IKEA Strategic Management: Macro Analysis, Internal Resources & Plan

This report provides a detailed analysis of IKEA's business strategy, examining both the macro and micro environmental factors influencing the company. It utilizes tools such as PESTLE analysis to assess the impact of political, economic, social, technological, legal, and environmental factors on IKEA's operations. The report also employs SWOT analysis to identify IKEA's strengths, weaknesses, opportunities, and threats, and the VRIO model to evaluate the company's internal resources and capabilities. Furthermore, Porter's Five Forces model is applied to evaluate the competitive forces within IKEA's market sector. Based on these analyses, the report devises a strategic plan and management plan for IKEA, incorporating tangible strategic priorities and objectives, and utilizing Ansoff's matrix to guide strategic decision-making.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................4
TASK 1............................................................................................................................................4
P1 Apply appropriate tool to analyse the impact of Macro environmental factors on strategies
of chosen organization:...........................................................................................................4
M1 Critically analyse the macro environment to determine and inform strategic management
decisions.................................................................................................................................6
TASK 2............................................................................................................................................6
P2 Analyse the internal environment and capabilities of an organisation using appropriate
framework...............................................................................................................................6
M2 Critically evaluate the internal environment to assess strengths and weaknesses of an
organisation‟s internal capabilities, structure and skill set..................................................10
TASK 3..........................................................................................................................................10
P3 Applying Porter‟s Five Forces model evaluate the competitive forces of a given market
sector for an organisation.....................................................................................................10
M3 Devise appropriate strategies to improve competitive edge and market position based on
the outcomes.........................................................................................................................12
TASK 4..........................................................................................................................................12
P4 Devise strategic plan and management plan for company..............................................12
M4 Produce a strategic management plan that has tangible and tactical strategic priorities and
objectives..............................................................................................................................15
D1 Critique and interpret information and data applying environmental and competitive
analysis to produce a set of valid strategic directions, objectives and tactical actions........15
CONCLUSION .............................................................................................................................17
REFERENCE.................................................................................................................................18

INTRODUCTION
Business strategy refers to a set of action or decision that is used by organisation in order
to operate their business in effective manner for the accomplishment of organisational goal
within stipulated time (Timms, 2017). These course of action aids company to follow plausible
techniques and measures. Planning of strategy related with the business is termed as business
strategy planning. It will creates right direction path for company in order to reach predetermined
goal within a small period of time and that leads to increment in operational efficiency and
profitability. The current report is based on IKEA company with the component of exploring
strategical decision that is taken by company over course of years (Yuan and et.al 2020). This is
a Swedish multinational company that designs and sells ready assemble furniture, kitchen
appliances and home accessories. This company was founded by Ingvar Kamprad in year 1943
and they operates their business across globally. This assignment will cover PESTLE analysis to
identify macro environment as SWOT along with VRIO in order to determine internal
capabilities and resources. Moreover it includes porter's five forces to gain knowledge in
business competitive environment. Additionally strategic plan is devised with the help of
Ansoff's matrix.
MAIN BODY
TASK 1
P1 Apply appropriate tool to analyse the impact of Macro environmental factors on strategies of
chosen organization:
Stakeholder analysis: It refers to the analysis of various stakeholders such as customers,
employees and investors who are associated with company.
Higher power and high interest: These are the most important part who posses high
power as well as interest in business. In context of IKEA, it has several investors who invested
higher amount in business fall under this category.
High power but low interest: It is analysed that there are some stakeholders such as large
investors and more who has higher power but not have inclined towards business function. It is
essential to keep them satisfied.

Lower power higher interest: Here, it is essential to keep informed these person on
regular basis. In context of IKEA, there are several stakeholders such as customers, employees
and more who have higher interest in business functions.
Lower power, low interest: These people are not more important for company and need
to keep informed on periodically basis.
Pestle Analysis is a framework mainly used by an organisation in order to monitor
various external factors that influence business activities. It is an external analysis tool that
include several elements related to outside environment (Ciasullo, Cardinali and Cosimato,
2017). This tool helps higher authorities to formulate strategies and policies to meet with future
uncertainties and to minimize their impact. Although, these factors put a substantial impact on
business functions but cannot be control by managers. Pestle analysis of IKEA is discussed
below:
Political Factors: Political environment includes factor such as foreign trade, tax
policies, government stability and other elements that influence the sales and profit margin of a
company. It is essential for mangers to analyse these elements to make necessary changes in
their strategies and policies accordingly. IKEA that operates its business across the globe is
highly affected with political factors. Government insatiability affects distribution system of
company. As they are operating in various countries its supply chain and distribution system is
highly affected (Cardoni, Kiseleva, and Lombardi, 2020). by barriers imposed by different
countries on foreign trade. Now, China has lower down the barriers over entry of foreign brands
thus the organization has an opportunity to enhance its share at global market. Mangers of
company are looking forward to expand their business in Asian Market. As company is
operating its activities majorly in European market any change in current government will also
impact its sales and profitability significantly.
Economic Factors: It refers the economic condition of a country that influence overall
business productivity and outcomes. It consists of various factors such as revenue, expenses,
profits, employment opportunities and many more (Cardoni, Kiseleva, and Lombardi, 2020). In
reference to IKEA, it is highly affected with economic factors. Due to current pandemic
situation purchasing power of consumer has lower down thus sales and profitability of company
is getting affected. Although its sales getting affected but business entity has managed the
product of its price in such a manner that will help to manage the impact of global recession. It

provides quality products on reasonable price that gives the brand an edge over other
competitors. Organization is creating a lot of job opportunities that will help to increase in
earning and standard of living of people. Brexit also significantly influenced the operations of
company. Now, it cannot hire employees and exchange necessary goods or services from
Britain. Another important factor is strong dollar price that significantly affects the sale and
profitability of company at market place.
Social Factors: It refers elements such as personality, attitude, behaviour, lifestyle of
people within a country. These factors significantly affect the functions of an organization.
While a company expands its business across the world, it is essential to give due consideration
to these elements. Ikea is operating in various countries thus it need to do the advertisement and
promotions of products as per the environment of particular country. Due to this, it had to take
back one of its advertisement in Russia that was based on homosexuality. AS per the culture of
that nation it was not allowed but other countries where homosexuality is acceptable criticize
this practice of organisation (Pestle and Ramos, 2018). Managers of business entity do not give
due consideration to social factors that is reason they do not have good rating over social media
platforms. Hence, company should give importance to culture of different nations in which it is
operating functions.
Technological Factors: To survive in today's competitive environment, it is essential for
an organization to adopt new and advance technologies. It refers to make modifications in
current techniques and adopt more innovative, unique, updated methods to execute operations in
an efficient manner. In case of IKEA, it gives importance to this factors. Managers of company
spend huge amount on research and development in order to produce new and advance products
to meet with consumer’s needs (Savitri, 2018). They are working on evolution of unique
furniture with robotics power that can be adjusted as per the space availability. They are
consistently engage in updating their current techniques in order to provide better services to
consumers. As per the current trend at market place, they are working on autonomous vehicles
that can be used by people as an extension of offices, home and so on. It will not only satisfy
consumers but also help company to survive in the comparative world for a longer period of
time.
Legal Factors: This is one of the important factor that affect overall business operations.
It consists elements such as laws, rules, regulations, trade & tax policies and many more that has

been formulated by regularities. It helps to ensure smooth functioning of organisational
activities. Ikea is highly affected by compliances made by the government of different countries.
Company has been sued by consumers as it was unable to meet with safety standards, it has case
of deaths of customers due to its furniture offered by organization. This damage the brand
image of IKEA at market place (Bentley-Goode, Omer and Twedt 2019). So, managers of firm
are required to ensure to follow the rules and regulations related to consumer’s safety and
security in order to get buyers faith over brand. Therefore, it is crucial to follow the legal
compliances of various countries in which firm is operating its business functions.
Environmental Factors: Business entities are considered as an integral part of society. It
is crucial for them to give consideration to environment protection and overall societal well-
being. This practice not only helps to enhance profitability but also create a strong brand image
of company among customers. Managers of IKEA make sure that their activities would not harm
environment. They have invested approx. $ 1 Billion in renewable energy in order to cope up
with harm of climate change (Marttunen, Lienert and Belton, 2017). To develop sustainable
products, company is using renewable and recycles raw material. It is investing huge amount in
solar and wind panes in order to protect environment. Apart from this, organization emphasis to
receive material such as wood and cotton from sustainable sources. These all practices will help
to retain consumers and formulate a strong image of brand at market place.
M1 Critically analyse the macro environment to determine and inform strategic management
decisions
When analysing the external environment of IKEA it is concluded that technological
factor is helping IKEA to successfully generate profit. Due to the technological advancement
company is bringing regularly allows it to face competition in market. Also the investment in
environmental factors is helping IKEA to enhance their brand value. These are the factors which
will successfully help IKEA to determine their strategies in such a way that the profitability of
organisation can be increased.

TASK 2
P2 Analyse the internal environment and capabilities of an organisation using appropriate
framework.
SWOT analysis of IEKA
This tool aids management team of company in order to identify strength and weakness
of company along with opportunity and threat. This is useful for company to get competitive
advantage at marketplace.
Strength Weakness
 The designers of IKEA creates stylish
and creative products which can easily
transport and assemble (Timms, 2017).
 The true strength of IKEA is their
inexpensive products. They
continuously search about new mode
to drive cost down without affecting
the quality of product.
 IKEA is the most well known brand
for furniture across globally.
 The product of IKEA is also known for
being lesser quality which is turned out
as a weakness for IKEA
 IKEA had bad run ins with bad press, in
non-western countries they faces some
challenges about their brand towards
promotional activities.
Opportunity Threat
 They have opportunity of market
expansion.
 As online shopping becomes more
popular in today's world so they have
excellent opportunity to sell their
product through websites.
 IKEA can expands their grocery
business in grocery industry.
 Existence of competitive rivalries
towards production of furniture
products.
 Increase in demand of premium and
luxury products.
 Due to changes in laws & tax policies
of government that will affect the price
of IEKA products.
From above discussed swot analysis it has been identified that the capabilities of firm is
that they have well know and established brand image at mark place for furniture products. As

well as they are the manufactures of creative and unique furniture products. Which gives then
strength to remain in competitive edge.
VRIO MODEL
VRIO model is used to analyse internal resources of firm in order to identify whether
they are beneficial for company or not in order to provide competitive advantage. (Orozco,
2017). The word VRIO stand for valuable, rare, inimitable and organised. In context of IKEA
these resources are obstinate below:
Resources Valuable Rarity Inimitable Organized What is the
result?
Local food
product
Local food
product
- - - Competitive
Disadvantage
Employees Employees employees - - Partially
competitive
Patents Patents Patents Patents - Competitive
advantage on
temporary basis
Financial
resource
Financial
resource
Financial
resource
Financial
resource
Financial
resource
Long term
Competitive
advantage
In order to find out internal capabilities of IKEA, four resources have been considered i.e.
local food product, employees, patent and financial resources (Pham, Pham and Pham, 2018).
The VRIO analysis of IKEA is mentioned at each level whether these resources are able to
provide a competitive advantage or not.
Valuable: The term value refers to how easy to obtain resources at marketplace. In which
there are some resources that posses some quality which adds value for buyers in order to
provide competitive advantage to firm in market. For the same, valuable resources of IKEA are
discussed below:

Local food product- The local food products of IKEA are very valuable as these are
highly differ from other competitive rivalries. Due to this, these are valued more by the
consumer in comparison to other players of market.
Employees- The employees of IKEA are valuable resources for the firm as they are loyal
to company and it can be seen by the retention rate of company which is very good. Along with
this a significant portion of workplace is highly trained and that will aids company to produce
more output for corporate.
Patents- It is also a valuable resources for IKEA company as these permits firm to trade
their products without any hindrance of any other players of market (Azha and Lin, 2017). This
will aids company to generate more revenue and enhance market shares of corporate.
financial resources- It has been analysed that financial resources of IKEA is highly
valuable for company. This is because these resources helps in identifying the external
opportunity. As well as also aids in resisting by external threats.
Rarity: These are those resources which have unique creation and existence in market for
company and desire to provide competitive edge to other players of market. It has been found
that local food product of IKEA are not rare as these are easily for consumers through other
competitors. Still there are some resources which are rare for IKEA and these are as follows:
Employees- For IKEA their employees are rare for firm as they are highly trained and
skilled which is not in case of other company. The positive workplace environment and high
retention rate make sure that these employees won't to leave this firm.
Patents- It is an another resource that is rare for IKEA company and this is because it is
not easily available and nor grouped by other competitors. This will aids company to use it
without any hindrance of other players of market.
Financial resources- It has been found that final resources of IKEA are rare to the firm.
As strong financial resources are only group by some organisations within industry.
Inimitable: This refers to those resources which cannot be copied by other companies. In
relation to IKEA , it has been found that employees are not expensive to imitates this is because
other company also trained their employees in order to improves their skills. As well as others
company can hire employees of IKEA by providing them better compensation package and
opportunities. Yet company have some resources that are imitable for them and these are
discussed below:

Patents- Patents of IKEA are very challenging to imitate as it is not possible to imitate
those products which are legally allowed. As well as it is very expensive process to get patents so
most of the companies will not try to get involve in this.
Financial resource- It cannot be easy to imitate financial resources of IKEA company
this is because these resource have been obtained by organization through long term benefits.
And which is not possible for the new entrants to acquire same profit for a long period of time to
simulate these financial resources (Dobni, Klassen and Sands, 2016).
Organised : In order to achieve predetermined goal within stipulated time, some
resources need to be organised in effective manner. And this has been found that patents of
IKEA company are not well organised means company is not using their patents with full
potential. Unmoving IKEA posses some resources that are organised in effective manner and
these are as follows:
Financial resources- The financial resources of IKEA company is well organised in
order to capture all values and competitive advantage. These resources are used on the basis of
strategies for proper use of opportunities and combatting with the threats of company.
Resources based view: This framework is used by the entities of company with the help of
using resources that they possess and which enables them to achieve competitive advantage. In
which the resources that this company have is well known brand image, patents, employees, their
local food products etc. in which some of the resources are valuable and rare. All these aids them
to combat with competitive edge.
M2 Critically evaluate the internal environment to assess strengths and weaknesses of an
organisation‟s internal capabilities, structure and skill set.
While analysing internal environment of Ikea the major strength of company is the well-
known brand image of company. Employees of organisation along with financial resources
present with them are successfully helping them to attain this strength. They are valuable
resources for the organisation. However the quality of quality of products which IKEA produces
are required to be worked upon. It is necessary for company to look into organisation of its
resources to improve quality of its products.

TASK 3
P3 Applying Porter‟s Five Forces model evaluate the competitive forces of a given market sector
for an organisation
Porter five force model is tool which is used by entity to analyse the impact of
competitive forces in market. This framework comprises of several types of forces which reflects
the competitive intensity of firm (Ocasio and Radoynovska, 2016). With help of this tool,
competency level of business environment is easily identified. Moreover, strategic competitive
advantage is taken in most effective manner by using this tool.
In relevance with IKEA, they operate their business globally which means that they uses this
framework with aim of analysing competitive advantage or situations. So, competitive forces
are further discussed below-
Industry rivalry- This competitive force in which whether competition is high or low
within a specific industry is examined. The level of industry rivalry in retail & furnishing
industry is relatively high which reflects the dominance of market. It is often seen that more the
competitors are available in market, lesser is power of entity. It is important for entity to be
aware about competition in industry so that decision making & strategy is implemented in most
efficient way. In context with IKEA, they too have many competitors in same sector such as
local supermarkets, brands also sell same furnishing products and goods. This enhances the
degree of competition in sector. The degree is industry rivalry is likely to be arise & changeable
which results in change of management, strategies, tactics.
Threat of new entrants- IN this rapid changing market sector, new entrants of business
also affecting the business at larger scale (Dickson and McCord, 2016). The corporate world sis
changing & many forms of business have taken place. In reference with chosen firm, threat of
new entrants is basically low because in furnishing industry it took time to set in such a
competitive market. So, it is beneficial for IKEA to strengthen their base in field which will lead
to future competitive advantage. Further, they can acquire local brands who are stepping as new
competitors. It is not easy for new entrants to compete with such a huge brand or attract
customers for same products or goods. The threat of new entrants is low which leads to use of
strategies and tactics in proper manner. Manager of company make assure that firm is aware
about new entry of business who are doing same business with lower price so that it is easy to
make strategies appropriately.

Power of supplier- It is another competitive force which is focused in which it specifies
the number of vendors and their costs within a market. The power of vendors depicts the how
effective company has suppliers. Suppliers are those who are responsible for arranging of raw
materials, goods, etc. to the company (Dickson and McCord, 2016). In relation with selected
firm, they power of supplier is basically low & IKEA easily switches from one vendor to other.
Moreover, IKEA has launched IWAY which a code of conduct used for suppliers in which
vendors are responsible for communicating code of conduct to sub suppliers. Vendors are most
crucial part of business because without them it is not possible for entity to distribute products
globally. So, it is important chosen firm maintains a positive relationship with each other.
Bargaining power of buyers- In this force, the intensity of power is moderate or say
insignificant because of they retain customers and hold them for future period. It is because
customers are main reason for growth and development. So, in context with chosen firm, they
focuses on promoting of their product at global scale. Besides this, power of buyers can be
viewed as low to moderate. Company follow strategy of providing cheap products to customers.
Thus, it is evaluated that they have due to low marketing strategies, buyer power is low. Buyers
are most important which generates profits and sales to business. Thus, it is essential to make
ensure that buyers power is measurable so that it is easy to make decisions. Bargaining power
of buyer is tend to be low which is beneficial for entity & enhances the selling criteria of firm.
Threat from substitute of products- Then arises forces of threat of substitute of
products in which it depicts that at what level customer switches to other products over IKEA
one. From market it is seen that the threat of substitute is low because the level of trust between
customer & company is high (Johnson, 2016). Also, due to their effective marketing strategy
they are able to maintain a positive relationship between customers which is beneficial for
marketing. The degree of substitute of product depends upon specifications, characteristics &
competitive or USP advantage of that product from competitors. Due to low threat, company is
able to retain their customers for longer period of time.
After analysis of above matter, it is stated that this framework Porter Five Force Model
is an effective framework which is carried out by IKEA. Through this it is easy to make
decisions within a company in most efficient way by carrying out proper analysis of market
situations. By accessing to these forces, strategies are implemented in most effective manner. By
accessing to these forces, it is easy to make decisions regarding business. Therefore, appropriate