Pearson BTEC Business Strategy Report: IKEA's Strategic Analysis

This report provides a comprehensive analysis of IKEA's business strategy. It begins with an examination of the external environment using PESTLE analysis, assessing political, economic, social, technological, legal, and environmental factors influencing the company. The report then delves into IKEA's internal environment, evaluating its strengths, weaknesses, opportunities, and threats through SWOT analysis. It further assesses IKEA's internal capabilities using VRIO analysis, determining the value, rarity, imitability, and organization of its resources. The analysis extends to Porter's Five Forces model, evaluating competitive rivalry, supplier power, buyer power, threats of entry and exit, and substitutes. The report concludes with an application of the Ansoff Matrix, exploring market penetration and product development strategies for IKEA's growth. The report provides a detailed overview of IKEA's strategic direction, incorporating relevant models and frameworks to offer insights into its business operations and future prospects.

Business Strategy

Contents
TASK 1.......................................................................................................................................................3
Analyze the influence of environment on chosen company.........................................................................3
TASK 2.......................................................................................................................................................6
Critically evaluating the internal environment and capabilities...................................................................6
TASK 3.......................................................................................................................................................8
Evaluate and apply the outcomes of Porter’s Five Forces model.................................................................8
TASK 4.....................................................................................................................................................10
Interpreting strategic direction...................................................................................................................10
CONCLUSION.........................................................................................................................................14
REFERENCES..........................................................................................................................................15

INTRODUCTION
Business plan relates to the collection of strategic works and practices utilized by a
company in order to still stay successful in the field of industry. The company will conduct its
market research and operations in the best possible manner with the aid of organizational
practices. The organization’s decision on a corporate strategy is very essential as it gives a clear
objective, a full idea of the activities or actions in order to achieve the desired results in a
potential way (Pucheta‐Martínez and Bel‐Oms, 2019). IKEA is the Swedish furniture committed
to making ready to install furniture, kitchen electronics and much more for its prospective
consumers in terms of the respective report. The respective report is based on a strategic study
and operational decisions against the macro-environment component. Incorporating the
organization's existing strengths and using the VRIO and resource-based strategy for future
strategic research. It also involves a company study of competition utilizing the Porter five-
power model that is part of the corporate strategy. Finally, for Porter's conventional approaches,
the organization's strategic strategy is to be understood by designing the roadmap to acquire
valuable information and perspectives for taking successful decision-making.
TASK 1
Analyze the influence of environment on chosen company.
Vision- The IKEA’s vision declaration is 'The daily life of many people is good.' The business
model aids in the creation of a wide corporate portfolio with its practical and built home
furnishing goods so that they have greater exposure to their items at the best economic quality.
Mission: In IKEA's mission statement but the term above is business performs goals and goals.
Their goal is to provide one of the best furnishings for huge numbers in the most accessible price
range.
Objectives: They strive to better the lives of people who have a growing effect on their company
every day. They are very concerned with the atmosphere for the achievement of favorable
outcomes, like creating a distinctive picture on the sector.
PESTLE ANALYSIS:

Political factor- An organization is able to assess the business environment in order to collect
potential information and knowledge. In IKEA, which is an significant aspect of European Union
entry to UK markets. In this regard, it was analyzed that the entry and exit are not restricted or
restricted. The other feature is a 30-28 percent reduction in corporate taxes which helps increase
income in the foreseeable future (Rondi, Massis and Kotlar, 2019).
Positive aspects- Regardless of the reduction of the British economy's income tax rates, the rise
of ratability and competitiveness on the sector are helpful to IKEA.
Negative aspects- At the other hand, since there are no restrictions at entrance and departure,
there is significant pressure in the industry that impedes the organization's self-interest in
obtaining the desired outcome.
Economic factors: Interest rates, taxes and other regimes which directly impact the business
activities are part of the independent action. Diverse types of new policies and regimes must be
encountered in the UK economy because Brexit organizations.
Positive aspect: These were evaluated that IKEA is one of the best-known and highly established
companies focused on business development and sustainability. The increases in the GDP rate,
interest rates and consumer availability income have a positive effect on the respective
organization’s business activities.
Negative aspect- Changes in economic circumstances hamper their very critical market practices.
Social factors- Social factors are a transition of flavor and of consumer behavior, in it is the
organization's opportunity to monitor research to meet its significant inroads into the job.
Positive aspect-Due to changing consumer taste and preferences, the institution has been shown
a positive opportunity to expand its business opportunities. New technologies and services have
been valuable to their respective companies in that regard in the industry.
Negative aspect: As customer taste and tastes have increasingly evolved, it has been studied that
organizations find it very challenging to cope with such developments because market demand is
time to understand.

Technological factor: Technological considerations consist in the usage of one of the most
sophisticated technologies and methods that have enabled both businesses and customers
improve their quality of living. While they conveniently build pieces that are often eco-friendly
in design, they are a leader in their respective assets under IKEA.
Positive aspect- In contrast to IKEA, each company has to spend tons of money in upgrading the
technological facilities that are essential to customers, such as simple assembly of furniture and
environmentally sustainable goods.
Negative aspect- Technology development is measured in excess of time and expense as
expertise was needed (Cusumano, Gawer and Yoffie, 2019).
Legal factors- Legal factors include the various types of legislation and restrictions which
directly influence the customer's business activities. As part of IKEA, consumer rights and
obligations imply business operations while functioning in the UK market safety standards.
Positive aspect: Different kinds of law and policies help to modify the organization can
undertake effect and improve organizational productivity.
Negative aspect: This has been investigated that the organization works in several countries to
negatively affect their operations by collaborating with different forms of regimes.
Environmental factors- Climate changes, weather and several other factors affecting company
operations of the project are the respective factors.
Positive aspect- The organization can bring its goods and services to remain successful as a
consequence of shifts in environment and business conditions.
Negative aspect- When output rises, it generates a lot of waste and pollution.
Stakeholder analysis: The identification of stakeholders is the method of defining and grouping
the individuals participating in the project in terms of their involvement, value and effect. In
IKEA, we need to collaborate with stakeholders including manufacturers, analysts, suppliers,
retailers and several others in order to develop a corporate plan for market expansion. It is also
quite probable that the respective actors will better be classified and prioritized in different

categories (Fraser, 2019). It consisted of ensuring productivity, managing closely, tracking and
keeping updated, so each person could make best efforts to grow and enhance organizations.
TASK 2
Critically evaluating the internal environment and capabilities.
To evaluate the internal capabilities of the organization need to conduct the SWOT and
VRIO analysis that are as follows:
Strength:
 The great strength of each organization
because they are fully aware of its
customers' insides and outs. It helps to
provide the best quality experience for
customers.
 The key feature of these product lines
is that they have many designer and
more physical decorations. Their goods
can be conveniently shipped and
installed quickly.
Weakness:
 There is a bad press in the sense of
IKEA as workers talk about their unfair
care. They were critical of
misadvertising and of the use of IKEA
furniture in children too.
Opportunities:
 This is examined that just a few 38
countries it has been feasible to expand
market prospects. This is also
necessary.
Threats:
 The threat that they faced rapid
competition due to growing furniture
companies facing their respective
organizations.
VRIO analysis: The VRIO analysis has proved useful to the company in obtaining its internal
capabilities, which helps to continue operating its business operations in the most viable option
(Ghauri, Grønhaug and Strange, 2020).

Resource Valuable Rare Inimitable Organized
Design and
quality
Yes
Financial
resources
Yes Yes
Affordable
range
Yes Yes Yes
Employee
potential
Yes Yes Yes Yes
Valuable:
 The most precious asset for the company is its extremely valuable economic capacities,
which help to spend in the benefit of opportunities in the external environment.
 The organizational design and assembly process of IKEA is one of the most precious
commodity attributes that contribute directly to the development of organizations.
 The best range of organizational prizing has proved very important to attract workers'
attention to achieve desirable results.
 For the organization it is very important to have the employee potential as it is very
important to contribute talented personnel.
Rare:
At IKEA, financial capital, competitive merchandise portfolio, and staff talent are one of the
most unique opportunities open to the company to improve customer engagement in a
meaningful way.
Imitable:
Items in the respective range are not so easily imitated by others because it allows the company
to achieve desirable results. In IKEA's context, they offer their customers with one of the best
price ranges which are not easy to imitate in nature. Employee potential is a critical aspect,
which is very difficult to apply and benefits from them (Machoka, 2019).

Organized:
• It is very necessary for an organization to manage the workplace capacity, which is incredibly
critical for an organization
TASK 3
Evaluate and apply the outcomes of Porter’s Five Forces model.
Porter’s five force- The five forces System of Porter is a tool for the study of a company's
rivalry. It derives five forces from the economic theory of a business location that determine the
competitiveness of an industry and therefore its profit margin attractions. It consists a range of
forces that contributes in a detailed manner. This depends on companies’ that how well they
apply these forces in the aspect of different kinds of operations (Sanders and Wood, 2019).
Intensity of competitive rivalry: With the aid of their respective features, the rivalry on the
market may be accomplished. There is a wide variety of businesses of specific categories of
goods working in the same sector in IKEA. It faced intense kind of rivalry because of major
corporate numbers.
Bargaining power of suppliers: The influence of the manufacturer in conjunction with IKEA is
incredibly strong because it supplies furniture at reasonable costs as a raw material. Throughout
this relation, IKEA also wishes to manufacture better raw materials to achieve favorable results.
Bargaining power of buyer: Customers are really critical for the business, as the influence of
the customers in relation to IKEA is strong and they also prefer premium goods. Small furniture
dealers were assessed on the market. Buyers ' bargaining strength is strong in principle in the
respective situation.
Threat of entry and exit barriers: The threat of joining and exiting new businesses in IKEA
has been assessed to be quite straightforward, destroying the self-interest of business in growing
market prospects. This has been assessed to restrictive operating practices in the UK sector,
organization challenges are generated to obtain favorable outcomes.

Threat of substitute and complementarities: It is very necessary to ensure the position of
replacement goods and services on the market. In IKEA, different kinds of furnishing devices on
the market that are used to supplement IKEA goods and services have been analyzed. In this
way, companies are more likely to establish plans and techniques to produce favorable outcomes.
Ansoff matrix: in strategic marketing strategy, the corresponding model is very relevant when a
company has used chances in growing its sales rates to create new goods and services. Below are
the approaches for market growth.
Market penetration strategy: The associated approach offers details about how more corporate
goods and services will be marketed through their current customer base (Ojiako, 2020). The
respective approach also allowed the organization to expand its current business by expanding its
frontiers. The approach of market penetration aims in order to increase market share by offering
the new goods or services in the established markets. An initiative for an off-the-shelf company
is also seeking to gain further revenue from other industry players
Product development strategy: The respective approach explores how current goods and
services may be improved by evaluating customer desires and demand in order to increase their
interactions in a meaningful way. The approach for product development involves taking fresh
products from ideas to production and delivery to customers. If current channels for company
sales are platitude, fresh development approaches need to be looked at. Current approaches for
product growth seek to strengthen current goods in order to increase the same demand or build
fresh ones. Each method of approach has specific steps in product growth.
Market development strategy: For any strategy company reaches the new competition by
finding areas in which the tools can better be deployed to accomplish the target objectives and
targets. They targeted at expanding their presence in IKEA in order to eventually expand
business opportunities. Finding out spheres accessible on the market has proven helpful to
achieving future outcomes.
Diversification strategy: With new goods and services in the respective phrase enterprise,
revenues and development are strengthened to continue becoming successful on the sector. In
order to produce desired results, the respective element is essential to the organization. The
strategy of diversification is a mode of growth that promotes corporate development. These

offers the company fresh possibilities. Through the adoption of this approach, the firm not only
diversifies the offerings in the target regions, but also extends its industry horizons. The
pragmatic strategy lets the organization boost revenues and income while reducing costs.
This is therefore important for an organization, in order to attain optimal targets and priorities,
for an assessment of the business and development areas. The IKEA is one of the most
recognized companies in terms of the growth of their respective organizations.
TASK 4
Interpreting strategic direction
A company has immense ability to establish plans and approaches, which are really
necessary to step in the correct path and accomplish successful targets and goals. Under the
IKEA system, they use the Porter Generic Growth and Development Strategy to stay successful
on the sector.
Here are the Porter’s generic strategies:
Cost leadership: Price management concerns the company as the low-cost supplier in the
market. The main drivers of cost gain that differ from market structure provide major advantages
such as scale structures, advanced technologies and exclusive access to produce favorable
performance (Cardoni, Kiseleva and Lombardi, 2020). In the sense of IKEA the company is
highly likely to use one of the most powerful pricing which helps to achieve no customer in
general.
Differentiation: The corresponding approach consists of the most special actions of companies
in the market along with other kinds of measurements that consumers often use to produce
favorable performance. The attributes that consumers consider to be the most relevant and
special role to meet market demand are the corresponding attributes. Throughout that way, it is
exceedingly necessary for the company, by meeting the desires and desire of the customer, to
place itself uniquely in the sector.

Focus: In each generic approach, selecting the narrow market position consists of optimizing the
business prospects in the field. The groups on the basis of business in through strategic company
division or category represent customers the best way possible.
The company may differentiate itself in the market by the use of respective qualities
through creating its own expertise and ability in one direction. In the context of IKEA it has been
determined that cost control helps end consumers with an expanded share of the industry by
providing one of the lowest costs.
Strategic plan: In an enterprise that determines the areas in which business may gain valuable
advantages to stay successful on the sector, a strategic strategy is quite necessary (Lyneis, 2020).
In IKEA, they want to increase business prospects for growing industry on the Vatican City
sector in Europe
Organizational structure- When market prospects grow, organizations need to select one of the
strongest governance systems on which workers can agree.
Mission: Through the current position of the Vatican City, IKEA aims to grow or broaden the
business at the lowest rates.
Vision: The vision of each company is to deliver one of the best eco-friendly products and
services to influence consumers ' purchasing decisions.
SMART objectives- Rising productivity by 22 percent by 2022 for the emerging sector that is
Vatican City.
Macro environmental factor- For the enterprise to enter the macro climate, PEST control,
which is as follows, is quite important:
Political: In order to establish a new business structure, the sector and its political dynamics must
be examined or assessed to build effective plans and tactics.
Economical: The organization is very likely to develop plans and strategies to deal with the
market situation in Europe in a way that potentially achieves desirable aims and goals.

Social: Social factors include shifting customer habits and expectations in the organization's
study of recent market purchase behavior.
Technological factor: The choice of one of the best tools to enhance the wellbeing of people is
very critical for the company.
SWOT analysis: SWOT analysis is an analytical strategy used to recognize power,
vulnerability, opportunity and risks to entities or organizations in conjunction with market
competition or project planning (Quinlans and Griffin, 2019).
Strength:
The core strength of growing company, who
has the history of increasing the business in
different markets.
Weakness:
It may be counterproductive to self interest if
the competition in Vatican City is not well
understood.
Opportunities:
The biggest opportunity to competitiveness and
business growth before the company.
Threats:
The greatest threat in the nation was the huge
number of competitors.
Competitor’s analysis: A study of competitors' strengths and limitations of existing and future
rivals in marketing and policy management is a test (Baumgartner and Mangematin, 2019). It
study provides an aggressive and defensive conceptual background in which openings and risks
are defined. In promoting productive and successful policy development, execution, evaluation
and adaptation, profiling integrates all skill appraisal channels into one system. Competitor
analysis is an important part of corporate strategy. Most companies do not systematically
conduct this kind of analysis enough. Rather, several businesses are operating on what is known
as "informal thoughts, conjectures and assumptions that any manager gets constantly from the
hysteria of competitor knowledge" and thus many businesses face the possibility of risky
competitive blind spots because there is a shortage of rigorous competitor analytics.
Bargaining power of suppliers It is small since vast amounts of vendors have
operated in the industry inside the Vatican
industry.
Bargaining power of buyers The amount of alternatives open to customers

is as growing.
Threat of substitutes It is strong because there are vast amounts of
choices for customers because impact the
business earnings.
Threat of new entry and exit There are less limits on access or admission of
your company
Competitive rivalry The number of entrants in the industry has
proven to be high
In this respect, it is of considerable significance for a corporation to formulate policy and
strategies in order to stay successful by analyzing the market climate.
Market analysis: The attractiveness and dynamics of a particular sector in a specific field are
analyzed through a market analysis. This is part of the study of the sector and also a component
of the regional environmental research. Both such analyzes will help to define a company's
capabilities, vulnerabilities, incentives and risks. A distinct consumer research is focused on the
business segmentation (Saiz-Alvarez, 2019). There is a significant distinction. Some of the main
factors for this is the highly crowded market of provided goods. Consumers ask for more goods
and services separately and are more knowledgeable than ever regarding the selection of items.
Market segmentation is therefore required. Segmentation requires a lot of consumer analysis, as
there is a requirement for a great deal more business awareness.
Smart objective Actions taken to
achieve the
objectives
Resource
implication
Criteria of
success
Responsible
In IKEA, they
decided to offer a
wide variety of
goods and
services to
broaden their
market
In order to
produce the
required
outcomes, the
company has
tremendous
ability to better
The company
will establish
various forms of
services, such as
finances,
personnel and
several others to
It proved useful
to them by
broadening
market prospects
and targeting
vast numbers of
CEO

opportunities.
This is important
because the
competition still
stays open.
analyze the
business
environment as it
is crucial for
collecting
valuable insights.
execute its
strategies.
customers.
Monitoring and evaluation- The identification of various variables or characteristics which
have proven valuable in the development of market conditions is very necessary for an
organization. The company should improve efficiency with the aid of benchmarking and main
success metrics so it can remain effective in future market environments. It was determined that
the corresponding actions were very helpful to the company in identifying future results in order
to improve productivity effectively (Strategy, 2019).
CONCLUSION
The aforementioned report concludes that management plans play a critical role in
presenting the organization’s strategic course in terms of organization’s operations such that they
stay reasonably successful. During building approaches the company will use PESTEL and some
other method to analyze the macro market climate for gathering better insights. To order to
obtain the required results, companies must have exposure to the internal resources that have
assisted the company to gathering the requisite expertise and morale of employees. It is really
important to evaluate competition and tactics to obtain desired results when putting the fresh
goods and services into the marketplace. Creating plans in the right direction needs a reliance on
conventional management approaches by theoretically leveraging corporate capital in the right
direction to produce desirable outcomes.

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