Organizational culture refers to the underlying values, beliefs, norms, assumptions, and the mode of interaction existing in a particular work setting of an organization (Lubis & Hanum, 2020, p. 88). A corporate culture with a positive value system is likely to impact positively the local business culture. Cultures with positive feedback to issues such as child labor, corruption, and environmental degradation are likely to influence business firms positively. A successful business organization has tough policies governing its code of ethical standards. Businesses ought to formulate and implement and strong integrity and ethical program to safeguard themselves from deformation due to unethical employee practices. Employees must adhere to the laid down policies and core values of the organization. A firm may need to implement its ethical program due to the following reasons. The culture with negative feedback to such factors is likely to have a negative influence on the local business culture and ultimately corporate culture.
IKEA is a multinational company formed by Ingvar Kamprad in 1943 that designs furniture and make household equipment and other ready-to-assemble appliances. It is the world’s largest furniture retail company since 2008, and currently, it has more than 400 stores operating in 49 countries and employing more than 140,000 workers (Ericsson, 2018, p. 4). The company has a good reputation for its best designs, high quality, and low-cost products. IKEA is also the largest wood consumer in the retail industry. Throughout its operation, the company focuses on making sure it adheres to its policies, including responsible logging and socially responsible practices. It also focuses on bettering lives for all its stakeholders including the community in which it operates.
According to Cole (2019, p. 10), the company’s success is attributed to its strong ethical policies guarding its operations in international markets. In the case of Russia IKEA was able to overcome most hurdles imposed on it by the country’s local government. Russia, being a country with a weak legal system on matters of corruption, subject most international organizations operating therein to corrupt deals. The country’s war on corruption is primarily below par with most local government officials, who demand bribes to provide basic utility services. Shashkova (2019, p. 67) refers to corruption as ‘another subsector of the economy’ estimating it to US$ 300 billion annually.
IKEA’s non-tolerance to corruption in Russia is evidenced by the way it handles its employees who bow down for corruption. The Transparency International report of 2012 ranked Russia in the top five list of the most corrupt developed countries (Cole, 2019, p. 19). IKEA is a company with strict adherence to corporate policy and does not protect its corrupt employees even the ones who turn a blind eye to corrupt deals. For instance, in 2010, IKEA, fire two of its executives Kaufman and Stefan for failure to report a corruption scandal even though they were not directly involved. IKEA has an unconditional obligation to ensure its high ethical standard and core values are upheld. I agree that such an attitude towards unethical practices reflects a typical, corporate culture that every business organization ought to emulate. Corruption is unethical and a social vice that sabotages economic development.
IKEA faced the Russian lawsuit with various allegations devised by the local authorities as a way to fight back for failure to comply with their corrupt deals. For instance, in 2004, the company was establishing a new store at Chimki, a few miles out of Moscow, the Russian capital under permission from the mayor (Shashkova, 2019, p. 65). When the mayor was succeeded by Strelchenko, a retired military officer, his officials bared opening of the store claiming that the road leading to the store is passing over a gas pipe and thus was risky heavy traffic. IKEA offered to remedy the situation by constructing pressure reducers to which the authority declined. IKEA claimed that it failed to pay a bribe for the new mayor and thus took a fight against the company. The incident shows the extent to which corrupt regimes go to force businesses to bow down to their corrupt demands. I believe that the move taken by the company to make the matter public is an excellent way of fighting corruption.
Another interesting incident concerning the firm happened when the local authority barred the company from building an off-ramp over Leningrad Highway to ease traffic, leading to its Khimki store (Cole, 2019, p.28). They claimed it would thwart the view of the historic Tank Trap monument while it was later pointed out that the company declined to bribe Luzhkov and his team. It took the intervention of Kamprad who appealed to the president, Vladimir Putin, which made the firm being granted permission. The extent to which IKEA protects its core values and ethics depicts a typical corporate culture that every firm should adopt. The company faced many setbacks in the course of its expansion processes; the firm was incurring unnecessary expenses and spending more time as a result of barriers imposed by corrupt and bureaucratic Russian local government.
IKEA always worked so hard to ensure sustainable environmental protection in its logging practices. There is an instance where the Russian media accused the company of illegal logging practices (Ericsson, 2018, p. 12). This brought a lot of scrutiny and harsh criticism from various global environment protection agencies. Analyst later found out that the company was working according to the Russian logging guidelines. The defamatory allegation was only intended to tarnish the company’s name and ruin its reputation because of the grudge held against it by the Russian local government. Being an environmentally and socially sustainable company should have made IKEA cautious on its logging practice and opt to cut fewer trees to conserve forest resources. Also, in my opinion, IKEA ought to shun its aggressiveness in increasing production scale since it is dealing with one of the world’s most sensitive products. A business wishing to venture into international markets should scan both internal and external environmental factors of the business. With increased globalization facilitation and a need to expand, firms are looking abroad in search of new markets for their products. Globalization is a major factor in contemporary management practices in world economics. Managers across the world operating multinational firms are faced with a need to analyze international markets before they venture.
Management of a company needs openness, accountability, and communication in both its internal and external operations. To achieve the same, employees from every single department ought to exercise their highest level of integrity. Integrity and adhering to the corporate culture becomes a vital element of achieving transparency in the organization. Lack of clarity in the firm's operations may make employees conform to the local cultures in foreign markets, which can be harmful to the company’s reputation. In countries with weak legal systems to deal with social vices like corruption, child labor, and environmental degradation, the national business culture, is in most cases unethical (Warrick, 2017, p. 397). Therefore, organizations need to be in control of their adherence to ethical practices for the sake of their good reputation.
As the number of business organizations venturing into international markets continually increases due to globalization, a robust organizational culture rooted in the ideals, core values, and ethical principles can greatly influence the success of a multinational business firm. Companies in the contemporary corporate landscape need to scan, identify, and evaluate the external environment and establish a robust organizational culture through establishing their values, preferences, and lifestyle. This approach will enable a firm to establish appropriate synergies to enable it to establish and sustain a robust organizational culture. The knowledge of how to conduct business in a foreign market is extremely important. Before venturing into a new market in a foreign country, a company needs to scrutinize and understand the culture of people living there. Such firms are to go through various cultural hurdles and uncertainties while competing with other businesses, local and international. Culture can bring positive or negative influence on employees’ conduct, which has far-reaching consequences on how they undertake their routine tasks as well as how they treat customers.
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Cole, R.E., 2019. The Effects of Deforestation on Carbon Storage in Khabarovsk Krai, Russia. Available at: https://scholarworks.wmich.edu/cgi/viewcontent.cgi?article=5333&context=masters_theses
Ericsson, A., 2018. Organizational Culture and Employee Loyalty: The Case of IKEA. Available at:https://www.diva-portal.org/smash/get/diva2:1192802/FULLTEXT02
Lubis, F.R., and Hanum, F., 2020, December. Organizational culture. In 2nd Yogyakarta International Conference on Educational Management/Administration and Pedagogy (YICEMAP 2019) (pp. 88-91). Atlantis Press. Available at: https://download.atlantis-press.com/article/125949878.pdf
Shashkova, A., 2019. Russian Specifics in Combating Corruption. Available at SSRN 3506011. Available at:http://archive.kulawr.ru/netcat_files/521/703/1.2015_Kutafin_University_Law_Review_4_52_0.pdf
Warrick, D.D., 2017. What leaders need to know about organizational culture. Business Horizons, 60(3), pp.395-404. Available at: https://fardapaper.ir/mohavaha/uploads/2018/06/Fardapaper-What-leaders-need-to-know-about-organizational-culture.pdf