Pestel Analysis of the IKEA Corporation

Pestel Analysis of the IKEA Corporation In this research report Author have identify business strategy about IKEA as an organization, the first part of this research is about introduction of IKEA which explain all initial information and its process from Supplier to customers. Next part contain literature review that try to identify what is the different between operational and tactical planning, it also analysis and rational with IKEA. Middle part of this research contains SWOT and PESTEL analysis of IKEA with theatrical background and explains each and every factor which can effect in business operational and tactical planning. In last Author has concluded this research with conclusion about over important of strategy in business. Introduction: Business strategy itself shows that strategy needs for every business. To achieve object in certain time period, each and every organisation required strategy and to stay top on the table need better strategy then the other competitors (Houston, 2002) The reason to make strategy is to make business fit into its environment. So that every time you should change strategy according to environment (Houston, 2002) Business strategy is nothing but make a plan and take decisions, and using that plan and decision achieve greater profit and success in decided time (Kourdi, 2009) By making strategy organisation can know where resources like finance, people, effort, technology should be concentrated (Kourdi, 2009) Literature Review: Swot analysis: When an organisation is in hard market situation it needs measurement to find out current situation and find the right strategy to achieve object (Bohm, 2008) Where is the company right now? Whats the strength of the company through which company have an edge than others. To neutralize weakness of the company any organisation should know which the weaknesses are and how its damage the success ratio (Bohm, 2008) Its also important to know which possible threats and opportunities can be expected from around the world. Through SWOT analysis any organisation analyse companies strengths, weakness, possible threats and opportunities. Opportunities and threats investigates internal and external as well as positive and negative factor of a corporation (Bohm, 2008) Strengths -supplier -Production -Distribution Weaknesses -What are our weaknesses as well as should know competitors Opportunities -What opportunities are in front of us based on market size, consumers requirements and their chaining trends, gaps in our product line, service and distribution Threats -Internal threats -External threats -Based on our weakness and competitors Strengths, changes in technology. Figure1.1. Elements of the SWOT analysis: (Mello, 2002) PESTEL Analysis: Expansion and improvement in business totally depends on any organizations Pestel analysis. Pestel analysis is very useful tool to measure and examine the environmental influences of political, economic, sociological, technological, environmental and legislative (Craig, 2005) Political Environment Sociological Environment Economic Environment CORPORATION OR INDUSTRY Technological Environment Environmental Environment Legislative Environment The activities of competitors, suppliers, customers always leads organisation to force the change the strategy. Customers who change their requirements by the time, competitors who merge within the industries may require the organisation to improve the structure, culture or other internal feathers to stay and compete (Craig D. J., 2005) It is important to have business strategy to a number of stakeholders. Groups or individuals having an interest in the activities of an organisation, stakeholder groups are relatively simple for commercials organisation and more complex and countable for not-for-profits organisations (Strategy, 2005) Requirements to implement a new strategy: As requirements of consumers are always varies, for that reason every time it is important to implement a new strategy to sustain in market among the competitors (Houston, 2002) Implement a new strategy means change current strategy in all factor means technological, change in production line, improving in storage and distribution. Organisational Analysis: Ikea is very well-known private limited company, which offering well designed and functional home furnishing products at low price. So many people can afford to buy. Ikea the brand name is basically associated with founders name, Ingvar Kampard who is born in southern Sweden and raised on Elmtaryd a farm near the small village of Agunnaryd. Inter Ikea system B.V.1999 2010 The founders main goal is To create a better everyday life for the many people. In the early age of five founder starts to selling matches to his nearby neighbours and the age of seven he starts to sell matches in bulk at a low price but still make good money. After that he expands to selling flower seed, greeting cards, Christmas tree decorations and later pencils and ball-point pens. In 1943 Ingvar Kampard established his own business and in 1951 first Ikea catalogue is published. In 1953 first Ikea showroom is born and within short time of period more than 35 countries has more than 315 stores. Ikea mainly decide the price and according to price they design the product. Ikea offered a low price of any product because of customers contribution. Customers come in the stores and choose their products with an easy-to-read and clearly mentioned all needed information on the tag and collect and transport and assemble by themselves. That is the idea behind: You do your part. We do our pa rt. Together we save money. (Hartline, 2008) Inter Ikea system B.V.1999 2010 Ikea is also well known for its charity work, Ikea working together with UNICEF to save the children around the world. Ikea donate one euro for every soft toy sold in stores during a certain period each year. In India they providing medicines and essential requirement to children and trying to stop child labour. Inter Ikea system B.V.1999 2010 SWOT analysis for Ikea In this tuff economic condition and with the number of competitor around the world, any organisation must know their Strengths, Weakness, Opportunities and Threats. Ikea uses SWOT analysis to reach its objectives. Strengths and Weakness are internal factors of the business. They are controlled by within the business. Opportunities and Threats are external factors, which are outside the control of business. Marketing, product cost, finance, manufacturing, business structure and strategy are counted in internal factors. Likewise environment, economic condition, competitor, technology advances, social changes, culture, political law are consider as external factors (Hartline, 2008) Strengths: One of Ikea main strengths are they develop products with flat packing and easy assemble by consumer. So not require massive storage and transportation is very ease for supplier and consumer. Good quality with a wide range of choice at all times that makes customers always willing to buy. Ikeas business strategy is produce environmental friendly products means they using renewable and recyclable raw materials such wool, cotton, glass, metal and rattan. Inter Ikea system B.V. 1999 2010 A well planned design products which works very functionally and reduce the price and attract the customers (Hartline, 2008) Ikea create loyal suppliers by committing to buying in large volumes for long period. So that they can negotiate for low price for customers likewise security for suppliers of having guaranteed orders (Hartline, 2008) In Ikea all are same. Ikea treat everybody same way. So companys anti-bureaucracy weeks helps to create good corporate culture (Hartline, 2008) Ikea has own designer to design the product according to cost. So Ikea can keep price low as they want. Inter Ikea system B.V. 1999 2010 Some of their products are produced in some countries where labour cost is very low compare to other countries. Inter Ikea system B.V. 1999 2010 Weakness: Ikea should know their weaknesses to improve their services and expand the business around the world. The expansion of the business always creates difficulties to maintain the standard of quality and customer satisfaction. Its also difficult to keep environment healthy for a large organization. Ikea has the business in more than 35 countries. Supply products with same good quality are hard for them. Ikea must keep communication to suppliers and consumers to maintain the standard of business, for a large business is not easy. As a business of furniture and all household products made from the plastic, wood, glass, rubber, paper, chemicals, it is hard to maintain environmental standards. Ikea believe in low price and good quality. For that Ikea needs to differentiate how they can be chipper with a good quality than the competitor (Hartline, 2008) Do it your self-system: Ikea is believes in self-serve approach but some customers who earning more salary, may not like to go warehouse and picking out their furniture. Some customers may not have time to assemble their furniture once they get it home (Hartline, 2008) Opportunities: Ikea should use its strengths and brand name to take advantage coming opportunities in the world. Making environmental friendly products can be useful in price sensitive market. As the company states: There is a true business potential for IKEA in providing solutions that enable customers to live a more sustainable life at home. IKEA is developing effective solutions for customers in order to support them recycling or reusing used products, aiming at no products ending up at landfill and the recycled materials used in producing new IKEA products. (The Times 100) Ikea should produce more and more products from materials that can be recycled and should develop technology to reduce carbon footprints and use of water. Ikea should use more and more renewable energy so they can keep price low as much as they can and attracts the more consumers in current financial climates. By providing better customer services by their co-worker, by telecommunication or by media or taking opinion from peoples they can sustain in the market. Threats: By knowing the possible threats each and every organization can be prepare for better business strategy. Ikea should know the external and internal threats. Competitor: competitor consider as an external threats. Having with better business strategy like low price with better quality, better customer services, good communication with consumer and supplier (Hartline, 2008) Competitor can come with better technology edge. So to avoid this threat Ikea should be more adoptable (Hartline, 2008) Culture: Culture is also playing part as major threats. Ikea has a large business around the world where people with a different culture and different attitude. This culture can be changed by different methods like training programme, changing people or giving them satiable jobs, totally giving new structure or appearance (Pfeiffer, 1993) PESTEL analysis for Ikea Political: It is important to make number of observation regarding political changes in the world or country where you doing business because uncertainty of political environment could have massive impact on business (Britton, 2009). Changes in political environment also emanate from a countrys institutional arrangements (Britton, 2009). Ikea should analysis of political environment because each and every country has own rules. In some country political is very stable and providing good infrastructure for the business. Economic: Economical effects means any business organization concerned with imports or exports will be affected by many ways like taxation, interest rates, employment levels and Inflation, Economic condition of ones countries means spending ability of consumer force to change any organizations strategy and products services. In some countries you should concern about economic condition before starts the business. Business strategy should be fine according to countries economic condition so most of consumer can afford to buy your products (Craig, 2005) Ikea can achieve its vision to create a better everyday life for the many people by considering economic condition of countries. Sociological: Sociological effects means particularly any countrys demographic profile such as the increasing birth rate or decreasing death rate or unbalance in genders or increasing population can affect any business (Craig, 2005) To finds more flexible people just because of their geographical or social condition leads the shortage of skilled worker. This can pressurise organisation to move new location just to find out technological solution (Craig, 2005) Technological: Technological developments in recent years are significance. If you want to sustain in the market among the competitors you must have edge in technological improvement (Craig, 2005) Any organisation should be ready to adopt new technology. The business depends on how you marketing the product, which technology you are using for production and distribution and for storage (Craig, 2005) Environmental: Every country is very concern about their environmental condition. Change in climate for last couple of years just because of human activities has made aware everybody. To expand the business every organization should analysis of environment. (Britton, 2009) In every country requirement of products is always varies according to their environmental condition. Organisations required being in the leading position of making possible changes rather than coming from a catch-up position. Every organisation needs to respond to green issues are voiced by customers or community groups. (Robert Dransfield, 2004) Legislative: Legislation includes certain factors like employment law, taxation law, companys own law, health and safety law, patent law, industry regulations (Sinclair-Hunt, 2005). In business strategy you should concern legislation. Legislation is a part of business. Reducing union power was perceived as economically essential for freeing the labour market and hence rejuvenating the economy through the free play of market forces (Undy, 1996). Conclusion: As a worlds biggest retailers Ikea should counts numbers of thing to capture the maximum market among strong competitor. They should use more and renewable energy for their business to reduce the price of products and to reduce carbon foot-print. Ikea have good name around the world for their products with good price with good quality and to sustain the image they should know their internal and external threats and should try to come over. As a large business they should have good communication with suppliers and with consumers. By adopting latest technology they can be ahead of competitors. Using waste or damaged material they can produce product and can save environment.