Custom «The IKEA Child Labor Case Study» Essay Paper Sample

Introduction and Situational Analysis

Marianne Barner a business area manager for carpets was faced with a tough decision in May 1995 after just being with IKEA Company for just two years. She was faced with the task of doing away with one of the company's suppliers of India rugs which would disrupt the entire sully of rugs and carpets and thereby affecting sales (Bartlett & Ashish, 1990).  This was a result of a German TV station airing a documentary naming the supplier of the rugs as one that used child labor in the production of rugs. Barner was frustrated because all the suppliers of IKEA, the world's largest furniture retailer had initially signed an addendum to its supply contracts expressing the need not to use child labor.

Barner was more concerned with the long term action IKEA must take on the issue rather than the short term decisions and on one time she was urged to sign up to industry wide response to concerns in the Indian carpet industry on the use of child labor. During this time an issue was proposed by the partnership of importers, manufactures, retailers and Indian non governmental organization for the adoption of "rug mark" which was a label that was to be put on carpets that were certified after being approved that they didn't use child labor in their production. On the other hand the Swedish save child organization were urging IKEA to ensure that the best interests of a child were implemented. Despite the Indian rugs accounting for just a small percent in terms of profits, observers saw this as a risk because of the time, costs and reputation it had to incur therefore it was not worth the profit potential.

Ingrar Kamprad was the founder of IKEA and retained the title of honorary chairman despite stopping down as the CEO in 1986 and was still involved in the company's activities. IKEA was the largest specialized furniture retailer in the world by mid 1990's which meant that a total of 116 million people had either visited an IKEA store in the 98 stores available in the 17 countries. This meant that IKEA dealt with 2,300 suppliers in 70 different countries in the world in order to be able to supply products to its customers. In 1963, even before the Stockholm store had opened and this gave IKEA the need to expand into Oslo and Norway (Bartlett & Ashish, 1990).  A decade later, a store had opened in Switzerland and it became its first in a non-Scandinavian market. In 1976 IKEA entered Germany and later on became its largest market and at each new store the same simple Scandinavian-design products were backed up with an offbeat advertising and catalog. This presented the company as "those impossible Swedes with strange ideas." This in a way was reflecting the company's conservative values. Hence each new entry was financed by previous successes.

IKEA was working to resolve the formidable problems that it faced when a Swedish television company documentary was aired that showed children weaving looms in Pakistan and IKEA was mentioned for they were importers of carpets. This caused a wave of shockwaves that were sent through the company. Barner defended the company by stating that child labor wasn't a high-profile public issue at the time because the UN Convention on the Rights of Children had just been published in December 1989. Hence it was now their role of the media to raise awareness to the general public on a topic that was not well conversant and known to people, including IKEA. Barner stressed that it was now an issue that they were now addressing because she had gone to India and spent a couple of months in order to see how the operations did run there but there was no exposure to child labor

IKEA later on sent a legal team to Geneva as a response to the problem so as to seek input and advice from the international labor organization. The 1973 Convention 158 was adopted by the international labor organization which was ratified by 120 countries with the exception of the Pakistan, Nepal and India. The convention main aim was to ratify countries so that they could abolish labor of children under the age of 15 or the age of compulsory school in that particular country (Bartlett & Ashish, 1990).  This lead to a black and white clause being adopted by the IKEA which stated that incase a supplier did employ children under the legal age, they had no other option rather than to cancel the contract. A third party agent was appointed in order to monitor child labor practices at its suppliers in Pakistan and India.

Barner contacted Swedish Save the Children, ILO and the UNICEF because India was the largest purchasing source for carpets and rugs and it could be set back for the company so she had to expand her understanding and at the same time get advice about child labor, especially in India. The data was often elusive as she later came to find out because the estimates of child labor in India varied from the 1991 government's census figure which should that about 11.3 million children under the age of 15 working in the industries.  On the contrary the Human Rights Watch's group estimated the figure of children working to be much higher, of between 60 million and 115 million child laborers. Hence it was very clear that a very large number of Indian children who were as young as five years old worked in mining, manufacturing, agriculture, and quarrying. This also led to the discovery of child laborers who were acting as street vendors, household servants, or beggars. Hence an estimated 200,000 children worked on looms in large factories and also for small subcontractors and this scaled to the point in which extra income was awarded to homes where the whole families worked on looms thus they were employed in the carpet industry.

Parents had to pay off debts which typically were in the range of 1,000 to 10,000 rupees which they had incurred; by actually making their children work, essentially in places of servitude order to pay their parents depts. There were astronomical interest rates that were place on the loans which could take years to pay off because of the very low wages offered to children. In some extreme cases the dept was passed on from one generation to the next for example some indentured child laborers eventually passed on the debt to their own children. This practice continued to be widespread despite the Indian government showing that it was committed to the abolishment of bonded labor. According to Children Act which was passed under British rule in 1933 which prohibited bonded labor in children. In 1976 the government passed the Bonded Labor System Act in order to reinforce the earlier law but it took a less absolute stand on unbounded child labor. This was characterized as an issue of socioeconomic phenomenon arising out of poverty and the short of development.

Hence the Prohibition and Regulation Act of 1986 outlawed the use of child labor to children under the age of 14 and defined "hazardous industries" and working conditions and regulated children's hours in others (Bartlett & Ashish, 1990).   Therefore the law specifically permitted children to work in craft industries so that they could allow the passage of specialized handicraft skills from one generation to the next generation. Hence the government felt that the greater part of child labor involved children who were working alongside their parents and under their constant supervision in cottage industries, agriculture, and service roles.

Stakeholder Analysis

Barner and her direct manager traveled to Nepal, India, and Pakistan on the fall of 1994 in order to learn more. This was after managing the initial response to the crisis and she felt the need to educate them on the issue so as to give a report back home and also to met with their suppliers. They met with activists, unions, NGOs, U.N. organizations, politicians and carpet export organizations. 

Barner was informed of the formation of the "Rug mark" Foundation which was triggered by a consumer awareness program that was started by consumer activists, human rights organizations, and trade unions in early 1990s in Germany and this was response to the child labor problem in the Indian carpet industry. This led to 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 while the Indo-German Export Promotion Council had joined up with key Indian carpet manufacturers and exporters in order to implement the idea. Hence the Rug mark Foundation was structured to supervise the use of the label and it was expected to begin with the exportation of the rugs bearing a unique identifying IKEA was a major purchaser of Indian rugs was later number. This was viewed as a way of dealing with the ongoing possibility for child labor problems on goods sourced from India.

Barner again met regularly with the Swedish Save the Children's expert on child labor because they had a straight forward way of looking at the issues at hand. Hence the best interests of the child should be emphasized so that the well fare of children is not abused. This was the principle set at the heart of the U.N. Article 32 from the U.N. Convention on the Rights of the Child Convention on the Rights of the Child (1989), a document with which Barner was now quite familiar.

Analysis Based on Ethical Theories

Barner a business area manager with full profit-and-loss responsibility for carpets knew that the more she learned the more complex the situation became because she had protect not only her business but also the IKEA image and brand. She felt the company should make a difference in the lives of the children she had seen for she viewed her responsibility as broader than this. Hence in IKEA, majority were concerned with the issue of a very proactive stand could put the business at a considerable cost of disadvantage to its major competitors and it was a view that was not universally held.

After 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. In this documentary it showed children working at looms at Rangan Exports which was one of IKEA's major suppliers of furniture. The German documentary maker refused to let the company preview the video but instead produced still shots taken directly from the video and later on invited IKEA to send representatives so that they could take part in a live discussion.

Barner viewed this as a direct confrontation and aggressive approach aimed directly at IKEA and one of its suppliers because it was unlike 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. This was clear that this German-produced program planned to take a stand against IKEA hence it was a personal issue. Barner, the first response was whether to recommend that IKEA participate in the program or decline the invitation but beyond the immediate public relations issue, she also had to decide on apparent violation of the contractual commitment it had made not to use child labor.

This crisis raised the issue of whether the overall approach IKEA had been taking to the issue of child labor was appropriate and also if the company could continue to try to deal with the issue through its own relationships with its suppliers? Another issue was whether it could it step back and allow Rug mark to monitor the use of child labor on its behalf? And finally, it recognized that the problem was too deeply embedded in the culture of these countries for it to have any real impact and simply withdraw.

Conclusion and Recommendations

As the Filmmaker just provided IKEA with several still shots taken from the movie, though the whole film was requested to be viewed, leaves too many unpredictable options that the cutting of the movie would provide an image which wouldn't leave any space for explanations concerning IKEA's engagement in India but defending itself against accusation which might be made through the movie. Hence the movies have the power to suggest a certain image especially if negative scenes are shown and it is indispensable to IKEA to review the movie before attending the discussion. Therefore their refusal to show the movie to IKEA, it is understood that their purpose is not to hear about IKEA's engagement but having somebody to hold responsible. The discussion might have an aggressive and confrontational attitude towards IKEA for using a supplier, which employs children. Therefore this suggest that IKEA a reckless company just caring about profit and not the well fare on children.