IKEA's Success: An Analysis of Business Environment, Strategy

This report provides a comprehensive analysis of IKEA's business environment, employing PESTLE and SWOT frameworks to evaluate external factors and internal capabilities. It examines the political, economic, social, technological, legal, and environmental factors impacting IKEA's operations, along with its strengths, weaknesses, opportunities, and threats. The report further explores suitable leadership styles for achieving business objectives, focusing on affiliative and democratic approaches while rejecting coercive methods. A critical assessment of IKEA's Corporate Social Responsibility (CSR) initiatives, particularly its sustainability strategies related to planet, people, and profit, highlights the company's commitment to environmental sustainability and social responsibility. The analysis concludes by emphasizing the importance of adapting to environmental concerns, addressing competition, and leveraging technological advancements for sustained success. Desklib offers a wealth of similar solved assignments and study resources for students.

Context of Business

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
PESTLE Analysis of IKEA.........................................................................................................3
SWOT Analysis of IKEA:..........................................................................................................5
Evaluates the changes in PESTLE factors that influence the opportunities and threats in the
business.......................................................................................................................................5
Leadership styles that will help the business in meeting its objectives......................................6
Critically comment on their Corporate Social Responsibilities in the processes using evidence
from your research......................................................................................................................7
REFLECTION............................................................................................................................8
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
The contemporary business environment is highly competitive and evolves continuously
with the change factors of the macro and micro environment (RUSLIATI and et. al., 2020).
With the growing technology, diversity, globalisation the business to stay competitive requires
the effective leadership. A leadership is the act of guiding, teaching, supporting and mentoring
the people within in an organisation through appropriate leadership styles. The present report is
the discussion on the business environment and leadership of the “IKEA”- a Swedish originated
an Dutch headquartered multinational retail that designs and sells ready to assemble home
accessories, furniture, kitchen wares and other goods and home services. From many years the
IKEA is termed as the world's largest furniture retailer. The report will outline the SWOT and
PESTLE analysis for the IKEA. Further their is evaluation of the Pestle factors to address the
strengths to negate the threats and weaknesses affecting the opportunities. There is the
recommendation of the suitable leadership style to meet the business objectives of the IKEA.
The corporate social responsibilities are discussed in the report. In the end there is the reflection
on the knowledge gained for the project.
MAIN BODY
PESTLE Analysis of IKEA
PESTLE Analysis is one of those tool that is used by the organisation to evaluate the
external environment in which the business operates. This tool covers the six factors in the
external business environment that has ability to influence the operations and profitability of the
business. Further the analysis is covered in context of IKEA (PESTLE Analysis of IKEA, 2018): Political factors: IKEA is an international company and they have their operations
running in more than 41 countries which exposes the business to several types of political
conditions (Nandonde, 2019). The countries in which the political stability is not there and
the government has implied several restrictions on the businesses then in that the case the
operations of the company will get negatively impacted. In case there are less restrictions
and there is more political stability in the country in which they are operating then that
will positively impact the business.

 Economic factors: Ikea gets effected by the worldwide economy and the economy of the
country in which the business is operating. The recession in the economy of the country
in which the business is operation will negatively impact the business and in case the
economy of the country is booming then it is more likely that the business will get
positively impacted. The factors such as GDP, inflation and other such rates directly
impact the operations and profitability of the business. Social factors: This refers to the factors that are related with the society, their choices
and behaviour (Phan, 2021). IKEA has mastered the art of marketing in such as way that it
is most appealing to the customers, they actually take the social trends and the customer's
trends and behaviour seriously which positively impacts the sales of the business. The
negative impact that the business will have on their operations would be because the
organisation is unable to adopt to the social changes and the preference of the consumers. Technological factors: As IKEA into the business of furniture their major component of
showcasing their products was through paper catalogues, however they adopted to the
latest technology in the recent years. They started showcasing their products on the
internet, this helped the people who are looking for purchasing product right from the
ease of their home. If the organisation is able to adopt to the new innovations and
technology then this would positively impact the business. However if the business is
unable to adopt to the latest innovations and technology then it will negatively impact the
business. Legal factors: The business is required to deal with the legalities that are concerned with
the business. In context of IKEA, they must follow the rules and legal laws of every
country in which they are operating so that they can ensure that there are not legal
obligations against the business. If IKEA conducts any kinds of legal misconduct then it
will negatively impact the image of the business.
 Environmental factors: Ensuring sustainability in the environment is the prime aspect of
the business and they must ensure that in no way their operations are harming the
environment of the country in which they are operating. In context of IKEA, they are
aiming to put almost 1billion dollars in the improving the renewable energy in the poorer
nations.

SWOT Analysis of IKEA:
This analysis is helpful in determining the strengths, weaknesses, opportunities and
threats that are associated with the business. This analysis helps the business in making strategies
so that they can overcome the weaknesses and further deal with the threats. Further the SWOT
analysis is done on IKEA:
Strengths- The major and biggest strength of IKEA is its clear vision which helps in adding
value to experience of the customer irrespective of the market condition. The key strength of the
company is their different style of providing dis assembled furniture to the customers which
attract people towards their new style (Elavarasan and et. al.,2020). They focus on the concept of cost
leadership as this helps in targeting the middle class people which is a major strength as they
give competitive edge to the other companies.
Weaknesses- The major weaknesses that IKEA faces is controlling the standard across every
store that they deal around the world. The obsessive focus that company have on the cost
leadership strategy sometimes lowers the quality of the product that company is delivering to
their customers. There has been a few environmental concerns that IKEA has regarding the ways
in which their manufacture and operate.
Opportunities- The company has huge opportunities for expansion as they have not currently
started their operations in all the major countries. The green business model helps the company
in generating huge opportunities as this will attract the customers who are interested in buying
such products. IKEA can take advantage of such situations and further enhance their operations
so that they can make the most out of it.
Threats- There are certain new businesses in the industry who are imitating the ways in which
IKEA deal which is a major threat for the business (Düking and et. al.,2018). As this is the USP of
the respective company and they need to preserve this in order to stay in the market.
Evaluates the changes in PESTLE factors that influence the opportunities and threats in the
business
There are certain things that the PESTLE factors effect in the organisation and they must
address these issues in order to gain opportunities in the market. The environmental concerns
needs to be addressed as this can be a major weakness for the business and the organisation will
loose its competitive edge. The threats that the organisation faces is the competition as there are
several businesses in the environment that are trying to imitate the style of the organisation and

further use that in gaining advantage in the environment. The macro and micro factors of the
business are somehow interrelated, the political factors that the organisation faces somehow
becomes the threat to the business. The technological factor that the IKEA is upgrading in the
ways they showcase their furniture to the employees is strength as well as opportunity as there is
a lot of scope in the technological field. The businesses who are unable to address the innovation
and advancement in the technological field faces several challenges in the environment and this
becomes a major weakness for the business.
Leadership styles that will help the business in meeting its objectives Coercive leadership style- This leadership style is built on the direct form of leadership
and built on instructing the employees in the tasks that needs to be followed in the
business. In this leadership style, the leader just gives commands to the employees
without any open minded discussion (Huertas-Valdivia and et. al.,2019). This style is based on
the concept of direction and commanding. In context of IKEA, they don't use this
leadership style as they don't believe in the concept of just giving commands and they
don't want to burden the employees with excessive direction and commanding as this will
reduce their productivity and creative skills. Affiliative Leadership Style: This leadership style is based on the concept of enhancing
the work environment and making it positive. In this type of leadership, the leader tries to
enhance the working environment by building emotional bonds. This type of leadership
requires is focused on empathy and this focuses on building relationship by establishing a
range of communication styles. This is one of the leadership styles that is promoted in
IKEA in which the managers and leaders keeps communicating with the employees so
that they can feel connected and the objectives and goals are well communicated. Democratic leadership style: The democratic leadership style is based on the concept of
open thoughts where the decisions and ideas are taken from the employees. Leaders
appreciates the thoughts of their employees and motivate their people to take part in the
decision making process (Rahbi and et. al.,2017). The workplaces will become flexible if
they use this type of leadership approach in their organisation as there will be several
opinions from people that work in the organisation which will eventually help in attaining
the goals and objectives. In context of IKEA, they use this leadership style in the

organisation as they want to get opinions of several people so that they can enhance their
decision making skills. Further they use this style as they believe that by interaction with
the employees they feel welcomed in sense as their thoughts matter in the organisation.
Critically comment on their Corporate Social Responsibilities in the processes using evidence
from your research
In IKEA the corporate Social responsibility is termed as the evolving business approach
that assist the company to become the socially accountable. In the IKEA the corporate social
responsibility plays an important role in enhancing the performance in perspective of economic,
social and environmental performance (Advantage, 2020). IKEA is known for the furnishing
retailer all across the world and is known for maintaining the sustainable business by
implementing the CSR in its global supply chain. The research aims to critically comment on the
CSR actions and practices in the global supply chain of the IKEA. It is critically evaluated that
the CSR brings the boost to the brand of the IKEA. The CSR and sustainability actions of the
IKEA are discuses below:
 IKEA Sustainability strategies: the company heavily emphasizes on the planet, people
and profit of the company. CSR is the key sustainable indicator for the IKEA to embed
the sustainable and CSR policy and values in the company (Orazalin and Baydauletov,
2020). The sustainable policy helps the company in Branding image as the green and eco-
friendly organisation which not only increase profit size but also have concern and care
for the social environment and people.
For this the company has started its programme named as People & Planet Positive in
2012, after this the company was grown as the globally recognised leader in the environmental
sustainability and social responsibility (Beji and et. al., 2021). As per the CSR 2020 report of
IKEA the company has three initiatives to have CSR in their process of the making the IKEA a
leading and largest global retailer of ready to assembler products. The three key CSR initiatives
of the IKEA are (IKEA Corporate Social Responsibility (CSR) and Sustainability, 2021):
 Healthy and Sustainable living
 Climate positive initiatives
 Social equality and fairness

IKEA's Healthy and Sustainable living programs: it is critically evaluated in 2020 the IKEA
as the global organisation has been taking serious action to expand its sustainable living thereby
keeping the eye and concern for the environmental impacts of its operations. To fulfil this
objective of the CSR the company has taken effective actions in this process of this objective by
developing a new product line which includes: water cycling system for bath and showers,
energy efficient LED light bulbs, solar panels and much more (Endrikat and et. al., 2020). This is
all to promote the sustainable and healthy well-being among the customers and other
stakeholders of the company.
The IKEA has also introduced and launched the plant based food grocery items as the
alternatives in their stores and restaurants. The IKEA has also taken initiatives to reduce the food
production wastage in nearly two years.
IKEA's climatic positive strategy: the company never stops investing into the CSR strategies
that has power to make the activities cost effective, eco-friendly materials and processes. In
2020, the IKEA has effectively reached it goal of integrating the sustainable wood resources in
its furnishing with the 98% of the wood use din products will derived from the recycle materials
(Islam and et. al., 2021). Also the suppliers and partners of the IKEA are implementing the
policies that could minimize its environmental impact by improving the durability of its home
furnishings. CSR objectives related to the climatic positive objectives, 80% of its textile
products and the soft furnishing are now made of the natural products and recycled polyester
(Modak and et. al., 2020).
IKEA's Social Equality & Fairness strategy: Equality for all the people is also the part of the
CSR as the people must be equal to compete. For this the IKEA has a diversity and Inclusion
policy that leads a way towards the gender equality. IKEA has taken retroactive steps to
guarantee its company policies align with the UN Standards of Conduct for eliminating
LGBQT+ discrimination in the workplace.
REFLECTION
I have analysed that by writing this research on IKEA I have learned lots of skills and
gained a huge amount of knowledge about the business environment and leadership styles used
by the businesses. Firstly during the analysis of the micro and macro environment I have gained
analytical and critical thinking skills as to for the appropriate analysis of the areas of strengths
and weakness the skills were necessary. Through this research I have gained the knowledge

regarding the external environment factors such as political, technology, environmental etc. that
help the company's to analyse their existing opportunities in the market the threat they create to
the business. Through this research I have developed the research skills which was very
necessary for analysing the market and its needs. I have also gained and developed my
knowledge regarding the different models like SWOT and Pestle analysis to analyse the macro
and micro environment of the business. Thus in research I have also developed and enhanced my
leadership skills by learning about the implementation of the suitable leadership style in order to
meet the objectives. The leadership style learned by me will also help me in future as the
professional. Thus through the research on CSR I have learned and developed about the different
practices of CSR and why it is essential for the businesses. Thus CSR was new concept for me to
learn and deeply research on. This was very interesting topic for me to research and also I have
learnt how I can bring sustainability and CSR in my own life through my daily life and well
being. Thus, the whole reach has given me a life learning experience as through this I have
gained deep insight regarding the business, its operations, environment and ways to meet the
business objectives. Most importantly I have learned a huge set of skills which will also help me
to grow personally and professionally.
CONCLUSION
It is concluded from the above report that in an organisation there are is huge importance of
factors associated external and internal environment. In order to have effective leadership
decision the organisation must analyse the external and internal a factor in order to evaluate the
strengths, weaknesses the company has and that can be used to negate the threats and
opportunities can be grabbed to improve the weaknesses. Thus company use the democratic
leadership style to meet the objectives of the company. The company has its business model for
the sustainability and CSR to have sustainable growth.

REFERENCES
Books and Journals
Advantage, C., 2020. Corporate Social Responsibility. CSR and Socially Responsible Investing
Strategies in Transitioning and Emerging Economies, 65.
Beji, R and et. al., 2021. Board diversity and corporate social responsibility: Empirical evidence
from France. Journal of Business Ethics, 173(1), pp.133-155.
Düking, P., and et. al.,2018. The potential usefulness of virtual reality systems for athletes: a
short SWOT analysis. Frontiers in Physiology, 9, p.128.
Elavarasan, R.M.,and et. al.,2020. SWOT analysis: A framework for comprehensive evaluation
of drivers and barriers for renewable energy development in significant
countries. Energy Reports, 6, pp.1838-1864.
Endrikat, J and et. al., 2020. Board characteristics and corporate social responsibility: A meta-
analytic investigation. Business & Society, p.0007650320930638.
Huertas-Valdivia, I., and et. al.,2019. Effects of different leadership styles on hospitality
workers. Tourism management, 71, pp.402-420.
Islam, T and et. al., 2021. The impact of corporate social responsibility on customer loyalty: The
mediating role of corporate reputation, customer satisfaction, and trust. Sustainable
Production and Consumption, 25, pp.123-135.
Modak, N.M and et. al., 2020. Corporate social responsibility and supply chain management:
framing and pushing forward the debate. Journal of Cleaner Production, 273,
p.122981.
Nandonde, F.A., 2019. A PESTLE analysis of international retailing in the East African
Community. Global Business and Organizational Excellence, 38(4), pp.54-61.
Orazalin, N. and Baydauletov, M., 2020. Corporate social responsibility strategy and corporate
environmental and social performance: The moderating role of board gender
diversity. Corporate Social Responsibility and Environmental Management, 27(4),
pp.1664-1676.
Phan, S., 2021. The effect of PESTLE factors on development of e-commerce. International
Journal of Data and Network Science, 5(1), pp.37-42.
Rahbi, D.A., and et. al.,2017. The effects of leadership styles on team motivation. Academy of
Strategic Management Journal, 16(3).
RUSLIATI , T and et. al., 2020. Does Entrepreneurial Leadership Matter for Micro-Enterprise
Development?: Lesson from West Java in Indonesia. The Journal of Asian Finance,
Economics, and Business, 7(8), pp.445-450.
Online:
PESTLE Analysis of IKEA. 2018. [Online] Available through: <https://pestleanalysis.com/pestle-
analysis-of-ikea/>./
IKEA Corporate Social Responsibility (CSR) and Sustainability, 2021,[online], Available
through: <https://www.thomasnet.com/articles/other/ikea-csr/>./