Final answer:
IKEA faced several challenges upon entering the Russian market, including complex social and political dynamics, autocratic rule, and a need for modernization. The company navigated these issues by adapting to local business environments, localizing its supply chain, and emphasizing community relations and flexibility in its operations.
Step-by-step explanation:
Challenges Faced by IKEA in Russia
When IKEA entered the Russian market, it encountered several challenges such as navigating the complex social and political landscape, understanding Russia's autocratic rule, and modernizing within Russia's dilapidated manufacturing base. To tackle these obstacles, IKEA had to adapt to the local business environment, which was, at times, governed by inconsistent regulatory practices and required negotiations with the government and local suppliers.
Foreign investors were initially attracted to Russia during Vladimir Putin's presidency due to substantial economic growth, making Moscow one of the richest cities in the world.
However, the company had to manage the risks associated with such investments, including dealing with the economic disparities where much of Russia's population continued to suffer from poverty and related social issues.
IKEA's strategic approach to dealing with these challenges included localizing its supply chain, investing in community relations, and maintaining a flexible approach to business practices. Throughout their operations, they continued to monitor and address any rising environmental problems in Russia and Transcaucasia.