Modern era is highly competitive and complex. To sustain in such corporate market firms have to make appropriate strategies which can support in achieving the goal of the business unit. Strategic management is the combination of several decisions which can assist to managers in enhancing the overall profitability of the organization. For the present report IKEA is being taken into account. It is a multinational retail firms which has become a brand name in UK for its modern architectural designs and furnitures (Lee, Lin and Cheng, 2013). Current assignment will cover the PESTLE, Porter's five and SWOT analyses for the cited firm. Mission, vision of IKEA will be discussed in this study.
PESTEL is an imperative tool used for the analysis of any business plan and strategy. Businesses are affected by their internal and external environment. PESTEL is used for analysing the external or macro environmental factors constituted by political, economical, social, technical, environmental and legal (Yüksel, 2012). For maintaining its brand name it has to analyse its business strategies accordingly.
Political Factors: The governmental factors that intervene in the functioning of the company's operations are categorised here. IKEA can get affected by the political decisions and policies formulated by the government. This impact can be in the form of revenues or consumer rights, trade restrictions or various tax policies, etc.
Economical Factors: The trends or changes proposed by the government that can effect the economical policies or profit margins of IKEA constitute the economical factors. Government's control over interest rates, export and import policies are major game changers for IKEA.
Social Factors:Shared beliefs and attitudes of the consumers towards any product produced by the firm in the market are collective social factors. IKEA has to focus on manufacturing furniture in accordance with the demands and beliefs of the consumer.
Technological Factors: Company can achieve huge profits if it has great access over the digital market. Digital marketing via social media portals and websites with launching of technologically advance and convenient furniture can be a plus point (Slack, 2015).
Environmental Factors: Furniture as is made of wood but IKEA can concentrate on recycling wood and scrapping and innovation can be made so that the nature doesn't get exploited by the company. Violation can cause threat to the company.
Legal Factors: Health and safety rules, equal treatment, ethical advertising, etc. are some legal factors that IKEA has to consider while formulating business strategies.
Porter's five forces analysis
This is a tool that reconstructs structure of the company according to the five forces or five industrial variables (Hill, Jones and Schilling, 2014). IKEA' s analysis according to this tool is as follows:
1. Threat from New Competition: With minimum legal barriers it becomes very easy for new entrants to compete with IKEA. So, it has to manage and keep a redundancy check on the activities of new competitors as it is quite easy for them to slowly acquire the potential customers of the company with uniqueness and innovation in their product (Hollensen, 2015).
2. Bargaining Freedom of Customers : For IKEA to meet its business goal and objectives it has to look forward for giving least advantage to the buyers over bargaining. The more the bargaining the less is the profit.
3. Bargaining Power of Suppliers: IKEA having branches in 51 countries with suppliers nearly around 1000, hence lack of differentiation amongst the suppliers increases company's bargaining power. It has to purchase resources at lowest price possible so that the production cost is achieved at very low price.
4. Threat of Substitution: With such a huge world there are chances that two or more firms produce the same product. This can pose a threat for IKEA, that is its products can get substituted by other company's product at better price or quality. This calls for a check on the pricing, promotion, quality and innovation of IKEA' s products.
5. Rivalry in Industry: Sustainable competitive advantage and great level of marketing techniques can create rivals for the IKEA. This rivalry in the furniture industry is a measure for competitiveness in the market.
Opportunities and Threats Analysis:
Analysing the threats and opportunities of IKEA is described ahead :-
Opportunities: IKEA is the leading furniture supplier and manufacturer of UK.
- With the growing world it has opportunities in expanding its business to other countries (Cavalcante, 2013). This will not only increase its brand name but also generate revenues in the developing countries. Greater opportunities can be obtained in countries like Brazil, Indonesia for future growth.
- Online shopping website of IKEA can be activated for gaining audiences across the world without physically opening retail and manufacturing units.
- IKEA can also open its subsidiaries in other sectors than the furniture market. Investment can be done in the food and health industry with the growing diversion of consumers towards a healthy lifestyle.
Threats: Growing competition is a threat for IKEA. Technology is developing and spreading in all directions like fire. Company must be aware about all the technicalities with furniture market. Lack of awareness can be taken as an advantage by the competitors. Income levels of the consumer is also threat when it comes to inflation. Changes in taxation or increase in income can lead to decline in consumer expenditure and hence IKEA has to suffer losses. Lack of competitive advantage due to low quality and low standard products is a threat for the company.
IKEA is the well know brand which provides satisfactory services to its customers. Firm focuses on utilization of resources effectively and hate wastage. For entering into new Chines market, it will require several resources:
Financial Resources: Chines market is well established and competitive market. There are many organizations which are working well in this surrounding. IKEA needs funds and monitory resources so that it can enter into such complex environment easily. Sufficient financial resources will support firm to establish in such Chinese easily. It will support to market a product and to use attractive marketing techniques so that people take interest in the well designed furniture and buy it products (Battisti and et.al., 2015). Apart from this financial resources will be beneficial for conducting market research. By this way IKEA will be able to identify the needs and expectation of Chinese people. By this way it will be able to launch such products which can meet with their desires.
Human Resources: Employees are the key persons in the organization. Activities, skills of individual help to accomplish the objective of firm. For entering into Chinese market IKEA will require talented persons who can handle operations in international market significantly. Though IKEA has number of skilled person in the workplace who are capable to manage business successfully. But it needs such human resources who can operate business and can handle quarries of other culture people effectively (Lee, Lin and Cheng, 2013).
Physical Resources: For entering into Chinese market, IKEA needs physical resources such as physical outlets, telephone lines, computers, raw materials etc. If it has sufficient materials then it will be able to establish own self in Chinese market easily. In the absence of outlets in visible place or insufficient raw material, firm may get failed in international market.
Information Resources: If IKEA enters into Chinese market then it will require some educational and information resources. Before entering into new market, it will require some basic information regarding competitors, their performance, needs of consumers, buying behaviour of people in such environment etc. This knowledge will support firm to be prepare and to take such strategic decision through which it can gain profit in new market as well (Lee, Lin and Cheng, 2013).
Technological Resources: Chines market is well established market so IKEA needs some advanced machineries and technologies so that it can compete with such big competitors. Because old obsolete machineries will not give optimistic results to the cited firm.
IKEA concentrates on needs and wants to users, so its vision is to create daily life better for all. Its next vision is to offer well designed furnitures at affordable rates so that most of the people can buy products easily. Organization focuses on its valuable employees so its vision is to give them possibilities to grow in the IKEA. To create better workplace environment for them and to make them comfortable in the entity is another vision of IKEA.
IKEA is having the clear visions and is working to translate these visions into mission.
Its mission is to develop skills of employees so that they can be professionals. To develop them in such manner so that they can provide wide range of home decorating products to consumers and can service them better, is the basic reason behind developing of skills of workers.
To be the world largest furniture brand is mission of the company (Iyoha, 2012).
To offer wide range of home furnishing products at lower price to consumers is another objective of the firm. Its mission is customer oriented so it focuses on needs of service users.
Its mission statement is to provide profit to all stakeholders of the organization.
IKEA is an international brand and working well in the corporate world. Since 1943 its growth is tremendous (Rubach, 2013). With the use of SWOT analyse, managers will be able to know the strength and weaknesses of the cited firm. Which will support in making such strategies through which organization can utilize its strong points significantly and can minimize drawbacks.
IKEA is using innovative strategy in the workplace for gaining higher market share in such corporate complex market (Iyoha, 2012). Its drive cost down strategy is the biggest strength of the company. It uses such resources which can produce final goods at lower cost. It maintains quality of furniture but offer lower price products to service users. So that most of the people can afford such low range home furnishing items easily. Global presence is another strong point of IKEA. Due to this its customer data base is high and it is gaining profit and due to this revenues of the firm are increasing continuously (Paliwoda and Thomas, 2013). Cited firm has strong relationship with its suppliers and due to defective supply chain management it operates its business significantly in international market as well. It offers more than 3500 products in the market, thus, wide range of goods and quality well designed products are strength of the company. That is why people prefer this brand for their home decoration (van Putten and et.al,).
Competition is high, some companies such as Walmart, ASDA are the biggest competitor of IKEA. They offer attractive products of consumers and some time their lower rates and attractive discounts influence the mind of customers. As firm is working well but due to lack of flexibility in the workplace, employees some times feel demotivated which results in increasing job turnover. IKEA has to manufacture products by concentrating on environmental polices. It can not avoid these in the workplace. Due to unfavourable polices it some time feel difficult to produce quality products (Peltier, 2016).
IKEA has sufficient financial resources, it can expand in international market easily. Due to increasing economic conditions it has great opportunity to enter into new market. People has employment and their income is quite well. So due to strong financial conditions of some countries, it has chance to expand its business worldwide. Online marketing strategies are another opportunities for the brand. As people prefer to purchase online, it will be beneficial because by this way company will be able to offer products at lower rates. It will help to reduce operational cost of the company. So online sales of products is another great opportunity for cited firm (SWOT analysis of IKEA, 2013).
Increasing competition is the biggest threat, it can harm over all industry to great extent. Financial crises can harm overall business of entire industry. Firm will have to modify its operation accordingly. Government polices can be amended any time, so in such condition IKEA has to mould its operations according to the authorities guidelines. It harms the overall profit of the company.
IKEA should consider certain factors while entering the Chinese markets. These factors are the pricing strategy, marketplace expansion, social and cultural acceptance by the consumers (Cairns, 2014). Pricing strategy must be based on the income and expenditure analysis of the consumers in China. IKEA should focus on acquiring maximum ownership when it comes to retail stores than the joint ventures. This will not affect its freedom of choice and investment. Cultural and social acceptance of the product and brand is necessary for survival in competition. The product must be based on full proof market analysis of China.
This report encloses the detailed strategic analysis based on three critical tools that is PESTEL, SWOT and Porter's five forces model in IKEA. Company's detailed analysis enlightens over focusing on the possibilities and resources it has before entering the Chinese market. These investigations also define the pros and cons that strategic management and planning of business must be considered before taking any crucial steps. This report also contains recommendations that can be considered by the company when expanding in the global market.
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