Challenges Faced by IKEA: A Management Approach

This report discusses the challenges faced by IKEA and explores the management approach used to overcome them. It includes SWOT analysis, Porter's five forces model, and PESTEL analysis. Recommendations for the organization are also provided.

Individual Report on challenge

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
RECOMMENDATIONS.................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The competing value framework is determined as an appropriate tool for analysing
organisational culture as well as organisational dynamics in order to perform different functions
in an appropriate manner. In this report, the company is taken which is named as IKEA. It is
determined as an international Conglomerate that focuses on a marketing different kind of
product and services such as furniture, kitchen appliances and many more for satisfying its user.
This company was given in year of 1943 by in Ingvar Kamprad. In this report, there is a
description regarding different challenges which is faced by organisation that imposes direct
effect on company. There is different kind of models such as SWOT analysis, Porter's five force
model& PESTEL analysis for conducting research related to challenges faced by organisation in
an appropriate manner. There is also a discussion regarding management approach from CVF. In
addition to this, there is also recommendation that can be adopted by organisation (Fernandes
and Crutchfield, 2018).
MAIN BODY
IKEA is determined as an international Conglomerate that focuses on a marketing different
kind of product and services such as furniture, kitchen appliances and many more for satisfying
its user. This company was given in year of 1943 by in Ingvar Kamprad.
 The vision of IKEA is to achieve leading position around world.
 The mission of IKEA is to provide unique quality goods and services to its user.
 The objective of IKEA is to increase sales by 20% in upcoming 3 months
2.1 SWOT Analysis
SWOT analysis is adopted by IKEA for analysing strengths, opportunities, threat as well
as weaknesses of organisation that is going to be mentioned below:
STRENGTHS WEAKNESSES
 Due to having superior brand around
the world attracts large number of
customer regarding product of
organisation.
 It is determined as a main strength in
order to provide product which is
 They operate their operation in
different countries, there is a corruption
case due to expand their business in
Russia is main weakness for
organisation.
 Environmental problem IKEA requires

determined as cost effective and
valuable for organisation.
putting in check regarding its
stakeholder there are different kind of
environmental issues that arises and
generating bad goodwill and brand
image of company in front of customer
in Marketplace.
OPPORTUNITIES THREATS
 The organisation focuses on opening its
retail outlets in India as well as China
so that it attracts large number of
customer which is determined as a main
opportunity for company.
 In addition to this, they also implement
advanced technology in order to
provide unique product to its user
during the period of time.
 Due to change frequent change in law
and regulation, the IKEA do not cope
up with changes that is determined as a
main threat for organisation.
 There are different competitors of
IKEA which erode profit in future
period of time (Trenholm Alcock and
Robinson, 2016).
Porter five force model
Porter five forces model is determined as a generic framework which is adopted by IKEA
that is given below:
Threat of new entrants the threat of new entrants is low because the new market is not
capable to take benefit from economies of scale to that extent in which IKEA operates.
Therefore, it is difficult or complex for the new entrants to conduct their business operation as
similar to IKEA. Hence, they provide superior quality products and services to its user and the
new entrants require more funds in order to operate their business at that level (Ioannidis, 2018).
Rivalry among existing firm there are different competitor such as Wal-Mart, ALDI as
well as many more. Therefore, it is important to provide unique quality product and services for
increasing their sales in future period of time otherwise it decreases sales of organisation.
Bargaining power of buyer customer has a wider choice to purchase product and
services from its customers during particular phase of time period. Therefore, it is necessary for

IKEA to provide them product according to their need that increases sales of business
organisation otherwise it is not profitable of company.
Bargaining power of suppliers herein it is assess that there is a different kind of supplier
who provide similar kind of product to its customer. There are different competitors of IKEA
who offer similar kind of product. Therefore, it is necessary for them to offer product according
to their needs.
Threat of substitute products there are various competitive firm provide similar kind of
product and services to its user for satisfying than. Therefore, IKEA focuses on offering them
goods as per their needs that help in increasing profit margin in future period of time (Munala,
Welle and Hohenshell, 2020). Thus, the organisation focuses on providing superior quality goods
and services to its user that helps in achieving competitive advantage over rivalries at
marketplace. It also helps in increasing profit margin and sales of company in future period of
time.
PESTEL analysis
The PESTEL analysis adopted by IKEA to uncover present controversies growth as well
as challenges that is going to be mentioned below:
Political factor IKEA focuses on opening its outlet in above 41 countries, the
organisation abide by its regulations. Therefore, the political stability is advantageous for
company in order to conduct their activities in an appropriate manner. Apart from this, due to
having friendly government it is important for IKEA to focuses on relationship to keep stable
otherwise, the income is determined as a risky. Therefore, it imposes negative impact on success
and growth of company.
Economic factor it involves purchasing power, inflation and many more imposes direct
effect on operations and function of IKEA. Due to economic slowdown, there are different issue
which is faced by organisation in order to recruit workforce from Britain that imposes negative
effect on organisation. Apart from this, there is opportunity from developing nations where they
focus on expanding its organisation in rapid manner and enhance sales. Therefore, they open
their store in 2018 and also open 25 outlets in India in year of 2025 impose positive impact for
company.
Social factors impose direct effect on operation and functions of organisation. It is
necessary for IKEA to follow culture in order to satisfy changing needs of customers during

particular phase of time period, it impose positive effect on company. Apart from this, due to
frequently change in need of customer it is not easy to provide them goods according to their
wants.
Technological factor IKEA focuses on updating their technology to put to cope up with
changing environment of organisation. They focus on conducting appropriate research in order to
bring more technology to put customers satisfied. The organisation focuses on implementing
advanced technology for satisfying its user. Due to implementing advanced technology to
enhance its cost for company that is negatively affect organisation.
Environmental factor in context of the environmental factor, it imposes direct effect on
organisation such as due to enhance awareness of individual person regarding climatic change. It
is determined as a responsibility for company to offer goods that are sustainable. Therefore, the
organisation provides product according to sustainability that impose positive effect on company.
In addition to this, there is also challenge for IKEA to possess 400 plus outlets in 40 plus Nation
but the organisation focus on achieving target by 2030 is determined as a major challenge for
organisation (Pradhan, 2019).
Legal factor Herein, it is important for company to follow all rules and regulations in
order to conduct their operations in an appropriate manner then it positively affect the company
in addition to this due to frequently change in laws it is difficult for a company to follow it that
negatively affect organisation.
Thus, the PESTEL analysis adopted by IKEA to uncover present controversies growth as
well as challenges and also consider external factor which impose both positive and negative
effect on organisation.
2.2 Management approach from CVF and reason why
There is different management approach from use of CVF. Thus, the human relation
theory related to management approach that is going to be mentioned below:
The human relations theory signifies method through which manager interact with
subordinates in an appropriate manner. The management team emphasized on maintaining
appropriate human relation then it increases satisfaction level of worker that enhances
productivity level of organisation in future period of time. Therefore, the human relation theory
is used for conducting different activities in an appropriate manner. The objective of human
relation theory is to appreciate human assets regularly by offering training session. To offer their

efficient as well as acceptable leadership is main objective for IKEA to use this theory. And the
IKEA focuses on satisfying basic need of individual person during particular phase of time
period. They provide food, shelter to individual person and in addition to this they also provide
safety to them. Apart from this, they also satisfy their belongingness need to interact with them
in an appropriate manner. In addition to this, they also focus on satisfy their self esteem and self
actualization need in order to conduct their business operations in an appropriate manner
(Subotnik, 2018).
The Business challenge
There are various challenges which are faced by IKEA which imposes direct impact on
business organisation.
 Return on investment IKEA increase their spending around 1.5 dollar billion in India
but it is determined as a major challenge for organisation to earn profit for its investment
that help in increasing their profit margin in future period of time.
 Therefore, the other challenges faced by IKEA are higher tax that is determined as a main
a challenge for Idea. Thus the focus is on cope up with challenges in order to conduct
their business operation in an appropriate manner. Due to increase in higher tax rate it
imposes a direct effect on organisation during particular phase of time period.
 There is different strategic challenge faced by IKEA in order to conduct their business
activities and functions in an appropriate manner. They focus on taking feedback and
review from client as well as design preferences from market that helps in taking decision
during particular phase of time. They also focus on motivating supplier in despite of
varying customs as well as expectation from nations to nations.
Thus, the management team of IKEA focuses on overcome with these challenges in order to
conduct their business operations in an appropriate manner (Ruisch, Anderson and Pizarro,
2018).
RECOMMENDATIONS
There are different recommendations which can be recommended to organisation that is
going to be mentioned below:

 The organisation focuses on opening its retail outlets in India as well as China so that it
attracts large number of customer which is determined as a main opportunity for
company.
 In addition to this, they also implement advanced technology in order to provide unique
product to its user during the period of time.
 They also focus on providing effective training to its employees that helps in offering
proper services to its user during the period of time.
CONCLUSION
On given report, it is assess that the competing value framework is determined as an
appropriate tool for analysing organisational culture as well as organisational dynamics in order
to perform different functions in an appropriate manner. In this report, there is a description
regarding different challenges which is faced by organisation that imposes direct effect on
company. There is different kind of models such as SWOT analysis, Porter's five force model&
PESTEL analysis for conducting research related to challenges faced by organisation in an
appropriate manner. There is also a discussion regarding management approach from CVF. In
addition to this, there is also recommendation that can be adopted by organisation.

REFERENCES
Books and Journals
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Ioannidis, J.P., 2018. The challenge of reforming nutritional epidemiologic
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Munala, L., Welle, E. and Hohenshell, E., 2020. “If You Report Your Dad, How are You Going
to Survive”: Health Practitioner Perspectives on Quality of Care for Survivors of Sexual
Violence and the Challenge of Family Interference. Journal of interpersonal violence,
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Pradhan, S., 2019. The use of commercially available games for a combined physical and
cognitive challenge during exercise for individuals with Parkinson’s disease–a case series
report. Physiotherapy theory and practice, 35(4), pp.355-362.
Ruisch, B.C., Anderson, R.A. and Pizarro, D.A., 2018. The challenge of accounting for
individual differences in folk-economic beliefs. Behavioral and Brain Sciences, 41.
Subotnik, D., 2018. Measuring sexual assault on campus: The clery report challenge. Academic
Questions, 31(3), pp.339-344.
Trenholm, S., Alcock, L. and Robinson, C., 2016. Brief Report: The Instructor Experience of
Fully Online Tertiary Mathematics: A Challenge and an Opportunity. Journal for Research in
Mathematics Education, 47(2), pp.147-161.