Regent College: HND Business and Business Environment Report on IKEA

This report provides a detailed analysis of IKEA's business environment, examining its organizational structure, including functional and hierarchical structures, and the interrelation of various organizational functions such as HR, marketing, finance, and production. It delves into the positive and negative impacts of macro-environmental factors, utilizing PESTLE analysis to assess political, economic, social, technological, legal, and environmental influences on IKEA's operations. Furthermore, the report conducts an internal and external analysis of IKEA using a SWOT framework, evaluating the company's strengths, weaknesses, opportunities, and threats. The report concludes by evaluating how internal strengths and weaknesses interrelate with external macro factors, providing a comprehensive overview of IKEA's business strategy and its response to the external environment.

Business and Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 & P2 COVERED IN PPT ....................................................................................................1
TASK 2............................................................................................................................................1
P3 Relationship between different organisational functions.......................................................1
TASK 3............................................................................................................................................3
P4 Positive and negative impact macro environmental factor over business operations............3
TASK 4............................................................................................................................................5
P5 Internal and external analysis of organisation. .....................................................................5
P6. Evaluate how strength and weakness interrelate with external macro factors......................6
CONCLUSION................................................................................................................................7
REFERENCES ...............................................................................................................................8

INTRODUCTION
Business environment is the combination of internal as well as external factors which
affects the business operations and its growth. These factors can not be controlled by
organisation. It is important to analyse external factors for identifying the opportunities that can
be used by firm in order to their advantage and complete business goal in effective manner.
This report is based on IKEA group, which is one of the best retailer among the world. This
organisation offers kitchen appliance, home utility and furniture across the world (Boons and
Lüdeke-Freund, 2013). In this, various types of organisations and their purposes are elaborated.
This report also various functions of organisation which are interrelated with each other and also
affects work performance of each other.
TASK 1
P1 & P2 COVERED IN PPT
TASK 2
P3 Relationship between different organisational functions
Every business organisation is the combination of various organisational function which
supports in accomplishing business goals. Manager of this enterprise have to evaluate the
performance of the employees in order to understand barriers and obstacles which affects
effectiveness of work. In relation with IKEA Group, this organisation focuses on expanding its
business offering reasonable products and services to its customer worldwide (Foss and Saebi,
2017). For achieving its predetermined goals, this organisation performs various functions which
are interrelated with each other. Organisation is the combination of several functions like
finance, marketing, human resource, production, operations, research and development etc.
Every department in this organisation is related with each other and also influences the work
performances. Interrelation of IKEA's organisational function of are evaluated as below:
Human resource:Major work of human resource department in every organisation is to
hire right candidate for right designation. In relation with IKEA, HR manager is using several
methods to increase number of applicants which directly provides many options to hire the best
one. This function Human resource department is related with marketing function as team of
marketing department are advertising brand name of company in the market and attract the
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candidate to work with the company (Gan and et. al., 2012). It support the human resource
department in performing their job role effectively and achieve goals.
Marketing: This department promotes products and services of the company at market
place in effective manner. In context to IKEA Group, marketing manger is directly connecting
with the customers and consumers. This helps them to understand the requirement of the
customers. Marketing function of IKEA group is related to production function as team member
of marketing department knows the actual requirement of customers and guides production to
team manufacture to modify products and service. It will reduce the wastage of production team
and increase customers satisfaction level.
Finance: Finance department provides fund to every department according to their
budget. It is responsibility of finance manager of IKEA group to provide financial fund on time
to every department in order to support them in completing their task on time. This function is
related with function of this organisation as it issues the fund to all to finish their task.
Production: Production department emphasize on manufacturing products and services
on time in order to increase its work efficiency. In context to IKEA Group, production
department is related with the finance department as it provides fund on time. If production team
will not get funds on time then it will not be possible for them to manufacture the products in the
given period of time (Gupta, 2013).
(Source: Hierarchical organisational structure, 2018)
Organisational structure: Organisation have follows outline or pattern in which they perform
their business activity for achieve organisational goals and objectives. Various types of
organisational structure are evaluated as below:
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Illustration 1: Hierarchical organisational structure

Functional structure- In this, organisation is dividing its functions in separate
department like human resources, finance, marketing, IT, research and development etc. Under
this, employees are shifted to department according to their speciality. This helps the
organisation in improving its performance as employees are getting opportunity to work in their
chosen department. It also helps manager of each function in achieving organisational goals and
objective on time.
Hierarchical structure- In this organisational structure, employees have to follow
pyramid where every employees have to report its superior and further that superior have to
report his senior. It will be beneficial for the IKEA group to use this organisational structure as it
easier for the organisation to manager large number of employees at international level
(Hamilton and Webster, 2015). It also saves the time of the management team as well as
employees as it does not involve anyone in reporting time.
Among the above mentioned organisational structure IKEA Group is using hierarchical
structure which helps in monitoring all the employees worldwide. This structure also supports
the organisation is increasing the satisfaction level of employees as they are free to discuss their
problems with superiors.
TASK 3
P4 Positive and negative impact macro environmental factor over business operations
External environment of the business is considered as the macro environment as it
influences business both in positive and negative manner. In context to IKEA Group, this
company offering its products and services at global level which is directly affected by the
external environment and impacts probability margin. Impact of external factor on IKEA group
is described below with PESTLE analysis:
Political factors: Changes in rules and regulation within the trading country affects the business
of IKEA. Positive: Changes in taxation policies can increase reduce the products cost and enhance
its profitability.
 Negative: Its difficult for IKEA to maintain common price of similar products according
to the changing rules of the government of different countries (Scanning the
Environment: PESTEL Analysis, 2016).
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Example: Modification in employment legislation affect the working pattern of the company.
Economical factors: These factors directly impact the performance of IKEA for long run.
Economical factors involves recession, interest rates, economic growth patterns etc. Positive:Recession in trading country will increase the sales of IKEA as its products are
reasonable and satisfactory for the customers,
 Negative: Recession also might have its negative affect as it reduces the spending of the
customers which will also decrease the sales of IKEA.
Example: Change in interest rate might impact business in positive as well as negative manner.
Social factors: These factors involve the social factors which affect the business in positive and
negative manner. Positive: CSR activities are building positive image of IKEA among customers.
 Negative: Changing taste and preferences of customers will reduce the sales of IKEA
group in different countries (Hollenbeck, Noe and Gerhart, 2018).
Example: Participation in social welfare event will develop goodwill of IKEA.
Technological factors: Advance technology is beneficial for the companies to perform their
business activity in effective manner. Positive: Usage of advance technology will help IKEA in connecting with large targetted
audience.
 Negative: Opting technology is the expensive for IKEA as it large company.
Example: Using technology will support business operation in positive manner and can
utilise competitive advantages.
Legal factors: Different laws of every organisation affects the business environment in positive
and negative manner both. Positive: IKEA can use legal factors in positive manner by following laws of every
trading country.
 Negative: Its difficult for the maintain their profit margin with governmental laws which
affects the long term affect (Jones, Wicks and Freeman, 2017).
Example: It will be beneficiary for IKEA they are following all the legal legislation as it will
make business operations more smoother for organisation.
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Environmental factors: Business operations affects the environment of the country so it is
necessary for IKEA to use environmental friendly systems to reduce its affect. Positive: In order to reduce the harm to environment, IKEA group should install solar
panels in its stores to reduce negative affects of radiations.
 Negative: According to the requirement of the customers, IKEA have to use many
advance technology that harmful for environment.
Example: IKEA can utilise natural resource by establishing solar plants. It will directly reduce
the affect technology on environment (Kew and Stredwick, 2017).
TASK 4
P5 Internal and external analysis of organisation.
It is required by every organisation to evaluate internal and external factors. In relation to
IKEA group it is beneficial in order to identify the internal strengths and opportunities available
at marketplace. SWOT analysis of IKEA Group is elaborated below:
Strengths Weaknesses
 IKEA provides its products and
services at reasonable price which
grabs the attention of customers.
 Vast range of products in its stores
provides opportunity to its customer to
choose best one.
 IKEA is using innovative ideas to
launch new products in its stores that
improves the satisfaction level of
customers.
 It is difficult for IKEA group to
maintain the tag of reasonable products.
In order to manage the cost, this
organisation is sometimes reducing its
cost.
 Maintaining different laws of trading
countries is affecting the business in
negative manner.
Opportunities Threats
 IKEA can introduce products in
different sector to increase number of
 Increasing number of competitors is
becoming major threat for IKEA group.
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customers (Kian Chong, Shafaghi and
Leing Tan, 2011).
 IKEA group can use Online promotions
to promote its
product at domestic as well as
international level.
 Changes in taste and preference of the
customer may affect the business this
organisation.
Influence of internal and external analysis on decision making process: Internal and
external analysis of business environment is beneficial in decision making process as it helps in
identifying the weaknesses of the company that helps in taking appropriate decision in order to
modified the product as per the requirement of customers. Decision making process is also
affected by the opportunities raised by the external factors. In this various strategies are
formulated to grab these strategies (Klem, 2013).
P6. Evaluate how strength and weakness interrelate with external macro factors
In modern world, it is being found that micro-environment can put impact on IKEA
group in both positive or negative manner. In order to understand this, some of factors are
elaborated beneath:
PEST Analysis:
Political: Changes among rules and regulation which is being made by parliament of UK
can be considered as things that can put impact on IKEA. Some of its factors includes different
things like tax policies, trade tariffs that can affect organisation's working.
Strength- United Kingdom's retail sector is pretty much smooth where organisation do
not make much changes. Therefore, this can be taken as a strength for of this factor.
Weakness- IKEA is dealing in different nations, where countries follows different laws.
Slight changes in them may put impact on company's profit margins (Lee, Kao and Yang, 2014).
Economical: This factor plays a crucial role that includes interest rate, inflation rate,
foreign exchange rate that can majorly put impact on business of an organisation.
Strength- Enhancement in economic conditions is very much helpful for IKEA through
which they can hit company's targets and business objectives.
Weakness- Slight fluctuation among monitory rates can put impact on sales of products of
IKEA.
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Social- This is being considered an another factor that plays a crucial role because it
includes buying behaviour of customers, values, culture and many more.
Strength- If IKEA develops their products as per the requirements of customers, than they
will directly grab a good position at marketplace in a short period of time.
Weakness- If customer's needs gets changes then it can be said that company may face
high losses (Portugal-Perez and Wilson, 2012).
Technological: This factor carries a rapid changing nature. Therefore, it is being
considered as an element through which IKEA can hit their targets if they would update products
and services.
Strength- Using updated tools of technology will help IKEA in giving good competition
to rivals.
Weakness- Expenses of IKEA can majorly get increased if they will rapidly adapt
updated technology.
CONCLUSION
From the above mentioned report it has been concluded that it is essential for every
business to evaluate internal and external factors to find out the opportunity which will help in
business growth. In order to analyse business environment SWOT analysis is beneficial for the
company. It will also support in modifying the products and services according to the
requirement of the firm and gain desired profits.
REFERENCES
Books and Journals
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Boons, F. and Lüdeke-Freund, F., 2013. Business models for sustainable innovation: state-of-the-
art and steps towards a research agenda. Journal of Cleaner production. 45. pp.9-19.
Cavalcante, S., Kesting, P. and Ulhøi, J., 2011. Business model dynamics and innovation:(re)
establishing the missing linkages. Management decision. 49(8). pp.1327-1342.
Commander, S. and Svejnar, J., 2011. Business environment, exports, ownership, and firm
performance. The Review of Economics and Statistics. 93(1). pp.309-337.
Dima, I. C., Grabara, J. and Modrak, V., 2014. Sustainable logistics and business
competitiveness. International Letters of Social and Humanistic Sciences. 15 (2).
pp.148-156.
Ebert, R. J., 2011. Business essentials. Pearson Education.
Elliot, S., 2011. Transdisciplinary perspectives on environmental sustainability: a resource base
and framework for IT-enabled business transformation. Mis quarterly. 35(1). pp.197-
236.
Findlay-Thompson, S. and Mombourquette, P., 2014. Evaluation of a flipped classroom in an
undergraduate business course.
Foss, N. J. and Saebi, T., 2017. Fifteen years of research on business model innovation: How far
have we come, and where should we go?. Journal of Management. 43(1). pp.200-227.
Gan, Z. B., and et. al., 2012. Construction and optimization of trust network in e-commerce
environment. Chinese Journal of Computers. 35(1). pp.27-37.
Gupta, A., 2013. Environment & PEST analysis: an approach to external business environment.
International Journal of Modern Social Sciences. 2(1). pp.34-43.
Hamilton, L. and Webster, P., 2015. The international business environment. Oxford University
Press, USA.
Hilton, R. W. and Platt, D. E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Hollenbeck, J. R., Noe, R. A. and Gerhart, B. A., 2018. Human resource management: Gaining a
competitive advantage. McGraw-Hill Education.
Jones, T. M., Wicks, A. C. and Freeman, R. E., 2017. Stakeholder theory: The state of the art.
The Blackwell guide to business ethics, pp.17-37.
Kew, J. and Stredwick, J., 2017. Business environment: managing in a strategic context. Kogan
Page Publishers.
Kian Chong, W., Shafaghi, M. and Leing Tan, B., 2011. Development of a business-to-business
critical success factors (B2B CSFs) framework for Chinese SMEs. Marketing
Intelligence & Planning. 29(5). pp.517-533.
Klem, J. B., 2013. System and method for tracking information in a business environment. U.S.
Patent 8,583,514.
Lee, J., Kao, H. A. and Yang, S., 2014. Service innovation and smart analytics for industry 4.0
and big data environment. Procedia Cirp. 16, pp.3-8.
Portugal-Perez, A. and Wilson, J. S., 2012. Export performance and trade facilitation reform:
Hard and soft infrastructure. World development. 40(7). pp.1295-1307.
Ratten, V., 2014. Future research directions for collective entrepreneurship in developing
countries: a small and medium-sized enterprise perspective. International Journal of
Entrepreneurship and Small Business. 22(2). pp.266-274.
Online
Scanning the Environment: PESTEL Analysis, 2016. [Online]. Available through:
<https://www.business-to-you.com/scanning-the-environment-pestel-analysis/>.
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