Business Strategy Analysis: IKEA's Macro and Micro Environment

This report presents a comprehensive business strategy analysis of IKEA, a leading global furniture retailer. It begins with an introduction to business strategy and its importance, followed by an overview of IKEA's mission, vision, and objectives. The report then applies the PESTEL framework to analyze the macro-environment, examining political, economic, social, technological, environmental, and legal factors impacting IKEA. A stakeholder analysis identifies key internal and external stakeholders and their influence. The internal environment is assessed using SWOT analysis and the VRIO model to evaluate IKEA's strengths, weaknesses, opportunities, threats, and resources. Porter's Five Forces model evaluates the competitive forces within the market sector. Finally, the report integrates these analyses to develop strategic recommendations and a conclusion summarizing the key findings.

Business Strategy

Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
Apply appropriate frameworks to analyse the macro environment for a given organisation......1
LO2..................................................................................................................................................4
Using appropriate frameworks analyse the internal environment and capabilities of a given
organisation..................................................................................................................................4
LO3..................................................................................................................................................6
Apply Porter’s five forces model and to evaluate the competitive forces of a given market
sector for an organization............................................................................................................6
LO4..................................................................................................................................................8
Apply a range of theories, concepts and models, interpret and devise strategic planning for a
given organisation........................................................................................................................8
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Business strategy is undertaken as the integration of decisions as well as actions which are
considered through entity in order to attain the business goals. Moreover, with assistance of
effective tactics, business could undertake competitive edge upon others. Along with this, for
rendering appropriate strategies is vital for evaluating both internal as well as external
atmosphere so that affects of several factors could be determined upon business (Aladag and et.
al., 2020). Likely strategies are developed through various business levels like functional,
business and corporate. for this report, the undertaken firm is IKEA, which is known to be one of
the growing retailer firm that deals in home appliances, furniture and others. Also, it have
headquarters is in Netherlands as well as operates into several countries such as United
Kingdom, Norway, Sweden, and others. The topics which going to be covered in this report is,
external and internal environment analysis with assistance of appropriate framework. Moreover,
the porter’s five forces model, porter’s generic model and Bowman clock model. Apart from the
strategic plan are also developed in this report.
LO1
Apply appropriate frameworks to analyse the macro environment for a given organisation.
Overview of organisation: IKEA is undertaken as the world’s renowned furniture selling
entity which have been trading privately. Moreover, the respective firm owner is Stitching Ingka
Foundation. Along with this, respective firm have been involved within retail outlets offering
furniture, financial assets management, customer satisfactory, shopping centres and many more,
the firm have been performing into various areas like North America, Europe and so on.
 VISION: The vision of IKEA is to develop an effective life for individuals in order to
offer them appropriate as well as comfortable furniture.
 MISSION: The mission of IKEA is to support their vision as well as provides board
variety of well developed, home furnishing at comparable lower cost so that individuals
may simply afford its offerings.
 Objectives: The key objective of IKEA is to enhance the various stores so that it may
enhance its market share by 15% as well as therefore the profit in a year.
PESTEL Analysis
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In order to effectually accomplish business goals, this is vital for IKEA for analysing the
affect of several external factors so that various factors influence may be minimised (Basari and
Shamsudin, 2020). Moreover, this might be performed with assistance of PESTEL analysis that
described below:
 Political Factors: The political stability as well as effective legal system have optimistic
affects upon IKEA as because of this there would not such changes that would undertakes
into norms. Moreover, alliance as well as associations with other countries would has
affirmative affects upon IKEA as it simply trade with them.
 Economical factors: The economical situation is feasible for IKEA as its opportunities
for FDI are simply available as well as government is anticipated for minimising the
corporate rate up to 18% that would have affirmative affects of firm. Additionally, the
customer per capita income is high that provide them opportunities for developing its
business.
 Social factors: Within United Kingdom, the living standards of individuals is effective as
well as because of that they are competent to spend huge amount upon products quality
as well as it provides opportunity for them to open up its new shops into country.
Additionally, with enhanced educational level, the consumer undertakes to buy branded
goods which are of standard quality that would be favourable for Respective companies.
 Technological factors: Within United Kingdom, individuals consider to have
technological advanced goods that allow them to have much potential. Because of this,
the management of IKEA have opportunity for providing its effective products that are
formulated with effective process of technological process.
 Environmental factor: The government have undertaken several steps as well as laid
various implications upon administrative of wastage so that ecological protection may be
assured. With this, firm could assure effective image into its consumer minds.
 Legal factors: IKEA have to comply with equality as well as employment act into
workplace but it would also has affirmative affects upon them as this assure satisfied and
efficient personnel which could contributes with its effectiveness.
Based upon the above PESTEL analysis, this has been determined that entity has vita
benefits upon whole external environmental factors as well as because of this they may simply
explore its marketplace into United Kingdom (Chernyakhovskaya and Berezka, 2020).
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Moreover, the expansion with whole favourable factors would assure that it would has effective
investment opportunities as well as with assistance of its abilities and resource IKEA may open
new shops in simple manner so that its sales may get enhanced in effective and efficient manner.
Stakeholder’s analysis
The stakeholder analysis allows firm to identify the affects of both external as well as
internal stakeholders upon entity so that they could effectively manage its influences as well as
may formulate then understandable the advantages of several tactics as well as tactical actions
undertaken through them (Cramer, 2020). The IKEA stakeholder analysis is described
underneath:
Stakeholder Interest Power
Employees High Low
Investors High High
Suppliers Low Low
Managers High High
Based upon above provide table, this could be determine that respective entity have several
internal as well as external stakeholders that have direct affects upon decision making of firm. In
addition to this, the stakeholder like investors have higher power and interest both because of
that entity should able to disclose its tactics as well as plan of action before them as it could
impact its activities (CUPPARI, 2020). But the firm’s suppliers has both lower power as well as
interests because of that respective entity required do not has to concentrates upon them at the
time of planning. Along with this, the managers are that stakeholders that undertakes whole
essential decisions according to analysis of several factors. Additionally, it also implies that
manager’s suggestions should be consider through entity’s management.
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LO2
Using appropriate frameworks analyse the internal environment and capabilities of a given
organisation.
For entity, this is vital that it has to determine its intrinsic factors. Moreover, with
assistance of it, they could identify its strengths as well as weaknesses in order to attain its goals
through obtaining various opportunities present within marketplace (Hauser, Eggers and
Güldenberg, 2020). For supporting this, SWOT Analysis are performed in respect of IKEA are
described underneath:
Strengths Weaknesses
 The IKEA’s brand value is effective
with assistance of that they may
simply convince its audiences for
making purchases.
 The constant research &
Development of entity allows them to
reduce its offerings price as well as
making their goods effective and
attractive.
 The control over standards is higher
for firm as it intent effective quality
as well as low price that is not
possible.
 Moreover, the enhancing raw material
cost impacts the whole cost as well as
entity’s standards.
Opportunities Threats
 As per capita income of audiences is
enhancing, this provides them
opportunities for exploring its
marketplace and their offerings.
 The audiences are at present
becoming cost effective as well as it
intent to buy such furniture which it
could changes in periodic manner
because of that they could able to buy
furniture at low price.
 The modifying norms as well as
taxation regulations could has
unfavourable affects upon the firm’s
operations.
 The enhancing rivalry from local
retailers have affect upon attainment
of organisational goals.
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Resource based view:
The resource based view of entity assists business for determining their ability based
upon the basis of its resources. Along with this, with assistance of respective model, it could be
evaluated that how firm’s resources aids competencies as well as how it exploits resources (Izni
and Wandebori, 2020). The IKEA management could effectually evaluate its abilities and
resources by VRIO model that is described underneath:
Particulars Valuable Rare Inimitable Organisational
Applicable
Financial
resources
✔ ✔ ✔ ✔
Employees of
the company
✔ ✔ - -
Distribution
network
✔ ✔ - ✔
Research and
development
✔ - - -
As per the offerings it could be determined that monetary resources as well as distribution
system of Respective firm which provides them sustainable competitive benefits as they are
important to them, imitable, rare and effectually utilised through entity. But the staff of company
facilitates them temporary competitive benefits as the staff could be imitable through rivals by
facilitating same type of training to its staff (Mead, Jeanrenaud and Bessant, 2020). Along with
this, the research & development so adapted through firm with intent of minimising the cost
renders them advantages but this do not provides them to undertake competitive benefits as this
is not much rare this may be opted through enterprises.
With aids of respective internal analysis, this could be determined that IKEA have essential
resources with assistance of that they could efficaciously starts new outlets into United Kingdom
so that it could able to attain its whole organisational goals.
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LO3
Apply Porter’s five forces model and to evaluate the competitive forces of a given market sector
for an organization.
Competitive analysis is considered as strategic procedures which aid them to determine key
competitors of entity potential investigation upon its goods, tactics of marketing as well as sales.
Through performing it, entity may formulate a solid business tactics which aids them in
developing marketing positioning upon their rivals (Moussa and et. al., 2020). IKEA is one of
the well known brand which deals in home furnishing goods. In addition to this, they mainly
renders effective goods quality which aids them to achieve pre-specified competitive edge in
very simple manner. For effectual competitive analysis, firm could execute Porter’s fie force
model which identified as deconstruct sector framework properly. Respective model is described
below:
 Bargaining power of purchase (High): The bargaining power of consumers related to
furniture as well as home appliances manufacturing sector is higher because of
availability of much options and suppliers within market place. The consumer’s of IKEA
are much price sensitive as well as this condition enhances its bargaining power. Within
United Kingdom, There are various furniture retailers to whom person may purchase
various goods therefore, in this respect, respective entity executes few strategic directions
into its workplace which aids them to manage its purchaser power at particular level.
also, these options are innovative product strategy and effective services which renders
them competitive edge over their competitors.
 Bargaining power of suppliers (Low): The bargaining power of suppliers is lower as
within market place of United Kingdom there are very much material suppliers who
enables them to buy raw material at affordable price (Netz, Svensson and Brundin, 2020).
moreover, respective entity could set rules of its business as well as its suppliers have to
comply them as IKEA have several options for switching one to others in very simple
manner. Therefore, because of lack of options within market area, suppliers have to
switch its cost that minimises its marketing power.
 Threats of substitutes (Low): From several years, IKEA have developed stronger brand
reputation at international level where the trust level among brand as well as consumers is
much higher. Therefore, the threats of substitute product for IKEA are lower as firm has
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already an effective and stringer base of audiences. Additionally, entity facilitates quality
services to their consumers which aids them to develop stronger relations through brand
service recognition. So, this is difficult for substitutes to threats firm’s marketing
positions.
 Threats of new entrants (Low): Within manufacturing sector, the new entrants threats is
common as well as essential as there are no any particular legal or regulatory barriers for
entering within sector. As IKEA themselves known as one of the leading internal leader
into home appliances as well as furniture manufacturing sector but this also faced threats
of new entrants within marketplace but the affect of these competitors are lower. The key
reasons behind this is that new marketplace would not become competent to advantage
the economies scale as possible as it have (Romadhon and Ahmar, 2020). While on other
side, this would be also tough for new entrants for gaining its effectual access towards
distribution channel that would be likewise as IKEA. So, the new entrant’s power upon
respective firm is lower.
 Existing rivalries (Higher): As IKEA is one of the growing furniture producer which
faces direct as well as indirect competition from their existent competitors. Based upon
the analysis, the existent power is higher over entity. The indirect rivals of IKEA are
Sainsbury, Walmart, TESCO and others which sell same kind of goods within
marketplace. Whereas on the other side, direct rivals of entities are Argos and other who
only perform their business into furniture production as well as home furnishing services.
In addition to this, few well known online retailers also have tough competitors for entity
who performs worldwide.
Ansoff model:
Respective model is mainly utilised for analysing the marketing growth grid as well as it is a
tool that is utilised through various entity for analysing the options of growth strategy (Satyro
and et. al., 2020). Moreover, with assistance of Ansoff model, IKEA may determine various
opportunities of development and may also analyse risk that is related with every strategy.
Respective model are described below in relation to IKEA are:
 Market penetration: Within respective strategy, entity utilises their existent goods for
selling into existent marketplace. In case IKEA, they could executes respective strategy
into its procedures of business than this may be performed through minimising their
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existent prices through obtaining existent competitors who perform into existing market
are and through enhancing its distribution as well as promotional practices.
 Market development: Within respective strategy, entity enters into new marketplace
with assistance of their existent offerings. Moreover, this options drives towards strategy
of market expansion for a firm. Therefore, IKEA could execute respective strategy
through entering in new market either domestic or international. With assistance of this,
respective entity could facilitate its offerings to various segments of audiences for
accomplishing the pre-determined opportunities of development.
 Product development: Based upon respective strategy, entity has to formulate or
introduce new goods for rendering them into existent marketplace. In case IKEA desires
to undertake this strategy than it have to incorporate extensive research & development
for analysing the needs if consumers and requirements. in addition to this, respective firm
could formulate some kind of strategic partnership with other entity for maximising their
channels of distributions.
 Diversification: Within respective strategy, entity introduces there existent goods as well
as services within existing marketplace. Moreover, it is considered to be much riskiest
strategy for any entity where product as well as market development have some mitigated
risk. Therefore, In respect of IKEA, they may have diversified options of business where
it could needs potential synergies among existent business as well as new marketplace.
Based upon the above determination, this has been determined that market development
strategy would be effective strategic option for respective entity (Schaltegger, Hörisch and
Loorbach, 2020). As with assistance of this, they could able to explore its business into smaller
countries wherein lower competitors along with this, respective strategy could aids them to
formulate international chain image through facilitating quality offerings across the world.
LO4
Apply a range of theories, concepts and models, interpret and devise strategic planning for a
given organisation.
Strategic direction are considered as the tools, decision and attitudes which includes the
evaluation of procedures which ascertains needs of entity for making changes into their business
model that aids them to attain strategic vision (Velasco-Saltos, Mesías-Vargas and Medina-
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Chicaiza, 2020). In respect of IKEA, they have to opt strategic alternatives which would aids
them to ascertain the opportunities of growth for that resources as well as human potential would
be utilised for attaining opted goals. For instance, entity may opt strategic directions with
assistance of Porter’s generic model which aids them to select one of the effective option for
achieving pre-determined development opportunities. The description related to this model is
discussed below:
 Cost leadership: Within respective strategy, entity has to adopt an option for providing
the lower possible cost within marketplace. in this respect, firm could select an option for
keeping the cost lower as much as they can or assures that firm should have huge market
share wherein they could provides average cost. Into both cases, one key point is to
minimise firm’s product cost for gaining an effectual leadership into marketplace.
 Differentiation leadership: based upon respective strategy, entity has to launch its goods
or services which have an innovative characteristics. With assistance of this tactics, they
may develop its products as extensive as much as possible for formulating them much
attractive aspects than other comparative goods facilitated through competitors. For
implementing this strategy, firm needs an effective research, creativity and capability for
delivering higher goods quality range which have creative and eye catching
characteristics. Along with it, this procedure also needs an appropriate marketing for
developing knowledge of new product formation advantages.
 Cost focus: Based upon respective strategy, entity has to target the niche marketplace and
provides cost effectual as well as lower price products. Within respective entity, they
seeks cost benefits for their target dynamics as well as desires for that they facilitates
quality services by remaining the costs low.
 Differentiation focus: Within respective strategy, entity targeted a niche market place
where it's offerings have innovative features. In addition to this, respective strategy
incorporated stronger brand loyalty within their audiences. Moreover, the key needs into
this tactics is to serve creative services for their clients with assistance of innovative
services quality.
Based upon the above analysis, this have been determined that IKEA needs to execute
cost leadership strategy into its procedures of business by that it may sustain within marketplace
for longer period. As respective firm already execute this particular strategy, therefore this would
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be advantageous for them to achieve predetermined success with assistance of cost leadership
strategy.
Bowmen’s clock strategy
Respective model also aids an entity for perceiving the options of strategic positioning
which assists to obtain key competitive benefits into market area. Description about this model is
explained below:
 Low price and lower added value: Based upon respective strategy, entity may remain
competitive into marketplace when audiences perceive some value rather than lower cost.
 Low price: Respective phase ascertain that entity requires being lower cost leaders
within marketplace for its brand positioning. This, they needs for setting a lower
profitability margin but higher output volume which assists for sustaining into market
area for longer duration.
 Hybrid: Respective phase ascertain firm's strategy wherein the needs for offering lower
cost services but also executing few innovative features into goods.
 Differentiation: Based upon respective stages, entity required to provides a higher
quality goods with assistance of stronger brand awareness. An innovative goods could
aids firm for gaining expected positions within market
 Focused differentiation: Respective strategy ascertain that entity could position within
marketplace through higher level of price as clients could purchase them because of
higher perceived values
 Risk higher margins: Based upon this stage, entity set out higher costs of its goods
without providing anything extra in perceived values.
 Monopoly pricing: Within respective phase, firms sets a monopoly into marketplace and
stay with only single business into marketplace.
 Loss of market share: Respective phase is not much expectable at this level entity is not
become competent for providing any goods based upon consumers needs as well as
desires.
Based upon the above analysis, this have been determined that for IKEA hybrid phase would
be much effectual wherein entity could launch its offerings at lower cost through executing
innovative ideas.
Strategic Plan:
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Strategic management plan is considered as the practices that are formulated through
entities to attain its objectives effectually. Moreover, this plan incorporates vision, mission,
strategy and others that could assists for accomplishing business objectives (Wahyuni and
Eltivia, 2020). Managers are accountable for acknowledging which forms of plan is needed for
running business and enhance profit. Within IKEA, their manager are developed a strategic plan
for expanding their business in Monaco.
Business Purposes Explanation
Over view of firm IKEA is undertaken as the world’s renowned furniture selling
entity which has been trading privately. Moreover, the
respective firm owner is Stitching Ingka Foundation. Along
with this, respective firm have been involved within retail
outlets offering furniture, financial assets management,
customer satisfactory, shopping centres and many more, the
firm have been performing into various areas like North
America, Europe and so on.
Mission The mission of IKEA is to support their vision as well as
provides board variety of well developed, home furnishing at
comparable lower cost so that individuals may simply afford
its offerings
Vision The vision of IKEA is to develop an effective life for
individuals in order to offer them appropriate as well as
comfortable furniture
Objectives The objective of IKEA is to expand their business in Monaco
to enhance profit by 10% within a year.
Strategies The management of IKEA are adopting various strategies to
implement the plans that are as defined:
Marketing Mix:
Product – Respective firm offering the existent products
within Monaco.
Price – Respective firm is opting competitive pricing strategy
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which would aids them to attract more customers in new
country.
Place- IKEA plan to expand their business in MONACO along
with its existent products.
Promotion- Within new country, they opt various promotion
strategy such as magazine, YouTube and others. So that they
may attract various persons.
Tactics Within IKEA, the mangers are concentrating upon strategies
which are:
Competitive pricing –It is undertaken as one of the
influencing strategy that is needed to opt through entity for
taking competitive benefits. So, managers of IKEA are setting
out competitive price for their existent products in MONACO.
Total Quality Management:-The purchasing decision id
developed through audiences after determining whole practices
as well s quality. So, this is essential for respective entity to
provide effective quality goods at new country.
Potential consumers The potential consumers for IKEA are categorised in two
which are described underneath:
Segmented markets –For the business expansion of IKEA,
their managers are concentrating upon the individuals of
MONACO and provide existent product with effective quality
for customer satisfaction.
Targeting Market:- They focus upon all class of persons.
Positioning Market: IKEA position themselves into new
marketplace through effective product cost and quality..
RECOMMENDATION
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Therefore, this has been recommended to respective entity that in order to expand their
business into new market it has to undertake some strategy which would helps them to operate
their business effectively and efficiently. Such as cost leadership strategy into its procedures of
business by that it may sustain within marketplace for longer period. In addition to this, it has
been also suggested that they would have to adopt that market development strategy. As with
assistance of this, they could able to explore its business into smaller countries wherein lower
competitors along with this, respective strategy could aids them to formulate international chain
image through facilitating quality offerings across the world.
CONCLUSION
Based upon the above report, it has been concluded that this is important for all entity to
develop effective business strategy as this aids them to attain their objectives. Moreover,
business required to undertake the affects of both external as well as internal factors with
assistance of several models like Pestle, VRIO and others. In addition to this, strategies could be
determined and affect of several industry forces so that effectual tactics may be formulated for
entity. Along with this, the resource as well as capabilities of business are determined with aids
of that firm’s competency could be analysed in order to undertakes several plans and actions in
well defined and profitable manner.
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