Business Strategy Report: IKEA's Macro-Environment, Internal Analysis

This report provides a comprehensive analysis of IKEA's business strategy, examining the impact of the macro environment through a PESTEL analysis, including political, economic, social, technological, environmental, and legal factors. It also assesses IKEA's internal environment and capabilities using the VRIO framework, evaluating its value, rarity, imitability, and organization. The report further explores the application of Porter's five forces model to IKEA's market position and concludes with an interpretation of strategic direction. The analysis covers IKEA's vision, mission, objectives, strategies, and tactics, highlighting how the company adapts to external challenges and leverages its internal strengths to achieve its goals. The document provides a detailed overview of IKEA's operations, market position, and strategic responses to various environmental factors.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...............................................................................................................3
LO1. Analyze the impact and influence which the macro environment has on an
organization and its business strategies...........................................................................4
LO2. Critically evaluating the internal environment and capabilities.................................8
LO3. Evaluate and apply the outcomes of Porter’s five forces model............................12
LO4. Understanding and interpreting strategic direction.................................................15
CONCLUSION.................................................................................................................18
REFERENCES................................................................................................................19

INTRODUCTION
Business innovation can be understood as the game plan or a series of options that
help business people achieve specific business goals. Modernizing an organization's
management is just an all-inclusive strategy to ensure poor market conditions, fulfill its
functions, satisfy customers and achieve the best parts of the business. Many business
trends and activities that a company uses to attract customers, effectively console it,
enhance performance and achieve ranking goals are a business approach. Diagram of
how a business should do to make an ideal closure. The company's approach gives the
advanced system a coordinated system to identify, analyze and exploit productive
opportunities, to detect and satisfy risks, to utilize resources and features, to
compensate for deficiencies.
Most of the organization's current system is due to time back actions and business
started to come closer, but when economic conditions turn to unexpected conditions,
the organization needs a vital response to take on the opportunities. Therefore, for an
invisible turn of events, a piece of the business system is planned as an expected
response. The given project is based on impact analyses of macro environment on
IKEA and also consists of assessment of organizations internal environment and
abilities. Analysis of Porter’s five forces model has also been done with the context of
IKEA market.

TASK 1
LO1. Analyze the impact and influence which the macro environment has
on an organization and its business strategies
Overview of IKEA
Ingvar Kamprad founded IKEA in 1943. With their office in Delft, the Netherlands, the
group has completely developed from a small Swedish company to a home-based
equipment brand on the planet that has previously sold through a list of job applications
To date, IKEA operates in one hundred stores worldwide with later development
potential.
Vision of the company
“To create better everyday life for the many people.”
Mission of the company
The mission statement of a company is compiled and created in terms of establishing its
vision and underlying beliefs built for a company, as a mirror of the game plan and the
system to be presented with the material to obtain the recommended appearance. from
an elaborate idea.
Through the future deployment of resources, IKEA's mission revolves around achieving
lasting support development for the assured benefit of suppliers, customers and agents.
In this way, a certain part of the benefits created by IKEA is attributable to economic
provisions, to the development of objects directed towards the promotion of new and
existing sources, while ensuring that the final cost imposed on customers as reasonably
as possible to expect.
IKEA Objectives: To offer a wide range of home furnishings with good structure and
capability, great quality and strength, at costs so low that most can carry them.

IKEA strategies
- The Self-Combining element reduces labor and transportation costs
- Focus on individual promotion rather than big presentation
- Limited warranty and subsequent tracking model
- Opening of small shops and uniform promotion
- Diversity in business
- Country-specific management style
- The decision of the average seller
- Financial strength, autonomy and flexibility
IKEA Tactics
- 2.6% cost reduction
- To grow with the opening of 7 new stores
- Pay 40 million Euros into supply-based panels and unstable factories in newly
manufactured stores
Impact of the macro environment on IKEA’s strategy:
A broad scenario is the external scenario in which a group company operates. The
external approach of society includes variables such as practical, social, political and
innovative elements. The changes in these elements are having a direct impact on
business development and performance. In a company, for example IKEA, for example,
an organization that regulates the furniture collection is similarly affected by these large-
scale ecological components.

Positive impacts: The positive effects of mass settlement on the IKEA case can be
characterized by positive changes in spending levels, laws and laws applied to IKEA
group. Social factors, for example, customer loyalty can promote positive effects on the
organization.
Negative impacts: Changes in macro environment such as currency fluctuations,
increase in the cost of raw materials and interest rate has negatively impact the strategy
of IKEA because of decrease in the demand company’s product due to rise in prices.
Macro Environment (PESTEL)
The great ecological elements that affect society are political, economical, social,
technical, environmental and legal. This is the second important thing now. The
PESTEL study is the tool that helps decide which destiny for the IKEA.
Political: -
The world of politics involves funding, strategies, rewards and governmental activities in
which, as a legitimate condition, rules, guidelines, advertising, administrative matters
and exchange agreements are introduced. Each country has its own distinct political
and legal components. IKEA operates worldwide and has to follow certain political and
legal factors in several countries, for example IKEA needs to use a completely new
tactics to get businesses to operate in China ("Strategies the globalization of IKEA and
its search into China ”, nd). IKEA has to negotiate in some countries where there is less
political security although IKEA cannot negotiate its strategies in developing countries
due to some legitimate components (like high currency rate, huge competition over low
price and high restrictions on FDI). In developing countries, the current strategy is that
IKEA owns and acquires a business with 100% foreign direct investment (FDI) and
destroys its agreements to open stores. IKEA, like most European and American
companies, is currently operating in the global economic downturn. In most countries,
economic growth has been slow over the past two years. Other economic factors are
common to all countries and must be inflation rates, interest rates, wage rates and
minimum wage legislation.

Economical:-
The practical scenario includes variables that influence the buyer’s purchasing power
and the design of the cost. IKEA finds different ways in different countries around the
world by providing a wide range of quality-specific items at a cost that most people can
handle. According to (Scherrer, 2003) the development of the country is reflected by the
feeling of money that influences desire. IKEA is present worldwide, but its major source
of activity comes from Europe. Due to the harsh economy in Europe, lower paid people
can manage the costs of items accessible from IKEA, although due to the tight and
central market nearby it has become extremely difficult for IKEA the products His
products are sold in China.
Social:
The markets in which IKEA operates are facing evolving social models. For example,
there are currently fewer first-time buyers in the housing market, mainly due to the
difficult financial times. In this way, there may be a rhythm in the market development
phase. Numerous people participate in a new healthy lifestyle in Sweden. This Swedish
lifestyle is reflected in the outgoing IKEA. The freshness of the exterior is reflected in the
materials and materials used and in the feeling of the room they create using light
woods, surfaces and untreated materials.
Technological:
IKEA has maintained innovation as a commercial tool. It has an advanced site where
customers can view indexes online, check stock availability before they leave for the
store, web application and even connect with the messenger support team. As
innovation progresses, IKEA will continue to innovate and innovate the innovation to
keep up with its systems worldwide, from forming associations with suppliers to
wholesalers.
Environmental:

Since its inception, IKEA has been respectful of nature, which has led it to use both raw
materials and energy. This reduces costs and allows the organization to achieve its
green goals and has an overall positive impact on nature.
Legal:
IKEA is a worldwide company. This means that it is subject to several laws and laws in
different countries. This represents a risk where IKEA will not be able to control
principles and quality in certain areas where IKEA articles are the area where there is
no guidance for examining working conditions.
Critical analyses of impact of macro environment on IKEA
Comparing the major natural elements of IKEA using the PESTEL study shows that
IKEA has achieved great results by getting new modifications upon request. IKEA
shows how they tracked everything around the effective downturn that paints a strong
picture of the society. IKEA is facing all of its natural features before entering the
Chinese market, but it got the right strategies and demonstrated how they have
progressed in China. In six years of IKEA experience they have experienced several
setbacks, but the organization has remained firm and focused on its strategies and
overcome all obstacles that have occurred regardless of whether be they political,
economic, social, legal, mechanical or natural.

TASK 2
LO2. Critically evaluating the internal environment and capabilities
The VRIO framework is a tool that evaluates an organization's merits and shortcomings.
The system is organized in the progression of four surveys to be carried out on
company exercises. These four investigations concern value, irregularity, limitability and
relationship. These investigations are summarized in the following figure.

Critical evaluation
The VRIO analysis is an elegant presentation methodology for valuing an organization’s
assets and along this line of benefit, which includes the analysis of value, anomaly, cost
for reflection and asset linkage the society.
Value
In reality, IKEA's functions are important; IKEA's activities and capabilities allow you to
deal with external threats and openings:
a. Separation from the contenders
b. Develop an action plan and value chain that will encourage the company to build new
structures.
Rarity
IKEA had been involved in making the air in its stores enjoyable and making employees
appreciate the work as if it were a "family trip". None of its competitors (Walmart,
Amazon, Wayfair and Tesco) could do such simple procedures.
By default, IKEA had an unusual combination of:
a. Low costs: IKEA has acquired backward integration through this it purchase raw
materials at cheaper rate and simultaneously able to successfully minimize its overall
cost.
b. Best quality: Providing best quality at cheaper rate is not possible for every company.
But IKEA achieve this through maintaining its quality same even at low cost of
production.
c. Conventional tactical structures
d. A great buying experience.
Inimitable resources

Difficult to imitate or temporarily update the IKEA model, IKEA will always be the
pioneer and the competitors behind it due to its eagerness to learn, adapt and
experience. The various controversies that require reporting on the organization model
should have the initiative, the efforts, the time and the most important thing that the
administration needs.
Organization
Because IKEA has been in mobile advertising for a long time with its proximity to
several countries, so has:
a. The understanding and skill required,
b. The profitability required
The best use of its assets and capabilities.
Resource based view for competitive analysis:
IKEA is compared with other resource-based view companies (eg Starbucks, H&M and
Body Shop). Replacing so many organizations represented here is a real customer
experience. Unparalleled messenger respect depends on meetings of great help, solid
branding and dynamic communication that emerge from it. This needs to be as close to
customers, an understanding of the pre-requisites and the methods of furniture that suit
their features and lifestyles. Getting from (and with) customers in different ways is
crucial if an organization wants to stay customer focused.
The social and natural responsibility of enterprises has been shown to be fruitful, both
now and in the long term. Imaginative help ideas that use physical elements such as
management standards and customer meetings can use motivation. Quality logic and
logic of important value are harmonious, fruitful and sustainable.
After a survey on the PORTERS system value chain, information is provided on what
makes IKEA a pioneer among its competitors. The one-of-a-kind plan and the least
effort of an object reduce the agent and new participants. The key to selling their
products is their quality of minimal effort due to a strong relationship with suppliers and

loyal customer returns. They had the opportunity to inspire their article by providing a
fantastic courier server and extra management after the contract.
SWOT Analysis
Quality, gaps, openings and vulnerability test the society's current and ultimate
existence. Quality and lack are inherent in the society and can be changes where
circumstances and risks are outside the part of the society that is difficult to change.
Strength:-
Market research
IKEA knows the exact details of customers. If they didn't, the group would create difficult
memories by providing customers with what they need. Furthermore, what their
customers need is a combination of medium furniture and appliances.
Given that IKEA didn't have the most misleading idea of what their customers want, they
wouldn't be able to sell such a large number of units. And it wouldn't be difficult for them
to devote so much work to transforming events and a plan of countless numbers into
them.
Countless designs
IKEA architects make elegant, newly designed products. In any case, it goes beyond
physical wealth. The articles are extracted for a simple vehicle and for collection. In the
shop, you are ready to see the finished, collected piece. However, when you go out, you
will find all the strange things and you will end because it is easier to put your vehicle
and take it home.
Affordability
Cheap IKEA items are the true brand quality. Maintaining operational level is what
keeps customers coming back for more.