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. But first there are several company related attributes to mention. IKEA is a company which is highly related to their Swedish tradition and origin as this is a basically part of their marketing strategy and corporate identity. Many people are connecting IKEA’s Swedish image with the way IKEA is communicating their product range: Cheap, easy and yet reliable and stylish. Because of these conditions given, IKEA is forced to make sure that they are able to transfer these elements of their corporate idea into the Russian market. Of course there always are slightly differences from country to country in the way IKEA communicates to their customers, but adoptions should be limited to executive marketing decisions and not interfere with IKEA’s basic business idea.
These previous points are strongly limiting any kind of indirect entry strategy. IKEA needs to keep the conceptional differences between their home markets and the Russian points of sale as small as possible. That means as further the gap is between the original shops and the ones in Russia, the bigger is the chance of a flawed identity. Therefore entry strategies like franchising, licensing and indirect export over all could not be an opportunity to enter the Russian market. The reason is simple: It will get quite hard to find a Russian businessman who is familiar enough with Swedish culture. The franchise guidelines IKEA would be forced to give out would probably fill up thousands of pages and even then, Russian IKEA franchise businesses would communicate anything else but Swedish family piece to their customers. IKEA remains facing the more viable entry strategies of a direct export in terms of opening their own stores in Russia as they did, or to start an alliance as a strategically partnership or joint venture.
The major problem they IKEA faced by choosing the direct export as an entry strategy was the missing knowledge and experience about the Russian market, its further development, the people and the Russian culture as well as Russian living conditions. The arrangement and adaption of the communication strategy and the product range took place steadily and needed time. Therefore, even if the Russian market potential was still growing and expanding IKEA lost market share and sales power because of wasted resources and by performing a not optimally adjusted marketing strategy. A solution to face these problems from the start of the market entry would have been to search for a Russian partner company that is capable of IKEA’s missing knowledge. The different opportunities in here are based in the shaping and the form of alliance.
IKEA can be sure that they have got a very well working business model. They don’t want to share their success even if a deeper alliance would probably allow them to share loss as well in case of failure. IKEA wants to keep control of the company as it is still private hold and they want to keep it that way in Russia. In addition a joint venture alliance usually is kind of a long term relationship. IKEA indeed just needs a partner to get started in the market Russia. Once they catch on they might want to quickly quit former alliances. In my opinion the best solution would have been a strategic alliance with a possibly quite small partner as the object of trade for IKEA is just knowledge.
A small, traditional company that enables IKEA the transfer and arrangement of their culture and company politics into the Russian market by providing all the information IKEA needs to prevent the above-mentioned mistakes. The partner company is not needed to perform in any physical goods business as their relationship to IKEA will only be based on information access. After the successful market entry, the strategic, information based alliance could be quit quickly and easy or getting changed into a usual business relationship, depending on the need of future information supply of IKEA.
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Topic: Ikea Enntering the Russian Market
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