Impact of Macro-Environment on Business Strategies of IKEA

This report analyzes the impact of macro-environment factors on the business strategies of IKEA, including political, economic, social, technological, environmental, and legal factors. It also assesses the internal environment of the company and conducts a stakeholder analysis.

BUSINESS STRATEGY

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Impact of macro-environment on the organisation and its strategies..........................................3
Stakeholder analysis....................................................................................................................6
TASK 2............................................................................................................................................8
P 2 Assess the internal environment............................................................................................8
TASK 3..........................................................................................................................................10
P 4 Models, theories and concepts.............................................................................................10
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Every company develops its own strategies of business in order to achieve its short-term and
long-term goals. Business strategy is basically a long-term plan which a company creates for
achieving the organisational mission. It includes the objectives and goals of the company, the
type of products and services which the company plans to deliver, the target customers whom the
company wants to sell the products along with the markets in which the company serves in order
to earn much profitability (Vahlne and Jonsson, 2017).
IKEA is a group of Swedish companies which operates around the world and has its
headquarters in Netherlands. It deals in designing and selling of ready-to-assemble furniture,
appliances used in kitchen, home accessories and provides home services. Since 2008, it has
been the world’s largest retailer of furniture. It has more than 420 stores which performs its
operations in more than 50 countries. The company is famous for its innovative designs in
different furniture types and appliances. Also, the interior design work performed by the
company is eco-friendly which is also its strategy towards sustainability (About the IKEA group,
2019).
The report will analyse the impact of macro-environment factors and the stakeholders by using
the PESTEL and stakeholder analysis for developing effective strategies and decisions of
strategic management. Furthermore, the internal environment of the company will also be
evaluated by doing SWOT analysis along with Resource Based View for analysing the
competition in the markets. It will also use Porter’s Generic Strategies for developing strategic
management plan which includes various strategic directions.
TASK 1
Impact of macro-environment on the organisation and its strategies
As the company performs its operations in different countries, it is important to analyse the
external environment to set the goals and develop strategies accordingly. The PESTEL analysis
is basically a tool or can be considered as framework which helps in analysing the impact of
macro-environment factors on the company and its strategies (Frue, 2018). The impact of the
PESTEL factors on the strategic development of IKEA is as follows:

Political: The company must abide by all the regulations of the country in which IKEA operates.
Some countries have similar laws and the political influences while the other have different
regulations. It is sure that the companies benefit from the political stability of the country as the
economic stability is impossible without it. It is also possible that IKEA in order to expand itself
in some location can lose profits because of the restrictions imposed by the government. Also,
the government if unfriendly can impose restrictions on the trade, importing and exporting
foreign goods which is necessary for the company to remain stable (Ehsan Ullah and et.al.,
2016). But, IKEA can make use of this and must make stronger relationships for opening
international brands and also must move to Asian markets which can be an effective strategy to
minimize negative effects of these political factors.
Economic: The IKEA’s economy is susceptible to the to the economy of the world. Companies
like IKEA are suffering from the recession of 2007. That time, many people lost their jobs. For
this, the company witnessed that the consumers were making conscious buying decisions. The
people considered the furniture as the need rather than the luxury (Suárez-Ruiz, Zhou and Pham,
2018). After observing the needs of the people of upgrading mattress and couch, the company
made its price relatively low in order to attract the customers who want inexpensive things but at
the same time stylish. IKEA is influenced by strong and weak dollar. But fortunately, the
economy has strengthened and the jobs are opening up at a high pace which make the company
able to accept the challenges in order to increase the sales.
Social: Along with tailoring the products to the customers, IKEA must also focus on not
offending social values. Social values of every country is different. For example, the IKEA has
developed a strategy to remove the same-sex couple from its magazine as in Russia
homosexuality is considered shameful. But this created a problem when it was accepted overseas
except Russia. This made the company in dilemma (Garnier and Poncin, 2019). The main aim of
the company is to earn maximum profit. The social factor also impacts the company as it gets

one-star review because the customers did not get the products after ordering online and some
got after waiting for so long.
Technological: Till now, IKEA was using paper catalogues but due to advancement in
technology, the company made more use of the internet to promote its products through various
online platforms. The company is attracting large number of customers through its strategy to
expand its online presence. The customers even get order the products online and get it at their
doorsteps. It helps the company to provide realistic experience to the customers if they cannot
reach its stores. This increased the customer satisfaction which leads to company’s profitability.
Environmental: Environmental factors are the biggest concerns before IKEA which forced the
company to make a large investment of approx. $1 billion for the renewable energy in the poorer
nations. Their main aim was to make its in-store energy completely renewable. The company is
doing this by investing in the solar and wind panels (Spinoglio, 2020). The company is also
shifting its materials like cotton and wood from the sustainable resources.
Legal: Legal threats impacts every type of business. The companies must follow the regulations
and laws in the country in which it performs its operations. IKEA also lays emphasis on the laws
of every country in which it is expanded. Since the company has expanded its stores, it must be
updated with all the labour laws. The quality of its products is also not good which is causing
harm and various injuries to the consumers (Williams, 2017). These devastations impact the
communities and families. These destroys the goodwill of the company and also creates a risk on
the customer base. The company needs to ensure that its products are safe and does not cause
harm to its customers. Though the customers can recover with time, but the reputation once
destroyed cannot be recovered.
Vision of IKEA

The vision is to improve the quality of life of many people. The business ideas of IKEA
support the company’s vision by delivering a wide range of furnishing products which are well-
designed and functional and also of low prices which makes them accessible and affordable to
most of the people by following all its core values like humbleness and will power, leadership,
enthusiasm and togetherness, cost consciousness and dare to be different (IKEA: Vision, Mission,
Core values, 2019).
Mission statement of IKEA
It is also based on the vision and the core values established for the company which helps
in reflecting the course of action and also helps in implementing the strategies for achieving the
long term vision (IKEA: Vision, Mission, Core values, 2019). The company promotes large
variety of furnishing and functional products at low prices to make them accessible and
affordable to the customers in every country. It defines the purpose and objectives of the
organisation.
IKEA’s objectives
 To lower the prices by 2.6% in the next two years.
 To expand itself by opening its stores in various countries.
 To invest EUR 40 million in building solar panels and renewable installation in newly
built stores.
 To compete with the other countries like India and China.
Stakeholder analysis
IKEA believes that it is gaining knowledge by building stronger relation with the
stakeholders and its partners. In order to learn, share experiences and achieve much more things,
IKEA cooperates with the companies, organisations and the trade unions. Its stakeholders are as
follows:

Better Cotton Initiative (BCI)
It is a collaborative multi-stakeholder effort which was initiated by WWF. It focuses in
improving the overall social and environmental impacts of the cotton cultivation in the world
(NHPhuong's IKEA, 2020). IKEA is a part of BCI and is facilitated by it greatly.
Building and Wood Workers International (BWI)
It is the Global Union Federation of democratic and free trade unions which protects
more than 12 million members for the purpose of building materials, forestry, wood and allied
industries. IKEA is a member of BWI.
Other stakeholders
IKEA’s other stakeholders are government specially the Swedish and Foreign
governments, the owners in Europe and North America, labour unions such as retailer leader in
home furnishing of Swedish company (Li and Zhang, 2019). Also, the employees which are
almost 147000 in around 27 countries, Competitors in the products of home in the head office,
suppliers which are almost 1002 in 51 countries and also the banks and the insurances which
helps in the raw materials suppliers. The employees perform the tasks very efficiently in order to
contribute in implementing the strategies made by the company. the competitors also act as
stakeholders as they set a bar above which the company has to rise in order to lead them and be
differentiated among others (Yuting, 2019). According to the competition, IKEA gets an idea to
develop the strategies accordingly.

TASK 2
P 2 Assess the internal environment
There are limited resources which are there therefore it is very important for the
organisation to be able to have an effective framework to be able to gain a competitive advantage
for themselves. There are a lot of right decisions which the organisation needs to make so that
they can have a higher productivity and the organisation will be able to work accordingly (Razak
and et.al., 2016). IKEA has been using this framework from a very long time so that they can
have a higher control on the resources to have good productivity and operations sustainability in
the market.
Resources Valuable Rare Inimitable Organization
Capital  
Intellectual property   
Human Resource  
Technology    
 Valuable
IKEA has of well maintained standard and quality for the products and services in the market
by having an effective and motivated workforce. Technological changes are coming in the
organisation effectively from time to time so that the reputation and productivity of the
organisation does not fall in the market. The company’s human resource and capital are also
being well maintained because there is a lot of investment which is being made in the
technological aspect and human resource has been able to maintain and sustain the changes
which are coming in the organisation effectively. The company has been able to have a higher
profitability margin in the market making the company be able to expand themselves further.
 Rare
There are a lot of rare factors which need to be present in organisation like their raw material
and resources which the company has been using (Sanaei and Sobhani, 2018). IKEA has been
able to replace their materials with resources which are easily found making the company have a
higher productivity level and satisfaction of the customers is going to be maintained. Right skills

and techniques for a very important factor in the company and the workforce is being trained
from time to time to be able to maintain the standards and reputation in the market which is
going to make the company have higher brand image and value for the customers.
 Inimitable
There are a lot of similar products which competitive organisations are having in the market
and the company will have to take measures and patents which are going to make the company
have higher reputation and loyalty of the customers (Balashova and et.al., 2018). The services
and products of the organisation has always been high and well maintained matching the
standards of the lifestyle of the customers making the company have higher reputation and
control of the market. There is also a lot of innovation which is taking place in the company so
that they can sustain the customers of the organisation.
 Organization
It is very important for the organisation to have a right measure and strategy to be able to
operate in a competitive industry can have a better sense of direction. There is a lot of
competition which is present the competitors of the organisation are Tesco Marks and Spencer,
etc. Higher profitability there has to be good controlling and monitoring from time to time since
the market is developing rapidly.
SWOT
 Strengths
The company is having a lot of experience in the market therefore they are being able to
make the right decisions at the right time making the company have a high competitive
advantage (Mohelska and Sokolova, 2016). the competition is increasing therefore the company
has changed the pricing strategies and other strategies and measures to make sure that they are
having a higher productivity and performance in the market in order to maintain their reputation
and brand value.
 Weaknesses
The workforce of the organisation is not being focused upon and making the motivation level
of the organisation fall which is impacting the productivity. The company will have to focus on

the employees as well so that they can make sure that they are having a good performance in the
market.
 Opportunities
The company is having a strong portfolio for themselves which is a great opportunity to be
able to have a stable functioning in the market. The company has to have a good performance
and productivity in the market so that they will be able to maintain the demands and needs of the
customers.
 Threats
The companies greater that is that of the competition which is rising in the market. There are
a lot of changes which are taking place in IKEA which the organisation will have to adapt in
order to have higher profitability in the market for a long run (Cardoni, Kiseleva and Lombardi,
2020). There is also a requirement of a lot of investment for technological changes and other
changes which are going to make the organisation have a higher brand value and brand image in
the market.
Benchmarking
The employees of the organisation are going to be monitored and evaluated on their performance
so that there is a stable and sustainable working which is going to be present. Since there are so
many changes taking place in IKEA the company will have to take such measures and
benchmarking is one of the tools which the company can use in order to have higher
performance in the market.
TASK 3
P 4 Models, theories and concepts
Mission
The company is in the market to get higher brand value, image and loyalty of the
customers which is very good for a long run of the business in the market.

Vision
Through the products and services the organization wants to gain the loyalty and trust of
the employees and customers in the company which is going to make the standards of the
company be maintained. The company wants to value the stakeholders, community, customers,
colleagues in industry so that there is going to be a better place for the company in the market.
Core value
Satisfaction of the customers is very important in IKEA which the company is trying to
maintain through their products and services which is going to make the company have higher
profitability. The company wants to have a higher value in the market so that there is going to be
higher performance which is going to be present.
Objectives
 To increase the market, share by 50% till the end of year 2024.
 To enhance consumer experience by 40% in upcoming 11 months.
 To increase sales of new product of Nissan by 25% till the end of year 2023.
Ansoff matrix
 Market penetration
IKEA has made a place for them in the market which is existing with the same product
making the company have a good functioning. The company wants to have a loyal customer base
therefore they are providing a lot of discounts and sales through the loyal customers which they
have established for themselves over the years (Marx, 2016). The trends and demands of the
customers are changing therefore there is a lot of investment which the company has been doing
for innovation making the portfolio stronger of the company so that they will be able to expand
in the future. There is a standard which the company has developed for themselves in the market
in front of the customers and that needs to be maintained.
 Product Development
The company is not going to take a lot of risk because in product development there is a new
product in the existing market which is going to make them company have a maintained
reputation since it is not risky. This is a very good factor for launching new products in the

market making the company have a competitive advantage and higher sales as well. Loyal
customers are going to provide the right feed bank to be able to help the organisation to improve
the products as further demand and expectations of the customers.
 Market Development
Getting old product in the new market is another well taken measure which can be taken by
the organisation since the product has always been appreciated in the existing market. the
productivity an operations of the company is going to increase making the organisation have a
higher profitability margins and the loyalty an market share is going to increase rapidly making
the company have a higher reputation an brand value in the market.
 Diversification
Diversification is a very risky factor which any organisation can take in the market since it
includes a new market and a new product. This stage requires a lot of experience in the market
which can help the company be able to take the right measures and have the right skills to be
able to maintain the demand and brand reputation in the market (Cagnin, 2018). There are more
customers whom are going to get attracted since it is going to be innovative and the company
will be able to have more sales and profitability to be able to invest in future demands of the
customers.
Market tactics
 Price
The company has been using skimming strategy to be able to enter and launch new products
in the market which is a very competitive strategy and will help the organisation to have a strong
base for a long run in the market (Johansson and Kask, 2017). The quality of the product is well
maintained and matching the standards of the customers therefore they are using this method to
make sure that they have higher market share and customer base.
 Promotions
The company has been using the online platform to make sure that they are getting the right
sales and information is being passed on to the customers about the changes which the
organisation has been getting over the period of There is a lot of investment which IKEA has
made in the market to promote their products and services.

 Place
For the customers to reach, IKEA has started a lot of making the satisfaction level of the
customers increase and it is also going to make the company have more sales. The demands and
needs of the customers is increasing day by day for the basic products which the company is
dealing in therefore it is very important for the organisation to be able to make sure that the
customers are getting everything that they need. There is a standard and trust of the customers
which needs to be gained by the organisation in order to have more and higher profitability and
higher sales (Weng, 2020).
 Product
A lot of innovation and creativity which IKEA is doing in the market for themselves to have
a stronger market base. That is a lot of unique identity which the company has been able to
develop making themselves have the right attracted customers. The company has not been selling
their default products to the customers because they have a reputation which has to be well
maintained and also make sure that the company is having a competitive advantage since there is
a high and rapid growth in the competitive level.
Bowman’s strategic clock
To make a decision an analyse the risk and factors which are going to be important for
the organisation there are eight stages which are given in bowman’s strategic Clock. the 8 ages
of actors are low price, risky high margins, monopoly pricing, focused differentiation, loss of
market share, differentiation, low added value, hybrid and low price. It is very important for the
company to analyse these factors for making sure that they’re using the right strategy in the
market for gaining a competitive advantage (Uyar, 2019). IKEA has been using monopoly
pricing making the organisation have a higher profitability an making the company have a
deserving an higher reputation in the market which is very good for the portfolio of the
organisation. There are a lot of measures which have to be taken by IKEA in the market because
the competition is increasing and there are more factors which need to be analysed to gain higher
performance and operations.

CONCLUSION
The overall report was based on IKEA which deals in furniture and home appliances. It
firstly examined the impact of the macro environment on the organisation and its strategies It
used the PESTEL analysis and stakeholder analysis in order to develop strategies of achieving
the organisational goals by focusing on the mission and vision of IKEA. It also assessed the
internal capabilities and environment of the company by doing SWOT analysis and resources
based view. Various models, theories were highlighted in order to analyse the strategic directions
available for IKEA along with a strategic management plan.

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