Corruption in Russia: IKEA's Expansion to the East (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Corruption in Russia: IKEA's Expansion to the East (A)
This four-part case series can be used to discuss business ethics, compliance/governance, integrity management, reacting to and preparing against corruption in the context of internationalization and allows to also briefly touching upon the issue of Corporate Social Responsibility (CSR). Case (A) describes a challenge IKEA was facing, while trying to enter Russia in 2000. The company was preparing to open its first flagship store on the outskirts of Moscow, only the first of several planned projects. After substantial investments in infrastructure and logistics, IKEA focused on marketing, but quickly faced a sudden complication. Its major ad campaign in the Moscow Metro with the slogan "[e]very 10th European was made in one of our beds" was labeled "tasteless". IKEA had to stop the campaign because it "couldn't prove" the claim. Soon Lennart Dahlgren, the first general manager of IKEA in Russia must have realized that the unsuccessful ad campaign was going to be the least of his problems: A few weeks before the planned opening, the local utility company decided not to provide their services for the store if IKEA did not pay a bribe. What should IKEA and Lennart Dahlgren do? Was there any alternative to playing the game the Russian way, and paying? The subsequent cases (B), (C), and (D) describe IKEA's creative response to the challenges described in case (A), and then report about new challenges with alleged corruption within IKEA and in the legal environment, and finally raise the question whether IKEA can be considered to have a social responsibility to fight corruption on a societal level in order to build the platform for its own operation in Russia.
Swot Analysis of "Corruption in Russia: IKEA's Expansion to the East (A)" written by Urs Mueller includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ikea Corruption facing as an external strategic factors. Some of the topics covered in Corruption in Russia: IKEA's Expansion to the East (A) case study are - Strategic Management Strategies, Corporate governance, Cross-cultural management, Ethics, Social responsibility and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Corruption in Russia: IKEA's Expansion to the East (A) casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, increasing commodity prices, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models,
increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, etc
Introduction to SWOT Analysis of Corruption in Russia: IKEA's Expansion to the East (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Corruption in Russia: IKEA's Expansion to the East (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ikea Corruption, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ikea Corruption operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Corruption in Russia: IKEA's Expansion to the East (A) can be done for the following purposes –
1. Strategic planning using facts provided in Corruption in Russia: IKEA's Expansion to the East (A) case study
2. Improving business portfolio management of Ikea Corruption
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ikea Corruption
Strengths Corruption in Russia: IKEA's Expansion to the East (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ikea Corruption in Corruption in Russia: IKEA's Expansion to the East (A) Harvard Business Review case study are -
Learning organization
- Ikea Corruption is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Ikea Corruption is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Corruption in Russia: IKEA's Expansion to the East (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Ikea Corruption in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Ikea Corruption is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Urs Mueller can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Ikea Corruption has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
High brand equity
– Ikea Corruption has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ikea Corruption to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Ikea Corruption
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ikea Corruption does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Ikea Corruption has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Corruption in Russia: IKEA's Expansion to the East (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Cross disciplinary teams
– Horizontal connected teams at the Ikea Corruption are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Diverse revenue streams
– Ikea Corruption is present in almost all the verticals within the industry. This has provided firm in Corruption in Russia: IKEA's Expansion to the East (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Highly skilled collaborators
– Ikea Corruption has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Corruption in Russia: IKEA's Expansion to the East (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Ikea Corruption has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ikea Corruption has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to lead change in Leadership & Managing People field
– Ikea Corruption is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Ikea Corruption in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Corruption in Russia: IKEA's Expansion to the East (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Corruption in Russia: IKEA's Expansion to the East (A) are -
Skills based hiring
– The stress on hiring functional specialists at Ikea Corruption has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Need for greater diversity
– Ikea Corruption has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Ikea Corruption has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Corruption in Russia: IKEA's Expansion to the East (A), in the dynamic environment Ikea Corruption has struggled to respond to the nimble upstart competition. Ikea Corruption has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Ikea Corruption is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Ikea Corruption needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ikea Corruption to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Corruption in Russia: IKEA's Expansion to the East (A), it seems that the employees of Ikea Corruption don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Corruption in Russia: IKEA's Expansion to the East (A), is just above the industry average. Ikea Corruption needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Slow to strategic competitive environment developments
– As Corruption in Russia: IKEA's Expansion to the East (A) HBR case study mentions - Ikea Corruption takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High operating costs
– Compare to the competitors, firm in the HBR case study Corruption in Russia: IKEA's Expansion to the East (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Ikea Corruption 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Urs Mueller suggests that, Ikea Corruption is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Low market penetration in new markets
– Outside its home market of Ikea Corruption, firm in the HBR case study Corruption in Russia: IKEA's Expansion to the East (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Corruption in Russia: IKEA's Expansion to the East (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Corruption in Russia: IKEA's Expansion to the East (A) are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Ikea Corruption can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ikea Corruption in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Ikea Corruption can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Leadership & Managing People segment.
Manufacturing automation
– Ikea Corruption can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ikea Corruption can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Ikea Corruption can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ikea Corruption can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ikea Corruption to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Ikea Corruption to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Ikea Corruption can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Better consumer reach
– The expansion of the 5G network will help Ikea Corruption to increase its market reach. Ikea Corruption will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ikea Corruption can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Ikea Corruption to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Ikea Corruption has opened avenues for new revenue streams for the organization in the industry. This can help Ikea Corruption to build a more holistic ecosystem as suggested in the Corruption in Russia: IKEA's Expansion to the East (A) case study. Ikea Corruption can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Ikea Corruption in the consumer business. Now Ikea Corruption can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Corruption in Russia: IKEA's Expansion to the East (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Corruption in Russia: IKEA's Expansion to the East (A) are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Ikea Corruption
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Ikea Corruption.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Ikea Corruption will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Shortening product life cycle
– it is one of the major threat that Ikea Corruption is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Ikea Corruption needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Ikea Corruption can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Ikea Corruption needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ikea Corruption can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Corruption in Russia: IKEA's Expansion to the East (A) .
Technology acceleration in Forth Industrial Revolution
– Ikea Corruption has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Ikea Corruption needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ikea Corruption can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Ikea Corruption needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Leadership & Managing People industry regulations.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Ikea Corruption business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Ikea Corruption high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Ikea Corruption can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of Corruption in Russia: IKEA's Expansion to the East (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Corruption in Russia: IKEA's Expansion to the East (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Corruption in Russia: IKEA's Expansion to the East (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Corruption in Russia: IKEA's Expansion to the East (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Corruption in Russia: IKEA's Expansion to the East (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Ikea Corruption needs to make to build a sustainable competitive advantage.
