IKEA- Case Study
Is the possibility that an unexpected and drastic change due to political forces will result in adverse circumstances for business operations. * 1998 the Russian Monetary policy finally collapsed-This caused a MACRO POLITICAL RISK for all companies operating in Russia, including foreign companies. * Due to this INTERNAL THREAT, all foreign companies left the country. IKEA also faced a political risk in Russia in terms of ORGANISED CRIME: Although developing markets hold jaw-dropping potential, it often remains just that. Realizing potential from developing markets is incredibly challenging. Companies often find that the institutional (cultural, political, and economic) environments in the developing markets they enter are not only underdeveloped in an absolute sense, but also in a relative sense. That is, the cultural, political, and economic environments in developing markets are so vastly different from anything that they encounter in their own domestic market (or even in other developed markets) that the costs involved in navigating them exceed even their most conservative estimates. Weeks before the opening of its flagship store outside Moscow in 2000, employees of a local utility company approached Ikea. If the Swedish retailer wanted to have electricity for its grand opening, it had to pay a bribe. Instead, Ikea rented diesel generators large enough to power a shopping mall. The generators roared to life in a loud rebuke to the corrupt executives who thought they had the retailer cornered, and soon the utility turned on the power. As Ikea opened stores across Russia, and became one of the most outspoken Western corporate critics of Russian corruption, renting generators to thwart extortion from power companies became standard practice. * Discovered that the Russian executives hired to manage the generators were taking bribes from the rental company to substantially inflate the price of the service-This fraud could...
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