Business Strategy: Analysis of IKEA Company

This report analyzes the business strategy of IKEA company, including the impact of environmental factors, internal capabilities, and competitive forces. It also includes a SWOT and VRIO analysis.

Business Strategy

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY ..................................................................................................................................3
P1- Ways to apply appropriate analysis to know the impact and influence of micro
environmental factors.................................................................................................................3
P 2 internal environment and capabilities of the company.........................................................6
P3- Porter's five Analysis of industry to see competitive forces..............................................8
P4- ways to apply range of theory , concept and models and interpret and devise strategies
planning for the given organization.........................................................................................10
CONCLSUION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The Business strategy is the long-term plan of action configured to achieve a specific
goal or a set of the companies objectives. A core management and the function, strategy states
that how organizational business should be conducted in each area of the operational
department of the company in order to get success in their business, and they can achieve their
get goals
This report will cover the case study of IKEA company which is Swedish company
who are selling their products on the international level and their products are, Furniture, home
accessories, Kitchen appliances etc. This report will analyze the influence of the environmental
factors with the help if PASTEL and SWOT Analysis . It will also discuss about the internal
factors and capabilities of the IKEA company and their strength and weakness by the SWOT
and VRIO Analysis. It will also apply the Porter's five process which will help to see the
competition in the market where they are operating their business.
MAIN BODY
P1- Ways to apply appropriate analysis to know the impact and influence of micro
environmental factors.
IKEA company is one of the top multinational retail company, and they are performing
very well on the international level. This company has a proper vision ad mission and proper
strategies to achieve their goals and objectives of their business (Bivolaru, Andrei and
Purcaroiu., 2009). This companies vision is to create better everyday life for the many people
a and their mission statement is “Our business idea supports this vision by offering a wide range
of well-designed, functional home furnishing products at prices so low that as many people as
possible will be able to afford them”.
There are some factors which affect the strategies of the company and also influence n
the companies decision-making strategies so it is important for the leaders of the company to
careful about the factors and by understanding to factors IKEA company can take competitive
advantages.
PESTEL Analysis of the IKEA
Political Factor
Since the IKEA company stores are open in more than the 41 different region,
the company must abide by the regulations of each. Some of the regions may be can

share their similar bills and political influence. But this cannot happen all the times, .
One thing is for sure: all countries performance from political stability. Without it,
economic staleness is impossible which Means that the IKEA company can lose
earnings in one location over some other, depending on who is in complaint and what
they stand for.
Economic
One of the major economic factors which is currency exchange has huge
impact on the companies' profitability (Chen and Kodono., 2014). On their business side
this company is affected by the powerful and the Weaker currency. The prices of the
droller increase the more US companies may can lose their money , and likely the
economy has been reinforced and it is healing rapidly which ,means that the more
jobs are opening up and sales of the IKEA company us rising. This makes this
company more profitability and company can take the competitive advantages.
Social
The social factor has also impact ion the companies strategy. One of their market is
Russia and their the company have removed the same Sax couple from their Magazine. The
Homosexual people is still not acceptable in this country Informed the IKEA displacement the
visual aspect of their cataloger to lawsuit the generic thinking of Russian people. Beyond the sea,
homosexuality is accepted and their they can be together. That’s why the company IKEA was
put in the hot seat for removing the couple from magazine. One more incident, IKEA has been
removed one of the women from a Saudi Arabian cataloguer. Which also put them in a
problems
Technological
Technology has huge impact on the companies strategy and it also help this company to
achieve the success in their business. Company is using the trendy technology for their
production areas which increase their production ad also affect the efficiency of the employees
to provide services to their customers. Company can create opportunity for themselves by
developing their online website so they can attract customers
Environmental

IKEA company to too much involved in the Eco- friendliness, and they are also putting
their financial resources on the Renewable energy in the poorer nations and the amount is
around 1 billion (Ge and Li., 2019). Their main focus is to have their store gull renewable
energy and now they are also thinking to shift their material as well and they can bring the
wood and cotton to be taken from the sustainable sources. This will help IKEA company to
create good image among the people, and they can gain customers locality.
Legal
Company is controlling their business on the global level, and they are having business
in more then 500 countries. The tax structure of the countries change, which the time which is
affecting the companies' profitability.
Stakeholders Analysis
Stakeholders of the IKEA plays important role for the company to make their business
successful. Their are two types of stakeholders in the company and they all are having different
status, structure, power and interest.
Internal
Management
This group of stakeholders manage the employees performance at the workplace of
the company, and they are having high interest and high power both (Huang., 2019). Leaders
and managers of the IKEA company are superiors, and they manage the action of the
workers .
Owner
Owner of the institution share the profit and also attend the meetings and the show
their interest in the business and provide financial resources for their company.
Staff and employees
Employees of the IKEA company are most valuable resources s because they are well
trained and they also hold stake in the company.
External
Investors
investors invest in the IKEA company so they can earn some revenue but it is totally
depend ion the company's performance (Islami Mustafa and Latkovikj., 2020). They are not
inserted in the companies other thing they just interested in the company's revenue.

government
Government is also an stakeholder of the company because they provide loan to the
company with the lower amount of interest on it.
Summery
As per the this question have successfully analyzed the factors which affect the
companies business and it has been found that company need improvement in their technology
which can be improved through the developing their online website and also has conduced the
stakeholders Analyses and explain the roles of each stakeholders and discus about their
importance like employees help to achieve companies goals etc.
P 2 internal environment and capabilities of the company
SWOT analysis of IKEA
Strength-
In the list of Forbes the company stands at 46th position with the value of $ 11.9 billion.
The company stands at no 6th position in the top 10 companies dealing in the retail sector. The
revenue that the company earns over a year is more than € 30 billion. The company has been
able to establish their brand successfully in the market which states that they are able to attract
their desired customers as they offer quality range of products and services. The company deals
on their concept that is strong and stands on the products that they offer that they are well
designed and even then their products are developed at low design.
Weakness-
The size that the company maintains its operations is large which creates difficulties
sometimes to maintain the quality of products according to the set standards. In some countries
supply chain of the company is affected by their legislations. This affects the perspective that the
consumers has for the company. Other than this company needs to balance the level of price and
the factor of quality in product used. They need to strategize and differentiate themselves in
order to leave their competitors behind. also company needs to make an effective channel of
communication so that they can have interaction with their stakeholders about the activities that
are related with the betterment of the environment (Bıçakcıoğlu, Theoharakis and Tanyeri,
2019).
Opportunities-

IKEA has many opportunities to avail in the market such as manufacturing more and
more green products, demand for low priced products are more because of the economical crisis.
They believe that if they go green they can maintain their share in the market. Also the demand
for the products that are eco friendly is on the rise this may help the company to achieve growth
in the market. Also they have the scope to tap those markets which are cost conscious and
saturated as they are the perfect fit for the business model of the company. Company is also
availing the opportunity of working for the growth of environment by reducing carbon footprint
and taking more use of energy that are renewable. Other than this the company is also looking to
reduce the amount of transportation through airways and sent the products in bulk.
Threats-
Many local competitors of the company has copied the business model of the company.
This states that it is necessary for the company to keep working on their model and updating it as
new so that they can counter this measure of threat. Other than this level of change in political
stability which can increase the taxes. This will result in increase the prices of the products
offered by the company and their strategy of offering the products at low cost (Park and Mithas,
2020).
VRIO analysis
Valuable
 Financial resources of the IKEA organisation is most valuable resources because
company can use the resources to run their operations activities smoothly and also
implement new technology at their workplace (Jeong Amd et.al., 2013).
 employees of the IKEA company are supposed to be valuable because they are having
skills, and they are highly motivated.
Rare
 Financial resources of the company are rare because not every company in this field can
this much strong resources.
 Home and kitchen product of the company are not rare because customers can find the
same products easily and the durability of the IKEA product is rare.
Imitable

 employees of the IKEA are not that costly immediate because their are high possibility
for the company that their employees can leave their organization if they will get better
salary as compare to the IKEA company.
 The patents of the IKEA company are very hard to imitate because it is not lawfully
accept to imitate a proprietary product. Similarly, resources to be formulated, and they
get a apparent for them is also a pricey activity.
Organize
 Supply chain of the IKEA company is fully organized, and they responsible from the
staring process to the end process of the supply chain.
 Financial resources of the company has been organized properly and financial manager
of the company ensure the flow of cash in the companies.
Summery
though the company has an immense amount of goodwill in the market which helps them
to establish their presence easily the methods use by them are old and the level of competition
they are facing is high for which they need to implement new strategies into their structure. T
with the help of Vrio analysis has been found that the KEA company's financial resources are
not been fully used by the department which can be improve of the companies finance
manager ensure the utilization of financial resources.
P3- Porter's five Analysis of industry to see competitive forces
IKEA company is one of the top retailer company is all around the globe and this
retailer industry has huge competition and the others five forces can be helpful to know the
impact of those forces. Here is 5 forces of the Retail industry.
Porter's Five forces
Threat of new entrant
Threat of the new force is very high for the new business if they want to enter the retail
industry (eong Amd et.al., 2013). They will need high financial resources to set up their business
so first of all they should have strong financial resources and if they will able to enter this
industry then also they have to recruit employees for their stores and make proper set up to
show their presence, and they should have the good pricing strategies. It is also difficult to enter
this retail industry because their are many big brands Like IKEA, TESC, M&S etc already
capture the most of the market so it will be hard for them to show their presence in the retail

industry and get the success in their business. This show that the threat for the new entreat in
the retail industry is very high, so they can feel this force very high.
bargaining power of suppliers
Bargaining power of the supplier is low because in this industry because the number of
supplier is more then the buyers so the suppliers have very less control over the prices of the
products. Companies who are working in this industry can buy their product in less prices, and
they can add some value for their customers. Companies like IKEA can force their suppliers to
provide them row material for their product in less prices and the suppliers have to provide them
in less prices otherwise they have option to go with another supplier who can provide them Raw
material in less prices (Mkude and Wimmer., 2015). The support which are provided by the
suppliers are firefly standardized and the very less differentiated and have very low switching
cost. This makes easily for the retailers in this industry to switch their suppliers and go with
some other suppliers. The suppliers in this industry do not claim with the the other product s
within the industriousness which means that the there is no other secondary product other
than the ones that the suppliers supply. This thing can make the suppliers powerful force for
the industry.
bargaining power of Buyers
Bargaining power of the supplier is very high because in the industry where IKEA
company is operating their business have other retailers who sell the same product which are
sales by the IKEA company so customers have the other choice to go with the other retailers
like M&S is one of them. This makes company to bargain with the customer on their product
prices, so they can gain loyalty of the customers, and they can stay in the competition. Quality
of the product can provide the comp0itive advantages, and they can decrease this force from
them. The IKEA company should maintain the quality of their products.
Threat of substitute product
There are very less substitute products are available in the products that are make by
the industry in which IKEA operates (O'Hara And et.al., 2017). There are very less substitutes
which are acquirable and this are also make by the low profit realizing industries. This
means that there is no control on the maxim profit that organizations can earn in this industry

in which IKEA run their business. All of these cause makes the danger for the substitute
products weakeners power withing the industry.
Rivalry among the existing Firms
Competition among the industry where IKEA company is operating their business is
very high because they care facing a high pressure and competition in the market on the basis of
prices of the product,. New competitors are selling the product to the customers in less prices
which put pressure on the other companies to decrease their product p0ricess as well. This also
affect the IKEA company, and they also have ti decrease the prices of their product, so they can
e in the competition and earn the profitability. This how the threat of competition is high in the
retailer industry.
Ansoff matrix
Market penetration
In this strategy company focuses on increasing sales of existing products to an existing
market. So IKEA company will look for the expansion of the business in the market where they
are already having good selling product. They well the existing product in existing market. This
will help to make them more stronger in the market, and they can take the competitive
advantages in the market.
Product Development
With use of this strategy IKES company will introduce the new product in the market
where they are already have their presence (Omsa, Abdullah and Jamali., 2017). This is one of
the best strategy for this company because their customers who are loyal with them will but
the product form them and this can create high competitive advantages for the IKEA company,
and they can also gain the customer's locality.
Market Development
In this strategy company will enter the new market with the existing products which they are
already selling in the other market stores. This strategy have the high chances to get the success
for the IKEA company because their products are already famous in the other countries, and
they can easily sell their product in the new market a but they have to ensure that that companies
customers behavior o n your product, and they will have to analyze the market before enter in
the new market.
Diversification

This strategy for the IKEA company will focus to enter the new market with the new
product. This is highly risky strategy for them because there is very high chance that a company
can fail in their business expansion (Ouma and Oloko., 2017). Ikea company can suffer from the
losses if they will use this strategy but if they will able to enter and their business get success
then they will able to earn the high profit and show there presence in the market with the one of
the top emerging brand in the retail industry and show their presence in the international
market.
Summery
Porter's five forces helps to analyze the competition and the threat within the industry
where the IKEA company is operating their business and it has been found that company can
take the competitive advantages if they are able to make good relationship with their suppliers.
And the best strategy company can use is through the Ansoff matrix is product development
and this strategy will help them to take competitive advantages.
P4- ways to apply range of theory , conception and models and understand and devise strategies
planning for the given organization
In working environment of the company, where people hardly considers to it as
'business planning', business follow a generally much more in order to the controlled and
disipline approach. When business plan projects, plan and make the new products and services,
new initiatives and programmers. They also draw up the new plans for change in their
business, for doing things more differently and also doing things more better. They also can
discuss about the draft and then implement for the short, longer-term and medium plans as to
where, organizationally, we want to get to, what we want to achieve. IKEA company have to
plan companies operation, and they have to set the goals which can be achievable by the
employees of the company so company can show their presence and take the competitive
advantages in the market where they are operating their business. Porter's genetic strategies can
help this company to plan and take the competitive advantages in the market.
Cost leadership
In the Cost leadership strategy IKEA organisation will fit out the to turn the low cost
procedure in the retail industry (Pan, Chen and Zhan., 2019). The sources of the advantages
from the cost may can calculate on the construction of the industry and this can also conclude
the economies of the scale , advantageous way to the row material and the proprietary

technology and many other factors in the economy. A low cost producer must find b y the IKEA
company and effort all sources of the advantage of the cost for the business and if the firm
may can accomplish and sustain overall cost leadership, then it will be an preceding fair
performer in their industry and also provided it can bid prices at or near of the industry ordinary.
They can take the competitive advantages and show their re presence in the market where they
are operating their business. They can use the competitive pricing strategy to take the
competitive advantages in the market.
Differentiation
Differentiation strategy can be useful for the IKEA company because this will help them
to gain competitive advantages. Denunciation in the product of the company can be beneficial
for the company because people like to buy product which can provide them extra benefits
otherwise people can but the same products from the other (Wagner, Hassanein and Head.,
2008). If their will some differences in their product then they will able to attract customers, and
they can show the difference in their product and the other companies' product. New feature in
the product will attract customers and convenience them to buy product from the IKEA
company. So company should develop their product through the market researcher. Their
marketing team can help to research the market and find the needs of their customers and
according to that company can develop their product.
Focus
The generic strategy of focusing rests on the select of a narrowing competitive scope in
this industry. The focuses choice a section or the group of part in this industry and adapt its
strategy to delivery them to the situation of others.(a) In cost focusing a company seeks a cost
benefits in their target part, while in (b) distinction focus of the company seeks specialization in
their target section. Both the variable of the focus strategy rest on differences between a
focuser's mark section and other the segments on the industry. The targeted section must either
have the regular buyers with unusual needs or else the manufacture and delivery system of that
first serves the target section must differ from that of other industry segments. The best
suggestion for the KEA company will be to focus on the there product quality because the
quality can improve the customers satisfaction and if the quality will be good then customers
willing to pay for the product.
Tool management system

Inventory management system
Inventory management system for the IKEA can provide them success in their business
because this is one of the best system which can be impliment6ed by the company, and they can
control there useful resources their inventory. This system helps to manage the companies raw
material, and also count the available resources in the company. One of the best use of the
Inventory management system is that the company can use it for the future forecasting of the
resources in the company (Xue-ru., 2009). They can provide expect need of the resources in
the future so company can make available the resources for the future needs, and they can
provide the products to their client when they will require and company can achieve the success
in the market where they are operating their business. This is the best management system
which can be used by the IKEA company to take the competitive advantages, and they can also
manage their inventory properly and make available the resources.
Bowman's Strategic Clock
Low price and low value Added
In this strategy company sell their product in the lower prices and their value will also
be lower and IKEA have to ensure that no one can undercut them. This will help them to take
competitive advantages.
Low price
In this strategy company will less their product in lower prices but the quantity of the
product will be high so IKEA ca make some profit bu selling the Bulk products and make
some profit
Hybrid
The aim is to persuade consumers that there is good added value through the combination
of a reasonable price and acceptable product differentiation. This can be a very effective
positioning strategy for IKEA, particularly if the added value involved is offered consistently.
Differentiation
In This strategy company develop their product and create some differentiation so they
can sell their product in the less prices by showing the differences.
Focused differentiation

IKEA is the luxury brand, and they can adopt this strategy and this strategy aims to
position a product art the highest prices levels in the market and the customers buy their product
because of the higher value .
Risky High Margins
This is an risky strategy in which IKEA will sell their product in the higher prices
without adding any extra prices, so they can earn higher profits by selling products.
Monopoly Pricing
Monopoly product have no extra feature and other sellers will also sell the product
same specification it is depend on the customers if they want to buy or not. So IKEA can use to
take competitive advantages but the margin is very low.
Loss of Market Shares
In this strategy company will sell their product in the giver prices if their other
competitors are selling the same product in the lower prices. IKEA will sell it on higher price.
Summery
As per the above task has been analysis the Porter's Genetic strategy and find out that
the company can take competitive advantages if they will use the cost leadership strategy . In
addition, Bowman's Strategic Clock can be used and best option this strategy will be if the
IKEA will use the product differentiation for the competitive advantages.
CONCLSUION
AS per the report has been analyzed the influence of the environmental factors with the
help if PASTEL and stakeholders analysis . It also has been discuss the internal factors and
capabilities of the IKEA company and their strength and weakness by the SWOT and VRIO
Analysis (Zhang, Leng and Zhou., 2020). This report has been apply the Porter's five process
which will help to see the competition in the market where they are operating their business.
This has been also provide strategies to overcome from those issues and company ca gain
competitive advantages in the market and create their good respect among the customers.

REFERENCES
Books and journal