Analysis of IKEA's Business Environment and Strategic Functions

This report provides a comprehensive analysis of IKEA's business environment, examining various aspects of its operations and strategic positioning. It begins with an introduction to the business environment and its impact on organizations, followed by an overview of IKEA's functions and their r...Read More

BUSINESS
ENVIRONMENT

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1 ...........................................................................................................................................1
P 1. Different types and purposes of organisations...............................................................1
Covered in PPT.......................................................................................................................1
P 2. Size and scope of a range of different types of companies.............................................1
Covered in PPT.......................................................................................................................1
TASK 2............................................................................................................................................1
P 3. Relationship between various organisational functionalities & its link to objectives.....1
TASK 3............................................................................................................................................3
P 4. Positive and negative influence of macro environment on IKEA...................................3
TASK 4............................................................................................................................................5
P 5. Interior and exterior analysis of IKEA............................................................................5
P 6. Inter-relation of strengths and weaknesses with the extraneous macro factors..............7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Every company used to operate in a business environment. There are so many macro
factors exists within that surrounding such as government, technology, society, economical &
political situation and many more. These components are giving impacts on whole performance
and working of ventures in positive as well as negative manner. Therefore, all enterprise should
run their businesses by keeping such elements in consideration either in a new location or an
existing place. In order to know about these influences in detail, each organisation need to
conduct Pestle analysis (Lee, Olson and Trimi, 2012). The present report is based on IKEA
which is a Swedish founded, Dutch – based international association. It is dealing with designing
and selling RTA (i.e. Ready – to – assemble ) furnitures, domestic commodities & appliances
related to kitchen. In addition to this, it comes under one of the largest retailer of furniture in all
over the world. This was established in the year of 1943 in Sweden by Ingvar Kamprad. His
name was mentioned in Forbes and thus become famous as one of the ten wealthy person in
whole globe in 2015 whose worth income is considered as more than forty billion dollars. It is
consting of large number of stores in numerous of countries named as United States, United
Kingdom, Italy, Germany, etc. In this project, different aspects associated with business
environment is going to discussed in clear way.
TASK 1
P 1. Different types and purposes of organisations
Covered in PPT
P 2. Size and scope of a range of different types of companies
Covered in PPT
TASK 2
P 3. Relationship between various organisational functionalities & its link to objectives
IKEA is having several functions which is inter- connected with their objectives as well
as structure. This concept can be clearly understand by below written points :
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 Research and development : This been observed that IKEA is spending huge sum of
money in the R&D sector. In order to create innovational products and services, involved
members of the firm has been conducting different kind of surveys and researches.
Another motive is linked with knowing about requirements and demands of their possible
users which can be accomplished by taking interviews and feedbacks of clients on regular
basis (Zott, Amit and Massa, 2011). This thing is treated as eminent since without having
any idea about request and taste of consumers, their production department can not be
able to develop merchandises, if they do so according to their wish then surely people
will not attain satisfaction. Thus, as a bad result, civilians do not show interest in their
goods. But it is the aim of company to keep their possible consumers contented from
delivering goods as per their desires. So, both objective and function of R & D is liked
with one another and having same motto of retaining users for long time period.
 Production : Another target of this venture is to produce unique and quality based
accessories so that if people use their products ones, then they purchase that again &
again. For doing the similar, IKEA attempts for manufacturing best quality furnitures and
home appliances in order to seek attention of large number of clients from all over the
world since they are carrying out business activities at global level. Therefore, it could be
stated that production division is also associated with its objective of yielding superior
quality merchandises as well as services.
 Human resource management : The next ambition of this organisation is to set up
powerful existence in current market – places so that they can remain at first position in
race of completion (Hair, 2015). Since there are large number of companies which are
delivering identical product and services at cheaper rates. This is why people are moving
towards those firms and as a bad consequence, selling rate of corporation is being
decreasing on constant basis. In order to tackle this major issue, managers of IKEA are
focussing towards recruiting more & more skilled and qualified workers on continuous
basis. The main reason of doing so is to generate innovational goods or services along
with considering the quality. This helps them in impressing numerous of people since
individual wishes to use something new and unique; for the same, they would also ready
to pay more amount of revenue without thinking (Low, Chen and Wu, 2011). Hence,
sector of HRM is inter-related with the aim and are coordinating in achieving this also.
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 Sales & Advertisement : This is the next department of IKEA which is focussing on
doing promotion so that their level of sales increases in drastic manner. To perform or
attain this, they are taking use of different digital modes such as social media. For
example, Face book, What's app, twitter, You tube, Instagram, etc. are being utilised by
their promotional team in conveying messages to larger number of audiences in very less
time. In addition to this, these applications are treated as extremely cheap in nature and
almost every people in all over world is connected with such digitalised technologies.
Therefore, numerous of consumers are knowing about their newly formulated appliances
in instant way when IKEA used to post images on these social media sites. Thus, it could
be stated that via such activities, selling rate of venture enhances effectively. Again
increasing turnover rate per annum is one of the goal of cited company which would be
accomplished by doing publicity. Therefore, both of them are affiliated with one another.
 Accounting and finance : This is considered as confidential sector of organisation that is
responsible for handling all accounts & finance related terms. Herein each information
associated with overall expenditures which has done in completing different tasks like
purchasing raw materials, transportation, wages given to employees along with incentives
and compensated amount, transportation & communication charges, promotional actions,
sales, etc. are being gathered and handled ; so that final decision could be made at the
ending of month or year that is whether company has made profit or not (Van Vuuren,
Roberts-Lombard and Van Tonder, 2012). This is inter-linked with objective of satisfying
work – forces by providing them proper salary & other facilities so that they also remain
mitigated and work happily.
TASK 3
P 4. Positive and negative influence of macro environment on IKEA
There are various of macro factors which directly affect in business environment, IKEA
require to conduct PESTLE analysis that are describe as follows: Political factors : IKEA company operate in more than 41 nations. Also political factors
are exist in every country and it affect on organisation. Political stability lead towards
economic stability and it means they are maintaining better sales and profitability in
effective manner. The government attitude towards international brands and firm policies
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are directly affected (Reeves, Love and Tillmanns, 2012). Political effect in term of
positively on whole initiation which will make it effective and also try make it coercion
and corruption free. Economical factors : This will play an important role in the business environment. The
situation and condition of world economy decide that how much income and profit
amount earn by various business enterprise. Most of the people are lost their job in high
level and mainly focus on decline the cost value. IKEA has been managed and controlled
their products pricing and also assist in supporting some of the pressure which rise from
economic variations. This can lead towards supply chain interruption. In few years, China
and India has enact as lower the political barriers for international brands. Social factors : Social and cultural factors can directly impact on their business and their
profitability. This is necessary for respect the cultural and social values for the local
market. While printing promotional pamphlets for distributing in international level,
IKEA make sure that wrong things does not show in the right manner. Company using
augmented reality for improving the level of customer services which are provided. At
current customer expectation is higher and doing better cumbersome services. IKEA has
been observed that better customer facilities which lead towards customer services.
Social trends and other factors has been impacted on sales and profit. If specific style are
with trend then the firm should focusing on them. Technological factors : This sector also providing advantages to an organisation since by
using advanced technology, IKEA can easily enhancing their productivity and
profitability level in proper manner. They can select employees for conducting online or
offline interview with the help of video conferencing system. As per this result, these
factors help company for recruiting large number of candidates in limited time period and
also save lot of money which invest in conducting face to face interview sessions. With
the help of digital technology company can adopting different tools and methods for
developing new products which attract large number of customers. Such technologies like
Artificial Intelligence and Cognitive Intelligence can able the retailers for understanding
customer behaviour appropriately and better which help in provide them new level of
experience. They can adopt latest techniques and methods which is helpful in making and
generating maximum profit for providing various products to their customers.
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 Environmental factor : As company is chiefly dealing with merchandises linking with
furniture, thus, activity of cutting down of trees are being conducted at faster rate. This is
causing increment in global warming which in turn not only affecting lives of regional
people but also whole civilians as well as animals who are living in the earth. Hence, it is
treated as negative impact. On the other hand, it has been recognised that environs are
also effecting positively on performance of IKEA as all essential raw supplements are
being generated in surrounding such as timbers, woods, etc.
 Legal factors : Norms and regulations made by government is giving positive and
negative impacts as well on cited corporation. They used to impose high rates of
taxations and that is why large sum of money goes on paying such taxes only. Hence, it is
influencing in adverse way. At the same time, some rules are made for the benefits of
organisation like child labour acts, laws related to equal wages, health and safety and
many more so that rights of personnels do not get breached and working may goes on
smooth manner.
TASK 4
P 5. Internal and external analysis of IKEA in order to identify strengths and weaknesses
In order to conduct internal as well as external investigation, SWOT analysis requires to
be applied by IKEA which is described below :
Internal analysis- Factors which are affecting within the company are falls under this
such as; strength and weakness are major elements that are influencing association in various
manner. However, these factors are changes in the organization due to the fluctuation in several
other components. For example; potentiality of staff members are beneficial for organization in
several ways, high range of capital and so on. Thus, major strength and weakness of an
association are discussed as follows:-
Strength :
 One of the biggest capability of that company is having clear vision that is nothing but
adding values to their important users regardless of situations of marketplace. This is
being converted into an eloquent and well - described scheme of business and an
approaching to retail, which is innovating in its simpleness and also considered as deadly
in its targetting of rivals and effectual in its orientation.
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 Some other primal strength of this firm is its broad conception which is translating into
an arrangement of merchandises that could be accumulated by the clients themselves
leading to larger cost trim down which provides benefits to consumers. Having its single-
minded engrossment on price leadership, IKEA has come out as the universe's leading
merchandiser of furniture.
Weakness :
 Since IKEA has been operating in more than one nations around the globe, it is
comprising of advanced criterion and a larger sized business meaning that it is hard to
handle various regulations across different locations. Although, the enterprise is
attempting its best to employ unvarying quality throughout its trade goods' ranges and
across all over its areas. They are giving more focus on improving its qualities.
 There are several concerns linked with environment and due to that operations of cited
venture are getting impacted negatively. Besides this, they are also facing challenges in
communication as well as articulating various principles associated with surroundings to
their users, stockholders and other share – holders (Reeves, Love and Tillmanns, 2012).
External analysis- Threats and opportunities are external factors which are affecting
company policies in several ways. As fluctuation in single one is influencing other elements.
Proper description of this components are discussed further-
Threats :
 Lower costing framework of business of IKEA has been resembled as well as derived by
most of their challengers, which highlight that this firm is needing to make innovated
products on regular basis if they wish to defeat all of their competitors. For example,
different territorial and localised corporations have concentrating on to the DIY trend and
are also giving priorities to costing. Thus, for staying active and spry, IKEA ought to
develop new and innovate plan of actions.
 By the arrival of the internet and digitalised shopping, DIY as an important operator of
strategical success now become no longer exclusive Unique Selling Proposition of IKEA.
Besides that with the development as they are not having a physical existence. Hence, it
could stated that such retailers are treated as great threats for IKEA.
Opportunities :
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 IKEA is containing the “green” commercial hypothesis, this is offering them larger
opportunities in context of seeking attention of large number of civilians who would be
likely to purchase their trade goods or services. This is giving rises in the ethicality of
consumers or the procedure of purchasing famed as “Ethical Chic”. Therefore, clients
will ideally prefer to acquire their deliverables or productions that are conscious in terms
of environs.
 Possibly one of the biggest golden chance of IKEA is its cost leadership. This shows that
they focussing completely on single direction which is cost instead of anything else. On
the other hand, this has increased concerning regarding quality, the purchasers do not
appear to mind since they are acquiring their currency's worth and the adding in context
to value to the consumers is other epochal opportunity.
P 6. Inter-relation of strengths and weaknesses with the extraneous macro factors
IKEA is a multinational company mainly dealing in modern designed furnitures, kitchen
appliances and interiors. IKEA is Swedish based company and operates in different countries
with many stores. It was once world's largest furniture retailer. It is crucial for managers to retain
the reputation in global market and for they need to identify their strength, weakness, threat,
opportunities and other factors. With proper analysis and research they can make effective and
strong business plans that will help them to maximise their profits. Following is the inter-
relation of some of the macro factors:
Political Factors: These factors are crucial to analyse if IKEA wants to expand their
business in other countries. Different countries have their own political environment and
company should have the knowledge about government rules, regulations, different acts and
polices of particular country. This help in better stability of organisation.
 Strength: It is important for IKEA to ensure political stability for better growth and
expansion in different countries. Proper knowledge and research can surely help them in
stability.
 Weakness: Ineffectiveness in implementation of government rules and regulations within
company can lead to political instability and can also reduce the goodwill of company.
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Economic factors: These factors are crucial for IKEA to analyse as they greatly impact
profitability of company. As company is operating worldwide, then they should be aware of
different economic conditions in order to avoid instability and loss.
 Strength: Proper knowledge of different economic factors can maximise stability as well
as profits to company.
 Weakness: Fluctuations in inflation, exchange, growth rate can pose negative impact on
company.
This has been discovered that there is an important relation between strength & weakness
of IKEA with the extraneous macro constituents. This can be better understand by given below
points :
 Stability in political conditions helps in attaining profits. Thus, it is can be said that
IKEA may become more powerful in nature as a result. Whereas enforcement of high
taxes by the government or legal bodies are making them fiscally weak.
 Evolution of contemporary technologies is proved to be more beneficial for IKEA since
it is assisting them for achieving their goals & aims in minimal time period. In addition
to this, improvement in techniques also aids in generating feeling of more contentment in
customers. On the contrary, because of development in this field; increment in
competition has recorded and in turn civilians are migrating towards other firms as they
are having numerous of options. This is causing loss for IKEA since due to that, its
selling rate get decreases and they would loose their stronger presence in retail market.
 Society is also catering assorted opportunities to IKEA to earn higher quantity of money
as they are showing more interest in purchasing stylish furnitures which is being offered
by them. Thence, it is strengthening economic situation of overall venture.
 Legal components are also contributing positively in overall working of IKEA since
governmental bodies has been formulating different laws in favour of company. For
instance, they are providing protection against various unethical operations like child
labour, discriminations, excessive exploitation of workers, etc. Hence, making this firm
more disciplined and systematic in nature (Reeves, Love and Tillmanns, 2012). On the
other hand, some rules are giving adverse impacts on total corporation such as high tax
revenue rates. This would made IKEA weak in terms of economy.
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 Due to the deforestation on continuous basis, the level of global warming is rising day on
day which is affecting negatively on the whole globe. Thus, it can be said that IKEA is
also getting influenced in indirect ways since pollution is increasing drastically. But
there are also some positive effects. This is cited organisation is attaining their raw
materials like wood , timbers and many more in a easier way from nature.
CONCLUSION
From the above based report, it can be summarized that business environment is a vital
concepts wherein different components are existing there. Those factors are giving effects in
optimistic as well as antagonistic styles on complete working of corporations. For determining
such impacts PESTLE analysis has been conducted in this assignment. IKEA need to focus on
the same for getting familiar about such happening. Apart from that, a company also require to
know about its own features like strength, weaknesses, threats and opportunities as well. For
knowing this, IKEA ought to carried out Swot analysis which is also being discussed in this
report.
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REFERENCES
Books and journals
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Hair, J. F., 2015. Essentials of business research methods. ME Sharpe.
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Van Vuuren, T., Roberts-Lombard, M. and Van Tonder, E., 2012. Customer satisfaction, trust
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Reeves, M., Love, C. and Tillmanns, P., 2012. Your strategy needs a strategy. Harvard Business
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