Business Strategy Report: Analyzing IKEA's Strategic Management Plan

This report provides a comprehensive analysis of IKEA's business strategy, focusing on its macro and internal environments and strategic management plan. The report begins with an introduction to business strategies and their importance. Task 1 delves into the impact of the macro environment on IKEA, utilizing PESTEL analysis to examine political, economic, social, technological, environmental, and legal factors. Stakeholder analysis is also performed to identify key stakeholders and their influence. Task 2 analyzes IKEA's internal environment and capabilities, applying VRIO, RBV, and SWOT analyses to assess its strengths, weaknesses, and resources. Task 3 outlines a strategic management plan, integrating the findings from previous tasks. The report concludes with a summary of the key findings and their implications for IKEA's future success.

Business Strategy
1

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Affect of macro environment on selected firm.......................................................................3
TASK 2............................................................................................................................................7
Internal environment analysis and capabilities of company...................................................7
TASK 3..........................................................................................................................................10
Strategic management plan...................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
2

INTRODUCTION
Business tactics or strategies can be defined as decisions and appropriate actions that
each organization can takes in order to achieve set goals and smart objectives of its ventures. It
can be developed in recent time especially to gain competitive edge within specific sector, which
is really very important to do. This term clearly defines what a company needs to do to obtain
desire outcomes that can aid direct decision making procedure relate to resource allocation and
recruitment. The current assignment will be based on IKEA, which falls under leading kitchen
appliances, furniture and home accessories provider companies in the world. This study will
explain impact of macro environmental factors on chosen brand. Furthermore, it will define
internal capabilities and environment of organization by applying appropriate models. This
report will describe strategic management plan that will be developed including range of correct
models, concepts, approaches and theories.
TASK 1
Affect of macro environment on selected firm
IKEA is the best and well known home furniture organization in the whole world (Al
Shuwaler and et.al., 2020). This Swedish firm excellently sells a wider category of interiors
design products and home accessories to target customers. Mission of this company is to develop
a better everyday life for each customers either new or existing one. The vision statement of
chosen firm is to build overall foundation based on openness, honesty, fairness and trust. The
goal of company is to offer quality products or services to buyers. The main objective of
business is to give workers as well as employers sense of progressing direction. IKEA can
achieve all these things after analysing external environment, and then taking right decisions.
Strategic intent of this firm is to gain competitive edge. There are range of frameworks has been
accessible in the world of business that can be used to conduct external environmental analysis.
PESTEL analysis-
Political factor-
Political stability, instability, tax rate and trade policy are different types of political
factors that have an impact on any company (Shen, Bui and Lin, 2017). Political stability is one
of the elements that put positive impact on IKEA business growth and success. It also leads to
economic stability which in return increases sales and profitability of company. Due to this
3

factor, organization can achieve its goals and objectives in systematic manner. With political
support firm can easily enter into new market place and collaborate with any other reputed brand.
Economic factor-
All economic factors play vital role in environment of business. In case of IKEA,
unemployment is one of the biggest components that influence strategic aims and objectives of
firm positively. For example, company can hire those people who lost his or her jobs and seek to
work with well reputed brand like IKEA. This factor gives a new chance to management,
through which they can achieve above aims in effective manner (Lorincová, Schmidtová and
Javorčíková, 2018). Human resource management can recruit skilled and talented applicants who
are able to contribute gaining competitive benefits in marketplace.
Social factor-
Buying habits, lifestyle change, income level etc. are appropriate examples of social
factors that affect strategic plans and objectives of organizations. Preference of each buyer has
change according to trends in market, which directly influence profitability and productivity of
IKEA in negative manner. When people demand for new and stylish furniture design, it direct
put pressure on organization for which they have to conduct deep analysis of market. It impact
negatively on current production strategy, plans, marketing activities and other things.
Technology factor-
Technology advancement is the most effective and influencing factor that impact
positively on sales, revenue and success of IKEA (Sánchez-Gutiérrez and et.al., 2019). For
example, with digital marketing tools and platforms, organization marketing department can
reach at global level by promoting their business via Facebook, Instagram and Billboard. It can
be considered as the best opportunity for chosen brand which they can grab to gain all benefits
like intense competition level. It can help to increase consumer base and build strong bond
between management and buyers.
Environmental factor-
Government and consumer concern for environment safety could put positive impact on
current practice and strategic goals of IKEA, because they already invested in eco friendliness.
Organization More than 1 Billion has been invested in context of renewable energy in poorer
countries. Furthermore, they also invest in wind and solar panels that save electricity and
4

consumer natural source of light. Firm has been a very sensitive corner for environment safety
within business that can lead to make better utilize of energy and raw material.
Legal factor-
The major issue for big companies like IKEA is regulations and laws that can affect
existing practice and operational activities of firm in negative manner. It has been identified that
copyright infringement law suit filed by American furniture company Emeco against chosen firm
put negative impact on its developed strategic intent and objectives, it also lead to decrease brand
image in market. Laws always affect business plans and way they manage each operation within
its industry. Due to this case, firm had to stop producing chair that claimed to be copied.
Stakeholder analysis-
It is one of the appropriate procedures that here can be used to identify different
stakeholders of IKEA and their interested or influence on strategic intent of firm (Eskerod and
Larsen, 2018).
Keep satisfied (High power and Interest) –
Most people or stakeholder is interested in growth and success of business, because it
provides several benefits to them in return. Government is the main stakeholder of IKEA
Company, who has high interest in progress of firm within industry (Wu, 2020). Along with
other stakeholders, organization needs to keep national and local government satisfy by
increasing revenue and GDP, which is really very important to do as compare to other brands.
5

Figure 1Power Interest Grid
(Source: Stakeholder Analysis, 2020)
Manage closely (High power and low interest)-
In list of stakeholders, customers are included because they have high power to change
price of each product and are also less interest to purchase from specific brand (Hultman and
et.al., 2017). IKEA and its management have to manage customers and their needs as well
because it makes them able to retain profitable buyer for longer period of time. These
stakeholders have strong bargaining power, when firm could not provide items according to
demand, people can switch to another furniture provider.
Monitor (Low power and high interest)-
Suppliers are also including in list of stakeholders who have low power but highly
interested to work with IKEA for longer period (Laurin and Fantazy, 2017). Organization should
monitor each and every activity of their suppliers, which allow management to manage supply
chain effectively and it can increase operational efficiency as well. Because of low power
supplier cannot be able to increase service charge that means it does not put any negative impact
on firm growth.
Keep informed (Low power and interest)-
Those people who have less power and interest in profitability increment of IKEA are
workers. Organization just informs all applicants about new business plans and goals because
6

they are not interested in great success of firm. Employees have more option relate to career
progress in market which permits them to switch to those employment offers that are beneficial
for them.
It has been critically analysed that all above factors and elements impact strategic
management decisions. For example, due to high unemployment rate, manager has to take
decision to hire knowledgeable applicants which is quite beneficial for company in term of
increasing their productivity.
TASK 2
Internal environment analysis and capabilities of company
Internal environment of companies is composed of different range of components that
include workers, managers, organizational culture and workplace environment. With several
models and concepts, in recent time it is very easy to identify internal environment of IKEA.
VRIO analysis-
It is one of the strategic frameworks that use to determine and examine chosen company
strengths as well as weaknesses (Buzatu, Pleșea and Iulian, 2019). This tool is structured in
stages of key four elements relate to venture activities.
Value-
IKEA have strong internal ability such as management is able to build positive brand
image in market. It is valuable asset for company, which no one can take from organization
easily. It is one of the biggest strength of firm that allow manager to increase consumer’s base
and gain attention of new buyer towards purchase of furniture. It can be analysed that effective
leadership team is another internal capability of enterprise that lead to greater success.
Rare-
In market where IKEA operated its business, having strong and positive brand image is
quite impossible, it can be considered as rare resource of company, which allow them to gain
competitive edge in ethical manner. Financial resources of firm are also identified as rare that
permit organization to invest in project which is beneficial and helpful for them. Not every
company have strong workforce like IKEA, which help to improve and increase operational
efficiency even better (Garvey, 2017).
Inimitable-
7

It can be analysed that financial assets of chosen brand are costly to imitate, in short no
other brand can copy this resource of IKEA which is another key strength of firm. Competitors
of organization can acquire this assets when they work hard and efforts to enhance their brand
image. Furthermore, experience workers are internal capability of business because they all are
much able to give tough competition to rivals and also support increase profits & revenue.
Organization-
The best thing about IKEA is its brand presence and recognition in market that can help
its business to be successful in nations where they want to enter with range of quality products or
services. Firm effectively managed their skilled workers teams and organizational culture as it
allow management to work productively and increase productivity rather than before. The
positive work culture within organization motivates applicants to do their task appropriately and
accomplish on time.
Resource Based View-
RBV is the best managerial framework that can be used to identify strategic assets IKEA
can exploit to reach at global level and achieve its sustainable competitive edge (Alexy and et.al.,
2018). It can be used for analyzing and interpretate internal assets of company.
According to this model tangible and intangible resources of organization could allow
management to gain competitive edge. For example, home furniture, kitchen appliances and
other things are included in list of tangible products that consumers can see and pay for it, which
in return increase sales and profits margin of firm even better. With quality items and services
brand can satisfy target market that also provides competitive benefits to overall venture in
effective manner.
SWOT analysis-
Strengths-
The major strength of IKEA as international home furniture Organization is their clear
vision and employees (Yu, 2019). Both these things added great value to consumers for
examples, with talented people company achieves their vision and it can make them able to
manufacture products as per needs of clients that simply add value for buyer. Firm with strong
team and experienced people can conduct market research which is quite useful for business in
term of gathering data about current market trends, customer’s needs and their further
expectations. Another strength of brand is newly designed furniture that are easily transported
8

and assemble before use. In outlets of company, people can see finished, assembled items which
make decision of purchase easier for each buyer.
Weaknesses-
Firm operates in different nations all around the world, which make things difficult to
manager for example; because of multiple operations in nations company can face challenge to
control standards across locations due to poor management practices (Yaw, 2018). This weak
point can put negative impact on sales and products production procedure. Customers can also
suffer from poor quality when administration practices cannot be managed effectively.
Furthermore, it can be said that poor management can lead to negative work culture at workplace
that can negatively influence workers and business performance. These weaknesses can decrease
sales and revenue of firm in market and can also restrict them to gain competitive edge. Along
with these things, it has been identified that because of operating in many regions company
cannot be able to manage standards everywhere.
Opportunities –
Technology advancement and development of digital platforms are the biggest profitable
chances for IKEA, which they can grab in order to achieve its aims and business objectives
successfully. For instance, with advanced technology management can control venture standards
effectively across different destinations, which is quite beneficial for company in term of
maximizing operational efficiency and effectiveness even better. Furthermore, there are varied
technologies are accessible in the world of business that several companies has been used to
manage standards and administration activities, which is very important to do. With these two
things company can enter into new market and manage existing one without facing any issue as
it help strength brand image. All opportunities can definitely give profits to firm and that is fact.
Threats-
Intense competition level within furniture industry where IKEA managed its business
operations is the biggest threats for company. It increase work pressure on staff and management
as well which is not good. The competition between existing players for furniture items is
growing, Walmart and other brands attempts to offer inexpensive home goods to customers that
can threaten IKEA to move towards reconsider their current plans and strategies. Moreover,
online shopping and use of internet also create challenge or threat for organization, which firm
want to overcome by taking right decision and developing plan.
9

TASK 3
Strategic management plan
Porter’s generic strategies-
Cost leadership-
When IKEA chose this strategy as strategic direction they can earn great income or
profits in return after each product sale at low price as compare to other companies in furniture
sector. This tactics can vertically integrate into good value added, services and proprietary
elements. It can be consider as mechanism of developing competitive benefits by offering low
cost items and services in overall sector to consumers. With this strategy firm can gain benefits
for example they can increase market share and size as well. It also leads to maximize
profitability and business sustainability (Kimiti, Muathe and Murigi, 2020).
Differentiation-
Porter’s generic model defines four different types of strategic directions or tactics that
IKEA Company can consider and use to achieve goals and set objectives of its business. This
approach is one of them that help firm to develop or produce unique and attractive designs of
furniture for customers. This strategy is beneficial for firm because it help to gain attention of
new buyers and retain existing one for longer period of time (Panwar and Khan, 2020). It can
also aid in gaining competitive advantages and generating brand awareness within market place
effectively.
Cost Focus-
This tactic needs competing based on cost to target a narrow segment, when IKEA follow
this approach they does not need to charge low prices for products purchase in its sector (Jyoti,
Arora and Kour, 2017). Company can set price according to decision of top authority which can
be lower or higher than competitors. Sometime organization can target segment or group of
customers by considering demographic factors or others. Firm can sell same products that its
rivals offer to people in niche lower their actual cost to increase profits and gain competitive
benefits.
Differentiation focus-
It is second of above focus tactic that requires providing unique elements that fulfil needs
of narrow market in effective manner. It is one of the best approaches that IKEA will use to
reach at international level and gain competition benefits (Sousa and da Silveira, 2020). The best
10

thing about this strategy is that is give buyer a chance to buy unique furniture that no one can
offer to them. Many firms like IKEA by using this strategy develop consumer brand loyalty in
systematic manner as it can put positive impact on growth of firm.
Ansoff’s matrix-
This framework is also known as product market expansion grid that helps IKEA when it
uses to chalk out right strategy for market growth and products. This model can be considered as
business analysis tool which is quite helpful in determining business growth chances.
Market penetration-
This strategy of Ansoff’s Matrix is the best because it allows company to sell their
current items with better quality within existing market, where IKEA provide their goods since
for so long. It will help firm to increase their overall profit and market share even better. The
success of this tactic is possible when company make more sales to current target market and
discover new people within well established segment, without making any changes within items.
This tactics along with above one is also good for firm as it help to become a global leader.
Product development-
When IKEA wants to enhance their business progress even better they have to introduce
a unique product for targeted market in existing location. With this process the success of
product development approach is possible, which turn into increasing customer base, revenue
and profitability rather than competitors (Albers and et.al, 2018). Chosen brand can use this
tactic and offer new products to potential buyer, it will add more value to people and increase
share. Furthermore, company with this strategy can win venture aims and improve performance
level. Product development can reduce prices to improve competitiveness.
11

Figure 2Strategic directions
(Source: Ansoff Matrix, 2019)
Market development-
This is the third quadrant of chosen model that IKEA can adopt or use when they take
decision to sell range of their goods in new markets, where profitable buyers are seeking to
purchase unique designs furniture for his or her homes. It can be considered as progress tactics in
which company can determine and create a new market for current items. It is quite risky
strategy more than above one, but profitable as well in term of gaining attention of international
customers. Firm can use this strategy in two manners, first by pushing products to new
geographical market and second is by making few modifications in goods like new products
dimensions.
Diversification-
This concept is totally different from all above strategies because it drives company to
enter into new nation or market with overall new design of items. Furthermore, it can be
analysed that when organization want to use this tactic they can acquire a venture that is not
12

related to current items line & segment as well. As compare to other, this strategy is riskiest and
most complex growth tactic as it not depends on business successful items and also not on its
market position.
Strategic objectives-
IKEA company before using strategic strategies and consider directions set clear
objectives, because it allows taking right judgment in the future.
 To generate brand awareness at international level
 To increase consumer base and satisfaction level
 To become global leader.
Tactical actions-
It is really very important for IKEA to take right decision for its business in context of
gaining further opportunities and growth. Its management and workers have to support company
and contribute in competitive environment to get success. From above tactics, organization must
use cost leadership and diversification tactic, because it cater a lot of benefits. For example, cost
leadership strategy improves business sustainability in effective manner that lead to gain
competitive edge. The sustainability of company can become excellent benefits for brand when
economic situation take a turn for worst. Second tactic is also helpful because it aid to achieve
long term investment plans and create brand image in new market.
Strategic directions-
This term can refer to activities or decision IKEA can take to achieve above objectives, it
includes actions and suitable plans manager have put in place to work toward mission, vision and
goal of further for organization. Firm can divide role and responsibilities to each applicant
equally without making differentiation, it help to encourage people perform even better. These
things can help to gain competitive benefit, get success and further market opportunities.
Monitoring and controlling-
There are varied ways IKEA and its manager can use to monitor and control operational
and functional activities. For example, management and leader can collaborate with each other
than then identify gap between last year profit and current one especially after implement
develop plan. Benchmarking, KIP and etc. are range of models that so many companies has been
used to monitor success of strategic plan.
13

CONCLUSION
By summing up above discussion, it has been identified that IKEA is one of the most
famous and popular furniture manufacturers in US. Organization by manufacturing quality
products and providing valuable services to customers building excellent brand image in
industry, which in return increasing sales, profitability and generate revenue more than
competitors. Furthermore, it has been concluded that with cost leadership strategy and
diversification Tactic Company has gained competitive edge.
14

REFERENCES
Book and Journals
Al Shuwaler, A and et.al., 2020. IKEA’s Corporate Social Responsibility. International journal
of Tourism and hospitality in Asia Pasific. 3(2). pp.70-77.
Albers, A and et.al, 2018. Product Profiles: Modelling customer benefits as a foundation to bring
inventions to innovations. Procedia CIRP. 70. pp.253-258.
Alexy, O and et.al., 2018. Surrendering control to gain advantage: Reconciling openness and the
resource‐based view of the firm. Strategic Management Journal. 39(6). pp.1704-1727.
Buzatu, A.I., Pleșea, D.A. and Iulian, C., 2019. MANAGING ORGANIZATIONS FOR
SUSTAINABLE BUSINESS DEVELOPMENT: INTERACTION BETWEEN VRIO
FRAMEWORK AND McKINSEY 7S FRAMEWORK. New Trends in Sustainable
Business and Consumption. p.243.
Eskerod, P. and Larsen, T., 2018. Advancing project stakeholder analysis by the concept
‘shadows of the context’. International Journal of Project Management. 36(1). pp.161-
169.
Garvey, P., 2017. Unpacking IKEA: Swedish Design for the Purchasing Masses. Routledge.
Hultman, J and et.al., 2017. Exploring store format development and its influence on store image
and store clientele–the case of IKEA’s development of an inner-city store format. The
International Review of Retail, Distribution and Consumer Research. 27(3). pp.227-240.
Jyoti, J., Arora, H. and Kour, S., 2017. Outsourcing and Organizational Performance: Role of
Cost Leadership, Differentiation and Innovation Strategies. Sustainable Competitive
Advantage: A Road to Success. 171.
Kimiti, P.G., Muathe, S.M. and Murigi, E.M., 2020. Nexus between Cost Leadership Strategy
and Performance: Fact or Fallacy in Milk Processing Firms in Kenya. International
Business Research. 13(10). pp.1-1.
Laurin, F. and Fantazy, K., 2017. Sustainable supply chain management: a case study at
IKEA. Transnational Corporations Review. 9(4). pp.309-318.
Lorincová, S., Schmidtová, J. and Javorčíková, J., 2018. The impact of the working position on
the level of employee motivation in Slovak furniture companies. Acta Facultatis
Xylologiae Zvolen res Publica Slovaca. 60(2). pp.211-223.
Panwar, T. and Khan, K., 2020. Ingredient Branding: A Differentiation Strategy for the
Commoditized World. Paradigm, p.0971890720959539.
Sánchez-Gutiérrez, J and et.al., 2019. The impact on competitiveness of customer value creation
through relationship capabilities and marketing innovation. Journal of Business &
Industrial Marketing.
Shen, C.H., Bui, D.G. and Lin, C.Y., 2017. Do political factors affect stock returns during
presidential elections?. Journal of International Money and Finance. 77. pp.180-198.
Sousa, R. and da Silveira, G.J., 2020. Advanced services and differentiation advantage: an
empirical investigation. International Journal of Operations & Production Management.
Wu, Y., 2020, February. The Marketing Strategies of IKEA in China Using Tools of PESTEL,
Five Forces Model and SWOT Analysis. In International Academic Conference on
Frontiers in Social Sciences and Management Innovation (IAFSM 2019) (pp. 348-355).
Atlantis Press.
15

Yaw, W.K., 2018. Effects of Globalization on Asian International Retailing: Case of
IKEA. Asian Research Journal of Business Management. 5(4).
Yu, R., 2019, February. Core Elements of IKEA’s Successful Product Design. In Journal of
Physics: Conference Series (Vol. 1168, No. 3, p. 032118). IOP Publishing.
Online
Ansoff Matrix. 2019. [Online]. Available through: <https://businessjargons.com/ansoff-
matrix.html>
Stakeholder Analysis. 2020. [Online]. Available through: <
https://www.productplan.com/glossary/stakeholder-analysis/#:~:text=A%20stakeholder
%20analysis%20is%20a,of%20these%20stakeholder%20groups%20throughout.>
16