Group 4 – Russia

Hello  everyone! Here is our final presentation concerning the problem of IKEA in Russia!

First we would like to  say, why in our opinion IKEA has chosen to operate on Russian market.

In Russia IKEAs interests are represented by its subsidiaries: IKEA HOUSE which manages shopping centers IKEA, and IKEA MOS which  is developing a network of shopping centers” MEGA “. The first IKEA  complex opened in Moscow in March 2000 and since this time there appeared 13 operating stores in Russia. Also it owns furniture factories and saw mills. Speaking about Why russia is so important for IKEA, we have to say that Russia-is rapidly growing and developing market, it has great future in long term. And if you suggest a good investment, further developing the business infrastructure, market area, you can create a such kind of thing, a giant, a “monster” which in any other country will not be allowed to do. In addition, we could not help saying about the natural resources of our country – Russia is very important as a producer. If IKEA had ignored the Russian market some years ago, its lost-sales cost would be much more than what IKEA is losing now.

There are of course some special features in Swedish management style that distinguish  it from the others.Diligence, punctuality, seriousness, decency and trustworthiness, these things are the basis of Swedish business relationship. The term “Swedish model” starts in the beginnings of the 1960th.“Swedish model” doesn’t have the one definition. But we can detail the main goals of it:

  1. The full employment;
  2. Equalization of income.

One more interesting fact is that there is actually the law called MBL in Sweden. This law obliges to discuss problems with stuff before head managers find a solution. Managers do not give orders. They call orders “guidance”.As for us, in Russia, the most of factories have special awards for their employees who do work enough well. In fact, this stimulates staff quite well. For Russian people it’s too difficult to understand how work can be done well if there is no stimulus on the factory.We think that Swedish management is very useful gear in economy for any country, but it depends on the different mentalities  of different countries.

Now we  would like to draw your attanetion to the main features of Russian model of managment.Russia is a country, which has undergone a radical period of readjustment. The old order has left a political and economic void. Things in Russia change on a day-to-day basis and that what is true for one region might be untrue in the next. Certain universal truths, however, typify the Russian approach to business in general:

1)For centuries, the state has been seen as an organ of oppression and statutes are therefore seen as the ‘enemy’ and to be evaded at all costs.

2)The only things that can be relied upon are close personal relationships within the business environment, which are essential to successful business.
3)The legal status of many Russian companies is very dubious. The laws are being rewritten constantly and are virtually unenforceable. Thus, most agreements have to be made on a trust basis.

As you can see the  highlights of those 2 system are pretty different, probably that is why IKEA had to overcome such obstacles while entering the Russian market as :

1. Corruption

2. Red tape

3. The exorbitant duties on imported goods

4. Additional study of building land

5.  Strict continuous monitoring and control

In spite of the fact that IKEA faced many handicaps while doing business in Russia it appears that IKEA has successfully adapted to Russian business conditions.Instead of receiving all the documents needed to build a store IKEA usually started the construction before the receipt of all the licenses. That is, to my mind, a good example of Swedish being action-oriented. However although the receipt of about 300 licenses proves to be time-consuming and tiresome process, that is the requirement of Russian law and its violation caused IKEA many problems.

Accustomed to facing administrative barriers in many regions, IKEA learned that establishing contacts and building good relationships with local authorities, politicians and influential people is essential for doing business in Russia. This fact can be explained by Russian extremely high level of power distance in all the areas, not common for Swedish management style and Swedish culture in general.After the crisises IKEA had undergone in Russia during the last years it turned out that Swedish principle of flat organization is rather difficult to implement in Russia and working unsupervised can have negative consequences. This can be seen as a result of Russian high level of uncertainty avoidance. That is why the management of IKEA is far more engaged in supervision of IKEA Mos now. What is more IKEA even invites detectives to investigate the troublesome cases.

To make a conclusion we would like to say that Swedish way of management is believed to be one of the most successful and effective. And we are sure that Russia would benefit from using it in it’s management sphere. So below  you can see main advantages of Swedish way of management :

  • Sweden government invests  a lot in education, research and the visionary development and then it provides managers with well-educated  and possessing multitude of skills staff
  • The main principle of Swedish management is not to give direct orders but to help employees to understand a problem and then to work out the solutions
  • Simplification of the supply system streamlines  the work of the companies and as a result provides the better quality of work
  • Every person can influence the decisions concerning his  own life what creates a special psychological climate in the country

What is extremely important is  that it’s impossible to use Swedish model of management without improving standard of living and the country. So in order to be successful in any sphere a government of a country should first establish a favorable atmosphere in the social one.

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