Analyzing the Impact of External and Internal Environment on IKEA

This assignment analyzes the impact of external and internal environment on IKEA, including PESTEL analysis, SWOT analysis, and stakeholder analysis. It also discusses the resources and capabilities of IKEA using the VRIO model and the resource-based view (RBV) model.

Business Strategy

Table of content
INTRODUCTION....................................................................................................................4
TASK 1......................................................................................................................................4
Analyse the impact of external environment on organisation............................................................4
TASK 2......................................................................................................................................5
Analyze the internal environment and capabilities............................................................................5
TASK 3......................................................................................................................................7
Examine Porter’s five force model....................................................................................................7
TASK 4......................................................................................................................................9
P4 Apply frameworks for strategic planning in importance given to company.................................9
CONCLUSION.......................................................................................................................11
REFERENCES.......................................................................................................................12
Books and Journals..........................................................................................................................12

INTRODUCTION
Business strategy is determined as a process that helps in accomplishing goal in
timely manner. It is important for organisation to maintain appropriate plan of organisations
that help in organising various activities in proper way. In assistance of this, it is important
for organisation to use latest technology for achieving competitive edge over rivalries in the
market. This assignment is carried upon IKEA. It is determined as a Swedish international
organisation that is located in Delft, Netherlands. This company was given by Ingvar
Kamprad in 1943. The management of organisation emphasized on offering different types of
goods and services like home wares, furniture and foods to its user. In this report, PESTEL
well as SWOT analysis is used for analysing internal and external environment that imposes
direct influences on performance of company. In addition to this, there are different model is
used for providing direction to its company that help in taking decision which will be
beneficial in future period of time. There are various models and theories adopted by
organisation which is explained in this assignment (Adam, 2016).
The strategic planning which is adopted by IKEA is going to be mentioned below:
Aim: ‘The purpose of company is to maintain superior reputation and goodwill in
mindset of its user at marketplace”.
Vision: “The vision of company to is to accomplish leading position around the
globe”.
Mission: “The mission of organisation is to offer good quality goods and services to
user at relatively less price”.
TASK 1
Analyse the impact of external environment on organisation
It is required for the business firm to make effective plans and schemes for the
increment of the efficiency and profitability of the organisation. In adding up to this business
environment is energetic so that it is essential to acquire changes which are related to finance
human resources and marketing for the successfulness and extension of organisation
(Weldearegay, 2017). The manager acquires PESTEL analysis for the assessment of outer

environment which implements the direct authority on the level of performance to the firm
which used to be discussed below:
PESTEL ANANLYSIS
PESTEL analysis is the substructure which is going to be used for the identifications
of the outer environmental factor applies direct impact on the level of performance to the
business organisation. It is useful in understanding level of appreciate evaluation of business
as well as plans at so many levels. In adding up to this it is required to develop the alertness
on the subject of market trends to instruct for the activation of their companies at worldwide
level.
Political factors: Factors regarding politics incorporated with administrations
regulations, systems, legislations as well as guidelines and so many supplements to which it
implements both the positive and negative characteristics on the yield of the business
establishment. Due to unstable political situations the contribution chain of IKEA which is to
be found in Europe unfavourably affects the presentation level of industrial organisation.
Resting on previous hand, the company follows the set of laws and guidelines which is
compulsory by the government which completely have an effect on the production as well as
prosperity of the administration.
Economical factors: Economic factor includes swap over the charge rate of interest
earnings and price rises as well as evaluation rate and so on. Due to economic collapse, it
results in decrement to the economics of the individual human being. And it grades in the
dropping of the purchasing control of the human being of the country. As a result it imposes
unhelpful manipulation on sales of IKEA. On the previous hand, the director emphasised
only if the higher quality products and forces to the purchaser at reasonable prices. So that, it
enlarges the image of the brand in addition to kindness of the company in the eyes of
buyer .It results in enlargement of the accomplishment and expansion of the administration at
concentrated area (Westerman, 2018).
Social factors: Social factor include faith, belief, promotes, experience and
preferences to buyers which straight influence the level of performance of company. It is
essential for the business definite to make out the changes which are needed and demands of
the customers in the order to convince them. It imposes the limited customs, cultures and

inheritance, so that, it is not achievable for the firm to assess the necessity of the buyers in a
valuable manner. Thus, it badly affects the sale if the corporation at concentrated area.
Technological factors: Technology implements an important role in the achievement
and enlargement of the business administration it is very important to assign the superior
technology in command to offer the higher quality products and services to its purchases.
Consequently the executive of IKEA takes the artificial intelligence in order to represent the
requirements of the purchasers for raising their knowledge and skill stage at the place of
work. While the rates of functioning the most recent technology is very high so it includes
extra prices to the goods and services of the selling administration.
Environmental factors: Environmental factors include weather conditions
temperatures as well as climatic states or circumstances and so on. The trade form a force
ecological or eco friendly merchandise and services to its buyers in order to boost up their
standards of living wages at concentrated areas it is useful for rising the cells and the earnings
of the companies in future period of time. Due to transformation in climatic stages it is
required that IKEA to change their policies because it negatively affects the presentation rank
of business firm (Yang, Jiang and Zhao, 2019).
Legal factors: Legal factor includes employment regulations purchasers defence law
and legislations and many more. Due to this modification in tax strategy, the commerce form
changes their strategies so that it imposes difficult impact on the expansion of the company.
While the company pursue the legal authorities so that it imposes encouraging powers on
sales of the trend administration in forthcoming period of occasion. Adding up to this it
results to retain the customers, for long period of time.
Consequently, after inspection it is concluded that the over mentioned outer environmental
factors, it is very important for the trade firm accept the different plan of actions in order to
control and supervise all the activities and the functions of the organisation form so that its
results for the profitability and growing sales in future period of time.
Stakeholder analysis
Stakeholder analysis is determined as a process of assessing group of individual person that
help in taking appropriate decisions in future period of time. It is the procedure that helps in
determining and communicating projects in appropriate manner. For organising a stakeholder
analysis of IKEA, Interest Power Grid is adopted that is going to be mentioned below:

High Power High interest in first quadrant, the stakeholder is determined as a most
efficient and required to be handled closely and put information by using appropriate
communication. The stakeholders with high power as well as high interest in IKEA is
determined as a shareholder of organisation who focuses on investing their fund in project of
organisation and also for future initiatives
High power low interest these are determined as those stakeholders who are from
second quadrant as per which the need and requirement must be satisfied with proper
information. Therefore, the user of chosen organisation is situated in grid focuses on need of
its user that must be satisfied.
Low-power low interest this is determined as a third quadrant in which the
stakeholder has a minimum interest as well power within business organisation. Therefore, it
is necessary to maintain overall activities and task in an appropriate manner during particular
phase of time period.
Low power high interest this is determined as a fourth quadrant that shows those
stakeholder that required to be informed as they possess higher interest within business
organisation but have a low power. For example, government of various countries in which
IKEA perform their operation have higher interest in their functions or activities in respect of
process of organisation (Buckley, Burton and Mirza, 2016).
TASK 2
Analyze the internal environment and capabilities
Internet environment involves element which is determined as uncontrollable by
organisation to some level. SWOT analysis is determined as a tool that is used by IKEA for
analysing strength, weakness, threat and opportunity of company that is given below:
SWOT Analysis
STRENGTH WEAKNESSES
 IKEA operate their business around
the globe that assists in enhancing
sales as well as level of profit in
upcoming time period.
 The weakness for chosen organisation
is that outlets are located outside city
that decreases sales and level of
profitability of organisation.

 They operate their business across
globe that helps in attracting ample of
its user in the market.
 Due to involvement of different types
of approaches that is connected to
manufacturing and supply chain those
results in enhancing efficiency level
of organisation.
 Due to enhancing controversies that is
connected to security of furniture is
determined as a weakness of
organisation.
 The company take time for making
appropriate plan that is connected to
new outlets is determined as main
weakness of organisation.
OPPORTUNITIES THREAT
 The organisation focuses on boosting
its budding economy in context of
manufacturing goods and services at
less cost.
 Due to enhancing popularity and
recognition within E-Commerce
sector that help in enhancing brand
image and goodwill of IKEA.
 The main benefit is to execute latest
technology for offering new goods
and services to its user at less cost. It
helps in enhancing sales and level of
profitability of organisation in given
time period.
 Due to using diversification tactics by
its rivalries that decreases sales of
IKEA.
 The price of executing advanced
technology is high then it adds
additional price to product as well as
services of organisation.
 It is important for company to analyse
need of its user thus it require
appropriate research that add extra
cost for organisation can be
determined as a threat for IKEA
(Siedel, 2016).
Hence, the swot analysis helps company in providing comprehensive and detailed
information that is connected to trend at Marketplace. It helps organisation in assessing
performance and level of progress at larger level (Kabir, 2019). Furthermore, the business
organisation used VRIO model for analysing opportunity and resources that is adopted by
company. They emphasized on activity and resources in an appropriate manner. It also assists
in monitoring activity of company in proper way. In assistance of this, the VRIO shows
actual image of organisations that help in taking appropriate decisions which is beneficial in

upcoming time period. There are different factors like valuable, organised, inimitable and
rare those are significant to determine by IKEA that is given below:
Valuable there are different resources which are considered as a valuable such as
customer loyalty, CSR, technological advancement and brand. Therefore, the
organisation offer superior quality product and services that increases loyalty and trust of
customer toward their services which is provided by firm. They also implement advanced
technology in order to fulfil their responsibility towards organisation and society which will
be beneficial for organisation in future period of time. In addition to this, brand is also
determined as a valuable resource through which the company offer branded product and
services to its user around globe. Therefore, these are considered as valuable resources which
must be considered by company for taking effective decision in future period of time.
Rare are those resources which are unique and specific. Therefore, the rare resources
of IKEA are CSR, technological advancement as well as brand. The CSR activities which
is implemented by IKEA is determined as unique that help in fulfilling responsibilities
towards society. The IKEA also focuses on implementing advanced technology in order to
provide specific products to its user that help in increasing brand image or loyalty of
customer in future period of time. Due to have value recognition, they operate their functions
and activity of organisation around the globe.
Inimitable are those resources which are not copied by any other competitive firm.
Therefore, the technological advancement and brand is determined as inimitable resource
of organisation. There are various patent as well as trademark which is used by company
using technology that is inimitable by other competitive firm. In addition to this, they have a
unique brand that is not copied by other rivalries firm that increases sales and profit of
company in future period of time and it is determined as rare resources of organisation
(Chotipanich, and Issarasak, 2017).
Organised Brand is determined as an organised resource of IKEA that help in
achieving target in timely manner. Therefore, in context of IKEA the focus is on having a
talented workforce that help in providing specific goods to its customer in achieving leading
position around the world.
Hence, on the basis of given topics, it is assessed that SWOT and VRIO analysis is
adopted for assessing internal and external factors of organisation. It is used in enhancing

success and growth of Organisation in upcoming time period. In addition to this, resource
based view (RBV) model is used by IKEA company that is going to be mentioned below:
Resource based view is determined as a strategy that help in accomplishing
competitive edge over rivalries within business organisation. The belief or Idea related to
theory is to get niche market in order to overcome from threats and the organisation focuses
on having resources which help in achieving profit in future period of time. As per RBV
model, it is important to grab new opportunities by adopting resources as well as competency
that are provided. The main purpose of this model is to provide support to strategy which is
implemented by organisation during particular phase of time period. There are two kinds of
resources which are used in RBV model named as tangible as well as intangible assets for
organisation. Therefore, the IKEA Company adopts this model that is going to be mentioned
below:
Tangible assets these are determined as physical things such as Land, capital,
property as well as many more. These are those kinds of resources which are easily purchase
by customer that helps in achieving competitive edge over rivalries at market place.
Therefore, the company focuses on providing superior quality footwear and food product to
its user for satisfying their need. It helps in increasing the loyalty and trust of customer
towards product and services provided by company in future period of time (Verma, Sharma
and Chen, 2020).
Intangible assets these are determined as those assets which do not have any physical
value but owned by organisation. It includes reputation, intellectual property as well as
trademark of business organisation during particular phase of time period. Hence, the
organisation focuses on their image in front of customer at marketplace that helps in
achieving competitive edge over rivalries at marketplace.
Therefore, there are two types of assets which are used in RBV model which is
necessary to consider by IKEA Company in order to grab opportunity and minimise threat
within business organisation in future period of time. Hence, there are different models which
are used by IKEA for assessing internal and external environment which enforces direct
influences on productivity and profitability of business organisation during particular phase
of time period.

TASK 3
Examine Porter’s five force model
Porter five forces model is used by organisation to achieve competitive edge over
rivalries in the market. It helps in enhancing growth of company at larger level. It is adopted
for analysing competitors prevailed in the market and maintain appropriate strategy that help
in enhancing sales in upcoming time period. There are various elements that are determined
by IKEA which is going to be mentioned below:
Threat of new entrant’s herein, the threat of new entrants is considered as very
high. There is not any kind of rules for taking entrance in this kind of sector. It imposes direct
impact on the activity and profitability level of organisation. In reference of IKEA, the
management team emphasis on offering best quality of products and services such as home
wares, furniture’s to its user at relatively less price. Hence, new start-ups take entrance that
help within this sector and achieving profit during particular phase of time period. In
assistance of this, the organisation executes their activities of organisation that help in
enhancing sales in future time period.
Threat of substitutes there are various products like home wares, furniture that is
offered by rivalries at marketplace. Hence, it is important to provide unique goods and
services to its user for achieving competitive edge over rivalries in the market. Apart from
this, they provide goods at relatively less price in order to compete with rivalries. It aid
assistance to organisation in enhancing sales and level of profitability in upcoming time
period (Narkhede, 2017).
Bargaining power of customer there are ample of rivalries like Tesco, Sainsbury and
Wal-Mart prevailed in the market. Thus, the user has a wider choice to choose goods and
services at marketplace. It is analysed that the bargaining power of user is determined as high
in this industry. I addition to this, it is important for management team of IKEA to maintain
appropriate strategy as well as tactics for analysing changing requirement of its user. It assists
in offering product and services according to need and requirement of its users. It enhances
sales and level of profitability in future time period.
Bargaining power of suppliers is determined as a low in this manufacturing
industry. It is important to impose cost as per price which is charges by its competitive
organisation. It helps in retaining customer or sustaining them for a longer period of time. In

assistance of this, it is necessary to build appropriate relation with its user that helps in
increasing their experience level in future time period. And also it builds trust and loyalty of
buyers and helps in retain them within business organisation for longer time period
(Susilowati, Utomo and Setiawanta, 2017).
Competitive rivalry the competition level is determined as a high in manufacturing
industry. There are different types of rivalries like Sainsbury, Tesco that provide superior
quality goods and services to its user at relatively less price. Thus, it is important to provide
products according to the need of its user in market. It assists in achieving competitive
advantage over rivalries t marketplace. It also enhances sales and level of profitability in
upcoming time period. In addition to this, the primary purpose of organisation is to provide
unique quality furniture as well as home ware to its user at less cost for accomplishing
competitive advantage over rivalries in the market.
Hence, on the given strategies it is assessed that it is important for organisation to
provide superior quality goods to its user that help in achieving competitive edge over
rivalries in the market and company focuses on accomplishing leading position around the
globe. Ansoff matrix is used by organisation for achieving competitive edge over rival firms
hat is going that is given below:
Market penetration the management team of IKEA emphasized on offering existing
goods in prevailed market to its user. In assistance of this, they provide different kind of food
items and home wares to its user at relatively less price for satisfying them.
Market developments herein, the management team emphasized on providing
available goods in new market. In assistance of this, they maintain appropriate strategy that
helps in offering food product and home wares to its user in at new market place. Their main
focus is to attracting ample of user in new market (Niaki and Nonino, 2018).
Product development herein, the manager focuses on offering innovative goods to its
user in prevent market. In reference of IKEA, the management team emphasised on
developing product named as New Chicken Burger that help in attracting large number of
user in the market.
Diversification in this level, the organisation focuses on improving innovative
products prevailed in new market. It is determined as a risky stage to launch new goods in the

market. Furthermore, for achieving profit is important for organisation to improve new goods
in new market place.
TASK 4
P4 Apply frameworks for strategic planning in importance given to company
Porter generic strategy is used by organisation to offer unique goods or services to its
user at relatively less price for achieving competitive edge over rivalries in the market.
Furthermore, the management team of IKEA use Porter generic strategies that are given
below:
Cost leadership the business organisation emphasised on offering unique and specific
goods to its user at a relatively less price. It assists in enhancing market share by providing
goods at low cost. In assistance of this, the primary aim of company is to earn profit by
providing superior quality goods as well as services to its user. It helps in increasing sales and
level of profit in the market.
Differentiation the business organisation emphasises on uniqueness in this sector that
is valued by its user. This strategy helps the organisation in providing something specific and
unique to individual person as per their need and wants (Obeidat, Al-Hadidi and Tarhini,
2017).
Focus the other generic strategy is used in the choice of narrow scope of competition
within industry. There are mainly two variants in this strategy that is cost focus as well as
differentiation focus.
Cost focus as per this strategy, the organisation focuses on achieving competitive
edge by providing relatively less price goods and services to its target segment.
Differentiation focus in this strategy, the organisation focuses on providing unique
and specific goods as well as services to its target audience. IKEA is determined as
international organisation and want to achieve leading position around the world. Therefore,
the management team of company adopts cost leadership strategy for targeting large
number of audience by providing goods and services at relatively low cost.
Strategic planning

Strategic planning is determined as a process which signifies different types of aspect
which is necessary to follow by business organisation. The administration planning involves
an objective as well as strategic steps that help in providing particular or specific direction. It
is determined as a guidance that is offered to organisation in order to increase higher level of
performance and satisfied customer during particular phase of time period. The strategic
planning which is adopted by IKEA Company that is given below:
 Aim The aim of organisation is to build superior brand image as well as goodwill of
company in mind set of its user in the market.
 Vision “The vision of company is to accomplish leading position around globe”.
 Mission “the mission of organisation is to offer good quality goods as well as services
to its user at relatively less price for satisfying need and demands of its user in the
market”
 Objectives: The objective of IKEA is to increase sales by 40% in upcoming 6
months”.
 Values: IKEA is determined as a largest brand that has reliability, simplicity and
principles.
 Strategy and tactics it is important for business organisation to maintain appropriate
strategy that help in increasing sales and level of profit in the market. The
management team adopt cost leadership strategy for satisfying need and wants of its
user at marketplace. They provide superior goods and services to its user that helps in
achieving competitive edge over rivalries at marketplace (Priem, and Alfano, 2016).
CONCLUSION
From the given report, it is assessed that business strategy is determined as a process
that helps in accomplishing goal in timely manner. It is important for organisation to maintain
appropriate plan of organisations that help in organising various activities in proper way. In
assistance of this, it is important for organisation to use latest technology for achieving
competitive edge over rivalries in the market. In this report, PESTEL well as SWOT analysis
is used for analysing internal and external environment that imposes direct influences on
performance of company. In addition to this, there are different model is used for providing
direction to its company that help in taking decision which will be beneficial in future period
of time. There are various models and theories adopted by organisation which is explained in
this assignment.

REFERENCES
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