JMD2821 MOG Assessment 2: IKEA's Ethical Challenges in Russia

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JMD2821 MOG ASSESSMENT 2

Executive summary
The concept of an ethical dilemma is the decision-making problem between two possible
imperatives of the moral nature & both of them are to be completely acceptable & preferable.
The complexities have been identified or arose out of the situational conflicts. The case of
“IKEA in Russia – Ethical Dilemmas” is being discussed along with the describing the efforts as
well as the tribulations of the international giant furniture retailer, IKEA to set up & run the
business in the emerging market of Russia. The major challenges along with the favorable
opportunities are being discussed & analyzed in Russia. Apart from all these, the struggling of
the company is also being identified about the corrupt bureaucracy. The ethical standards have
also been discussed not only in Russia but also in other global markets.

Introduction
Though it is very essential nowadays for each & every business organization to expand their
business globally, it is also equally essential to perform all the duties, responsibilities & act
according to the development & proper implementation of the ethical standards, effectively &
efficiently. IKEA is the largest multinational retailer of furniture whose core work is to
innovatively design & sell the furniture, home accessories & other appliances that are used in the
kitchen. It also provides useful goods & other effective services to the home of different people.
It was founded in the year 1943 by Ingvar Kamprad. The furniture that is manufactured by the
local manufacturers is also being sold through this business, in the year n1948. The case study of
IKEA is being analyzed & discussed in the context of the ethical dilemma or ethical standards.
Favorable opportunities are also being discussed that can be grabbed by IKEA in the effective as
well as in an efficient manner.

The case “IKEA in Russia – Ethical Dilemmas”
Okan Yunalan, who was a Turkish National acted as an intermediary for the Carl Ola
Ingvaldsson, the former head of the leasing department in the Russian Subsidiary of IKEA for
extracting a bribe & sentenced to the high-security prison for five years. He was very guilty of
the large scale extortion after demanding $ 225,000 from the company for leasing two premises
at the shopping complex of IKEA in Tyoply Stan, which is a suburb in Moscow. It had been
founded that the different accomplices managed to leave the country & their extradition was
sought by Russia (AKÇAY & BAĞCAN, 2016).
According to IKEA, the investigation was welcomed by the Russian authorities into the incident
& who would co-operate IKEA, effectively. This instance was the first one in which high
corruption was identified in Russian operations. The uncompromising attitude of IKEA towards
corruption was well known to all the businesses of different countries, but sometimes, IKEA
failed to become successful in the context of ensuring that all its employees completely &
properly adhered to all the ethical standards set up by them (Holmsten-Carrizo & Mark-Herbert,
2014). The efforts, as well as the tribulations of IKEA, are being described in the whole case
study along with considering the unique circumstances identified in Russia.
Efforts and tribulations
IKEA made huge efforts to find out the new, effective as well as the ethical model of the
business that can aim at reducing the negative or the unfavorable impact on the whole
environment. The main purpose of IKEA is to create, develop & enhance the healthy &
sustainable living for all the people in an easy manner. Their target is to make & develop the
increasing choices of sustainable nature each & every day. Therefore, IKEA put more effective
efforts in the direction of ensuring a higher level of sustainability among the peoples' life because
the unsustainable consumption, as well as the wide climatic changes, are some of the biggest
challenges for the humanity (Schneider & Bermudez, 2018). In total, 153 stores are being
established, developed & run by IKEA & various problems have also been determined that can
be faced by IKEA while expanding its whole business at the global level.

IKEA is making huge, favorable & sustainable efforts in the direction of creating as well as
building the new stores in different Russian areas that will require the demolition of homes.
Therefore, the highest efforts made by IKEA & these types of tribulations may result in facing of
the huge difficulties for establishing the business in Russia. It has been researched that the
economy of Russia is growing rapidly which means that the people or the consumers can spend
their earnings in the increasing order (Holmsten-Carrizo & Mark-Herbert, 2014). It has been
identified that to run the newly established business in Russia, IKEA needs to follow up all the
laws & regulations in a consistent manner. It also negotiated as it wanted to build a store in
Moscow in the right or the standard price. For this, it has also approached the city of Moscow in
different ways so that it can effectively establish the stores not only the Moscow city but also in
other areas of Russia.
Key opportunities to IKEA
The higher strengths are being used by IKEA to favorably take advantage of all the opportunities
that arise among their surroundings. The business organization of IKEA is highly & sustainably
focused on the changing business environment that will ensure the good returns at the
competitive price within the sensitive market. It has also been identified that IKEA possesses the
great & true potential in terms of providing the unique as well as the best solutions that can
ensure & also enhance the higher level of sustainability for all the customers at their respective
homes (Müller, 2016). Effective & standard solutions are being developed by IKEA for
providing all its potential customers with effective solutions, effectively & efficiently. Following
are some of the favorable opportunities that are to be essentially grabbed by IKEA & taking the
great advantage through the sustainability agenda:
 Increasing & growing demand for all the greener products
 Demand for the lower carbon footprints & for the reduced water usage
 Increasing or high demand for all the low priced products
 It possesses the great ability to attract the customers for buying the IKEA products
 It has the cost leadership which states the company involves the single-minded focus on
the overall cost at the expense of other things (Ericsson, 2018)

 The huge expansion ensured & enhanced by IKEA within the emerging market of Russia
& other countries & hence leveraging the higher level of profitability within the
competitive business environment
Apart from the above opportunities, the economic crisis in Russia has highly forced all the
potential buyers of furniture to be the savvier in the context of the prices & this had largely
benefitted IKEA in the sustainable manner (Müller, 2016). The first attempt was being made by
IKEA to begin the Russian operations due to collapsing of the Soviet Union in the year 1991.
Challenges faced by IKEA
IKEA had faced multiple numbers of challenges in the context of the changing social trends,
economic factors & the market forces. Different ways have been identified in which IKEA will
be able to address all the issues & eliminate all the challenges in the effective as well as in an
efficient manner.
 Social trends: The needs, requirements & liking of all the potential customers get change
rapidly because of which it has become very difficult for Ikea to enhance the sustainable
life (Gbanabila, 2014).
 Changing market forces: The economies of scale get change each & every day which
results in the higher barriers to the entry for all the small companies entering into the new
market.
 Economic factors: Sometimes, IKEA as to reduce its prices during the period of financial
crisis & because of which it can lead towards the higher depression (Raska & Richter,
2017).
Solutions implemented by IKEA
After the proper identification & analysis of each & every challenge, IKEA determines the
effective unique & innovative ways to positively deal with all the challenges & ensure the long
term sustainable growth, effectively & efficiently. The online help is being guided to all the
customers so that IKEA can have the proper interaction with all the customers & can easily
favorably identify the changing social trends. It is also effectively focusing on home
improvement within the slowing market of housing (Mikhnovets, 2015). IKEA also ensure the

complete effective & proper training to all its workers in a professional manner & hence is
becoming more responsible to become more sustainable.
The effective pricing strategy is being determined & implemented by IKEA for all its target
customers in the case when the whole sector of retail faces the period of depression. It can also
increase the level of budget for its products & services by innovatively designing the
innovativeness in its products. The proper implementation of these strategies requires the strong
level of communication to be ensured & enhanced, effectively & efficiently (Bezrukova, et.al.
2015).
Struggling with IKEA with a corrupt bureaucracy in Russia
The Russian bureaucracy means the great numbers of bodies, not only the federal government
but also the governments of different regions & officials in the judicial force. It has been
determined that the state of Russia is facing the war with corruption as well as the bribery. The
government servants who receive any kind of the presents or the monetary bribes, they are being
forbidden by the heads of government as well as the municipal bodies. Because of all these
things, IKEA was greatly, highly & deeply struggling with the corrupt bureaucracy in the
Russian state. All the lawsuits were being retaliated by IKEA for keeping their level of honesty
at the higher level & also determining those effective ways in which it can conduct or run its
business in the clean manner in that area or the state where the corruption was the part of the
whole corrupted system of Russian bureaucracy (Yang & Shao, 2019). In the pure as well as the
honest manner, IKEA had struggled a lot as it was unable to purchase the land for building its
stores & connecting with all their target customers.
The large numbers of cases were fought by IKEA in the court in the Russian state. IKEA was
shocked when it founded that all the other companies or large retailers avoid the difficult
complications by just paying the number of bribes to the government servants & was very
disappointed about knowing that this was the result of its higher & the greatest ambition for
conducting the business in Russia (McKenzie & Dukeov, 2014). Various market players &
businesses have said that doing the business in Russia being the Saint is very difficult. The
blunders of IKEA are great examples of this.

IKEA faced almost all the lawsuits that had been filed against it for building the stores. IKEA
developed its shopping malls in all the countries rather than taking the premises or the land on
lease. But, in Russia, building the stores is very difficult as it reduces the opportunities for the
government servants to get an increasing amount of bribes through the mode of corruption
(Tiwari, 2015).
IKEA was provided with those plots for the construction that were mainly located on the land of
former collective land. All those plots were having the history of tangles privatization & also
were very old that it was almost impossible to find out the relevant documents of those plots
(Abrahamsson & Gavriilidou, 2018).
IKEA had taken an effective decision to conduct the internal investigation to identify whether
any of its employees were being engaged in the corruption or bribery, either directly or
indirectly. A Russian contractor offered a bribe & all the top-level managers were just guilty
instead of doing something in against of it or preventing it. In the exchange of the bribe, the
officials agreed on signing the certificate of fake acceptance for the electrical equipment in the
shopping mall of IKEA. And, the project was not being approved (Belousova, et.al. 2016).
Adherence of IKEA to its ethical standards
The vision of IKEA is to create a better life for each & everyone & every day. The ethical
standards of IKEA involve the core essential values which are the constant desire for the
renewal, great enthusiasm & togetherness, cost-conscious, strong will power & humbleness,
strive to meet the reality, accepting & delegating the responsibility, daring to be innovative or
different and simplicity (McKenzie & Dukeov, 2014).
Along with focusing upon all the core values, an effective strategy of sustainability has also been
developed consisting the strategies goals for the long term to enhance the different communities
as well as the whole environment in a positive manner by the year 2020.
Proper training is being included in the ethical programs of IKEA along with the proper codes &
policies so that all the employees can be guided ethically. Though, higher level of ethical risks
are being faced by IKEA in the context of purchasing the land, raw materials & may more, but it
possess the strong code of conduct in relation of all its ethical standards because of which it is

not only able to positively & efficiently deal with the corrupted bureaucracy in Russia but also in
all the other different countries & global areas (Bezrukova, et.al. 2015).
Apart from all these things, IKEA also provides the funds to those institutions that necessarily
require them for building the schools & other educational institutions for all the children, for
eliminating the major cause of child labor and ensuring the higher empowerment of all the
women in the whole world. A standard amount of money is being donated by it in UNICEF also.
Along with these, IKEA provides strong support to the Children's Rights & Business principles
in a great & sustainable manner (Mikhnovets, 2015). IKEA also greatly & effectively opposed
the higher level of corruption in Russia by maintaining 12 stores. It also fired two executives
working in IKEA after getting the bribes that have been paid to them in exchange for the
electricity supplies.

Conclusion
It has been concluded that the strong reputation is being developed & maintained by IKEA in
terms of not only selling the quality products & services to all the potential customers at the
competitive prices but also following up the ethical standard & ethical code of conduct in the
effective & in an efficient manner. Though the maximum ethical challenges were being faced by
IKEA, still it bravely faced all the challenges & continued to suitably obey all the laws & legal
practices in all the countries in which it was running the business & enhancing the expansion.
With the help of the strong & effective ethical values & the ethical standards, all the employees
were being properly guided in using & ensuring the decisions taken by the company. Therefore,
developing & maintaining the culture of strong values is the must so that it can control &
monitor all the operations very carefully within the different countries in the globalized context.

References
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