Business Strategy in Retail Sector

This project report explores the business strategy in the retail sector, focusing on IKEA. It analyzes the impact of the macro-environment, internal environment, and capabilities of the company. It also applies Porter's Five Forces model to understand the market dynamics. The report discusses various theories and concepts related to strategic planning. Subject: Business, Course Code: N/A, Course Name: N/A, College/University: N/A, Document Type: Study Material, Assignment Type: N/A

Business Strategy in Retail
Sector

Table of Contents
INTRODUCTION......................................................................................................................................3
LO1.............................................................................................................................................................3
P1 Frameworks to analyzing the impact and influence of the macro-environment.....................3
LO2.............................................................................................................................................................6
P2 Analyze an internal environment and capabilities of given organization.................................6
LO3.............................................................................................................................................................8
P3 Applying porter’s five forces model in a given market sector....................................................8
LO4...........................................................................................................................................................11
P4 Applying range of theories, concepts and models that interpret and devise strategic
planning in a given organization.......................................................................................................11
CONCLUSION........................................................................................................................................15
REFERENCES........................................................................................................................................16

INTRODUCTION
Business strategy refers to set competitive moves that are used by an
organization to attract customers, strengthen performance and gaining the competitive
advantages that helps in earning profits and achieves the company goals. It gives an
outline map that helps in accomplishing the task in a desired time. It defines all the
decisions and actions that is performed by an firm to gain the market share and
increase the market growth for longer sustainability in the market place. This project
report is based on the IKEA that is one of the multinational groups that design and sells
to kitchen appliances, furniture and home accessories. This report is based on
analyzing the macro environment and internal environment to know the capabilities and
abilities of a company to earn a revenues and profits. It also includes the porters five
forces model that helps in analyzing the rival firms and gain the competitive advantage.
This project gives information related to various models, concepts that assist in
understanding the strategic directions that is available within the business enterprise.
This module helps in giving the knowledge to enhance the performance and increase
the profits for longer survival of the firm(Akter and et. al., 2016).
LO1
P1 Frameworks to analyzing the impact and influence of the macro-environment
Mission
The main mission of the IKEA is to offer a wide range of functional home
furnishing goods at a best price so that many people can afford it. To provide valuable
quality products to attract large customer base and builds a long-term supplier
relationship(Johnson, 2016).
Vision
The vision of the IKEA is to a better everyday life for every people who use their
products and services. it is based on togetherness and caring for people and planet
according to that they earns their objectives.
Objectives

The objective of an IKEA is to providing well- designed home furnishing that
function, gives excellent quality and durability and low prices so that majority of the
person can afford to buy the goods offerings.
PESTLE analysis
It is an analytical framework that gives the knowledge about the external
environment which affects the operations of the company. a manager of an IKEA can
evaluate the macro environment by using PESTLE analysis(Thompson, Strickland and
Gamble, 2015).
Political - This factor inculcates the tariff rates, stability in central government,
tax regulation etc. in IKEA its supply chain creates an crucial effect because it is based
on China and India and they have low barrier of entry in the foreign market it helps in
increasing the presence of their brands and due to this they may plan to enter into the
Asian market.
Economical – It is the factor that includes GDP, growth rate, inflation rate,
purchasing power of the people in the country. in this the growth rate of the UK is stable
and because of this their people have high source of income where customers are able
to buy the products this will benefitted the IKEA to sale their products and earns a high
revenues(Woerner and Wixom, 2015).
Social – All countries have different culture, values, beliefs, customs, opinion
and perception. Here people of UK are very open minded and they are very advanced
because of this IKEA can sale their products with best quality furniture that attracts
numbers of customers in the sociality as they also follow CSR in which they are
responsible for socially benefit. This attracts the large number of people.
Technological – In today’s world people using advanced technology and
because of this if a firm need to explore their business they also use advanced
technology. In IKEA to attracts numbers of customers they follow a social media tool
where they promote their products to attract large number of customers and enhances

their sales. They also use advanced machinery and update resources according to the
market demands.
Legal – It involves the rules, regulations and laws that is imposed by the
government of the country for the benefit of the employees and the welfare of the
customers. In this IKEA follow proper rules and laws that is imposed by the nations for
the employees about the equal pay. So that it increases the employee performance and
gives the productive results in a specified time(Peng, 2017).
Environmental – This factor is linked with protecting the environment from the
hazardous resources and activities of the company. in this IKEA can use the resources
that are environmental friendly and the atmosphere clean and green because of this it
place an positive image in the customer mind and they buy the products this will
enhances the sales and revenues of the firm.
Stakeholders Analysis
It refers to a factor that is used to analyze the project related to the power and
interest of the various stakeholders towards the company. it includes four types of
stakeholders that involves employees, customers, shareholders and government. For
IKEA this matrix helps in showing the interest level and the power that consume an
individual in the firm can be shown below(Leonidou and et. al., 2015).
High power, high interest – In this step shareholders can be consider because
they are the investors in the firm. This type of person is the important person for the
IKEA because they prioritizing the work and helps the organization to perform every
activity in a proper manner so that they get higher returns.
High power, low interest - This category involves the customers of the IKEA
because they contain the high power, as they are the reason of the success and failure
of the business. Every organization produces their products as per their demands. If
they are not satisfied company cannot earn higher profits(Soltanizadeh and et. al.,
2016).

Low power, high interest – It includes the employees of the company as they
have high interest because they indulge their most of the time in the firm. in IKEA they
contribute more on the business projects to achieve the objectives so that they get the
incentive form this.
Low power, low interest – It includes the government of the country where
IKEA has operated their business. This they are not interested in the profits and the
resources but at the same time hold the sufficient power to affect the working of the
firm.
In this manager of the organization can regularly communicate with these stakeholders
to gain the competitive advantage and ensures their high profits and revenues after
completing the project on time.
LO2
P2 Analyze an internal environment and capabilities of given organization
SWOT Analysis
It refers to a study of an organization to identify the internal strength and
weaknesses on the basis of which IKEA can modify their activities and also gives the
external opportunities and threats that can impact the business in a considerable way.
Strength Weaknesses
 IKEA is one of the best
recognizable brands in a world of
furniture globally. Good brand
recognition with low cost offerings is
the biggest achievement for the
company(Amran and et. al., 2016).
 It has strong financial position
because of this they invest more on
research and development. Its solid
funds play an essential role of
 Negative publicity is the major
weakness because firm can face
controversy about the poor
treatment of employees; lobbying
government authorities and
questionable advertising practices
this will reduce the brand reputation
and also the loyal customer base.
 They also face the issue related to
the environmental concerns on their

cushion in recession and decline
time. Because of this it make a
strong customer base.
operations and because of this they
face the challenge in
communicating its environmental
policies to its customers and
stakeholders.
Opportunities Threats
 Increasing the demand of
environmental friendly products in
the consumers these days. It helps
in grow the market share.
 IKEA can set their business in India
and China so that they get the low
cost labor so that they target the
large customer base.
 Fast competition is the major
threats face by the IKEA in the
growing market of furniture.
 There is a bad press which may
subject to lawsuits from customers
side that were injured by the
product offering of the company.
Resource based view strategy
It refers to a managerial framework that is used to recognize the strategic
resources which a firm can exploit to achieve the sustainable advantage that is based
on the competitive firm. It can include two types of strategy in context of an approaches
i.e. tangible and intangible strategy. Here, tangible is based on the land, labor,
machinery, capital etc. intangible strategy includes that have no physical presence like
trade mark, copyright, patent etc, that is hold by the Firm IKEA(Yuliansyah, Gurd and
Mohamed, 2017).
VRIO analysis
VRIO refers to a valuable, rare, imitate and organized that is based on the
brilliant technique which helps in evaluating the business resources and its competitive
advantage. In context of the IKEA it is essential to evaluate the VRIO analysis to know
the capabilities of resources to gain the competitive advantage and attracts the large
customer base. It can be explained below.

Valuable – It is an analysis which shows the manager of the IKEA to effectively
utilize the valuable resources so that they can beat the competition in the marketplace
in an efficient way. in this firm possess those resources that gives the long term benefit
to the company in this some of the valuable resources are available in IKEA i.e.
financial resources and supply chain management(Marx, 2015).
Rareness – This approach helps in identifying and understanding the IKEA that
the offering they produce are rare or not. Because rare goods help in giving the large
customer base and these are also loyal towards the organization. For company rare
resources are machinery. By using this they can make innovative and modify products
to their consumers and this will increases the sales and profits of the IKEA.
Imitable- In these aspects those resources are offered by the IKEA that are not
copied by other firms. if they competitor firm sale the copied product in a small price that
it will affected the business image and its revenues. In this raw material of producing the
different types of products are the imitable resources of the company(Chen, Eshleman
and Soileau, 2017).
Organization – It show how an IKEA can manage and organize their resources
so that they will earn revenues and make a good market reputation in the marketplace.
If it is not organized in an effective way, than organization may face loss and decrease
in its customer base. Resources that should be managed are suppliers, raw material,
investors, workforce of the company.
LO3
P3 Applying porter’s five forces model in a given market sector
Porter’s five forces model
It refers to a strategic approach that is used to examine and analyzing the five
competitive forces that shapes the whole industry and it also helps in making the
corporate decision and strategy so that IKEA can enhances their revenues. It can be
explained below(Teh and Corbitt, 2015).

Threat of new entrant - The threat of new entry is not high for IKEA it is
renowned organization that place their presence in a global market. They offer quality
products in a low cost because of this it is not possible for the new firm to enter into the
market with cost leadership style. Due to this new entrant cannot compete with the IKEA
and cannot break their customer base and market share.
Bargaining power of suppliers – This type of model contains the high power in
the furniture industry. Because of this bargaining power is high and if supplier can sale
their inputs on high cost than IKEA can deal with other suppliers and it helps in reducing
the cost of production and enhances the profit margins in the firm(Torrent-Sellens,
2015).
Bargaining power of customers – Customers contains the high power as there
is high number of purchaser in the retail sector. In context of IKEA, if they charge high
amount with low quality than they can reduce their customer base and decrease their
profits. If company can sell their products on low cost with best quality goods than they
will attract high customer base with high profits.
Threat of a substitute - There is a possibility of substitute products related to
the furniture sector because of thie IKEA can choose the low pricing strategy to sell their
products and services so that customers cannot switch towards the substitute products.
Rivalry of a firm – There are many rival firms can present in the market for IKEA
that was operating their business on a global level such as Wayfair, American wood
mark etc. threat is high from this competitors who are present in the market place for
IKEA. Because of this firm can chose the cost leadership pricing strategy and gives the
offers and discounts so that customers are loyal towards the company. so that company
will earn high profits and gain the competitive advantage in the competitive
world(Leischnig, Woelfl and Ivens, 2016).
Ansoff matrix
It refers to an approach that is used by the manager of the IKEA to select the
suitable strategy for the firm to growth and it can be explained below.

Market penetration – In this strategy IKEA can enhance their market with their
existing product and in the current market. in this they lowers the prices of their products
and also provides a complementary services to their customers because of this profit
can be increased(Mellat-Parast and et. al., 2015).
Market development – In this approach firm need to develop or enhance their
market in a new place with their existing offering. It helps in attracting the new
customers with current products. It will increase the profits and revenues with the
increase in sales. It also helps in enhances the market share.
Product development – This strategy focuses on offers an innovative product in
a current market. it helps the IKEA to gain the competitive advantage and also
increases the customer base with their modified and innovative products. In this they
attracts the potential customers who are loyal towards the firma and they will earn
higher profits(Kossyva, Sarri and Georgolpoulos, 2015).
Diversification – In this firms focuses on providing the new products and
services in a new market and it is also called the risky strategy. If IKEA is used this
strategy than it will enhances the market share and growth of the firm. Also gives the
competitive advantage and high revenues. It also attracts large and new customer base.
In this manager of the IKEA can follow a strategy of market development where they
expand their market with their existing products and services. It helps in gaining the new
customer base with new market and also increase the market share and profits. In this
they target the potential customers who can buy the products and earns high revenues
from this.
LO4
P4 Applying range of theories, concepts and models that interpret and devise strategic
planning in a given organization
Porter’s generic strategies

This model is focus on generating strategies that helps in gaining the competitive
advantage by using the three factors that includes cost leadership, differentiation and
focus. In context of IKEA, manager needs to evaluate these three factors and make the
strategy on the basis of this. It can be explained below(Meckling, 2015).
Cost leadership – It refers to that strategy in which firm set the low price for their
goods and services. In this company can attract large customer base and those people
who are price sensitive and they will be easily targeted by the business enterprise. In
this IKEA can offers a low price for their products offerings due to this it capture the
large consumer base and firm will enhance its market image. In this firm provide offers
and discounts to their consumers this will enhance the sales and profit margin of the
organization in the market place.
Differentiation - In this approach company can innovate and modify their
products so that it attracts large number of customers and also helps in gaining the
competitive advantage because they differentiate their products from the rival firms.
This will benefitted the organization for a longer term. IKEA can offers a innovative
products and services that is different from competitors it will increase the sales and
enhances the customer base.
Focus – This approach can includes two strategy i.e. cost focus and
differentiation focus. In this if a IKEA can attracts customers within a small period of
time than they lower the price of their products and if they can gain the competitive
advantage than they modify and differentiate their goods so that consumer can buy the
product at any price and beat the competition in the marketplace.
From the above formulated strategies in the porter’s generic model IKEA can choose
the cost leadership strategy where they gives the best quality products at reasonable
price by giving them offers and discounts at the same time. This will increase the
customer base and also enhances the sales. it also make increment in profit and
revenues and because of this market share of the firm also enhances with longer
sustainability in the market place.
Bowman’s strategy clock

It refers to that strategy which is used to determining the suitable strategic
positioning that means in a way that IKEA can position their offerings so that they earn
high amount of profits and revenues in their longer sustainability of the business. it
includes various determinants that can be shown below.
 Low price and low value added- It is less appropriate for the IKEA as it does
nbot helps to maintain the competitive position the market place because in this
products are of homogeneous type due to this customers less value the goods
even the amount of the offering are low.
 Low price- In this context of the IKEA this strategy is justified that they contain
the low cost on their products and using the value based strategy. In these profits
on the products is low even if the high sales incurs.
 Hybrid – It involves the tactics related to the low price with differentiation in the
goods and this is very effective for the IKEA as they give the high returns on the
sales.
 Differentiation- In this strategy IKEA can focus on the innovation and
modification of the products and enhance their customer base and the profits in
the marketplace.
 Focused differentiation - this strategy suggest the high value to the products
because of differentiation in products and the customer value this. In IKEA is very
helpful to attract the large customer base on the company price.
 Risky high margins- It shows the ability to take high risk that may contain the
failure of the results. In this IKEA is not follow any new strategy regarding the
price and provides the goods on no extra benefits.
 Monopoly pricing- In this strategy here is the only one organisation that sale the
particular product due to this they may contain the monopoly in the setting the
price. If the people want and needs that offering they spend the amount that was
taken by the seller.
 Loss of market shares- This is that type of strategy which contain the disaster
effect in the rival market, a company can set the amount on the middle range of
the products due to this they prevent the loss of the market share.

This strategy is helpful for the IKEA as it helps in giving the positive review on
differentiation the products so that they attracts the large base of the customer and
enhance the market share and also stay in the market for the longer sustainability.
Strategic planning
It refers to a documentation that gives the direction to the business by providing
the answer relating to the where a company stands and where they see in future. It
gives the information that is based on vision, mission, objectives and by using this
prepare a action plans so that a firm reach to their objectives and enhance their
profits(Johnson, 2016).
Vision: The vision is to create a better world and make a better life for many people. It
is also goes beyond the home furnishing to provide a better life and place a great
impact on the business.
Mission: By offering a wide range of well-designed home furnishing products as low
price that many people can afford it and this business idea supports the vision of the
firm.
Strategies: The strategy that can be adopted by the IKEA is market development as
they have enough capability to utilize their all competencies. It is very easy for the
company to attract new area customers as they have well- designed home furnishing
because they sell their products in an attractive ways that does not harm the
environment(Soltanizadeh and et. al., 2016).
Objectives: The main objective of the business is to earn profits by 15% and enhance
their customer base this will increase the sales by 20% within 20 months.
Tactics: It refers to a short term objectives that are set by an enterprise to earn
revenues and achieve the task on time. These tactics can be followed by IKEA to sell
their product to the customers and enhances their sales and it will increase the profit

margin. This tactics can be based on the elements of the marketing mix that can be
given below.
Product The product that is sale by IKEA is home furnishing, kitchen
appliances, hoe accessories and many other useful products and
occasionally home services. in this they enter into a new market with
these existing products.
Price They follow a low pricing strategy that contains a good brand image
because they offer well-designed home furnishing products with
high quality. They will expand their market in other market with this
same market strategy.
Place The company has own stores and outlet where they distribute their
product. They will expand their products presence by opening their
more stores in the different market so that they earn more and more
profits.
Promotion They promote their business by using media, advertising, sales
promotion and public relations. To open their outlets in the new
market they can use social media and direct marketing so this will
help in earning more revenues.
Implementation: It is an essential term for the organization to execute the plan which
they formulate to achieve the objectives. For this IKEA can allocate the financial
resources by making the marketing budget and control all the performance that helps in
measures the performance and can be adopted by the business enterprise to compare
the actual budget with the standard budget. This helps in improve the performance of
using the resources.

Evaluation : It is the last step where a company can evaluate the whole performance
by collecting the information by using follow-up of the plan that has been making to
achieve the objectives. In this firm evaluate the hurdles that affect the productivity at the
time of developing the market of IKEA. At this stage they take some corrective action by
comparing the actual performance with the assigned performance.
CONCLUSION
From the above report it is to be concluded that business strategy is a prominent
helps in making the strategy to gain the competitive advantage, earns revenues and
attracts more and more customers within a short period time. It suggest the PESTLE
and stakeholders analysis for analyzing the facts that is considered in macro
environment and helps in longer sustainability of business. It also suggests an internal
environment to know the capability and internal strength and weaknesses to face the
competition and earns revenues. It also shows the porters five forces model that helps
in giving the competitive advantage and attracting large customer base. At last it shows
various models and concepts that helps in giving the strategic decisions to earns a
higher profits(Evans and et. al., 2017).

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