Case Study: IKEA's Strategic Decisions and Market Presence in Russia

This case study examines IKEA's strategic decisions and market presence in Russia. It explores the external factors considered during market entry planning, including economic conditions, social-cultural nuances, and the political and legal landscape. The analysis highlights the impact of a cooperative political environment on IKEA's business operations and the strategies employed to foster strong market presence, such as client-focused approaches, skill upgrades, innovation, and strategic investments. The case study details IKEA's approach to establishing large shopping complexes and adapting to the emerging market's dynamics, including the Zero tolerance policy. The analysis further provides an overview of the challenges faced by IKEA and the strategies adopted to overcome them, contributing to its substantial growth and market share in Russia.

Running head: IKEA IN RUSSIA
IKEA in Russia
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1IKEA in Russia
Case Summary:
The presented case structure illustrates upon the business policies taken by the
company IKEA, a Sweden based furniture brand, for the emergence and expansion in the
Russian market. The founder of the company, Ingvar Kamprad, was reluctant to start a
business in the country for its poor economic structure and the financial crisis situation that
the company was going through, for a long time. Moreover, the corrupted bureaucratic
structure that the country had, also contribute to the reluctant behaviour of the founder of the
company. However, in order to expand and gain a new economy and market, the company
had taken initiative to expand its business in the country, Russia. Also the growing middle
class in the country was another reason for the company to take the initiative to start a new
business there. Therefore, the company took the initiative to move their business in the new
country, by approaching the government of the same. However, initially, the company had
faced certain critical situations, regarding the corruption presented in the country and also
regarding finding the correct place to start the business. The government of the country had
presented the organization with a market area that was too poor to afford its products.
Therefore the company shifted their market to Khimki, a place in Moscow, where they
experienced a very friendly and helpful political environment, which helped them to expand
their market. More importantly, as the company was trying to open a chain in the country, on
the inauguration day, the company had experienced a massive sale and a long queue outside
the shop. Therefore, the company had experienced a good start in the country. Furthermore,
the company had presented the people of the country with an upgraded and innovative
designing with a dynamic pricing structure. The people of the country was presented with
only two choices, one, products for the lower class people and products for the higher class
people, that too with very limited choices, to choose from, but IKEA had appealed to the

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middle class population of the country that was growing and dominant in the market.
Therefore, the company had rightly recognised the needs of the population and also the target
market for the company, which enabled IKEA to gain a profit of $100 million in the first
year, thrice of what they had expected. Further, the company had invited other electronic,
fabric and other companies into the market and had taken an approach for the shopping
complex culture into the country, with international brands. The IKEA group had also
provided the population of the country with, restaurants, baby care rooms, and other comfort
zones, that had enabled the company further, to gain a niche in the market. The company had
also incorporated a handsome pricing structure to gain the market. Therefore, such strategies
and policies taken by the IKEA group, had enabled the organization to be the giant
organization in the market of Russia. Further, the company had taken the Zero tolerance
policy that had, again, enabled the company to gain a niche in the market and a sustainable
approach for the same (Lasserre 2017).
Questions- Answer
Q.1. External Factors considered by the companies while strategizing the market
entry planning. The factors considered by IKEA.
While strategizing to make new market entries the companies are to consider certain
external factors which are,
Direct Export: The most common way to expand business in a new country is to
reach the new market through agents and distributors, who can help the particular
organization to reach its products to the market directly. Therefore, the organization
must be focusing upon choosing the right distributors and agents, as in time they will
become the primary face of the organization in that particular country.

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Economic Factors: While moving the business into a new country, the pivotal factor
that influence the business in a country is the economic structure of that particular
place. Every county has its own economic structure, therefore, before expanding the
business in a new market economy, the organizations must be aware of the e
economic conditioning of that place and the company must also focus upon the
buying capability of the people of the country.
Social and Cultural Factors: Each country is seen with differences in the social and
cultural sectors. These differences are very significant as they can either hinder the
marketing policies of the organization or can facilitate the organization with newer
opportunities. The marketing mixes, included by a company should be governed by
and focusing upon the socio- cultural nuances of the country. The organizations must
include the diversities in order to approach the customers in a correct way, therefore,
they may have to tailor their products in order to suit the customers of that particular
place, which will positively contribute in the sales of the country.
Political and Legal Scenario: The political scenario of a country and the legal
structure governing the country act as a major influencer on the business policies of
the country. Before, moving the business in a new country, the organizations must be
aware of the political situation of the country, and must try to assess whether the
political conditioning will be effective for the business in the country or whether it
will be affecting the business policies taken by the organization. Political stability or
instability and the political attitude of a country, are observed to be major
contributing and influencing factors upon the business policies of an organization.
The policies governing in a country, also contribute effectively. Moreover, the tax
structure and the legal and political norms of the countries act as major influencing
factors for a company to expand its business in a new country (Rothaermel 2013).

4IKEA in Russia
In case of IKEA, the external factors that had influenced the market policies for IKEA
was the poor economic structure of the country, the corrupt bureaucratic structure of the
same that demanded practice of bribery, to which IKEA had taken the Zero tolerance
Policy, the constitutional crisis situation present in the country, and the favourable
market conditioning present at Khimki and the friendly behaviour of the Mayor of
Moscow (Lasserre 2017).
Q.2. Impact of co-operative political machinery in case of an emerging market.
Impact of Russian sojourn on the business policies of IKEA.
The political machineries of a country have sound impact upon the business conduct
of the place. A sound and non- corrupted political system is essential for expanding
business in a particular area. A stable government is another imperative for a better
business conduct in a new country. A stable government of a country provides an
organization the impetus to conduct their businesses in a sound manner, where there
will be no external pressure to deal with the government. Another important factor for
the organizations to conduct business is a sound way is, the cooperation of the
government of the country, or rather, the place where the organization is planning on
to expand. The political leaders should be helpful in order to expand their business in
other parts of the country, a cooperative government also helps the organizations to tie
up with other business organizations in order to expand (Epstein 2018).
IKEA had started its business in the country with the idea of providing home furniture
to the people of the country which will be both affordable and of quality. Their initial
goal was to include a sustainable expansion in the country, including quality, cost and
attractive designs. The company had rightly accounted to all these aspects and along
with helping the company to gain their aim of helping the people of the country to live

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a better life. Therefore, since the company had elicited the potential to thrive, the
political machineries of the country and the policies, had contributed positively
towards the expansion of the same. A market of a country can only be promising if it
provides the impetus to the organizations to thrive. Therefore, since the country was
going through a continuous and radical changes, the company had to, accordingly,
change its goals, values and aims and tailor its products to suit the political
conditionings of the country. There had come a particular point when the company
was going a through utter crisis situation. But, the modifications and changes that the
company had made and the market demands had contributed in the expansion and
growth of the country (Lasserre 2017).
Q.3. Strategies taken by a company to grow business in an emerging market.
Strategies to create strong market presence. IKEA’s strategy of establishing
large shopping complexes.
The strategies that the companies take to grow in the market are,
Client- focused: As per the researchers, in order to grow in an emergent economy, the
organizations include client centred strategy in their orientation. The organizations
focus on the customer need or requirements and therefore, engineer their products
according to the customer needs. The organizations also focus upon building an
effective communication system with the customers of the country.
Upgrading Skill: As the companies take into consideration the customer needs, the
companies must focus upon their skills that will help to achieve the goal. The
organizations also need to focus upon their HR policies regarding motivating and
developing the employees and also retaining the same. The organizations also try to

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find out the gaps in the skills of the employees and take proper steps or measures to
account them.
Innovation: The organizations also include in their strategies, the pace for innovation.
It is seen that to grow and expand in the current market, the companies must need to
include innovation in their orientation, in order to grasp the present market and thrive
upon that.
Investments: The organizations also include in their strategies the policies for
investments, that is, the companies strive to make proper and correct investments. The
correct investments refers to, the investments made in the technologies, the
investments made in the market research and product manufacturing, and also to the
investments made to the lessen the business loans (Grant 2016).
Strategies to make strong market presence:
The companies also focus on including strategies that will enable the organizations to
create a strong market presence. These strategies include,
Understanding the best-selling product of the organization, and further focusing on that to
create a niche in the market.
Extending the product line by including newer and different products in order to increase the
sale in the market.
The companies also strive to explore the market to gain and increase their customer base.
This is essential for the organizations in order to grown and expand their business.
The companies also include in their orientation, expansion of distributors and clients. This is
essential for the companies to expand their sales in their market. In order to grow and expand
in an emerging market, the companies must invest and strategize for including a good
distributional channel that would enable the company to penetrate the market and thrive.

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Along with these, the companies also include in their strategies, a rigorous pricing structure
and policy. This is imperative to gain a niche in the market for all the organizations. The
companies try to gain knowledge regarding the buying capability of the customers and tailor
their pricing structure according to that (Ahola et al. 2013).
IKEA centres on the Ikea Centre of the country, where the IKEA group is positioned, and
they have taken a strategy of operating MEGA Family Shopping Centre. The company owns,
plans, develops and governs the major shopping complexes of the country, which have
contributed in the continuous ad steady growth of the company. In the year 2013, the
company had showed a growth of 3.1 percentage. It had first opened its store in the country,
in the year 2000, and by the end of 2003, it had opened a total of 12 stores, across the
country, and thus has become a powerful organization in the country, influencing upon the
political organization of the country. It has gained, such a strong positioning of the county,
that the yuppies of recent times are called the “IKEA Generation” (Lasserre 2017).
Recommendations for IKEA:
IKEA has been seen to have been doing excellent business in Russia, and the
strategies that the organization had included in its orientation, had gained the company to
achieve an exceptional corner in the market. However, with changing times, the researchers
are of the opinion that the organization has reached a point of saturation, which can pose
potential threats to the sustainability of the company. Therefore the following
recommendation can be made for the company to excel and b competent in the market.
The company can rigorously use the formula of market acquisition, that is, it can gain onto
and include other smaller industries into its chain, thus increasing a customer base and
creating an impetus for sustainability for the smaller organizations (Vladimir 2016).

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The company can also revise their pricing structure and their modelling style, in an
endeavour to reach to attract the customers of the middle class or the lower middle class. This
will also gain them an expanded customer bases and will empower their brand image
(Avodele et al. 2016).
The organization must also include the concept of brand expansion. This is, they must take
into account certain other products under the same brand name and image in order to appeal
to a different genre of customers, and thus expanding their customer base (Alexey et al.
2015).
Conclusion:
Therefore, evaluating the case study and reflecting upon the question answers, it can
be stated that IKEA is doing excellent business in Russia, and irrespective of certain factors,
like the corruption system and the unstable governmental structure of the country, the
company has done exceptionally well in the field (Kouznetsov, Dass, and Schmidt 2014).
Further, in order to expand the company must include a modified strategy structure and
practice better policies into its orientation to further enhance its brand image and market
position in the country.

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Research:
Lasserre, Philippe. Global strategic management. Macmillan International Higher Education,
2017.
Grant, Robert M. Contemporary strategy analysis: Text and cases edition. John Wiley &
Sons, 2016.
Ahola, Tuomas, Jaakko Kujala, Teuvo Laaksonen, and Kirsi Aaltonen. "Constructing the
market position of a project-based firm." International Journal of Project Management 31,
no. 3 (2013): 355-365.
Epstein, Marc J. Making sustainability work: Best practices in managing and measuring
corporate social, environmental and economic impacts. Routledge, 2018.
Rothaermel, Frank T. Strategic management: concepts. New York, NY: McGraw-Hill Irwin,
2013.
Kouznetsov, Alex, Mohan Dass, and Peter Schmidt. "Entry mode decisions: the effects of
corruption and weak law enforcement on foreign manufacturing SMEs in post-communist
Russia." Baltic Journal of Management 9, no. 3 (2014): 277-293.
Kovalev, Vladimir. "Intrapreneurshp: International Experience: A Qualitative Study of
Companies in Russia, Sweden and Latvia." (2015).

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Kalinin, Alexey, Natalia Zaitseva, Kamila Novak, and Anna Firsova. "Sustainable Russia: A
Guide for Multinational Corporations." Available at SSRN 2813217 (2016).
Ayodele, Anthony, Erika Pasquel, Kimara Taniesha, and Erica Sowah. "A critical evaluation
of the application of Total Quality Management at IKEA."