Category winner: IKEA in Russia – Ethical Dilemmas

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This case won the Ethics and Social Responsibility category at The Case Centre Awards and Competitions 2016
 
The case

Who – the protagonists

Lennart Dahlgren, a prominent IKEA employee on the verge of retirement but asked to oversee the setting up of IKEA’s operations in Russia.

ikea

What

Ingvar Kamprad set up IKEA in 1943. He based the name of his company on his own initials plus the first letter of his farm, Elmtaryd, and the village where he spent his childhood, Agunnaryd.

IKEA initially sold products such as pens, wallets, picture frames, table runners, watches, jewellery and nylon stockings at discounted prices. In 1948 it began selling furniture made by local manufacturers and by 1956, the company was designing its own flat-pack furniture. By 2014, IKEA’s revenue was over €29 billion.

Why

CathedralKamprad had been keen to do business in Russia since the 1960s. By the early 2000s, a market report from A.T. Kearney, a global market consulting firm, stated that in terms of retail expansion, Russia was the top country in the world: ‘With a growth rate of 30 per cent for retail sales from 1999 to 2003 and a relatively sparse retail network to serve its growing market, Russia is full of promise.’

When

IKEA decided to enter the Russian market in the 1990s as part of its global expansion strategy.

Where

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IKEA was founded in Sweden, and the first IKEA furniture showroom opened in Älmhult in 1953. Its headquarters are now in Delft, the Netherlands, and it has over 370 stores in 47 countries across the world, including Spain, the UK, China, Hungary, Japan and Portugal.

Key quote

‘People in the West know astonishingly little about Russia. Those who call themselves Russia experts usually don’t understand the first thing about it. People who say they don’t know much about Russia come much closer to understanding it.’ – Lennart Dahlgren, former Russia Country Manager for IKEA, February 2011.

What next?

Dahlgren realized that Russia had a highly corrupt bureaucracy, which demanded bribes to get anything done. However, he was determined to comply with IKEA’s policy of zero tolerance of corruption. Along with all Western companies in Russia, IKEA faced threats of blackmail, sabotage, and demands for bribes. How can Dahlgren negotiate this ethical minefield?

 
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IKEA in Russia: Ethical Dilemmas
Ref 713-037-1

Teaching note
Ref 713-037-8

The authors

author

G. V. Muralidhara and Namratha V. Prasad

The authors discuss why their winning case stands out from the ‘IKEA crowd’ and offer some advice for writing cases from published sources.

Special award

We are delighted to receive this award, which is considered part of the case method community’s annual ‘Oscars’. It is all the more special because it is based on the number of institutions that have used our case globally. We are happy that many faculty members have found it interesting to use in their classes. Any case is written with a view to having wide appeal and receiving this award shows that we have succeeded in that endeavour.

ikeaStanding out from the crowd

There are many cases about IKEA’s strategies. Our case stands out because it aptly documents the dilemma faced by a well-recognised company that wanted to adhere to its ethical standards, even though not doing so would have been easier from a business point of view. In the current era, where there is rising disillusionment with corporations due to their purely profit-driven motive, a company that adheres to ethical standards is perhaps a refreshing change.

In-depth understandingikea

Students like this case because it helps them understand IKEA’s ethical approach and they can relate this to their own ideas about how an organisation should go about developing an ethical business. They also get an in-depth understanding of the issues related to corruption prevalent in those emerging economies that are considered to be attractive investment destinations. Students realise from this case that giving in to corruption does not make business easier in the long run. It is enjoyable to teach the case because of the scope it offers for discussion. 

Top tips

While developing a case from published sources it is necessary to search for a variety of articles that document the company’s activities relating to the topic under focus over a period of time. We also look for sources that provide multiple perspectives. Keeping a keen eye on detail and writing the case in an engaging manner help in keeping the reader’s interest alive. This leads to a better understanding of the case and a well-rounded case discussion in class.

About the authors

G.V. Muralidhara is Dean of the Case Research Center, ICFAI Business School (IBS), Hyderabad.
muralidharagv@ibsindia.org
tw @MuralidharaG

Namratha V. Prasad is a Senior Research Associate at ICFAI Business School (IBS), Hyderabad.
namr.236@gmail.com

 

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