IKEA is a multinational Swedish company that specializes in selling home accessories and ready-to-assemble furniture. The company was founded in Sweden in 1943 by Ingvar Kamprad, a 17 year old boy who is currently among the richest people in the world (IKEA 1996p.56). Over the years, the company has been recognized for its modern architectural designs in the various appliances and furniture that they retail. For this and other efforts, the company was ranked the world’s largest furniture retailer in 2008. According to GBS (2004 p.78), the company’s name entails the initials of the founder (Ingvar Kamprad), the farm he was brought up in (Elmtaryd), and his hometown (Agunnaryd) consecutively. As of 2011, the company had established 332 stores in 38 countries and with a total of approximately 139 000 employees.
Understand the external environment affecting an organization
Explain the importance of external factors affecting an organization
Stakeholders are people who have shared interests in a corporate organization and are affected by their way of doing business. In this case, the shareholders are the employees, investors, and the various individuals and organizations that are affected by IKEA’s activities be it as retailers or as revenue generators that impact the local economy. Being an external factor in an organization they play a critical role in decision making as they help the organization make responsible decisions especially since they have shared interests (Dahlvig 2012p.63).
Doing business in a competitive environment may seem a drawback, but can also be helpful in terms of expanding a brand. This is because one is motivated to implement strategies that will enhance the competitiveness of the brand so as to survive in the competitive environment. In the long term, this helps in growing the brand, increasing their profitability, and basically strengthening the brand.
At this age and time, it is indispensable for a company to implement tools that will keep them updated on their current status, and basically the position they hold in regards to the external environment so as to make more decisive strategic plans. The PESTLE analysis is among the most effective tools that can be used to ascertain this.
IKEA’s PESTLE analysis
Chronologically, political factors have been known to play a vital role in business expansion especially in new markets; this is because the political condition of a region directly affects the company’s performance. In this case, the Swedish government has had their policies changed from time to time which has greatly impacted IKEA and the self-assembly furniture industry at large. For instance, by increasing import tax, many companies have had setbacks in their financial performance. In this case, visa application procedures when exporting or importing furniture from IKEA is impacted depending on the state one is in (Grigsby et al 1997 p.107).
Given that the economic factors impacts on the demand, cost and capital availability, it is evident that the economic condition of a country impinges on the profitability and success of businesses. For instance, during the recession people tend to spend as little as possible and would prefer buying food and other necessary accessories to furniture which are luxury. Basically, by affecting the demand, IKEA among other companies suffers from the decreased supply of their products (Edvardsson et al 2009 p.116).
According to HåKansson (2002 p.389), social factors are play a critical role in increasing the opportunities that companies have in supplying their products to their target consumers. Socially, the demand of a product is usually impacted by peoples’ tastes which affects the perception they have on the product. In this case, IKEA has over the years conducted strategic marketing plans that have seen the brand receive recognition from all corners of the globe; however, there other factors that have impinged this efforts. Family values and the attitude people have that is influenced by their level of education have been seen to be among the factors that determine demand.
When it comes to technology, technological prowess has been used to enhance the competitiveness of the various competitors in the market share. However, this has also brought a number of challenges to the industry which has affected the demand of appliances retailed by IKEA and the entire furniture industry at large. Among them is the technological breakthrough that enhances the efficiency of activities in IKEA’s retail stores; this is meant to reduce the queues and introduce electronic price tags (Afuah 2009 p.427).
Hill et al (2009 p.228) observed that the destabilization of the climate has been said to be a result of carbon emission caused by air pollution and forests destruction; this has forced the government to implement policies that protect forests and restricts some business opportunities for IKEA and other companies in this line of work.
The efforts of the Swedish government to curb practices that are hazardous and impact the environment have affected IKEA and their operations. As a result, IKEA has put in place measures that will reduce the risk factors that affect the environment and the sustainability of its habitats.
Analyze the needs and expectations of stakeholders of an organization
When establishing a brand, every organization usually has its target consumers and objectives that will help them grow the company if implemented. To begin with, meeting the needs of the consumers by responding to their expectations is the way to go. For this, it is necessary for an organization to understand the tastes and preferences of its consumers so as to profitably satisfy customers’ expectations (Dess 2012 p.90). With IKEA’s business activities crossing international borders, the company has over the year had a well coordinated global supply chain. This is basically the relationship between its various retail stores that are established in diverse location across the world. It is through this supply chain relationship that their various outlets can keep in touch with modes of running their business such as controlling the prices of their products, ensuring that their activities are conclusively implemented in all their stores. With the ever evolving business world, the competition in the markets has constantly grown stiffer and consequently calling for better ways of doing business. Usually, the market and investors expects companies to attend to the needs of consumers who are the priority in enhancing the growth of the company; this is usually by offering products that suite the tastes and preferences of the various customers (IKEA 1996p.319).
Analyze the major changes taking place in the external environment that will affect strategy.
GBS (2004p. 123) pointed out that with the government implementing legal structures that are to protect forests, the media has had speculations that IKEA consumer 1 percent of the earth’s wood supply.
IKEA’s SWOT analysis
Over the years, IKEA has been known for their environmental friendly philosophy in which they recycle 85 percent of their waste in making their furniture. This philosophy has seen them run campaign on environment conservation for its sustainability. For this, they also ensure that their suppliers share the same spirit in environment conservation. IKEA also has a record of profitably satisfying their customers through their variety of modern architectural designs that suite the taste of most consumers. Being among the most established brands in this line of business, IKEA is able to avail its products in all corners of the world and at reasonable prices (Grigsby et al 1997p.295).
One of the reasons that IKEA has been experiencing stiff competition is the fact that most of their stores are not located in city centers where there is high demand for their products. With this, traveling out of town becomes a challenge especially since it also adds up to the expenses.
Having diversified to various locations in the world, IKEA is able to showcase its products to millions of people; thus, increasing their chances of making more sales. With the advancement of technology, IKEA is now able to showcase their unique furniture through online platforms in which they can reach out to numerous consumers without having to spend a lot in establishing stores. Additionally, the low cost manufacturing countries such as India and China present an opportunity for the company to increase their profitability due to the reduced cost of manufacturing (Edvardsson et al 2009).
In the current business world, the numbers of organization have greatly increased especially those that produce similar commodities. With this, competition is built between companies that share consumers in the market. As a result, competition has contributed to the collapse of diverse organization because of lack of strategies to counter-attack the hypercompetitive players in the market. In this case, the competition become stiffer as the different players not only compete for consumers but raw materials too as well as the resources vital in production of the final product (HåKansson et al 2002 p.314).
2.0 Be able to review existing business plans and strategies of an organization
2.1 Use appropriate tools to analyze the effects of current business plans
In an aggressive industry, IKEA has come up with business techniques and programs to make sure that it remain s appropriate in the marketplace and management an area of the industry. A SWOT research of the company indicates that it has much durability. For example, it has highly effective on the internet way of life and advertising. In a globe where globalization has taken over, on the internet way of life is important. The company programs on enhancing it on the internet product sales through ongoing internet marketing. This will make sure that customers become conscious of its products or services from whoever place on the globe.
In a bid to improve its company IKEA is concentrating on global development, the company has adopted highly in effective internet way of life and marketing. This is important as it will improve the volume of income and eventually the income within the company. IKEA wishes to have a better keep of the Western industry. Given the aspect that it already has more presence in European countries, this is a clear sign that the industry is aware of the way of life of the industry.
2.2 Review the position of an organization in its current market
According to Afuah (2009p. 154), IKEA’s control is experienced with firm opponents from other retailers in the marketplace. This has required IKEA to come up with techniques on how to deal with the risks experienced by the opponents. A evaluation of the SWOT research of IKEA indicates that in order for the company to stay appropriate in the center of the opponents that they compete, the control has recognized possibilities that its applications to discover so as to make sure that it goes up to being a leader in the marketplace in the industry. The possibilities recognized are the need for better keep of the Western industry and the globally development into Asia and Africa.
Afuah (2009p. 154) further elaborates that IKEA has established a great base of market compared to its competitors. Its market segmentation although is insignificant, has a higher edge compared to the competitors. The company’s specialization in producing and selling of furniture which are transported as different parts is unique and has an advantage to the competitors.
2.3 Evaluate the competitive strengths and weaknesses of an organization’s current business strategies
One of the greatest highly effective aspects of IKEA is that it specializes in clients who are working with a limited budget. Given the aspect that most individuals fall under either lower or middle-class group of clients, the industry provides a lot for individuals. This is an advantage over most of its opponents in the marketplace because clients are naturally attracted to a store because the costs in this store are relatively low in comparison to costs in the other shops. IKEA also has incredibly huge presence in the internet way of life. Since IKEA is a global company, the internet marketing is ideal for attaining different parts all over the globe (Hill et al, 2012).
Despite the aspect that the company is global, it is a relatively small enterprise as opposed to opponents in the marketplace. Hence, individuals are not conscious about the company and its items. Moreover, globally, the company has not affected the industry in a significant way.
Given the aspect that globalization has taken over the globe and most of the locations, internet marketing is largely improves to any company. Also, since IKEA is a worldwide organization, the internet marketing is ideal for getting different locations all over the globe
3.0 Be able to develop options for strategic planning for an organization
3.1 Use modeling tools to develop strategic options for an organization
Dess (2012p.46) pointed out that Mintzberg came up with the 5 P’s of way to be able to give information to companies that plan to come up with effective techniques to make sure that they become effective and make extremely. The 5P’s are technique, technique, design, position and viewpoint. The most ideal option for IKEA is way of developing sections in Asia and Africa to reduce the submission costs to these potential market sections.
A company should plan for the long run to be able to come up with techniques that will make sure that the company functions are all looking for at conference the goals of the company. This will make sure that the workers and all other appropriate stakeholders are well aware of what is predicted of them. Discovering the market will also help in coming up with the design of technique performance. This guarantees that the techniques are used well. As such, there is no needless invest of resources. Place provides with the surroundings in which the company is located. Mintzberg’s 5Ps is a modeling tool is important for IKEA in formulating the strategic options in the market. This way they can act well to further expand the company
3.2 Develop a comparative understanding of activity from organisations in the market
In the market, IKEA encountered strategic challenges and come up with ways of overcoming them. IKEA has branches in Europe, china, North America and is planning to go to India. The prices of IKEA are also low compared to other companies.
According to IKEA (1996p.272), IKEA built many factories in china and even increased the usage of local materials. 30 percent of the global products of IKEA come from china, and about 65 percent of the total sales in china are sourced locally. Furthermore, China is seen as the next stronghold for IKEA in production and exportation of its goods apart from Europe. Torekull et al (1999p.76) pointed out that UKEA will also use China as its strategic point in entering the Indian market in the near future. The lessons the company learn in china can be transferred and applied ij the Indian market.
One of the barriers IKEA faced in the market was the high prices for people who purchased their products. Moreover, the global branding by IKEA that promises low prices did not catch well in china because products from western are seen as have aspirations in the larger Asian markets. In Europe and the US, IKEA adjusted its location of their stores according to their strategy (Torekull et al 1999p.76).
IKEA is well known for its furniture as its main products. However, the company can diversify to other industries as its organizational strategy. This is because of the success associated with the brand. Therefore, the company can perform well in emerging industries like the hospitality. This can be done by merging with the existing companies in the industry or coming as venture capitalists.
GBS (2004 p.67) pointed out that joint venture with other companies can boost IKEA to expand and diversify to other countries that it has not set its foot, moreover, IKEA is known for stylish designs and good services. These can be transferred to the new industries.
Apart from diversification, the company can also think of merger with small companies in the industry. This way it can form indomitable monopoly in the market or even form oligopoly in the market segmentation. Merger enables the company expand and has a large market base. Moreover, by forming merger with small companies, the company will benefit from the knowledge and expertise of the local market of the existing companies. Similarly, the company can benefit from the extra labor for the company from the small and middle companies they merge with (GBS 2004 p.67).
Be able to construct a strategy plan for an organisation
4.1 Propose a suitable structure for a strategy plan that ensures appropriate participation from all stakeholders of an organisation
The structure IKEA will adopt for strategy plan is drill down. The structure will explore the performance shortfalls of the company in its financial return. It applies its components in assessing the performance determinants. It also incorporates the vision, mission statement, corporate principles and values, competitive advantage, SWOT analysis and execution plan.
According to Dahlvig (2012p118), stakeholder contribution is a key part of organization group responsibility as well as the primary point here. Through the structure, Organizations connect with their stakeholders in conversation to find out what group and ecological problems issue most to them about their performance so they can improve decision-making and responsibility. Interesting stakeholders is a need of the Globally Verifying Effort, a network-based organization with durability confirming structure that is commonly used around the world.
Involving stakeholders in decision-making methods is not limited organization group responsibility methods. It’s a system used by group and personal market companies, especially when they want to make understanding and accept to alternatives on complicated problems or problems of problem.
A real concept of stakeholder contribution is that stakeholders have the opportunity to impact the decision-making procedure. This distinguishes stakeholder contribution from e-mails methods that aim to problem a concept or impact categories to believe the simple fact with a choice that is already made. The Environment Authorities developed the Concepts of Authentic Participation. These are developed to offer a structure for genuine stakeholder contribution.
4.2 Develop criteria for reviewing potential options for a strategy plan
Strategic preparing for companies is not regarded fun. Perfect preparing is often done under stress because it is needed. Perfect planning is important yet many such programs are discovered on bookcases, not on the individual plans being used.
Done well, an ideal strategy provides a useful concentrate that encourages and goes the company toward its objective objectives, plus it provides a records to use others to the objective. In brief, a ideal strategy is a useful information to concentrate time, capabilities, and sources in operating a effective company.
In reviewing the potential options for strategic plan, the criteria should ask whether the strategy has the following:
- Fit opportunities and resources
- Give overall direction
- Minimize barriers and resistance
- Reach the affected people
- Advance the mission
4.3 Construct an agreed strategy plan that includes resource implications
A strategic plan is a record used for communication with the company the companies objectives, the activities required to accomplish those objectives and all of the other critical factors designed during the preparing perform out (Grigsby et al 1997p.32).
Strategic preparing is a business control action that is used to set main problems, concentrate energy and sources, enhance functions, make sure that workers and other stakeholders are working toward common objectives, set up contract around designed outcomes/results, and evaluate and modify the company’s direction in reply to a modifying atmosphere. It is a regimented effort which makes essential choices and activities that type and information what a company is, who it provides, what it does, and why it does it, with a concentrate on the long run. Effective strategic plan articulates not only where a company is going and the activities required to make improvement, but also how it will know if it will continue to perform.
IKEA Company will pursue the following strategies for it to achieve each of our objectives:
- Assist the community where our branches are located as part of our corporate social responsibility. These will include environmental conservation
- Use the local resources that are available in the location of the company. Furthermore, the raw materials should be environmentally friendly
- Apply technology in our processes and avoid employing under age, the unskilled and incompetent labor
- Incorporate all stakeholders before taking a major decisions
- Survey and report on customer’s satisfaction, attitude and behavior.
- Be able to examine factors affecting an organisational strategy plan
According to Dahlvig (2012p118), the core values of IKEA are the basic components that evaluation how the organization goes about their work. The current organization goals of IKEA are to aim to provide their clients with items of high quality and to create earnings.
When examining IKEA’s core values and their goals, they usually recognize. In a bid to accomplish their goals, the company’s core values are considerably ingrained and act as the team cornerstones of IKEA and cannot be impacted to experience the goals.
Organizations can have primary concepts as well. These are the directing concepts that help to determine how the organization would act. They are usually indicated in the organizations purpose statement.
The core values for IKEA include:
- A dedication to durability and to doing in an eco-friendly way.
- A dedication to development and quality.
- A dedication to doing good for the whole.
5.2 Develop appropriate vision and mission statements for an organisation
To enhance our position in marketing that is major locally and also increases our organization presence worldwide.
IKEA desire to become number one retail store outlet organization in UK by providing high quality products and distribution of highest possible level
5.3 Produce agreed future management objectives for an organisation
Organization objectives are the finishes that a company places out to accomplish. The company makes perfect programs to allow it to accomplish these finishes – thus programs are the means for the finishes (Edvardsson et al, 2009 p.105). The objectives and programs that a company makes are identified by handling the specifications of the various stakeholders in the business. The stakeholders are those people and categories that are struggling with and have a new in how the business is run and what it accomplishes. Look at has a variety of stakeholders, including:
The goals that a business chooses are based on mixing the various passions of these stakeholder categories.
For example, an objective to be the market go, will benefits all stakeholders because clients will get top quality products, investors will get awesome functions; workers will get good income, and so on. Organizations make a structure of goals. At the top level an company will often make a ‘mission’ creating out the objective of the organization
The aim of an organization helps in guiding, managing and examining the organization’s success. The aspects that figure out the goals for IKEA are the legal form and size of the organization, the company way of life, its financial situation, products or solutions, marketing, resources, features, team and atmosphere (Grigsby et al 1997p.32). The agreed future objectives for management for IKEA are:
- To enhance profit
- To fulfill the profits
- To increase and its operations
- To enhance its market share
- To enhance its corporate team responsibility
- To enhance the earnings of its short-term sales
- To enhance the value of their investors.
5.4 Develop measures for evaluating a strategy plan
The strategy evaluation process for IKEA is made up of the following steps:
- fixing the performance benchmark
IKEA will use both qualitative and quantitative requirements for the performance comprehensive evaluation. The quantitative requirements contain net benefits dedication, making per share, the rate of worker earnings and cost of production. The qualitative aspects, on the other hand, are very subjective aspects evaluation such as capabilities and abilities, versatility and potential for taking risks (Edvardsson et al, 2009 p.105).
- Performance measurement
The traditional for actual performance will be the traditional performance. The system for relationships and confirming will help IKEA In identifying its performance. In identifying the performance of the IKEA, the financial statements such as benefits and loss account and balance piece will be ready yearly (Edvardsson et al p.112).
6.0 Be able to plan for the implementation of a strategy plan
6.1 Develop a schedule for implementing a strategy plan in an organization
It is advisable to have a tracking system within the organization that records on the implementation process. As such, this ensures that each strategy that has been laid down is implemented in the manner that it should be implemented.
The departments all work together in synchrony towards a common goal (Ireland, 2012). The managers come up with the organizational goals which will be achieved by the various departments. The different department will make up the organization. The software will facilitate a smooth running of the organization. Every department will be carefully monitored to ensure that they are working efficiently to achieve the organizational goal.
6.2 Create appropriate dissemination processes to gain commitment from stakeholders in an organization
Stakeholders in an organization are very important. The employees learn the need to be accountable for their options. Wal-mart is a global organization. It has many branches in different parts of the world. The company has virtual teams and the software helps to monitor the operations of the various teams. It also ensures that the culture of the organization is upheld in every branch across the various countries.
It is important for coordination among the various departments. The different departments comprise of the organization. A smooth running of the departmental operations implies that the organization at large is working smoothly. The organizational goals will be enhanced through the implementation of the software in its operations because cost management is an important part of the organization.
6.3 Design monitoring and evaluation systems for the implementation of a strategy plan in an organization
It is vital to evaluate once in a while. This ensures that people are on their toes and they do not relax. Monthly strategy planning is key. The integration of the accounting and performance reports is fundamental in ensuring that each and every individual within the organization is accountable. It enhances transparency in all the business operations and anyone involved in fraudulent activities can be easily identified. It prevents unnecessary costs that would be incurred because of some untrustworthy employees. Conclusion
It is important for every organization to come up with strategies to ensure that its goals are achieved. There are various strategic options that organizations may implement in the course of strategic planning. Market research is necessary to determine the best strategic options that best suit the organization. It is an effective way of ensuring that resources are not wasted whereby an organization implements the inappropriate strategies.
IKEA. (1996) IKEA 1996. [Sweden], IKEA.
Torekull, B., & Kamprad, I. (1999) Leading by design: the IKEA story. New York, HarperBusiness.
GBS (2004) Great Ikea! [S.l.], Marshall Cavendish Ltd. Retrieved from http://search.ebscohost.com/direct.asp?db=bth&jid=6MN6&scope=site.
Dahlvig, A. (2012) The IKEA edge: building global growth and social good at the world’s most iconic home store. New York, McGraw-Hill.
Grigsby, D. W., & Stahl, M. J. (1997) Cases in strategic management. Cambridge, MA, Blackwell Publishers.
Edvardsson, B., & Enquist, B. (2009) Values-based service for sustainable business: lessons from IKEA. London, Routledge.
HåKansson, H., & Waluszewski, A. (2002) Managing technological development IKEA, the environment and technology. London, Routledge. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=96089.
Afuah, A. (2009) Strategic innovation: new game strategies for competitive advantage. New York, Routledge.
Hill, C. W. L., & Jones, G. R. (2012) Essentials of strategic management. Australia, South-Western/Cengage Learning.
Dess, G. G. (2012) Strategic management: text and cases. New York, McGraw-Hill/Irwin.