SWOT and PESTLE Analysis of IKEA: Business Context and Leadership Style

This report provides a detailed analysis of IKEA's business context, including a SWOT and PESTLE analysis. It evaluates how changes in PESTLE factors have influenced the opportunities and threats of the business and recommends a suitable leadership style from Daniel Goleman's leadership styles to help meet business objectives with a focus on changes in the business environment.

CONTEXT OF
BUSINESS

Table of Contents
INTRODUCTION :.........................................................................................................................3
1.1 perform the swot analysis of IKEA:......................................................................................3
1.2 perform the pestle analysis of IKEA:....................................................................................5
1.3 Evaluate how the changes in PESTEL factors has influenced the Opportunities and
Threats business. Critically comment on how the business is addressing their Strengths to
negate Threats and Weakness affecting their Opportunities.......................................................7
1.4 Recommend a suitable leadership style from Daniel Goleman’s leadership styles which
will help them meet their business objectives with focus on changes in the business
environment: ..............................................................................................................................8
1.5 Critically comment on their Corporate Social Responsibilities in the processes:................9
CONCLUSION:.............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION :
Business can be defined as the activity which helps in making an individual's living as well as
help them in making money in the process which includes the process of producing or buying
and selling of the goods and services which basically have the motive of profit making. On the
other hand, business context can be defined as the concept in which there is a very specialised
vocabulary which is being employed. The business context can be an individual organisation or
any big business community or maybe a particular project with an initiative as well. The business
context analysis however is the method which helps in analysing the business surroundings and
the business environment under which the business or the organisation actually operates. for this
respective report however, IKEA has been taken into consideration which is a Swedish founded
company with the headquarter in the Delft, Netherlands (Aman and et.al., 2022). It basically
deals in the ready to assemble furniture, kitchen appliances, furniture and other goods and home
services as well. IKEA is the world's largest furniture retailing company since the year of 2008.
TASK 1:
1.1 perform the swot analysis of IKEA:
Strengths of IKEA:
 CUSTOMER KNOWLEDGE: one of the main strengths for the IKEA company has to
its extensive customer knowledge. The company knows and analyse the purchasing
factors that basically influence all the customers to purchase the goods and products and
also apply the best activity to induce those decision making. IKEA basically offers to the
public a wide range and variety of products. The designers of the IKEA company
continuously work for introducing the new designs for the products which will look
attractive top all the customers ad make the buy it in that particular period of time (Diab,
2022) .
 SUPLY CHAIN INTEGRATION: IKEA company basically is committed to have those
long lasting relationships with all of its suppliers. From this healthy relations, the
company has any advantages which includes the large volume of bulk orders and get the
advantage of low prices than before. IKEA also sources its all the materials to all the
close suppliers which helps in reducing the transportation cost for the company as well.

The IKEA company also uses the approach of IWAY which basically helps in
approaching all the close suppliers within the supply chains as well (Welch and et.al.,
2022).
Weaknesses of IKEA:
 LOW QUANTITY OF THE GOODS AND SERVICES: OKEA is basically a
company which can not find a solution to have a compromise between the continuous
cost reductions and at the same time also maintain the same quality which they are
providing to it customers for the goods. According to the data, it can be said that the
customer's of IKEA are very much less satisfied by all the predicts and services they
offer. The reason being that the quality of the goods and services they produce is only
average as compared to the other stores in UK (Dimitrova and Öhman, 2022). The cost of
the company is being reduced which hence results in the larding to the reduction in the
products quality as well which is being again followed by the increased number of the
goods which are also being returned and the brand name is also being damaged.
 STANDARD PRODUCTS: The main competitive advantage for the IKEA company is
that it derives from the low costs, that are also considered as the part of the standardize
products which are also being achieved. The standardization of the products however also
attracts very low number of the customer segments. And hence, the inability of the
business organisation which are ready to offer the best quality products with the more
customized at the same time which also allows its competitors to complete the place and
fortify instead of their position as well.
Opportunities for IKEA:
 FURTHER EXPANSION IN OTHER DEVELOPING COUNTRIES: The markets
of retailing produce are being increased by at least 5 percent on the average rising
markets in the previous year. Therefore, there is a very big opportunity for the IKEA
company to increase its net revenue growth as well. The IKEA company however
operates on many of the developed countries but does not completely got set up in many
of the still developing countries (Dwivedi and et.al., 2022). With the expansion globally
in counties like Mexico, Brazil, Indonesia, there is a very great and big opportunity for

the IKEA company which will also help them to increase the presence in those market
places and also will help them to sustain their growth in the future.
 EXPANSION TO GROW IN THE GROCERY MARKETS AS WELL: people are
now a days very much interested in making their lives healthy and hence are switching to
more healthier foods rather than the junk foods. Therefore, the current demand for the
healthier foods sets are very high which also includes the high demand for the healthy
groceries as well. This is a very great opportunity for IKEA to expand its business by
having more healthy stuffs at the current retailing process which will result in the current
expansion of the company aligned with the current trading operations as well.
Threats for IKEA:
 INTENSIFYING THE COMPETITION: there are many low cost retailers which
includes the Walmart, ASDA, Tesco and many more which all are entering in the
homeward of the specialise markets like IKEA. Hence there are many different types of
retailers which have the similar products and in addition to that with low costa as well.
The well management of the supply chain and the huge market for the IKEA can easily
switch to those other competitors and hence this becomes a big threat or the company
itself (Moss, Loor and Parada, 2022).
 GROWTH OF THE AVERGE CONSUMER INCOME: the increase in the
individuals income can be defined as the people with less income will buy less prices
products with low quality as well which is what exactly IKEA is offering in its stores
across the world. Hence when the incomes of the individuals rises, the people will be less
attracted to the products that IKEA offers because of the low quality and low prices as
well and hence this will turn to the retailers which will in return will offer some high
quality products.
1.2 perform the pestle analysis of IKEA:
 POLITICAL: IKEA basically operates in almost more that 40 countries and hence the
political decisions of the countries as well as their riles and polices differ from country to
country and company to company. Hence it an be said that if the government of that

country is business friendly than it become sway more easy for the companies like IKEA
to head up a start in its operating activities as well.
 ECONOMIC FACTORS: the Brexit in the UK is the main economic factor for many of
the countries including the IKEA as well. The Brexit has many impact on the companies
and it was completed in the year of 2019. the Brexit made it very difficult for the
company to employ the workers from Britain. In addition to this, the loose flow of the
goods and services with in the country will be stopped after Britain got an exit from the
union itself (Nguyen and Appiah, 2022).
 SOCIAL FACTORS: on every business, there are some social as well as some cultural
factors which have a huge impact on the operational activities of the company which also
includes the IKEA. Hence, it can also be said that what is good in one country, it is not
necessary that it is good for other countries as well. Therefore, it becomes a very
important factor for IKEA to appreciate the culture of different countries as well as also
take care of their values.
 TECHNOLOGICAL FACTORS: every business requires to have advanced and
modern technology to cope up with the new trends in the market place. Hence, IKEA is
continuously updating its technology use in the company to cope up with all the dynamic
changes which are happening in the business environment. Hence, it is heavily investing
on the development to make its customer experience great as well as to keep them
satisfied as well. One of the major technological factor to introduce in any kind of
organisation including the IKEA would be the self- checkouts in the organisation to save
the time of the employees as well as the customers.
 LEGAL FACTORS: there are different rules and regulation under the eyes of law which
are important for the organisations to follow while they do their operating activities. And
these laws and regulation basically differ from countries to countries. Not following those
laws can be a big problem for the IKEA company. For example, IKEA has to source 30
percent of its inventory from the local store of the country itself. This becomes a
necessary condition to follow for IKEA for opening up the franchises in India itself.
 ENVIRONMENTAL FACTORS: the environmental factor can be defined as the things
which affect the environment and the nature in any ways. As more and more people are
knowing the importance of the climate change in the world, it has given a very big

responsibilities to the companies to lower down all the waste produce which affect the
environment in many ways. Hence, IKEA has now a responsibly to be as sustainably as
possible. And if not, it will automatically lose its reputation in the market place along
with the customer base as well (Nguyen And et.al., 2022).
1.3 Evaluate how the changes in PESTEL factors has influenced the Opportunities and
Threats business. Critically comment on how the business is addressing their
Strengths to negate Threats and Weakness affecting their Opportunities.
There are few factors in the pestle analysis which are basically influencing the threats and
opportunities of any company including IKEA which also plays an important role in having the
big roles in dealing and chances as well.
 The political factors basically have a major influence on the opportunities. The reason
being the trade policies which have been the most used and has also impacted the the
changes in the individual's which are ready to join the IKEA but Brexit being the most
negative thing for the company as it is the decision of the UK to leave the European
union which had a huge impact on the operational activities of the IKEA as all the trade
relations along with all the dealing has now has problems in being completed.
 As the interest, exchange and the inflation in the company has ruined the differences in
the competition along with the leading competitors in the market place. In addition to
this, the same quality of product but at lower cost by the competitors of IKEA make the
reduced sales of the company (Øian, Kuivalainen and Vanninen, 2022).
 It can be said that the ready to made meal is very famous in the company and hence it is
very important for the company to have the facilities and the idea of what are the most
demanded products by the consumers in that particular area. Hence, the idea is of having
a positive aspect for the company or the organisation.
 Strengths for any company will help them in fighting up with the problems which are
being faced by the organisation on a daily basis and also having a clear brand image,
IKEA therefore has a huge market under it across the world and is also now spreading its
business and targets all segment of the society due to the products it sales.
 In addition to this, the labels of the company is however attracting the consumers as the
new generation are all inclined in showing off all the brands hence it is a very good

option for the company itself to have some of its own labels on some products which are
being made by them.
 IKEA has been mostly demanded for all the home décor, furnishing and the kitchen
appliances stuffs internationality. They just need to upgrade themselves with the all new
designs as well as the patterns which can attract the customers which can result in the
increase of sales and hence the increase in the net revenue of the company as well
(Phillips and Chao, 2022).
1.4 Recommend a suitable leadership style from Daniel Goleman’s leadership styles which
will help them meet their business objectives with focus on changes in the business
environment:
According to this theory, Daniel categorised the leadership styles into six categories which are
totally based on the emotional intelligence and which also helps in the skill development of the
employees of the organisation.
THE SIX GOLEMAN STYLES:
 coercive leadership: it has the words of directive and commending hence is used for
solving a problem efficiently and quickly.
 Authoritative leadership: this leadership basically helps in giving their team a basic
direction in order to achieve their goals but let them free to go in any possible way.
 Affirmative leadership: this type of leadership is all about the people. The creation of
the positive work they want to do in their working environment for their collogues. The
disadvantage is that the team rarely receives the any correction advise for the upper
management which leaves their members confused and leaderless (Ramakrishna, 2022).
 Democratic leadership: this leadership is also called the participative in which every
member of the team has the value which is genuinely heard by the management team.
There is more flexibility and the collaboratives in the workplace but it is hard to discuss
every individual's opinion as well as their ideas.
 Pacesetting leadership: in this leadership, people generally have the power to know the
importance of setting a great example for your team members and to let them have the
high standards for the task they perform.

 Coaching leadership: this type of leadership has leaders which are very much focused
on the personal growth as well as the development of the members of the team instead of
just the work related goals or the organisational goals (Staffler, 2022).
it is being recommended that the most appropriate leadership style from the Daniel Goleman's
leadership styles will be the authoritative leader as it basically concerned with the positive
emergence among the teams which helps in reaching up to all the organisational objective which
will also help them in achieving them. This leadership style is also very impelling in order to
motivate the member of the company which in this case is IKEA and it is very important for the
company to have motivated employees in order to promote growth of the company.
1.5 Critically comment on their Corporate Social Responsibilities in the processes:
Corporate social responsibility can be defined as the set up which basically includes the self-
regulation whose in purpose is to be socially accountable for the company in the society the
organisation has to adopt the corporate social responsibility which is very important for it and in
addition to this, it has to be social to its stakeholders, its customers and to itself most importantly.
If the companies take this model into consideration,they have to include every single aspect
which can affect the company from both internally as well as externally in every possible way
which generally includes the environmental, social, economic and the political factors of the
society. The company including IKEA has to think about it end users as they plays a very
important role in increasing any company's revenue and the growth. This can be said as the very
crucial reason for all the companies that are running in the market. And therefore wants a good
positive reputation as well as the brand image in the market place (Taylor, ed., 2022). It has
been seen that not every business in the society has a good financial support to do all of its other
works which basically includes the marketing which is considered as the major thing to get
recognised as a brand itself in the market place. However for the local communities and the other
small businesses in the society, it however becomes very important to pay attention to all the
efforts which can actually help them making their brand image with a good reputation in the
market place as well. IKEA basically uses this model in order to have a long term commitment
as well as the motive of the company's growth in the future and in addition to this, by applying
appropriate corporate social responsibility, it also helps in increasing the customer base for the

company as people came to know that the company is not all about its profit maximisation but
also see its responsibilities towards the society as well as towards the environment and hence
they will choose their company instead of some other multinational stores in the market place.
The corporate social responsibility of IKEA can be follows by taking into consideration the
followings:
 The environmental efforts: making suitable strategies for decreasing the big carbon
footprints which is harmful for the environment.
 Philanthropy: the responsibility of the companies to make a good gesture and make a
move for the welfare of the poor sections of the society (Toth and et.al., 2022).
 The ethical labour practices: by keeping the employees of the organisation satisfied and
treating them equally which will help them to gain good image in the marketplace.
CONCLUSION:
From this respective report, it has been concluded that the Business can be defined as the activity
which helps in making an individual's living as well as help them in making money in the
process which includes the process of producing or buying and selling of the goods and services
which basically have the motive of profit making. In this report however, the sow as well as the
pestle analysis has been discussed along with the Daniel Goldman leadership styles and
recommendation for the suitable leadership style of the company has also been covered. In
addition to this, the evaluation of how the changes in the pestle analysis has influences the
opportunities and threats in the business along with how the businesses are addressing their
strengths to negate their threats as well as their weaknesses which affect their opportunities has
also been discussed in this respective report.

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