Business Strategy for IKEA

This document discusses the business strategy of IKEA, including the impact of macro and micro environmental factors, stakeholder analysis, internal capabilities, and evaluation of Porter's Five Forces model. It explores how IKEA focuses on customer satisfaction, deals with political and economic factors, utilizes technology, and addresses legal and environmental concerns. The document also analyzes the company's internal resources and capabilities, strengths and weaknesses, and competitive position in the industry.

Business Strategy

Table of Contents.
INTRODUCTION................................................................................................................................3
TASK 1............................................................................................................................................3
TASK 2 ...........................................................................................................................................5
TASK 3 ...........................................................................................................................................7
TASK 4 ...........................................................................................................................................9
CONCLUSION..................................................................................................................................12
REFERENCES...................................................................................................................................13

INTRODUCTION
IKEA is founded in the 1943 and the company was founded by the Ingvar kamprad. The company is
providing the services worldwide and the company is dealing in the providing the ready home
furniture. The company is rated and the world largest furniture retailer company. People need home
and also want to decorate the homes with the furniture and the all the products like the furniture and
home decor products are provided to the customer. At present the company has opened 433 stores
all over the world. It is spread in maximum 52 countries and the website of the company contain at
least the 12000 products. The report want to provide the knowledge of the business strategy and it
includes the strategies used by the company. It includes impact of the macro environment and the
impact of the micro environment as well. The report consist of the theories and the models which
would improve the performance of the company. Report is also analyzing the industry and the
business environment as well.
TASK 1
Influence of the environment on the company IKEA
Impact of the macro environmental
The company wants the that the customers must be satisfied and company is also focused on
satisfying the needs of the customers and also the company is trying to solve the problems of the
customers as well. Company has created the vision to create the better life for people. Through this
mission and vision statement the company is focusing on the completing the needs of the customers.
Home furnishing products are provided by the company at the low prices and deliver the messages
to the every one which one could afford these products (Singh 2016 ).
PESTLE analysis
Political factors
IKEA is opening the stores all over the world bu the political condition of the country is
affecting the sale of the company. The company is entering the Asian markets which would include
the political condition's and the economy is also not growing from that speed and the company
wants. Some countries have developing economy and the political conditions is not right so the
company must already be prepared about the consequences of the company.
Economic factors
The recession is grabbing all the companies of the country and the global market as well
(Terkenli and Kavroudakis 2017). The economic condition of the country is not good for the
business and specially of the new businesses. Employees of the company are losing the jobs
because of the recession. In order to fight the recession the company came up with the measures
like the process of the products were decreased continuously and the home furnishing products are

stylish but these products were not expensive.
Sociological factors
The business environment is affecting the business of the company in many ways which
include the Russian case of the company. The company of the Russia removed the image of the
same sex from the magazine and the Russia is till dealing with the mentality of the homosexuality.
So the company had to come up with the other reasons for the people and for the goodwill of the
company as well (Rześny-Cieplińska and Szmelter-Jarosz 2019).
Technological factors
The people of the countries are increasing and so the companies as well. The companies are
preparing the digital catalogs for the products and the also selling the products online as well.
Company is offering the products to the customers through the websites and also using new
techniques for preparing the products as well.
Legal factors
Big business companies are always dealing with the legal cases. The government has levied
rules and the regulation for protecting the customers. Recently the case of the company was shown
on the news and the case was of providing the poor quality of the product and which have resulted
to the injuries and the death. Company is looking in to the safety measures regarding the products.
Environmental factors
Company is investing In the renewable energy in poor nations which would include the
environment. The company is also investing in the solar projects and wind panel project as well.
stake holders analysis
stake holder analysis is process in which the stakeholder are identified and theory skill sand
the interest are understood (Fozer, and et.al., 2017). Stake holders analysis is helping the key
organizational players and the goals of the company are specified. It would help min solving the
conflicts and the issues as well.
Determine the stake holders and identify the stake holders which are working in the
company. The stake holders include the employees of the company marketing, finance, product,
consultants as well.
For further analysis one must group the stakeholders and also try to prioritize the stake
holders according to their interest and the skills. The stake holders would also be divided by the
influence level and the participation level. The stake holders are divided into the four categories.
High power and high interest – it includes the stake holders like the which are having all the skill
and the abilities which are needed for completing the project (Barik. and Kumar 2018).
high power and low interest – it includes the stakeholders which include the having the high power
for completing the work but these are not having the interest in completing thee work.

Low power and low interest - in these process the stake holders need to keep the people checked
and informed as well. These stake holders might face the problems in completing the task than the
leader need to help the stake holder and solve the problems.
Low power low interest – these types of the stake holders need to be informed for each and every
project and the task as well.
The stake holders are also divided in the on the basis of the power and the interest like
subject, players, context setter and crowd. Players have high power and high interest while the
subjects have low power and low interest. Context setters have the high power and know interest
while the crowd have the low power and low interest.
TASK 2
LO2 critically evaluating the internal environment and capabilities
Resource Based View (RBV) frameworks for competitive analysation of IKEA
the resource based view frame work of the company examines the link between the internal
characteristic of company & company performance. The main principle of a company can be
regarded as the bundle of resources as well as resources which are simultaneously valuable, rare,
imperfectly, imitable as well as non sustainable. Thus, VRIN or VRIO are the companies main
source of sustainable competitive advantages. Therefore, RVB finds the sources of superior
profitability within the organization IKEA (Barik. and Kumar 2018).
VRIO analysation for internal capabilities of IKEA
For finding the internal capabilities of the organization, VRIO analysation can be used
Valuable
The VRIO analysis of IKEA shows that financial resources of IKEA are highly valuable as it helps
in investing external opportunities. Thus, this helps in suppressing IKEA internal threats.
The VRIO analysation of IKEA shows that workers are the important resource in an organization.
As workers of the organization are highly trained, and they tend to produce the output which is
productive for the organization. For gaining higher value for end customers of the organization, the
organization tends to have higher level of retention as well as encourages employees to be loyal.
Rare
Only few companies of the industry are having strong financial resource, and IKEA is one of them.
Through the VRIO analysation it has been found that financial resources of IKEA are found to be
rear.
Moreover, the employees of the group are also found to be rare. As the employees associated with
this organization are highly trained as well as skilled, which is not commonly found in other
organizations. Thus, the better understanding and better work environment ensures that the

employees won't leave the organization easily like other companies.
The patent followed in this organization is rare too, as these patents are not easily available or
copied or could be processed by any competitor of the industry.
Moreover, the supply chain distribution network is to a rare capability of IKEA group analysed by
the VRIO analysis.
Inimitable
The financial resources of IKEA are costly to imitate. This has been found through VRIO
analysation of IKEA group. The organization acquires the resources which are with the company for
prolong period which helps in earning the profits for the organization. Thus, the new entrants as
well as competitors of the organization required prolong time in order to cope with the IKEA group.
Similar to IKEA, other companies too train their employees in order to improve their skills.
Therefore, these other organizations can hire employees from the IKEA in order to offer better
understanding package, work environment, growth opportunity as well as several benefits. Thu, this
provides the organization with temporary competitive advantage.
Organization applicable
In order to capture the value, identification of VRIO analysation is done. As it is necessary to invest
the resources at the right place, making usage of money as well as suppressing the threats.
Therefore, these resources proved to be a source of sustainable competitive advantage for
organization IKEA.
It has been identified from the VRIO that, the patents at IKEA are not well-organized. This means
the company IKEA is not utilizing these patents at the full potential. Therefore, in order to
overcome such critical issues, the company IKEA has started selling its patent products, before the
patent get expired.
The network of distribution is identified by VRIO analysation as IKEA organization uses some
sophisticated network in order to reach the customers and to ensure that the product is available to
each of its outlets (Lieder and et.al, 2017).
Strength and weakness of IKEA internal capabilities
Strengths of IKEA
The clear vision is the biggest strength of IKEA. Having the clear vision tends to add value to its
customers, irrespective of the conditions of the market. The organization follows the clear strategy
and an approach for retailing the furniture business. Thus, this facilitated the organization IKEA
with the effective positioning in the market, challenges its competitors as well as pioneering in its
simplicity.
As being the worlds leading furniture retailer, it is the strength of the company with clear concept

that this organization translates the array of products which can be assembled by the customer,
which ultimately facilitates in cost reduction of the product.
Measurement of strength by IKEA group is done by using the matrices which is provided by the key
performance indicators which includes usage of renewable material, smart way to use raw material,
to establish & maintain long term relationship with the supplier as well as with the leveraging the
efficiency and synergistic from the economic of scale.
Weakness of IKEA
As IKEA operates in multiple countries all across the world. The organization has to follow the
difficult control standards for different locations. Although the organization uses the uniform quality
throughout its product range, but still due to difference in the locations of supply, replicable as well
as scalable control of quality is the organizations key weakness.
The profitability of the company is sometimes challenged when the cost of the inputs and raw
material goes higher. So at this time, the leaders of the organization has to maintain the quality with
the increasing cost of inputs. Moreover, the organization here in such conditions needs to replicate
the standards throughout the world, wherever it has established its supply chain.
There are some environment concerns for this organization, as the organization faces challenges in
communication and articulation its environmental policy for customers, stakeholders, as well as to
its shareholders.
TASK 3
LO3 Evaluate and apply the outcomes of Porter's Five Force model
Porter's five forces for IKEA
For identification of attractiveness of the industry as well as in the retail industry, in terms of
competitive forces the porter's five forces are found. The 5 competitive force which are there in this
frame work are bargaining power of the buyer, threats due to new entrant in the industry, threat due
to substitute product available in the market as well as competitive rivalry in the industry (Higgins,
Omer and Phillips, 2015).
The five forces of porters explanation for IKEA group can be explained as
Bargaining powers of the buyer
The bargaining power of buyers can be explained as, since there are huge competitions in the
furniture industry ranging from ready-made furniture manufacturer as well as several retailers and
resellers. There are several customized designers of furniture too present in the market. Since, it is
the general tendency of humans that they tend to buy the commodity usually through the retailers
only rather than through any other sources of the market. And moreover, the cost of switching
between retailer is very less in this sector of industry.

Bargaining powers of the supplier
As there are so many manufacturers of furniture in the developing countries. The furniture company
IKEA too has access to so many suppliers which increases the power of bargaining for this
company. Since the company has good reputation, it has the capabilities to develop small supplier
into the class producer in this high competitive world, which ultimately increases the access of the
company worldwide.
Threats from substitute
From the availability of substitute product in furniture industry, the threat is very low. As it is
obvious that each individual has difference in their preferences, and due to which they had
difference in their choice too. So the threat due to substitute product is very low as people tend to
buy according to their continence, or which ever product suits them the best.
Threats due to new entrants in the industry.
The capital involvement in this industry is generally high. For a new organization to enter this
sector of market is very hard. As for an new organization to get success in this industry has to cope
up with the supply chain challenges as well as it has to establish relationships with the supplier of
the industry to become competitive in the present market conditions. More over, the involvement of
disinvestment in this industry is too very high, which can prove to be a threat for the new entrants of
the industry.
Competitive rivalry
The war of competitive price in this industry is very high, as there are so many retailers are already
saturated in this industry. For an organization of this sector, in order to increase their market share,
the organization tends to focus on their core competencies as well as tends to grow in the particular
market. Thus, the revalry of competitiveness in somewhat in this industry (Olson and et.al, 2018).
Ansoff matrix to produce valid strategic directions
Strategic directions using Ansoff matrix
For IKEA organization the strategic direction can be explained through the Ansoff matrix such as
Market Penetration
The market penetration strategy is to sell more products to the existing customer base. Thus, in this
concept the company tends to make a brand reputation by selling specific products like which are
high in quality as well as low in price. The organization IKEA too tends to manage to penetrate to
new market, the strategy to provide the customers with the best in class quality with the least cost.
And since, due to its design and affordable prices made the company famous and ultimately the
sales of the company grew.
Product development

The strategy product development is used in order to increase the customer base as well as sales of
the organization. In the existing market, introducing new product is the strategy of product
development. There fore, the organization IKEA has used the product development strategy in order
to have faster growth in the industry. Thus, this was the another strategy which helped IKEA to find
as well as to have higher profitability growth worldwide.
Market development
For existing product in the new market. As this mean to sell more of the existing product of the
company in the new market. In this strategy of IKEA, the company is reaching new market
segments by expanding its reach into the new geographical areas of the world. As in the situations,
if the products of the IKEA is doing well in one market, so they are supposed to enter new market,
this is actually done by the IKEA company since the past few decades in order to become the
biggest furniture retailer of the industry. Thus, IKEA has started expanding its market to the places
which are close to its culture as well as to its home country, before it tends to target the more
challenging geographical areas such as China. In order to determine the way to enter new foreign
market, electric paradigm is the best tool for such identification (Akter and et.al, 2016).
Diversification
Diversification means introduction of new product into new market. Thus, the company IKEA uses
several techniques of innovative approaches in order to have launch new product into the new
market. This strategy will help IKEA in increasing its sales and ultimately will help in increasing
the profitability of the company.
TASK 4
LO4 Apply models, theories and concepts to assist with the understanding and interpretaion
of strategic directions available to organization
The strategic directions available to IKEA
As through the Ansoff matrix which mostly concerned with the strategic choices at the generic
level. But, at the precise level, the strategic choices are developed the with the support of generic
strategies. Therefore, for the organization IKEA to expand its supplier base, the organization has the
opportunities through which it could expand its global sourcing. More over, in order to increase its
bargaining power the organization could develop a supplier relationship with the strategic alliance
with several manufacturers, such as from the Indian market. Therefore, by establishing good and
effective strategic alliances with the suppliers, the group IKEA could have the availability of supply
of goods which are competitively cheaper as well as of good quality.
Evaluating the strategic choices
Evaluating the strategic is necessary to analyse whether the developed choices of strategies will

tends to give success to the organization or not. This analysation can be done with the help of three
criteria.
Stability analysation
The stability analysation is majorly concerned with the strategic choice which has been developed
to address the key issues, which are relating to the strategic position of the company. By increasing
the facilities of online selling of the product, the company IKEA could easily fulfil the various
needs of the customers. As several times, there are situations when the stores are present at the city
centre and the people living in the outskirts wants to purchase any product. Then the online facility
of this company, facilitate its customers with online selling. Thus, this makes the customers feel
convenient with such services. Moreover, the financial resources of this company are strong enough
to adopt strategic alliance with the suppliers of the industry (Thompson, Strickland and Gamble,
2015).
Acceptability analysation
The acceptability analysis is majorly concerned with the expected performance outcomes such as,
would the strategies could meet the expectations of the stakeholders, risk of strategies or chances of
return. For the organization IKEA, due to its online presence, the risk associated with it market
development strategy is quite low. Although, there is always an uncertainty in the sales as well as
uncertainty in the expected return in online market. As IKEA is investing in website development as
well as in online shopping facilitates, it is expected that the organization will tend to grow its sales
and could make its stakeholders happy with the increase in revenue generation and ultimately due to
increase profitability.
Feasibility analysation
The feasibility analysation concerned with the fact that would the organization is capable to develop
a strategy or whether the could work in practice. For the evaluation of financial feasibility, the tools
used for this analysation are the resource development analysis as well as the feasibility analysis.
Since, the organization IKEA has the huge financial capabilities as well as infrastructures, the
organization could easily peruse online market developing strategy as well as it can expand its
supplier base.
Use Porters generic strategies to create a strategic plan for IKEA and what tool management
could be used to apply these strategies.
The porters generic strategy for the creation of strategic plan for IKEA.
Being the famous furniture organization, the secret behind the success of this organization is the
strategy
Overall cost leadership

The biggest aim of IKEA is the strategy of overall cost leadership. Throughout the history of
organization, the company was focused on the low price. Company IKEA always tends to find out
the low price in every process. This can be evaluated through the knowledge that this organization
always tend to confirm the price of the good before designing it. More over, in order to reduce the
cost of commodity in transportation, the organization uses flat package. Additionally, the company
tends to reduce the staff at the store to reduce the cost of the commodity. Along with these strategies
the company uses scale effect in order to purchase good from all across the world (Sia, Soh and
Weill, 2016).
Differentiation
The range of furnishing articles availed by this organization are around 9500 which are designed to
functional as well as they are good-looking along with the low in price. One can find everything
they need in IKEA. As it is the natural tendency of the customers, they need the best quality at the
lowest price, and it is generally hard for organization to maintain both the concerns. So the
organization uses special techniques in order to stand in the market. IKEA also takes children as
their customers, and tends enhance the spirit to care for children. Thus, due to this the company has
won many customers' heart's. Moreover, the company is doing good job for protecting environment.
Focus
IKEA office, home storage as well as children IKEA are the 3 main parts of IKEA organization.
Everybody is their target customer. Moreover, in accordance to the target sector, the company has
segmented their market in many parts, to meet the requirement of different customers. Additionally,
one of the product which helped the organization in winning many hearts of the customers is due to
its special new design for the children customers.

CONCLUSION
This report can be concluded as, IKEA company was founded by the Ingvar kamprad. The company
is providing the services worldwide and the company is dealing in the providing the ready home
furniture. The company is rated and the world largest furniture retailer company. People need home
and also want to decorate the homes with the furniture and the all the products like the furniture and
home decor products are provided to the customer. At present the company has opened several
stores all over the world. It is spread in maximum countries and the website of the company contain
at least the lacks of products. The report want to provide the knowledge of the business strategy and
it includes the strategies used by the company. It includes impact of the macro environment and the
impact of the micro environment as well. The report consist of the theories and the models which
would improve the performance of the company. Report is also analyzing the industry and the
business environment as well (Johnson, 2016).

REFERENCES
Books and journals
Books and journals
Akter and et.al, 2016. How to improve firm performance using big data analytics capability and
business strategy alignment?. International Journal of Production Economics, 182, pp.113-
131.
Barik, B. and Kumar, S., 2018. Macro Environment of Indian Life Insurance Business: A PESTLE
Analysis.Bimaquest.18(3).
Fozer, and et.al., 2017. Life cycle, PESTLE and multi-criteria decision analysis of CCS process
alternatives.Journal of cleaner production.147. pp.75-85.
Higgins, D., Omer, T.C. and Phillips, J.D., 2015. The influence of a firm's business strategy on its
tax aggressiveness. Contemporary Accounting Research, 32(2), pp.674-702.
Johnson, G., 2016. Exploring strategy: text and cases. Pearson Education.
Lieder and et.al, 2017. Towards circular economy implementation in manufacturing systems using a
multi-method simulation approach to link design and business strategy. The International
Journal of Advanced Manufacturing Technology, 93(5-8), pp.1953-1970.
Olson and et.al, 2018. The application of human resource management policies within the
marketing organization: The impact on business and marketing strategy implementation.
Industrial Marketing Management, 69, pp.62-73.
Rześny-Cieplińska, J. and Szmelter-Jarosz, A., 2019. Assessment of the Crowd Logistics Solutions
—The Stakeholders’ Analysis Approach.Sustainability.11(19). p.5361.
Sia, S.K., Soh, C. and Weill, P., 2016. How DBS Bank Pursued a Digital Business Strategy. MIS
Quarterly Executive, 15(2).
Singh, A.K., 2016. Selecting Regional Postponement Centre Using PESTLE–AHP–TOPSIS
Methodology: A Case Study in a Pharmaceutical Company. Global Business
Review. 17(5). pp.1266-1268.
Terkenli, T. and Kavroudakis, D., 2017. A Stakeholders’ Analysis of Eastern Mediterranean
Landscapes: Contextualities, Commonalities and Concerns. Land. 6(4). p.90.
Thompson, A., Strickland, A.J. and Gamble, J., 2015. Crafting and executing strategy: Concepts
and readings. McGraw-Hill Education.