IKEA in Russia

Essay by fr34kUniversity, Bachelor'sB+, February 2008

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1.What are the main motives for Ikea to enter the Russian market?One of the motives for Ikea to enter the huge Russian market was that its founder Ingvar Kamprad truly believed that the country has massive raw material base and high level of education can make the obvious production centre for a global furniture company. They also had a company that they were furniture from Russia for more than 20 years, but without a presence on their market. The motive and a really ambitious goal is to supply all the global market with Russian-produced furniture. It might be also that economic crisis and the devaluation forced authorities to open for foreign investments and Ikea caught the right moment. My opinion is also that they learned a lot from previous failed set ups and they knew how to approach this sophisticated market.

2.Taking into consideration Ikea’s business model and the industry they operate in, what do you see as the main challenges facing Ikea in the Russian market? In other words, what will be the key success factors for the company in Russia?We are commenting this in 2008 and the article was from 2003.

Like Mr Dahlgren says that IKEA is still losing money in Russia and does not expect to turn a profit until 2005. To be profitable, they would have to boost locally produced furniture from 13% now to more than 30%. After Ikea set’s up the infrastructure, those objectives will be definitely reached (or are already now in 2008). Ikea is buying its 60-plus suppliers equipment and granting credit for investment and working capital, because Russian companies’ are having big problems with inability to borrow from the local banks. Some quotes in the article by Mr Dahlgren: “You have to think long-term in Russia.