Red Star Furniture Group Co Ltd Harvard Case Solution

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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 an international business in Sweden. It is mainly a house furnishing business established by Ingvar Kamprad in 1943. He named the company at the age of 17 when he started his very first mail-order company. It was called as IKEA by a combination of terms connecting to his personal life from his personalizes to his family farm i.e. Ignvar Kamprad Elmtaryd Agunnaryd. He began his vision to make true by offering his some goods obtained by a low-cost source for the local merchants by newsletter advertisement. In 1948, by the extra advertisement in the newsletter about the furniture has matched the requirements with its competitors. It has actually resulted in renounce the products sale and begin with furniture. For the consumer satisfaction and minimize the rate of returns, he intentionally opened a shop in an Almhult called town near his hometown. Later on, the little newsletter advertisement transformed into a catalogue.

Because 1950 to late 1990s, it has made tremendous progress in both the earnings along with in expanding of the business. At first, it had one shop while in the late 1990s it has more than 100 stores residing in several nations( see Exhibition 1). The company was growing so well in competition with leading rivals in the market. The rivals due to decreased sale threatened the suppliers of IKEA to not take orders at low rates. In 1961, IKEA contracted with a number of the factories manufacturing furniture and therefore it again developed low expenses. On the other hand, Red Star Furniture Group Co Ltd Case Study divided its shop in a variety of departments like cheap cost snack bar, children play-area, along with a Sweden Look for the cuisines making it a popular exporter of food. Nevertheless, over an amount of time, the item range was broadened ranging from carpets, floorings, lights to different line of product required in providing home.

The motive of the business was to sale quality items with affordable prices with variation in items globally based on a vision to develop a better way of life for almost everyone. Every year, the company celebrates an anti-bureaucrat week to develop much better contact between the suppliers and clients.
Executive 0Summary
In the mid period of 1990s, IKEA has a broad working networking with about 70 countries tracking down its items about 11,200. When there were environmental problems occurring about IKEA's products simultaneously the issuance on the kid labor emerged. Due to this factor, Red Star Furniture Group Co Ltd Case Study Analysis appeal reduced dropping the 20% of its sale in Denmark.

Secret Gamers.

There are 2 crucial players in this case one is IKEA Company and other is its suppliers. IKEA's method is to outsource its item manufacturing to providers. These suppliers are normally third party and based throughout the world.


The technique of outsourcing has some issues like guidelines and guidelines of these nations. In some cases providers from these underdeveloped nations does not follow required standards as compare to industrialized countries. So these weak guidelines and regulations can result in weak environment policies or kid labour. There is unfavorable impact of these concerns on income of the company and also track record of the company. Because the majority of the business's customers are based in industrialized countries. These clients have high expectations from Red Star Furniture Group Co Ltd Case Study Solution in regards to good quality items with low cost. (Marianne Baxter, 2012) These customers have also high expectations from IKEA in element of social obligation. They wanted IKEA to be socially responsible and wanted that it did not have any connection with kid labour or any other environment concern. As IKEA got its supply of carpets mainly for under industrialized countries like India, Pakistan, Nepal. These under developed nations have uncontrolled kid labour. So this is primary problem that IKEA is facing recently. The business is not controlling its providers effectively. Also underdeveloped countries permit kid labour because of hardship. So company can not depend upon local government for resolving this issue. IKEA techniques likewise did not work well sufficient to resolve this issue (see Display 3).

Approaching Concern of Child Labour.

IKEA method is to keep high level of social obligation because it is among the substantial catalyst in success of business. Red Star Furniture Group Co Ltd Case Study Help is concerned on child labour issue and other ecological concerns to support this method. There was aspect of social duty which was engrained in the culture of IKEA's founder Ingvar Kamprad (Display 2). Individuals from India had conflicting views relating to child labour and social obligation. According to Indian people kid labour is okay if it is enabled by moms and dads or if kids are working under supervision of their moms and dads. There prevails practice of kid operate in India and government is likewise unwinded over this matter if it is unbounded child labour or if their moms and dads are agreed and enabled their children to work. Kids are likewise allowed to operate in craft industries to make sure that skills from earlier generation are not lost.( Naidu & Ramaiah, 2006) In Addition, IKEA was also motivated by Swedish Conserve the Kid organization to act "in the very best interest of kid".( Odenbring, 2018) According to this they would be doing only that work which is in the very best interest of children. They would not be involved in any transaction in which kid labour is utilized or there is any possibility of environment problem. Due to the fact that they are dependent of kid labour, many of the households would be doing not have essential source of earnings. Their standard expenditures like food, clothes are satisfied through their working of kid.( Duflo, 2006) Likewise laws are not strict enough to address issues of environment or social problems like child labour so business need to worry whether it is appropriate to conduct service in India or not. They needed to ensure that their company does not engage in any activity which is against social duty. The decision requires to be taken by likewise integrating viewpoint of social obligation from the viewpoint of consumer not from perspective of providers. Consumers need to not be having doubt their company is engaged in any undesirable activity. If requirements concerning social obligation from customer point of view are not followed, there might be negative outcome. There was case happened in 1980's. IKEA had actually failed to meet required requirements on formaldehyde for a few of its items. In that case IKEA had lost its incomes by 20% in Denmark. Because business's reputation in the eyes of consumers had actually decreased. In 1992 there was likewise loss of around $6 to $7 million. This loss was resulted from discontinuation of a popular bookcase series due to the fact that it was not according to required level of formaldehyde. This likewise damage business's credibility significantly.

Response to German manufacturers on Video Program:
Porter's 5 Forces Analysis
In reaction to the invitation of German manufacturers for IKEA, the invite should need to be accepted. The very first primary thing to think about is that the documentary is made by a German company. It is not necessary to be and accept the invite part of the live discussion but it is of important significance. As it supplies Barner to have live discussion during on-air shows. It produces a likelihood to give much better explanation of their concerns about their relationship with India. Specifically, Barner can possibly demonstrate her thought of mind with a clear reason letting people know that for her it is more crucial to be more concerned about the IKEA track record as she is only accountable for this. It is necessary to eliminate the criteria of kid labour however this can perhaps refrained from doing by stopping business links with their partner companies which include the pattern of child labour. This understanding of Barner may assist her in keeping IKEA clear reflection and might also lead to more powerful relationship of the business. It likewise provides IKEA to conscious the German producers to fight versus the child labour.

As the German Manufacturers had actually only used IKEA to see a few of the shots from their documentary. They should be asked for to let them view the entire motion picture rather of some shots which reveals certainly an unclear picture of the truth. This may be the method of German manufacturers to show themselves right versus the claims but leaving IKEA behind loaded with doubts about their relationship with the business of India on the issue of kid labour.

On the contrary, the IKEA has been positively represented about the concern of Child labour when the problem was initially put up by the Swedish Tv. There are a set of details on child labour by IKEA which was substantially collected by ILO and UNICEF.

As the German manufacturers refused to show their documentary to IKEA before it is telecasted simply suggests there wicked intention of point the finger at somebody and their relationships with IKEA possibly. There might a strong contradiction that the IKEA is fearlessly engaged with a company which uses child as their labour and continue their relations to earn earnings with the suppliers while being mindful of the fact.

Barner has a strong point of justification which is their philosophical statement i.e. everyone makes mistakes however one takes its duty. The obligation of the errors taken by anyone is considered as the very best source of pride.Despite of the reality that Red Star Furniture Group Co Ltd Case Study Analysis was not mindful about the growing concern over the kid labour in addition to the involving kid's as labours by the industries, the suppliers of the IKEA. During the approval of agreement, IKEA began investigation versus its provider industries worldwide. If shown in the documentary by German producers, the management of IKEA is not scared of accepting its errors. It will accept its error and take procedure to put it right again.

Barner can likewise develop another reason on the inefficient responsibility over social concerns. It is intending to be involved with the social issues but has actually not taken such steps yet. In the field of marketing, IKEA is on top with excellent concepts as well as its eye-catching products.
Swot Analysis
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 issues of each private working in the markets and making them a handsome revenue. In future, IKEA will prepare to be part of obligation over the social concerns.

It can be concluded that as per the issue for the company's track record and share of share ought to accept the invite and present it legitimate thoughts just in case if whatever in documentary is versus the Red Star Furniture Group Co Ltd Case Study Solution. Specifically, IKEA had actually started a Foundation based on the concept of securing rights of child labour and to provide them with totally free environment to inform themselves. (Barlet, 2006).

Actions on Supply agreement with Rangan Exports:.

Under the IKEA concerns about the most rational and tactical strategy in referral to the kid labour issue need to supply Rangan Exports with another chance to assist them in overcoming this issue.

IKEA requires to take some procedures in order to determine of the truth. , if the evidence against the Rangan export is true therefore leading it in the failure on the moral level which were outlaid by IKEA.. This plainly suggests that on IKEA, the provider industry leading to contravention on the child labour concern.

Subsequently, IKEA deals with a vision of creating much better way of life for every single person which is a strong representation for the enterprises to represent the rights of workers of Rangan Exports. The idea of kid labour does not include a single business as a vast network of companies are accountable in putting it ahead. This is among the most crucial concern 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 Help not chooses for the agreement termination, this brings a threat of losing brand position and reputation. This might result in the monetary decline state of IKEA by decreased ratio of sale, less appeal of the brand name and the issues over social duties. The primary drawback of this substitute is the IKEA deprivation with a rewarding association and might result in the terminating relations with the sources of carpet by India.

The 2nd alternative is to caution the provider market with extension of the relate to a pledge to let not do this mistake again and surely prevent the child labour. This will help in upkeep of the healthy association between the provider and the Red Star Furniture Group Co Ltd Case Study Help. This likewise supplies a chance to better teach the suppliers about the drawbacks of the kid labour. Nevertheless, this choice is made on the basis of IKEA's self-created policy. This makes obvious for the all suppliers that IKEA is strictly against the child labour and truly condemn it. This may have a bad effect on the market credibility of Red Star Furniture Group Co Ltd Case Study Help by the generation of false publicity.

As it is for the second time that IKEA ended up being a victim of kid labour which has greatly damaged its reputation. For this function, Barner should pursue the assistance by ILO and UNICEF along with NGOs which may assist Rangan in leaving the requirement to utilized kid labour for the carpets manufacturing. It might select to spread out awareness among the residents worldwide about the social concerns and how one's life is affected by in terms of social, and ethical worths.

Red Star Furniture Group Co Ltd Case Study Solution by the adoption of first option, ends its relationship with thesupplier violation. If lead to the failure then depict a bad effect on all suppliers 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 must decide of disuniting with Rangan public. The press ought to be hired for the statement of their decision with its factor with the summarization of the policy of IKEA on the use labour of kid. She must report all the whole situation of the issue emerged and make sure that all the suppliers are strictly following the guidelines of the agreement. , if any of the supplier found in compliance to exploitation of the any of the contract rule offering labour of child should be fired.


In sum, the business can preserve its reputation in the market and somehow can bear the loss created by one provider. With the steady credibility in the market, Red Star Furniture Group Co Ltd Case Study Solution will definitely conceal its monetary crisis within a brief time period.
Vrio Analysis
Technique Relating to IKEA's Operations in India

IKEA strategy is essentially focus on long term relationship with its suppliers rather than short-term. This long term strategy helps IKEA in getting reputable and competitive provider source. For long term relationship they used to assist their supplier to make complete use of their capability. For example, they asked providers to offer services and products besides their core product or services. The exact same strategy that was used by IKEA in Poland might be obtained.( Harapiak, 2013) The strategy was to contract out production of furniture and not produce by its own. IKEA likewise needs to make sure that they include public through its marketing actions which must be practical in understanding IKEA's intents.

At earlier time IKEA had no focus on ecological and social issues which also contains child labor they utilized to focus on just one strategy i.e. supplying affordable and quality items to clients. That improved focus could assist Red Star Furniture Group Co Ltd Case Study Solution in enhancing its track record towards its clients. Terminating operations from India would not make sure solution to child labor but likewise negative reputation would be built that IKEA is not taking any trusted action to solve fundamental problem i.e. kid labor.

There would be also another unfavorable impact i.e. disagreement from public. As there prevails view point that huge companies are constantly selfish and are interested in just creating revenue and consumers would be thinking that IKEA is one of them. Public has common view that these business ought to be socially responsible to society as like they are needed to be accountable to its investors. Then it would result in loss of sales and IKEA's value too, if IKEA did not take any possible step to fix problem of kid labor. For a business like IKEA credibility loss is big loss because value of company also based upon it and also there would be decline in incomes and goodwill if there is any reputation loss.

If IKEA consider only sales figure then getting out from Indian market is more suitable. Due to the fact that sales from Indian market only contributes small part to IKEA's profits.

Red Star Furniture Group Co Ltd Case Study Analysis required to ensure that kid labor is not used for their items. So for that purpose IKEA requires a system that can monitor whole treatment. That system ought to quickly find whenever kid labor is utilized in any activity. Suppliers need to be motivated to provide education to kids so children can learn something. For that purpose, suppliers would be having financial issues. As provider has lack of financial resources to provide education to kids, so Red Star Furniture Group Co Ltd Case Study Solution should help provider financially and supply them financial assistances and ask to offset by future deliveries.

There could be another option for this problem that Red Star Furniture Group Co Ltd Case Study Solution might install its own production company combined with school. All monetary needs of that school might be met by profits from that making business. IKEA needs to run this school by itself and its auditing job must be provided to any other institute like Rugman to make certain it is working properly for benefit of children. (Usman, 2010).

Red Star Furniture Group Co Ltd Case Study Help Ought To Sign up to Rugmark.

As IKEA has no experience regarding kid labor so new staff would be needed for this purpose. It ought to sign up to Rugmart becausethey are experienced in this field of kid labor and ask Rugmort to develop and keep an eye on procedure recommended by IKEA.

Solving Source of Child Labor.

Red Star Furniture Group Co Ltd Case Study Help needs to fix root cause of kid labor in order to support its long term vision. IKEA starting executing its technique in multi ways. If it is found that provider did not take any corrective action strategy then IKEA would broke contract with that provider and there would be no trade with that specific supplier in future.

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

Red Star Furniture Group Co Ltd Case Study Analysis has commitment to its clients to provide high quality items with low costs. Their method would make full use of engaging providers and interact to deal with concern of child labor. Nevertheless according to my individual perception as from investors point of view, company is not using its resources effectively through this technique. They would be having difficult option in future from deciding that whether to increase roi for shareholders or continue involvement with social duties of Indian and UNICEF. Investors would be having unfavorable picture of IKEA since of less return of financial investment if is heavily invests for social well-being. If IKEA stayed in Indian market then it would lead to higher costs for customers. Disputes of interest for society and management would be dealt with. A client would not feel comfortable when he came to know that he acquire a rug which was woven by child but is now getting informed by supplier of IKEA. But he would be feeling more comfortable when he came to know that he buy a rug on somewhat greater cost which was not woven through child labor.

The main problem that IKEA is facing currently is kid labor since a German documentary maker makes documentary of a provider of IKEA that was utilizing kid labor for production of products. It was also concluded that Red Star Furniture Group Co Ltd Case Study Help should sign up Rugmart because IKEA has no any understanding regarding kid labor and Rugmart is expert having understanding relating to problems of child labor. As IKEA has no experience relating to kid labor so brand-new staff would be needed for this purpose.