Table of Contents
1.1 IKEA background.
1.2 Report structure.
Task A: Market Environment Analysis.
2.1 External (Macro) Environment Analysis.
2.1.1The PESTLE Analysis for IKEA
2.2 Internal (micro) environment analysis.
2.2.1 Porter’s Five Forces Analysis for IKEA
2.3 Critical Success Factors of IKEA
Task B: Resource and Capability Analysis.
3.1 IKEA strategies to manage its resources and capabilities.
3.2 IKEA Value Chain Analysis.
Task C: Strategic Fit Analysis.
4.1 SWOT Analysis of IKEA
4.2 How IKEA’s strengths and weaknesses fit the opportunities and threats in its market environment
Effective management of strategies of a business plays a significant role in organizational goals and objectives. Kotler et al. (2014), strategic management is the way of defining and applying several strategies to meet organizational goals and objectives. Palmer (2013) said strategic analysis focus on the development and implementation of business strategies in gaining sustainable competitive advantages. The strategic analysis outlines both internal and external business environments. For analyzing internal business factors, a number of models are applied such as SWOT and Value Chain Analysis tools. For analyzing external business factors, PESTLE analysis tools, and Porter’s Five Forces model are widely used. This report conducts a strategic analysis of a business name, IKEA.
1.1 IKEA background
IKEA was founded by Ingvar Kamprad in 1943. IKEA is now operating in 42 countries with more than 127 countries. It is serving millions of customers every week with its more than 127,000 thousand devoted and dedicated staff. The key products of IKEA are home accessories and home furnishing. The mission of IKEA is to make better everyday life at home and its vision is to create a comfortable and welcoming home for the people. IKEA attracts all ages people including children, young, adults, men, and women. IKEA is now operating in global markets including Asia, Africa, the US, and the EU (IKEA Annual Report, 2014).
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1.2 Report structure
This report, first, outlines a brief discussion on strategic analysis and management along with the IKEA backgrounds. Then, this report conducts a critical analysis of the internal and external business environment of IKEA applying several analytical tools and techniques. Following this, this report conducts a capability and resources analysis of IKEA using several analytical tools. Finally, this report conducts a strategic fit analysis of the IKEA business.
Task A: Market Environment Analysis
This section conducts a market environment analysis of IKEA focusing on both internal and external business issues. As Kotler et al. (2014) suggest, the external business factors are analyzed using PESTLE and Porter Five Forces Analysis. The internal business factors are analyzed using SWOT analysis tools.
2.1 External Environment Analysis
External environmental issues are those which come from outside of the business that is not controlled by the business. According to Kotler et al. (2014), the PESTLE analysis tool is widely used to analyze the external environment of a business. PESTLE refers to political, economic, social, technological, legal, and environmental factors. The following diagram shows the elements of PESTLE tools:
Diagram: PESTLE Analysis on map. Source: (Kotler et al., 2014)
2.1.1The PESTLE Analysis for IKEA
|Factors||Analysis of IKEA|
|Political: political factors are those which come from government policies and regulations. For example, political instability, tax, and VAT policies, social unrest, and violence.||IKEA is operating in the global market and more than 40 countries across the world. Thus, it has to face several laws, regulations, and situations that come from several international governments, political parties, and politicians. Most importantly, the political instability and social unrest in developing countries give extra pressure on the performance of the IKEA business.|
|Economic: economic issues are those which come from an economic circumstance where the businesses operate. Economic factors include currency fluctuations, monetary and fiscal policies, inflation and deflation, economic downturn.||IKEA is operating in the global market and in many countries across the world. For example, the UK has exited from the EU which has impacted both UK and EU economy that has impacted IKEA business negatively. In addition, when the economy is the downturn of any country, it impacts the performance of the IKEA business including revenue and profit margins. Different monetary and fiscal policies in different countries give hard time IKEA in adapting its product prices and profit margin in global markets.|
|Social: social factors are those that are related to the health and welfare of people. These issues also include demographic information, population growth, income and expenditure level of people, culture and traditions, etc.||IKEA is operating in many countries and the global market. Thus, different cultural and social issues impact the business of IKEA. This is because every individual country has a specific culture, traditions, and social issues. Based on tradition and culture in every different country people have different choices of their home accessories. Therefore, IKEA needs to take differentiations for every single market and frequent changes in demographics are giving hard time to IKEA.|
|Technological: technological issues are those which are related to technologies used in business and technological development invention and automation to meet the customer changing needs and expectations.|
|The inventions of new technologies and their uses in the business of IKEA have given huge success to IKEA and advantaged its customers. IKEA has been using different sophisticated technologies in its operational management, supply and demand chain, customer services, and customer and employment managing. These technologies used in IKEA has given huge success. The usage of the internet and IKEA website are providing huge information to customers who are supporting IKEA to attract its target and potential customers.|
|Legal: legal issues are those which are related to consumer rights, employee rights, both buyers and sellers rights when the purchases are conducted|
|Different countries have different legal policies. Thus, as IKEA operates in different countries, it must face different legal policies that impact the performance of IKEA businesses. For example, payment types and payment methods differ from country to country. In addition, every country may have different policies related to health insurance as well pension scheme along with other legal factors which impact on the business performance.|
Environmental factors are those which are related to weather, global warming, climate changes, natural disasters such as earth quick, flood, heavy rain, over snow, etc.
|IKEA has to face several environmental factors in different countries. For example, it faces over snow and rough weather in the EU, where flood and heavy rain is a common phenomenon in China. Global warming is a common problem across the world. These kinds of environmental factors impact the performance of the IKEA business. Thus, IKEA needs to take the initiatives to overcome to deal with environmental factors that are expensive.|