Analyzing the Impact of Macro Environment on IKEA's Business Strategies

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...............................................................................................................3
LO1. Analyze the impact and influence which the macro environment has on an
organization and its business strategies............................................................................4
LO2. Critically evaluating the internal environment and capabilities.................................9
LO3. Evaluate and apply the outcomes of Porter’s five forces model.............................16
LO4. Understanding and interpreting strategic direction.................................................19
CONCLUSION.................................................................................................................23
REFERENCES................................................................................................................24

INTRODUCTION
Business innovation can be understood as the game plan or a series of options that
help business people achieve specific business goals. Modernizing an organization's
management is just an all-inclusive strategy to ensure poor market conditions, fulfill its
functions, satisfy customers and achieve the best parts of the business. Many business
trends and activities that a company uses to attract customers, effectively console it,
enhance performance and achieve ranking goals are a business approach. Diagram of
how a business should do to make an ideal closure. The company's approach gives the
advanced system a coordinated system to identify, analyze and exploit productive
opportunities, to detect and satisfy risks, to utilize resources and features, to
compensate for deficiencies.
Most of the organization's current system is due to time back actions and business
started to come closer, but when economic conditions turn to unexpected conditions,
the organization needs a vital response to take on the opportunities. Therefore, for an
invisible turn of events, a piece of the business system is planned as an expected
response. The given project is based on impact analyses of macro environment on
IKEA and also consists of assessment of organizations internal environment and
abilities. Analysis of Porter’s five forces model has also been done with the context of
IKEA market.

TASK 1
LO1. Analyze the impact and influence which the macro environment has
on an organization and its business strategies
Overview of IKEA
Ingvar Kamprad founded IKEA in 1943. With their office in Delft, the Netherlands, the
group has completely developed from a small Swedish company to a home-based
equipment brand on the planet that has previously sold through a list of job applications
To date, IKEA operates in one hundred stores worldwide with later development
potential.
Vision of the company
“To create better everyday life for the many people.”
Mission of the company
The mission statement of a company is compiled and created in terms of establishing its
vision and underlying beliefs built for a company, as a mirror of the game plan and the
system to be presented with the material to obtain the recommended appearance. from
an elaborate idea.
Through the future deployment of resources, IKEA's mission revolves around achieving
lasting support development for the assured benefit of suppliers, customers and agents.
In this way, a certain part of the benefits created by IKEA is attributable to economic
provisions, to the development of objects directed towards the promotion of new and
existing sources, while ensuring that the final cost imposed on customers as reasonably
as possible to expect.
IKEA Objectives: To offer a wide range of home furnishings with good structure and
capability, great quality and strength, at costs so low that most can carry them.

IKEA strategies
- The Self-Combining element reduces labor and transportation costs
- Focus on individual promotion rather than big presentation
- Limited warranty and subsequent tracking model
- Opening of small shops and uniform promotion
- Diversity in business
- Country-specific management style
- The decision of the average seller
- Financial strength, autonomy and flexibility
IKEA Tactics
- 2.6% cost reduction
- To grow with the opening of 7 new stores
- Pay 40 million Euros into supply-based panels and unstable factories in newly
manufactured stores
Impact of the macro environment on IKEA’s strategy:
A broad scenario is the external scenario in which a group company operates. The
external approach of society includes variables such as practical, social, political and
innovative elements. The changes in these elements are having a direct impact on
business development and performance. In a company, for example IKEA, for example,
an organization that regulates the furniture collection is similarly affected by these large-
scale ecological components.

Positive impacts: The positive effects of mass settlement on the IKEA case can be
characterized by positive changes in spending levels, laws and laws applied to IKEA
group. Social factors, for example, customer loyalty can promote positive effects on the
organization.
Negative impacts: Changes in macro environment such as currency fluctuations,
increase in the cost of raw materials and interest rate has negatively impact the strategy
of IKEA because of decrease in the demand company’s product due to rise in prices.
Macro Environment (PESTEL)
The great ecological elements that affect society are political, economical, social,
technical, environmental and legal. This is the second important thing now. The
PESTEL study is the tool that helps decide which destiny for the IKEA.
Political: -
The world of politics involves funding, strategies, rewards and governmental activities in
which, as a legitimate condition, rules, guidelines, advertising, administrative matters
and exchange agreements are introduced. Each country has its own distinct political
and legal components. IKEA operates worldwide and has to follow certain political and
legal factors in several countries, for example IKEA needs to use a completely new
tactics to get businesses to operate in China ("Strategies the globalization of IKEA and
its search into China ”, nd). IKEA has to negotiate in some countries where there is less
political security although IKEA cannot negotiate its strategies in developing countries
due to some legitimate components (like high currency rate, huge competition over low
price and high restrictions on FDI). In developing countries, the current strategy is that
IKEA owns and acquires a business with 100% foreign direct investment (FDI) and
destroys its agreements to open stores. IKEA, like most European and American
companies, is currently operating in the global economic downturn. In UK, there are
various change which is based on political factor such as diversion in economic growth
has been slow over the past two years. Other economic factors are common to all
countries and must be inflation rates, interest rates, wage rates and minimum wage
legislation.