Unit 1 Business Environment Assignment - Ikea

Introduction 

This report is about studying the business environment where the factors will be identified which can affect the growth of a business. Basically the report is about Ikea which is a profit motive company which will be compared with the song say say say that denotes the charitable purpose along with this report will focus on various analysis through which the micro and macro factors affecting the growth of the Ikea will be identified.

Part 1

Part A PPT (P1, P2, M1)

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There are two types of organization structure Private sector and Public sector. Private sector divided into two parts profit making and non profit making organization.
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IKEA is a largest retailer of furniture and home appliances which is operating with profit motive in the many countries of the world. It creates value for the customers.
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“Say Say Say” is a  song sang by  Michael Jackson & Paul Mc Cartney  and this single is promoted with a music video. The genre of the song is disco.
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Part of the comparison covers objective, size, structure and product or services.
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IKEA works for earning profit and the song was prepared with a non profit making motive. Size of the song is flat and IKEA operates is multinational organization.
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There is no specified structure of song but IKEA as an organization adopt  structure based on functions. Song provides welfare services to society and IKEA provides wide rang of furniture products to its customer.
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Part B Short essay about Ikea (P3, M2)

Ikea
Ikea is a private retail company which is a multinational group of companies which is engaged in the business of designing and sale of furniture. This company has its headquarters at Netherlands. The other business strategy of this company except furniture is appliances and home accessories. Ikea is a well-known company which is known as one of the best companies of this world which is a furniture retailer. As per recent data Ikea has its more than 389 stores in 48 countries and the main aim of this company is to earn revenues through providing the quality furniture to the people along with the reasonable prices (Ambec & Poitevin, 2016)
Ikea is a value driven company where the main passion of the company is to make products which designs the better home for the people and the company is doing business of providing variety of designer furniture products to fulfill the dream of people with the extensive range of furniture and through this Ikea is meeting the expectations of the customers and providing customer satisfaction to a large extent (Moldoveanu, & Dobrin, 2012). This also helps the company to establish greater customer loyalty as well as through retaining the customers in long run Ikea is able to survive in the market from such a long time as there are number of competitors of Ikea who are dealing in the same business but still the customers prefer products of Ikea this is because the excellent quality and prices of this company.
The main headquarters of Ikea is in Netherlands but the business of this company is operated from more countries. The structure of Ikea is divided into two parts the first one is its shops and factorites and the second one is its franchise and trademark and then shops and factories are subdivided into INGKA Holdings and Stich ting INGKA Foundation where the franchise and the trademark is divided into Inter IKEA systems, Inter IKEA holdings, Interrogo foundation. This defines the organizational structure of Ikea. The structure of Ikea is divided in such a way that there is proper hierarchy of work and the whole system of Ikea is divided into departments so that the departments are responsible for the performance of their own department. This system help in allocating the resources properly as well as this is also easy for evaluation and monitoring of the performance at various levels of each department of Ikea (Salas, et. al, 2010).

The main functions of this company defines the purposes of Ikea for which it is established and the main function of this company is to generate revenues for the growth and development of the business. The main purpose of Ikea is to provide the society with best designs of furniture along with best quality and reasonable prices. Ikea has a vision to maintain the position of the best retailer furniture company of this world. The main focus of Ikea is to establish sustainability in its products so that it can use all those products which do not cause any harm to the environment so that it can establish improved sustainability in the business.

Part 2

Part A (P4, P5, P6, M3, M4)

Section 1 PESTEL analysis

There are many factors which affects in an organization which affects the growth and development of such organization. These factors can be internal or external where internal factors are controllable factors which can be controlled by the organizations but external factors which are known as macro environment factors are beyond the control of organization and these factors directly affects the growth of the organizations so in order to identify the impact of these factors on Ikea PESTLE analysis has been conducted to determine the effect of macro environment factors on this company.

PESTLE analysis of Ikea

Political factors:The political environment of Ikea is stable as the business of Ikea is operated in such countries where they have political support and political stability as this impacts the business of Ikea. As Africa is a nation where there is no stability in politics but Ikea does not operate its business in Africa rather than the business of Ikea is operated in all those countries where it has political support. Political factors includes all those factors such as tariffs of government, trade restrictions of government, policies of government on taxation and such other factors of change in government plans and policies which can affects the growth of Ikea (Kaliba, et.al, 2011).
Economic factors:Revenues of Ikea are directly affected by the change in the exchange rate fluctuations as the operations of Ikea are operated in various countries so the fluctuations in the currency change affects the global business of Ikea. There are various countries where the business of Ikea is being operated so the changes in tax rates, inflation rate, deflation rate and recession of that particular country affects the business of Ikea up to the certain scale till the business is operated in that country. Economic growth of the country affects the business of Ikea and other factors such as unemployment, changes in the tax rates and such other factors affects the growth of Ikea.
Social factors:There are various social factors that affects the profits of Ikea directly and indirectly. Social factors includes changes in the preferences of the people, change in market trends and other such factors which are related with the society. Ikea is third largest company in the list of consumers in the world. The turnover of this company is very high and this turnover is affected by the trends of society which is depending upon the designs of furniture. The changed preferences of the people due to rapidly changing environment affects the growth of Ikea as in some cases Company may not be able to adopt such changes so fast (Hueske, et. Al, 2015).
Technological factors:the main business tool for Ikea is its technology as it is reputed company for providing the variety of designs in the furniture. This company has always followed the recent trends and technologies so as to cope up with the rapidly changing environment. Ikea has always updated and upgraded its technologies as per the market trends to fulfill the demands of the customers so as to establish a stability in generating revenues.
Legal factors: legal factor denotes the laws, rules and regulations that are applicable to Ikea as the business of Ikea is operated in various countries so in order to avoid any can of legal implication it is necessary for Ikea to fulfill he laws and rules that are applicable to it. If Ikea is not able to control its standards in the fulfillment of laws then this can affect the business of Ikea and can cause reduction to its revenues (Srdjevic, et. al, 2012).
Ecological factors:This includes environmental factors which are related to the environment where Ikea operates its business. Ikea has always been engaged in better use of raw material and energy also Ikea has always full filled its responsibilities towards the environment. There are great initiatives by Ikea towards saving the environment also the main focus of this company is to establish stability policy so that Ikea can also contribute its efforts towards saving the environment. This helps the company to fulfill its green targets also the use of ecofriendly products has a positive impact on the environment (Kriticos, et. al, 2015).

Section 2 SWOT analysis

SWOT analysis is conducted with a view to identify the strength, weaknesses, opportunities and threats of company. This analysis of Ikea helps in identification of the core areas where the Ikea can take advantage of its strengths and can develop in its opportunities area (Carlsen & Andersson, 2011). This analysis also helps in identifying those areas where Ikea is having disadvantage in comparison to other companies also threats for the company can also be identified so that Ikea can take measures to overcome the effect of its threats. SWOT analysis of Ikea is as follows.

Strengths Ikea (S) Ikea has strong captured customer market. Ikea adapts the rapidly changing technologies and innovations. The supply chain of Ikea is very large as the business operations of this company are in various countries. Ikea has diversified portfolio as there are number of stores of Ikea in various countries. Ikea has its customers all over the world. Ikea has a very good brand reputation in the market

Weaknesses (W) As the company is a reputed company and the business of Ikea is very large so there are chances that it can face negative publicity. Identification of designs and styles of individual’s is not an easy task so Ikea sometimes faces customer dissatisfaction. Ikea does not have its own transport facilities so the supply chain of the company is affected by this. Due to long network of Ikea it not able to establish its connectivity.

Opportunities Ikea is further expanding its business in business in developing economies this will provides development opportunities to Ikea. Ikea has also started its business online and the online sales of the company is also increasing so Ikea is generating revenues through online sales. Ikea is also tending to increase its market in various other segments. Ikea has growing demands of its products.

Threats (T) Ikea has some responsibilities towards its partners and society and it is obligatory for Ikea to fulfill these responsibilities. There are various companies which are engaged in the same business of designing and manufacturing of furniture so there are various competitors of Ikea. The level of income of people affects the level of spending of the people which directly affects the revenues of Ikea. Discount policies by the competitors.

Opportunities Ikea is further expanding its business in business in developing economies this will provides development opportunities to Ikea. Ikea has also started its business online and the online sales of the company is also increasing so Ikea is generating revenues through online sales. Ikea is also tending to increase its market in various other segments. Ikea has growing demands of its products.

Threats (T) Ikea has some responsibilities towards its partners and society and it is obligatory for Ikea to fulfill these responsibilities. There are various companies which are engaged in the same business of designing and manufacturing of furniture so there are various competitors of Ikea. The level of income of people affects the level of spending of the people which directly affects the revenues of Ikea. Discount policies by the competitors.

Section 3 Relationship between the macro environment factors and strength and weaknesses of Ikea.

kea is one of the largest furniture manufacturer retailer company and this company has its extended operations in various countries of this world. The strengths of Ikea helps in reducing the impact of macro environment factors on the growth and development of this company. Ikea is a reputed company having its expanded business in various countries so if this company implement its expansion plans this will help the company in expanding its business as well as this will provide many growth opportunities for the company which will work for the betterment of the company. The supply chain of the company is very large as well as the company is adopting the latest technologies and this helps Ikea to minimize the impact of technological factors on the growth and development of the company. Ikea has a very large network so this can bring the complexity in the network of the company so for this Ikea should establish stable network so in order to avoid any kind of such other problems such as negative publicity and such other measures must be taken by Ikea to minimize the effect of these factors on the growth of Ikea so that this does not becomes a threat for Ikea. Ikea should focus on making strategies to take advantage of its strengths so that it can properly work on its expansion plans and also it should identify its weakness so that measures can be taken by Ikea so that it can convert its weaknesses into strengths as the company is already engaged in establishing its improved sustainability policy and better ways are taken by Ikea to reduce the negative impact on environment so Ikea should improve its efforts in these ways to provide satisfaction to customers and to establish greater customer loyalty (Rus, et.al, 2012).

Part B Reflection Summary (D2)

The study of macro factors is conducted with a view to identify the external factors that affects the growth and success of Ikea. Macro environment factors contains all those factors which are beyond the control of Ikea where micro factors reflects the internal factors which affects the growth and success of Ikea and micro factors contains all the factors that can be controlled by Ikea.
These micro and macro factors affects the decision making of the business as Ikea should take decisions on the basis of its strengths so that it can take advantage in all those areas. Ikea should take corrective decisions for improvement of its weakness so that it can convert its weaknesses into strengths also Ikea should involve itself in all those decisions where it is having a growth opportunity. The decisions of Ikea must be in favor of the growth of the company that such decisions must be able to convert its threats into opportunities (Ramilan, et. al, 2011).
PESTEL analysis helps in identification of macro environment factors which affects the growth of Ikea so decision making of this company must be in such a way that the decisions must be considered on the basis of estimation of the impact of global factors that could impact the outcomes of the decisions so this should be ensured that the decisions are on the basis of determination of political, economic, technical, legal, social, environmental and all other macro environment factors. To reach the ultimate goal of Ikea that is to earn higher revenues through providing the best quality along with the reasonable prices while taking in view the environment policies Ikea must implement its decision making on the basis of determining the impact of micro and macro environment factors on it.

Conclusion

This report concludes that no business can run in isolation. There are various factors that affects the growth of the business directly or indirectly as this report is about Ikea which is an international company engaged in designing and manufacturing of furniture so this report has implemented a PESTEL analysis of Ikea as well as SWOT analysis of Ikea to identify the impact of these factors on Ikea and the main aim of Ikea is making profit so a comparison has been concluded for a song which has a motive of social service with the profit oriented company Ikea.