IKEA: An Economic Downturn, and Problems with Corruption

During the prolonged recession that began in 2008, IKEA ran into two significant

stressors: decreasing product demand and unpredictability in the Russian market.

1

The

global economic recession led to sharp increases in debt and decreases in sales. In

addition, the company ran into difficulties in its operations in Russia. As acknowledged

by most officials, even president Demitri Medvedev, businesses in Russia are often the

target of extortion and corruption. It is, to say the least, quite difficult to operate in Russia

without bribing a local, regional or even national government officer. Every business

encounters challenging times, but what defines the company is how it responds to

difficult times.

In the short term, the best strategy for IKEA may be to defend its own corporate

integrity and the well-being of its executives and employees by resisting bribery. How

about the economic downturn? That larger source of stress for the company requires a

much different kind of coping response. There is a saying that the strong survive. If that

is so, what is the source of strength for survival? In IKEA's case, it may be its core

business model of selling minimalist, flat-pack furniture, something that its competitors

are trying to emulate.

Duke behavioral economist Dan Ariely has a theory that IKEA's build-it-yourself

furniture creates long-term customer loyalty.

2

Why? Because you like the furniture even

more after struggling to put it all together with a minimum of useful instructions. No one

would suggest that the instructions are overly detailed. This mild ambiguity creates a

customer opportunity, specifically, the opportunity for the customer to engage, or invest,

in the whole process of creating the furniture. Engagement and involvement lead to

commitment. That may be the underpinning for Ariely's theory about IKEA's model for

creating loyalty and business. While the company's business model may be an internal

source of strength to survive and thrive in a very competitive retail environment, IKEA

may draw strength too from its loyal and lasting customer base who has displayed their

own strength and achievement in assembling IKEA furniture.

ANSWER THE FOLLOWING DISCUSSION QUESTIONS:

1.

How might the methods that IKEA uses to deal with external stressors, such as global

economic and political conditions, be applied to the treatment of individual

employee's stress in the company?

2.

What are some ways in which the two stressors IKEA faced could function as positive

stress for the organization?

3.

If you were an official at IKEA, how would you deal with the question of bribery?

Would you rather pay a bribe to make life for your company easier, or would you not

pay the bribes and face a bigger challenge in doing business in a foreign market?