Business in Russia

Adolfo Hinojosa
Strategic Management
September 9, 2014
Ikea and Russia: Corruption and Sound Business

Attempting to do business in Russia can formidable for any company and this includes Ikea. The Russian political atmosphere is rife with bribery and the blatant use of corruption in government dealings has become an accepted way of doing business. The Ikea example shows how government regulation can halt a business dead in its tracks. The mall Ikea has invested in has been ready for over a year, yet sits unused due to pending government approval for safety concerns. These concerns include a government restriction due to walls not having reinforcement for near-hurricane winds. The article claims that there has never been a recorded incident of those types of conditions in the mall’s area. The Russian government however conveniently had a company on standby that could fulfill this “extra” requirement. This further highlights the issues of corruption in Russia. Having covered the issue of corruption and how deeply seeded it is in the Russian business world, the question of continuing business in Russia for Ikea arises. Also needing to be asked is if Ikea chooses to stay what they can do to help them operate in Russia without having to succumb to corruption.
Ikea, in my opinion, needs to stay and continue doing business in Russia for a few reasons. First Russia has had a recent modernization. This has led to rise in the middle class and thus a rise in the more informed consumer. This growing middle class allows room for a more sophisticated buyer for Ikea to target. Also Russia is an enormous nation. The country itself is vast and the ability for Ikea to cement itself as a known brand is too good of an opportunity for it to pass up. Due to these reasons, I feel it is prudent for Ikea to continue doing business in Russia.

First, I would make sure Ikea had a training program in place to make sure company frontline employees and executives understood and could identify potential corrupt practices in everyday business. This will help Ikea steer clear of corrupt business practices. Secondly, I would include a program to monitor and access risk across the company in regards to corrupt business practices. This will ensure that Ikea does not continue to feed the practices in place by the Russian government. Another strategy Ikea can employ to help them combat corruption is to become more involved in the government process.
Currently they are combating and fighting the corruption by using the media to show the public how Russian officials are halting the expansion of business in their country. I however would take a different route and actually befriend the officials that are in charge of the procedures that allow business to expand in Russia. This way you are seen as a friendlier entity. Having a good relationship with key government officials can help Ikea also extend and present to them how Ikea wants to do business. This will allow them to gain a greater influence in the Russian political arena. These types of relationships can be crucial to future business opportunities and it helps to have good relations with the government of a foreign market. By networking and allying themselves with strong key political figures they will stand to gain a positive image in front of the government with the main goals of achieving political influence on both regulatory and political lobbyists. It is in my opinion that Ikea follow my recommendation to continue to do business in Russia and follow the strategies to help both minimize risk of corruption in business dealings with the government and build a strong, firm foundation to solidify a positive working relationship between both entities.