Business Communication

Problems

Since opening its first store in Russia in 2000, the Swedish retailer has encountered some crucial challenges from the markets, suppliers, competitors, and the Russian authority. However, the Swedish retailer has become a potent symbol of Russia's consumer boom. An instant hit with Russian shoppers, IKEA has since plowed billions of dollars into the country, building giant shopping malls in a dozen of Russia's largest cities. IKEA's Russian success seemed like personal vindication for its founder, Ingvar Kamprad. The reclusive 81-year-old billionaire has long harbored an almost obsessive fascination with the country, describing it as "his last big hobby".

Market

From a market driving perspective, the most critical factors for a successfulness in a furniture industry is local culture absorption and price policy. Furniture industry has a high cultural sensitivity. The root of most of its problems was the company’s not paying attention to local needs and preferences. IKEA is considered as a brand that represent the Swedish culture. The Swedish culture that has its roots in Almhult and is personalized by the value of its founder Ingvar Kamprad is a vital part of IKEA’s brand identity and one of its main positioning tools in Russia. The question will be should IKEA hold its standard that represent it country of origin or to adapt to the Russian culture.

IKEA is known as the company that strongly holds its corporate values. IKEA does not stress its decision making on market intelligence. Some cases show that it is lack of using market data. Instead, it is guided more by its own vision.

Moreover, to push the price to be more competitive one is a trade-off dilemma since IKEA still wants to maintain its high image brand. Russian tends to be the “efficient” customer. They reluctants to pay more for unclear benefit.

Suppliers

There are two major issues regarding the supplier. First, the local industry norms and standards that is below the IKEA’s ones. Second, how to transfer IKEA values to the suppliers. IKEA Russia focus on pushing suppliers to increase their technical standard, improve the efficiency, and increase the price competitiveness of their products. The problem is that the level of supplier development is not as high as in other developed European countries.

Since the employee of the suppliers is not IKEA’s employee, it become the problem to transfer the IKEA values and norms to the employee. Consequently, the most challenging one is to find trusted and respected suppliers. IKEA has to transfer its international standard to the local suppliers.

Leadership

IKEA employs mainly local people in Russia. However, the senior management staff is still mainly Swedish. Therefore, the management style, organization behavior, and norm of employee behaviors are strongly driven by the Swedish culture. This Swedish management style more or less will cause the resistance from the local employee. In addition, the figure of Kamprad is strongly influence the management style in IKEA. Even, at an age of over 80 year old, Kamprad still has the veto to decide which product to be released to the market.