Report: IKEA at Russia

Running head: REPORT IKEA AT RUSSIA
REPORT IKEA AT RUSSIA
Name of the Student
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Author Note

1REPORT IKEA AT RUSSIA
Introduction
In this essay, the discussion will be laid on three questions relating to IKEA and its
business in Russia. A critical analyze will be discussed at the end of the discussion of the case
studies. IKEA is a multinational company from Sweden, though the headquarter of the
company is in Leiden, Netherlands. The company was founded in the year of 1943. The
company belongs from the retail industry, which designs as well as sales ready-to-assemble
kitchen appliances, furniture, home accessories and other useful goods and home services.
The organization has been the largest furniture retailer globally since 2008. The company is
present in about 424 locations worldwide. The founder of the company Ingvar Kamprad, and
he used his own initials while naming the company, and added the first letter of his farm
Elmtaryd (E), and the village where the childhood of Ingvar Kamprad has spent Agunnaryd
(A). The number of employees are near about 208,000 (Bezrukova et al. 2015). The company
decided to enter the market of Russia in the late 1990s, as the company was deciding to
expand globally at that time. Though Kamprad was very much keen to do the business since
the 1960’s, but faced some problems. The company had to deal with the corruption before
setting up their first ever store. If paying bribes were started by that time, then it has started as
a system. The company is popular for showing an uncompromising attitude in case of
corruption issues, and earned several awards for maintaining the ethical practices within the
organization, like it has been identified as one of the most ethical companies worldwide in
specialty retail for four consecutive years. The company was awarded the “2012 World Retail
Congress International Retailer of the Year”, as the company proved the superiority over the
competitors in terms of branding done by the company, strategizing the action plans properly
and profitability of the company or the amount of revenue earned by the company. IKEA
wanted to enter the market of Russia due to presence of many external factors (Abrahamian
2013).

2REPORT IKEA AT RUSSIA
Q1. What are the various external factors which a company must take into account while
devising a market entry strategy for a new country? Discuss these factors in the Russian
context and in the actions taken by IKEA.
There are plenty of external factors which are taken into account while a company
wants to enter into a new market These factors can be categorized under PESTLE Analysis,
which includes the Political, Economic, Social, Technological, Legal and Environmental
factors. In the given case study, Ikea hugely follows the “Green Business Model”, so it has a
great opportunity to attract the customers of the new place who will prefer to buy their
products. The increase of the ethical consumer, who prefers to buy the products which are
environmentally conscious will be a huge opportunity for the IKEA company to tap the
untapped market of Russia. Another opportunity the company will have is the cost leadership
management of IKEA. Though the quality can be an issue in this case, but at the end of the
day the customer will see whether the money spent is worthy for the product or not, and
whether they are getting any additional value or not. Another factor responsible for entering
the new markets is the expansion strategy formulated by the company. The political stability
of the country where the company wants to expand is another major factor to enter into a new
market. Like in the case of IKEA, they have been trying to enter into the market of Russia
since the 1960’s. Their first attempt was halted due to the collapse of the Soviet Union in the
year of 1991 (Pohlen et al 2016). Another attempt failed due to the Constitutional crisis of
1993 and also due to some unfavourable economic conditions of the country. Economic
stability of a country is impossible if the political stability is absent from a region. The
relationship with the local as well as the international government is very much important as
well. In case of IKEA, the Mayor of Khimki helped a lot to set up their first ever store in
Russia in March 2000. Though the ‘Russian Financial Crisis ‘broke out at that time, the
company continued to construct their first-ever store. The social and cultural factors have also

3REPORT IKEA AT RUSSIA
to be kept in mind before entering a new market. Homosexuality is still banned in Russia, and
for this, the company had to remove a picture of a same-sex couple from their Russian
catalogue. They changed their idea to suit the normal thinking of the society of Russia.
Providing the well-designed furniture in an affordable price is another major opportunity to
enter the untapped market of Russia, where there was a lack of this kind of products for the
middle class society of Russian people, who, before the entry of IKEA used the old model
Soviet-era furniture. IKEA helped to transform their likings from the old Soviet models to the
new Scandinavian model of furniture manufactured by IKEA (Bruno et al 2013).
Q2. What is the impact of strong and co-operative political machinery on the business
prospects of an emerging market? In this context, discuss IKEA's Russian sojourn. What
should IKEA's business strategy be in the future?
IKEA, as seen from the case study, is one of the leading entrepreneurial investment in
the country of Russia, as the company opened many other stores in Russia including the
manufacturing units as well. The company is very well known for following the anti-
corruption practices in its business operations, and, due tom this behavior of the company, the
comp any has faced problems in not only in Russia, but in other parts of the country as well
when the company wanted to expand their business. The company stood firm in following
and maintaining the ethical standards to operate their day-to-day business operations as well
as financial terms, in spite of all kind of difficulties faced by the company. The anti-
corruption attitude was properly maintained by the organization to enter and expand their
business in Russia and run their business successfully. The company has diversified
themselves by setting large shopping complexes with multiple benefits instead of relying on
the stand alone business or the single stores of the company.