of environment concern. Because they are dependent of kid labour, many of the households would be doing not have important source of income. Their basic costs like food, clothing are satisfied through their working of kid.( Duflo, 2006) Also laws are not stringent adequate to resolve concerns of environment or social issues like child labour so business need to fret whether it is appropriate to carry out business in India or not. They required to make certain that their business does not engage in any activity which is against social obligation. The decision requires to be taken by likewise incorporating approach of social responsibility from the perspective of consumer not from point of view of providers. Consumers ought to not be having doubt their company is taken part in any unwanted activity. There might be unfavorable outcome if standards regarding social responsibility from consumer point of view are not followed. There was case happened in 1980's. IKEA had stopped working to satisfy necessary requirements on formaldehyde for some of its products. Because case IKEA had actually lost its incomes by 20% in Denmark. Due to the fact that company's credibility in the eyes of consumers had declined. In 1992 there was likewise loss of around $6 to $7 million. Since it was not according to needed level of formaldehyde, this loss was resulted from discontinuation of a popular bookcase series. This also harm business's credibility considerably.

Reaction to German producers on Video Program:

In action to the invitation of German manufacturers for IKEA, the invite ought to need to be accepted. Specifically, Barner can perhaps demonstrate her idea of mind with a clear justification letting people know that for her it is more essential to be more worried about the IKEA reputation as she is only responsible for this. It also offers Economics Case Study Help to conscious the German manufacturers to combat versus the child labour.

As the German Manufacturers had just provided IKEA to see some of the shots from their documentary. They need to be asked for to let them see the entire movie instead of some shots which reveals certainly an uncertain picture of the truth. This may be the method of German producers to show themselves right against the claims however leaving IKEA behind loaded with doubts about their relationship with the companies of India on the problem of child labour.

On the contrary, the IKEA has been positively portrayed about the issue of Child labour when the problem was initially set up by the Swedish Television. There are a set of info on kid labour by IKEA which was considerably collected by ILO and UNICEF. This info really demonstrates the same viewpoint as like that of the documentary makers. This will let the producers to astonish about the problematic problem by clear representation of kid aid throughout their labour at the manufacturing markets.

As the German producers declined to show their documentary to IKEA prior to it is telecasted merely suggests there wicked intent of point the finger at somebody and their relationships with IKEA potentially. There might a strong contradiction that the IKEA is fearlessly engaged with a company which uses kid as their labour and continue their relations to earn profits with the providers while being conscious of the reality.

The obligation of the errors taken by anyone is thought about as the best source of pride.Despite of the truth that IKEA was not mindful about the growing issue over the kid labour as well as the including child's as labours by the industries, the suppliers of the Economics Case Study Solution. Throughout the approval of agreement, IKEA started examination against its provider industries around the world.

Barner can likewise create another justification on the ineffective responsibility over social concerns. It is meaning to be included with the social concerns but has not taken such procedures. In the field of marketing, IKEA is on leading with exceptional concepts as well as its appealing items.

The issues of the IKEA is towards leading long term relationships with its network of distribution internationally. IKEA is not just recently associated with any of the social activities about the rights and concerns of each private working in the industries and earning them a good-looking earnings. In future, IKEA will prepare to be part of duty over the social issues.

Thus, it can be concluded that based on the concern for the business's reputation and share of share need to accept the invitation and present it legitimate thoughts only in case if whatever in documentary protests the IKEA. Specifically, IKEA had actually begun a Foundation based on the concept of securing rights of kid labour and to offer them with free environment to inform themselves. (Barlet, 2006).

Actions on Supply contract with Rangan Exports:.

Under the IKEA issues about the most tactical and logical method in referral to the child labour problem should provide Rangan Exports with another chance to assist them in overcoming this issue.

IKEA needs to take some steps in order to figure out of the truth. , if the evidence against the Rangan export is true thus leading it in the failure on the moral level which were outlaid by IKEA.. This plainly shows that on IKEA, the supplier industry leading to conflict on the child labour issue.

Consequently, IKEA works with a vision of producing better lifestyle for every single person which is a strong representation for the enterprises to mean the rights of workers of Rangan Exports. The principle of kid labour does not include a single business as a huge network of companies are responsible in putting it ahead. This is one of the most critical problem of social concerns and it would be oppression to blame a single one.

If the management of Economics Case Study Analysis not decides for the contract termination, this brings a risk of losing brand position and credibility. This may result in the financial decline state of IKEA by reduced ratio of sale, less popularity of the brand name and the issues over social duties. The primary disadvantage of this replacement is the IKEA deprivation with a beneficial association and might result in the ending relations with the sources of rug by India.

The 2nd alternative is to caution the provider industry with continuation of the relate to a guarantee to let not do this error again and certainly inhibit the kid labour. This will help in upkeep of the healthy association between the supplier and the Economics Case Study Analysis. This likewise provides a possibility to much better teach the providers about the disadvantages of the child labour. Nevertheless, this decision is made on the basis of IKEA's self-created policy. This makes apparent for the all suppliers that IKEA is strictly versus the kid labour and truly condemn it. This might have a bad impact on the marketplace reputation of Economics Case Study Solution by the generation of false publicity.

As it is for the second time that IKEA became a victim of kid labour which has significantly harmed its reputation. For this purpose, Barner must pursue the aid by ILO and UNICEF in addition to NGOs which may help Rangan in escaping the requirement to used child labour for the carpets production. It might pick to spread out awareness amongst the homeowners internationally about the social issues and how one's life is affected by in terms of social, and ethical worths.

IKEA by the adoption of very first option, ends its relationship with thesupplier infraction. If results in the failure then portray a bad effect on all providers by the increased power of bargaining and the offense of the policy of IKEA. The press ought to be called upon for the statement of their choice with its reason with the summarization of the policy of IKEA on the usage labour of kid.

In sum, the company can keep its credibility in the market and somehow can bear the loss produced by one provider. With the steady track record in the market, Economics Case Study Solution will undoubtedly conceal its monetary crisis within a short time period.

Method Relating to IKEA's Operations in India

IKEA method is essentially focus on long term relationship with its suppliers instead of short term. This long term method assists IKEA in getting dependable and competitive supplier source. For long term relationship they used to assist their provider to make complete usage of their capacity. They asked providers to supply products and services other than their core products and services. The very same technique that was utilized by IKEA in Poland could be obtained.( Harapiak, 2013) The strategy was to contract out production of furniture and not produce by its own. IKEA likewise requires to make certain that they involve public through its marketing actions which ought to be helpful in comprehending IKEA's objectives.

At earlier time IKEA had no focus on environmental and social issues which likewise contains child labor they utilized to focus on only one technique i.e. supplying budget friendly and quality items to customers. That enhanced focus could help Economics Case Study Analysis in enhancing its reputation towards its clients. Stopping operations from India would not ensure service to child labor but also unfavorable reputation would be built that IKEA is not taking any trusted action to solve fundamental issue i.e. kid labor.

If Economics Case Study Help did not take any possible step to resolve problem of kid labor then it would result in loss of sales and IKEA's value too. For a business like IKEA credibility loss is huge loss because worth of business also based on it and likewise there would be decrease in incomes and goodwill if there is any reputation loss.

If IKEA think about only sales figure then getting out from Indian market is more suitable. Since sales from Indian market only contributes little portion to IKEA's earnings.

IKEA needed to make sure that child labor is not utilized for their items. For that purpose IKEA needs a system that can keep an eye on whole procedure. As provider has absence of monetary resources to provide education to kids, so IKEA ought to help provider financially and supply them monetary help and ask to offset by future deliveries.

There might be one other option for this issue that Economics Case Study Help might install its own manufacturing business integrated with school. All monetary needs of that school might be satisfied by earnings from that producing company. IKEA must run this school by itself and its auditing task must be provided to any other institute like Rugman to make certain it is working properly for best interest of kids. (Usman, 2010).

Economics Case Study Help Must Sign up to Rugmark.

As IKEA has no experience regarding kid labor so brand-new staff would be needed for this function. It must sign up to Rugmart becausethey are experienced in this field of kid labor and ask Rugmort to keep an eye on and establish process suggested by IKEA.

Resolving Source of Kid Labor.

IKEA requires to fix root cause of child labor in order to support its long term vision. For that purpose child welfare and education requires to be promoted. There ought to be collaboration with suppliers and motivate providers to execute programs for kid well-being and education. As providers had absence of resources so they ought to be offered financial aid and asked then to offset by future orders. This is long term method not short term option. (Martin, 2013) So it could not be carried out by IKEA alone. Economics Case Study Analysis starting executing its strategy in multi ways. There was partnership between UNICEF and IKEA. The purpose of this collaboration was to provide education to all kids who are working in carpet producing cluster. Some alternative knowing centres were established for those children who were not allowed to get education from public schools. Community welfare was also promoted through this program. Partnership they likewise partnered with their suppliers in order to produce solution for issue of child labor. There was program established with provider. The significant quality of program was audit of providers on regular basis. Restorative action strategy would be needed if there was any kid labor found throughout audit. In restorative action strategy kid labor is needed to be eliminated and provider is needed to make up for welfare and education of that child. There would be appropriate follow up from IKEA to make sure that in real required corrective action plan is implicated. However if it is discovered that supplier did not take any corrective action strategy then IKEA would broke agreement with that supplier and there would be no trade with that specific provider in future.

Examination of Economics Case Analysis Technique.

IKEA has commitment to its customers to provide high quality items with low rates. If IKEA remained in Indian market then it would result in higher costs for consumers. A consumer would not feel comfortable when he came to know that he purchase a rug which was woven by child but is now getting informed by supplier of Economics Case Study Analysis.


The primary issue that IKEA is facing currently is kid labor due to the fact that a German documentary maker makes documentary of a provider of IKEA that was utilizing child labor for production of goods. It was also concluded that Economics Case Study Analysis must sign up Rugmart since IKEA has no any understanding concerning child labor and Rugmart is professional having knowledge concerning concerns of kid labor. As IKEA has no experience regarding child labor so brand-new staff would be required for this function.