Financial Risk Management 2 Harvard Case Solution

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Financial Risk Management 2 Case Study Solution & Analysis


IKEA is a global business in Sweden. He called the business at the age of 17 when he started his first mail-order business. It was called as Financial Risk Management 2 Case Study Analysis by a mix of terms relating to his individual life from his personalizes to his household farm i.e. Ignvar Kamprad Elmtaryd Agunnaryd.

Given that 1950 to late 1990s, it has made tremendous development in both the earnings along with in expanding of the business. At first, it had one store while in the late 1990s it has more than 100 stores living in numerous countries( see Exhibit 1). The company was growing so well in competitors with leading rivals in the market. The competitors due to declined sale threatened the providers of IKEA to not take orders at low rates. In 1961, IKEA contracted with a lot of the factories manufacturing furniture and thus it again came up with low costs. On the other hand, Financial Risk Management 2 Case Study divided its store in a variety of departments like inexpensive price lunchroom, children play-area, along with a Sweden Purchase the foods making it a popular exporter of food. Over a duration of time, the item variety was expanded varying from carpets, floor coverings, lamps to different item line needed in providing house.

The intention of the business was to sale quality products with affordable costs with variation in items internationally based on a vision to produce a better way of life for practically everyone. Every year, the company celebrates an anti-bureaucrat week to establish much better contact between the suppliers and consumers. Kamprad thought on the truth that it is just possible to make no mistake while you sleep. However, the concept of preparing for the future was highly motivated. In 1986, Kamprad was replaced by his Individual assistant who was an experienced individual of the business.

In the mid period of 1990s, IKEA has a broad working networking with about 70 nations locating its products about 11,200. It dealt with practically a bigger variety of providers around 2300 globally (see Display 2). When there were ecological issues occurring about IKEA's items concurrently the issuance on the kid labor emerged. This has actually led the business to deal with the challenging circumstance in the maintenance of their relation with providers. Due to this factor, IKEA's appeal decreased dropping the 20% of its sale in Denmark. .

Key Gamers.

There are two essential gamers in this case one is IKEA Company and other is its providers. IKEA's technique is to outsource its product making to suppliers. These providers are usually third party and based throughout the world.


There is negative impact of these issues on earnings of the company and likewise track record of the business. They wanted Financial Risk Management 2 Case Study Solution to be socially responsible and desired that it did not have any connection with child labour or any other environment concern. IKEA techniques likewise did not work well enough to resolve this issue (see Exhibition 3).

Approaching Problem of Child Labour.

IKEA method is to keep high level of social obligation because it is one of the significant catalyst in success of business. IKEA is worried on kid labour problem and other ecological problems to support this technique.( Naidu & Ramaiah, 2006) Furthermore, Financial Risk Management 2 Case Study Help was also motivated by Swedish Conserve the Children company to act "in the finest interest of child".

Action to German producers on Video Program:

In reaction to the invite of German manufacturers for IKEA, the invitation should require to be accepted. The very first primary thing to consider is that the documentary is made by a German company. Nevertheless, it is not necessary to be and accept the invite part of the live discussion but it is of vital importance. As it provides Barner to have live conversation during on-air programming. It produces a possibility to provide much better description of their concerns about their relationship with India. Specifically, Barner can potentially show her thought of mind with a clear reason letting people understand that for her it is more vital to be more concerned about the IKEA track record as she is just responsible for this. It is necessary to eliminate the requirements of child labour but this can perhaps not done by stopping service relate to their partner business which involve the pattern of kid labour. This perception of Barner may assist her in keeping IKEA clear reflection and may likewise cause more powerful relationship of the business. It likewise provides IKEA to mindful the German producers to eliminate against the child labour.

As the German Producers had actually just provided IKEA to see some of the shots from their documentary. They need to be requested to let them enjoy the entire motion picture rather of some shots which reveals certainly an uncertain picture of the reality. This may be the technique of German producers to show themselves right versus the allegation however leaving IKEA behind loaded with doubts about their relationship with the business of India on the problem of child labour.

On the contrary, the IKEA has actually been favorably represented about the issue of Child labour when the issue was at first put up by the Swedish Television. There are a set of info on kid labour by IKEA which was substantially gathered by ILO and UNICEF.

As the television market has great prospective to show false news as the fact by their outstanding ability to modify any lie into a fact and makes people think on it without any doubts. Therefore, it seems rather impossible for Barnerto assess the documentary before the session. As the German manufacturers declined to reveal their documentary to Financial Risk Management 2 Case Study Analysis prior to it is telecasted just indicates there evil intent of blame someone and their relationships with IKEA perhaps. There may a strong contradiction that the IKEA is fearlessly engaged with a company which utilizes child as their labour and continue their relations to earn profits with the providers while being aware of the reality.

The responsibility of the mistakes taken by anyone is thought about as the finest source of pride.Despite of the reality that IKEA was not conscious about the growing concern over the kid labour as well as the including child's as labours by the markets, the providers of the Financial Risk Management 2 Case Study Help. Throughout the approval of contract, IKEA started examination against its provider industries around the world.

Barner can also develop another validation on the inefficient responsibility over social concerns. It is planning to be included with the social issues but has actually not taken such steps. In the field of marketing, IKEA is on leading with exceptional ideas along with its eye-catching products.

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

Thus, it can be concluded that as per the issue for the business's reputation and share of share must accept the invite and present it legitimate thoughts only in case if whatever in documentary is against the IKEA. Specifically, IKEA had started a Foundation based on the principle of securing rights of child labour and to provide them with free environment to educate themselves. (Barlet, 2006).

Actions on Supply contract with Rangan Exports:.

Under the IKEA concerns about the most reasonable and tactical strategy in reference to the child labour issue ought to offer Rangan Exports with another possibility to assist them in conquering this problem.

IKEA needs to take some steps in order to determine of the truth. , if the proof versus the Rangan export is true thus leading it in the failure on the ethical level which were outlaid by IKEA.. This plainly indicates that on IKEA, the supplier industry leading to conflict on the child labour issue.

Subsequently, IKEA works with a vision of producing better lifestyle for each individual which is a strong representation for the enterprises to represent the rights of employees of Rangan Exports. The concept of kid labour does not include a single business as a huge network of companies are accountable in putting it ahead. This is among the most crucial issue of social issues and it would be injustice to blame a single one.

If the management of Financial Risk Management 2 Case Study Solution not decides for the contract termination, this brings a risk of losing brand position and track record. 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 responsibilities. The main disadvantage of this replacement is the IKEA deprivation with a rewarding association and may result in the terminating relations with the sources of rug by India.

This will assist in maintenance of the healthy association between the supplier and the IKEA. This makes obvious for the all suppliers that IKEA is strictly against the kid labour and really condemn it. This might have a bad effect on the market track record of IKEA by the generation of false promotion.

As it is for the 2nd time that IKEA ended up being a victim of kid labour which has greatly harmed its credibility. For this purpose, Barner should pursue the assistance by ILO and UNICEF along with NGOs which may help Rangan in leaving the need to utilized child labour for the rugs production. It may pick to spread out awareness amongst the citizens globally about the social issues and how one's life is affected by in terms of social, and ethical worths.

Financial Risk Management 2 Case Study Solution by the adoption of very first alternative, terminates its relationship with thesupplier violation. If results in the failure then depict a bad influence on all providers by the increased power of bargaining and the violation of the policy of IKEA. It can make a charge for the behaviour which is not fairly. Hence, Barner needs to decide of disuniting with Rangan public. Journalism needs to be called upon for the announcement of their choice with its factor with the summarization of the policy of IKEA on the use labour of kid. She needs to report all the whole situation of the issue emerged and be sure that all the providers are strictly following the guidelines of the agreement. If any of the supplier discovered in compliance to exploitation of the any of the agreement guideline offering labour of kid ought to be fired.

In sum, the business can preserve its reputation in the market and in some way can bear the loss developed by one provider. With the steady track record in the market, Financial Risk Management 2 Case Study Solution will definitely cover up its financial crisis within a short amount of time.

Method Relating to IKEA's Operations in India

Financial Risk Management 2 Case Study Help strategy is generally focus on long term relationship with its providers rather than brief term. The exact same technique that was utilized by IKEA in Poland might be borrowed. IKEA likewise needs to make sure that they involve public through its marketing actions which must be helpful in understanding IKEA's intentions.

At earlier time IKEA had no focus on social and environmental issues which likewise includes child labor they utilized to focus on just one technique i.e. supplying economical and quality products to clients. That enhanced focus might help Financial Risk Management 2 Case Study Solution in improving its track record towards its consumers. Stopping operations from India would not make sure service to child labor however also unfavorable track record would be built that IKEA is not taking any trusted action to resolve basic problem i.e. kid labor.

There would be likewise another unfavorable impact i.e. dispute from public. As there prevails view point that huge business are constantly selfish and have an interest in only creating profit and consumers would be thinking that IKEA is among them. Public has common view that these business ought to be socially responsible to society as like they are required to be responsible to its investors. Then it would result in loss of sales and IKEA's worth too, if IKEA did not take any possible action to fix issue of kid labor. For a business like IKEA reputation loss is huge loss due to the fact that worth of company likewise based on it and likewise there would be decrease in profits and goodwill if there is any track record loss.

If IKEA consider just sales figure then getting out from Indian market is preferable. Because sales from Indian market just contributes small part to IKEA's incomes. In an economical/capitalistic view risk is more than advantages. But to accomplish business's long term objective i.e. "to develop a much better everyday life for many individuals" and "in the best interest of the child" it is suggested to not get out from Indian market and continue operations in Indian market with taking essential safety measures.

IKEA required to make sure that child labor is not used for their items. For that purpose IKEA needs a system that can keep an eye on entire treatment. As supplier has absence of financial resources to provide education to children, so IKEA needs to help supplier economically and offer them monetary help and ask to balance out by future shipments.

There might be one other solution for this issue that IKEA could install its own manufacturing company integrated with school. IKEA should run this school by itself and its auditing job ought to be provided to any other institute like Rugman to make sure it is working properly for finest interest of children.

Financial Risk Management 2 Case Study Solution Ought To Register to Rugmark.

IKEA believes that every company has its own strengths and weak points. As IKEA has no experience concerning kid labor so brand-new staff would be needed for this function. It ought to register to Rugmart becausethey are experienced in this field of child labor and ask Rugmort to monitor and establish procedure suggested by Financial Risk Management 2 Case Study Help. Apart from this there need to be also random tracking from IKEA to make sure that necessary purpose is accomplished.

Solving Origin of Child Labor.

IKEA needs to solve root cause of kid labor in order to support its long term vision. For that purpose kid welfare and education needs to be promoted. There should be partnership with suppliers and encourage suppliers to execute programs for child welfare and education. As suppliers had absence of resources so they ought to be provided financial assistance and asked then to offset by future orders. This is long term strategy not short-term solution. (Martin, 2013) So it might not be performed by IKEA alone. Financial Risk Management 2 Case Study Help beginning executing its strategy in multi methods. There was collaboration in between UNICEF and IKEA. The purpose of this collaboration was to offer education to all children who are operating in carpet producing cluster. Some alternative learning centres were established for those kids who were not allowed to get education from public schools. Neighborhood well-being was also promoted through this program. Partnership they likewise partnered with their providers in order to create service for issue of kid labor. There was program developed with provider. The considerable quality of program was audit of providers on regular basis. If there was any child labor found during audit, corrective action plan would be needed. In corrective action strategy child labor is required to be gotten rid of and provider is needed to make up for well-being and education of that child. Then there would appertain follow up from IKEA to ensure that in genuine required restorative action strategy is implicated. However if it is discovered that supplier did not take any restorative action strategy then IKEA would broke agreement with that supplier and there would be no trade with that specific provider in future.

Examination of Financial Risk Management 2 Case Analysis Technique.

IKEA has commitment to its customers to supply high quality products with low prices. If IKEA stayed in Indian market then it would result in higher expenses for customers. A customer would not feel comfortable when he came to know that he purchase a carpet which was woven by child but is now getting informed by supplier of Financial Risk Management 2 Case Study Analysis.


Since rules and policies of under developed countries are different from develop countries, it can be concluded from analysis that Financial Risk Management 2 Case Study Solution had been facing issue in under developed countries. Since a German documentary maker makes documentary of a provider of IKEA that was using child labor for production of items, the primary problem that IKEA is dealing with presently is child labor. It is concluded that IKEA needs to accept invitation to live discussion due to the fact that in this way they would be having chance to protect and explain their case to public. It was likewise concluded that IKEA should register Rugmart since IKEA has no any knowledge regarding kid labor and Rugmart is expert having knowledge regarding problems of child labor. As IKEA has no experience regarding child labor so brand-new staff would be required for this purpose. The method that is suggested for kid labor is that there ought to be collaboration with providers and encourage suppliers to carry out programs for kid welfare and education. As providers had lack of resources so they ought to be supplied financial assistance and asked to offset by future orders. This method would make complete use of engaging providers and interact to resolve concern of child labor.