IKEA: Analysing Internal and External Factors for Sustainable Growth

This report examines the internal and external factors influencing IKEA's success. It utilizes PESTLE and SWOT analyses to identify opportunities and threats, and explores ethical considerations within the company's operations. The report also delves into the social consequences of IKEA's business practices and provides recommendations for sustainable growth.

In Collaboration with
Name of Assignment
FdA Leadership & Management
Module: Understanding Organisation and Environments
Student Number: ####
Tutor: Julia Davidson
Date Month Year
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Table of Contents
1.0 Introduction................................................................................................................................4
2.0 Internal and external factors......................................................................................................5
3.0 Analysing the factors.................................................................................................................7
4.0 Social Consequences: -............................................................................................................11
5.0 Conclusion...............................................................................................................................14
6.0 Recommendations....................................................................................................................15
References......................................................................................................................................16
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1.0 Introduction
The organizational environment can be explained as the process that composed with various
factors which are surrounded around the organization and having great impact on the
performance, operations and different resources that is used in the organization. This may
include all those elements that stay outside the organization but still having eth potential impact
on the organizational productivity and profitability. It is necessary to understand the concept of
the business organization that influences the organization productivity. An organization is
facing the external environment as the vast impact on the management of the organization
uncertainty. The study focuses on the concept of the organizational environment and elaborates
the impact of internal environment (SWOT analysis), External environment (PESTLE) and
theories of legal systems.
Overview of the organization
For this project the IKEA is chosen is a Swedish founded Dutch based multinational company
that operate its business in designing and selling the ready to assemble the furniture, home
accessories and kitchen appliances. The company is considered as the largest furniture retailer
company since 2008. The company is founded by the 17 years old boy whose name is Ingvar
Kampar and now listed as 10 of the billionaire personality. They IKEA is known for its unique
designs that is adopted or implemented in the home appliances and furniture and the interior
design work with context to the eco-friendly simplicity. Additionally, the company is well
known for the attention rot the cost control, continuous product development and the
operational details that allowed the company to deliver the products and services at a very low
price.
Due to increase in the competition the IKEA Company needs to understand the applications that
as strength and weaknesses of the organization with understanding the concept of the external
envioreonmnt that Maya involve the opportunities and threats.
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2.0 Internal and external factors
Due to democracy now every organization is having their own culture. There are various factors
that affect the ability of the organization in order to respond and compete successfully the
changes that exits in internal environment as well as external environment. The success and
failure is calculated with the aspect of the culture (Gummesson, et. al., 2014). The internal
factors of the organization determine through which the organization can move forward in both
the self-contained organizational entity and the way in which it response to the external
environment.
The environment of the business environment is categorised into 2 parts that are internal
environment and external environment that are briefly explained below:
PESTLE analysis
The PESTLE analysis is the marketing tool that is used for the purpose of identifying eth
external factors that exists outside the organization. In the business and marketing environment
before developing any kind of straggles it is necessary to conduct the situational analysis.
According to the principle of PESTLE model the model must be conducted within 6 months
that help in analysing the changes that are done in the macro environment. The IKEA Company
use the model to analyse the external environment and the current factors that are becoming in
the trend (Gummesson, et. al., 2014). With the model the organization monitors and responds
the changes that are changed and developed in the macro environment and that develop the
competitive advantages for the company.
SWOT analysis
SWOT analysis is considered as the analytical technique that focuses on the evaluation of
internal environment. The IKEA Company is aims and object is to maintain sustainability and
environmental design which is considered as the central design of the organization. The SWOT
analyse help in laminating the sustainability plan for the company with combing the socially,
environment and economic issues.
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Ethical issues
In order to work in the competitive environment the IKEA Company needs to follow the ethical
concerns. The IKEA Company is encountered by various ethical issues at the time while
entering into the developing countries (Kotler, 2015). It can be explained as through the
following the follow aspects.
CSR
It is the corporate sustainability that is being performed by the particular organisation for the
growth and development. This can be accomplished without paying money on the marketing.
When a particular organisation includes in the social and environmental concern to their
business functioning. CSR by the particular company is generally adopted that company have
good balance of economy (Kotler, 2015). Environmental and social imperative. Please company
is involved in the eco-friendly practices that are helping in providing new small business
implementation.
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3.0 Analysing the factors
PESTEL Analysis
The PESTLE analyses of the IKEA Company are as follows:
External factors Description
Political IKEA Company is operated its business in almost 41 countries. Due to
different- different political influences the business is affected. The
political forces affect the supply chain activities to sales activities. Due to
stability of political environment the economic stability also affected
which return in beater profit and sales. The political factors affects the
supply chain of the organization whereas the large part of the IKEA
Company’s supply Chain is located near in Europe.
For example, Bruit is having great impact on productivity of the company.
Economic The economic factors play a very crucial role in performing the business
environment. IKEA Company needs to manage its prices of the products
that will further on help in managing the pressures which is ascend due to
the fluctuation of economic. Still the fluctuations in the economic are
considered as the good for the organization but due to the strong dollar it
makes the brands of US such as IKEA Company to lose their profits. In
the case where economic condition is better there the condition of the
employment will be improved and the brands will enjoy the higher profit
and better sales.
Social The social ND cultural factors are also very important and havi9ng the
great impact on the organizations. The social factors are having the deep
impact on the profit of the organizations. The IKEA Company opiate its
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business according to the social environment of the countries. For
example it removes the lesbian couple from the magazine in Russia.
While developing and printing the catalogues the IKEA Company ensures
that right things should be showed at right culture. More than that the
social trends and factor is also having the great impact on the sales.
Technological Technology is considered as the central part of the company. Famous
brands such as IKEA are focusing on the providing the experience that is
derived through the digital channels that make feel like real life shopping
experience (Hultman, et. al., 2012). It adopts augments reality that
improves the level of services that is provided to the customers.
Legal The legal threats are considered as the major issue due to the laws and
regulations the laws can be proved as costly for the organization. Among
the most labour laws are considered as the important concerns. The IKEA
Company faced various cases of tapping the over and death which is
caused while developing the furniture design.
Environmental The IKEA Company deliver and product the products and services in such
a way that does not harm the environment. It produces the product within
the availability of the resources (Hultman, et. al., 2012).
SWOT analysis
SWOT analyses of the IKEA Company are as follows:
Strength
The IKEA Company is having strong brand
image in all over the world.
Weakness
The IKEA Company is having small size of the
global business which is consider as the very
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The company is considered as the strongest
brand of the furniture’s.
The brand of the company will attracts the
customers from worldwide and delivers the
same quality of product.
It is increases the renewable use of the
materials.
The IKEA Company believes in long term
partnership with the suppliers (McDonaldand
& Wilson, 2016).
challenging to standardise the product.
The company is having the weak relationship
in relation with supply chain that affects the
consumer’s views towards the product.
The company is having weak communication
with its customers and stakeholders with its
environmental activities (Novicevic, et. al.,
2012).
Opportunity
The IKEA Company is having growing
demand for the greener products and low
priced.
The company is having more customers as they
lay down from more expensive stores
The company may grow in India and China.
Due to the demand of the reduced water, gee
and lower carbon footprint the company will
be benefited (Abbas, et. al., 2017).
The developing social responsibility may
include the UNICEF, save the children, world
wide fund and so on.
Threat
It is having significant reduction in the time
buyer in the housing market.
Due to free entry and exit there is more
competitors
The recession may lead to disposable income
reduces and consumer spending (Novicevic,
et. al., 2012).
.
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Ethical issues analysis
Product The IKEA Company have to face the issue of different catalogues of
different countries. While developing the product the company faces the
issues of different culture of the countries.
Price The main objective of the IKEA Company is top deliver the product at a
very low price but due to increase in competition and competitor strategy
the company face various issues (McDonaldand & Wilson, 2016)).
Place The IKEA Company needs to deliver the product according to the market
of that country.
Promotion The IKEA Company does not spend much on the promotion activities but
try to communicate with the people.
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4.0 Social Consequences: -
Development is a process by which is continuous improvement can be accomplished. This will
provide a knowledge and path for the development in IKEA. The different points under
continuous improvement can be understood as: -
Quality Control
Quality control method and technique is the technique by which quality of the produced good
can be analysed with the help of quality control.
Quality Assurance
There is the Assurance of quality that is implemented in the particular product and services.
Quality Assurance team helps in the continuous improvement in the product and services of this
company (Wilson & Gilligan, 2012).
Total Quality Management (TQM)
Effective management of the quality of the any product and services that are being provided to
the customer can be done with the help of Total Quality Management. The total quality
management. The customer are the main focus, the feedbacks received from the customer is
implemented in the development of the operational practices.
Other methods to improve quality: -
Quality Circles
The employees of this organisation should work for the organisation in such a way that fulfils
different quality standards made by this organisation for its customer. This is helping in creating
quality circles.
Kaizen-Lean production method
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Lean manufacturing is the process by which from the minimum resources the maximum output
can be attained. This will help in saving energy.
Blame free environment and problem solving skills for employees
The employees of the organisation involved in the practices that create friendly and good
environment among the employees of the organisation. Good amount can be provided to the
employee of the organisation. There is an issue between 2 members of the staff. This will be
very helpful in maintaining the good organisational change. This can be accomplished with the
help of problem (Wilson & Gilligan, 2012).
Managing change
There used to be different organisational change that used to be take place in organisation.
Organisational change affects the motivation of the employees in the organisation. This can be
positive or negative (Elg, et. al., 2012.). It is very necessary to motivate among the employees
of the organisation.
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5.0 Conclusion
From the above it has been concluded that it is quite necessary to analyse the external as
well as internal environment in order to develop various strategies for the organization. Analysis
of the external and internal environment revolves around the current trends and strategies of the
competitors that influence the business market totally. The external environment is performed at
the international level or may be at the general level. The study involves economic trends of the
national and local economics, technological advancements, government policies of local and
national influences and the social trends. The study also includes the impact of the global
market and advancement of the technology throughout the world that’s why it is necessary to
examine the internal and well as internal business market. In order to understand the concept of
external as well as internal business environment the IKEA has been chosen.
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6.0 Recommendations
 The IKEA Company needs to make pre planed strategies through analysing the current
market situation that help in availing the unnecessary cost.
 Unnecessary cost can be minimised by this organisation for the growth and development
of the organisation. The unnecessary cost can be saved by the new business techniques.
 Strong strategy can be very helpful in gaining the competitive advantage.
 There should be the situation in which the promotion can be done by this company in the
unique way. This will help in creation of a good brand image for the company. This will also
help in making the company a word of mouth.
 There can be different economic situations and consequences that can occur on the
business of this organisation.
 The events can be decided and organised in order to make a good popularity among the
customers of this company.
 Sporting sponsorship is technique by which promotion of the product and services can
be done .this will enhance revenue as well as profit.
 Innovation in the production services and the implementation of the feedback in the
constructive direction is very beneficial in such type of cases.
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References
 Abbas, R., Shahbaz, B., Ali, T. and Maqsood, M., 2017. ANALYSIS OF
SUSTAINABLE COTTON INITIATIVE IN THE PUNJAB; THE IMPACT ON
INSECT/PEST RISK MANAGEMENT. Journal of Agricultural Research, 55(1).
 Elg, U., Deligonul, S.Z., Ghauri, P.N., Danis, W. and Tarnovskaya, V., 2012. Market-
driving strategy implementation through global supplier relationships. Industrial Marketing
Management, 41(6), pp.919-928.
 Gummesson, E., Kuusela, H., & Närvänen, E., 2014. Reinventing marketing strategy by
recasting supplier/customer roles. Journal of Service Management, 25(2), 228-240.
 Hultman, J., Johnsen, T., Johnsen, R. and Hertz, S., 2012. An interaction approach to
global sourcing: A case study of IKEA. Journal of purchasing and supply management, 18(1),
pp.9-21.
 Kotler, P., 2015. Framework for marketing management. Pearson Education India.
 McDonald, M. and Wilson, H., 2016. Marketing Plans: How to prepare them, how to
profit from them. John Wiley & Sons.
 Novicevic, M.M., Morf, D., Evans, M., Sanders, L., Sun, W. and Cecil, C., 2012.
Adapting competencies for emerging markets: The case of IKEA's entry into China. Journal of
Applied Management and Entrepreneurship, 17(2), p.4.
 Wilson, R.M. and Gilligan, C., 2012. Strategic marketing management. Routledge.
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