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


Case Analysis

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.

Problems

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.

Solutions

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.

Recommendations

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.

Conclusion

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. (2020, November 18). Corruption in Russia: IKEA’s Expansion to the East. Retrieved from https://ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/

Work Cited

"Corruption in Russia: IKEA’s Expansion to the East." IvyPanda, 18 Nov. 2020, ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/.

1. IvyPanda. "Corruption in Russia: IKEA’s Expansion to the East." November 18, 2020. https://ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/.


Bibliography


IvyPanda. "Corruption in Russia: IKEA’s Expansion to the East." November 18, 2020. https://ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/.

References

IvyPanda. 2020. "Corruption in Russia: IKEA’s Expansion to the East." November 18, 2020. https://ivypanda.com/essays/corruption-in-russia-ikeas-expansion-to-the-east/.

References

IvyPanda. (2020) 'Corruption in Russia: IKEA’s Expansion to the East'. 18 November.

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