Ikea Internalization

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Stakeholder management in a multicultural environment.
A case-study of a global retailer entering the Russian Market.

Authors:

Dinara Izmaylova Federica Zuccon

Supervisor: Nils Wålhin

Student Umeå School of Business Autumn semester 2010 Master thesis, one-year, 15 hp

DEDICATION
"When we consider a new project, we really study it... not just the surface idea, but everything about it" Thomas, F and Johnston, O, 1981: The Illusion of Life. Italy: Walt Disney Production

To my father Gianfranco who made all of this possible. Thanks for the support you provided to achieve this important goal! I also express my deepest gratitude to my mother and all my family for their unconditional love, trust and encouragement. Federica Zuccon

To my beloved parents: thanks for your support and inspiration! Thanks also to all my friends and boyfriend for your warmth and love! Dinara Izmaylova

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ABSTRACT Nowadays, an increasing number of global retailers such as IKEA, Carrefour and Auchan, are expanding their business internationally: internationalization is seen as a way to face competitors as well as to enhance position on the market. In particular, emerging markets are becoming a fertile field for investing resources due to their fast economic development and growing disposable income of the local population. A number of market actors (or stakeholders) affect or are affected by the internationalization process, and therefore stakeholder management determines its success to a large extent. Thus, stakeholder management competences are becoming increasingly important in today’s business world. Our study addresses stakeholder management strategy applied by a Swedish global retailer (IKEA) when internationalizing to the Russian market. We also try to identify the main cultural differences between the focal organization and the Russian stakeholders, and the way in which the company faces and overcomes those diversities. Thus, we first give a brief overview of stakeholder management approach applied by IKEA on the corporate level, and then focus on particular practices adopted in Russia. Although the IKEA Group has internal and external stakeholder management framework, we find out that no explicit stakeholder management methodology is used in Russia. The strategy of managers is emergent and implicit, but within the company guidelines and code of conduct and in accordance with organizational culture and values. Although we outline IKEA Russia’s interaction with all main stakeholder groups on the Russian market, we examine more in detail the strategies applied towards the company’s three most critical stakeholders: government, suppliers and employees. Hence, IKEA Russia opts for longterm close collaboration with suppliers through knowledge and expertise exchange, close relationship-building, improvement of working standards, and even financial investments in some cases. Employees are granted good working conditions and respectful attitude, different compensation package, possibilities for personal and professional development. Government, identified by our respondents as the most challenging stakeholder, is approached through lobbying on different levels, development of personal relationships, exchange of experience and best practices. However, when interacting with authorities, IKEA also has to adapt, be “flexible within the limits”, and focus on the long-term. Having outlined real-life strategies applied by IKEA in Russia, we compare them with the results of theoretical modeling. In order to come up with theoretical propositions for stakeholder management of IKEA in Russia, we developed a stakeholder management model, which comprised all the most relevant theories. We, thus, discover that theoretical suggestions for stakeholder management are close to what is done by management in practice. However, the theoretical model overlooks “soft” aspects of dealing with stakeholders: local and organizational culture, turbulent...
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