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June 20, 2022

Subject: Corruption in Russia: IKEA’s expansion to the east A

IKEA faced issues entering the Russian market. The company faced issues such as a corrupt

bureaucracy, issues with finances and the Russian government. The issues made IKEA to delay

its entry into the Russian market. IKEA initially struggled to identify a prime location at a low

cost. The company failed to identify a prime location in Moscow. IKEA had to open a store in

Khimki. After opening the first store in Khimki, IKEA also faced other issues.
IKEA was faced with a disastrous ad campaign after entering the Russian market. The ad

campaign that IKEA launched was labeled “bad taste.” IKEA also faced other issues such as the

Moscow city refusing to build an overpass to ease traffic to IKEA’s new store (Müller, 2016).

IKEA was ordered by Russian officials to build the overpass. The traffic issue was not resolved.

The local utility company required IKEA to pay a service fee. The company told the general

manager to pay a service fee or operate without electricity.

One of the options that IKEA had was to cancel the opening in Khimki. IKEA could have opted

to completely cancel the opening because of the issues that were faced in opening the store. The

pros of this option would be that IKEA would have acted ethically. IKEA would have avoided

paying bribes if it opted to cancel the opening (Müller, 2016). Another advantage is that IKEA

would save some money in the amount that would have been paid as service fee.

The cons of canceling the opening would be making huge losses. IKEA had already invested a

lot of time and money. IKEA had substantial investments in logistics and infrastructure. The

company had also invested in marketing. Cancelling the opening would mean that IKEA had

wasted its time and resources by investing in Russia. IKEA had spent a lot of time researching

the Russian market.

Another option would be to delay the launch of the new store. The general manager of IKEA

could give a legal notice to the utility company. The manager could engage in talks with the local

government. He would open a lawsuit and complain about corruption in the utility company.

This pro of this option would be that the company could start operations without paying the

service fee. However, the company would have to spend more time in filing the lawsuit and

complaining about the issue to the local government.

The third option would be to pay the service fee to the utility company. IKEA could pay the

service fee to ensure that it is provided with electricity. The advantage of this option is that IKEA

would start operations immediately. The disadvantages include loss of money in form of the

service fee and failure to adhere to ethical codes by paying bribes.

The characters in this case have assumptions that relate to the issue and might affect the decision.

For example, Lennart Dahigren, IKEA’s general manager in Russia, might assume that it is

impossible to sue the utility company. There might be assumptions that the Russian government

is corrupt, and one has to pay a service fee to receive various services.

The solution that I would choose is paying the service fee. Paying the service fee would be the

best option even though one would not abide by the ethical principles. IKEA could agree with

the utility company and pay the service fee. The company has already invested millions of

dollars in Russia. After the service fee is paid, the utility company should ensure that there will

be no further issues.

IKEA should focus on opening the store. The general manager should avoid fights with the

utility company. Cancelling the opening would be a bad option because IKEA would incur losses

(Kent, 2020). IKEA spent two and half years in construction; therefore, there is need to open the

new store quickly. IKEA has a good reputation for standing against corrupt practices and

following ethical standards.

IKEA has various ethical principles such as integrity, fairness, respect and honesty. These are

ethical principles that should be considered in this case. The company has zero tolerance on

corruption. It is important to make decisions based on the interests of the organization. IKEA
should pay the service fee to the utility company because to ensure that it opens the new store

first.

REFERENCES

Kent, G. (2020). Ethical principles. Research training for social scientists. London: Sage, 61-7.

Müller, U. (2016). Corruption in Russia: IKEA’s expansion to the East (AD). Emerald Emerging

Markets Case Studies.