Business Environment Report: Analysis of IKEA's Operations

This report provides a comprehensive analysis of IKEA's business environment, examining its organizational structure, functions, and legal framework. The report begins with an introduction to the business environment and its importance for companies like IKEA, which is a private retail company specializing in furniture. It then delves into the types and purposes of organizations, differentiating between public, private, and voluntary sectors, with a focus on IKEA as a private entity. The report explores the size and scope of IKEA, NHS, and Oxfam, highlighting their respective missions and operations. It also examines the interrelationship between various organizational functions, such as human resource management, marketing, finance, and production, and how these functions contribute to achieving organizational objectives. Furthermore, the report analyzes the positive and negative impacts of the macro environment on IKEA's business operations, including political, economic, social, technological, environmental, and legal factors. The report concludes with an internal and external analysis of IKEA, identifying its strengths and weaknesses and how these relate to external macro factors. References are provided for further reading.

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Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Types and purposes of organisations; public, private and voluntary sectors and legal
structures.....................................................................................................................................1
P2 Size and scope of a range of different types of organisations................................................3
TASK 2............................................................................................................................................4
P3 Relationship between different organisational functions and how they link to
organisational objectives.............................................................................................................4
TASK 3............................................................................................................................................7
P4 Positive and negative impacts the macro environment has upon business operations..........7
TASK 4............................................................................................................................................8
P5 Internal and external analysis of specific organisations in order to identify strengths and
weaknesses..................................................................................................................................8
P6 Strengths and weaknesses interrelate with external macro factors for organization.............9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment is important for company to increase the effectiveness of all the
function of organization. As it directly helps in attaining set goals and objectives in an
appropriate time frame. Mainly, it include internal and external factors that directly affect the
overall functions of the company such as customers, management, employees, business
regulation and many more. All these will helps in enhancing the productivity level of the
company at market place (Business Environment, 2018). Along with this, if any kind of changes
are occur in business factors then it larger affect the company target. For attaining better results,
manager of the company make and implement effective strategies and policies within company
in order to attain desirable results. Present report is based on IKEA, is a private retail company
which operate their business in various countries and also provide furniture. It is profit making
company in market place. This assignment discussed about purpose of various business
organization with its legal structure. Along with this, relationship between different
organizational function with its objectives is also mentioned in this project. Furthermore, positive
and negative impact of macro environment on business activities is also discussed in this
assignment.
TASK 1
P1 Types and purposes of organisations; public, private and voluntary sectors and legal
structures
In today's various type of of organization are operate their business in market place with
their specific purpose. Along with this, there are three type of organization such as private,
public and voluntary.
Private organization: These type of business organization operate as well as managed by the
private people. As the main aim of this type of companies is to make profit by serving quality
products and services. Along with this, there is no government role and control on private firms
(Bovee, 2010). The best example of private organization is IKEA, is a multinational company as
they manufacture furniture by using modern technologies with the purpose of attaining better
success. This company founded in 1943 for providing quality products and services to larger
number of customers in order to attain success at market place.
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Purpose of IKEA: As the main purpose of this company is to create customers demand
by delivering quality products and services at affordable cost. BY this company easily enhance
their productivity level and at the same time also capture larger marker share.
Legal structure of private company: Partnership: It is refer to that business which is owned by two or more than two people
in which all the partners share all the profit and losses in equal manner. The main purpose
of this type of companies is to generate larger profits (Bryman and Bell, 2015). Sole proprietorship: These type of business is operate by single person at small scale as
the main purpose of this type of companies is to gain profits. Along with this, they take
responsibilities to manage all the business activities.
 Limited companies: These are separate legal companies which decide in two types such
as limited by share and limited by guarantee.
Public organization: This type of business organization is control by government authorities of
the nation. As it can be public education, healthcare, military police and many more. In this the
main aim of public companies is to provide betterment to the society by providing them quality
services. NHS is an example of public organisation as it is health care organization in which they
serve medical services to society. This will contribute in improving the living standard of the
society which directly impact on development of the economy.
Purpose of NHS: As a public organization, NHS work for providing benefits to society
with the purpose of improving their living standard. Mainly they serve medical services to
people as per their requirements.
Legal structure of public company: Central government: This type of authorities are focus state department by taking all the
decision for betterment of the company. State government: Under this, they control all the activities of state level. Along with this
they provide support to education, medical and another department.
 Local government: In this, they provide various functions with the purpose of managing
public organization activities in most effective manner. As it consider day to day
activities.
Voluntary organization: This type of business operate their business for betterment of society.
They work for development of society not for generating profits (Buckley and Casson, 2010). In
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this Oxfam is best example of voluntary company as the main aim of this company is to provide
quality services to poor people for removing poverty from the nation. This will aid in developing
economic growth.
Purpose of Oxfam: The main purpose of this company is to find and provide solution to
society for removing the poverty and making a better nation (Kang, Lee and Kim, 2010). For this
Oxfam conduct various education and development programs in front of public to improve their
life style.
P2 Size and scope of a range of different types of organisations
Every business organization having their specific size, scope and nature as well. As it
helps in evaluating entire activities with the purpose of attaining better success at market place.
As all these can be understood by following points:
IKEA
 Size: IKEA is a multinational company as they manufacture furniture to its customers
with the purpose of generating profitability. This company founded in 1943 and in which
they serve quality products and services to larger number of customers. Along with this,
they operate around 415 stores in various countries. Company has approx 194000
employees who put their efforts for attaining sustainability in market.
 Scope: As IKEA operate their business for generating profits at market place. In this they
manufacture home ware furniture to its customers with the purpose of attaining
profitability level. Along with this, the main mission of this company is to generate
profits and also attain long term growth in market place. With the help of this, company
easily establishing competitive advantage at market place.
NHS
 Size: NHS is healthcare organization as they operate their business for providing better
services to society for enhancing their living standard. This company was established in
1948 in which they offer free services to people in UK. In this, they having various
skilled and specialist doctor who have capability to provide better treatment.
 Scope: Under this, the main function of NHS is to deliver medical services for society
without any kind of making charges from poor people. Along with this, they also provide
dental and optical services to society (Kian Chong, Shafaghi and Leing Tan, 2011). In
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addition of this the main mission of this company is to ensure that all the people live
healthier and independent which directly contribute in enhancing economic growth.
Oxfam
 Size: Oxfam is voluntary company in which various charitable firm are operate their
activities for removing poverty. In was founded in 1942 with the purpose of serving their
services in over the world to fulfil basic needs of the people.
 Scope: Oxfam provide various services such as food, shelter, education and many more
are provide to people with the purpose of making poverty free nation (Klapper, Lewin
and Delgado, 2011). In this, the main mission of this company is to provide solution to
public for removing poverty and at the same time also improve their living standard. This
will helps in improving economic condition of the nation.
TASK 2
P3 Relationship between different organisational functions and how they link to organisational
objectives
Overall success of the company is highly depend on its function as all these are having
their specific roles and responsuibilit8ies to execute entire activities in effective manner. Along
with this all the organizational functions are also relate with its objectives. Thus it is important
for manager of the company to manage entire activities in systematic way. In context of IKEA,
all the organizational functions are also contribute in completing entire task in effective way to
attain desirable goals and objectives. AS there are some points which define the interrelation
with various organizational function which may leads in attaining success at market place:
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Human resource management: Every business organization required skilled and capable
workers for execute business activities. In this HR department play vital role in managing as well
as executing entire activities to attain set goals and objectives in an appropriate manner (Klapper
and Love, 2010). Along with this, it includes, workforce planning, remuneration, performance
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appraisal and many more. All these will aid in attaining set targets. For attaining the same, HR
manager provide training and development programs to improve skills and knowledge of the
workers at workplace.
Marketing department: It is also an important section of business organization which is
relate with the production department of IKEA. In this it is important for marketing manager to
undertake and effective research for evaluating customers needs and wants (Machuki and Aosa,
2011). With the help of this company easily provide quality products and services to its
customers as per their needs and wants.
Finance department: Adequate fund is vital for business organization because as it helps
in executing all the activities in systematic manner. As it is highly relate with marketing
department because it give information to finance department with the purpose of allocating
funds. With the help of this company easily increase their profitability level by using advanced
technologies within their activities to make attractive products.
Production department: For capturing market share, it is important for IKEA to produce
quality products and services by understanding customers needs and wants. Production
department use information which collected by marketing section to make necessary changes
within their products so that they easily invite large number of customers and at the same time
also established their positive brand image. Along with this, production department is highly
linked with distribution department because it helps in delivering quality products and services to
end users.
Organizational structure: Function based: Under this, the organization structure is set as per various function of
this company which helps in attaining set goals and objectives by performing entire task.
As there are some functions such as marketing, finance, operations and many more. Geography based: In this, company structure is set as per various regions of nations in
which firm easily provide quality products and services. With the help of this company
can satisfy customers needs and wants (Mahmood and Hanafi, 2013). Product based: As the organization structure is divide as per company products and
services which may helps in increasing profitability level. For example IKEA serve
various furniture products.
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 Consumer based: Customers are vital for every business organization as the company set
their structure as per customers behaviour and taste towards the company products. With
the help of this they make necessary changes within their products and services.
TASK 3
P4 Positive and negative impacts the macro environment has upon business operations
IKEA is multinational company which manufacture quality furniture in over the world. In
this macro environment also having positive and negative impact on business activities. Thus, it
is important for manager of the company is to identify all the factors and implement strategies to
reduce the negative impact on company (Ullah and Lai, 2011). In context of this positive and
negative impact of various factors can be understood by following points:
Political:- It involves government policies, trade barriers, & taxation changes . They affect the
organization in monetary & non monetary terms.
Positive: IKEA generally works with Europe & America which are developed country
with stable political environment, this was proven as positive impact on the brand.
Negative: In 1970 & 1980, IKEA had used prison labours for its production department
in Germany, which had placed negative remark on its brand value.
Economic: This includes monetary changes took place due to GDR growth, Interest rate, Labour
cost etc.
Positive: IKEA's low pricing strategies supports customer's in its low financial position,
they felt attached to the company as it supported them in their tough situations.
Negative: Rising prices of fuel have rose the cost of supply chain system which have
directly increased the prices of IKEA's products.
Social: This involves Population growth, negative brand image, change is social environment of
the store locations.
Positive: IKEA supports charity work which is done for child saving, and UNICEF. It
proves its societal responsibilities by developing corporate social responsibility.
Negative: It has suffered a lot due to its negative publicity & also reduced its sales
because of the unsatisfied customer as they are not getting products according to there
requirements
Technological: This factor involves technological updates which are emerging day by day.
Advance networks required for organisation (Welford, 2013).
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Positive: IKEA is very advance & in updating its website every day on time which helps
its customers to check the availability of product before visiting store.
Negative: It deals with the global market so its difficult to adapt latest technology for its
trade in underdeveloped & developing countries.
Legal: This factor involves changes in rules & regulation of the country which vary with the
crossing of boundaries (Werther Jr and Chandler, 2010).
Positive: IKEA is following all the employment laws regulated by government in each
country. They also provides ethical & healthy environment to employees, satisfied employees
works in a effective manner which ultimately increases productivity.
Negative: With the changes in labour laws, cost of labours also increases which directly
rose the operational cost.
Environmental: This factors focuses on social responsibilities towards limited availability of
raw materials, increasing pollution ratio & business ethics.
Positive: IKEA has positive impact on environmental factor as it is in the favour of using
renewable sources in their stores. They had also spent huge amount in solar plants.
Negative: With the changing time its difficult for the IKEA to manage their
manufacturing, supply chain and promotional works with the less use of resources. This is
difficult for the company to maintain its brand image.
TASK 4
P5 Internal and external analysis of specific organisations in order to identify strengths and
weaknesses
For attaining success at market place, it is important for business organization to identify
their actual performance at market place. In this, IKEA conduct an internal and external analysis
to identify strength and weakness of the company at market place. For this SWOT analysis is
effective tool to evaluate their performance level at market place:
Strength:
 The main strength of this company is that, it define their clear vision in which firm add
values for satisfy customers needs and wants in an appropriate way.
 IKEA use new and innovative techniques within their business activities on regular basis
which may helps in enhancing profitability level (Wild, Wild and Han, 2014).
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 Diversified product portfolio is also a strength as company serve various furnitures for
flats and houses, this will aid in increasing productivity and selling as well.
 In addition of this, brand reputation and market presence is helps in inviting large number
of customers towards its products and services. This will contribute in capturing larger
market share form its rivals.
Weaknesses:
 Negative publicity is biggest weakness for IKEA because it fails in treating their
customers well as it directly impact on brand image of the company at market place.
 In addition of this, low quality is also reduce the brand image of the company. By this
UK customers are not satisfy with its services. Along with this cost reduction of company
is also reduce the product quality at market place.
Opportunities:
 Expansion in developing economics is an opportunity for business organization in which
firm enhance their brand image at market place. For example, currently IKEA operate
their business in developing economics. In they also having opportunities to expand intro
Indonesia, Mexico, Brazil to increase their growth level.
 IKEA also use online sales in which they offer their services at online platform to
increase their overall sales. Along with this, it also reduce extra cost.
 In addition of this, IKEA also expand their business in grocery market as they easily
increase their profitability level by establishing positive brand image.
Threats:
 High competition in market place is a threat in which company reduce their profitability
level at marketplace.
 Average consumer income refer to less low price which reduce the quality products. This
will reduce the customers base within the business (Bovee, 2010).
P6 Strengths and weaknesses interrelate with external macro factors for organization
For grabbing customers attention and attaining success at market place, it is important for
business organization to relate external macro factors with strength and weaknesses. As IKEA
operate their business at global level as they have to evaluate all the factors for reducing the
negative impact on company activities. With the help of this company easily attain competitive
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advantage at market place. In this context, PEST analysis is determine the impact of external
factors with company strength and weakness are as follows:
Political: This factor is one of the important factor as it directly affect the overall growth of the
business (Bryman and Bell, 2015). It consider various rules and regulations that is important for
company to follow it effectively within their business activities.
 Strength: IKEA consider all the laws at the time of operating business activities. Along
with this, it helps in establishing positive brand image at market place.
 Weakness: Some time company fails in implementing their business activities as per rules
and regulations which negatively affect the image of the company.
Economical: It is also an important factor which is relate with the overall economy of the nation
as it helps in ensuring that how much profit and revenue will generate by company. It includes
income level of the customers. It includes exchange rates, interest rates, foreign currency and
many more.
 Strength: As IKEA manage their product price effectively so that they easily capture
customers attention towards its products and services. This will increase the brand image
of the firm.
 Weakness: As global warming is major concern which highly impact on business
activities in negative manner.
Social: This factors is largely affect the business activities deeply as it relate with the culture
values, customers taste and many more. As all these are important for firm to consider within
their activities to generate profits.
 Strength: IKEA take initiatives and conduct various social programs to improve
customers values. This will enhance the productivity level of the company.
 Weakness: If company fails in aware about their values and distribution as it reduce the
profitability level of the company.
Technological: IKEA use online business with the purpose of attaining better success at market
place which may capture larger market share form its rivals (Kang, Lee and Kim, 2010).
 Strength: IKEA produce eco-friendly products which helps in increasing company image
at market place.
 Weakness: Some time new and innovative technologies consume time and cost which
reduce the company performance.
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