Analysis of Challenges Faced by Businesses in UK and Response Strategies - Ikea Case Study

This analysis explores the current challenges faced by businesses in the UK and provides strategies for responding to these challenges. Using Ikea as a case study, the external environmental factors affecting the company are analyzed using PESTLE analysis. Strategies for political, economic, social, technological, legal, and environmental challenges are discussed.

Analysis of one UK
business

Contents
INTRODUCTION...........................................................................................................................3
TOPIC- “Identification of current challenges that are faced by businesses in UK and how can
they respond to these challenges”....................................................................................................3
Overview of the company......................................................................................................3
External environmental analysis of Ikea:...............................................................................3
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The businesses that operate in UK have to deal with many external and internal factors
which affect their operations and functions and also influence their sustainability in the market.
The businesses cannot control and change the external environmental factors rather they can only
adjust their strategies and policies which help them to deal efficiently with the negative impact
these factors create on them (Henriques, C and et. Al., 2015). This helps the company in being
stable in the market which can help it to become successful in the changing market environment.
For understanding about the challenges that are faced by companies in UK, IKEA which is a
European multinational group which deals in designing and selling of furniture, kitchen
appliances and home accessories etc. is taken. The PESTLE analysis of the business in UK will
be done along with formation of strategies so that the challenges that are faced by the company
can be efficiently dealt with.
TOPIC- “Identification of current challenges that are faced by businesses in
UK and how can they respond to these challenges”
Overview of the company
Ikea is a European multinational group which deals in designing and selling ready-to-
assemble furniture, kitchen appliances and other home décor accessories along with providing
home services. The company was founded in 1943 by Ingvar Kamprad and is now the world's
largest furniture retailer. The company is well-known for its modern design of furniture and
other home appliances which are often environment friendly. It is a one-stop shop for all the
household needs which helps the customers in acquiring designer products for decorating their
houses (Kolios, A., Read, G. and Ioannou, A., 2016).
External environmental analysis of Ikea:
For analysing the external factors the most efficient tool which can be used is PESTLE
analysis which helps in analysing all the factors that affects the functions and operations of
a business and also influences the way in which the organisation can survive successfully
in the market. While operating in UK Ikea has to deal with the following challenges in
response to which it formulates its policies:
 Political: These are the rules and regulations of government of the country such as
trade tariffs, taxation policies etc. which affect the businesses. UK is a politically

stable nation which helps the companies of UK to grow and develop in an efficient
manner. Ikea is benefitted from the political stability of UK as the company do not
have to change its policies and strategies frequently which helps in saving its costs.
Political stability also help the company to offer its products to the customers at the
same tax rates which helps in making customers loyal. However, due to Brexit the
company might face loss of markets in the European Union whih affects the
profitability of the company (Raharja, S.U.J., 2017).
Strategy: The company can expand its business in the untapped Asian markets by
the way of expansion which will help the company to boost its sales and also it can
recover its losses which have occurred due to Brexit. Also through this strategy the
company will be able to deal with the competitors in UK who has expanded their
market in UK as the political stability of country plays a positive role in expansion
of all the companies which increase the amount of competition faced by Ikea in
UK.
 Economical: These are the economic factors of a country like unemployment rate,
GDP, purchasing power of people. In UK the GDP of the country is growing and
also the unemployment rates are low which means that the purchasing power of
people of the country is high. This is a positive factor for Ikea as the company can
sell its products in UK at high profit margins as their power to purchase is more.
This means that they can afford expensive products (Ziolkowska, J.R. and
Ziolkowski, B., 2015). However as the inflation rates are growing and people are
purchasing things that they need rather than the things which adds on to their
luxury, Ikea faces a drawback due to inflation. The company needs to formulate a
strategy which can help the company to make profits even at the times of inflation
this can be done by using the following strategy:
Strategy: Ikea can try to achieve economies of scale by making the processes of
the company more efficient and effective that the cost of producing furniture can be
reduced which helps the company to offer low priced products o customers which
are of best quality. This strategy can help the company to survive the drawbacks of
inflation as it can increase its sales by offering people with inexpensive furniture at
highest quality which helps in achieving highest level of satisfaction for customers.

 Social: These factors are related to the type of people that forms the society of
country. It includes factors such as demographics, age, sex, caste, etc. which
determines the beliefs and liking of people of a community which influences the
businesses so that they can offer products which can help the companies in gaining
high profits. In UK the standard of living of people is high which means that they
can afford high priced furniture in order to decorate their homes. Ikea provide its
customers with highly designed furniture and kitchen appliances which help in
decorating their houses. However as the preference of people spending their money
is shifting from purchasing assets to spending more on education, recreational
activities etc. This might affect the business of Ikea in a negative manner. For this
Ikeaa can follow the following strategy.
Strategy: The strategy that can be followed by Ikea in order to deal with this
situation is by providing offers and holiday schemes to their customers which will
help in attracting more customers towards the company. This will increase the
company sales and will also help in building a strong customer base along with
making the customers loyal towards the company. This strategy will help in
increasing the value for money for its customers by giving them the benefit of
highly designed furniture and also of the holiday packages that they offer.
 Technological: These factors are related to the technological advancement of a
country which is brought by the research and development that takes place in the
country. UK is a highly technologically advanced nation which means that Ikea can
use technology in the most efficient manner which will help in fast and accurate
manufacturing of high quality furniture at low rates. This decreases the company
costs and increases their profits while increasing the customer base by providing
them furniture at low price. However as the technology is becoming more advanced
other furniture companies have started selling ready to assemble furniture from
their online websites. This has increased the competition for Ikea in the country and
has also affected its profits. For dealing with this problem the company must follow
the following strategy.
Strategy: Ikea can launch its online portal so that it can reach to a large number of
customers in the most efficient manner. This will help the company in increasing

its sales to its already existing customers and will also help in expanding its
customer base. Also the company can take feedbacks from customers through their
online apps which will help the company in improving its furniture in a manner that
can enhance customer experience which will also help the company in gaining a
competitive advantage in the market. Further the convenience for customers of
placing orders so that the products they ordered can directly reach to their homes
will help in increasing the convenience for customers (Ansah, R.H. and Sorooshian,
S., 2017).
 Legal: These are the country laws related with businesses which affect the
businesses of the country. These laws are important to be followed by companies
so that they can work within the legal framework of the country which includes
following the labour laws, employment laws, discriminatory laws etc. In UK the
country laws are formed in such a way that they support the manufacturing sector
of the company by providing them with a variety of tax reliefs, subsidies etc. This
helps in reducing the costs of Ikea in manufacturing furniture as they can get huge
amount of subsidies from the government. However as the laws of UK are very
strict to be followed this increases the cost of Ikea as it has to go through a large
number of legal procedures which increases the cost of company like increase in
the cost trademark which has to be renewed within a certain period of time.
Strategy: The company in order to deal with these can introduce corporate social
responsibility in the company so that all the decisions that are formulated in the
company can help in gaining the satisfaction of all the stakeholders. CSR will also
help in taking ethical decisions which will make the company more socially and
environmentally responsible. This will help in the growth and development of the
society as a whole and can also gain the loyalty of customers (Zahari, A.R. and
Romli, F.I., 2019).
 Environmental: These factors are related to the presence of natural resources in the
country, climate and weather conditions, presence of water, pollution etc. These
factors also affect businesses working in the market as the businesses has to face
many legal restrictions related to the environment so that the negative impacts of
business activities on the environment can be reduced. Ikea provides high designed

furniture and kitchen appliances to its customers which help to decorate their
houses. The company uses wood in order to manufacture its products which affects
the forest cover in UK and also affects the wildlife of the country. However the
company can follow this challenge by following the strategy mentioned as follows.
Strategy: The company can follow many environment friendly practices which
will help in reducing the negative impact that the activities of the company has on
the environment. For this Ikea can focus more on the use of renewable energy
sources and building more plants than it cuts to manufacture furniture. This will
help the company in developing the environment more which means that the
company will also face low government interventions (Baxter, M. and Landry, A.,
2017).
From the above external factors analysis it can be seen that Ikea can create more
opportunities by dealing with the challenges that the company face in UK. This will
help the company to become a leader in the market and will also help in dealing
efficiently with the market competition. Apart from the above mentioned strategies,
industrial networks and business relations will also help the company in dealing
with all the negative impacts that the factors create on business. It will also help in
increasing the competitiveness of Ikea in the market and can help in its sustainable
survival in UK (Bilsland, K. and Cumbers, A., 2018).
CONCLUSION
From the above report it can be concluded that the companies need to examine the external
factors of the environment in which they operate. This will help the company in dealing
efficiently with the negative effects of these factors so that the companies can survive
successfully in the competitive market. It is important to analyse the businesses in a timely
manner which will help in identifying the potential threats and opportunities in the market so
that the opportunities can be grabbed and the threats can be handled in the most significant
manner. Appropriate strategies and policies can be formulated by the company so that
companies can continue to survive in the most significant manner.

REFERENCES
Books and Journals
Henriques, C and et. Al., 2015. The future water environment—Using scenarios to explore the
significant water management challenges in England and Wales to 2050. Science of the Total
Environment, 512, pp.381-396.
Kolios, A., Read, G. and Ioannou, A., 2016. Application of multi-criteria decision-making to risk
prioritisation in tidal energy developments. International Journal of Sustainable Energy, 35(1),
pp.59-74.
Raharja, S.U.J., 2017. Strategic Analysis of the Regional Water Company in Cirebon City West
Java, Indonesia. Review of Integrative Business and Economics Research, 6(2), pp.408-413.
Ziolkowska, J.R. and Ziolkowski, B., 2015. Energy efficiency in the transport sector in the EU-
27: A dynamic dematerialization analysis. Energy Economics, 51, pp.21-30.
Ansah, R.H. and Sorooshian, S., 2017. Effect of lean tools to control external environment risks
of construction projects. Sustainable cities and society, 32, pp.348-356.
Zahari, A.R. and Romli, F.I., 2019. Analysis of suborbital flight operation using
PESTLE. Journal of Atmospheric and Solar-Terrestrial Physics, 192, p.104901.
Baxter, M. and Landry, A., 2017. IKEA: Product, pricing, and pass-through. Research in
Economics, 71(3), pp.507-520.
Bilsland, K. and Cumbers, A., 2018, July. Organizational Control and Autonomy in Retail Work
Spaces: Evidence from a UK IKEA Store. In Academy of Management Proceedings (Vol. 2018,
No. 1, p. 12455). Briarcliff Manor, NY 10510: Academy of Management.