The journey IKEA starts from Sweden. It was the most successful entrepreneurial project of Ingvar Kamprad. In 1943 he set up the business and called it IKEA. The name represents his initials IK. The company started a business by making pens, wallet, pictures and many other things. In 1953 IKEA opens its first furniture showroom in Sweden. Over the next years, the company expand its business in different countries and introduced many successful products. In 1990 IKEA enter the Russian market but failed due to circumstance, but Kamprad did not give up, and finally, in 2012, they opened the very first store.

The company grows further by opening 338 stores in around 40 countries, and the company aims to expand the business also in Asia, where the target location in India. The mission of the company is to provide a wide range of home furnishing products that are unique and beautiful, representing IKEA at such reasonable prices that as many as possible can be their customers. IKEA has many iconic products in the market related to home furnishing, but the company has the vision to go beyond home furnishers and introduce more products.

2 IKEA in Russia Ethical dilemma

2.1 Essential facts

The global expansion strategy of the company allows it to enter the market of foreign countries. The owner of the company always wanted to expand business in Russia, but due to many reasons, he was unable to do it. In 1993 the company attamed to open a store in Russia, but it delayed because of the Soviet Union collapse. IKEA For the second time, the company faces failure because of the Russian constitutional crisis and unfavorable economic scenario. The owner had knee interest in the Russian market, so he tries once again to introduce IKEA in the Russian market. In 1998 an excellent employee of the company Lennart Dahlgren was asked to go ahead and set up IKEA in the Russian market at that time was in talks about many negative opinions.

The investors rather go to other countries then investing in Russia because the economy rate of the country was very low along with the high poverty rate. Dahlgren realizes that even though the current situation of the country is not favorable, but in the future, the investment can make a good profit since the market of Russia was growing. According to the report of A.T Kearney, Russia considered being the 1^st country of the world in terms of retail expansion. From 1999 to 2003, the growth rate was 30% for the retail sale. The Russian market was promising that its growth will increase in the future.

But there is another problem for the cross-border investor that the Russian system has highly corrupt bureaucracy and demands a big amount of money in the form of bribery to allow international investors in the Russian market. Not only government officials but almost all departments were corrupted. On the other hand, IKEA has strict rules that they will never consider corruption to expand business or in other circumstances (Bo, Enquist, & Hay, 2006).

The representative of the company states that the companies who are interested in Russia should not, in any circumstance, give up honesty because when a company gives bribery to the authorities, it encourages the corrupt system, and this cycle never ends. The corrupt system was an obstacle for foreign companies to come to Russia, and it also has a bad effect on the economy of the country since international investors find it hard to invest there. IKEA finds its way in Russia and set up the first store in Khimki. But soon after the store began, the Russian financial crises broke out. This dilemma was the consequence of the Russian government’s domestic debt and devaluation of Ruble. The country had seen high inflation due to this crisis, which ultimately affects the foreign and domestic business (Veronika & Chernatony, 2011).

IKEA, instead of this unreasonable situation, continued the business and experienced a phenomenal response from the people after opening the store. The company has not only experience corruption in state affairs but also among the IKEA staff. In 2012 the head of the Leasing department in an establishment located in Russia found guilty of extortion. He demands 225,000 bribery from the company, which sought to lease permits to the IKEA. The company had such a strict attitude against corruption had a hit on its reputation. IKEA did not cover it but welcome the investigation by the Russian government. Even though the company has really tough criteria to select an employee at the initial stages, there were around 16,000 applicants, but only 440 get the job.

3 Summary of reflections

The corruption in Russia is the root of several issues. It has been stated that the government has suppressed the corruption, but the bureaucracy of Russia tells another story. Not only this, but the other departments, like administration, law enforcement, healthcare, and education, are also suffering from this dilemma. From the history of Russia, corruption has been a very common phenomenon and with the passing time, it has become stronger and affects the overall system of the country. The weak law enforcement cause trouble for not only the citizens and domestic companies but also the international business. International investors take into account the governess and policies of the country before they invest there. The system of Russia proved to be challenging for them because of corruption and demand for bribery. IKEA is the company with zero tolerance for corruption, disappointed highly after this situation. The bureaucracy spears no thought about the business that IKEA will do and its benefits for the economy of the country. Aside from the state system, the company had to experience corruption under its management. The trend of corruption and bribery had affected not only the mainstream departments but also the business and other related departments. The system of the country had set the example of corruption, and the people from another field do not shy away from following it. The political authorities seem to sacrifice the long-term advantage of business to fulfill short term advantage, which was based on an immoral approach. The companies who change their decision for investing because of these unfavorable policies indicating the big loss and threatening situation. The system cannot change overnight, and I think that corruption is like fire, and it can destroy the system along with the lives of people. The law enforcement should be strict in the country that there will be no place for corruption in any aspect of the country.

3.1 Information from Future Readings

In Russia, the foreigners who come to expand the business have almost the same rights in the country as the Russian nationalist. However, the government authorities have put a restriction on some aspects. The system does not allow the Foreigner company to own the land in the frontier area, along with a few other restrictions. They have banned them form agricultural acquisition land, land forming part of a seaport, and the land on other locations but except these places, the foreign investor can use the land according to some rule’s regulations and payments. The system does not support private aloe authorization of the land by foreign investors in the country. The Russian Federation set the territories where the foreign investors are not allowed to establish their business unless they get permission from the state (Debra, Sprinthall, & Kem, 2002).

4 Case Question: (4, 5, 6, 7)

4.1 Essentials:

International investing is way riskier and more complicated than domestic investing. There are many ways that companies can use to enter international markets. The detailed planning and strategies according to the situation and policies of the target country is essential. The information about the location helps to make decisions accordingly.

Licensing is the first step to enter the new market. Through licensing, the company makes a decent agreement to give rights to using products and services to the other company. It is very useful when the purchase of a license has a large market.

For rapid market expansion, the franchising model is considered to be important. It works well with establishments that have repeatable business models like home furnishing. It is easy for such companies to transfer to other markets. In the franchising model, two aspects are important 1^st the product must be unique and the brand has strong recognition and 2ndly awareness of the competition that new market possibly gives to the emerging company (Mette & Skjoett-Larsen, 2009).

The companies that aim to invest across the border can experience the cultural difference. Partnering becomes necessary to address these issues. It has a variety of forms, from co-marketing arrangements to the sophisticated alliance in manufacturing. Joint ventures are a particular form of partnership.

To make reliable atmosphere companies ten to make green fields investment in a foreign land. It is the greatest requirement in international business. It is an investment where the country buys the land and build the facility to operate the business.

4.2 IKEA and Russian aspects

It was not an easy journey for IKEA to expand its business in Russia. The company faces many problems because of the unstable business environment in Russia. The system requires bribery to set business for foreign companies, but IKEA had a strict policy against corruption. The policy of the company ends up finding an alternative to avoid this. The made a significant trend of entering in the market while challenging corruption. The government departments, including health, fire, electricity, tax, custom many others, were constantly rising challenges for Russia.

IKEA manage to overcome these issues by consulting the same departments. The company tried to build off-ramp and completed all the formalities related to getting a construction permit, but the government authorities stopped the construction. It took them a year to come around and let the company build off-ramp. Around 200 other companies come together with IKEA to protest against the authorities. IKEA did not compromise on any of its initiatives. The company opens its second store at the location of Chimki; it was a huge project but face setback when new casted Mayor put a restriction on it (Deborah, 2017).

IKEA did not only face the problems, but some authorities were in support of IKEA and Made things easy for them. The people of Russia also did not disappoint the company because it was very well received among them. The rates IKEA offer was so reasonable that the number of customers increases greatly after the opening of stores in different locations.

4.3 Reflection summary:

To set the business in another country is not easy; there are always challenges the important thing how Newley emerged, companies cope with this challenge. Many companies failed in foreign countries because of unfavorable conditions. To survive, the company must make plans and strategies that help them stay in the market effectively. I think IKEA had all of these things when it enters top Russia. There was many Obstacle that IKEA faces entering into the international market. The Russian market was not an easy place for them to survive, but in my opinion, the leadership and strategies of the company are very strong. They did not give up on any of their decision, and the leadership of the company makes the business survive in such tough circumstances.

The economic collapse in the country made it hard for international investors to survive in the market, but IKEA management kept working toward opening their store. With time the company becomes stable and sets the terms with the authorities to run a smooth business. Further, the major element that let IKEA compete in the Russian market was the demand for their product. IKEA uses the best customer strategies to survive in the international market. The economy of the company was down at the time when IKEA introduce its product. But, because of rates, people find it affordable. The company provides its services at a price that is reasonable for a commoner; the product becomes famous among the people, and fortunately, the company did not face any problem in the form of product failure.

4.4 Reference to the future readings.

The economy of Russia continues to get stable the has improved tax administration, which makes it easy for foreign businesses to come to Russia. The government is providing a wide range of array of incentives for the investors to develop their business and the products in the country. The major incentives are offered through special economic zones (SEZ). It is available for all the investors who are interested in Russia. The incentives provided by SEZ are in four broad categories, which are industrial, technology implementation, port, and tourist recreation. Business located in these zones will get benefits for more sufficient bureaucratic procedures along with subsidized expenditure on infrastructure, elimination of custom Duties, and state investment on transport networking. In some situations, foreign ownership is permitted, except some sector designates as strategic. There are many incentives that the Russian government is providing to foreign investors. It will increase investment in the country in the coming years.

5 Case Question: (8,9,10,)

Impact of the strong and co-operative political machinery

5.1 Essentials

When the company wants to enter the market of another country, it has to go through a lengthy procedure, and the management has to talk to the government authorities of the host country to get the permit. Later on, expanding business requires the consistent collaboration of the bureaucracy government department. In the beginning, IKEA experience many clashes with the authorities and bureaucracy. The company did not get an electric connection for its first store. The utility department officials were insisting on getting bribery to give it an electric connection. The company has to get hire a large diesel generator for the store. The company paid a large amount of 190$ million because of the system and political authorities who were unable to provide the company with its requirement as promised. Because of issues with the utility department and no accommodation from the government, it has become the standard practice of the business to hire generators. The company somehow manage it, the company wants to move to Moscow, but the Moscow city authorities were not in favor of it. They did not permit it to come to Moscow. In 2003 the company intended to build a warehouse that would cost 40 million, the process passes by smoothly, but the Deputy Governor who had issues with the company from the beginning start opposing the idea. The company had to donate money for the non-profit to get a permit for the Wearhouse. Over the years, the company has major clashes with government officials.

5.2 Russian Sojourn

The company had to experience a rough path every once in a while, because of government and bureaucracy. IKEA has its principle, but some events indicate that the company has to step back from them because of the economic corruption in Russia. It tried hard to fight against the corrupted system, but at some point, the foreign company needs to do staff they way host county wants it. On the other hand, there were several events where IKEA find the bureaucracy and government authorities rather helpful. It opens another store in the Kazan with the support of authorities and the mall they opened considered to be the biggest one in the region.

Further, in 2011 the ministry of economic development involves international business and convince IKEA to continue its expansion in Russia. The economic befits with such large companies are enormous, so the ministry persuades them to open more stores and enhance local manufacturing capabilities. The company has loyal customers around the world and in Russia too. IKEA emphasizes strongly on customer services. The store becomes popular soon after opening, and it was estimated that around 10,000 visitors come to the store every month (Dario & Torkan, 2012).

According to the companies’ report in every 1^st year, it earns 100$ million from Russian stores. The profit that a company made from the 1^st store was three times more than expected, and this way, it becomes another successful business expansion for IKEA, and that is all that a business requires to stay in the host country even after facing such difficult circumstances.

5.3 The future strategies for IKEA

IKEA is a famous brand around the globe it has expanded business in Europe and North America by opening its stores in Norway, Denmark, France, Belgium, Netherland, Australia, and many other mainstream counties. IKEA has over 262 stores in 24 counties around the globe. The company aims to open a 700,000 square feet store in the Philippines by the year 2020. In the future, the company intends to come into the Asian market, making it more global. The future strategy of the company is to target the market of India and provide IKEA products in this region too. The future strategy of the company is to cooperate with the culture of the host country without sacrificing its principles. The company states that shortly it will make the largest IKEA store in the world the belief that there will be no as bigger store as theirs in the country before and after. The company will continue to go beyond borders in the future.

5.4 Reflection Summary

I observed that the political authorities and bureaucracy have a strong effect on international investments because they had the ultimate power. It does not matter what the political system of the country is, the political authority will always have the controlling power, and when it comes to international investment, the company needs to take the political authorities in trust because, without their constant, the business will never flourish in the new country.

IKEA being the global company having many stores in different corners of the world was suffering in Russia because of miss coordination with the political officials without their intervention the minor arrangement like electricity connection was hard to get for the company. The government should consider the fact that the expansion of foreign business is beneficial for them too. The positive government corporation can make the business grow as a ministry of the economy comes to terms with IKEA to pursue it for opening more stores.

IKEA has experience conflicts because of its policies. The system of the market in Russia was diverse. It is hard for the company to follow. It's policed in such a diver’s system, so they end up bowing to the authorities at some point. This factor shows the impact of political power on business expansion and foreign investments.

5.5 Information from the future readings

IKEA is taking into consideration the customers’ needs and requirements. The company is considering to open small stores in the big cities for the convenience of the customers. IKEA believes that its store will be found at the corners of the city. Further, the company aims to focus on its loyal customers and what they expect from it rather than the negative forces. The political observes state that Russia has to bring significant changes in the system that includes permitting freedom of the press and letting the opposition exist.

The issue of corruption must be addressed for better opportunities in the country. The phenomenon of corruption In Russia is an institutional problem rather than transactional. Because foreign investment is beneficial for the country, the authorities have made several incentives, and as compare to past the things go more smoothly for the investors.

6 Case Question: 11, 12, 13

6.1 Essential Facts

IKEA have to look over their core components which are required to meet the challenges, which are imposed by market values, they have to reconsider their market segmentation, this could be a flexible structure to improve market share and increase their competitive advantage. To make their market strong, Ikea should change its supply-product sale, and this will help them to maintain their market share and increase their revenue. In their cost side, they managed their supply chain, which allows them to operate at low cost through their economies of scale. Logistics will allow them to control their inventory. Their supply chain is one of the core components which will help them in achieving their market goals along with strategic allowances. The company can bring innovation in its assembly process of furniture, which will allow them to reduce their costs of transportation so that they will be able to transform their challenges in their competitive advantage, which will help them to establish a strong market presence.

Expanding their business in other regions will make their market presence strong, although they are covering huge areas globally, few countries are unable to buy their products and services, covering up those areas as well will help them to retain the highest rank in the market. Their opportunities are related to the sensitiveness of the company's respect and the changed behavior of people's preferences. Thus, the generation of product lines and market segmentation for niche will provide enough potential for success. Using the high end, vintage styles which are eco-friendly as well., trendy products with the inspiration of social movements can be the segments that IKEA can improve to make their market stronger than before. Also, they can innovate their furniture with digital integration to get a better market in the future as well. Implementation of this new strategy of product design will be an important move towards a better market.

6.2 Growth Strategies for Emerging Markets

There are following some of the key strategies which the company can use for improving its performance in the emerging markets such as:

· The company can focus on markets like China, Brazil, and India.

· There are various requests by the consumers of NZ as they want to purchase products from IKEA. Thus they are requesting its presence in the country. After a thorough analysis of the market and other important factors, the company can decide to enter the market.

· It will be a good thing that a company that mixes some of the local trends in the products for attracting consumers because they have some similarities.

· To get success in any market, the company must have a strong idea about the needs of its consumers.

· The market trends should also be analyzed effectively before making any investment or expansion strategy as it helps the company in saving its money and avoid unnecessary financial damage.

6.3 Establishing Strong Market Presence in Undeserving Markets:

There are some other specific strategies that the companies can use to mark a special presence in the undeserving markets. A strong market penetration strategy can be designed for building the brand name. This strategy will help in increasing sales among the existing consumers of the existing markets. The company can generate a huge number of revenues. there are following some of the strategies which the company can consider:

1. The very first thing can be a focus on retaining the consumers and increasing the market share of the product

2. Addition of the elements which increase the consumer usage

3. A strong marketing strategy that binds consumers to the brand.

The companies can easily use the tactical approach for improving customer engagement with the brand. The companies use social media not only for marketing but also to build a strong emotional connection with them, which makes it quite difficult for them to switch the brand. For instance, the company can increase the usage of existing products among the consumers by introducing small modifications in it, which consumers value.

7 The strategy of IKEA for Establishing Stand Alone Shopping Centres instead of Large Shopping Complexes:

IKEA company has developed various stand-alone shopping centers. However, the layout of these shopping centers is mazy due to which the impulse buying behavior among the consumers has increased because different furniture items keep on popping in the journey of consumers, and they are tempted to buy them. Moreover, one more major trick which has been used by the company is, it always put the most famous items at the back of store so the consumers have to roam the whole store for finding them and a table lamp which was not the plan of shopping could be added to the trolly (dailymail.co.uk, 2011).

While on the other hand, shopping malls are subtly designed due to which the consumers are more attracted to the retail floors. There are cafes, play areas, and plenty of brand stores that can steal the chances of IKEA. Thus, the company prefers to keep the whole attention to its products.

7.1 Reflection

The researchers have gathered information from different consumers who have visited the IKEA store. Most of them have informed that the company has displayed the items in a manner that it fancies the consumers. They are unable to leave them, and it generates the impulse buying behavior in them. There are different sections. Some of the main areas include children's cots, bunker beds, and regular beds. Couches, kitchen tables, lamps, shelving units, chairs, area rugs, and various other things are present in different designs, patterns, and colors that one has to keep the heart of stone to reject them. There is a separate section arranged by the company which only contains the tableware, including cutlery plus crockery sets.

To further improve the experience of consumers in the stores, the company has arranged a separate café at the upper level. While in the basement area, there are products with discount packages; thus, the consumers who are unable to buy expensive products, they can consider the discounted one. It is a good strategy for retaining consumers from the middle-class.

7.2 Information from Future Readings

IKEA has established its stores in the UAE and Dubai areas. The outlets are present in the half section of the ground and at level 1. It is situated inside the Festival city behind the Crowne Plaza Hotel. Most of the time, the consumers who can purchase the premium products visit these malls, and over time they become a fan of IKEA. They keep on visiting the outlet for evaluating the new offers and products so they can improve their home collection.

No matter which region of the world, the outlet of IKEA is present, the company is using the same type of tactics for luring the consumers to buy the products. However, by analyzing the financial health of the company, it could be said that it is quite successful in the approach. Moreover, with the increasing popularity, the company is working to make improvements in its stores as well as products, so the customer remains engaged.

It is suggested that the company can increase its online presence because the buying pattern of consumers is changing, and they are looking for companies that offer them products at online stores. However, if the trend change, then the company needs to devise new strategies for maintaining the attention of consumers.

8 Bibliography

Bo, E., Enquist, B., & Hay, M. (2006). Values-based service brands: narratives from IKEA. Managing Service Quality: An International Journal 16, no. 3, 230-246.

dailymail.co.uk. (2011). Why shoppers find it so hard to escape from Ikea: Flatpack furniture stores are 'designed just like a maze'. Retrieved from dailymail.co.uk: https://www.dailymail.co.uk/femail/article-1349831/Ikea-design-stores-mazes-stop-shoppers-leaving-end-buying-more.html

Dario, S., & Torkan, G. (2012). New transport organization by IKEA. An example of social responsibility in corporate strategy. Advances in Management and Applied Economics 2, no. 3 , 181.

Deborah, L. (2017). The corporate responsibility code book. Routledge.

Debra, S., Sprinthall, N., & Kem, J. (2002). Moral reasoning in the context of reform: A study of Russian officials. Public Administration Review 62, no. 3, 282-297.

Mette, A., & Skjoett-Larsen, T. (2009). Corporate social responsibility in global supply chains. Supply chain management: an international journal 14, no. 2, 75-86.

Veronika, T., & Chernatony, L. (2011). Internalising a brand across cultures: the case of IKEA. International Journal of Retail & Distribution Management 39, no. 8 , 598-618.

IKEA in Russia – Ethical Dilemmas Case Brief

1 Overview of IKEA