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Introduction

IKEA was the world's largest furniture retailer since the early 1990s. It sold
inexpensive furniture of Scandinavian design. It is a favorite among customers
searching for well-designed products at low prices. IKEA stores sell ready-to-assemble
furniture, appliances, and household goods.
Today the firm is the largest furniture retailer in the world, with 139,000
employees operating in 43 countries. Germany is the firms largest market, followed by
the United States and France. Its large range of products includes furniture, food, large
items such as cabinetry, and smaller items such as cabinetry, and smaller items such as
kitchenware, dcor, and small plants. IKEA also operates restaurants within their stores.
Background
IKEA was founded by Ingvar Kamprad (Kamprad) in 1943 in Agunnaryd,
Sweden, when he was 17 years old. Kamprad started by selling goods like pencils,
wallets, jewelry, picture frames, and watches. Kamprad tried to keep costs low by
purchasing goods in large quantities and passed on a part of this benefit to his
customers. In 1947, Kamprad introduced furniture in his product line and found that
there was a good demand for it. He sourced furniture from manufacturers in local
forests so that he could keep the costs low. As the scale of business grew, Kamprad
found it difficult to make individual sales calls and so started advertising in the
newspapers. In 1951, he designed a product catalogue and distributed it to potential
customers who lived near his store.
Management Control System

Management
Controls

Cultural
Controls

Administrat
ive

Plannin

Cyberne
tic

Rewards
and

Corporat
e Values

Organizati
on

Budge
ts

Budg
ets

Premium
Salary
System

Personn
el Ideas

Governan
ce

Business
Plans

Beliefs

Policies
and
Procedur
es

Summary

Financial
Systems
(sales,
cost,
gross
margin,
value of
damaged

Nonfinancial
Systems
(customerbased,
marketbased,
personnelbased
productivity
and supplybased)

Group
Rewards

Discounts
on stores
merchandi
se

IKEA was the Russian story that almost never happened. Still, the Swedish retail
giant has transformed Russian kitchens, bathrooms and bedrooms in ways that the
profit-wary communists of a few decades ago could have never imagined. In some
ways, one might say that IKEA has finished what Richard Nixon started in the famous
Kitchen debate with Nikita Khrushchev over 50 years ago.
On 17 August 1998, IKEAs Lennart Dahlgren arrived in Russia. Dahlgren, newly
appointed as the future head of IKEAs Russian division, was sent by IKEA founder
Ingvar Kamprad to open the Russian market. The process to begin business in Russia
took the company longer than expected, cost more than anticipated, and due to corrupt
officials and bureaucracy, the retail giant came very close to abandoning their Russian
stores altogether.
The city of Moscow offered locations for the first store, but it was soon clear that
the cost of opening inside the city limits was far higher than ordinary real estate and
construction expenses. Then-mayor Yuri Luzhkov had suggested several sites, but
when the company expressed interest in another property along one of Moscows major
avenues, Kutuzovsky Prospekt, company officials claim that the city mailed flyers that
resembled IKEA letterhead to local residents. The flyers, an apparent forgery, stirred up
opposition to the site.
IKEA eventually chose to open their first store in the Khimki region, just outside
city limits. That store faced unique obstacles and the opening was delayed after police
raided the store just days before the scheduled grand opening. Officials claimed that a
highway off ramp that had been constructed to handle the projected store traffic was in

the wrong spot. The fact that officials had previously approved the ramp design, and
inspectors had approved the construction process, seemed to have been forgotten.
In June 2000, some forty-one years after the kitchen debate between Nixon
and Khrushchev, IKEA was ready to advertise the grand opening of their first Moscow
store. But, there was another hitch: government officials at first banned the ads, saying
that recent studies had discovered that consumers exhibit unstable moods when in
underground floors, and that adverts promoting a store with an underground retail level
might constitute a danger to public health. Foreign investors have long believed that
local officials protect Russian businesses against competition by using excessive
regulations and operating restrictions.
Despite the challenges, the first IKEA opened to a crowd of excited shoppers.
The line to enter the store was several hours long, traffic in the area was jammed, and
by the close of business that day, thousands of shoppers had picked the store clean.
While hard to fathom, official estimates put the opening day traffic at near 40,000
shoppers.
Even then, there were kinks to resolve. The first day almost bombed when
shoppers thought that prices were written in US dollars. At that time, the dollar was the
most trusted currency following Russias recent default and currency devaluation. There
was a big difference between $600 and 600 roubles, and so store employees quickly
added the word roubles alongside prices to put shoppers at ease. For the rest of 2000,
the average floor traffic exceeded 100,000 shoppers per week.

Bureaucratic hurdles have sprung up often, and for the most part IKEA has held
the line on refusing to pay bribes to local officials. The company did agree to a $30
million donation to a charity benefiting the elderly to gain permits for construction of a
large distribution centre outside Moscow in 2003. There was also a scandal during the
acquisition for property in St. Peterburg when a former IKEA CEO allegedly approved
an under-the-table arrangement between a large Russian subcontractor and local
officials. The CEO was fired. Although unverified, Dahlgren says that he had sought a
meeting with President Putin and IKEA founder Kamprad, but dropped the request after
being told that the price tag for such a meeting was north of $5 million.
IKEA has invested heavily since the beginning in promoting their brand. Along
with their associated property management company, MEGA stores, IKEA conducted a
promotion in December 2014 to remind Russian consumers that giving is as important
as receiving. Random shoppers were offered a gift, and then they were given the
opportunity to give a gift to another person.
The advertising and promotion investments in Russia seem to be paying off, and
today Russia is IKEAs fourth most profitable market. There are 14 IKEA stores in
Russia: three in the Moscow region, two in St. Petersburg, and more outlets in Kazan,
Yekaterinburg, Samara, Ufa, Nizhny Novgorod, Novosibirsk, Rostov-on-Don, Krasnodar
and Omsk.
Perhaps IKEA has not only transformed Russian homes, but hopefully has
affected Russian officials with insight on honesty and integrity in business transactions.
Despite all the challenges, IKEA loves Russia, and Russians love IKEA.

compliance with local laws and regulations

Legal
Technological

high quality and system to promote shorter


queues
efficient store environment to keep
customer satisfied
availaility of leading-edge technology

Environmental

use right material


corrective actions
policies and campaigns supporting
environmental awareness
waste recycling

low prices
availability of suppliers locally
reliable access to distributie channels.
entity expansion
currency forecasts
foreign investments

opportunitiy to distribute high quality


furnitures

stable political condition


set a global brand

Social
Economical
Political

PESTEL Framework

SWOT Analysis

Opp
ortu
nitie
s

Strengths
Weakn
esses

Weaknesses

Thre
ats

Opportunities

Threats

Problem/s:

Solution/s:

Conclusion/s:

Recommendation/s: