Influence of Environment on IKEA Business Strategies

This document discusses the influence of the environment on IKEA's business strategies, including an analysis of the company's internal environment and capabilities. It also evaluates the outcomes of Porter's five force model and its implications for IKEA.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION..........................................................................................................................................................3
TASK 1...........................................................................................................................................................................3
Analyse the influence of environment on IKEA business strategies...................................................................3
Stakeholder Analysis...........................................................................................................................................5
TASK 2...........................................................................................................................................................................6
To have the critical evaluation on companies internal environment and capabilities.........................................6
TASK 3...........................................................................................................................................................................8
Evaluation and application is Porter's five force model outcomes......................................................................8
TASK 4.........................................................................................................................................................................10
Interpretation of strategic decisions with application of various models theories and concepts......................10
CONCLUSION.............................................................................................................................................................11
REFERENCES .............................................................................................................................................................12

INTRODUCTION
Business strategy has been termed as set of course action along with bundle of
decisions with assistance of entrepreneurs in achieving specific goals and objectives of
a particular organization. It is master plan implemented by companies management
want to have secure position in competitive market along with having proper completion
of market operations, customer satisfaction. The formation of business strategy is
concern about major issues such as raising sources of finance and expansion of
business (Alkan,2019). IKEA is the multinational Swedish company designs and sell
assembled furniture along with kitchen appliances, home accessories and useful goods.
The company is having responsibility for shareholding of 1 % of worlds commercial
wood consumption and being the largest users of world wood in retail sector. In this
report, there will be discussion regarding business strategy of an IKEA along with
internal environment and capabilities.
TASK 1
Analyse the influence of environment on IKEA business strategies.
IKEA is the world’s largest and most recognisable furniture retailer since 2008. The
name of company actually stands for acronym - Ingvar Kamprad, Elmtaryd And
Agunnaryd. Ingvar Kamprad, a 17-year-old started his business in late 1943 and 72
years later listed as one of the ten richest people in world. Nowadays company is
operating in 52 countries (Goel and Garg, 2018.) with 423 stores, and with the most
powerful online shopping that contains a huge range of available products that are
closest representation of entire range of stores. IKEA’s aim is continuous growth in the
future by providing a high value for money to existing as well as new customers.
Vision statement
“To Create A Better Everyday Life For Many People”
Mission statement
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The business entity support in providing variety of functional along with well-designed
products for home furnishing at such low prices that as many people as possible would
be able to purchase from us. (Barrow., 2017.)
The company's mission is to achieve high standard quality product to have production of
long-lasting products at economical pricing.
Objectives
Company wants to have the offering of home furnished items as with good design and
function along with quality and low prices which can be affordable by majorly of target
customers. To create a better life not only for customers but also for co-workers and
people who work at suppliers.
Macro-environment plays an important role in formulation of strategic decision. As being
the company which is providing one shop for all households which is one of the
complicated aspects for company. By providing a self assembly furniture, IKEA is
saving funds on transportation costs, as well as customers do, however the firm has to
face the issues due to cultural insensitivity or faulty products or simply inability of
customers to assemble furniture that might lead to in customer’s frustration, complaints
or injuries in the worst scenarios.
PESTEL is tool that is used to analyse a macro-environment in which any organisation
exists. Below is analysis of an IKEA
Political
why the use of dash [-]? Why not make the information flow?
There is political involvement of company since year 2012 as they have
admitted the crime of using the prisoners of East Germany on decade of 1970-1980 for
production of products. The company has extended public apology to affected people.
This turns out to be significant political controversy in world. The revenue of company
depends on relationship terms and stability of government. India and China has turned
out to be more potential market along with positive shift.
Economical
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IKEA is affected by international laws after recession of year 2007. Company
has changed pricing of product conservatively. On the other hand company is more
influenced by strong and weak dollar is stronger dollar will make loss of brands to US
companies. As there is recovery after recession of year 2007, employment conditions
are improving which is impacting towards more sale and profit.
Social factor is important for company to have knowledge regarding local nuances
before any international expansion (Goel and Garg, 2018). The company should have
proper understanding of all cultural and social aspect of market before expansion of
the business. IKEA has suffered a lot of one star reviews along with disgruntled
complaints.
Technological
Ikea is paying more focus in providing better experience in form of digital market. The
company has also stated to improve level of customer satisfaction. IKEA website will
help customer to find the nearest stores to have increase in brand loyalty which turn out
to be positive marketing strategy in longer run.
Environmental
The factor which is associated with sustainability of company are paying more focus on
environmental concerns. This will help in reduction in cost along with improving the
brand value. The company is having investment in climate about $1 million along with
renewable in-store energy.
Legal - laws and regulation are biggest threat to an organization. As one hassle with
law can proved to be costly to company. The company has faced issues of tipping and
death due to furniture. When Such issues occurred then it is responsibility of company
to have assurance to customers that products are safe (harapiak, 2013.) In addition to
this, laws may vary from one country to another and penetrating its businesses within
those laws have been quite tough for company.
There is no analysis for task 1 but rather descriptions.
Stakeholder Analysis
Ikea company used to have work with various trade unions, organizations and other
companies sharing their particular ideas to achieve a greater level of success. There
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are more of domestic and international stakeholders. The stakeholders of company are
employees, suppliers, shareholders, managers along with customers and trade unions.
The company has a strong training policy, adaptation and integration of employees.
Low interest High interest
High power Keep satisfied
Governing authorities
Trade unions
Manages closely
Shareholder
managers and CEO
Low power Monitoring
Retailers
Logistic Partners
Keep informed
employees
customers.
TASK 2
To have the critical evaluation on companies internal environment and capabilities.
VIRO analysis used to have a look at internal source of an organization to have
assessment that company is having sustainable competitive advantage This have the
mentioned of various stages in which discussion regarding various resources could
have the better improvisation to attain high level of advantage from competitors. VRIO
stands for acronym Valuable , Rare, Imitable, organization. So for the understanding of
valuable financial resource of Ikea with investing in external opportunities has arisen
(Janczewska, 2017). This will also help in combating external threats. This make
perceived value of customer high as comparative to theory competitors. According to
VRIO analysis patent are more valuable resource which allows company to sell
product with any competitive interference. This turns out to have company a greater
level of revenue. There should be large number of promotional activities to have
translation of product into sales. This has signification that company have done
valuable research and development. The company is having more cost and less
benefit. The research and development turns out to be a disadvantage in competitive
market of Ikea. The next is about RARE in which financial resources are turns to be
rare in VRIO analysis. The competitor can use of locally available resources in same
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way company Ikea is using. The next is that employee of Ikea are valuable ones as
they are highly skilled and trained employees as compare to competitive firm
employees. So company used to provide better compensation and healthy work
environment to the employees . Patent are also termed as rare resonances as they are
not easily available or have composition by competitor (Jiang, Jia, and Gong, 2018).
There is acquirement of lot of investment and time to come up to have better
distribution as comparative to Ikea. The next discussion is regarding amiability of Ikea
financial sources as they are costly resource required by company can have
prolonged profits to have accumulation of profit. The next is about patents which are
having very difficulty in immutability distribution of Ikea is very costly as to has been
peeled gradually in years. The company can gain competitive advantage through
changes in sustainable development and patents of products have division before
patent use top expire. According to VRIO analysis there is identification of financial
equipped resources and network of distribution which help in gaining competitive
advantage, there is existence of comparative asperity for locally produced product . On
other hand cost structure of Ikea is turning out to be more disadvantageous along with
research and development investment.
SWOT ANALYSIS
IKEA strength is gaining the competitive edge is its market research in terms of
there immense availability of designs and affordably to different customer. The
company has its brand recognition having more than 600 million customer available at
annual basis. The company has its establishment in more that 38 countries.
Weakness of company is its bad press due to lack of feedback from the company
towards its customers along with ridicule advertising techniques. The company is
lacking is providing quality of products which is creating opportunity to another
competitive firms. On the other hand the company is having opportunities in having the
global level of expansion such as p-laces of Malaysia, Mexico and Brazil. Ikea is having
the chances of becoming more popular by exhibiting their products through their
websites. Low cost model of company is turning out to the situation for company is
order to have proper innovation in order to stay ahead in market.
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TASK 3
Evaluation and application is Porter's five force model outcomes
Ikea porter's five force model have mentioning of five forces as to have determination
of advantage from competitors landscape of organization. The strength and weakness
identified by model will help company to have strategic planning which inherent profit
potentiality within industry. The forces are discussed as follows-
Threat of New Entrants
the company comes into furniture and home appliance manufacturing industry as
there are no minimum legal or regulatory barriers to enter this industry. However, any
new market will not be able to earn a profit from the economies as compared to IKEA at
initial stages of operations. The distribution strategies and challenges have access to
barriers to new entrants in market (Kumarand Bansal, 2015). The company can have
advantage of economies of scale by fighting off the new entrants by having cost
advantage. The company can also pay focus on innovation to have differentiated
products to get the competitive advantage from the new entrants. This will lead to have
string brand identification and will have more attractive customers as competitive to new
entrants.
Bargaining power of suppliers
it is unsubstantial for Ikea to have the differentiation of products as it has 1002
suppliers in 52 countries. This used to have increase in companies bargaining power.
The company have imposes a great bargaining power to have impositions CSR
activities along with having the purchasing of products and supplies for new prices. The
company can tackle issue by having multiple suppliers as the switching cost is low.
Bargaining Power of Buyers
There are a large number of buyers as comparative to supplier for company.
The customer don't have control over the process then bargaining power of buyers is
low (Noe and et.al.,2017.). The income of buyers is low within industry which used to
create pressure and makes less price sensitive. So company doesn't have threat on
bargaining power of buyers. The company can pay more focus on innovation and
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differentiation along with quality of products. The company can have a large base of
customers. The company can take cost advantage from economies of scale.
Threat of Substitute Products or Services
Availability of substitute products are less produced in this industry in which IKEA
operates. There is a low level of substituent available and low profit earning industries.
This reflects that there is no ceiling price for maximum profit. Comparatively, firms
producing with industry in which IKEA operates sell at a lower price than substitutes,
with adequate quality ( Pham, Pham and Pham, 2016). This can have results as
consumer can easily switch to substitution. The company can tackle by providing
greater quality of products along with more focus on innovation and differentiation . The
company can also help out in having more unique benefits to customers along with a
better understanding of the needs through proper market research and customization.
Rivalry Among Existing Firms
industry in which IKEA operates is large industry in which the rivals are very few. It
means company cannot make further move without being noticed. So the rivalry of firm
among existing firm in weaker force working within industry. The competitors are
showing less interest in engagement which turns out to be positive growth. This makes
weaker force with in the industry. (Schneider and Bermudez, 2018). The company can
have advantage of economies of scale by having cost advantage and focusing on new
customers by seeking threonine unique products. The company can also pay focus on
innovation as to have differentiated products form new entrants. This will lead to have
string brand identification and will have more attractive customers as competitive to new
entrants. There should be marketed research for proper understanding supply demand
within industry.
Implication of Porter's Five Force analysis on IKEA have understanding how various
factors under each five forces affect profitability of industry. A stringer level of force
means lower profitability and vice versa. The company should have the strategic
formulation for acceptability of product development strategy along with cost effective
development.
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TASK 4
Interpretation of strategic decisions with application of various models theories and
concepts.
The Porter's generic strategies is model discussing competitive advantage through
creation and sustaining superpower level of performance . The strategy that will be
discussed in this report will be cost leadership, differentiation along with focus.
The cost leadership strategy is ways in which competitive advantage in the market will
be discussed. The main target of company to have an increase in profits and market
share by reduction in cost. Ikea uses ow price strategy, great quality, knight services
and creative innovative designs by use of modern technology to have grab over
market more quickly. Exchange rate has been termed as the biggest weakness
between RMB and EURO. Due to these changes, customers cannot afford products of
china this weakness is used as strategy logistic by company. The change in tradition
gives opportunity to company in having cost leadership which as termed as one of the
important strategic advantages.
The next is about differentiation strategy in which having production of unique products
or services to have attraction of more and more customers (Walsh, Dose
and Schwabe, 2016). In terms of differentiation of products, company usually turned
out to be late as compared to competitors, there is more need for research and
development as to make more of creative and innovative products. The cost leadership
has been the vivid strength of company by giving greater quality at low cost. The
company has quality of product at a low price by reduction in production cost. The
company is not placing all unique product of Ikea in exclusive store as part of strategy
to develop a keen interest among customers. The effective sales and marketing process
are also have Importance in differentiation strategy to have better market understanding
of differentiated products.
The next is about having the focus cost leadership strategy by having different per
differentiated characteristic low cost products. The company usually have focus
strategy on differentiated by making a large amount of Chinese traditional designs in
china Ikea stores. The company use of low cost strategy to have the separation into
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different business aspects for making the huge success in the furniture industry. With
the use of above three Porter's generic strategy, company is getting more of the
comparative advantage as compare to competitors by becoming the world's largest
furniture retailer. Moreover, Ikea have the focus strategy in order to provide well level
stupefaction to customer as per there demand. The porter generic strategies are
different as over there aspects in different business.
CONCLUSION
The company is one of renowned brands with having 100 stores all over world. With
understanding of report it can be understood that company should have the
responsibility of further actions taken in particular market for competitive forces with new
challenges. The company is having action relying on their particular strength along with
reduction in weakness. The company should have proper identity in market with
relation to contribution over years to have promotion of effectiveness and development
of business strategies.
The company have categories of inclusion that us there low prices, cost-effectiveness
and accountability for people surroundings. The product and progression have relation
to environmental structure. ( Swolf and Wispeler, 2015.) The company support and
assistance in furnishing homes and offices along with valuable and exceptional
suggestions. The organization has the delivery services for customers which
haveassurance related to products have the acceptance of high level of satisfaction.
More added to that company avails offering to target customers to excites there
shopping experience more interesting. At current scenario company is renowned for
product development strategies having rich (Harapiak, 2013.)and great variety of
product delivery across globe.
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