Unit 1 Business Environment Solution Assignment – IKEA

Introduction

The macro and micro environmental factors are important for the operations of the business of the companies. The macro factors include the political, economical, technological, social, environmental and legal factors and the micro factors consist of the customers, suppliers and the stakeholders of the company. Both the factors have positive and negative impacts on the success  business. In this report, study has been conducted on two organizations among which one is the profit oriented organization which is IKEA and the other one is NHS which is a nonprofit organization. The report has explained the difference and link between the overall purposes of the organizations along with the study on the macro and micro environments on IKEA.

Part 1

P1, P2

Slide 1: The presentation is based on the study on the two organizations named as NHS which is a nonprofit organization and IKEA which is a profit oriented organization. The structure, scope, size, products and services of both the organizations have been studied in the presentation in order to identify the link between the two organizations.

Slide 2: This slide describes the two organizations NHS and IKEA and the purpose of the two companies.

Slide 3: The slides explain the objectives of NHS which identifies that the main objectives of the company are to serve the society and maintain sustainability in the operations.

Slide 4: This slide explains the types and purposes of the organization and the difference between the two profits and nonprofit organizations.

Slide 5: The slide describes the size and the scope of the business of NHS and IKEA and the difference between the two.

Slide 6: The slide describes the size and the scope of the business of NHS and IKEA and the difference between the two.

Slide 7: This slide includes the products offered by IKEA as the company deals in the products like all purpose furniture for the customers.

Slide 8: The slide describes the size and the scope of the business of NHS and IKEA and the difference between the two.

Slide 9: The slide explains the link between structure, scope and size of IKEA and NHS along with the description of how the products and services serve the objectives of these organizations.

Slide 10: This has been concluded that the two organizations have different products and services but there is link between the two organizations in terms of scope and service to the society.

b) A short essay

IKEA is a profit oriented organization and the company manufactures furniture and the business of the company has been expanded worldwide. The vision and mission statement of the company explains that the company is indulged in the manufacturing of wide range of furniture available at low cost for the customers. The objectives of the company explain the goals for which the company has been incorporated (Moldoveanu & Dobrin, 2012). The objectives of the company include;

• To have a reputed brand image in the market.
• To earn high revenues.
• To gain the competitive advantage in the market.
• To achieve customer satisfaction and customer loyalty.
• To manufacture affordable furniture at low cost.
• To expand the business and bring diversity in the business.

The organizational functions of IKEA are so designed and the policies with the strategies for the purpose to attain those organizational objectives are well defined which help the company to achieve the objectives of IKEA. The organizational functions include the processes of planning, directing, coordinating, staffing and controlling the activities of the organization. The organizational function such as planning helps the organization of IKEA to prepare the plans and policies and communicating the strategies to the staff to provide them the direction towards the goals of the company which is the part of the directing function of the organization. The objective of attaining the competitive advantage in the market can be achieved with effective functions of the human resource management in staffing the appropriate staff for the accomplishment of the objective and the functions of coordinating helps the activities to be performed in a systematical manner in order to lower the cost of production and make the pricing policy affordable for the customers of the company. These organizational functions help to achieve the objectives of bringing down the cost of production and make a superior position of the company over the competitors. The objective of building a superior brand image and to expand the business of the company, the sales and marketing department of the company functions to promote the brand in the different countries where the company operates its business through various distribution channels. The controlling function of the organization help the company to develop and maintain the sustainable business and it helps IKEA to expand the business. The research and development department of the company functions to bring diversities in the products and this help to generate high revenues and increase the area of business. The organizational functions help the companies to achieve the objectives and develop the business of the company. The organizational functions also include the functions of marketing, sales, human resource management, finance department, administration department, and the production department which help in the attainment of the objectives and without the help of these functions the objectives cannot be attained with effectiveness. The functions need to work altogether if the company wants to achieve the objectives effectively and at the same time the company should monitor the organizational functions for the betterment of the organization (Kaliba, 2011).

Part 2

(P4) Section 1:  Identify some positive and negative impacts of the macro environment on the business operations.

Macro environment consist of the external environment in which the business of the company operates. The external environment for the organizations includes the factors like political, economical, social and technological factors. The changes in these factors directly affect the growth and success of the business. In an organization like IKEA, a company dealing in the industry of manufacturing of furniture is also affected by these macro environmental factors.
Positive impacts: The positive impacts that the macro environment can have on the business of IKEA can be related to the positive changes in the tax rates, laws and legislation as applied on the company. The social factors such as customer satisfaction can bring positive impacts on the company.
Negative impacts: The negative impacts of the macro environment on the business of the company can be rapid changes in the technological advances, economical factors like changes in the rate of taxes, social factors like changes in the trends and change in the government policies which are included in the political factors of the macro environment (Feimi & Pulaj, 2016).

(P5) Section 2: Conduct an internal and external analysis to identify its core strengths and weaknesses.

The analysis of the internal and external environment of the strengths and weaknesses of IKEA in order to identify the core strengths and weaknesses of the company are as follows;
Internal analysis: The internal analysis of IKEA includes the internal business environment of the organization consisting of the management and the employees, suppliers and stakeholders of the company. The strength of the company is the availability of the resources in the company and company make the effective use of the organizational resources for the successful operations. Another factor is the efficient management in the company which is dedicated and works toward the achievement of the objectives of the company. At the same time, the internal analysis shows that some of the weaknesses of the company as well, such as the company does not follow the reward strategies to motivate the employees and the production cost is also not under control.
External analysis: The external analysis of IKEA describes the core strength as the social factors which show the customer satisfaction of IKEA identified as its core strength and the weakness which has been identified are the rapid changes in the technology to which the company has to respond and keep the production updated (Viswanathan, et., al., 2014).

(P6) Section 3: Explain how these strengths and weaknesses are linked to the external macro factors.

The strengths of IKEA that are linked to the external macro environment are;

• The strength of IKEA consist of the clarity of vision and mission statement which makes it beneficial from the point of view of the social factors as the stakeholders are clear about the objectives of the company.
• The satisfaction of the customers is also linked with the social factors for the company.
• The strength in the form of strong brand image is linked to the technological factors as the company use the advance technology for the manufacture of furniture.

The weaknesses of IKEA that are linked to the external macro environment are;

• The control over the business activities in every country is the external factors that the company has to deal in.
• The increased cost of production are affected with the economic factors in which the company operates.
• The technological factors affect the promotional activities of IKEA (Wei, et., al., 2016).

Section 4: Apply some analysis models i.e. PESTLE and SWOT in order to develop an in depth understanding of the impact of the macro environment as well as to justify how this affects organization’s decision making.

The strength and weaknesses of IKEA can be related to the internal as well as external environment of the organization. The SWOT analysis of IKEA is as follows:

Strengths	Weaknesses
The reputed brand image is the biggest strength of the company. The vision and mission of IKEA is clear and strong objectives as well as strategies. Customer satisfaction is its strength.	The control over the expanded business following the same standards is one of the weaknesses in IKEA. Cost of production is high. Lack of promotions and reach to the customers due to large scale of business.
Opportunities	Threats
The preference of the customers towards eco friendly products. The affordability of the products attracts the customers. The company can also focus on sustainability to retain loyal customers.	Entrants of new competitors in the market. Macro factors affecting the business. Several market forces prevailing in the market.

PESTLE analysis of IKEA in order to develop in depth understanding of impact of macro environment on the business of the organization;
Political: The political factors that affect the operations of IKEA are the government policies, rules and regulations and the changes in laws that are applicable on the company. The political stability is also one of the biggest factors that affect the business of IKEA.
Economical: The economical factors are those factors which are based on the inflation rates, unemployment, interest rates and changes in the tax rates in the country where the company is operating its business. IKEA is affected with the positive and negative changes in the economy.
Social: The social factors consider the changes in the needs, preference and trends in the demands of the customers, and IKEA is affected with social changes as the company is focused towards the customer orientation operations. The needs of the society have been given priority in the company.
Technological: The rapid changes in technology affect the success of the organization. IKEA follows the new trends and adopt the latest technologies in order to keep the business of the company updated.
Environmental: The changes in the factors like weather and climate is the part of the environmental factors which affects the business of IKEA.
Legal: The laws and legislations affecting the operations of IKEA forms the legal environment in which the company operates.

The analysis of PESTLE and SWOT help to gather the information and builds as a base for the decision making about the strengths and weaknesses of IKEA and help the management to take the correct decisions in regards to the business of the company (Ceribeli, et., al., 2010).

B) Reflective statement

IKEA is the company mainly dealing in the furniture industry has established its business in different parts of the world. In this report, the impact of the macro and micro impacts on the operations of the company has been explained. The micro environment consist of the factors like management and employees of IKEA and the macro environment consist of the political, economical, technological and the social factors that have the positive and the negative impact on the company. The report described that the positive impacts of the macro environment on the company includes the positive changes in the government policies and laws in which the company operates, the favorable economic conditions of the country and the customer satisfaction that creates the value for the brand in the market. The negative impact of the macro environment which has been identified in the report includes the role of technological advancement for which the company needs to imply changes in its plans on regular basis. The internal and external analysis was conducted and shown in the report which reflected that the company has dedicated management which helps in the achievement of the organizational goals and the external analysis reflected that the company enjoys the loyal customers. The report explained that the strengths and weaknesses of IKEA are linked to the external factors such as one of the strength of the company which shows that there is customer satisfaction for the services of the company which is linked to the social factors of the company and the company follows the ethical and good business practices. The weakness which has been explained in connection with the external factors are the lack of the promotional activities which is a concern related to the technological factors. In this report, the PESTLE and SWOT analysis has been done for the purpose to identify the impacts of the micro and the macro factors on the decision making process of the organization. The report also included the analysis of the strengths and weakness and the opportunities for the business in the market. The decision making process includes the thorough understanding of the strength, weaknesses, threat and opportunities of the internal and external environment of the company along with the external analysis of the factors of the organization. The decisions are taken keeping in mind the affects of the internal as well as external factors. The SWOT and PESTLE analysis helps the management of the company to make corrective decisions concerning the weakness and threats which the company has been facing due to internal and external factors, similarly the decisions can be taken by the company in order to meet the opportunities available in the market (Kaliba, et., al., 2011).

Conclusion

This report concludes that there are various factors which affect the business of the companies. The report explained that IKEA have positive and negative impacts on its business from the internal and external environment of the company. The report include the study of the strengths, weaknesses, threats and opportunities of IKEA along with the PESTLE analysis in order to identify the impact of these analysis on the decision making process of the company. The analysis of the internal and external factors helps the companies to take the correct decisions regarding the business of the organization and attainment of the goals of the company.

References

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