IKEA's Business Context: Evaluating Environment, Leadership & CSR

This report provides a comprehensive analysis of IKEA's business context, examining internal and external factors that influence its operations. It includes a SWOT analysis to identify IKEA's strengths, weaknesses, opportunities, and threats, as well as a PESTLE analysis to assess the impact of political, economic, social, technological, legal, and environmental factors. The report evaluates how changes in these PESTLE factors influence IKEA's opportunities and threats. Furthermore, it compares and contrasts different leadership styles, recommending an appropriate style for IKEA's growth and challenges. The report also critically comments on IKEA's Corporate Social Responsibility (CSR) initiatives and concludes with a reflective report on the experience and knowledge gained from applying business theories to a practical context.

Context of Business

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Performing SWOT along with PESTLE Analysis for the business............................................1
TASK 2............................................................................................................................................4
From analysis of TASK 1, evaluation of the ways changes in PESTLE factors has influenced
opportunities and threats for an organisation...............................................................................4
TASK 3............................................................................................................................................5
Comparison and contrast of various leadership styles. Comment on appropriate leadership
style for the business....................................................................................................................5
TASK 4............................................................................................................................................7
Recommending suitable leadership style through which the entity can grow and overcome
challenges that are posed by business environment....................................................................7
TASK 5............................................................................................................................................7
Critical comment on Corporate Social Responsibility in the processes......................................7
TASK 6............................................................................................................................................9
Writing reflection report about the experience and knowledge gained from the report along
with the ways it benefitted in applying theories to practical context..........................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Context of business entails understanding about factors that impact practices and operations
of entity from different perspectives such as decision making and business objectives. Likewise,
business environment comprises all those aspects which are surrounding across a business
concern and impacts its operations along with determine effectiveness. It is cumulative of all
events, situations and factors which influences, surrounds or affects business enterprise. For
gaining insights about context of business, considered organisation is IKEA which is popular
multinational conglomerate specialised in designing, manufacturing, promotion, distribution and
selling ready to assemble home accessories, furniture and kitchen appliances (IKEA, 2021). It has
been largest furniture retailer which is known for modernist designs for different kinds of
furniture, appliances, etc.
The report highlights SWOT and PESTLE analysis for an organisation. It also includes
discussion about leadership styles and corporate social responsibility of the entity. At last, a
reflection report is prepared on the basis of experience and knowledge that is gained from the
working as well as benefits to apply theories in real organisational context.
TASK 1
Performing SWOT along with PESTLE Analysis for the business
SWOT Analysis
It is a tool that assist in documenting internal factors that guide business to attain its
objectives (Petrů, Havlíček and Tomášková, 2018). In aspect to IKEA, purpose of performing
SWOT Analysis is to determine intrinsic factors or elements which impacts functioning of
business along with offer useful information within process of strategic planning. SWOT
analysis of IKEA is underneath:
Strengths Weaknesses
 IKEA has clear vision that helps in
adding value to its potential and
prospective customers despite of
pertaining market conditions.
 Inexpensiveness of products is another
strength of the entity. Managers of the
 Operations of IKEA are diversified into
many nations and it is the reason it
faces troubles in form of negative
image or negative publicity.
 Major focus of IKEA is to keep cost
minimal, however, as the entity
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organisation seeks new ways for
driving down costs for retaining
customer base.
 Ikea constantly conduct research and
innovation for the purpose of bringing
prices down for target audience and
keeps on adding various products in the
portfolio.
provides goof quality services addition
to high product performance, it has
some control for standards.
 Product portfolio of the entity is not
wholly replicable in all locations as
well as scalability which creates issues
for IKEA as it enhances its costs.
Opportunities Threats
 IKEA has opportunity to expand
operations in untapped market by
concentrating on resources along with
opening new stores for diversification
of revenue and income.
 With green business model, IKEA has
wider opportunity in context to
attracting customers that prefer to buy
its products.
 Changing taxation policies along with
government law is threat for product
prices of IKEA.
 Growing disposable income has led
consumers to trade higher in market
chain that causes threat for the
company as consumers might switch to
other businesses offering similar
products and services (Caviggioli and
Ughetto, 2019).
PESTLE Analysis
It refers to a framework that assist in scanning external business environment to
determine influences on operations of company. In context to IKEA, purpose of application of
PESTLE Analysis is to highlight various extrinsic situations which impacts the venture of the
brand. Dimensions of PESTLE Analysis of IKEA is as performed:
Political: It includes political decision making, tariff regulations and hence forth that
intervenes in an economy (Zin and Ibrahim, 2020). In UK, political system is stable and
powerful that generates huge opportunities for business enterprises to carry out operations and
develop smoothly. However, in COVID-19 pandemic, government of UK has undertaken some
decisions because of which organisation including IKEA has to close its stores for longer time
period that impacted negatively on its performances and productivity.
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Economic: Economic situations of a nation reflect towards purchasing potential of
consumers which is directly linked with an organisation. It is determined that economy of UK is
market oriented wherein decision making about production, investment, distribution, etc are
directed by price signals that are developed by forces of demand and supply. However, decision
of BREXIT have created situation of inflation in UK because of which productivity of company
such as IKEA is impacted adversely as it resulted in increased product prices. Also, growing
disposable income impacts negatively on company as in this situation, consumers or households
have huge monetary resources for saving that restrict their contribution in sales volume for
offerings of company.
Social: It represents set of influences of behaviour, attitude, perception and values of
customer on business operations. In UK, perceptions and behaviour of consumer changes and
consumers shift fastly to another companies that provides benefits at lower prices. In context to
IKEA, it requires to address grievances of customers in fast manner from distinct nations for
improvising its status. It offers what is appropriate as per location as well as scrub out things
which are not suitable that attracts wider customers towards it to make purchase decision leading
to positive impacts on its strategies and operations.
Technological: It entails information and communication resources, automation,
ecommerce techniques and innovation that impacts practices of an entity (Aldea, Iacob and
Quartel, 2018). In UK, technology develops rapidly that influenced businesses such as IKEA to
adopt or update existing technologies for effective practices. However, making investment in
technology such as augmented reality, e-commerce and VR needs huge resources which
negatively impacts on profit margins of the entity. It is determined that investment in latest
technologies leads to transforming sales volume of the brand.
Legal: It pertains legal forces which elaborates what a company can or cannot perform.
Within UK, there are ample number of laws and regulations such as Employment Rights Act,
1996, Trade Union and Labour Relations Act 1992, Equality Act 2010 and hence forth. Changes
in such legislations or governing new laws impacts negatively on company, for example, IKEA
as managers have to put their focus on changing practices despite of emphasising on day to day
management.
Environmental: Environmental dimension affects business, industries and market to
function smoothly. Within UK, government has undertaken various initiatives for protecting
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environment of the nation. IKEA emphasis on sustainability addition to social responsibility that
impacts positively on brand recognition for taking initiative to protect environment of the
country.
TASK 2
From analysis of TASK 1, evaluation of the ways changes in PESTLE factors has influenced
opportunities and threats for an organisation
IKEA is a popular entity that has its headquarters in the Netherlands since 1943. It is
evaluated that changes in PESTLE analysis offers people of the company insights about external
factors influencing opportunities and threats for the entity (Castillo-Vergara, Alvarez-Marin and
Placencio-Hidalgo, 2018). On the basis of above analysis, evaluation of factors of PESTLE
analysis on opportunities and threats on IKEA are below:
Political: It has been evaluated that changes in political factor that is government decisions
about trade, it creates opportunities for the company to expand operations in untapped market
and opening new stores with support of government. In contrary, changes in political system
creates threat as it restricts the company to develop at international level.
Economic: From the analysis, it is evaluated that changes in economic factors including
BREXIT creates opportunities for entity such as IKEA for increasing product prices and
developing a competitive spirit in the market. At same time, emerging economies develop
moderate growth for the company that is IKEA as it creates complexities to hire personnel from
Britain.
Social: As per above analysis, it is evaluated that changes in social factors impacts widely
on the company’s operation. Different nation has distinct cultures, it is essential for IKEA to
concentrate on changing values and culture that are hold by people. Also, it creates opportunity
for the venture to attract large customer base through offering valued products by target society.
In contrary, when consumers invest or makes less purchase it creates threat of increasing sales in
the market.
Technology: From the analysis, it is evaluated that updating technology creates
opportunity for expanding venture operations in different market (Shafique and Beh, 2017). With
this, IKEA attains huge growth through adopting and updating technology such as e-commerce
as helps in penetrating in emerging market as well as attaining successful results. However, it
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creates threat in managing profitability in competitive scenario. It is because, when IKEA makes
investment in new technologies, it has huge chances of declining profit margin that results in
impacting on financial status of company.
Legal: According to the analysis, it is evaluated that changes in legislations and laws that
are governed by political leaders creates huge opportunities and threats for business. In context
to IKEA, changes in legislation creates threat to maintain operations for opening new stores in ne
market. Also, when changes or governed legislations are not adhered properly, it creates threat of
fines, penalties and lawsuit that might damage business image. At same time, working with
changes in laws such as patent, offers opportunity to the company for stopping others to
manufacture and sell similar products like IKEA.
Environmental: With changes in environmental factors, it is evaluated that increasing
awareness among population of climate change, creates opportunity for venture, like, IKEA to
provide products that are sustainable in manner. The company has released sustainability
strategy document that looks towards using renewable addition to recycled materials. However,
it also creates threat for IKEA as changes in environmental dimension restrict the entity to
achieve its business targets and invest widely in wind panels, sourcing resources from
sustainable sources.
TASK 3
Comparison and contrast of various leadership styles. Comment on appropriate leadership style
for the business
Leadership style refers to a style in which a leader influence and direct other persons to
attain the target of an organisation (Zhang, Gao and Li, 2020). Within IKEA, leadership style is
adopted for guiding and instructing subordinates to carry out operations in specific manner.
There are various leadership styles that could be adopted by leaders of a company. Some are
compared and contrasted for IKEA below:
Basis Charismatic leadership Democratic leadership
Overview of
style
It is a type of leadership style in which
a leader uses skills of convincing,
communication and charm to impact
others. For example, when leaders of
It refers to a leadership style in which
other members of the team play an
active role in the process of decision-
making. For example, when leaders
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IKEA will work with charismatic
leadership style, they will direct and
guide other members of a team
through communication, convincing
and charming skills so that employees
can be influenced by leaders in a
positive way.
of IKEA will work with democratic
leadership style, then other members
of the team will also have chance to
exchange their opinions and thoughts
to make better business decisions. It
provides better contribution from
other members of the team.
Importance In this type of leadership style,
employees are influenced by
charismatic leaders as they give
opportunities to employees for doing
something by which they can feel
greater than themselves.
In this type of leadership style,
employees are given opportunities to
put their thoughts and opinions in
front of all other members so that
they all can reach to a better decision
of company (Zuraik and Kelly, 2019).
Limitation In this type of leadership, sometimes
self-confidence of leader results in
over-confidence which can lead to loss
in company.
This type of leadership encourages
nobody to take responsibility when it
is going to be failure and is passed on
the person who gave and support the
idea which has got failed.
Contrast among charismatic and democratic leadership style:
In both Charismatic and Democratic leadership styles, leader is more affected as there is
greater burden of responsibility on leader. Employees are guided, directed and instructed by
leaders by maintaining spirit of cooperation. Leaders in both leadership style encourages their
employees to take participation in making better business decisions.
For IKEA, democratic leadership style is suitable as leaders of this company provides
opportunities to its employees to put their own opinions and thoughts for taking business
decisions. Leaders motivate and guide employees of company so that employees actively
participate in business activities of company by building team relationships among its personnel.
employees.
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TASK 4
Recommending suitable leadership style through which the entity can grow and overcome
challenges that are posed by business environment
It has been recommended to leaders of IKEA to use transformational leadership style for the
purpose of attaining growth as well as overcome challenges that are posed by environment of
business. With application of transformational leadership style, leaders of IKEA will use
organisational vision for inspiring employees to become more productive as well as work for
attaining goals of corporate. It will guide leaders to find innovative ways to get entire work force
on board with proper planning and strategy so to achieve vision easier for achieving growth
prospects (Kim and Park, 2020). Moreover, application of transformational leadership style at
IKEA will help leaders to reach to more employees along with bringing out best among them.
With this, leader spends time with each and every member of company along with discusses
issues with them so to brainstorm ideas for strategies to overcome challenges that are posed by
external business environment.
Transformational leadership style guide leaders to involve constantly with business growth
through managing working and continuous development of subordinates. As organisation, such
as IKEA will attain growth, the leader will maintain close connections with the corporate and
ensures to develop workforce effectively. It will help the establishment to go through changes as
they will influence behaviour of human resources towards engagement to deal with challenges of
external environment of company in smooth manner.
TASK 5
Critical comment on Corporate Social Responsibility in the processes
Corporate social responsibility is termed to self-regulating practice of a company for being
socially accountable towards own practices, stakeholders together with general public. Through
performing corporate social responsibility, business concerns become conscious towards type of
impact they have on all societal aspects that are economic, environmental, social, etc (Hodnett,
2019). IKEA is an enterprise which undertake corporate social responsibility for improving
communities, economy addition to environment. Effectively executed concept of corporate social
responsibility brings wider competitive advantage for a premise, including improved access to
markets, operational costs savings, efficient employee base, enhanced customer loyalty, risk
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management processes and improved quality. Mentioned below are four categories concerned
with corporate social responsibility in which managers of IKEA have contributed:
Environmental: It is all about belief that company must behave or carry out operations in
as environmental friendly in best possible manner. IKEA have environmental responsibility to
limit pollution addition to reduce greenhouse gases. It is more concerned for reducing water, air
and other category of pollution that improves its standing as good corporate citizens that benefits
society. It designs and manufacture house hold appliances and other products by combining
acceleration along with handling advance technologies for making offerings more friendly to
environment.
Ethical: It is related to carrying out business practices by treating employees and other
stakeholders fairly and honourably. In other words, ethical responsibility of a venture is to look
after welfare of personnel through ensuring fair labour practices for workforce (Reynolds and
McKimm, 2021). In context to IKEA, the company meet ethical responsibility through well
compensation together with well-paid manner that creates high job satisfaction level among its
people. Work environment of the organisation is supportive as well as gives them support to take
initiatives.
Philanthropic: It refers to serving humanity. Within this, an organisation pays close
emphasis towards wellbeing of needy or unprivileged people that badly needs its support for
sustaining themselves in the planet. It is determined that IKEA meets philanthropic responsibility
through donating money, resources as well as time to charities at domestic, national and global
level. Founders or business owners of a company donate billions of dollars that supports multiple
causes such as education, agricultural development, etc.
Economic: It is interconnected field which emphasises towards striking balancing among
business, philanthropic together with environmental practices. It is abided by set of standards
related to moral as well as ethical regulations. In the essence, business, for example, IKEA aim
to find solution which facilitates business growth together with profits via benefiting society and
community. End goal of economic responsibility is not to maximise profit, rather, to positively
impacts people, society addition to environment wherein business operates (Hamilton and
Webster, 2018).
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TASK 6
Writing reflection report about the experience and knowledge gained from the report along with
the ways it benefitted in applying theories to practical context
Working in the project of ‘Context of Business’ has provided me the opportunity to gain
insights about business environment. My experience in the report was great because I have
gained wider knowledge and understanding about business environment, leadership, corporate
social responsibility and their impacts on organisational activities. The project was individual
working in which I have collected information and write about tasks in well-structured manner.
In this, I have gained insights related to internal along with external analysis for performing
SWOT and PESTLE analysis. With this, I am able to apply these theories in practical scenario
and grab opportunities for attaining success together with framing major strategies to minimise
threats and maximising opportunities for any company. I felt great and happy throughout the
project because it has improved my knowledge for multiple leadership styles and kinds of
corporate social responsibility. Also, I felt great in writing the report in proper structure. At same
time, I felt that I became dissatisfied with my performance while writing the tasks.
It is evaluated by me that I am potential of applying leadership theories that are
charismatic, democratic and transformational leadership style as per situations. I think that my
working went well because of my dedication towards the report and interest that I generated to
learn ways to meet corporate social responsibility for bolstering image of company and building
the brand. It motivated me to produce good quality of working for determined timeline so to
make contribution for ethical working. I have also evaluated that some working of mine in the
report didn’t went well because of improper time management and poor decision making.
From my experience, I have concluded that I have improved my skills that are planning,
organising, problem solving and hence forth. Also, I have gained learning about framework to
conduct internal and external analysis of business environment that are SWOT analysis and
PESTLE analysis. I have also learned that while completing any project, tough situation arises
which needs to be resolved effectively and efficiently. In case, when I will get chance to work is
same type of project in future, I will carry out practices in different manner through planning
properly about time and sources to collect information so to write the report as per desired
criteria. For this, I require improving my time management skills and decision making skill. In
this aspect, I will improve my decision making skill by making proper plans, communicating
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