Comprehensive Business Strategy Report: IKEA's Strategic Analysis

This report provides a comprehensive business strategy analysis of IKEA, a multinational company specializing in ready-to-assemble furniture and home goods. The report begins with an introduction to business strategy and its importance, followed by an analysis of IKEA's macro environment using PESTLE analysis, considering political, economic, social, technological, environmental, and legal factors. The report then delves into IKEA's internal capabilities through SWOT and VRIO analyses, evaluating its strengths, weaknesses, opportunities, and threats, as well as the value, rarity, imitability, and organization of its resources. Furthermore, Porter’s five forces model is applied to assess the competitive landscape. Finally, the report concludes with a proposed strategic plan for IKEA, incorporating insights from the preceding analyses. The report aims to provide a detailed understanding of IKEA's strategic positioning and potential future directions.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Impact of Macro Environment on IKEA...........................................................................3
TASK 2............................................................................................................................................5
P2 Analysis of all the internal capabilities as well as environment of IKEA.........................5
TASK 3............................................................................................................................................9
P3 Porter’s five force model applied on IKEA......................................................................9
TASK 4..........................................................................................................................................11
P4 Strategic Plan for IKEA..................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................12

INTRODUCTION
Business strategy refers to a number of steps as well as actions which are undertaken by an
organisation in order to increase their revenues as well as profitability. There are many other
motives of formulation of a business strategy which includes attracting customers, achieving
customers satisfaction, increasing competition in market and achieving all its business objectives
as well as aims. Business strategy is responsible for guiding a business (Bai, C. Aand et. al.,
2020). They provide a roadmap to business and explains which next step is to be taken by
business. It is essential in order to maintain a sustainable growth of business. It is necessary that
business strategy is formed for a long period of time. In the following report business strategy for
IKEA is formed. It is a multi-national business which sells all the ready to assemble goods which
are furniture, kitchen as well as home appliances. It was founded in Sweden in 1943 by Ingvar
Kampard. It is present in 433 locations around the world. There are a number of analysis
performed on IKEA in order to derive its business strategy. It includes VRIO, PESTLE, SWOT,
porter’s five forces analysis and a number of other analysis to form business strategy for IKEA.
In the end of report a business strategy for IKEA is also prepared.
TASK 1
P1 Impact of Macro Environment on IKEA
There are a number of factors present in macro environment which can affect a business up to
certain extent. When taken into consideration the concept of macro environment is very large
and a lot of factors can be included in it (Balon and et. al.,2019). The best way to learn about
these factors is conducting a PESTLE analysis on business. Following is PESTLE analysis
conducted on business-
Pestle analysis
PESTLE stands for political, economic, legal, social, technological and environmental.
All these factors together have negative as well as positive impact on functioning of a business.
In order to create a strategy for IKEA so that it may earn profits and stay in market for long run
all these factors related to company are needed to be analysed well. Following are all those
factors affecting IKEA:
PESTLE analysis refers to analysing all the external factors present in a business
environment which may directly order indirectly have an effect positive as well as negative on

functioning of a business. PESTLE analysis generally stands for political, legal, social,
technological, environmental and economic factors. Below mentioned is Western analysis
conducted on IKEA in order to understand all the external factors affecting business:
Political factors:
IKEA has opened its doors in more than 41 countries. This makes it important for IKEA
to abide by rules and regulations of all these countries. There are many countries which have
similar kind of political influences. But many times, these may differ for different countries
around the world (Elias Mota and et. al., 2020). However, political stability will always benefit
the company. Without political stability economic stability for a country is not possible. So, it is
important for IKEA to look into all the political matters before venturing into a new country.
Social factors:
Social factors refer to all the values, beliefs of a society a company is running its business
in. It is important for business to follow the culture. It is important that company does not offend
any social values. This makes it essential for IKEA to make sure that the marketing material they
are using advertise their brand does not hurt feelings of any social, culture. IKEA have faced
many incidents in past where the advertising campaigns used by companies have been criticised
in the market by different communities. Profits for the company could suffer due to this
ignorance of cultural norms. Therefore, it is required by company to look into all the aspects
which may have a negative effect on functioning of company overseas.
Economic factors:
There are a lot of international laws which have affected economy worldwide leading to
negative effect on IKEA as well. Recession in the year 2007 can be said to be one of such
examples. Due to loss of work for a number of employs the buying decisions of customer
changed a lot over period. Before venturing into any new market company needs to focus on
GDP, foreign exchange rates, taxation, interest-rate and all other economic factors present in the
nation which might affect working of IKEA. Company must make flexible strategy in order to
deal with any upcoming changes in the economic factors. Economic factors are those factors
which directly influence profit earning capacity of the firm.
Technological factors:
Technology can be seen changing over a period of time. Every day new innovation and
techniques are launched in the market (Elias Mota, B. A., and et. al., 2020). Using latest

technologies can help the company to increase customer satisfaction, as well as support
employees with their work. IKEA took care of technological developments and they offered their
products on internet. They also provide realistic experiences to their customer in order to attract
them. These steps taken by company towards changing technological environment have been
benefiting company throughout. This also helps company to stay competitive in the market and
deal with its competitors.
Environmental factors:
It is very important for every company to take care of the environment they are operating
into. Exploiting natural resources can lead to be harmful for company and its working in future.
IKEA took care of this matter and invested in its eco-friendliness. IKEA have invested more than
$1 billion in order to provide renewable energy to the nations who cannot afford it. They did it
by installing solar as well as window panels at a number of locations. They have also moved
towards using materials like cotton and would which be sustainable sources. These steps taken
by company has proved to be helpful. So, in future company needs to take care of its
environment in order to sustain for a longer period of time.
Legal factors:
Every company needs to be sure they do not bend any laws while operating in the market.
If any law is ignored by company it may lead to specific legal proceedings against the company
which might affect brand image as well as profits for the firm (Leonidou and et. al., 2017). IKEA
have faced a number of legal proceedings due to harm and death of citizens from its products.
Company also needs to abide by all the labour laws, advertisement laws, compensation laws et
cetera while functioning in the market. Ignoring any of this law may lead to lawsuits against the
company due to which company might suffer heavy losses.
TASK 2
P2 Analysis of all the internal capabilities as well as environment of IKEA
Internal factors of a business are highly responsible for running a business smoothly. It is
necessary for organisation to keep a regular check on internal factors. Internal factors are those
which have maximum impact on a business. All the resources as well as stakeholders are
included in it. The best ways to analyse internal capabilities of business are SWOT as well as
VRIO Analysis.

SWOT Analysis
SWOT analysis stands for strengths, weaknesses, opportunities and threats (Peng, M. W
and et. al., 2017). This helps a business to know about all the internal factors which might
directly have an effect on its profitability and revenues. Following is SWOT conducted in IKEA:
Strengths
Market research: IKEA has a full idea about their customers. They know their customers in and
out. Their market research is very strong so that they can provide customers with whatever they
want. It becomes easy to make a strategy and sell their products if a company have full
knowledge of their customers and need of their customers.
Countless designs: IKEA provide with a number of designs, range and collection. This is the true
strength of the brand. Company goes beyond physical decoration and make their products easy to
transport as well as assemble. One can find finished product in the store where as they provide
products that can be assembled at home.
Affordability: IKEA provide its product at very afford prices to its consumers. This is another
strength of the company. They maintain cost-effectiveness for their clients throughout.
Weaknesses
Bad Press: IKEA have faced some bad press in its past. Employees have been complaining about
poor treatment given to them in their workplace. Also, their products have many times led to
injuries. Advertising technique they have used were ridicule by non-western companies as well.
Due this bad press it has led to distrust of customers in the company (Pucheta‐Martínez and et.
al., 2019).
Low Quality: It have been noticed that due to cheap prices quality offered by company is low. It
is very difficult to provide high quality prices at affordable prices by any company these days.
The same problem is faced by IKEA. There is a lot of criticism faced by company on social
media as well. It provides opportunities to other competitors of its to do better.
Opportunities
Few countries: IKEA had Stores in around 38 countries worldwide. Diversification and market
development are a great opportunity for company. It can set up its store in a number of places in
order to expand their business. There are various other countries like Mexico, Brazil, Pakistan
etc where company can set up its business and grow.

Online Shopping: Online shopping is in trend these days. Company have a website which sells
its products online. Especially when selling around holidays. They can sell variety of products
online by increasing the products they’re offering on their sites.
Grocery Stores: Company can push its sales bu venturing into grocery stores. It is a way of
product development. They can grow with the help of selling products including food products in
their own grocery stores.
Threats
Fast competition: Company is facing a lot of competition in market place. This competition for
company has led to be a threat for it. There are a number of brands like Walmart who offer
similar inexpensive products. However, they do not provide so much variety as IKEA.
Lawsuits: Company have faced a lot of bad press in past. This have led to be a threat for
company. IKEA have chances to face lawsuits from customers who have faced losses and have
been injured due to company’s products. There is also a number of bad influence and criticism
faced by company on social media. IKEA needs to take care of this factor. They need to counter
their criticisms and make sure that they have to maintain good image in public. They need to
work towards their brand image in market (Tardieu and et. al., 2020).
Increased income: it has been noticed that income of people in market is increasing. When
consumers have more income to spend, they do not want to but inexpensive products. They
believe in buying good quality products even though they are of high prices. This is the basic
nature of any consumer. IKEA product can be said to be such goods which have high income
effect on them. As the income of consumers increase, they will look for better options in market.
VRIO Analysis
With the help of VRIO analysis all the important resources in a business and its
importance in business is seen. The set of resources used for this analysis can be different for
different businesses. The value, rarity, imitability and organisation of these resources in business
is analysed through this analysis. Below mentioned is VRIO analysis performed on IKEA:
Valuable
 It is been seen that financial resources present with IKEA and highly valuable as they help in
investing a number of external opportunities that arise for the business. It is also helpful for
company to face the external threats. (Weng, W., 2020)

 It is been seen that all the employs of IKEA are valuable resource to them. Major employees
working in the company are highly trained and experienced. They provide productive output
for the organisation. They are very loyal to the company and retention of employees in
company is also very high.
 Other than this the distribution network set up by IKEA throughout its life in the market is
also a valuable resource for the company. It helps IKEA to reach far customers. It helps in
the increasing revenue of the company. This has also helped the company in promotional
activities directly relating to increase in companies’ sales.
 The research and development team of IKEA is still not a very valuable resource for the
company. This is because research and development require a lot of input in terms of finance.
Even though after so much financial investment company is facing competitive threat which
they are unable to overcome. Which proves that research and development team need to
improve and cut their cost.
Rare
 It can be said that financial resources of company are very rare. This can be said because
company on a strong financial position in the market which is only present with a few other
competitors in this industry.
 Employees of IKEA are also a rare resource for the company. The employees are trained as
well as skills according to the need of the company which is not present with every
competitor. They provide good compensation and healthy working environment to their
employs in order to reduce employee turnover rate of the company.
 Distribution network formulated by the company over year of its existence is also a rare
resource for company. It can be said because in order to obtain such distribution network
competitors of IKEA would require a lot of investment. Only a few other firms except IKEA
have similar distribution network which can compete with the company (Duquette, C.E. and
Williams, N., 2020).
Imitable
 In order to copy the financial resources, present with IKEA its competitor will have to invest
a lot. Company have used profits earned by them over years in order to develop this resource.
So, the competitors of company require similar amount of profits accumulated over a period
of time in long run in order to create this resource.

 Any competitor of IKEA could easily imitate its human resources. They need to train their
employs as IKEA did which is not a difficult process. Any competitor of IKEA can develop
similar human resources. They just need to train their employees well and provide them good
compensation to compete with IKEA.
 Distribution network which has been developed by IKEA over a period of time is not easy to
copy. In order to develop similar network competitors of IKEA would require a lot of
investment. IKEA took a lot of time to develop this network. Competitors would require
similar time and amount of money in order to develop such a distribution system.
 Research and development team of IKEA could easily be copied. It is not such a strong
resource for company so no competitor would like to copy this (Dhanuka, A. and Sharma, V.,
2020).
Organisation
 Financial resources of IKEA are organised enough in order to identify any great opportunity
present with company and capture it. Company have great financial advisors who is
strategically invest the funds of company in the right places improving earnings of the
company. This resource present with company have led to sustained competitive advantage
for the company in the marketplace.
 Distribution network of IKEA is also very well organised. They have been created in such a
way so that they reach a huge number of customers. They are of good value to company and
they provide advantage to company as well.
 When looking at other two resources of company that our employees as well as research and
development of company are not organised as well as other resources. Company needs to
focus on them in order to make them better and organised so that they can provide
competitive advantage to company as the other resources do
TASK 3
P3 Porter’s five force model applied on IKEA
PORTER’S FIVE FORCE MODEL
Porters five forces model can be conducted on every industry in order to know the
effectiveness and attractiveness of a business in the competitive industry. It helps business

manager to formulate a strategic plan for the business. It contains of five forces which can affect
competitiveness of the business. Below mentioned is this analysis performed on IKEA:
Bargaining power of suppliers
Bargaining power of suppliers for IKEA is low. This is because company have a number
of suppliers who provide products to the company. It is very easy for company to switch from
one supplier to other resulting in loss of business for the suppliers. Company have made a code
of conduct which is to be followed by its suppliers (Valenti, A. and Horner, S.V., 2020). This
code of conduct contains rules regarding discrimination, minimum wages, safe working
environment and child labour. The suppliers of IKEA need to abide by this code of conduct in
order to deal with IKEA also this provides IKEA an upper hand.
Bargaining power of customers
Bargaining power of customers in case of IKEA is very high. It has been seen in every
industry that customers incur a lot of power as there are a number of options available to them in
the market. Companies focusing on promotion, pricing strategy, digital marketing and e-
commerce in order to overcome this. However, in some cases bargaining power of buyers for
IKEA is moderate as the company is providing moderate quality goods at low prices. So, the
low-income level customers of IKEA do not have much bargaining power
Threat of substitute:
Company says no threat from its substitute because of the brand image it has created over the
period of time. The loyalty of customers towards the company is very high leading to high brand
image. The most important factor present with company is that they provide a variety of products
under a single roof. There is no such competitor providing products like IKEA leading to low
threat from substitute for the company.
Threat from new entrants:
The threat from new entrants in this industry and taking market share of IKEA is
moderate or low. There are a number of brands which run on small scale but this brand could not
affect business of IKEA. This is because company has built a large brand image and captured
large portion of the market share. Company have developed human resources, innovation,
financial resources, and infrastructure which is not easy to develop and requires a lot of
investment. All these factors reduce the threat company can face from new entrants (Payne, A.
and et. al., 2020).

Competitive rivalry in market:
The level of competition company faces in this industry can be moderate or high. Company have
some competitors which also occupied large number of market share as IKEA. IKEA is directly
competing with some supermarket stores which also provide for furnishing products. However,
the strategy of IKEA of providing affordable prices of furniture in moderate quality has helped it
to gain huge customer base. These factors help to lower the trade company faces from its
competition.
TASK 4
P4 Strategic Plan for IKEA
A strategic business plan is that which creates a path for business regarding their future
step. It is a basic fundamental describing all the ways in which a business can achieve its goals as
well as objectives. It is important for a business to provide their business strategy to managers so
that they can effectively communicate it to all the employees well (Cuervo‐Cazurra, A., Doz, Y.
and Gaur, A., 2020).
STRATEGIC BUSINES SPLAN
Below mentioned is strategic plan for IKEA which contains aims, objectives, mission,
vison, values, strategies, tactics and the market research way which will be followed by company
in order to achieve all those aims mentioned-
Aim- Major aim of business sis to create a better every day for people investing in their company
in any possible manner.
Vision Statement- Vision of Ikea is to create an everyday better for a number of people. Their
business idea is to offer a number of well-designed, functional home as well as furniture’s in the
lowest possible price.
Mission Statement- Their business supports the idea of developing a sustainable environment
and creating better living conditions for people around them. They believe towards giving them
better standard of lives throughout (CHENG, T.Y. and et. al., 2020).
Values- They believe that every individual have a different aspect to offer. They thrive to have
values in way they work. Major values they focus on are togetherness, care for planet as well as
people, simplicity, cost-consciousness, renew and improve, give and take responsibility etc.

Strategies and Tactics- Company is looking for market development. They are trying to expand
worldwide. For this they use their already available product and open stores into new countries
around the world.
Market Research- Company believes in collecting first hand data for themselves. This helps
them in getting true results from market (Mazzarol, T. and Reboud, S., 2020). They use
feedbacks, questionnaires, interviews etc for this process of collecting data and conducting
primary research. Only second hand data they trust is their past records.
CONCLUSION
With the above report helps in creating a strategic plan for IKEA. There are a number of
analysis done throughout the report in order to identify a perfect plan for the company. These
analyses consist of identifying macro environmental factors affecting businesses. All the internal
capabilities and the factors which have an effect on business practises have also been studied in
this report. The market conditions taking into account all the stakeholders of company have been
studied with the help of Porters five force model. At the end of this report a strategic plan for
company is developed. This plan will help the company to move forward towards their goals and
achieve it in a given time frame. In this way market strategy provides a roadmap or acts as a
guide for a business organization. While creating a strategy it is necessary for a business to look
into all the aspects which might affect business directly or indirectly in future. While completing
this report all the factors which have a direct or indirect impact on functioning and operations of
IKEA are being discussed and special measures to deal with them in future are also kept in mind
while preparing strategic plan. In this way company can draft such a plan which will help it grow
and prosper in coming future.