Analyzing the Business Environment of IKEA: SWOT, PESTLE, CSR, and Leadership Styles

This report analyzes the business environment of IKEA through SWOT and PESTLE models, evaluates how changes in PESTEL factors have influenced opportunities and threats, and comments on how IKEA is addressing its strengths to negate threats and weaknesses that affect its opportunities. It also discusses corporate social responsibility and recommends a leadership style to help IKEA meet its objectives.

Context of business

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK ..............................................................................................................................................3
Swot analysis of IKEA :..............................................................................................................3
Pestle analysis of IKEA :............................................................................................................5
Evaluating how the changes in PESTEL factors has influenced the Opportunities and Threats
in IKEA. Critically commenting on how IKEA is addressing their Strengths to negate Threats
and Weakness that affect their Opportunities :...........................................................................7
Daniel Goleman's different leadership styles and recommending one that can help IKEA to
meet its objectives :.....................................................................................................................9
Corporate social responsibilities in context of IKEA :...............................................................9
Reflection of the report :...........................................................................................................10
CONCLUSION .............................................................................................................................10
REFERENCES:.............................................................................................................................12
Books and Journals:..................................................................................................................12

INTRODUCTION
Business can be said as an activity of an organisation or enterprise engaged in any
commercial, professional or industrial related activities through buying and selling of different
products or services and is done with the main motive of earning livelihood through the profits.
Although some businesses can be made for welfare activities such as charity without the motive
of any profit and are known as NPOs (non profit organisations). These activities are guided and
regulated under some laws made by governments for maintaining a loyal and smooth functioning
and avoiding scams. The following report is based on the analysation of business environment of
a particular company. The chosen business entity is Ikea which is a multinational conglomerate
giant. It deals in big product line that consist of kitchen appliances, home products, ready to
assemble furniture and some other home related services and goods. It was found in 1943 in
Sweden and today have presence in many different countries of the world (Lawrence, 2018). The
report includes the analysis of external environment of the company through swot and pestle
models in detail. Through pastel, the influencing opportunities and threats are identified. Then,
Daniel Goleman's leadership style is explained with one recommendation according to the
related company. At last, is consists of the ways in which IKEA maintains corporate social
responsibility in its process.
MAIN BODY
TASK
Swot analysis of IKEA :
It is a framework that helps in analysing important factors that affects a company's
business performance and are part of its basic business environment both, externally and
internally. It can help IKEA in its strategic management. The detailed swot analysis of Ikea is as
follows :
 Strengths – This factor consists of the strong areas which help a company in forming a
competitive edge over other competitors in the market.
◦ Customer knowledge – The key advantage of the company is its extensive knowledge
about its customers (Cosenz and Bivona, 2021). Through researches and the bond it
share with the customers from a long time, it clearly understands the purchasing
factors that affects its customers and work in implementing the best practises which

can attracts and hold them. New designed products are continuously introduced and
different income level people are targetted with its huge variety.
◦ Cost centred – driving the costs down is one of the main strategy of the firm. It keeps
on innovating and working on finding new ways that can prove to be efficient t in
cutting down the cost. The cutting down of costs provides the company with
attractive with two choices, one is providing the customers with products at low
prices and second is enjoying good profit margins.
 Weaknesses – This is consisted of the weak areas which can prove as a problem for a
business entity and must be rectified or focused on.
◦ Low quality of products and services – As the main strategy of driving the costs low,
the brand has also compromised with the quality of its products. As it is very hard and
the company could not find the methods of cost reductions without harming the
quality. The number of damaged and returned products is increasing of the company
and it aslo decreases the satisfaction level of customers (Lombardi, 2019).
◦ Negative publicity – IKEA has been criticised many times due to its related issues
such as treating the employees poorly, suing wrong and unideal methods of
advertising its products. This impacts the goodwill of it negatively in the market and
this also decreases the loyalty of its customers with it.
 Opportunities – The use of this factor is to provide with elements which can help an
organisation in the growth building process when considered in the strategy
management.
◦ Diversifying product line – IKEA has been dealing in a not much diversified and
small line of products. It can consider the increasing demand of healthy food and
grocery products. It is already successful in managing food outlets, so the expansion
into grocery business would be well aligned and with less risks involved.
◦ Growing online platform – The increasing market of online buyers is increasing
rapidly in the whole world. IKEA has been less focused toward its online selling with
only 17% of the total sales in UK. The brand has high number of visitors on its
website, it can fulfil their demand by increasing the brand loyalty and providing the
complete range of products online (Pafford and Schaefer, 2017).

 Threats – This factor involve the threats that can be prove as a warning and can lead to
losses or uncertainness when not focused.
◦ Dense competition – The industry in which IKEA deals is more prone to competition
because of the less complexity and easy process involved. There are many local
dealers which decrease the sales of its product by attracting the local customers. For
gaining a strong competitive advantage, it should opt new and attractive strategies.
◦ Dependence on a particular product type – The furniture and home accessory related
product holds a major share of its product line and most of revenue come from it
only. Many low cost retailers such as Walmart and Tesco are entering in the same
type of product line. This can prove to be a major threat for the company for
decreasing its revenues. It must diversify and increasing its present line of product
and services by identifying the needs of the market (Tipu, 2018).
Pestle analysis of IKEA :
Pestle analysis is a framework that is used to analyse different macro (external)
environmental factors that have a strong impact and used in strategic management of a company.
This model can hep IKEA to scan the business environment in which it operates deeply and in
elaborated form. It is consisted of seven different factors that are discussed in the following
points in context of the corresponding company :
 Political factor – The elements of this factor are related to the actions taken by
government with its certain policies affecting the business environment such as trade
tariffs and fiscal policies. IKEA operates in many different countries of the world that
counts around 40. It needs to consider the decisions and policies of its each operating
country fro smooth working. More the business friendly belief of the government of the
country more it gets benefited (Ševčák, 2019). It has recently opened its store in India,
the country promote the multinational companies to produce its good in it through its
campaign 'make in India'. This ha benefited the company
 Economical factor– The included elements in this part of the modal are related to the
aspects of a economy such as foreign exchange rates, unemployment rate and inflation
rate. Due to the its large revenues collection from UK, it has been effected by the Brexit
movement heavily. The hiring of workers from Britain made a difficulty of it due the

corresponding occurrence (Brexit – exit of Britain from European Union). But
considering the developing economy, the firm is focusing on opening its stores in
emerging countries which can be prove as a good strategy.
 Social factor - The included factor in this are related to the behaviour of its consumers
and people of the society in which the company is working such as religion, consumers
buying patterns and attitudes / preferences. The different cultures of different countries
has given the enterprise with a difficulty to adapt in this factor. The consideration and
reaction of the company according to the important social changes and beliefs in the
world such as homosexuality can benefit it by gaining reputation from the people of the
market (Ndegwa, 2018).
 Technological factor – These include the innovatory and technology related factors that
impact the business environment of a company directly or indirectly such as research and
development and automation. In context of IKEA, the strengthening of its e commerce
platform is a necessary element that can help in providing the customer with smooth and
efficient experience. It can also focus on collecting the feedbacks or rating of its
customers fro the products bought by them through several technological mode such as
text messages and website to earn their credibility and know the areas to make changes.
 Environmental factors – This include the physical environment related factors that
affect the working or business environment of a business entity such as climates changes
and geographic locations. IKEA is considering the use of renewable sources of energy in
its stores. It has spent over a billion dollar in upgrading the renewable sector in some
underdeveloped countries (Luke-Vrbanić, 2019). The consideration of the company for
using sustainable material in the production of its products and renewable sources of
energy helps it in avoiding the circumstances that can come from any environmental
misconsideration for pollution that can lead to some legal monetary punishments or bad
impact on the society for the enterprise.
 Legal factors – This include the regulatory related factors that can affect the policies
and procedures of an business sector or industry such as consumer protection and
specific industry related laws. This include both internal and external factors. IKEA has
faced several legal actions that has leaded to many punishments. The main issue the firm
is suffering from is its unhappy labours. They are the backbone of any industry that must

be considered. Its providing of unhealthy working conditions must be rectified and it can
help in promoting the motivation of its workforce increase their productivity and avoid
certain related lawsuits (Gurung, 2018).
Evaluating how the changes in PESTEL factors has influenced the Opportunities and Threats in
IKEA. Critically commenting on how IKEA is addressing their Strengths to negate Threats
and Weakness that affect their Opportunities :
Political :
The make in India campaign has provided IKEA with an opportunity to gain strong presence in
the market with the relevant support of the government. It needs investment to place the
manufacturing sector in the country but will lead to betterment of the company in the long run by
reducing its expenses that are incurred in transportation costs.
The political factor also comes with a threat, as it is operating in many part of the world, a
change in political policies of any country related to the business environment can lead to
changes in the strategies of the firm and it needs to always be informed about the political
changes in its operating countries (Božić-Kudrić, 2020).
Economical :
The establishment in the emerging economies can be a great opportunity for the related business
entity as these economies have increasing income rate of the people and are attracted towards
western and developed brands. IKEA can enjoy increased revenues and presence though
diversifying in these countries.
The related factor also brings a threat for IKEA because of the chances of economical changes
that can lead strategic change for it and can also lead to losses as it happened in the Brexit
occurrence.
Social :
The relevant factor provide with the opportunity to IKEA to attract the society by behaving
according to the beliefs and values of the people of the market (Nicolae, 2021).
The harming of these related beliefs and values of the people can also lead to drastic loss of the
company though negative affect on reputation and prove to its one of the threats.
Technological :

The using of innovative ways of technology is an opportunity of the firm for providing the
customer s with more value and making its operations efficient.
Where as, incorrect use of these technological innovations without expertise view can lead to
high investments and losses for IKEA and is a threat which should be considered.
Environmental :
The environmental factor comes with a opportunity for IKEA as the use of renewable sources
of energy and sustainable raw materials in production of its products can provide it with a
competitive edge (Jhunjhunwala and Deo, 2018).
It also comes with a threat as wrong practices that can lead to pollution of the environment can
make the company liable to bear any related legal charges and can make negative impact on the
society.
Legal :
The legal factor provide an opportunity to IKEA by making the process of diversifying easy
though the patents and intellectual property of the company that can not be used by any other
business entity in the market.
The threat of this factor is the wrong practices of any legal regulatory that can lead to high
losses of the firm through monetary or non monetary punishments and negative harm on
goodwill the same as happened with it though lawsuits from workforce.
Strengths that help in negating threats and weakness affecting opportunities of IKEA :
The strength of customer knowledge of the company helps in negagating with main of its
weakness that are – negative publicity and low quality products at some extend as the study and
understanding of customers wants help the company in knowing what should be provide to the
customer base according to their needs and wants. Though understanding the customer, it can
provide high quality products with increased price to the demanding customer base and also
avoid negative publicity by finding the modes and ways of publicity that positively affect the
consumers (Timbate and Park, 2018). The cost centred strength helps in dealing with dense
competition threat of its by providing a competitive edge to it.

Daniel Goleman's different leadership styles and recommending one that can help IKEA to
meet its objectives :
Six types of different leadership styles are given by Daniel Goleman which are named in the
following points :
 The authoritative leadership style
 The commanding leadership style
 The affiliative leadership style
 The democratic leadership style
 The pacesetting leadership style
 The coaching leadership style
The recommended type of leadership style to IKEA that can help it in further growth is
visionary leadership style. This type of leadership style makes the leader to view its related
organisation on a long term basis and the stage at which it sees the enterprise after a long period
of time. This promotes the understanding of the complex business environment of the enterprise
deeply to make changes accordingly by considering the changes that can happen in the near
future (Shahab, Ntim and Ullah,2019). The goals formed are large that are seen to be
accomplished in a long period. Smalls goals are not savoured and small wins are not enjoyed to
keep the focus on the giant accomplishments. The motivation must be practised by the leader to
keep the employees inspired and informed about the goals and objectives. This helps in building
the far sightedness ability of both, the leader and employees. IKEA can implement this
leadership style to keep its presence stable and growing in future.
Corporate social responsibilities in context of IKEA :
This concept tells about the responsibilities of a business entity that are needed to be
considered for maintaining a smooth functioning in the market and are related to the social
beliefs of the society (Nejati, Salamzadeh and Loke, 2019). This is a huge concern and even
separate department is made to consider the related events in large scale companies and several
steps are taken accordingly. IKEA uses several streatic methods to to overcome this factor and
get reputation from the market, some of these are mentioned in the following points :
 IKEA Supporting Local Communities :-
◦ It has planted over one million trees in local communities across UK.

◦ Its home improvement and furnishing product providing chain aims on local
communities according to the location of its stores.
 IKEA Educating and Empowering Workers :
◦ The firm has introduced hourly wage structure according to the needs of its
employees.
◦ It has launched a online learning system to provide its employees with knowledge
about the product and efficient ways of dealing with the customers (Kim, Kim,
Marshall and Afzali, 2018).
Reflection of the report :
In the process of writing this report, many small problems have came in my way and I
have learned many new and efficient and knowledge providing things that can help me in writing
report in the future. It has also provided me with detailed information about the global leading
company in furniture and home related products – IKEA. Many new topics such as Daniel
Goleman's leadership styles were involved. The writing of the report needed a lot of research for
accurate and elaborated and this helped in improving my researching, sentence forming and
writing ability.
CONCLUSION
From the above report it has been concluded that any commercial, professional or
industrial related activity that involves buying and selling of product and services can be said as
business. It is done with the main motive of profit maximisation but there are also non profit
making organisations that are made wit the motive of welfaring the society or a particular group
of people. IKEA is a global leading company in furniture related product and is the chosen
company for the above report. Swot analysis is the basic framework that is simple but can
identify the highly business environment affecting areas of a business entity. The main
identification form this modal are strengths, weakens, opportunities and threats of a chosen
company. Then there is PESTLE analysis which is used in deeply analysing the external business
environment of a company though elaborating certain different highly affecting elements. There
can be opportunity and threat in every element of pestle. There are six different leadership style
given by Daniel Goleman which can used by a leader of a business company according to its

preference and goal of the organisation. Corporate Social Responsibility is the responsibility of a
business that must be considered by it for maintaining good reputation in the market. IKEA uses
many ways in consideration of this concept.

REFERENCES:
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