Analysis of IKEA's Business Environment

The assignment requires an in-depth analysis of IKEA's business environment using various frameworks such as PESTLE, SWOT, and ABCD analysis. It involves identifying strengths, weaknesses, opportunities, and threats that affect the company's operations and assessing the impact of macro environmental factors such as politics, economy, society, technology, law, and environment on the organization.

BUSINESS & BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION
.................................................................................................................................................
5
LO1
.................................................................................................................................................
5
P1: Explaining different types and purposes of organisations; public, private and voluntary sectors
and legal structures............................................................................................................. 5
P2: Explaining the size and scope of a range of various types of organisations ...........................6
M1 Analysing the way business structure, size and scope of different organisations link to the
business objectives and product and services offered by an enterprise........................................6
LO2
.................................................................................................................................................
7
P3: Explaining the relationship between various business functions and the way they link to
obusiness objectives and structure ....................................................................................... 7
M2: Analysing the advantages and disadvantages of interrelationships between business functions
and the effect that can have upon business structure ................................................................8
D1 Providing a analysis of the complexities of various types of business structures and the
interrelationships between different functions........................................................................8
LO3
.................................................................................................................................................
8
P4 Identifying the positive and negative effect macro environment has upon business ................8
M3: Applying PESTLE model for supporting in depth analysis of the macro environment .........9

LO4
.................................................................................................................................................
10
P 5: Conducting internal and external analysis of an enterprise for identifying strengths and
weaknesses ....................................................................................................................... 10
P6: Explaining the way strengths and weaknesses interrelate with external macro variables .........11
M 4: Applying SWOT/TOWS analysis and justifying the way it effect decision-making ............12
D2 Evaluating the effect which both macro and micro component have on business objectives and
decision-making ................................................................................................................ 12
CONCLUSION
.................................................................................................................................................
12
REFERENCES
.................................................................................................................................................
13

·INTRODUCTION
In present scenario, business is highly effected by several factors and which also have
influences on overall effectiveness business performance. This report will have focus on digfferent
aspects related to the business environment which have effect on the overall effectiveness of an
ernterprise. This assignment will define several aspects of business environment to develop an
understanding about the ways that can effective for running business.
IKEA is multinational company brought about in the year 1943 and providing quality
services. Company also retailing of furniture and other products. The report will cover the
functions for one of the chosen organisations, using an organisation chart to show the way
functions interrelate and an explanation of the way they link to business objectives and
construction. Further, it will apply a SWOT or TOWS analysis to IKEA to identify their key
strengths and weaknesses.
·LO1
·P1: Explaining different types and purposes of organisations; public, private and voluntary sectors and
legal structures
There are various types of organizations and majorly all types of companies which are
segmented in diffrent sectors such as public sectors, private sectors & voluntary sector organizations.
Moreover, the purposes of those organizations are not similar.
Public limited companies is operated and managed by theregulatory bodies for the people. For
example, Prudential public limited company which is the British financial service company in UK.
Public pay taxes to the legal authorities and this money is used to finance most of the public enterprises.
It has been determined that, the main objectives of public sectors organizations it to give important
public services and to use assets well for the betterment of the society.
Private employees operate and run the private sector organisations. Examples of private sector
companies are franchises, companies, partnership & sole properitors. For example Acromas Holdong
Ltd. Company in UK. Purposes of private sector organizations is to making profit, expand their
business, raising their market share and increase sales.
Individual people doe not run the voluntary groups. However, some will be accountable for
making sure that it sets targets and budgets & does what it is set up to do. It has been discovered that the
wealth of the public sector is directly managed by government or government bodies. For example,

Cancer Research UK is a cancer research and charity in UK. Therefore, the business operation is
operated by the various types of companies represented by sommeone of its people and for their nomal
welfare. National Health Service is considered as one of the famous public companies in England
(Aithal, 2016).
The IKEA business construction is segmented into parts these are franchising and operations
Of the IKEA stores in 36 countries, 235 are run by the INGKA Holding. The remaining 30 stores are
run by franchisees outside of the INGKA Holding. Most of IKEA’s operations, consisting the
management of the majority of its stores, the design & manufacture of its furniture, and purchasing and
supply operations are overseen by INGKA Holding, a private, for-profit Dutch company.
l壱P2: Explaining the size and scope of a range of various types of organisations
There are three different sizes companies such as small businesses that employee up to 50
people, medium size organisations employee about 250 people and large scale companies recruit over
250 employees. Small companies have faced difficulties in sustaining in the competitive business
enviroment. It has been recognised that small companies perform in a very small market. Whereas on
another hand there is little scope for the organization to changes their management strategy randomly. It
has been observed that, medium sized businesses have got better share in the market than small size
firms. (Arnaboldi, Busco and Cuganesan, 2017).
Sole Proprietor is an enterprise which is usually considered as a small companies with single
ennterpreneur who manufactures one type of product or a service. The proprietor has unlimited liability
for any assert against the business that could influence the owner personally and the scope of sole trader
is very limited. Partnership is considered as the second type of firm and is larger in size as compared to
a sole proprietorship. The partnership is formed by two or more persons to multiple partners & the
purpose and scope of business of the Partnership is to obtain, own, run, control, manage, develop and
enhance the Property. It holds the same unlimited liability feature as a sole proprietor. Another type of
company is Corporation and is the third type of organization which is much bigger than the previous
two. It can have near unlimited owners as of stock ownership and transfer capability. It has been
observed that the owners are not liable for any claims against the business.

l壱M1 Analysing the way business structure, size and scope of different organisations link to the
business objectives and product and services offered by an enterprise
Structure, size, and scope of any vompany are linked with the objectives of the business firm. It
is observed that any company make a big target as their goals, only when they acquire a btter company
structure. Companies build their goals by evaluating their business future scope. If the scope of any firm
is to serve national customers, then the business objectives will be set accordingly. On the other hand, if
they provide services to consumers internationally then they will make their business objective on the
basis of it. Based on the product and service, the company set their structure, size, & scope. If any firm
finds that its products does not need a huge strcture; then they do not set that. Whereas, if the
opportunity of business of any goods or services is broad only then an entity sets huge company size
and builds a scope, or, they devlop small sized organization (Bush, 2017). for having profit business all
genrally seek to make money and they create more particular short and long term goals to shape the
focus of the company's employees.
·LO2
·P3: Explaining the relationship between various business functions and the way they link to obusiness
objectives and structure
Organizational structures are based on the functions of the department of the firm because it
always makes their company structure and objective depending on the role they serve to the customers.
In relation to IKEA, its structure highly depends upon its functions like; sales, marketing, human
resource, research development, production and so on. Moreover, marketing is considered as bridge of
connection with the market in order to satisfy the consumers. It has been determined that the marketing
process is beneficial for both customers & suppliers. Furthermore, marketing assists the organization
like IKEA to deliver customer services for expanding its business which will support the quality life of
the customers.
Finance is very much associated with the expense or usage of company’s resources for various
operation. Firm’s financial function gives essential reports on financial performance and position in
association to business plan. IKEA has included advance human resource management department to
see after the employees by the organization. Further, the HR management section also concern about
the laws and policies. It has been determined that the role of the human resource management included
in different activities such as recruitment of staff.

·Finance - to control the movement of revenue across the country's businessed, financial
managers make money & dealing accounts. Budgets allows operations to have the resources
(raw materials, equipment and people) to run out procedures (Deasy, Meyer and Strudel,
VMware, 2016).
·Human Resources (HR) consists of planning and conducting staff needs & controlling hiring
and selection procedure. The HR team confirms that managers implement HR policies and
procedures constantly across the business.
·IKEA also requires the marketing based services for learning customer needs. The marketing
operation can inform the entire business tactic & makes sure that the IKEA image and brand
reflect its high quality.
l壱M2: Analysing the advantages and disadvantages of interrelationships between business functions
and the effect that can have upon business structure
Advantages of interrelationship between organisational functions & its influence upon
company’s structure are as follows:-
·Employees are controlled by experience person in the similar speciality who can perfectly
understands & review their performance and work (Crane and Matten, 2016).
·The team members work together with other staff in the field and it enables sharing of new
ideas and knowledge to make them learn new skills.
·Also, because of people’s proficiency, the employees with specialized skills can complete
tasks quickly, effectively and with more confidence, while making less mistakes.
Disadvantages:-
·The IKEA may have unhealthy competition performing with different fields. Moreover, there may
have deficiency of understanding as to how important that specific are the organisation.
·One more disadvantage of IKEA’s functional structure is that these functional groups may unable to
interact more frequently which reduces flexibility & innovation.
·In matrix structure when linked with organisational functions it is difficult to set priorities when
employees are moving between competing projects

·D1 Providing a analysis of the complexities of various types of business structures and the
interrelationships between different functions
In matrix structure, it has been observed that employees report to two different managers i.e. A
functional and a divisional manager which gives rise to departmental conflict. Also, when each section
or department in the company functions independently, inconsistency may result. Moreover, sometimes
poor communication occurs among varipus departments or busienss strctures due to lack of flexibility
in the structure (Devaney, 2018). no one thinks regarding organisational structure until something
goes wrong & profitability is get affected or consumers complain. In matrix structure it has been
observed that people report to two different managers; a functional one and a divisional one. When
budgets and deadlines affect competition among departments, disputes and authority struggle. Also,
when each of the section performs independently, inconsistency may result. For example, if some
consumers complain that no one responds to problems, a small business can restructure support so each
customer gets paired with a company representtative.
·LO3
·P4 Identifying the positive and negative effect macro environment has upon business
Moreover, home shopping networks are opened by technology including new retail markets,
web-based merchant & other online market and gives excess internet based market to the company. In
the macro environment, it has been observed that new risks are always occurring, and it became
difficult to find for any organization. In the case of IKEA, it is not possible for the organization to avoid
the change as it raises & have to adapt those changes in the country. Macro environments consists of
economic, social, technological, & governmental factors. Technology as determine that it has numerous
active and negative influence on the business workings (Erasmus, Strydom and eds., 2016).
Betterment can provide different business opportunities to the IKEA Company if they can
obtain it. Therefore, it enlarges point-of-sale to grow sales by enabling the company to process cash,
debit and credit card system. (Hamilton and Webster, 2015).
Legislation, provisions, and various governmental rules have a good & bad influence on the
business. If governments assists IKEA by providing forms of governmental support, loan, and leisure
activity and help them to introduce their company then it can positively assist the organization. On the
other hand, tax rates on the retail organization may negatively influence it.

A strong wealth of the country can raise the disposal revenue of consumers, in turn grow their
trading and assist them to trade more products & services. Whereas, on the slow economy may reduce
the earnings and can affect less amount of spending in the market.
The retail sector is considered under stress always in order to be a socially accountable
company as if they should sell ecological-friendly goods, eliminating controversial goods from the
market, setting commitment in the market, etc. However, it has been observed that there are several
events where socio forces and regulatory bodies overlap each other in various areas and may affect
IKEA. Although , these technical growth have one negative influence i.e. online customer’s only
choose those organizations that have real techniques excellence
l壱M3: Applying PESTLE model for supporting in depth analysis of the macro environment
Macro factorsImpact on IKEAPolitical factors :-
Political stability results in economic stability and it will lead to better sales and profits. Apart from it,
the government’s actions towards the foreign companies and its policies too matter. Moreover, political
instability can disturb the IKEA’s business. Economic factors :-
IKEA has managed its products prices accordingly. So, that assists it control some of the pressure that
comes from economic changes.The economic condition of a market is also a vital factor that influence
the pricing in specific regions and areas.conomic forces play a very important role in the business
environment. (Prajogo, KY Tang and Lai, 2014).Social :-
Social and cultural variables too can have a great effect on business . Moreover, social trends and
other factors can have a deep impact on sales.Technological :-
Technology has become important in the 21st century. Brands like IKEA are concentrating on
providing a form of experience from their digital channels. Environmental factors :-
Sustainability is now considered as very important that are focus area for most business brands. IKEA
too has shown some serious focus on sustainability. It has also invested in climate. Legal :-
Legal threats are always a bigger problem for every business. Labour rules are vital concern but there
are other legislation too that need compliance and can increase operational costs.
·LO4
·P 5: Conducting internal and external analysis of an enterprise for identifying strengths and
weaknesses
Strength Weaknesses IKEA is considered as the most successful global retailers and also considered
as powerful brand. It also concentrates on sustainability, innovation, easy to assemble furniture at low
cost. It is tough for IKEA to control standards across different locations, as the brand operates in
numerous countries around the world. Another strength of the organisation is that, with its single
minded focus on cost leadership, the company has emerged as the world's leading retailer brand in UK.
In recent years the quality of the organisation is highly affected due to rise in prices of raw materials and
input, as its major concentration is on cost leadership (Shuradze, Bogodistov and Wagner, 2018).

The biggest power the company has its clear vision, which is to add worth to its consumers regardless
of the market situation. It has been observed that, the company faces environmental concerns which
results in many challenges in interacting it environmental policies to its consumers, and stakeholdersIt is
considered as the leading brand with its strong financial position The company has not been able to
work well in the market place of Asia as compared to other markets. This is because the existence and
demand both remained very low.
Opportunities Threats It has been determined that, IKEA can figure out key business opportunities in
these countries where it currently operates. It has been observed that the demand for premium goods
has increased with better economic conditions, and in turn act as a threat to IKEA's affordable and cost
effective range of products that the company sells. Moreover, the biggest advantage or opportunity the
company has is its cost of leadership. Rise in competitive pressure from rival brands like; Tesco and
Walmart can affect IKEA's business. In addition, the brand can create strategic partnership with other
brands. Apart from this, the organisation in global market has to compensate for global economic
conditions. Therefore, changes in the situation of economic factors will influence company's furniture
business.
l壱P6: Explaining the way strengths and weaknesses interrelate with external macro variables
External environmental variables influences the company’s workings, decisions taking
process, tactic & performing on the business. Strength and weaknesses impact the surroundings in
which companies runs, but external forces influence in the whole geographic area in which a company
runs. Therefore, if the IKEA does not work well in the country and they have various weaknesses then
they may experience various complexities to attain share in a global market. Therefore, the firm should
create their global strategy after rechecking their strength and weaknesses. The company cannot raise
its business due to its low economy & policies, as both political & economic factors are major threats to
IKEA and for the weaknesses in the company. This is because, it has been observed that the business
cannot take benefit from difficult political situation. However, technological advancement assist the
company to acquire the correct information from the customers regarding IKEA. Moreover, the
organisation obtain opportunities from the global market. Therefore, it states that both SWOT and
PESTLE analysis are crucial for the brand and its business strategy.Strength and weaknesses of the
IKEA have direct link with the business and it can influence their operations. (Smith, 2016).
l壱M 4: Applying SWOT/TOWS analysis and justifying the way it effect decision-making
Strengths Weaknesses Company is very popular brand, so it now has strong base of loyal
customers. The organisation has wide set of business activities. It has been observed that
IKEA is considered as the environmental friendly company with its focus on sustainability.

The brand should concentrate on its brand awareness in the Asian market. Moreover, to overcome its
weaknesses the brand must create partnership with local retail brands. Opportunities Threats The
reason for rise in the demand for company's goods is due to improvement in the world's economic
situation. The company provides satisfying range of products. It has been discovered that, if the brand
establishes products at all price range then it can obtain wider market share (Smith, 2016).
l壱D2 Evaluating the effect which both macro and micro component have on business objectives and
decision-making
From external as well as internal variables, IKEA has a high share in the market and has able
to gain customer loyalty so business entity can easily enter into new market. In addition to this, an
organisation consists of skilled workers & employees turnover rate is low so an enterprise can expand
its business operation in the different geographical region. Therefore, manager in an organisation has
developed an effective product segmentation plan and along with that an enterprise has also adopted
price differentiation approach so firm can acquire the customers not only across the UK but also from
other countries(Zalengera, Blanchard and Gondwe, 2014).
It has been observed that macro and micro have significant influence on the success of the
business and hence, the factors of these environments should be considered in-depth at the decision
making process of strategic marketer. In business, the micro decisions of an individual business are
affected by whether the macro economy is healthy. In this way performance of an economy relies on
the micro economic decisions made by individual businesses.
·CONCLUSION
From the overall report it has been concluded that, this world of business is consisted of various
aspects and factors that affect the company both directly and indirectly and positively and negatively.
The report also concluded that there are various types of organisations exist with different sizes and
scope based on their production size. Apart from this, it stated various strengths, weaknesses,
opportunities and threats that IKEA has and its application on the organisation. Moreover, it assessed the
impact of macro environmental factors on the company both positively and negatively.

·REFERENCES
Books & Journals
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Arnaboldi, M., Busco, C. and Cuganesan, S., 2017. Accounting, accountability, social media
and big data: revolution or hype?. Accounting, Auditing & Accountability Journal.
30(4). pp.762-776.
Bush, T., 2017. PESTLE analysis: everything you need to know (2016). Available in:
http://pestleanalysis. Com.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Deasy, S., Meyer, R. and Strudel, F., VMware Inc, 2016. Controlling use of a business
environment on a mobile device. U.S. Patent 9,247,042.
Erasmus, B., Strydom, J. W. and Rudansky-Kloppers, S. eds., 2016. Introduction to business
management. Oxford University Press Southern Africa.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford
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Prajogo, D., KY Tang, A. and Lai, K. H., 2014. The diffusion of environmental management
system and its effect on environmental management practices. International Journal of
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Shuradze, G., Bogodistov, Y. and Wagner, H.T., 2018. The Role Of Marketing-Enabled Data
Analytics Capability And Organisational Agility For Innovation: Empirical Evidence
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Smith, M., 2016. No better friend, no worse enemy: How different organisational cultures
impede and enhance Australia’s whole-of-government approach’.

Zalengera, C., Blanchard, R. E. and Gondwe, K. T., 2014. Overview of the Malawi energy
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Online
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