Impact and Influence of Macro Environment on IKEA

This document discusses the impact and influence of the macro environment on IKEA, including political, economic, sociological, technological, legal, and environmental factors. It also explores the stakeholder analysis and evaluates the internal capability and environment of the company. Additionally, it applies Porter's Five Forces Model to analyze the competitive landscape and provides insights into the strengths, weaknesses, opportunities, and threats faced by IKEA.

Business Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1 ...........................................................................................................................................3
Impact and influence of the macro environment and its strategies ............................................3
TASK 2............................................................................................................................................5
Critically evaluating the internal capability and environment....................................................5
TASK 3............................................................................................................................................8
Evaluate and apply outcome of the Porter's five Forces Model of IKEA company...................8
TASK 4..........................................................................................................................................11
Interpreting strategic Directions................................................................................................11
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
IKEA is the company which is dealing in kitchen appliances and ready to assemble
furniture. The company was founded in the 1943 and was founded by the Ingvar kamprad.
Company is the world largest furniture retailer which are providing services to customers. The
IKEA group of the companies have complex administration structure and the company is
successful in making the 423 stores in 52 countries. Report consist of impact and the influence of
the macro environment on the company. It includes the business strategies which are used by the
company to improve the performance. Internal environment of the company is affecting business
and capabilities of the business as well. The report has also applied the porters five model on the
company which would also improve the competitive edge. The theories, models and the concepts
have been included in the report which would help the company to improve the performance.
Report wants to provide the awareness to the students regarding the different kinds of the
strategies used in the organization.
TASK 1
Impact and influence of the macro environment and its strategies
Mission statement and vision statement of the IKEA include the IKEA vision to create
the better life for the customers. Company wants to provide a well furnished products to the
customers at low prices. Through this statement the company is providing services effectively
and also company is raising the standard of the living of the customers as well. The company is
adopting new technologies for improvising the product. Macro environment is influencing the
company, so the pestle analysis is done below.
PESTLE analysis
Political factors
Company is affected by the political controversies in UK. The company is also accepting
the furniture which are made in the prisons in Germany. The act of the company has affected the
image of the company and the goodwill of the company. Founder of the company was Ingvar
kamprad and founder of the company was involved in the pro-Nazi movements in swedan and
these was also affecting the company image and the reputation as well (Smith and Rees 2017).
Economic factors
Economy of the country is affecting the companies on the large scale. There was the
change in the economy at the time of the brexit and due to that the company had to increase

prices of the products as well. Changes in the currency was also having the impact on the
performance of the company. In order to increase the sales the company had entered the global
market and also these emerging economies was strong base for the company for the growth.
Sociological factors
The company is taking the initiative to merge with the local organizations for training the
youth. This was increasing the skills and the abilities among the youth through the at the youth
ware able to apply the jobs on the basis of their skills and the abilities. The youth of the country
was shifting from the mobiles which consist every thing. This was shifting the focus of the youth
and the youth employees which are working in the company (Sutton and Filip 2018).
Technological factors
The company is using the latest technology for increasing the sales and the productivity
and as well. Company is investing in the augmented reality to increase the sales as well. The use
of the latest technology is improvising the products according to the customers need (Mahmudov
2019). As the time is changing continuously the technology is an essential part of the life.
Legal factors
There is the criticism over the taxes in countries. These are affecting the sales of the
company. There are entry barriers and the rules and the regulations for the new entries In the
market. This is not increasing the competition in the India but it is affecting the company.
Environmental factors
The company is focusing on the environment and also taking the effective measures for
protecting the environment. Organization is investing in the renewable energy resources through
which environment would be protected as well (Hisrich and Ramadani, 2017). The company is
also concentrating on the sustainability and the fulfilling the social responsibility towards the
environment.
STAKE HOLDER analysis
In the stake holders analysis the company is able to identify the people at the time of the
projects and the work is allotted to them according to the skills, abilities, and interest of the
employees. The analysis is done to help the organization and clear the goals and plans of
stakeholders. It would solve the conflicts and issues between the employees and the employers.
Stake holders analysis is done in the process and process is described below.
Determine the stake holders

Company is making the team of the stakeholders for the project and the company want to
make the list of the stake holders. Stake holders include the staff, marketing, finance, sales and
heads of all the departments.
Group these stakeholders and prioritize the stakeholders
After determining the stake holders the company need to start categorizing stake holders
on the basis of the interest skills. The stakeholders of the high power and high interest are
important for the projects. Members with the high power and low interest are not so important
because these members would get influenced by someone immediately. Low power and high
interest members must be informed time to time and must kept with the regular check. Low
power and low interest are members which need to be informed regularly. Now the stake holders
are divided on the basis of the skills (Ehsan Ullah, Karlsson, and Dada Olanrewaju, 2016).
Players are one which have high power and high interest and subjects are one which have the
low power and high interest. Context setters are one which have the high power and low interest
and crowd are the one which have low power and low interest as well. The stake holders are
performing according to their skills and abilities so work must be divided between stakeholders
by looking after the power and interest.
Communicate effectively
Once the stakeholders are communicated effectively they would perform work
accordingly. Through effective communication the company would increase productivity and
perform better in the market.
TASK 2
Critically evaluating the internal capability and environment
RBV framework
according to this framework it is easy to exploit new opportunities by using competencies
and resources which are already available rather than acquire new functions, skills and trait for
each and every different opportunities. Focus of the resources are on RBV model, with that
supporters arguing this framework should be prioritized withing the company strategies
development. In this model there two different types of resources in IKEA company and those
both resources are families with the Financial specialist and accountants.
Tangible resources

Most of the assets in the IKEA are tangible which have physical value in the market and
company have competitive advantages from those assets. These assets company can sale, and
they can get profit by selling those assets. Example of the Tangible assets are product of the
company, land, property and capital of the company this all is Tangible assets of the IKEA
company (Akter and et.al., 2016). These assets have higher value in the market and company get
profit, and they can expand their business.
Intangible assets
Intangible assets have no physical value but it can be felt and claimed by the IKEA.
Services given by the company to customers come under the Intangible assets. IKEA company
has good reputation and goodwill in the market which can feel, but they cannot touch.
Assumptions of the RBV framework
there are 2 assumptions of the RBV framework, Heterogeneous and immobile. It is
important for IKEA company resources must be Heterogeneous or immobile.
Heterogeneous
one of the first and major assumption is that resources of the IKEA, skills and capability
of the company should be significant from the other company. Which they will make exact same
resources like others then they cannot be successful, and they cannot be able to employ to
varying strategies for take competitive advantages (Amran and et.al., 2016). It is important for
IKEA to make different product from the other companies and their design and quality should be
better than others then only they will able to gain competitive advantages in the market.
Immobile
Second and most impotent assumption of the RBV framework is Immobile, and thus
employees of the IKEA cannot move freely from company to company for the short time period
(Evans and et.al., 2017). Because of this company can't quickly replicate resources of rival
organizations and therefore company implement same strategies. Intangible assets- intellectual
property and knowledge property etc. this is (immobile) than are tangible assets.
VRIO analysis of IKEA company
In the VIRO analysis of the IKEA company will look for each and every internal
resources of the company one by one to gain competitive advantages in the market. This analysis
helps to improve each resource of the IKEA company, so they can take grater competitive
advantages.

Valuable
 Financial resources of this company has higher value so company can invest into the
external opportunities which arise in the market (Grayson and Hodges., 2017).
 Local food of the company are valuable resources of the company they can take
competitive advantages from this.
 For each and every company one of the most valuable resources are their employees and
IKEA has best and skillful workers in their company who can help them to take
competitive advantages.
Rare
 IKEA company have strong financial resources and this is very rare because there are
very few companies in the industry who are having this much strong financial resources.
 Employees of the IKEA company are rare because they are highly trained and skilled
workers, employees in the company are well-educated and most of the labor in the other
companies are not that much educated (Higgins, Omer and Phillips., 2015).
 Distribution network of the IKEA comp0any is rare because other competitors of the
IKEA need high amount and investment to make distribution network like IKEA
company.
Imitable
 Local food product of the company are imitable because they are making huge amount of
profit by serving local food to their customers.
 According to the IKEA company there worker are very hard-working, and they give their
best toward the company (Johnson., 2016).
 Company is having reputation and good will in the market which help them, to gain
customer loyalty (Neugebauer, Figge and Hahn., 2016).
Organization
 Assets in the company are well organized and mangers of the IKEA company are giving
their best toward the company.
 They are making product with the best design, and they are having well organized
marketing team.
SWOT analysis of IKEA company
Strength

one of the biggest strength of the IKEA company is their clear objectives and vision.
Superiors of the company are have strategies for the different marketing conditions. This
company recently take 46th position in the all over the world in the brand value of Forbes list.
Financial strength of the company is very high and, they are investing amount of money on their
assets to make better and to gain customers satisfaction. Product of the IKEA company have
unique design (Linder and Williander., 2017).
Weakness
IN some county IKEA company have negative image because this company got into a
corruption case in the Russia because they wanted to expand their business and for the expansion
of the company they give money to the Russian government and leaders. One of the main
concept of the company is to keep the cost of product minimum but at that time provide good
services and quality products to the customers. This is not always possible.
Opportunities
Company sell Eco-friendly products in the market and nowadays customers demand for
Eco-friendly product that might help in the Growth strategies for the company (Rothaermel.,
2017). They are having good opportunities in the developing countries market such as China and
India. It is import5en5t for the IKEA company to give their focus on the Indian and Chinese
market because those counties have high population and people of those counties have unique
solutions of the problem.
Threats
Changing in low and government can have very bad impact on the product price of the
IKEA company. They should change product prices when tax rates and tariffs become high.
Growth in the disposable income have led customers to trade higher in the market chin.
TASK 3
Evaluate and apply outcome of the Porter's five Forces Model of IKEA company
Porter's five model OF IKEA
Threats of Substitute product or services
IKEA company is famous all around the world, but they are offering very few products to
their customers, It is because company do not have much available services and product which
can satisfy the demand of home appliance and furniture. At the same time this can be argued in
the increasing number online application and online based product and indirect substitution for

the definite types of product offered by the company (Akter and et.al., 2016). Example-
increasing the e-books demand among the customers decreases the IKEA book shelves to certain
extent.
Rivalry among Existing Firms
Rivalry among the existing Firms is very intense. There are many famous supermarkets
in the UK who are giving indirectly competition to the IKEA company. And new small size
Furniture firms also giving good competition to the company. Big online brands like E bay,
Flipkard and Amazon also selling furniture online. Global market of this industry, growth is not
suitable and this Further escalate increment in competition among the existing market players.
Threat of new entrants
Threats of the new entrants to home appliance and furniture manufacturing industry is too
much significant. There are very few barrios to enter this industry and there is no use of
knowledge in this industry (Amran and et.al., 2016). This can be argued that although the new
enters the in the market would not be able to benefits from the economies of scale to the same
extent as IKEA at least during the initial stages of operations.
Bargaining power of suppliers
Bargaining power of the IKEA supplier is too much low because their number is large
their small size and weak financial position does not allow them to enough advantage.
Bargaining power of Buyer
Customer in this industry want good quality product in affordable price and IKEA
company is using quality product in low price and giving competitive advantages to the
competitors in the market, but they are also suffering from losses because of change in the
customers demand and taxes (Neugebauer, Figge and Hahn., 2016). It is impotent for them to see
for their profit as well.
Threats from substitute products
IKEA has very low threat from the substitute products. There are some factors which
moderate substitute product threat. Brand image and reputation is one of them. IKEA company
has make good image in the customers mind with their low pricing strategies and quality services
to the customers. There are very few competitors of this company who offers wide range of the
product. The threat from the IKEA gets minimize.
ANSOFF Matrix of IKEA company

Market Penetration
IKEA company is using low cost pricing strategies to achieve growth in the market but
these strategies are not working because there are many compositors in the market who are also
providing quality products in low price, it will be better if they will bring new product in the
market which can help to take competitive advantages in the market (Welford., 2016). New
product will increase opportunities to expand their brand name in the different market and their
product should have unique design and price which can attract customers. This will also help
IKEA company to increase their market shares, and they can get better result in the company
growth. Before bringing new product in the market It is important for the markers of IKEA to do
research about market and make strategies according the customers demand.
Market Development
It is important for the company to expand their business on market where they can get
growth opportunities India and china is developing counties and those county's population
growth is very high so IKEA company can expand their business in this country market which
will help them to expand their business, and they can get growth opportunists. They can also
develop their market in the other countries where they6 can get row material in very low price so
company can make quality product in low price it will help them to gain customers loyalty.
Product Development
With the Change in the trend and increasing market competition, it is necessary for IKEA
company to develop their product. Company is getting competition from the both new and
existing competitors. They need new pricing strategies with the product development. Marketers
of the company should study the behavior of the customer, and they should understand
customers need according to their demand company should develop their product. Development
in the product is important because with the time demand of the customers also change. If
company will not develop their product then other company can overtake them, and they can
make replace IKEA company's position.
Diversification
IKEA company is selling Home accessories, kitchen appliances and Furniture. They can
build new product which can satisfy customers demand or thy can also enter in new industry like
fashion and footwear. This industry have better potential and growth in the market, it can take
time and also have some risk factors but it can create growth opportunists for them and IKEA

company have good financial resources to take risk to bring new product in the market. This can
help them to increase their market, and they can get5 better position in the market, company
should try this strategy top expand their business more.
TASK 4
Interpreting strategic Directions
Porter's Generic strategies for IKEA
According to the Michael porter there are 4 different Generic strategies which can help
IkEA company to take competitive advantages.
Cost leadership
Cost Leadership strategy will help IKEA company to gain market share by attractive to
cost-restrict5ed or cost conscious consumer. In this strategies company will their make their Aim
to become the lowest cost product producer in the funitur4e industry. In this strategy company
will remove unnecessary cost from the products and sell product to the costumers in low price
range (Yuliansyah, Rammal and Rose., 2016). Cost can be cut from the product during the
manufacturing process. They can use lean manufacturing and decease waste from the product it
will save their resources and company y can make quality product in low price, and they can also
gain competitive advantages. IKRA company's financial resources are strong, so they can adopt
these strategies to gain competitive advantages. IKEA can also use this strategies by using their
effective distribution channels and company's superiors should increase their bargaining power
to negotiate low product costs etc.
Differentiation
It is important for company to make their product different from the other company
because business cannot be successful if they are making same product which already makes by
big brands. IKEA can take competitive advantages if they are making different design and
different product for the customers according to their demand. For the uniquer design and
product development. They have to give chance to the unique designer who should have
different design for the product and who can develop product in the different way. These
strategies will make this company different from the others. It will help them to take competitive
advantages and company will grow more effectively in this industry. Marketers of the company
should do strong research and according to the research they should develop and innovate their
product.

Cost focus
It is important for the company to focus on their product cost they can increase price of
the product which is famous among the customers but other product which are not that much
famous in the market, company should decease their prices according to the demand of the
product (Thompson, Strickland and Gamble., 2015.). It is necessary that product price should
satisfy the customers, and they can take interest on the product. It will increase demand of the
other product as well.
Choose the correct strategy
IKEA company should different strategies to identify their new opportunities and their
weakness. This will help them to achieve objective and goals of their business. One of the
important strategy is SWOT analysis in which company can find out their strength, weakness
and opportunities which they can gain in the future. This strategy will help IKEA company to
make new strategies to gain opportunities for them, and they can achieve success in their
business. Value can analysis is one more strategy which can be utilized to identify process and
tool which are valuable for the IKEA company, this strategy can be used to gain competitive
advantages. Porter's five forces can be used to gain better knowledge of the Furniture industry.
Strategic planing of the company
Executive summery
This report has covered strategies plan of the IKEA company which has included mission
of the company and vision of the company and this report has also concluded marketing Mix in
which company has launch new product and in the end report explained monitoring/ evaluating
techniques.
Mission of the company
IkEA company's mission is to be customers-oriented, which is company is fully focused
on the customers' satisfaction. And they will provide better quality product in low price range.
Vision of the company
IKEA company vision is to create a better everyday life for many propel and their
business ideas is to offer a wide range of well-designed furniture and home appliances at low
price range which can be affordable for everyone.
Marketing Mix 4p/s
Price

this company is not premium price or any kind of skimmer (Theoharakis, Bicakcioglu
and Tanyeri., 2019.). They are selling their product in the low price range and it is affordable for
their customers, and they also take competitive advantages because of low price range in their
products. And they also provide home devilry of their product.
Place
IKEA has global market business, and they are selling their product to the Asia, America
and European counties, and they are also thinking to expand their business in India and china
because this two counties are developing counties and population in both the country have more
than other countries.
Promotion
IKEA is one of the largest furniture in the world, and they are doing promotion of their
product in the T.V, newspaper and Recent campaigns include the IKEA kitchen party advert ‘Be
Happy Inside’ campaign and the kitchen party advert.
People
They are having good relation with their customers because they are selling their product
to the customers in low price range this help company to gain customer loyalty, and they are one
of the most popular company in the market.
Monitoring/Evaluation techniques
360 degrees appraisal
A 360 is a type of employee performance review in which subordinates, co-workers, and
managers all anonymously rate the employee. This information is then incorporated into that
person's performance review (von den Eichen, Freiling and Matzler., 2015.).
In the 360 degree appraisal a staff member of the IKEA work for the specific time ,often
a year , is discussed and critiqued by the other workers. This process is different in that it obtain
feedback from the subordinates and co- workers.
Feedback
feedback is the monitoring techniques in which superiors of the IKEA company record
and monitor performance of the employees and according to their performance they give
feedback to them. This helps employees to understand their mistakes in the task, and they can do
their task better nest time.

CONCLUSION
As per the above report has been analyzed 4 tasks, first task covered PASTEL analysis of
the IKEA company and explain how factors effect the company's probability, In the task 2 report
has been critically evaluated internal and environmental and capabilities of the company, this
report conclude RBV framework, VRIN framework and SWOT analysis of the IKEA company.
In the Task 3 report has been apply porters five forces on the company and also concluded
ANSOFF matrix of the company. In the last task report has been analyzed Porter’s generic
strategies and also provided strategic planing of the IKEA company.

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