Analyzing the Macro Environment of IKEA

This study analyzes the macro environment of IKEA, evaluates its internal capabilities, and applies Porter's Five Forces model to assess the competitive landscape. It also examines the strengths, weaknesses, opportunities, and threats of the company using SWOT analysis.

Business strategy
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Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Analyse the influence of macro environment of company..........................................................3
TASK 2............................................................................................................................................6
Critically evaluating the internal/micro environment and capabilities........................................6
TASK 3............................................................................................................................................8
Evaluate and apply outcome of porters five force model............................................................8
TASK 4..........................................................................................................................................10
Theories, concept and Interpreting strategic direction..............................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
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INTRODUCTION
Business strategy is defined as the combination of all decision taken and action
preformed by the business to accomplish by management. It is firm working plan for achieving
vision, prioritizing objectives and optimizing financial performance with its business model. It is
a set of competitive moves and action which business uses in order to attract customers,
strengthening performance and compete successful. The present study is based on “IKEA” which
is multinational group that design and sells ready to assemble furniture, home accessories etc.
The report will identify mission, vision and objective of company as well as analysis macro
environment. This will critically evaluate the internal environment and capabilities by using
SWOT and VRIO.. Report will evaluate and apply outcomes of porter five force models. At the
end of report will applying a range of theories, concept and models as well as produce strategic
planning for company.
TASK 1
Analyse the influence of macro environment of company.
IKEA is the Swedish multinational group which is design and deals in ready to assemble
goods and services like home and kitchen appliances among accessories and other goods for
home. Company is following the hierarchical functional organizational structure for providing
guidance in order to completing work. The macro environment is affect to business in negative
and positive manner. This refers with the condition which exists in economy as a whole, rather
than in the particular sector and region. This includes gross domestic product, inflation rate,
spending, and employment, monetary and fiscal policy. Here is highlight vision; mission and
objective of IKEA are as follows:
 Vision: vision of IKEA is to create a better everyday life for the many people.
 Mission: the mission statement of IKEA is to provide a better life by keeping the mission
alive is their everyday employee (IKEA mission and vision statement, 2019).
 Objective: to offer a wide range of home furnishing items of good design and function,
excellent quality and durability at price.
Business strategy is providing the effective and valuable opportunity to IKEA in order to get
success at market place. Company already have various competitors at market place. For that,
business needs to become important for company to prepare their competitive price strategy by
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analysing micro and macro environmental factors. Through that management is able to analysis
affect of those facts. In order to analysis macro environmental factors and its affect on business,
here is discussed on PESTEL model and stakeholder analysis.
A PESTEL analysis is the framework which is used by marketers for analysis and
monitor macro environmental factors that have impact to IKEA.
Political factor:
IKEA is operates across more than 41 countries. A political factor is generally affected to
the business performance. This refers with the political parties business policies. In that some of
the nation’s party have power clear majority and the less majority to perform tasks. In the case of
fewer majorities is help to take big decision easily (PESTEL analysis, 2016). Sales activities
through supply chain management are affected by the political factor. This leads to economic
stability and turn it means better sales and profit.
Economic factor:
Economic factor is refers with the economic condition of nations and the global
economy. Present day’s economic condition is hardly affected through the corona virus. This
affect business in negative manner because businesses are not run properly all is locked as per
the government orders. However, if economic condition is good than it is beneficial for IKEA
because through customers have great purchasing power to purchase any product with their
income.
Social factor:
Social factor is affected to business in negative manner because this refers with attitude,
believes and taste of customers. Taste and preference are changed as per current trends (Akter
and et.al., 2016). For that here is taking best example as that customer is become more informed,
there is increasing demand of best quality of product and services as well as with new design
than it can affect to IKEA because customers wants new design of product. In that management
need to analysis complete market and their needs with company are help to produce best design
of product is help to attract more customers towards company. This will be more beneficial for
company.
Technological factor:
Technology is most important part of the market because present day customer order
there product from online platform in order to fulfil their needs and wants in effective manner.
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for example: IKEA is not adopting e-marketing for shopping and not offers their product on
online platform than company is affected with higher loss because another competitors are
provide their products on online platform. However, if company is provide products and services
online then it is more beneficial for company by attracting more customers. This help to increase
sales and profit margin of company.
Environmental factor:
Sustainability is more important for making focus on area for most business brand
because this help to creating best brand value at market place. As per the present scenario proper
waste management and recycle material is happing. For understanding in better manner taking
example; if company can stage where it is recycle those products which are waste. If company is
not having any kind of focus on recycle then it reduces customers (Anderson, 2019). For that
company have a need to make focus on recycle the product and share some parts of profit in the
corporate social responsibility.
Legal factor:
Legal factor is consisting with all the rules and regulations which are formulated by
government that give negative and positive effect on business. The most important law is
employee compensation law which can affect employer of IKEA. For example: if employee is
injured at workplace during working hours. In that case, company need to provide proper
compensation to employees against of their injuries (Yuliansyah, Gurd and Mohamed, 2017). If
company is not provide this, than it is affect to business and strategies because this is the right of
employees as per laws.
Those factors are giving negative and positive impact on business by influencing
strategies of company. Here is important to analysis stakeholder of company which explains
below:
Employees are major and important stakeholder of IKEA. They are main who are always
ready to give their hard contribution for achieving goals and objectives of company. Another
important stakeholder is customers, and they are present interest in IKEA’s product and services
(Angeloska-Dichovska and Petkovska-Mirchevska, 2017). They are the strong stakeholder
because if customers are not happy then they are not purchase products and this affect to profits.
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With the help of this IKEA is able to know their stakeholders because they are important for
company in order to introducing new strategies for sustainability as well as achieving current
strategies of IKEA.
TASK 2
Critically evaluating the internal/micro environment and capabilities.
Micro and internal environment is defined as the nearby environment, under that company is
operates. internal environment is compound the certain elements which are important for
company for working in better manner such as employees, management and structure of
company (Yuan and et.al., 2018). That is effectively helped to design employees’ behaviours as
well as direction in order to achieving mission and vision of company. In order to analysis
internal environment of IKEA here is select SWOT analysis model:
SWOT analysis is the study which is undertaken by company for identifying strength and
weakness from the internal body of company, as well as opportunity and threat from external
side of company.
Strength:
The biggest strength of IKEA is effective brand value because company is currently at
the 46th position in the world brand. Other is strength is financial revenue is also good that is help
to grow in positive manner (Anwar and Hasnu, 2016). Company have effective and best kinds of
manufacturing design of product which is also the biggest strength of company. That is
effectively help to attract more customers with their design. In addition to that, company is good
marketer and has the best or fantastic product placement in television and movies.
Weakness:
The company is operates in various country and that is why keeps getting into the local
troubles in the sum of product and services that is create negative image at market place.
Company have lack of control on their standards which is the main concerns is to keep the cost
minimal but at the same time company is provide good quality of services (SWOT analysis,
2019). IKEA is facing some of environmental problems, in that company need to keep in check
about their stakeholders because this is create negative brand image many of times.
Opportunities:
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IKEA have greatest opportunity by producing eco friendly products for their customers
because now day customers want eco friendly products and services. Other opportunity for IKEA
is to become a cost conscious, because customers are becoming very cost conscious. Another
opportunity, to expand their business by moving into another country developing country where
per capita income is lower.
Threat:
The main threat of company is changing in laws and taxes policies may have a bad
impact on the prices of IKEA products. Another threat of company is growth of disposable
income having bad customers to trade higher in the market chain. In addition to that, main threat
for company is local companies are coping products and design of IKEA. In that management
need to keep update and innovate their products are help to protect with counterfeit.
Those are the strength and weakness of IKEA Company (Bentley-Goode, Newton and
Thompson, 2017). Now is important to analysis internal capabilities of IKEA group by using
VRIO model. This help to understand the complete capabilities and capacity of company for
performing best in industry.
VRIO analysis:
This is the analytical tool which is help to evaluate resources and thus, competitive
advantage for company.
Valuable:
Financial resources of IKEA are highly valuable which help for investing into external
opportunity is. Employees are also valuable resources because company organized best training
session for train them for working in better manner. IKEA have best distribution channel which
is also valuable for the company.
Rare:
Their financial resource is rare and strong as per the companies in the industry. Another,
employees are trained and skilled which is not case with employees in other firms (VRIO
analysis of IKEA, 2018). The better compensation and work environment which help to ensure
about employees are not leave for other firms. Distribution channel is also rare which is help to
analysis competitors requires lost of investment and time to come up with better network of
distribution.
Imitate:
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Financial resources are the costly imitate which have acquired by company by profit over
the year. That new entrants and competitors are also requires more finance for sets similar
profits for the long period. Employees are imitate because another companies and competitors
are requires trained and skilled employees as IKEA employees which is take more time to sets.
This help to make effectiveness by providing effective competitive advantage. On the other side,
distribution network of IKEA is very costly to imitate.
Organization:
Financial resource of IKEA is organized to capture value for identified by VRIO analysis.
This is used strategically to invest on the right place for making use of effective opportunity and
by combining threats (Evans and et.al., 2017). Distribution network is help to reach out its
customers by ensuring products which are available on the all of its outsides in effective manner.
TASK 3
Evaluate and apply outcome of porters five force model.
Present day, competition is increasing day to day; there are many of competitors who are
sales and deals in same products which are offers by IKEA. As per that, it is very important for
company to analysis their competitive advantage by using porter five force model:
Porter five force model:
Porter five force models is the business analysis model which is help to explain
sustainability of business at different level. With the help of this mode, IKEA is able to know
about their competitive advantage in effective manner.
Bargaining power of suppliers (lower):
Bargaining power of suppliers is low affected force. Company IKEA is offers ample
number of product to customers are also higher. There are numbers of supplier in which IKEA is
operates is create lower force because this have less control on over price and which is make
bargaining power of supplier is weaker force (Ghemawat, 2016). As well as suppliers are not
provide the credible threat for forwarding integration within the industry in which IKEA is
operates. This is also make the bargaining power of supplier is weaker force on business.
Bargaining power of customers (high):
Bargaining power of customers in the furniture and the home appliance manufacturing
industry has the huge. The customers of IKEA are the price sensitive and this situation is
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completely increasing the bargaining power of customer. Most of the furniture buyer have the
effective information about furniture and advantage or disadvantage is associated with each of
the brand is create positive implication on their bargaining power of customers in effective
manner (IKEA porter five force analysis, 2018). As per that bargaining power of IKEA customer
is with high moderate is affected to business any time.
Threat of new entrants (low):
Threat of new entrants is lower force on business because company have their strongest
market image and growth which is help to attract customers. As per that competitors not have
any chance to affect because for maintaining their brand image at market place taming longer
time as compare with IKEA. Company have effective and strong product differentiation strategy
into the industry where company is produce standardisation product. Customers are look for the
differentiation of the products (Soltanizadeh and et.al., 2016). This creates the strongest
empathising on promoting business through advertising and others. As per that, threat of new
entrants within the market place has the lower effect and weak force.
Threats of substitute product and services (low):
Threats of substitute product and service are also the weaker force for company IKEA.
There are very lower and few substitute products where IKEA is operates. Few substitutes are
producing very few product and services as compare with IKEA and their designs are also not
attracted. This means not selling on large level and not having high profit margin which can
company is earn within the industry. As per that, threats of substitute product and services are
create very weaker and lower force within the industry.
Competitive rivalry (high):
Competitive rivalry is creating the high force within the industry. The number of
competitors in the industry in that company IKEA is operates in very few and also have thee
large in size. This is the simply means that company in industry will not make moves without
being any noticed (Habib and Hasan, 2017). This makes the rivalry among existing within the
weaker force into the industry. There is having very few competitors have a larger market share.
This means will engage in the competitive actions in order to gaining position and help to
become great market leaders.
As per the above analysis, here is easily understood that the bargaining power of supplier,
threat from substitute product and threat from suppliers have the weaker force within the market.
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On the other side, IKEA is affected by the competitive rivalry and bargaining power of
customers because both have higher affected on the business. Those factors are related to the
porter five force analyses within the market place in effective manner.
TASK 4
Theories, concept and Interpreting strategic direction.
From the above analysis, find out the various threats which are important to overcome by
IKEA for gaining highest competitive advantage for company. In respect of that here is
introducing bowman strategy clock model:
Bowman strategy clock:
This model is reflects various options for strategic position of company. this have main
purpose to draw which is to illustrate business will have various options to knowing about the
position of product and services.
 Low price and low value added this strategy is reflecting about the lower price of product
of lower added value. For the IKEA, this strategy is not good because company is deals
in furnishing goods (Hart, Sharma and Halme, 2016). Customers are not accepting the
lower quality of products. This strategy is not proving effective for IKEA in this price of
product is lower, but value is as well. As per that, this is not strategy for company.
 Low price: in this strategy company can set lower price of product and offers to
customers. This help to attract more customers towards lower price of product.
 Hybrid: in this strategy company make available differentiated products and services at
the lower price and of good quality. This option will be best and effective for company
IKEA to use.
 Differentiation: the main aim of this strategy is to offers the highest level of perceived
value to the customer. This is the effective opportunity or IKEA in order to producing
product and services by considering new trends which will be happen at the market place
in effective manner (Johnson, 2016). In that management requires investing on research
and development department because through that company is able to analysis whole
market and their needs which are help to know about those changes comes within the
industry.
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 Focused strategy: this is another strategy which established the aim to position of
product in high at the market place. This strategy can be adopted by using premium price
by using targeted segments, promotion etc. this help to make company for leading highest
profit margin.
 Monopoly pricing: in this strategy company make available its product at very high price
because already there is no competitor in the market.
 Loss of market share: in this strategy company make available id range of the product
which is quality poor (Leischnig and et.al., 2017). In the multinational sector this strategy
will not work out because people already get the good and effective quality product at
high price in the market.
Porter generic model:
 Cost leadership: cost leadership is the strategy where company is tries to control cost of
production in their business. As per that products and services offers on very cheaper and
lower cost. For that IKEA need to sets advisory board that is effectively helped to best
control and proper management resources (Leonidou and et.al., 2017). This help of this
management is able to get feedback about the decision before taking any actions and with
getting additional tax advantage for IKEA.
 Differentiation: in this strategy, company try to make better and unique design of product
for attracting more customers at market place. This help to make different product as per
competitors. For taking advantage, company need to adopt advanced technology and
increase investment on the research and development. Through that operation is
automated and cost is reduced as well as company able to analysis new trends for
business growth.
 Focused strategy:
o Cost focused: as per this strategy company give full attention on cost of products
by reducing cost for its customers (Razak and et.al., 2016). Through that
customers are more attracted and interested for purchase products and services
from company.
o Differentiation focused: in this strategy company focus on product differentiation
only by adding new product line. With the help of this customers are purchase
more products and services with company in order to fulfil their needs and wants.
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Recommendations for company IKEA is to adopt strategy new market identification as
per the porter generic model. IKEA must be looking for commencing their operations within the
new market so that more of the income is generate through market place. by using bowman
strategy, IKEA should make online shopping apps for offering online shopping facility to their
customers in order to attract more customers toward business.
Strategic management plan:
Strategic management plan is help to IKEA for promoting growth and sustainability of
company at market place in effective manner.
Strategy:
Strategy for IKEA is to target the customers for increase sales through online platform.
For that, company need to increase investment on research and development for analysing
current market trend.
Objective:
 To promote growth and sustainability of business till the ned of year.
 Lunching e-marketing.
Tactics:
 Preparing mobile apps.
 Organize training and development program for employees in order to know about
technology.
CONCLUSION
From the above study, it had been concluded that the business strategy had very
important and effective part of company which had been helped to get positive success at
marketplace. This report had been covered various framework which has been helped to gain
highest growth company. For analysis macro environment factor which has affect to company
report had represent with PESTEL and for micro using SWOT analysis model. For knowing
competitive advantage of company report had been include the porter five force model which
reflect about the bargaining power of suppliers and customers, threats of new entrants and
substitute product and competitive rivalry. At the end of report had highlight the strategic
management plan and mention some strategies for promote growth and sustainability of business
at market place.
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ONLINE
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https://bstrategyhub.com/ikea-vision-mission-core-values/ >
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https://www.essay48.com/term-paper/13655-IKEA-Porter-Five-Forces >
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VRIO analysis of IKEA. 2018. [ONLINE]. Available through: < https://www.case48.com/vrio-
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