IKEA has been forced to develop a supply chain model that is very scrutinizing of supplier labour policies, putting considerable strain on in-house procurement to ensure compliance to IKEA’s no child labour processes. These can represent significant costs and restructuring of the supply chain to ensure that no products are being subcontracted from regions that use child labour in production. At a time when IKEA is concerned with cost-cutting measures, this can complicate distribution and operations, making political issues in child labour a budgetary problem.
In Russia, IKEA global has been hindered by ongoing corruption that is occurring at the governmental and cultural levels. IKEA actually froze its investments in Russia in 2009 due to its anti-corruption stand and a recent scenario that involved bribes paid to subcontractors related to the procurement of electricity suppliers in St. Petersburg (Betts 2010). This puts pressure on strategic expansion plans as the company must cut through bureaucracy red-tape and attempt to gain governmental support for anti-corruption. In many ways, IKEA is at the mercy of regional governments who seem, in some territories, to turn a blind eye to these business practices. Campaigning against corruption represents a similar strain to operating budget and proper, efficient utilization of executive personnel.
Betts (2010) identifies that IKEA has also dealt with corruption in France that was occurring from political groups that suggested IKEA was involved in the exploitation of French workers at its stores. IKEA received cultural backlash from French citizens on picket lines that disrupted trading with 26 French retail stores. IKEA must continuously deal with political angst in certain countries where it operates and, since the company’s supply chain is global, becomes a target of political objectives.
The economic environment differs in ...
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(Strategic Management Research Paper Example | Topics and Well Written Essays - 3000 Words)
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Current Company Situation X 3.1 Past Performance Analysis X 4. External Analysis X 4.1 General Environment X 4.1.1 Political X 4.1.2 Economical X 4.1.3 Social X 4.1.4 Technological X 4.2 Industry Analysis X 4.2.1 New Entrants X 4.2.2 Substitute Products X 4.2.3 Bargaining Power of Suppliers X 4.2.4 Bargaining Power of Customers X 4.2.5 Competition X 5.
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