Analysis of Business Strategy for IKEA

Business
Strategy

Contents
INTRODUCTION...........................................................................................................................................3
TASK 1..........................................................................................................................................................3
P1: Analysis of macro environment.........................................................................................................3
M1: Critical analysis of macro environment............................................................................................5
TASK 2..........................................................................................................................................................5
P2: Analysis of an organization’s internal environment...........................................................................5
M2: Critical evaluation of internal environment......................................................................................7
TASK 3..........................................................................................................................................................7
P3: Application of Porter’s five forces model..........................................................................................7
M3: Devising of appropriate strategies to improve competitive edge....................................................9
TASK 4..........................................................................................................................................................9
P4: Application of theories, concepts and models and preparation of strategic plan for the
organization.............................................................................................................................................9
M4: Producing a strategic management plan........................................................................................13
D1: Critique and interpretation of information and data......................................................................13
CONCLUSION.............................................................................................................................................13
REFERENCES..............................................................................................................................................14

INTRODUCTION
Business strategy refers to a set of actions and moves which a business uses to attract the
customers towards it (Akter and et.al., 2016). It is primarily prepared in order to strengthen the
performance and achieve the goals and objectives of the organization. It provides an outline of
business in order to achieve the desired results. Thus it is the task of higher-level management to
prepare business strategies. This report is based on IKEA which is a Swedish multinational
company dealing in ready-to-assemble furniture, kitchen and home appliances. In this
assignment, specific analysis will be made on impact macro environment factors can have on
business strategies, internal environment of organization and its capabilities, evaluation and
application of Porter’s five forces. Additionally, focus will be made on application of models and
theories to assist in understanding and interpretation of strategic directions in an enterprise.
TASK 1
P1: Analysis of macro environment
IKEA is a Swedish multinational company which was founded in 1943 and deals in
ready-to-assemble furniture, kitchen appliances and other accessories. The headquarters of the
company is located in Delft, Netherlands.
Mission- IKEA’s mission is to provide goods for home usage to its customers at an
affordable price. It aims to provide quality products to its various customers.
Vision- The vision statement of IKEA is “To create a better everyday life for the many
people”. It aims to provide products which make the lives of its clients easier.
Objectives- IKEA’s objectives are providing furnishing items of good design, function,
durability and quality at low prices so that majority of people can afford them.
Analysis of macro-environment factors-
PESTLE analysis-
PESTLE analysis is a management tool which is used for analyzing those factors which
affect the macro-environment of an organization (Amran and et.al., 2016). Its application in the
context of IKEA is explained as follows-
Political factors-Political factors include government policy, political stability etc. These
factors impact IKEA as it may need to change its strategic decision and tactical action because of
their impact because politics has an influence on objectives of the company.

Positive impact- If the government policy is in IKEA’s favor then it can benefit from it
to realize its objectives and increase its level of profits.
Negative impact- If the political stability in the country is not good then it will
negatively impact IKEA as it may result in decrease in its profitability level.
Economic factors- These are economic growth, exchange rates, disposable income of
customers etc. IKEA’s strategic decisions and tactical actions are impacted by these factors as
they directly or indirectly impact its profitability level because economic conditions have a major
role in influencing profitability.
Positive impact- If the economic growth witnesses a boom then it will positively
influence IKEA’s business.
Negative impact- If the disposable income of customers decreases then it will result in
lower revenues for IKEA.
Social factors- These are population, age distribution, social culture etc. These factors
influence the strategic decisions and tactical actions of IKEA as it may need to change them
according to a change in these factors (Cubas‐Díaz and Martinez Sedano, 2018).
Positive impact- If IKEA manages to attract younger customers in population towards
itself then it can witness high growth in its revenues.
Negative impact- If IKEA’s products are affected by the social culture of a particular
area then it will negatively impact its business.
Technological factors- These are technological incentives, level of innovation, research
and development etc. IKEA’s strategic decisions and tactical actions are impacted due to them
because a change in technology influences restructuring of a firm’s products and services
(Ghemawat, 2016).
Positive impact- If IKEA is quick in adopting new technology in its production then it
will positively impact its business.
Negative impact- If IKEA does not quickly adapts to new technology then it will
negatively impact its business operations.
Legal factors- These are discrimination laws, employment laws and other rules and
regulations framed by the government. IKEA can be impacted by them because a change in them
can affect its strategic decisions and tactical actions.
Positive impact- If the new rules and regulations are in IKEA’s favor then it will result
in positively influencing its business.