Analyzing the Influence of Environment on IKEA: A Business Strategy Report

This report analyzes the influence of the environment on IKEA, including macro environmental factors, economic factors, social factors, technological factors, legal factors, and environmental factors. It also includes a stakeholder analysis and evaluates the internal capabilities of IKEA using SWOT and VRIO analysis. Furthermore, it applies Porter's Five Forces model to assess the competitive landscape and explores growth strategies using the Ansoff matrix.

Business Strategy
Table of Contents

INTRODUCTION...........................................................................................................................3
TASK 1 Analyze the influence of environment on chosen company.............................................3
TASK 2............................................................................................................................................6
Critically evaluating the internal environment and capabilities......................................................6
TASK 3............................................................................................................................................8
Evaluate and apply the outcomes of Porter’s Five Forces model....................................................8
TASK 4..........................................................................................................................................10
Interpreting strategic direction.......................................................................................................10
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Business strategy refers to the set of competitive works and activities that used by an
organization to enlarge the business opportunities in order to remain always competitive in the
business world (Ansoff and et.al., 2019). With the help of systematic activities organization can
be able to carried out their business works and activities in best manner. it is very much
important for an organization to choose business strategy as it provides the clear goal and
objectives, obtain better understanding of actions or activities in order to gain the desirable
outcomes in potential manner. respective report is based on the IKEA which is the Swedish
furniture organization that build ready to assemble furniture, kitchen appliance and many more
products for their potential consumers. Respective report is based on the critical analysis of the
macro environmental factor and tactical decisions against it. Further it includes the internal
capabilities of the organization by including the VRIO and resource based view to gaining
competitive analysis in potential manner. it also includes the competitors analysis of
organization by using the Porter’s five force model that is one of important part of organisational
business strategy. Finally it includes the interpreting strategic direction of the organization with
the help of Porter’s generic strategies by creating the plan in order to gain important insights and
knowledge for taking effective kind of decisions.
TASK 1 Analyze the influence of environment on chosen company.
Vision:The vision statement of the IKEA is “ To create better every day life for the many
people”.To elaborate the vision of respective organization bring business idea that assist in
achieving organisational diverse range of their functional and designed products of home
furnishing to provide at best economic price range to providing better accessibility.
Mission: In Mission statement of IKEA but above mentioned phrase related with the business
goals and objectives (Cusumano, Gawer and Yoffie, 2019). Their mission is to provide one of
best furniture in best affordable price range to large no. of people.

Objectives: In their business objectives consist of make better every day living of people
impacted by their business in potential manner. for gaining the desirable outcomes they are very
much concern for environment also for building distinctive image in the marketplace.
Macro environment: It is very much potential for an organization to evaluate the business
environment for collecting the potential knowledge and information. In context of IKEA that
accessing UK marketplace that is important part of European union (Danso and et.al., 2019). In
that regards it has been analyze that there are not any kind of restriction or limitation over the
entry and exit. The another attribute that is decrease in corporate taxation by 30 to 28% that helps
in gaining higher level of profitability in the near future.
Positive aspects: Due to decrease in the tax rate in the economy of UK, it proved beneficial for
IKEA in gaining the higher level of profitability and sustainability into the marketplace.
Negative aspects: on other hand due to not any kind of restriction over the entry and exit it
creates lot of competition in the marketplace that hinders the self interest of organization in
gaining the desirable outcomes.
Economic factors: In respective factor consist of the interest rates, taxation and other kinds of
regimes that directly affect on the business works and activities (Davis, 2020). In the UK
economy due to advent of Brexit organizations have to encounter various kinds of new policies
and regimes.
Positive aspect: It has been analyze that IKEA is one of most well known and developed
organization that always focus on the growth and sustainability into the marketplace. in that
regards increase in rate of GDP, interest rates and disposable income of consumers positively
affect on business activities of respective organization.
Negative aspect: Changes in economic conditions hampers their business activities that is very
much important.
Social factors: In social factors consist of the change in taste and preferences of the consumers ,
in that regards it is accountability of organization to conduct the through research to satisfy their
emerging demand.

Positive aspect: due to shift in consumer taste and preferences proved opportunity for the
organization to enlarge their business opportunities in positive manner. in that regards advent of
new products and services into the market proved beneficial for respective organization.
Negative aspect: due to rapid change in consumer taste and preferences it has been analyze that
it become very much difficult for organization to cope up with these changes as understanding
consumers demand is very much time taking activity (De-Aguilera-Moyano, Castro-Higueras
and Pérez-Rufí, 2019).
Technological factor:
In technological factors consist of the using one of most advance tools and techniques
that proved beneficial for organization as well as for consumers in raising their living standard.
In context of IKEA they are pioneer in respective attribute as they use easy to assemble furniture
that also eco friendly in nature.
Positive aspect: In context of IKEA respective organization have to invest lot of money for
improving the technology such as easy to assemble furniture and eco friendly products that is
important for consumers.
Negative aspect: It has been evaluated that technological advancement takes too much time and
cost as it required expertise (Fritscher and Pigneur, 2020).
Legal factors: In legal factors consist of the different kinds of regulations and regimes that
directly affect on the business works and activities of the organization. in context of IKEA while
operating in the UK market safety regulations, consumer rights and duties implied on business
activities.
Positive aspect: the various kinds of laws and regulations helps to amend the working conditions
of the organization and improve the motivation level of employees.
Negative aspect: It has been examined that respective organization operates in many countries
so cooperation with various kinds of regimes impact adversely on their activities.
Environmental factors: In respective factors consist of the change in climate, weather and other
many other factors that influence on business activities of organization.

Positive aspect: Due to change in weather and climatic conditions organization can bring in their
products and services in order to remain competitive.
Negative aspect: Due to increase in the manufacturing it produce lot of waste and emission.
Stakeholder analysis: Stakeholder analysis is the process of identifying the people who
contribute in project and grouping them as per their participation, interest and influence on the
project (Ghauri, Grønhaug and Strange, 2020). In context of IKEA that for building business
strategy for expanding their market need to collaborate with their stakeholders such as
consumers, researchers, investors, consumers and many more. In that regards it is very much
potential to group and prioritize respective stakeholders on various categories to serve them in
best possible manner. It consisted keep satisfied, manage closely, monitor and keep informed so
that every individual can give one of their best efforts in organizational development and
enhancement.
TASK 2
Critically evaluating the internal environment and capabilities.
To evaluate the internal capabilities of the organization need to conduct the SWOT and
VRIO analysis that are as follows:
Strength:
 The major strength of respective
organization as they are very much
conscious about the ins and outs of
their consumers. It helps to serve
consumers in their one of best possible
manner (Kitsios and Kamariotou,
2019).
 The another important attribute that is
they have lots of designer products and
further more from the physical
Weakness:
 In context of IKEA there are some bad
press as employees complained about
their poor treatment. They faced
criticism for using the bad
advertisement techniques and also
children hurt from the IKEA furniture.

decorations. Their products are easily
transportable and very ease to
assemble.
Opportunities:
 It has been analyze that it existed only
in few nations that are 38 so it is
opportunity in front of them to enlarge
business opportunities (Liao and Tsai,
2019).
Threats:
 The threat in front of respective
organization that they faced fast
competition due to growing firms of
furniture.
VRIO analysis: VRIO analysis proved beneficial for organization in accessing their internal
capabilities that helps to operate their business activities in most potential manner. here are the
VRIO of IKEA:
Resource Valuable Rare Inimitable Organized
Design and
quality
Yes
Financial
resources
Yes Yes
Affordable
range
Yes Yes Yes
Employee
potential
Yes Yes Yes Yes
Valuable:
 The most valuable resource in front of organization is its financial capabilities that is
highly valuable in nature and helps in investing for gaining the external opportunities that
arise (Park and Mithas, 2020).
 In context of IKEA organisational design and process of assembling is one of most
valuable resource attribute that directly contribute in organisational development.

 The organisational best range of pricing proved very much valuable in attracting attention
of employees in order to gain desirable outcomes.
 In that regards employee potential is very crucial for organization as contribution of
talented personnel is very important.
Rare:
 In context of IKEA the one of most rare resources that organization possess is
financial resources, affordable range of products and employee potential that
contributes in enhancing consumer experience in positive manner (Pucheta‐Martínez
and Bel‐Oms, 2019).
Imitable:
 In respective range consist of products that are not imitate by others very easily as it
helps to organization in gaining potential kind of outcomes. in context of IKEA they
provide one of best price range to their consumers that is not easily imitable in nature.
 The another important factor is employee potential that is very difficult to occupy and
take advantages from them.
Organized: In respective factors consist of:
 For an organization it is very much important to organized the potentiality of employees
that is very much important for organization (Sanders and Wood, 2019).
TASK 3
Evaluate and apply the outcomes of Porter’s Five Forces model.
For an organization assessment of competitors strength and capabilities plays very much
important role. In context of IKEA here are the competitors analysis with the help of Porter’s
five force model:
Intensity of competitive rivalry: with the help of respective attribute organization can be able
to access the level of competition in the marketplace. in context of IKEA there are large no. of

firms that are operated in the same field with various kinds of products. due to large no. of
organization it faced fierce kind of competition.
Bargaining power of suppliers: the supplier power in context of IKEA is very high as they
provide raw material for manufacturing of furniture at the high price. In that regards IKEA
always wants qualitative raw material for producing the quality products in order to gain
desirable outcomes (Travis and Hodgson, 2019).
Bargaining power of buyer: Buyers for the organization is very much important, in context of
IKEA the power of buyers is high as they often demand for quality products. it has been
evaluated that in the market small distributors of furniture existed. in respective scenario the
bargaining power of buyers is high in nature.
Threat of entry and exit barriers: It has been evaluated that in context of IKEA the threat of
entry and exit of new businesses is very much easy that harms the self interest of organization in
enlarge business opportunities (Uyar, 2019). Due to liberal policies in the operating business
activities in UK market create the hurdles in front of organization in achieving desirable
outcomes.
Threat of substitute and complementarities: the role of subsitute products and services in the
marketplace is very much important. In context of IKEA it has been evaluated that various kinds
of furnishing accessories available in the marketplace that is work as an substitution for products
and services of IKEA. In that regards it is very much potential for organization to build strategies
and tactics to gain desirable outcomes.
Ansoff matrix:
Respective model is very much important for the strategic marketing planning where an
organization applied the opportunities to grow their level of revenue for developing the new
products and services. here are the strategies to grow their business
Market penetration strategy: Respective strategy states about the way to sell more of
organisational products and services to their existing consumer base. Respective strategy proved
beneficial for organization to enlarge their present market base by exploring the boundaries.

Product development strategy: In respective strategy includes the way to develop the existing
products and services by analyzing needs and demand of consumers in order to enhance their
level of experience in positive manner.
Market development strategy: In respective strategy organization enter into the new market by
exploring the opportunities to best utilize the resources in order to achieve the desirable goals
and objectives. In context of IKEA they aimed to develop their market in order to enlarge
business opportunities in potential manner. it probed beneficial in achieving potential outcomes
by find out spheres that available in market.
Diversification strategy: In respective phrase organization move into new markets with the new
products and services for enhancing their sales and growth to remain competitive in the
marketplace (Uyar, 2019). respective factor plays important role in organization to gain desirable
outcomes.
So it is very much important for an organization to evaluate the market and areas of
improvement in order to achieve desirable goals and objectives. In context of IKEA which is
one of most well known organization in that regards development for respective organization is
very much potential.
TASK 4
Interpreting strategic direction
It is very much potential for an organization to build strategies and tactics that is very
important to move in the definite direction to gain desirable goals and objectives. In context of
IKEA they by using Porter’s generic strategy Plan for growth and development in order to
remain competitive in marketplace.
Here are the Porter’s generic strategies:
Cost leadership: In the cost leadership consist of the firm sets one self as the low cost producer
in the industry. The major sources of cost advantage that vary from the structure of industry and
includes major benefits that are economies of scale, proprietary technology and preferential kind

of access in order to gain desirable outcomes. in context of IKEA it is very much potential for
organization to use one of most effective pricing that helps to reach at large no. of consumers.
Differentiation: In respective strategy consist of firms efforts to be most unique in industry
along with some sorts of dimensions that are majorly utilized by the buyers in order to gain
desirable outcomes . in respective attribute consist of the attributes that perceived by buyers as
most important and by uniquely position oneself to compensate demand of consumers in
potential manner. in that regards it is very much important for an organization to position one
self distinctively in the market by accessing consumer needs and demand.
Focus: In respective generic strategy consist of the choice of the narrow market place by
elaborating the opportunities in the market with in the industry. In respective strategy
organization segment or group the segments on the basis of industry to serving consumers in one
of best manner .
By using respective attributes organization can be able to position oneself distinctively in
the market by elaborating own skills and capabilities to perform in one of best manner. In
context of IKEA it has been evaluated that by using cost leadership in which by offering one of
best pricing to the end users they gain larger market share.
Strategic plan:
Strategic plan is very much important for an organization that elaborate the areas in
which organization can reap important kind of benefits to remain competitive in the marketplace
(Pucheta‐Martínez and Bel‐Oms, 2019). In context of IKEA they want to enlarge business
opportunities in the market of Vatican city in the Europe for enlarge business.
Organisational structure: While enlarge business opportunities organization need to choose one
of best structure that is democratic in which decision making should be given to employees.
Mission:
IKEA wants to enlarge or grow their market in the new location that is Vatican city at the
most affordable price range.
Vision:

Vision of respective organization is to provide one of best products and services that are
eco friendly in nature to influence the purchasing decisions of consumers.
SMART objectives:
 To enter into new market that is Vatican city by 2022 to enhance profitability by 22%.
Macro environmental factor: To access the macro environment it is very important for
organization to opt PEST analysis that are as follows:
Political: To develop the new market organization need to analyze or evaluate the market and
their political conditions in order to build strategies and tactics in positive manner.
Economical : It is very potential for organization to build the plan and strategies to deal with the
economic conditions of the europe in order to achieve desirable goals and objectives in potential
manner.
Social: In social factors consist of the changing taste and preferences of consumers, in that
regards organization need to analyze the purchasing behavior of new consumers (Pucheta‐
Martínez and Bel‐Oms, 2019).
Technological factor: It is very important for organization to choose one of best tools to enhance
the living standard of people.
SWOT analysis:
Strength:
The major strength of respective organization
that they have the experience to enlarge market
in new countries .
Weakness:
It can harm their self interest that they not have
adequate knowledge about the market of
Vatican city.
Opportunities:
The main opportunity in front of organization
to gain the profitability and sustainability of
market.
Threats:
The major threat that large no. of competitors
existed in the country.

Competitors analysis:
Bargaining power of suppliers It is low in context of Vatican market as large
no. of suppliers existed in the market.
Bargaining power of buyers It is high as large no. of options available in
front of consumers.
Threat of substitutes It is high as consumers have large no. of
options existed that impact on the
organisational profitability.
Threat of new entry and exit There are less entry or exit restrictions on their
business activities that proved harmful for their
business.
Competitive rivalry It is high as large no. of competitors existed in
market that proved harmful for organization.
In that regards it is very much important for an organization to build strategies and tactics by
evaluating the business environment in order to remain competitive.
Market analysis:
Smart objective Actions taken to
achieve the
objectives
Resource
implication
Criteria of
success
Responsible
In context of
IKEA they aimed
to open their
stores to offer
wide range of
products and
services to
enlarge business
opportunities. It
is proved
beneficial to
To gain the
desirable
outcomes it is
very much
potential for
organization to
evaluate the
market
conditions in
proper manner as
it is significant
To build into
practice
respective plan
organization
need to arrange
various kinds of
resources such as
funds, manpower
and many more.
By enlarging
business
opportunities by
reaching large
no. of consumers
proved beneficial
for them.
CEO

remain always
competitive in
marketplace.
for gaining
important kind of
insights.
Monitoring and evaluation: it is very much important for an organization to evaluate various
kinds of factors or attributes that proved beneficial in improving the business conditions. With
the help of benchmarking and key performance indicators organization can be able to modify
their performance in order to remain competitive in business environment in potential manner
(Pucheta‐Martínez and Bel‐Oms, 2019). . it has been evaluated that respective efforts proved
very much beneficial for organization in effectively grasping potential outputs to gain
sustainability.
CONCLUSION
From the above report it has been concluded that business strategies plays very much
important role for the organization to provide the definite direction in regards of organisational
activities to remain enough competitive. While building strategies organization need to evaluate
the macro business environment with the help of PESTEL and any other tool to collect better
insights. With organization need to access the internal capabilities that proved beneficial for
organization in collecting the necessary knowledge regarding employees capabilities and level of
motivation in order to gain the desirable outcomes. while bring something new product and
services in marketplace it is very important to analyze competitors and their strategies to achieve
potential outcomes. to build the strategies in the right direction organization need to focus on the
generic strategies of organization by potentially targeting organizational resources in the right
direction for achieving the desirable outcomes.

REFERENCES
Books and journals:
Ansoff, H.I. and et.al., 2019. Societal strategy for the business firm. In Implanting Strategic
Management (pp. 285-310). Palgrave Macmillan, Cham.
Cusumano, M.A., Gawer, A. and Yoffie, D.B., 2019. The business of platforms: Strategy in the
age of digital competition, innovation, and power. New York, NY: HarperCollins.
Danso, A. and et.al., 2019. Environmental sustainability orientation, competitive strategy and
financial performance. Business Strategy and the Environment, 28(5), pp.885-895.
Davis, P.J., 2020. Getting employees involved in strategy planning. Journal of Business Strategy.
De-Aguilera-Moyano, M., Castro-Higueras, A. and Pérez-Rufí, J.P., 2019. Between broadcast
yourself and broadcast whatever: YouTube’s homepage as a synthesis of its business
strategy. El profesional de la información (EPI), 28(2).
Fritscher, B. and Pigneur, Y., 2020. A visual approach to business IT alignment between
business model and enterprise architecture. In Sustainable Business: Concepts,
Methodologies, Tools, and Applications (pp. 543-566). IGI Global.
Ghauri, P., Grønhaug, K. and Strange, R., 2020. Research methods in business studies.
Cambridge University Press.
Kitsios, F. and Kamariotou, M., 2019. Business strategy modelling based on enterprise
architecture: a state of the art review. Business Process Management Journal.

Liao, Y.C. and Tsai, K.H., 2019. Innovation intensity, creativity enhancement, and eco‐
innovation strategy: T he roles of customer demand and environmental
regulation. Business Strategy and the Environment, 28(2), pp.316-326.
Park, Y. and Mithas, S., 2020. ORGANIZED COMPLEXITY OF DIGITAL BUSINESS
STRATEGY: A CONFIGURATIONAL PERSPECTIVE. MIS Quarterly, 44(1).
Pucheta‐Martínez, M.C. and Bel‐Oms, I., 2019. What have we learnt about board gender
diversity as a business strategy? The appointment of board subcommittees. Business
Strategy and the Environment, 28(2), pp.301-315.
Sanders, N.R. and Wood, J.D., 2019. Foundations of sustainable business: Theory, function, and
strategy. John Wiley & Sons Incorporated.
Travis, D. and Hodgson, P., 2019. Think Like a UX Researcher: How to Observe Users,
Influence Design, and Shape Business Strategy. CRC Press.
Uyar, M., 2019. The management accounting and the business strategy development at
SMEs. Problems and perspectives in management, (17, Iss. 1), pp.1-10.
Wadström, P., 2019. Aligning corporate and business strategy: managing the balance. Journal of
Business Strategy.
Zucchella, A. and Previtali, P., 2019. Circular business models for sustainable development: A
“waste is food” restorative ecosystem. Business Strategy and the Environment, 28(2),
pp.274-285.