Case Study: IKEA's Expansion, Ethical Issues, and Strategies in Russia

This case study analyzes IKEA's operations in Russia, focusing on the ethical dilemmas and business challenges the company faced. It explores the strengths, weaknesses, opportunities, and threats IKEA encountered in the Russian market, including issues of corruption and bureaucracy. The essay exam...Read More

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Managing Across Border
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Managing Across Border 1
Executive Summary
IKEA in Russia- Ethical Dilemma case has been discussed in the below mentioned that
highlights the challenges and opportunities of the company that they faced in the market of
Russia. The furniture retail industry of Russia was both profitable as well difficult for the
company to survive as the business faced allegations of corruption and bureaucracy in the
environment. The essay explains about the ways the company dealt with such issues.

Managing Across Border 2
The purpose of this essay is to analyse the business functions of the company IKEA operating in
Russia. IKEA is a large scale furniture retail company that has placed its footsteps in different
parts of the world. However, the company faced several ethical issues in Russian market due to
corruption and bureaucracy. Further, more details about the case are discussed below:
Strength: The identified brand name of IKEA acted in favour of them as the organization has
already flourished its business in different parts of the world, so the people already knew about
the products and services of the company. Resulting in which, saved the cost of promotion and
marketing activities in the country. Secondly, larger customer segment and high demand of
furniture in the market acted as the strength of the company to implement sales and grow in the
Russian market as well. The company faced high demand of the goods in the market with less
competition due to which the sales subsequently increased in Russia (Müller 2016).
Weakness: Muddled government of the country Russia reduced the efficiency of the company to
perform business functions in the country. Since the company wanted to expand the scope of
business in different parts of the world, so they considered Russia as a better option but Soviet
Union of the country made it difficult for the organization to enter in the country. Secondly, the
company IKEA works with solidarity in the market however, the employees of the company did
complied with the objectives of organization in Russia. Corruption and bureaucracy activities of
the country hampered the sales of the company in the external environment. The corrupt
activities of employees of IKEA Russia bought accusation on the functions of the entire
department that reduced the goodwill of the brand and depreciated the sales as well (Markova
2016).
Opportunities: There is presence of high degree of middle income level customers in the
environment. This feature of the target market increases the opportunity of the company to target
a wider market segment of Russia. Large scale business expansion was the biggest opportunity
for the company to enter in Russia and serve to its people as well. As the company opened its
first store in the year 2000 that catered 40000 shoppers on its inaugural day and subsequently the
business opened its second store in the Russia with the partnership of Ramstore hypermarket in
the year 2005. The company opened the largest regional mall in Russia that attracted many
customers towards the store. High degree of target base eventually helped the country to increase
its sales in the Russian market (Kim, Colicchia, and Menachof 2018).

Managing Across Border 3
Threats: the expansion plan of the company did not work smoothly as the company welcomed
several environmental regulations in the market that affected its sales. The biggest threat of
IKEA Russia was the government of the country who tapped several regulations related to fire,
tax and customs etc. on the country. The government of Russia then encountered that the
company was giving monetary benefits to people so as to resolve the problem. Although the
company was known for its trustworthiness in the environment but they cannot control all the
employees from performing some falsified actions in the environment. Thus, it should be noted
that such defaming credits can reduce the sales of the company in the Russia market and may
attract severe penalties for performing corrupt activities in the business environment (Gordon,
and Fomin 2019).
From the beginning when IKEA was trying to entering in the Russian market, the government of
the country barred the idea of IKEA to enter as a solo flagship store in Moscow. Further, after
entering in the market, the company implemented marketing strategy that expressed that every
10th European was made in one of IKEA’s beds, but the company was unable to prove that claim
due to the marketing plan failed. Later the company encountered that the organization can only
grow in IKEA if they wish to give bribe to the officials. However, bureaucracy and bribery was
against the objectives of the company due to which the business found creative ways to attract
the people in Russia. The corruption of the departments of Russia was trying to dissolve in the
internal environment of the company. However, the business worked only on the basis of the
code of conduct formed by the organization that protected their interest in Russia and failed the
government to justify their claim of corruption and bureaucracy activities performed by the
company (Stahl, et. al., 2016).
Thus, in the limelight of above mentioned events, the fact should be noted that the above
mentioned paper highlighted details about the marketing and business activities of the company
IKEA in Russian market. The struggles and opportunities of the company in Russian market are
elaborated in the paper.

Managing Across Border 4
References
Müller, U., 2016. Corruption in Russia: IKEA’s expansion to the East (AD). Emerald Emerging
Markets Case Studies, 6(2), pp.1-25.
Markova, N., 2016. Business Ethical Norms in Russia: Integrative Social Contracts Theory
Perspective (Doctoral dissertation, Universität St. Gallen).
Kim, S., Colicchia, C. and Menachof, D., 2018. Ethical sourcing: An analysis of the literature
and implications for future research. Journal of Business Ethics, 152(4), pp.1033-1052.
Gordon, J.S. and Fomin, V.V., 2019. Ethics and Standardization. In Corporate Standardization
Management and Innovation (pp. 177-192). IGI Global.
Stahl, G.K., Miska, C., Puffer, S.M. and McCarthy, D.J., 2016. Responsible Global Leadership
in Emerging Markets', Advances in Global Leadership (Advances in Global Leadership, Volume
9).
Kazerooni, G., 2015. Being On the Right Side Corporate Social Responsibility Implementation
in Large Firms–A Study within IKEA.