IKEA Case Study

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IKEA CASE STUDY
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Introduction
IKEA began its operations in Russia in the late 1990s, and this was part of its
international expansion strategy. IKEA right from the beginning demonstrated its zero tolerance
to corruption, and this led to several setbacks when it established its stores, their inauguration
and the advertisements it conducted across Metropolitan1. However, there were occasions when
the authorities provided moral support and streamlined the difficulties experience either at the
local or federal level, and this had the impact of enabling IKEA conducts its activities faster than
in any other part of the world. IKEA grew and encountered prosperity in its shops in Russia.
Some of the stores became ranked as the leading grossers across the globe for IKEA. It is while
in Russia that IKEA launched its prosperous contemporary business model where it no longer
ran standalone stores in its furniture and return ran large complexes that catered for shopping and
entertainment needs. Despite the challenges that IKEA was faced with, it went ahead and
overcame them, particularly those arising from the corrupt bureaucratic system and this led to
IKEA halting its expansion in 2009 in Russia. Such a decision surfaced when the IKEA Russian
authorities refused to permit the company to open two of its stores, and this as a result of the
company refusing to engage in corruption with the safety inspectors involved in the deal.
However, it was in 2011 when the Russian officials gave IKEA consent to go ahead with its
plans.
However, IKEA was not without scandals that surfaced following concerns by lobby
groups regarding its operations being ethical. This came from international environmental
agencies that were conducting their research, which discovered that IKEA was using ill-directed
Russian logging principles to cut down some of the ancient growth forests. This raised eyebrows
1 G. V. Muralidhara and Namratha V. Prasad. IKEA in Russia:Ethical Dilemma's.
2013.https://www.thecasecentre.org/programmeAdmin/products/view?id=115031

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regarding its claims of being an environmentally sensitive firm that upholds sustainable logging
operations. According to Swedish NGO’s, they asserted that IKEA was cheating its customers
despite receiving FSC accreditation2. It was revealed that IKEA was cutting down trees from a
region that was a conservation area, and there was substantial evidence3. It was thus be argued
that it was the responsibility of IKEA to demonstrate leadership in obtaining wood without
exploiting the defunct environmental principles in nations such as Russia and China.
External elements IKEA must take into account while planning a market entry strategy for
a new country. Discuss such elements in the Russian context and the actions taken by
IKEA.
IKEA’s first store in Russia came to light in 2000 when it was opened in 2000 at Khimki.
At the day of the inauguration, a large crowd attended more than 40,000 shoppers. It was
reported that people had to wait for more than an hour to access the store and the roads that led to
it were characterize by traffic for several miles around the store4. According to the analysts, they
asserted that at the moment IKEA launched its premise, demand was high in Russia, particularly
originating from the middle class. Russia was undergoing transition at this time as there was a
rise of the middle class who were seeking ways to depose the old global Soviet-era furniture in
preference for the contemporary Scandinavian furniture demonstrated by IKEA. It is during this
time that IKEA seized the opportunity through it at the time when Russia only offered two
extreme options in its furniture that is the pricey furniture which was targeted at the affluent and
the cheap furniture which was for the other classes. However, on the other hand, IKEA offered
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3 Jeremy Hance . IKEA logging old-growth forest for low-price furniture in Russia. May 30, 2012.
http://www.solaripedia.com/files/1095.pdf (accessed May 23, 2019).
4 Urs Muller. "Corruption in Russia: IKEA’s expansion to the East (A-D)." Emerald Emerging
Markets Case Studies, 2016: 116-121.