Business and Environment Analysis Report: IKEA (Unit 1)

This report provides a comprehensive analysis of IKEA's business environment, focusing on various aspects such as different types, sizes, and scopes of organizations, including public, private, and voluntary entities. It differentiates between micro, small, medium, and large enterprises, exploring their legal structures. The report examines the interrelationship between organizational functions and structures within IKEA, highlighting the impact of the macro environment on business operations. A detailed SWOT and TOWS analysis are included, assessing IKEA's internal strengths and weaknesses in relation to external macro factors. The report concludes with an overview of IKEA's organizational purposes and strategic positioning within the global market.

Business and the
Business Environment
(Unit 1)

Table of Contents
INTRODUCTION....................................................................................................................3
Different types, size and scope of organisations...................................................................3
Difference between public, private and voluntary organisations...................................3
Difference between micro, small and medium sized enterprises and large
organisations..................................................................................................................7
Range of legal structures associated with different forms of business..........................7
Interrelationship between different organisational functions and how they are interlinked
with organisational structure..................................................................................................8
The impact macro environment has on business operations..............................................10
The internal strengths and weaknesses of Ikea and their interrelationship with external
macro factors. Understand organisational purposes of business........................................12
SWOT Analysis............................................................................................................12
TOWS Analysis............................................................................................................14
CONCLUSION.....................................................................................................................16
REFERENCES.....................................................................................................................17

INTRODUCTION
Business environment is consisting of various factors that has huge impact on
the operations and strategies of the organisation. The environment provides a
numerous opportunities to the business and it is necessary to identify the opportunities
to improve the performance to get success within the business. Business can easily
identify opportunities and overcome from the negative impacts if they are aware of all
the factors. Within the environment
This report will cover case study of IKEA stores which is a British multinational
conglomerate, who are operating their business in all over the world. They are selling a
product such as home appliances, home accessories, ready meant furniture, and
including home services.
This report will explain the types of businesses including their size and scope. this
report will also discuss about the functions within the organisation and there Enter
relationship with each other. this report will conclude past analysis to identify the factors
within the business environment that affect on the company’s operations (Xu, W., 2019).
In the end of this report will determine the internal weakness and strength of the IKEA
Company and their Inter relationship with micro factors.
Different types, size and scope of organisations
Difference between public, private and voluntary organisations
There are various type of businesses within the business environment who have
various roles and way of doing their work. Each of the organisation have their own
purpose and their type. Here is the purpose and type of organisations.
Public companies are created by the government bodies and when they create a
public company then their main purpose is to provide benefits to the public and local
communities. most of the companies work for the non-profit, but some of them are listed
as a public company, but they are earning profits it serves highly regulated areas such
as broadcasting and public transportations. Public companies mainly work to add value

for their customers and create product that could be helpful for the public and useful as
well. Examples- Sainsbury is the public limited company who are second largest
supermarket within the United Kingdom an having a good reputation within the market.
Private companies are owned by the individual person or the companies group
who share we spend their own capital investment and also take the benefits and liability.
companies who are registered as the private limited work on the purpose to earn
profitability by selling their goods and products to the customers and customers buy
product from them because they want to satisfy their needs. IKEA is an privately owned
company who are operating their business in various countries and they are selling
products such as kitchen appliances, home appliances and providing home services to
their customers. this company was founded by Ingvar Kamprad In year 1943.
The main purpose of the voluntary companies is too provide benefits to the
society and the work for the welfare of society (Collier, N. And et.al., 2018). they focus
to provide services and help to the needy people and their main source of income is
donations by the NGOs and government bodies. Age UK is an registered charity firm
Within United Kingdom who are Helping the people with the old age group and they Run
a shop and by selling the clothes they earn money that is spent on the old age people to
help them.
The legal entity is in Group or the individual that has legal rights and duties
related to the agreements, contracts, obligations, transactions, penalties and sues. This
term can be applied to any kind of organization formally constituted according to the
particular set of laws governing the country. UK environmental law Association. it is in
legal body that is authorized to make a law elated to the environment and implement
effectively.
There are mainly 4 type of organisation that are public private voluntary and
legal, this all types have their own size and scope that are limited.
Comparison base Public company Private companies Voluntary company
size NHS is an example of
public sector
On the basis of Size
there are many
A voluntary group or
the union is the group

organisation. This is an
umbrella term in UK for
all publicly funded
healthcare system. In
2019 there were
1,093,638 employees.
In terms of size in 2017
there were 142000
hospital beds in
England.
companies who are
privately owned and it
has directly benefits to
the owner of the
company. IKEA
operating their
business within all over
the world and they are
having their locations
around 433 Within the
50 two countries.
of individuals who enter
into an proper
agreement, usually as
volunteers, to form a
body to accomplish a
purpose, size and the
scope of the Voluntary
companies depend on
their expansion within
the country or
internationally
expansion. this kind of
companies have huge
scope in their business
it provides a
satisfaction to the
person who are the
owner of this business.
scope The public organisation
embarrass is of all
types of activities by
the government. hands
as an activity the scope
of public organisation is
no less than the scope
of state activities.
Companies within the
sectors get the support
from the government
and also get some
reliefs from the
government side.
Scope of the private
company is that it is an
separate legal entity
with the limited liability.
This type of companies
can raise their funds
and it is not require any
minimum capital so
anyone can open their
own private company.
Age UK is an registered
charity firm Within
United Kingdom who
are Helping the people
with the old age group
and they Run a shop
and by selling the
clothes they earn
money that is spent on
the old age people to
help them.
legal structure There are different
types of legal structure
such as sole
proprietorship,
The United Kingdom
environmental law
Association is an
charity from that is
Its implication it’s to
understanding and
awareness of the
subject and networking

partnership and LLP
and legal structure of
NHS is government
entity. The reason
behind this is that it is
operated and owned by
government. (Myhre,
S., Engen, S. and Falk,
K., 2020).
registered within the
England and it was
made to improve the
environmental loss with
the UK.
among lawyers and
non lawyers with an
interest in the area.
objectives Improvement in
physical and mental
health of people in
England
Improvement in
prevention, diagnosis
and treatment of illness
 Increase and
expand
business
 earn
probability
 Are there
people about
cancer
product Health and social care
services
Grocery and furniture healthcare services
funding Tax Personal investment public funded, charities
Public sector organisation and public limited companies are two different types of
organisation. Public companies operating in public sector are owned by government in
which management is done by government and funding is done through tax and by tax
payers. Public limited companies on the other hand are companies in private sector and
when they are registered on stock exchange their shares are offered to public. In this
NHS is an example of public sector organisation and Sainsbury’s is an example of
public limited company.
Difference between micro, small and medium sized enterprises and large organisations
Micro enterprises are smallest in size and employs less than 10 people and
they have Limited scope in terms of activities of business. Main objective of the micro
enterprises are to Earn substantial profit and running business with least investment

Small enterprises are Small but compared to micro are big and employs unto
50 employees. Scope is limited but can be increased with investment in business
activities. Objectives of small organisation includes maintain standard of living and
earning highest investment.
Medium enterprises are Big in size and employs up to 250 employs, Scope of
business is big and activities and operations of business are higher in terms of number.
Objective of medium organisation is to increasing profit and achieving highest
productivity.
Large enterprise are Largest in terms of size and employs more than 250
employees, Large size businesses largest scope and involves several activities in
organisation. Large organisations have their objectives in which earning profit and
maintaining competitive advantage is important objective.
Range of legal structures associated with different forms of business
In a sole proprietorshipof legal structure in which individual owner of the
business manages all activities of organisation. Micro and small business organisations
consist of this type of legal structure
This type of legal structure consists of two or more people who own and operate
business organisation. These are known as partners and a partnership organisation
can be created in any form including micro, small and medium size organisation.
Cooperativeorganisation is those that are association of people and these are
jointly owned and democratically managed. This type of legal structure is adopted by
small and micro organisation.
Limited companyIn this type of legal structure ownership is based on ownership
of organisational shares. These are managed and operated by people selected by
shareholders of organisation. IKEA is example of this type of legal structure.

Interrelationship between different organisational functions and how
they are interlinked with organisational structure
There are various functions within the workplace of the IKEA company who are
helping company to take competitive advantages and they are directly linked to the
company’s objectives and structure (Xu, W., 2019). Here are all the functions that helps
to improve IKEA Position within the market where they are operating their business.
Marketing and finance
Marketing is the top most Department of this company, it is because marketers
are responsible to Identify the customers who can buy product sale by the IKEA
company so company can and probability. earning a probability is one of the major
objective of the business. marketing team not only identify the customers but they also
research about the customers needs and demand and give this information to the
operational team of the company that helped to produce a new product by using that
information. Marketing also has interrelationship with the other department for
examples- They obtain useful information from the market related to the customers and
give to the Finance for related to the funds, To the Hrm for the employees and
production related to the customers needs.
Finance &all other departments
Finance played the major role within the IKEA, it is because finance manager of the
company is responsible to identify the source of finance and they also provide a budget
to each of the Department within the company so they can run smoothly and achieve
that objectives (Brandt, A., 2019). Finance manager is connected to the whole structure
because they are responsible to ensure the proper use of finance within each and every
Department. It helps to Fulfil the primary objective objectives of the company and
provide higher growth within the market. Finance department is interlined with the other
department because they every department need funds to run their daily activities and
finance manager is responsible to provide funds to each department.
Human resource management &all other departments

It is the Department that is responsible to bring a talent within the workplace of IKEA.
they also play major role in planning, Organising and controlling the workforce For the
company. Each and every Department need employees who can run day to day activity
and HRM irresponsible to provide each Department employees with the effective skill
and knowledge. They also provide a training and development programme where
employees learn about new skills and taken knowledge about the industry so they can
improve and help company to achieve success within the market where they are
operating their business. it increased the efficiency of the employees and they give their
best within the task and help company to achieve their goals and objectives.
Organisational structure of IKEA is functional organisational structure. Functional
organisation structure starts with top organisational position and later activities in
organisation are divided on the basis of their specific departments. Employees in this
organisational structure are organised according to their specific skills and their
corresponding functions in organisation. For example, employee having specific
knowledge of Marketing works in marketing department. In this each department is
separately managed. Interrelationship of various functions interrelate with organisational
structure in which when major organisational decisions are taken by CEO of the
organisation, later they are divided on the basis of different functions activities. This
means to achieve organisational objective department works on aspect of objective that
is relevant to their department. For example- when a promotional campaign is operated
by company, in this campaign is designed by marketing, HR requirement is fulfilled by
HR, and budget is given and managed by finance department. This is how
interrelationship of organisational functions interrelate with organisational structure.
Advantage of using function structure by IKEA is that it allows people to focus on their
role and encourage specialisation within organisation.
Disadvantage of functional structure used by IKEA involves that it can negatively affect
collaboration and cooperation in organisation. Along with this also negatively affect
processes and communication within different departments.

The impact macro environment has on business operations
In order to understand positive and negative impact of macro environment on
business pestle analysis can be utilised. Macro environment consist of all those factors
that have impact on all organisations rather than any particular organisation. Pestle
Analysis of IKEA is as follows-
Political- IKEA is a multinational organisation and this is the reason that it becomes
subject political conditions and political stability of different countries. Different countries
and for political situations offers different opportunities and threats for IKEA. It is
important that for its effective performance it abides to conditions of all countries in
which it operates (Ehsan Ullah, Karlsson and Dada Olanrewaju, 2016). Political stability
and favourable attitude of government for multinational and non-local organisations is
an opportunity for IKEA. But there are countries that have strict regulations for non-local
and multinational organisations and this is negative impact of macro environment. In
order to overcome this negative impact IKEA can use its goodwill and also following
regulations adequately can help it in establishing in such countries.In addition this,
changes in policy of international operations can also help in dealing with this challenge.
In context of ongoing pandemic situation government has imposed differentregulations
and because of this, difficulties of IKEA increased.
Economical- This involves factors that are involved in category of finance and
economics and factors involved in these are GDP, per capita income, inflation, cost of
operations, and interest rates. In this environment IKEA gets affected by recession and
inflation. These element reduces purchasing power of customers and because of this
customers and sale of IKEA both gets negatively affected. However, because offerings
of IKEA are affordable and because of this it can deal with this challenge based on
recession and inflation. In this factor current economic conditions are threat for IKEA
because it has affected capability of customers in relation with buying powers.
Social- This environment involves factors that are related to customers of IKEA. IKEA
has managed increase its market share by its offerings and changing consumer
behavior is a threat for IKEA (Shtal and et.al., 2018). This means that consumer’s
preferences and buying behavior have significantly changed and IKEA requires

adhering to these in order to remain competitive. Additionally, IKEA as a multinational
organization also gets affected by varied customer preferences and tastes of customers
of different countries and different region. In this online shopping behavior of consumers
has an effective opportunity for IKEA to attract more customers. Other than this, ethical
consumers are also an opportunity that IKEA can attract through its ethical and
responsible practices. To deal with frequently changing behavior of customers IKEA can
use its capability to frequently design and create new products. This means that this
factor is very valuable for competitive advantage of IKEA.Pandemic has significantly
affected consumer behavior and because of this consumers now prefer to shop online
rather than in-store. This requires IKEA to take necessary actions and change their
operational preferences.
Technology- Technology has become centre of competitive advantage and
sustainability of organisations. Technology had enabled IKEA to effectively carry or its
organisational operations and also to reach different segments of customers. Factors
that affect IKEA in this environment involves technological development in industry and
by competitors of IKEA. On this basis innovation is an opportunity for IKEA through
which it can create long term advantage for company. Technology is a highly valuable
factor in present times and IKEA can deal with challenges of this factor with its capacity
however large scale operations can create challenge for IKEA.Technologies like Virtual
and augmented reality are making considerable differences in how businesses operate
and this is why IKEA also requires considering these technological advancements, that
IKEA has considered and applied in business.
Legal- This environment includes factors that regulate and govern different operations
of the company. This involves employee regulations, equality law, diversity law,
standard of operations, consumer safety regulations (Rastogi and Trivedi, 2016). All
these laws and standards are different in all countries and IKEA has to conform to these
laws and regulations in order to ensure its successful performance of organization.
Difference in these laws and regulations also create difficulty for IKEA. It is very
important that it has adequate knowledge of laws and regulations of the country in
which it aims to enter to ensure that it does not make any negative impact on IKEA.

Environment- This is another factor of external environment. This is concerned with
safety and protection of environment. Because of negative impact of industrial practices
on environment, it has become subject to social consciousness. People are conscious
regarding whether they are buying from an environment friendly firm. Additionally
different regulations have also been adopted by different countries regarding safety of
environment and this also creates challenges for IKEA. However being environmentally
responsible it can create positive brand image and attract customers. In present times
this factor has become highly important for organizations and IKEA can deal with
challenges associated with by identifying and developing environment friendly practices
and products.
The internal strengths and weaknesses of Ikea and their
interrelationship with external macro factors. Understand
organisational purposes of business
Internal and external analysis involves identifying strengths and weaknesses of
organisation that are internal to an organisation. Strengths are elements that facilitate
and support achievement of organisational objectives. Weaknesses on the other hand
create difficulty in achievement of organisational objectives (Phadermrod, Crowder and
Wills, 2019). Analysis of external environment involves identifying opportunities and
threats for organisation. Opportunities are those elements that contribute in growth and
success of organisation whereas threats are those that can negatively affect growth and
success of organisation.
SWOT Analysis
This is a tool through which IKEA’s micro environment can be analyzed. Application of
this is as follows-
Strengths
IKEA undertakes strong market research. This means that IKEA is able to
understand varied requirements of customers on different countries. IKEA has effective
number of product designs that are easy for transportation and assemble. Strong brand