IKEA IN RUSSIA

IKEA : Entering Russia

INTERNATIONAL STRATEGY M. Lalanne

“The IKEA vision globally is to create a better everyday life for the many.”

Introduction

WHY IKEA ?

I (Ingvar) - Founder’s first name

K (Kamprad) - Founder’s last name

E (Elmtaryd) - Farm where he grew up

A (Agunnaryd) - Home village

Logo- Blue & Yellow : The colors of Swedish National Flag.

1953

2000

2009

1943

Export and Supply Process

• Russia does not have clear consumer habits.

• There have been several political risks in entering Russia.

• Exporting is an efficient and easy way to enter a foreign market.

• Therefore, IKEA has chosen to export its standardized products to Russia.

PESTEL ANALYSIS

Political

•Russia is ruled by Vladimir Putin alongside President Medvedev.

•The power of Russia comes from their supply of energy to most of the EU and their large stockpile of nuclear weapons.

•The government ranks at 154 out of 178 on the perceived corruption index.

Economic

•GDP is the 8th largest in the world 2009 at a 1.75 trillion USD

•Population is 9th in the world at 142 million people

•Military expenditures are 5th in the world at $50 billion

•Russia is dependent on exporting its natural resources like natural gas and oil.

•Inflation is high at 12% and unemployment rises.

Socio-cultural

•The Russian Federation has been producing a 7% annual growth since 1998.

•Average income is $640 per person.

•Life expectancy age 66.

•Russians average 14 years of schooling.

•The people suffer from alcoholism, drug addiction, and AIDs in large numbers.

Technological

•Cannot run their own oil companies without Western help.

•They have a good competence with nuclear weapons.

•Internet is available to companies and home users in Russia.

Environmental

•Russia is a wasteland that it littered with leftover waste from the Cold War and World War II.

•The land is scattered with toxic waste, air pollution, soil contamination, left over obsolete pesticides, and agricultural chemicals.

•Russians are able to survive because Russia has an extremely large surface area.

Legal

•Russian law is corrupt.

•15% of Russians have claimed to have paid a bribe in the past 12 months in 2010.

•About $400 billion worth of bribes are paid to Putin’s government.

•You can bribe for just about everything in Russia from electoral lists to college diplomas.

•Even IKEA has had a run-in with the law and bribery.

SWOT

Strengths International company : 200 stores

in 32 countries

Private foundation

Affordable

Attractive product

Product adjust to local need

Opportunity to try and test everything in the store

Advertisement

Weaknesses Quality

« Ikea does a half and customer do a half »

Ikea different from the culture in Russia

Social and environmental issues (use of child labor and formaldehyde problems)

SWOT

Opportunities Opening new store all over

the world (only 3 in Russia and why not more ?)

Creating a culture

Threats Competitors

Problems of corruption

Recessions and declining economies

Brand Pyramid

Provide well-designed, quality products at affordable prices

Brand Personality (fun, empathetic, intelligent)

To create a better everyday life for the many people.

The world’s number one global furniture store.

Global consumers that need affordable home furnishings and décor.

IKEA Marketing Mix Product

Furniture

10,000

Restaurants,play areas

low prices

no-frills pricing

Home delivery

Place

International

Suburban areas

300 stores

Promotion

largest furniture retail brands

value prices

Advertising

"IKEA is close to you (Икеа рядом с вами)"

Prices

30 to 50% lower

low-cost

Ikea entering Russia

IKEA’s entry strategy in Russia – Adaption or Standardization?

The company made the Russian consumer buy its products as a necessity

Long-term vision gave the flexibility required from IKEA to “invent” a market gap that was to be filled by them.

Adapted to the market they entered, something that would make the company limit the distance from the pulse of the Russian reality.

Porter’s Five

Force Analysis

Rivalry among

existing firms

 5/5Threat of new

entrants

 1/5

Bargaining power of

customers

4/5

Threat of substitutes 

2/5

Bargaining power of suppliers

 2/5

Competitor Mapping

Price

Quality

Dubrovskaya

Pottery Barn

Sears

JYSK

IKEA

Marketing Plan

The IKEA vision is to create a better everyday life for the many people.

The business idea is to offer a wide range of well-designed, functional home furnishings at prices so low that as many people as possible can afford them.

Marketing Plan

The use of various channels outside the store to explain the full IKEA offer, like the IKEA Catalog, other important ones are IKEA websites, publications, brochures, advertising and PR.

The IKEA Catalog is the world’s most distributed annual free publication with approximately 200 million copies printed in 61 editions and 29 different languages.

Goals

Increase online traffic and purchase by implementing a space simulator created by a game designer.

Increase customer-employee interaction

Advertising

The Sims 2

The pack was the second most sold game in Sweden for two consecutive weeks.

It includes 76 items.

Advertising

For eight months a subway train decorated in IKEA style was introduced in Novosibirsk, Russia.

Russian Subway

Advertising

Four cars were turned into a mobile showroom of the Swedish design.

Conclusion

Conclusions drawn from initial market research turned out to be very unreliable and difficult to assess.

Market structures and the behavior of consumers in Russia changed rapidly.

Recommandations

Because of the high duty, IKEA should produce in Russia.

Russia is also a very good place for purchase, because wages are low and the country has all raw materials that are needed (Wood, oil, steel) , however the company will have to figure out how to overcome the corrupt government of Russia to being to produce products within the country.