Ikea in Russia

Dr. Zhenzhong Ma

The Centre for Executive and Professional Education

Odette School of Business

IKEA IN RUSSIA:

Emerging Market Strategies and Ethical Dilemmas

Program: Master of Management

Group #5

Group Members: AMINAT ADEYERI 104464560

DERE IKOMI 104339493

ZIHAO WANG 104356874

MENGQING ZHAO 104481569

MINGLI JIA 104201974

Date: 21 July 2016

TABLE OF CONTENT

INTRODUCTION        3

IKEA IN RUSSIA        4

PROBLEMS IN IKEA RUSSIA        5

EXTERNAL FACTORS IN THE RUSSIAN CONTEXT        6

IKEA’s  RUSSIAN SOJOURN AND FUTURE BUSINESS STRATEGY        8

STRATEGIES IN EMERGING MARKETS        11

EMPHASIS ON CUSTOMER SERVICE        11

MAKING A DIFFERENCE        11

ANAYLZING CUSTOMER NEEDS AND WANTS        12

NOT EXPENSIVE, BUT NOT TOO CHEAP        12

RECOMMENDATION AND CONCLUSION        13

REFERENCES:        15

INTRODUCTION

Globalization in multinational organization has become a key factor to their growth.  Deresky’s (2014)definition of globalization can be seen as“dealing with global competition characterized by networks of international linkages comprising economic, financial, political and social markets that in turn bind countries, institutions and people in an interdependent global economy”. (p.5). Nevertheless, globalization does not come without its challenges. For organization to be successfulon a global scale they will need to factor in, not only the growth of their organization in the international country, but also the cultural, political and economic, legal and technological environment of these countries. One of the key challenges global organizations face is having good corporate social responsible standard, even the best organizations such as IKEA suffer the challenge of maintaining a high standard of corporate social responsibility. Corporate Social Responsibility according to McWilliams, Siegel, & Wright (2016)  “can be defined as a situation where organizations go beyond compliance and engage in actions that appear to future some social good, beyond the interest of the firm and that which is required by law” (p.1). Expansion into international markets calls for critical assessment of both the home and host countries code of conducts, when companies decide to expand into international markets they should first of all make sure they are compliant with the ethics in the host countries as well as theirs.

Our case analysis will focus on IKEA and its emerging market strategies and ethical dilemmas faced in Russia.

IKEA IN RUSSIA

IKEA is a Netherland-based Swedish company founded in 1943 by 17yr old Ingvar Kamprad. IKEA is a privately held company. It started off as family oriented business with a goal to design and sell ready to assemble furniture, home appliances and accessories. The name IKEA is coined from Kamprad’s initials (I.K.), his farm Elmtaryd (E) and the village where he spent his childhood Agunnaryd (A). IKEA is one of the world’s largest retail furniture company with its presence in 40 countries, owning 338 stores, including 30 service trading offices in 25 countries, 33 distribution centers and 11 customer distribution centers (Deresky, 2014).

IKEA’s emergence into Russia has been a venture that was pursued by Kamprad since the 1960’s. Several emergent failures did not stop IKEA from entering the Russian market and in 1998 IKEA finally gained entrance. Dahlgren, a prominent IKEA employee was the overseer of the emergence in Russian and with the corrupt state of Russia Dahlgren did not believe this venture will be a success, nevertheless, he still pursued the dream of Kamprad, which was to establish stores all over Russia.

Russia is a fast growing nation and they currently stand as the top in the world for retail expansion, with a constant growth of 30% in retail sales, through this IKEA saw it as an opportunity for to saturate the Russian market.

However, this expansion did not come without challenges and with the knowledge of the Russian environment and market, IKEA was faced with corruption issues, which tested their strong corporate social responsibility standards.

PROBLEMS IN IKEA RUSSIA

IKEA’s first venture in Russia started in Moscow, when it opened its first store in the year 2000 in a town north of Moscow called Khimki, IKEA faced a great deal of disruption from the Russian financial crisis but nevertheless,it still conquered the challenges faced at the time. The store in Khimki, served as a great opportunity for middle class citizens to buy furniture’s at an affordable price, this first openingranked up IKEA’s sales to more than US$100 Million which was three times what they had forecasted to generate in sales, with the growth rate and acceptance of the customers IKEA sort to seek more expansion in the Russian.

This expansion plans came with more challenges from both local and national government. However, IKEA was able to expand into 14 locations, while maintaining a high ranking in having one of the biggest stores in world located in Russia as well as Khimki being the top 10 grossing stores in the world. This successful expansion growth can be attributed to its high standard corporate social responsible and outstanding customer service. Although Russia proved to be a corrupt nation, IKEA saw grounds to rise above the corruption on most occasions. IKEA found ways to manage the corruption in Russia but these ways cost IKEA money and unnecessary time in expanding. In our case today we will analyze IKEA’s emerging strategies and ethical dilemma in Russia while focusing on the following areas: The various factors which IKEA should have taken into account while devising a market entry strategy, what IKEA’s future strategy should be in the Russian market and what strategies can IKEA use to grow its business in Russia. This will be followed by a recommendation and conclusion.