What comes to mind when you think of IKEA? You might have memories of following your parents through an IKEA maze-like store with the promise of Swedish meatballs at the end of the trip. The Swedish-based company is known for its flat-packed furniture, minimalist style, and affordability.

IKEA’s purpose, to “create a better everyday life”

for people through build-it-yourself furniture, has been a successful strategy. Founded over seventy years ago, IKEA has 190,000 employees working in over 400 stores in 49 countries. Its yearly revenue is approximately $41 billion—

that’s a lot of furniture! All this sounds like life for IKEA should continuously be a smooth ride. But, it wasn’t when several children were seriously hurt by one of its dresser designs that tipped over. After one child fatality, IKEA was responsible for the largest furniture recall in the world ever.

They recalled 29 million furniture items in a recall that was three times bigger than the next largest furniture recall in history. IKEA also rolled out a massive communication campaign about the recall and offered wall mountings for dressers for customers who did not want to return their furniture.

Then, there was another child fatality by a dresser that was not wall mounted.

Pretend you’re part of the management team. Using what you’ve learned in this part on monitoring and controlling, what five things would you suggest the team focus on? Think carefully about your suggestions to the team.

Global Sense This is a story about the global economy. It’s about markets, politics, and public opinion. And as US jobs—especially white-collar and professional jobs—continue to be outsourced and offshored, the story hits closer and closer to home. Although the terms offshoring and outsourcing are often used interchangeably, they do mean different things.

Offshoring is relocating business processes (production and services) from one country to another. Outsourcing is moving noncore activities from being done internally to being done externally by an entity that specializes in that activity.

One of the realities of a global economy is that to be competitive, strategic decision makers must look for the best places to do business. If a car can be made more cheaply in Mexico, maybe it should be. If a telephone inquiry can be processed more cheaply in India or the Philippines, maybe it should be. And if programming code can be written more cheaply in China or Russia, maybe it should be. Almost any professional job that can be done outside the organization is up for grabs. There’s nothing political or philosophical about the reason for shipping jobs elsewhere. The bottom line is that it can save companies money. But there’s a price to be paid in terms of angry and anxious employees. So are offshoring and outsourcing bad?

Critics say “yes.” It’s affecting jobs once considered

“safe” across a wider range of professional work activities.

And the offshoring and outsourcing have taken place at a breathtaking pace. What this means is that the careers many college students are preparing for may not sustain them in the long run. This structural change in the US economy also means that the workforce is likely to face frequent career changes and downward pressures on wages.

Proponents say “no.” Their argument is based on viewing economic development as a ladder with every country trying to climb to the next rung. And it’s foolish to think that the United States has reached the top of the ladder with nowhere else to go. Although people fear that educated US workers will face the same fate as blue-collar workers, whose jobs shifted to lower-cost countries, the truth is that the United States currently still has a competitive advantage in innovation;

although that may be in jeopardy. The US may have a trade deficit when it comes to goods (and a shortage of skilled labor that is needed in today’s manufacturing processes). But the US still has a trade surplus when it comes to services.

Trends overall seem to have steered away from US firms deciding to bring their manufacturing operations back to the US (what it is called “reshoring”). Tariffs have not had a clear effect on the offshoring and outsourcing numbers yet either. It’s safe to say that offshoring and outsourcing is a reality that is not disappearing any time soon. This means that offshoring and outsourcing is another example of why decision makers need to be aware of the context within which their organizations are doing business.

Discuss the following questions:

• How are offshoring and outsourcing similar? How are they different?

• What arguments do critics use to say offshoring and outsourcing are bad?

• What arguments do proponents use to say offshoring and outsourcing are not bad?

• How does the decision to offshore and outsource affect monitoring and controlling activities?

• Is it just manufacturers that deal with these decisions/ issues? Discuss.............

Discussion Questions

1. What might need to be different in Starbucks’s control process as a result of their shift to including more drive-through windows in their stores? What specific measures of performance might be needed with drive-through service that are not as relevant to inside-store sales? What are control issues that Starbucks may need to address related to its out-of store delivery offerings?
2. How could Starbucks use social media to practice effective levels of feedforward control, concurrent control, and feedback control?
3. What companies might make good benchmarks for Starbucks? Why? What companies might want to benchmark Starbucks? Why?
4. What “red flags” might indicate significant deviations from standard for

(a) an hourly partner,

(b) a store manager,

(c) a district manager,

(d) the executive vice president of finance, and

(e) the CEO? Are there any similarities? Why or why not?
5. Using the company’s most current financial statements, calculate the following financial ratios:
current, debt to assets, inventory turnover, total asset turnover, profit margin on sales, and return on investment. What do these ratios tell managers?
6. Can Starbucks manage the uncertainties in its value chain? If so, how? If not, why not?