Low consumer demand and confidence levels due to rising unemployment and unit prices have impacted discretionary spending. No major brand launches In previous years, luxury goods was more dynamic, with new shopping centre openings and luxury brands such as Jimmy Choo entering through monobrand stores.
St Andrews Theological Seminary, Quezon City, the Philippines Abstract The analysis in this paper looks at the dynamics of IKEA global market entry in Russia and examines the factors that would have put into consideration as alternatives strategies prior to the global expansion strategy.
The paper focuses the idea of specifying the relevancy of market and industry analysis as major requirement for entry in the global market entry strategy as a guide at the time of entry, the magnitude of investment at entry, and the area of competitive emphasis affects long-term performance in the market landscape.
The report commended that only after the market and industry analysis is carried out, principal decisions are taken, a strategy is prepared and put on a virtual test through simulation Zashev Borell and Broadman The major Issues Zashev stressed for the successful entry in global market is the market analysis when the exercise is carried out by competent and skilful officials.
This recommendation is contrary to the capacity of team IKEA team of technocrats who were assigned the task of developing a retail position in the Russian market. It is clear from the IKEA case that it market information was regarded as irrelevant for selecting the Russian market especially when a survey giving that information was considered as unnecessary as reported by IKEA manager.
We draw same conclusion basing on the following expressions provided by the case study which states that learning about customer needs has been essential.
Thus therefore, IKEA practices home visits, talk to people, see how they live, identifying special needs which have not been realized by customers Hamid and Wright Strategies for understanding the local culture and furnishing traditions have been carried out provide effective market segmentation and product differentiation resulting in a establishing a market share for IKEA in Russia.
Advantages and disadvantages of alternative business strategies The main point in this analysis on which we must focus attention here is that IKEA should have taken an alternative strategy market and industry analysis before it entered the Russian market.
The prevailing impact from absence of market and industry analysis regards the revelation concerning demographic challenges of traditional psychological purchasing behavior of Russian people and the huge investment in training and retraining of foreigners to understand the Russia culture.
The present state of alternative strategy IKEA should have adopted would have worked as a ground for preparation for managing current realization of the prevailing low incomes after the collapse of the economy, high customs costs in shipping, regulations and lack of suppliers of good quality products in Russia.
Consequently, the cost of the same item furniture has proved to be higher in Russia as compared to Sweden the home country of IKEA. Zeshev 2 IKEA entry strategy for Russia based on adaptation and standardization of how these approaches were balanced In this analysis, the more applicable debate on the concept of standardization is the debated frequently in the international marketing strategies is provided by Bharadwaj and Varadarajan They discussed that the relevancy of business to pursue a strategy that is standardized across national markets or adapted to individual national markets.
The above scholars have presented two aspects relating to standardization of marketing strategy across national markets as elaborated below.
To a large extent, there is agreement in the IKEA case that has been so far reached on which convention should be adopted in the recommendations of the emerging policy options regarding standardizations of the patterns of recourse allocation in the global strategy.
We draw same conclusion basing on the following expressions provided by in the IKEA Russian case that the store played additional role a training hub to standardize to create brand based vision of the IKEA culture among employees. Despite the obvious challenges faced by, IKEA, it is interesting to note that there is a strategy to make the management group more Russian which can facilitate the adaptation processed as illustrated in the organized tours of journalist to Sweden to sensitization of the brand vision in Russia.
IKEA market behavior was different in Russia as an emerging economy Zeshev reported that in the absence of clear and unbiased business policies on issues concerning leads to spread of misconception about the size of the Russian market regarding the demographics such as the average incomes in Russia which regarded as too low to generate sufficient demand and as a result the market is too small.
On the average, about one fourth of personal incomes is concealed and not included into the taxable base Radayev, Therefore the general statistics on incomes in Russia could not provide yet an accurate picture on this account.
This problem appears to be complex because salaries are the demographics which determine customer buying behavior and the driving force behind market segmentation. It is quite normal 3 therefore to project that IKEA may face challenge of market segmentation in Russian because it is already mentioned in the case that the Russian buying power is rather low.
On the contrary, while analyzing IKEA market behaviors, it would be relevant to mention the extreme perception of the big Russian market that is able to absorb almost anything. This attitude originated in the years after the breakup of the Soviet Union when almost any Western product had good chances to sell in Russia Zeshev These conclusions have not put into consideration the failure to specify that in contemporary times, serious preparation is needed to penetrate the Russian market, and thus, therefore, IKEA needs to position and promote its products within the frameworks of both global and competitive strategy.
IKEA considerations on within the frameworks of both global and competitive strategy IKEA is required to address the following questions 1. What must be the optimal location in Russia for the various value chain activities within the Russia putting into consideration the Russian demographics?
How to develop a sustainable global strategy and presence to achieve competitive advantage with other competitors in the furniture industry, such as china with its completive location near Russia. IKEA should also consider the following forces that can facilitate alternative global strategy.
Investment in research and IT and product development. However, capital equipment for IKEA would be substantial to take advantage of economies of scale to experience curve effect. IKEA should strive for economies of scale for access for more customers so that it can exploit Russia resources such as labor law materials.
External product life cycle ie old products can Sweden can be sold in Russian because it is an emerging economy and less strict that Western countries such as USA. Operational flexibility and shift production costs, currency exchange rate and exchange overtime in Russia The impact of IKEA ownership formation and sustainable IKEA entry strategy in Russia Opportunities of long term success in the Russia market main challenges for IKEA 4 This has been the subject of a number of assertions from managers IKEA Russia who noted that despite the cited successes, cultural differences will continue to play a major role since many of the regions and cities IKEA plans to enter in Petersburg and Moscow are different from the West.
This coupled with the confession that it will require a whole decade for IKEA to realize profits in Russia is A confirmation that IKEA requires an alternative strategy in form of market and industry analysis prior to expansion in other regions.
Optimizing target based market entry strategy model To begin with, one should consider closely whether the ownership of IKEA can facilitate successful entry strategy to achieve long term goals in Russian market.
The available case reveals that IKEA is controlled by a private foundation and the company is not on a stock market. A simple example of corporate strategy regarding financial allocation found in the innocent debates of the case stating that IKEA does not engage in multimedia advertizing because it rather expensive.
Optimizing target based market entry strategy model 5 Source: The latter also allows widening the time horizon of expectations and in Russia time is having somehow different dimensions compared with the West meaning that everything takes much longer time.
Longer time without doubt results in greater costs Zeshev In this regard, therefore, this his analysis correlates two positions emphasizing the relevancy of adhering to IKEA goals of establishing a big market share and ready to exercise continuous effort and investments over a long period of time.
It is a strong proposition presented IKEA owners and corporate managers particularly those from the west to optimize target based market entry as illustrated in Figure 1 above.Ikea Entering Russia IKEA IN RUSSIA INTRODUCTION Today, we present our analysis of the adaptation of a multinational in an emerging country We chose to study the Ikea’s case because the company is the leader in the field of interior design and furniture.
James Howard Kunstler is the author of many books including (non-fiction) The Geography of Nowhere, The City in Mind: Notes on the Urban Condition, Home from Nowhere, The Long Emergency, and Too Much Magic: Wishful Thinking, Technology and the Fate of the Nation.
But the government pricing regulations under discussion are very different from the FDA regulations that are causing the problem.
The writer of this article may oppose those regulations, and be taking them as fixed, saying that given their existence, medical prices must be controlled.
Let us write or edit the case study on your topic "IKEA: Entering Russia" with a personal 20% discount.
That’s why, IKEA decided to adjust its market behavior only after entering the market. The best way to search for viable alternative entry strategies is to watch the mistakes IKEA made and the problems they had by entering the Russian market.