Red Star Furniture Group Co Ltd Harvard Case Analysis

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Red Star Furniture Group Co Ltd Case Study Solution and Analysis


Red Star Furniture Group Co Ltd Case Study Help is a global company in Sweden. It is primarily a home providing company founded by Ingvar Kamprad in 1943. When he started his very first mail-order company, he named the business at the age of 17. It was named as IKEA by a combination of terms relating to his personal life from his personalizes to his family farm i.e. Ignvar Kamprad Elmtaryd Agunnaryd. He began his vision to make real by offering his some goods obtained by a cheap source for the regional retailers by newsletter advertisement. In 1948, by the additional ad in the newsletter about the furniture has actually matched the criteria with its competitors. It has led to renounce the products sale and begin with furniture. For the customer fulfillment and decrease the rate of returns, he intentionally opened a store in an Almhult called township near his hometown. In the future, the little newsletter advertisement transformed into a brochure.

Given that 1950 to late 1990s, it has actually made incredible development in both the profits along with in broadening of business. At first, it had one store while in the late 1990s it has more than 100 stores living in numerous countries( see Display 1). The business was growing so well in competitors with leading competitors 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 furnishings and thus it once again came up with low costs. On the other hand, Red Star Furniture Group Co Ltd Case Study divided its shop in a variety of departments like low-cost price cafeteria, kids play-area, as well as a Sweden Purchase the cuisines making it a popular exporter of food. However, over a period of time, the item range was expanded varying from carpets, floor coverings, lights to different line of product needed in furnishing home.

The intention of the company was to sale quality items with sensible costs with variation in items worldwide based upon a vision to produce a better lifestyle for nearly everyone. Every year, the company commemorates an anti-bureaucrat week to develop better contact between the suppliers and clients. Kamprad thought on the truth that it is only possible to make no mistake while you sleep. The concept of preparing for the future was highly encouraged. In 1986, Kamprad was replaced by his Individual assistant who was a knowledgeable individual of the company.

In the mid duration of 1990s, IKEA has a broad working connecting with about 70 countries tracking down its products about 11,200. It dealt with almost a larger variety of suppliers around 2300 globally (see Exhibition 2). When there were environmental problems occurring about IKEA's products simultaneously the issuance on the kid labor emerged. This has actually led the company to deal with the tough scenario in the upkeep of their relation with providers. Due to this factor, IKEA's popularity decreased dropping the 20% of its sale in Denmark. .

Key Players.

There are 2 essential players in this case one is IKEA Company and other is its suppliers. IKEA's strategy is to outsource its item producing to providers. These providers are generally third party and based throughout the world.


The method of outsourcing has some concerns like rules and guidelines of these countries. Sometimes providers from these underdeveloped countries does not follow required standards as compare to industrialized nations. So these weak rules and regulations can lead to weak environment policies or child labour. There is unfavorable effect of these problems on earnings of the business and likewise track record of the business. Due to the fact that most of the company's consumers are based in developed nations. These consumers have high expectations from Red Star Furniture Group Co Ltd Case Study Solution in regards to great quality items with low cost. (Marianne Baxter, 2012) These consumers have also high expectations from IKEA in aspect of social obligation. They wanted IKEA to be socially accountable and wanted that it did not have any connection with child labour or any other environment problem. As IKEA got its supply of carpets primarily for under developed nations like India, Pakistan, Nepal. These under industrialized countries have unrestrained kid labour. So this is main issue that IKEA is dealing with just recently. The business is not controlling its providers efficiently. Underdeveloped nations enable kid labour because of poverty. Company can not depend on local federal government for fixing this problem. IKEA techniques likewise did not work well sufficient to address this concern (see Exhibit 3).

Approaching Concern of Kid Labour.

IKEA technique is to maintain high level of social duty because it is one of the substantial driver in success of company. Red Star Furniture Group Co Ltd Case Study Analysis is concerned on kid labour issue and other environmental problems to support this strategy. There was factor of social duty which was engrained in the culture of IKEA's creator Ingvar Kamprad (Exhibit 2). People from India had conflicting views regarding kid labour and social duty. According to Indian individuals kid labour is not bad if it is allowed by parents or if kids are working under guidance of their parents. There is common practice of kid operate in India and federal government is also unwinded over this matter if it is unbounded kid labour or if their parents are concurred and enabled their children to work. Kids are likewise permitted to work in craft industries to ensure that abilities from earlier generation are not lost.( Naidu & Ramaiah, 2006) Furthermore, IKEA was also motivated by Swedish Save the Kid company to act "in the very best interest of kid".( Odenbring, 2018) According to this they would be doing just that work which remains in the best interest of kids. They would not be involved in any deal in which kid labour is utilized or there is any possibility of environment issue. Most of the households would be lacking crucial income source due to the fact that they rely of child labour. Their standard costs like food, clothing are satisfied through their working of kid.( Duflo, 2006) Likewise laws are not stringent enough to deal with problems of environment or social problems like kid labour so companies need to stress whether it is suitable to perform business in India or not. They needed to make sure that their organisation does not take part in any activity which is against social responsibility. The choice requires to be taken by likewise integrating approach of social duty from the point of view of customer not from point of view of providers. Consumers ought to not be having doubt their company is engaged in any unwanted activity. If requirements relating to social responsibility from consumer point of view are not followed, there might be negative outcome. There was case took place in 1980's. IKEA had stopped working to satisfy necessary standards on formaldehyde for a few of its items. Because case IKEA had lost its revenues by 20% in Denmark. Since company's credibility in the eyes of consumers had actually declined. In 1992 there was also loss of around $6 to $7 million. This loss was resulted from discontinuation of a popular bookcase series because it was not according to required level of formaldehyde. This likewise damage company's credibility considerably.

Response to German manufacturers on Video Program:

In action to the invite of German producers for IKEA, the invite ought to need to be accepted. Specifically, Barner can perhaps show her idea of mind with a clear reason letting individuals understand that for her it is more crucial to be more concerned about the IKEA track record as she is only responsible for this. It also provides Red Star Furniture Group Co Ltd Case Study Help to mindful the German manufacturers to combat versus the child labour.

As the German Producers had actually only used IKEA to see some of the shots from their documentary. They should be requested to let them enjoy the whole movie instead of some shots which shows definitely an uncertain image of the reality. This may be the technique of German manufacturers to prove themselves right against the allegation but 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 favorably represented about the issue of Child labour when the issue was initially put up by the Swedish Tv. There are a set of information on kid labour by IKEA which was substantially gathered by ILO and UNICEF.

As the television industry has terrific potential to reveal incorrect news as the fact by their excellent capability to customize any lie into a reality and makes individuals believe on it without any doubts. For that reason, it appears quite impossible for Barnerto examine the documentary prior to the session. As the German manufacturers declined to reveal their documentary to Red Star Furniture Group Co Ltd Case Study Help prior to it is telecasted simply indicates there evil objective of point the finger at someone and their relationships with IKEA perhaps. There might a strong contradiction that the IKEA is fearlessly engaged with a company which utilizes kid as their labour and continue their relations to earn profits with the providers while knowing the fact.

Barner has a strong point of justification which is their philosophical declaration i.e. everyone makes errors but one takes its responsibility. The duty of the mistakes taken by anybody is considered as the best source of pride.Despite of the fact that Red Star Furniture Group Co Ltd Case Study Help was not conscious about the growing issue over the kid labour along with the involving kid's as labours by the markets, the providers of the IKEA. Throughout the acceptance of agreement, IKEA started examination against its provider industries around the world. If shown in the documentary by German manufacturers, the management of IKEA is not afraid of accepting its errors. It will accept its error and take measure to put it right again.

Barner can likewise develop another reason on the inefficient duty over social issues. It is meaning to be involved with the social concerns but has not taken such procedures. In the field of marketing, IKEA is on top with excellent concepts in addition to its captivating products.

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 specific working in the markets and earning them a good-looking earnings. In future, IKEA will plan to be part of responsibility over the social issues.

It can be concluded that as per the concern for the company's track record and share of share must accept the invitation and present it valid ideas just in case if whatever in documentary is against the Red Star Furniture Group Co Ltd Case Study Help. Specifically, IKEA had actually started a Structure based on the principle of safeguarding rights of kid labour and to offer them with complimentary environment to inform themselves. (Barlet, 2006).

Actions on Supply contract with Rangan Exports:.

Under the IKEA issues about the most rational and strategic method in reference to the kid labour issue must offer Rangan Exports with another possibility to help them in overcoming this dilemma.

IKEA requires to take some procedures in order to figure out of the fact. , if the evidence versus the Rangan export is true therefore leading it in the failure on the ethical level which were outlaid by IKEA.. This plainly suggests that on IKEA, the supplier market leading to breach on the kid labour problem.

Consequently, IKEA deals with a vision of developing much better way of life for every single individual which is a strong representation for the business to represent the rights of employees of Rangan Exports. The idea of child labour does not involve a single business as a large network of companies are responsible 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 Red Star Furniture Group Co Ltd Case Study Solution not chooses for the agreement termination, this brings a hazard of losing brand position and reputation. This may result in the monetary decline state of IKEA by decreased ratio of sale, less appeal of the brand and the issues over social duties. The main disadvantage of this alternative is the IKEA deprivation with a beneficial association and may result in the terminating relations with the sources of carpet by India.

The second option is to alert the provider industry with continuation of the relate to a guarantee to let refrain from doing this mistake again and definitely inhibit the child labour. This will assist in upkeep of the healthy association between the provider and the Red Star Furniture Group Co Ltd Case Study Analysis. This likewise supplies a chance to much better teach the providers about the disadvantages of the kid labour. 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 genuinely condemn it. This might have a bad influence on the marketplace reputation of Red Star Furniture Group Co Ltd Case Study Solution by the generation of false publicity.

As it is for the 2nd time that IKEA became a victim of kid labour which has greatly harmed its reputation. For this purpose, Barner should pursue the assistance by ILO and UNICEF along with NGOs which might assist Rangan in escaping the need to utilized child labour for the rugs manufacturing. It might select to spread out awareness among the residents worldwide about the social issues and how one's life is affected by in regards to social, and ethical values.

IKEA by the adoption of very first option, ends its relationship with thesupplier violation. If outcomes in the failure then depict a bad impact on all suppliers by the increased power of bargaining and the offense of the policy of IKEA. The press should be called upon for the announcement of their choice with its reason with the summarization of the policy of IKEA on the usage labour of child.

In sum, the business can preserve its credibility in the market and in some way can bear the loss created by one supplier. With the steady reputation in the market, Red Star Furniture Group Co Ltd Case Study Solution will certainly cover up its financial crisis within a brief time period.

Method Relating to IKEA's Operations in India

Red Star Furniture Group Co Ltd Case Study Analysis technique is generally focus on long term relationship with its suppliers rather than brief term. The very same method that was used by IKEA in Poland might be borrowed. IKEA likewise requires to make sure that they involve public through its marketing actions which need to be handy in understanding IKEA's objectives.

Their objectives ought to also be validating company's policy. Their actions should likewise be according to Kamprad's view i.e. "produce a much better daily life for lots of people". They think that they can achieve this objective by offering highest quality products with low cost. But at earlier time Red Star Furniture Group Co Ltd Case Study Help had no focus on ecological and social issues which likewise includes kid labor they used to concentrate on just one strategy i.e. providing affordable and quality products to customers. As time passed they needed to include other values too to their focus. That improved focus could assist IKEA in enhancing its reputation towards its clients. The new focus included the viewpoint "in the very best interest of the child". So for that purpose it requires to be make sure that engagements in India would be fulfilling the necessary purpose too i.e. they did not engage any activity which includes child labor. Bulk of population in India is below hardship line so there is culture of kid labor and likewise kid loan. Parents utilized to permit their kids to work in settlement with cash. Discontinuing operations from India would not guarantee solution to child labor however likewise negative track record would be built that IKEA is not taking any reputable action to solve basic problem i.e. kid labor.

If Red Star Furniture Group Co Ltd Case Study Analysis did not take any possible step to solve 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 due to the fact that worth of company also based on it and likewise there would be decline in profits and goodwill if there is any reputation loss.

If IKEA think about just sales figure then getting out from Indian market is preferable. Due to the fact that sales from Indian market just contributes little portion to IKEA's profits. In an economical/capitalistic view danger is more than benefits. To attain company's long term objective i.e. "to produce a much better daily life for many people" and "in the best interest of the child" it is advised to not get out from Indian market and continue operations in Indian market with taking necessary precautions.

IKEA needed to make sure that kid labor is not used for their products. For that purpose IKEA requires a system that can keep an eye on whole treatment. As provider has lack of financial resources to provide education to kids, so IKEA must help provider financially and supply them financial aids and ask to offset by future shipments.

There could be one other option for this issue that IKEA might install its own production business integrated with school. IKEA must run this school by itself and its auditing job must be offered to any other institute like Rugman to make sure it is working effectively for best interest of kids.

Red Star Furniture Group Co Ltd Case Study Solution Must Sign up to Rugmark.

As IKEA has no experience relating to kid labor so new personnel would be needed for this purpose. It must sign up to Rugmart becausethey are experienced in this field of kid labor and ask Rugmort to establish and monitor process recommended by IKEA.

Resolving Source of Kid Labor.

IKEA needs to deal with root cause of kid labor in order to support its long term vision. For that function kid welfare and education requires to be promoted. There need to be collaboration with providers and encourage providers to carry out programs for kid well-being and education. As providers had lack of resources so they should be offered financial aid and asked then to offset by future orders. This is long term method not short term service. (Martin, 2013) So it could not be performed by IKEA alone. Red Star Furniture Group Co Ltd Case Study Analysis beginning executing its strategy in multi ways. There was collaboration between UNICEF and IKEA. The function of this collaboration was to supply education to all children who are operating in carpet producing cluster. For instance some alternative knowing centres were established for those kids who were not permitted to get education from public schools. Neighborhood welfare was likewise promoted through this program. In addition to this collaboration they also partnered with their suppliers in order to develop solution for issue of child labor. There was program established with provider. The substantial quality of program was audit of providers on regular basis. Restorative action strategy would be required if there was any child labor discovered during audit. In corrective action strategy child labor is needed to be removed and provider is required to make up for well-being and education of that kid. There would be appropriate follow up from IKEA to make sure that in real needed restorative action plan is implicated. If it is found that supplier did not take any corrective action plan then IKEA would broke agreement with that provider and there would be no trade with that particular provider in future.

Assessment of Red Star Furniture Group Co Ltd Case Analysis Method.

Red Star Furniture Group Co Ltd Case Study Analysis has commitment to its customers to offer high quality products with low costs. Their strategy would make full usage of engaging suppliers and work together to resolve issue of child labor. Nevertheless according to my individual perception as from investors perspective, business is not utilizing its resources effectively through this strategy. They would be having hard option in future from choosing that whether to increase roi for shareholders or continue participation with social responsibilities of Indian and UNICEF. Due to the fact that of less return of investment if is greatly invests for social well-being, shareholders would be having negative image of IKEA. If IKEA remained in Indian market then it would result in greater expenses for consumers. Disputes of interest for society and management would be resolved. When he came to understand that he purchase a rug which was woven by kid however is now getting informed by provider of IKEA, a customer would not feel comfy. He would be feeling more comfortable when he came to understand that he acquire a rug on somewhat greater price which was not woven through kid labor.


It can be concluded from analysis that IKEA had actually been facing problem in under developed nations because rules and regulations of under developed nations are various from establish countries. Since a German documentary maker makes documentary of a supplier of IKEA that was utilizing kid labor for production of items, the main issue that IKEA is dealing with presently is child labor. It is concluded that IKEA must accept invitation to live conversation since in this method they would be having opportunity to safeguard and discuss their case to public. Because IKEA has no any knowledge concerning child labor and Rugmart is professional having knowledge relating to issues of child labor, it was likewise concluded that IKEA should sign up Rugmart. As IKEA has no experience relating to kid labor so new personnel would be needed for this function. The technique that is suggested for kid labor is that there ought to be partnership with providers and encourage providers to execute programs for kid welfare and education. As suppliers had absence of resources so they ought to be offered financial assistance and asked them to balance out by future orders. This method would make full usage of engaging providers and collaborate to resolve concern of kid labor.