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Please note you do not have access to teaching notes, corruption in russia: ikea’s expansion to the east (a-d).

Publication date: 18 June 2016

Teaching notes

Subject area.

Business ethics corruption governance and compliance integrity management international management intercultural and cross-cultural management internationalization corporate social responsibility (CSR).

Study level/applicability

The case has successfully been used with a wide range of audiences from masters/MBAs to Executives. It will also work with undergraduates.

Case overview

This four-part case series can be used to discuss business ethics, compliance/governance, integrity management, reacting to and preparing against corruption in the context of internationalization and allows to also briefly touching upon the issue of CSR. Case (A) describes a challenge IKEA was facing, while trying to enter Russia in 2000. The company was preparing to open its first flagship store on the outskirts of Moscow, only the first of several planned projects. After substantial investments in infrastructure and logistics, IKEA focused on marketing, but quickly faced a sudden complication. Its major ad campaign in the Moscow Metro with the slogan “[e]very 10th European was made in one of our beds” was labeled “tasteless”. IKEA had to stop the campaign because it “couldn’t prove” the claim. Soon Lennart Dahlgren, the first general manager of IKEA in Russia must have realized that the unsuccessful ad campaign was going to be the least of his problems: A few weeks before the planned opening, the local utility company decided not to provide their services for the store if IKEA did not pay a bribe. What should IKEA and Lennart Dahlgren do? Was there any alternative to playing the game the Russian way, and paying? The subsequent cases (B), (C) and (D) describe IKEA’s creative response to the challenges described in case (A), and then report about new challenges with alleged corruption within IKEA and in the legal environment, and finally raise the question whether IKEA can be considered to have a (corporate social) responsibility to fight corruption on a societal level to build the platform for its own operation in Russia.

Expected learning outcomes

Responding to a threatening corruption demand (here: responding to an outside demand for a bribe), avoiding corruption from the outside, cross-cultural differences in drawing the line for corruption, preventing corruption within the organization, (corporate social) responsibility of firms to improve the political/legal/social/moral environment in which they operate are the expected learning outcomes.

Supplementary materials

Teaching Notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes.

Subject code

CSS 5: International Business

  • Business ethics
  • Corporate social responsibility
  • International business
  • Corporate values/philosophy
  • Governance guidelines

Acknowledgements

The author wishes to thank: Derek Abell for his support in the design of the case series and his attempt to collect additional information. Amanpret Singh, Daniel Rettich, Martha Ihlbrock and Tonisha Robinson for their support of researching, editing, translating and formatting of the case study, teaching note and supplementary material. A sanitized version of this case study series has previously been published in the Emerald Emerging Case Study Collection under the title “Corruption by design? L’Antimarché’s struggles in Russia (A-D)”.

Müller, U. (2016), "Corruption in Russia: IKEA’s expansion to the East (A-D)", , Vol. 6 No. 2. https://doi.org/10.1108/EEMCS-11-2015-0199

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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Corruption in Russia: IKEA’s Expansion to the East Case Study

Case analysis, recommendations.

The case analysis under discussion focuses on the opening of the first IKEA store in Russia. After the fall of the Iron Curtain, IKEA decided to enter Russian market and grab the attention of its newly emerged middle class. This decision was caused by the need of Russian people to have new, properly designed, and affordable furniture instead of the existing cumbersome cupboards and handmade items. However, the company encountered corruption and misunderstanding in Russia.

The first problem is associated with the improperly designed ad campaign that was perceived as immoral due to the fact that despite the dissolution of the Soviet Union, the local population preserved its mentality related to the taboo around sex. The second problem refers directly to corruption. In particular, several obstacles were created by Moscow officials to resist the store opening without paying a special service fee. For example, following its business model, IKEA was forced to build a new mall outside Moscow, namely in Khimki that is located three miles from the city. Furthermore, the construction of the special overpass that was expected to improve access to the store was blocked by Moscow, thus making the issue of traffic irresolvable. Finally, Russian representatives made an ultimatum, threatening to turn electricity off in case a service fee will not be paid.

From the above observations, it becomes evident that the core question of this case is whether to pay a fee or cancel the opening. It seems that the best strategy to resolve the identified problems is to continue expansion to the market with certain adjustments. First of all, it is necessary to change ad campaign calling people to share benefits of IKEA. This can be achieved through an in-depth exploration of Russian culture and mentality and subsequent conclusion. As for the ultimatum regarding electricity, it can be useful to implement diesel generators that are not dependant on it. The mentioned solution will eliminate one problem, yet it may give an opportunity to Russian officials to come up with another idea and also require paying the so-called service fee. In this connection, it is of great importance to resist local corruption on a global scale. In other words, it will be useful to apply for both national and global communities, attracting their attention to the problems. For instance, Anti-Corruption Agency identifies and controls corruption and bribery cases. Besides, it also seems to be important for IKEA to show Moscow the mutual benefits of their collaboration so that the latter can understand perspective opportunities.

The suggested solutions can be regarded as rather strong and relevant, especially the one that implies global collaboration in regards to corruption. A range of surveys initiated by international authorities can explore this case and identify potential threats as well. Speaking of the implementation of diesel generators to produce electricity, it seems appropriate to rent them from a foreign company and then transport to Russian mall. This can prevent the occurrence of similar situations in the future.

To conclude, it should be noted that the challenges faced by IKEA in Russia are quite difficult to resolve. Nevertheless, a set of well-organized decisions in the context of the comprehensively enhanced expansion strategy can improve the situation. At the same time, a contingency plan needs to be elaborated by IKEA CEOs, taking into account corruption issues, local culture, and Russian market strengths and weaknesses.

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IvyPanda. (2021, July 30). Corruption in Russia: IKEA’s Expansion to the East. https://ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/

"Corruption in Russia: IKEA’s Expansion to the East." IvyPanda , 30 July 2021, ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/.

IvyPanda . (2021) 'Corruption in Russia: IKEA’s Expansion to the East'. 30 July.

IvyPanda . 2021. "Corruption in Russia: IKEA’s Expansion to the East." July 30, 2021. https://ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/.

1. IvyPanda . "Corruption in Russia: IKEA’s Expansion to the East." July 30, 2021. https://ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/.

Bibliography

IvyPanda . "Corruption in Russia: IKEA’s Expansion to the East." July 30, 2021. https://ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/.

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Global Business Environment Scanning: Market and Industry Analysis as Major Requirement for Entry in Global Market; Case Analysis of IKEA Entering Russian Market

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In this paper we present an analysis by examining the dynamics of IKEA global market entry in Russia and try to expand the factors relevant to international market entry to IKEA discourse as alternatives strategies prior to the global expansion strategy. In this paper, we outline role of internal logic, a market and/or industry analysis that should be performed to provide the information needed for a sound decision-making regarding entry market strategy in global market. The same idea of specifying the relevancy of market and industry analysis as major requirement for entry in the global market analysis model which is relevant to prior entry in emerging international markets focusing on the timing of entry, the magnitude of investment at entry, and the area of competitive emphasis at entry-affects and long-term performance in the marketplace.

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IKEA in Russia: Strategies and Ethical Dilemmas

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Case Study: IKEA Entering Russia

Assignment 4: IKEA Entering Russia When IKEA entered the Russian market in 1998, Ingvar Kamprad had a vision and a long-term plan for what he wanted IKEA to achieve. Even though the country was in a bad financial situation at the time, he believed that IKEA would become the main supplier of home furniture to the average Russian families, and that sales volumes would exceed those in Sweden. Kamprad took the opportunity to communicate his vision during a visit in Russia which, I believe, is an example of him being a charismatic leader. He had set a strong vision for IKEA as a company as well - "to create a better life for the many people" (Browaeys & Price, 2015, p. 226). Kamprad 's leadership can also be described as value-based, where values …show more content…

When IKEA establish themselves in Moscow, Russia, the company followed their strategy and recreate their corporate culture at the new location. The culture was implemented by experienced IKEA employees who trained the new co-workers and taught them about the company 's values, traditions, routines, management style, human resource polices, customer relationship philosophy with the "flat-package concept", etc. In addition, IKEA employees did home visits in the local community. Driven by the vision to create a better life for the many people," IKEA wanted to learn more about the local living conditions. The company wanted to create needs, not yet identified by the locals, that IKEA could present solutions to, that would ease the customers everyday-life. For example, IKEA learned that many Russian families live in small apartments and therefore IKEA marketed how their storage solutions could solve some of these problems. This shows that IKEA is not only innovative, but also a learning organization, in the way it operates to keep its competitive advantage. They strive to continuously learn about the new markets and incorporate it in their strategy. With their vision and values as guiding tools, providing direction, they are also actively shaping the "landscape" they are working in (Browaeys & Price, 2015, p. 223). In my opinion IKEA has a transnational/global strategy. IKEA 's strategy is to offer the same product range in most countries. However, they are also offering some products that are adjusted to the needs in a specific region, such as preferences for type of wood, and a few products are produced only for that specific market. I believe that the balance that IKEA has found when it comes to global standardization has contributed to their success (Browaeys & Price, 2015, p. 204, 230,

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More about Case Study: IKEA Entering Russia

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Ikea Entering Russia Case Study

Can you see any alternative entry strategy that IKEA could have applied when entering the Russian market? What would have been the advantages and the disadvantages of these alternative strategies ? For IKEA there was alternatives strategy for entry the Russian market, as any other foreign market, the options for the company where: • Exporting • Licensing • Joint ventures IKEA can use any of these alternatives but there were not in the same line has the company wanted to be in Russia, so they didn´t use it and stay with the direct investment. If the company used this strategies the advantages and disadvantages would be: • Exporting Advantages: -Cheapest way to enter - the company do not have to know a lot about the new …show more content…

There are some important differences between emerging and well-established markets. In case of Russia it would include: • Demographics – after the transformation of the economic system in Russia, there were many people getting rich quickly. At the same time, there were high levels of poverty. Thus, Russia was lacking a typical middle class, which is the main target of IKEA. • Dynamic changes to the market – an emerging market is a very dynamic environment as the legal, social and economic system are not well established and are still changing. • Legal issues – in an emerging market there is usually a lot of bureaucracy, which impede getting necessary legal permits. Corruption is also very common. IKEA’s market behavior was influenced by those differences to some extent. First of all, no special marketing research was carried out. The market in Russia was still undergoing rapid changes and Russian customers did not have much contact with products similar to IKEA’s. Thus, data about the Russian market was often uncertain and difficult to assess. That’s why, IKEA decided to adjust its market behavior only after entering the market. Once they entered the market, they practiced home visits to customers in order to learn about the cultural differences, that were partly resulting from Russia being an emerging market. Furthermore, IKEA had to “recreate its company culture from scratch”. As the economic

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At the outset, it may be useful to characterise IKEA in terms of the characteristics of demand (also known as the four Vs, see Slack et al. p 20). First, IKEA is clearly a high volume operation – as indeed most international retailers are – which lends to systematising operations but which implies capital intensive processes and therefore cost considerations will be crucial. Second, IKEA offers a large number of products (up to 14000 depending on the country/store) so there is high variety in the

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COMMENTS

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  11. IKEA's Challenges in Russia

    Abstract. This case is about Sweden-based furniture retail giant IKEA Group's (IKEA) entry into and expansion in Russia. When IKEA entered this key emerging market as part of its international expansion strategy, it had to face several roadblocks when setting up stores, inaugurating them, and even while advertising them.

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    Case Intro 1 Case Intro 2 Excerpts <<Previous Page EXCERPTS CORPORATE STRUCTURE IKEA was structured in such a way as to prevent any kind of takeover of the company and to protect the Kamprad family from taxes. Though Kamprad was the founder, he did not technically own IKEA.

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    IKEA in Russia Case Study. Explore the fascinating journey of IKEA in Russia, from navigating challenges to achieving success. Discover key takeaways and recommendations for companies entering the Russian market. Background of IKEA & Overview of the Russian Market. Global Retail Giant.

  16. Ikeas Entry Strategy In Russia Marketing Essay

    IKEA is the Swedish home furnishing company having more than 200 stores in 32 countries selling a range of some 10,000 articles and having more than 84,000 employees within IKEA group. IKEA as a multinational company entering Russia with strategy based on adaptation and on standardisation.

  17. IKEA's Successful Entry into Russia: Navigating Cultural

    Through this, IKEA has managed to maintain its unique 'Swedishness' (IKEA Entering Russia, p. 599-600) In this case, IKEA's managers are sent to Russia from Sweden, acted as messengers of the culture from "the first leader" vision, into the various parts of the organisation.

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    Ikea Entering Russia Case Study Better Essays 2128 Words 9 Pages Open Document Can you see any alternative entry strategy that IKEA could have applied when entering the Russian market? What would have been the advantages and the disadvantages of these alternative strategies ?

  19. (PDF) A transnational perspective on knowledge sharing ...

    A qualitative case study of IKEA is reported which focuses on lessons learnt from entering Russia, China and Japan. The discussion centres on forward, reverse and lateral knowledge flows within ...

  20. Case study

    Lennart Dahlgren, IKEA country manager, Russia When Swedish furniture retailer IKEA's country manager arrived in Russia to set up the first store, the country was in a state of deep shock. It was 17 August 1998, the day the Russian monetary policy finally collapsed.

  21. IKEA Case Study Week 5.docx

    Case Study: IKEA in Russia 2 The challenges faced by IKEA while entering into the Russia market were typical of companies attempting expansion into foreign markets for a number of reasons. According to the World Economic Forum report, emerging markets "develop differently, have different infrastructural, socio-economic and regulatory challenges, face different environmental and geographical ...

  22. IKEA ENTERING RUSSIA

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