Analysis of Business Environment: IKEA's Organizational Report

This report provides a comprehensive analysis of IKEA's business environment. It begins by defining the business environment and its impact on organizations, including external factors such as clients, suppliers, competition, technology, government regulations, and economic trends. The report then examines different types of organizations, including public, private, and voluntary sectors, along with their purposes and legal structures. It analyzes the scope and size of various organizations, using IKEA, BBC, and Oxfam as examples. The report further explores the relationship between different organizational functions, such as human resource management, sales and marketing, information technology, and production. It also includes a PESTLE analysis to identify the positive and negative impacts of the macro environment on business operations. The report concludes with an internal and external analysis of organizations to identify strengths and weaknesses and their interrelationship with external factors.

BUSINESS
AND BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Types of the organisations, purpose of the organisation and structure.............................1
P2 Scope and size of a different kind of organisation............................................................3
TASK 2............................................................................................................................................5
P3 Relationship between various functions of organisation and their link ...........................5
TASK 3............................................................................................................................................6
P4 Positive and Negative impacts of macro environment upon business operations...........6
TASK 4............................................................................................................................................7
P5 Internal and external analysis of organisations to identify strengths and weaknesses......7
P6 Interrelationship of strengths and weakness with external factors of business environment 9
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment is the combination of internal and external factors which effects
organisations operation situation. External factors not only affects the operations of the company
but they also affects the internal factors (Añón Higón and Driffield, 2011). The business
environment includes factors such as: clients and suppliers, its competition & owners,
advancement of technology, government laws and social & economic trends. Ikea is
multinational group which designs and sell the assembled furniture, kitchen appliances and home
accessories.
In this report explained about types and legal structure of private, public and voluntary
organisation, size and scope of different organisations, relationship between different
organisational organisation, positive and negative impacts of macro environment upon business
operations, internal and external analysis to identify strength and weakness and their interrelation
with external macro factors.
TASK 1
P1 Types of the organisations, purpose of the organisation and structure.
Organisation is called of the combination of group of people and management who
works together to achieve the specific purpose of the organisation. Organisation's objectives may
be differ as per the nature of the organisations, some of the organisations works for generating
profit and some of the organisation works as non-profit organisation, co-operative organisations.
Joint ventures, financial organisation and educational organisation (Añón Higón and Driffield,
2011). The organisation's structure are also found differ as per the design and the nature of the
organisation. There are basically three types of the organisations works in business environment.
Public sector : In public sector those firms and organisations are covered which operated
and controlled by the government or authorised person, bodies on behalf of government. Public
sector organisation works for generating national income and funds for growth of the national
economy and living structure of the nation. Public sector organisations provide employment
condition in a country to improve the employment structure of the country. There are different
public sector organisation are working in UK such are Marks and Spencers (M&S), UK health
and care services, national highways authorities, government legal services.
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Purpose : Purpose of these organisation is to gain revenues and improve the structure of
the economy. Provide employment condition and provide appropriate base of education and
health and care facilities.
Legal Structure : Public sector organisations are bound to operate their operations as per
the rules and the regulations of the governance (Doz and Kosonen, 2010). Legal structure make
an environment of ethical practice in the country.
Private sector :- Private sector organisation works for gain higher profit and revenues by
selling quality products and services to the customers. There are many private companies are
working in UK as IKEA, Mclaren technology of group, JCB, Bestway group etc.
Purpose : Private sector organisations operations are centralised as one major objective
which is earning higher profit and incomes by providing quality goods and services to clients and
customers.
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Voluntary sector :- In Voluntary sectors organisation works as non-profit organisation.
Their works involves to make aware the public and improve the living standards, welfare of
society.
Purpose :These organisation has one objective is to provide best facilities in health care
services and education sector (Eckerson, 2010). Improve the living standard of under privileged
people. Their source of income is subscriptions, donations and charities.
P2 Scope and size of a different kind of organisation
There are various types of organisation which play important role in achieving long term
goals and objectives in systematic manner. All business are based on providing different
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products and their innovative ideas to the customers in order to attract large number of the buyers
in an effective and efficiency manner (Blanchard and et. al., 2011). They will support in giving
better employment and improving living strand of the clients as well as enhancing lifestyle also.
It will identify regarding services, size, mission, vision, legal structure, objectives, scope and
other necessary information of the business.
Overview of the IKEA : This is a private company which is known as home furnishing
distributor in international. It was established in 1943 and it is a retailer business in all over the
world. Their product range is 9500 including accessories and furnitures. Vision of the firm is to
generate an everyday life and give better quality in their items in regards to fulfil buyers
satisfaction level. Business ideas of the IKEA which assist the vision by producing a well
designed and functional products of home furnishing at affordable cost so in this different
persons are attract and buy their items. Main strength of the organisation is technology in flat-
pack, unique store surrounding and modern and traditional design price etc. In marketplace place
they have different varieties in this commodity which range reasonable and luxurious.
Overview of BBC: This is a public sector company which stand British Broadcasting
Corporation in United Kingdom. It was founded in 1927 which produced different programmes
in television from their studio. This business is founded by government as well as public
enterprise (Cantwell and et. al., 2010). There are approx 2100 people are working each other and
their aim is to achieving high success and growth of the business in a systematic manner. They
provide their services in portals, radio, television and broadcasting etc. Their revenue is €4
billion & net income is €166 billion. Company giving their services in 28 languages so that main
mission is need to inform, entertain and educate all person. Objective of BBC is to focused of
audience and create value for performance of money.
Overview of Oxfam: It is known as voluntary sector and charitable enterprise which focused on
the providing social services to the people in order to safe their life. It was established in 1942,
they mainly focusses on poverty eradication, policy research and pro-migration. They will work
with several business as to support individual who are living and surviving in poverty. Main
objective of this company is providing better life as well as giving social service to the patients
and other person in a proper manner. They use different kind of resour5ces related to the fund
which is provide by legal authority in regards to keep its operations as well as functional
capabilities. Mission of the Oxfam is to generate lasting result to poverty, social injustice and
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hunger etc. vision is very simple to want and need a world where person are valued as well as
treated equally.
TASK 2
P3 Relationship between various functions of organisation and their link
Each and every business has their own structure which considers different policies and
rule that outlines responsibility and roles of business are controlled, coordinated and allocated
within workplace. There are several kind of enterprise structure i.e. divisional, functional and
matrix etc. KIEA is following matrix structure in order to divide its workers in various teams so
that organisation function can be monitored in an systematic manner (Chow and et. al., 2012).
This firm is formed to execute its objectives and goals which are determined in under this:
 Main aim of the business is to increase financial profit as well as decrease operational
cost. They will be capable to operates their all practices and activities in effective way.
 They will provide core attention to employees and buyers in order to fulfil their
satisfaction level. For satisfying demands and needs of the clients it give high quality in
service or products.
Therefore, all goals and objectives are essential in achieving high profitability ratio. There are
several important function of IKEA which support in executing its desired objectives and goals.
These functions are determined under this:
Human resource management: One of the main department of the company which support in
recruiting and selecting talented workers who can attain long term growth and success of the
organisation. They operate all practices and activities of the firm in effective way. High
knowledgeable and skilled person can supply quality product in order to give better satisfaction
to clients. So in this they can assist business in regards to enhancing productivity and
profitability of enterprise (Commander and Svejnar, 2011). Whole functions are interrelated with
each other so in this IKEA apply matrix structure. This aspects support in utilising its HR in a
correct way.
Sales and marketing department: They play important role in deciding the product price as well
as support in encouraging them. Cited company provide core aid to their marketing function, this
is essential for the company because without this they can not advertise and promote their items
such as furniture as well as never attract large number of the clients due to commodity. Structure
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of the company which assist this section in order to making sales and marketing group so in this
they can direct all practices and activities of organisation in effective and efficiency manner.
Information technology: It is also very important and significant department of the company
which support in storing and managing necessary information in correct manner (Cordes and et.
al., 2010). This section play essential role in enterprise to providing accurate information and
data which is needed for the IKEA in regards to increase their sales and revenues.
Production department: One of the main and needed section of the business is production
department which play important role in achieving goals and objectives of the business. They are
able to looks after product and self which is offered by cited company. This section maintain the
stock as well as ensure that individual commodity its present resources.
TASK 3
P4 Positive and Negative impacts of macro environment upon business operations
PESTLE analysis shows about positive and negative impacts of macro environment on
business operations. PESTLE analysis includes: political, Economical, social, technological,
legal and environmental. So, the PESTLE analysis of Ikea given below:
Political
 Impact of political controversies affecting brand: Ikea has many political controversies
regarding its operation in past (Chavis, Klapper and Love, 2011.). That the company
accepted some of its furniture are produced by political prisoners. Ikea apologized for
same but it affects the image of Ikea.
Economical
 currency impact due to Brexit results in increased prices: Because of the exit of Britain it
effects the whole economy. It lowers down the currency of the economy which results in
increase of the prices of the goods.
 Emerging economies set for moderate to strong economic growth: It takes the help of
othjer countries to emerge their economies and to grow towards the strong economic
growth.
Social
 Initiatives with local organisation for training and creating jobs for refuges: Ikea is the
big company has to take the initiatives with local organisations to give the jobs to
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refuges. It helps in increasing the living standard of them and to create the opportunities
earn income. Indirectly it effects the demand of products of Ikea as they generate
opportunities to earn income.
 Ikea also provides to employees the benefits and incentives likes insurance and pensions.
Moreover they promise to provide the high quality products to the society. With the
fulfilling the demands of society they becomes the brand in the eyes of customers.
Technological
 Ikea used quality technology and systems to promote their scheduling, tracking, trading
patters and staffing. Its main is to be more productive and establish employee
preferences. They use such system which tells them to appoint the right person at the
right place which increases the productivity of the Ikea.
Legal
 Criticism over tax evasion in many countries: Tax evasion by Ikea in many countries
damage the image and brand of the company. As nobody wants to deal with such
companies which are not paying taxes. It creates the negative image of the company and
this will result i9n reduce the sales of the company.
Environmental
 Focus on sustainability and social responsibility: Ikea is the big company it requires to do
the environmental analysis as it is very necessary to grow in society. It is because in
today's world nobody tolerate the damage to environment (Commander and Svejnar,
2011). It will be considerd as social responsibility by company.
TASK 4
P5 Internal and external analysis of organisations to identify strengths and weaknesses
SWOT analysis of Ikea shows the positive and negative impact of macro environment
factors on business operations. So, the SWOT analysis of Ikea is given below:
Strengths
 Customer knowledge: one of the advantage which Ikea has that it has the great
knowledge about their customers. Company understands the purchasing factors which
influences the customers to buy the products (Eckardt, 2012). Ikea offers low price and
huge rage of products.
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 Innovativeness which drives cost down: Low cost is the main power of the Ikea business
idea and they always try to do things efficient and cost effective. For the purpose of
lowering the cost they always try new innovations in products.
 Supply chain integration: Ikea has very long relations with its suppliers. So the company
can order large volumes and benefit from lower prices and grater quality while they are
assured of guaranteed orders.
 Brand reputation and market presence: Ikea is the most valuable furniture retailer brand
in the world. Its image ensures that customers choose Ikea over its competitors.
Weaknesses
 Negative publicity: The company has many issues like poor treatment of employees,
questionable advertising practices and lobbying government authorities. It reduces the
brand image of the company.
 Low quality of products and services: Ikea continuously reduces the cost of the product
but they not maintain the same quality which reduces the sale of the company. It also
affects their customer satisfaction.
 Standard products: Due to standardized products Ikea is able to reduce the costs of
products and standardized products attracts the fewer customers.
Opportunities
 Further expansion into developing economies: Retail market grows with the rate of 5 %
average, so there is huge opportunities with Ikea to increase their revenue. The company
has operates in many developed countries but they are not operating developing
countries. So they have the great chance to operate in those countries.
 Growing online sales: Online sales has more part in total retail sales. So it is growing fast
and the Ikea has the chance to increase the sales.
 Expansion to growing grocery market: The trend of eating healthier food increases the
demand of grocery products in many developed countries (Eisenberg and Miller, 2012).
So Ikea has the opportunity to expand its grocery business by introducing more grocery
products in retail stores.
Threats
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 Intensifying competition: Many other companies like Tesco enters in the market which
have more lower prices. These retailers also have the same specifies as Ikea, including
low costs and well managed supply chain.
Growth of average consumer income: It means people buy less low price and low quality
products, which are offered by Ikea in stores (Hamilton and Webster, 2015.). Because of the
reason of increasing the income of the people are less attracted towards the Ikea and turns
towards such retailers which are providing higher quality of home products.
P6 Interrelationship of strengths and weakness with external factors of business environment
Strengths and weakness both are one of the essential internal element of every enterprise.
This guide manager at the time of policy formulation and business plans. Both strengths and
weakness largely affect by the macro factors exist in business environment. Managers compare
strengths of firm with those elements and plan future action of business. Any variation in these
factors affect both strength and weakness of company (Jayeoba, 2012). Managers of IKEA can
carry out analysis to achieve efficiency in business operations. Interrelationship of strength and
weakness of enterprise with macro factors can be understood by the following points: Economic factors: Different factors such as inflation rate, deflation rate, rate of interest,
bank and loan come under this. If company has enough finance resources that these
changes doesn't affect the business operations and pricing strategy of firm. To achieve
end results it is very essential for managers of IKEA to always be ready to face the
challenges arise due to variation in economic conditions of country. Political factors: This include the elements and legal policies framed by the government
of country. Any change in these affect business operation of enterprise. To perform
effectively in any situation it is very essential for IKEA to have specialised employees. Social and cultural factors: This is very necessary for any enterprise to have good and
skilled employees, financial resources to accept challenge arise due to modification in
social elements (Klapper, Lewi and Delgado, 2011). To capture a larger market share it is
essential for IKEA to have the capability to satisfy different need of customers. Technological factors: Technology play an effective role in retail sector so it is very
essential for IKEA to use upgrade technology to make products and satisfy the needs of
customers. It is very essential for firm to manage the use of natural resources.
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 Environmental factors: Today large number of organisations use different type of
technology and natural resources and materials during production process. To ensure
effective and optimum utilisation of natural resources it is very essential for managers of
IKEA to develop effective policies.
Both the factors strengths and weakness of company largely affect with the factors exit in
external environment. If manager of IKEA fail to identify this interrelationship than firm can not
make products as per the requirements of its customers and this will affect the profitability of
enterprise. So all efforts must be done by the managers of IKEA to better react to the variation
take place in external environment.
CONCLUSION
This report is about the business and business environment which explain the
organisations nature, purpose, scope, structure in business environment. An organisation is the
combination of different management departments and functions, it is described that how IKEA's
operational functional are interrelated with its management departments. It also defines the effect
of macro environment in the organisational functions. Analysis of the business environment
helps to identify the strength and the weakness of the organisation which helps the organisation
to make strategies and plans to achieve the objectives and goals. IKEA is one of the retail
industry which provide furniture and fixtures, home appliances in UK market. The base of
overall analysis of organisational structure is taken of Marks and Spencers public sector
organisation.
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