IKEA faced complications when expanding into the Russian market in 2000. Its major advertising campaign in the Moscow Metro claiming "Every 10th European was made in one of our beds" was deemed to be in bad taste as IKEA could not prove the claim. Additionally, a local utility company decided not to provide services to IKEA's new store in Khimki unless IKEA paid a special fee, despite IKEA having already invested $4.5 million into the store. These issues presented challenges for IKEA as it looked to establish its first location in Russia.

1. Corruption in Russia: IKEA’s expansion to the east (A)
By: Urs Muller

2. Introduction
• IKEA (Ingvar Kamprad Elmtaryd Agunnaryd), a Swedish multinational is the
world largest furniture retailer
• In 2000, IKEA entered Russian Market
After all its investments in infrastructure and logistics, IKEA focused on
Marketing but faced some sudden complications:
1. Ad campaign failure (Explained in the next slide)
2. Local Utility Company decided not to provide their services for the store
if IKEA did not pay a special service fee

3. • Its major ad
campaign in the
Moscow Metro with
the slogan – “Every
10th European was
made in one of our
beds”
• This slogan was
labelled as ‘Bad
Taste’
• Company had to stop
it because it couldn’t
prove the claim
“Every 10th European was made in one of our Beds”

4. From a Small Company to a Global Player
• IKEA’s Vision is to create better everyday life for many people
• Business idea of IKEA supports vision by offering wide range of well-designed,
functional home furnishing products at lower prices so that masses can afford
them
• IKEA was funded in 1943 as a general mail-order company in a small village in
Southern Sweden
• By 2000, privately owned IKEA Group was operating in 151 store in 29 countries
with turnover of about €9.5 billion
• In 1955 it established its innovative business model of self-assemble and flat
packaging for customer ease

5. • In mid-1960s IKEA opened its First flagship store outside of Stockholm and began
international expansions in Norway and then into Denmark
• Later it opened stores in Western Europe and then in US.
• IKEA mostly targeted people between 20 and 35, and launched a Family Card which
provided many benefits like; discounts, special deals, and a free cup of coffee in its in-
house restaurant.
• It also ran small playgrounds and offered child care while parents strolled through the
exhibition halls.
• IKEA’s strategy and company culture was often described as highly cost-cautious,
sometimes even as stingy.
• IKEA always sought out the lowest possible production cost to provide the most
competitive price.
• IKEA expanded internationally for the search of low cost opportunities and capacities
and not only to broaden its customer base.

6. Behind and after the fall of Iron Curtain
• The Swedish retailer was holding contracts with East Germany, Poland and Yugoslavia.
• In 1989, around 15% of the supply for IKEA came from the eastern countries.
• After the Soviet Union dissolved. IKEA saw the opportunity and opened its stores in Budapest,
Poland and Czech Republic.
• By 2000, IKEA had 5 stores in Poland, 2 in Hungary and Czech Republic and 1 in Slovakia.
• In 2000, IKEA planned to open its first store in Moscow and practically capture a potential
market of about 146 million customers.
• By 2000, IKEA had already entered the market in developed economies and started moving into
the emerging markets.
• The economic indicators seemed to the right direction and the country was still far behind the
European average consumption for furniture.
• Soviet – made furniture was very large and heavy and according to the New York Times, Russian
households was a goldmine for durable goods.
• Russia seemed a must for international retail chains in general.

7. PROBLEMS BEFORE
OPENING THE MALL IN
KHIMKI
• IKEA struggled to get a prime location
at the necessary low cost in order to
fit their business model.
• After an unsuccessful search within
Moscow IKEA decided to open their
first store in KHIMKI
• IKEA store takes 2.5 years for
development and construction
• The of Moscow blocked the
construction of an overpass that was
supposed to ease the traffic.

8. • Till that time IKEA already invested $4.5 million.
• The city of Moscow stopped construction, when only two
pillars left to built
• Few week before the grand opening of the first IKEA in
Russia in 2000, the local company reportedly company
management and gave an ultimatum: that IKEA could either
pay a special service fee or proceed without electricity.