Entering Russian market has often been hard for foreign companies; Russia is well-known for being a tough country in business. Some of those companies may make it achieve a certain success, but success does not come easily. In the following report we will see how IKEA entered Russia and the hardships that were encountered on the path.
IKEA is a Swedish home furnishing retailer created in 1943 in Sweden. IKEA is famous for selling home furniture and decoration in kit. The company's philosophy is to improve people every day life by offering a vast range of home furnishing products, which are functional and stylish, at a price accessible for most people. Prices became the key of IKEA's strategy.
This way of doing things enabled IKEA to become the leader in its category with an annual turnover of 23.1 billion euro and to employ 127 000 people in 41 countries. IKEA is well known for being a leading company in internalization.
IKEA's decision to enter Russia was expected since Russians' income and expenditures were likely to grow a little bit more every year due to their gradually general economic development. Moreover, the retail sector in the country is rapidly rising. In 2010, in Russia, according to their website (www.ikea.com), IKEA had set up 12 stores, 13 malls, one distribution center and three manufacture plants.
Tags: IKEA, Russian market, foreign companies
[...] IKEA should also offer a delivery service. To resume IKEA have to develop their customer services and they commitment to the clients. To conclude, in the beginning of 2000, few people were ready to bet on IKEA's success in Russia since they already failed 3 times. However, IKEA was to prove that those people were wrong. As a result, knowing that IKEA is present in 276 countries worldwide, today, Russia accounts for its total business[4]. They thought that return on investment in Russia would take years but the economic success was immediate: “our sales are four times in excess of predicted, and we have the best-performing IKEA stores in the world, followed by Spain” quotation of Anders Juhlenius, director of Khimki IKEA. [...]
[...] IKEA suspected another case of corruption on the judicial system. Analysis Since IKEA has always fought against corruption, this case of bribes was really bad for their image. By firing employees, they showed that take would not let such things happen again. In my opinion, IKEA was so busy expending in Russia's market that they did not check on their own executives and their finance. They probably increased their employees' awareness on the payment of bribes to the local company but they did not sensitize them of the fact that they could also be approach to be the receivers of the bribes. [...]
[...] There were about 3500 furniture manufacturers in Russia. Most of them were really small manufacturers since about 80% of the furniture outputs are produced by only 550 of those manufacturers. Around 30% of Russian furniture is made by manufacturers located in Moscow and its region. The rest of the manufacturers are mainly located in Northwest and Central Russia. Most of the domestic enterprises produce low price (price below 1500 US dollars) furniture. Price in furniture is very important. Since Russian homes are not especially spacious, they do not spend a lot on furniture. [...]
[...] IKEA soon became one of the foreign companies that denounce corruption in Russia. Analysis IKEA was clever enough to find an alternative to corruption. With this attitude they refused to fall into corruption like a lot of other foreign companies which think that if they pay their bribes then they would not have to suffer from the “non-payment of bribes”, such as: energy cut, transportation problems A lot of them think that bribes are a small payment compared to the benefice of being represented in Russia. [...]
[...] Businessmen did not think in the 2000s that an implementation in Russia would be easy. The main constraints observed by economists in the early 21st century were: • Administration: the opening of new shops is very strict, it takes a lot of time • Import duties are very high • High Inflation • The future development of Russia is very insecure In 2011, we know that Russian economic growth is not a problem anymore before the crisis). However, import duties and administration are problems that IKEA still has to face. [...]
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