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Case Code: BENV039
Case Length: 16 Pages 
Period: 1998 -2019     
Pub Date: 2019
Teaching Note: Available
Organization : IKEA
Industry :Furniture,Retail
Countries : Russia
Themes: Business Environment/International Management/Emerging Markets
Case Studies  
Business Strategy
Human Resource Management
IT and Systems
Leadership & Entrepreneurship

IKEA`s Challenges in Russia

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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. He wanted an ownership structure that stood for independence, a long-term approach, and continuity. Therefore in 1982, he created Stichting INGKA Foundation, a non-profit organization registered in Leiden in the Netherlands. In 1984, Kamprad transferred 100% of IKEA equity as an irrevocable gift to the Foundation. IKEA was privately held by this Foundation. Its purpose was to hold shares, reinvest in the IKEA Group, and to fund charity through it. It also protected IKEA from family squabbling and its inheritance in whole or in part by the Kamprad family. Kamprad said,...
Business Environment Case Studies | Case Study in Management, Operations, Strategies, IT and Systems, Case Studies
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The first IKEA store was opened in Älmhult, Sweden, in 1953. Since there was limited opportunity for growth in the Swedish market, IKEA decided to expand into international markets. IKEA’s international expansion progressed in three phases: in 1963, in Scandinavia; in 1973, in Western Europe; and in 1976 in North America...


Since the 1960s, Kamprad had been quite keen to do business in Russia, when it was still the Soviet Union . It was only decades later, however, that he attempted to set up operations in Russia for the first time. But the attempt came to naught due to the collapse of the Soviet Union in 1991. Another attempt failed due to the ‘Russian constitutional crisis of 1993’ which saw the beginning of an unfavorable economic scenario in the country....


In March 2000, IKEA’s first store in Russia was opened at Khimki (See Exhibit V for IKEA Russia’s Stores). The inaugural day drew a large crowd of 40,000 shoppers and a constant stream of customers emptied the store of its stock within two weeks. People waited for an hour to get into the store and all the roads leading to the store were blocked by traffic for miles around. Analysts believed that the rising middle class in Russia was looking to abandon the old world Soviet-era furniture in favor of the modern Scandinavian furniture offered by IKEA...


IKEA also had to face a number of obstacles in its expansion plans. The business environment in Russia was such that the company constantly encountered problems with regard to its stores from government officials in the fire, health and safety, electricity, tax, customs, and other related departments. These officials reportedly discovered ‘problems’ with IKEA stores, especially during critical times such as store openings...


There were also instances when IKEA received support from the Russian authorities that made things smoother for the company. The company opened another store called the ‘Mega Kazan’ in the Kazan region, 500 miles east of Moscow, in 2005. The store, built in partnership with Ramstore hypermarket , went on to become the largest regional mall in Russia. Dahlgren said that the authorities in Kazan had been very co-operative, which enabled the store to be opened in record time...


However, some incidents seemed to indicate that certain IKEA officials were bowing down to the all-encompassing corruption in Russia. Some industry observers believed that, at least in the initial years, its officials had been involved in corruption. “They were trying to exploit first-mover advantage and may have let their due diligence and corporate governance standards slip by cutting corners,” said Cushman & Wakefield’s, Alexei Slesar...


By 2020, IKEA aimed to achieve a revenue growth of 1.5 times to €50 billion from €34.2 billion in the fiscal year ended 2015-2016. Commenting on its future goals, Walter Kadnar (Kadnar), the general director of the network in Russia, said, “Our goal is long-term investment. The disposable incomes of consumers [in Russia] have declined, and we are trying to attract as many buyers as we can, keeping prices down. Such a policy should also enable us to achieve the goals set by 2020.” ..


Exhibit I: IKEA’s Revenue Growth (2001–2018)
Exhibit II: IKEA’s Consolidated Income Statement (2013-2017)
Exhibit III: IKEA’s Corporate Structure
Exhibit IV: IKEA’s International Expansion
Exhibit V: IKEA Russia’s Stores
Exhibit VI: Corruption Perceptions Index (2017)