Comprehensive Business Environment Analysis of IKEA: UK Market Focus

This report provides a comprehensive analysis of IKEA's business environment, focusing on the UK market. It begins with an introduction to the importance of the business environment and identifies key issues impacting the retail sector, such as Brexit and global competition. The report then applies the PESTEL model to assess the political, economic, social, technological, environmental, and legal factors affecting IKEA. It discusses both the positive and negative impacts of these factors on IKEA's operations and strategic decisions. The analysis highlights the challenges related to Brexit, global competition, and technological advancements. The report concludes with a reflection on the challenges faced during the assignment and offers insights into IKEA's strategic positioning within the competitive landscape. The report uses secondary data sources to support its findings, providing a detailed overview of IKEA's business environment.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
Identification of key issues affecting the sub sector...............................................................1
Analysis of PESTEL model....................................................................................................2
Discuss positive as well as negative impact on business.......................................................4
Reflection...............................................................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................6

INTRODUCTION
Business environment play a crucial role in decision making as well as development of
strategies (Bocken, Rana and Short,2015). There are various factors of business environment
which have huge impact on organisation and this affect functioning of business operations.
Business is surrounded by different factor such as market trends, technology, economic changes
and many more. Chosen company for this report is IKEA. This is a Swedish multinational
company which is dealing in retailing sector. It was founded in 1943 and founder of this
organisation was Ingvar Kamprad. IKEA is offering ready to assemble furniture, kitchen
appliances as well as various home accessories to different part of the world. This report consist
of key issues which is affecting respective sector as well as different factor of external
environment which can have impact on organisation. It consist of positive as well as negative
impact of these factor on business. This report includes different challenges faced while
conducting this assignment.
MAIN BODY
Identification of key issues affecting the sub sector.
There are various factors which can have huge impact on organisation as well as affect
effective and efficient functioning of organisation. It is very important for company dealing in
retail sector to identify major issues which can have impact on its business. This will help in
develop strong strategies so that business can conduct its operations in effective and efficient
manner. Key issues are those problems that needs to be solved at right time so that respective
company can achieve its desired goals and objectives. In UK there are many companies which
are dealing in retail services sector and by analysing key issues these companies can perform its
activates in appropriate manner. Retail sector includes buying and selling of products which help
in full filling needs and wants of customers. Retail sector includes various issues which have
major impact on organisation overall performance as well as affect its productivity and
performance (Hair and et. al., 2015). Key issues which is affecting furniture designing and
manufacturing companies within retail sector of UK market area is mention below.
Brexit issues: This will have huge impact on businesses dealing in retail sector as it will
directly affect overall performance of company. Brexit will have affect on macro economics as
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well as different rules and compliances followed by retail services sector. Retail service sector
consist of those companies which are providing product and services that help in full filling
needs and wants of customers. Due to issues of Brexit retail sector company will not be able to
perform its business operations in effective manner and this will have impact on growth and
development of organisation.
Globalisation competition : Globalisation is very important part of business as it helps
in overall growth and development of business. Companies dealing in retail sector needs to grow
and develop there business operations at different market area so that they can perform its
activities in more effective and efficient manner. There are various issues faced by companies
which are conducting business operations at global level. Globalisation will lead to increase the
competition for company. There are many companies which are operating its business operation
at global market level and this will have impact on strategies as well as decision making of
organisation. With the increase of global competition respective company have to use new and
innovation strategies so that they can conduct business operations in more effective and efficient
manner (Hamilton and Webster, 2018). This can be consider as a issues for business as it will
affect organisational production as well as profitability. Global competition increase chose for
customers and they can select product that can full fill their needs and wants in more effective
and efficient manner.
Analysis of PESTEL model.
PESTEL model refers to a tool that is very helpful for identifying as well as evaluating
factor of macro business environment. There are various factor of external environment that can
have impact on business operations as well as affect organisational strategies. PESTEL analysis
is a framework that will help company to monitor as well as evaluate external factor such as
political, economical, social, technological, environmental as well as legal. All of these factor of
macro business environment is mention below in detail.
Political factor: This type of factor consist of different rules and regulation which is
developed by government and political parties. Political factor consist of government policies,
political stability or instability, taxation policies, trade restrictions, foreign trade polices and
many more factor. This factor will have impact on business activities as most of the
organisational functions are dependent on rules and policies. It is very important for IKEA
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company to follow all rules and regulations of UK government in order to conduct business
operations in smoothly manner.
Economical factor: Economical factor refers to those factors which are which have direct
impact on profitability of organisation. This factor majorly deal with economic growth rate,
interest rate, inflation, disposable income, exchange rate as well as various other factor.
Economical factor will have major impact on management of demand of product and services
offered by company (Hillary, 2017). It is very important for organisation to spend their income
in correct manner so that they can achieve desired goals and objective. UK country has one of
the strongest economical condition which can have direct as well as indirect impact on business
profitability.
Social factor: This type of external factor is majorly related to social cultural factor and it
is very important that IKEA company evaluating and analyse each and every aspects of social
factor in effective manner. It consist of population, growth rate, age, distribution career attitude,
heath consciousness and other social factor. It is very important that respective company
identification all social factor and then develop effective strategies which help in full filling need
and wants of customers. Respective company needs to needs to understand interest and demand
of customers and then develop correct strategies so that they can meet with requirement of
customers.
Technological factor: Technological factor can be describe as those factor which are
related to new and innovative technology used by respective company. UK market area has one
of the advance and updated technology in the world which can help in improving performance as
well as productivity of organisation (Hockerts, 2015). IKEA company have to use more
modified technology in its business operations in order to improve its productivity as well as
performance. This factor will have affect on manufacturing and designing of products as well as
distribution of products to targeted customers.
Environmental factor: This factor refers to all those factors which are related to the
environment as well as surrounding of organisation. It has been analysed that environment play a
crucial role in successful performance of the business. Environmental factor refers to
atmosphere, ecological system, climate, weather and other environmental factor. It is very
important that company is following all rules and regulation which is developed by government
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for the protection of environment. Business activities of IKEA company does not harm
surrounding as well as environment in order to maintain healthy environment.
Legal factor: Legal factor consist of various rules and legislation set by government of
UK. This factor is very helpful in maintaining healthy and safety of customers as well as
employees. This consist of health and safety laws, equal opportunities, consumer rights and laws,
advertisement standards as well as product safety (Kolk, 2016). It is essential that company
needs to understand as well as follow all of these legislation in order to provide high quality
products to customers.
As per the above PESTEL analysis it has been evaluated that the major factor which will
have impact on IKEA company are political and technological factor. It is very essential for
respective company to follow all rules and regulation of political party in order to reduces
negative impact on Brexit on its business. Technological is important for respective company as
it helps in conducting business operations in more effective and efficient manner. This factor will
help in gaining competitive advantage over other rival companies.
Discuss positive as well as negative impact on business.
Brexit and global competition play a crucial role in conducting business operations and it
will have both positive as well as negative impact on business. It is very important to identify as
well as evaluate positive and negative impact of these factor on IKEA company. This will help
in developing effective strategies for organisation as it lead to achieve desired goals and
objectives. Positive and negative impact on Brexit and global competition is mention below.
A) Positive impact Brexit : UK have stable political and government party which will have positive impact
on retail sector and IKEA company. Political party are developing various rules and
regulation in favour of respective sector which can be considered as a advantage for
respective company. As per Brexit, UK sales has been rise by 8.9% on year and its sales
has reach to £1.7bn (Ikea seeks to make more products in UK to fend off post-Brexit
vote price rises, 2019.). IKEA UK has 15% of online sales which is a positive impact on
Brexit of organisation.
 Global competition: Globalisation will have positive impact on business as it will help in
conducting business operation in different parts of the world. It is essential that respective
company is operating its business activities in different market area in order to attract
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more and more customers towards business. Global competition will help IKEA company
to develop effective and efficient business strategies so that respective company can
achieve desired goals and objective (Teece, 2018). Due to globalisation of business, this
company will be able to use new and advance technology in its business activities.
Technological factor will have positive impact on IKEA business as it lead to enhance
business performance.
Negative impact Brexit: There are strict rules and regulation developed by UK political parties which can
have negative impact on IKEA business. This will affect overall performance of
employees due to trade restrictions and Brexit will have negative affect on investment in
nation within upcoming years. It is very important that this company develop strong and
effective strategies for conducting business operations in correct manner as well as
reduce negative impact on Brexit.
 Global competition: There is negative impact of competition of business as it will affect
organisational overall performance as well as productivity. With the increase in global
competition respective company needs to develop better strategies in order to meet with
customer requirement (Raziq and Maulabakhsh, 2015). In order to gain competitive
advantage over other rival companies this company have to use high and innovation
technology. New and advance technology is quite expensive and this can be considerer as
negative impact.
Reflection
While conducting this report I have faced some issues and challenges which has affected
by overall performance. The major problems that occur during completion of this report is time
issues as well as data collection. For this report majority of data which is collected in from
secondary sources. I has faced issues in gathering more appropriate and accurate data as per
requirement of report. Because of issues in collecting right data for this report I was not able to
concentrate on other task. This leads to mismanagement of time and I was not able to complete
requirement all task in right time. In order to overcome these issues I have taken help from my
senior person. They have helped me in conducting all task in correct manner as well as complete
report in right time.
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CONCLUSION
From the above report it can be concluded that there are various factors of business
environment which have impact on productivity as well as performance of organisation. These
factors will have positive and negative impact on organisation and it is essential that this
company is using right strategies to achieve desired goals and objectives.
REFERENCES
Books and Journal
Bocken, N. M. P., Rana, P. and Short, S. W., 2015. Value mapping for sustainable business
thinking. Journal of Industrial and Production Engineering, 32(1), pp.67-81.
Hair Jr, J. F. and et. al., 2015. Essentials of business research methods. Routledge.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Hillary, R., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Hockerts, K., 2015. A cognitive perspective on the business case for corporate
sustainability. Business Strategy and the Environment, 24(2), pp.102-122.
Kolk, A., 2016. The social responsibility of international business: From ethics and the
environment to CSR and sustainable development. Journal of World Business, 51(1),
pp.23-34.
Raziq, A. and Maulabakhsh, R., 2015. Impact of working environment on job
satisfaction. Procedia Economics and Finance, 23, pp.717-725.
Teece, D. J., 2018. Business models and dynamic capabilities. Long Range Planning, 51(1),
pp.40-49.
Online
Ikea seeks to make more products in UK to fend off post-Brexit vote price rises. 2019. [Online].
Available through:<https://www.theguardian.com/business/2017/may/20/ikea-seeks-to-
make-more-products-in-uk-to-fend-off-post-brexit-vote-price-rises>.
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