Table of ContentsIntroduction and BackgroundApproachExternal EnvironmentA PESTEL AnalysisPorter's Five Forces AnalysisInternal EnvironmentVRIO Analysis“At IKEA, our vision is to create a better everyday life for the many people. Our business idea supports this vision by offering a wide range of functional, well-designed home furnishing products at prices so low that as many people as possible will be able to afford them. "Say no to plagiarism. Get a tailor-made essay on “Why violent video games should not be banned”?Get the original essayIntroduction and backgroundIKEA was founded in 1943 in Sweden by Ingvar Kamprad. The word IKEA was the acronym of his name and address: "Ingvar Kamprad" and "Elmtaryd, Agunnaryd" the name of his farm and the name of the village in which it was located Kamprad's new business was essentially the fruit of the effort of. one man and sold fish, vegetable seeds and magazines to customers in his area. Then, in 1950, Kamprad laid the foundation for the future direction of IKEA by adding furniture and home goods. furnishings to the mail order line Stores were opened in neighboring Norway and Denmark, before the company opened in Switzerland (1973) and Germany (1974). in Europe, the first store was opened in the United States (in Philadelphia in 1985). As of December 2012, IKEA was present in 41 countries as a global destination store for home furnishings, appliances, ready-to-assemble furniture, home accessories and kitchen products. It is the world's largest furniture retailer, with over 301 stores and 30 franchised units. The company's largest market is Germany with 44 stores, followed by the United States with 37 stores. The private company's sales volume is estimated at more than $24 billion, with $3 billion coming from the United States, according to recent reports. According to the company, 533 million people visited its stores last year. IKEA products are exclusive to IKEA and generally reflect its Swedish heritage with modern architectural design. As of December 2012, the five largest IKEA stores in the world were: 552,000 square feet in Stockholm, Sweden. 494,000 square feet in Shanghai, China. 470,000 square feet in Shenyang, China.457,000 square feet in Tianjin, China.450,000 square feet in Berlin, Germany.The company offers armchairs, bath suites, ottomans, bedding, beds and bedrooms, bookcases, boxes, CD storage, ceiling lights, children's furniture, clocks, coffee tables, kitchenware, cable management, desk accessories, dining tables and chairs. It also provides tableware, entertainment units, floor lamps, picture frames, children's instruments, kitchen organizers, kitchen units, leather sofas, lighting, mattresses, mirrors, chairs and office suites, posters, rugs, sofas and more. Management analysis for the IKEA company, by identifying and analyzing: The external environment using tools such as "PESTEL" and "Five Porters" to discover the threats and opportunities of the company. The internal environment using the "VRIO" analysis tool to evaluate the company's resources and therefore the external environment. AnalysisA PESTEL analysis is a framework or tool used by marketers to analyze and monitor macro-environmental factors (external marketing environment) that impact an organization. The result is used to identify threats and weaknesses. Inasmuch asOne of the world's largest furniture retailers, IKEA's success is linked to its ability to identify external political, economic, socio-cultural, technological, environmental and legal factors that can influence its business.PolicyIKEA operates in nearly 41 country, political forces in each country can affect its business in that country, from supply chain process to sales, these political forces include:a. Government bureaucracyIn fact, IKEA faced this problem in Russia, as it waited for years to receive all the permitting documents to open its branch in the city of Samara, which led IKEA to freeze in 2009 its new investments in Russia.b. Stability of political systems Most of IKEA's activities take place in Europe and the United States of America, where the developed political systems are stable, which provides a comfortable environment for investors. On the other hand, IKEA does not work in the middle of Africa, where some countries are not politically stable.c. Government policies regarding taxation, customs tariffs and trade restrictions. Different tax rates across countries are sure to affect any multinational country. In 2016, IKEA was accused of avoiding more than a billion euros in taxes over the past six years by ministers in the European Parliament and it was published that "Ikea founder Ingvar Kamprad, created a complex tax structure in the 1980s to escape Sweden's high tax regime. » Any changes in customs tariffs and trade policies will also affect the company's operations and profits, especially most IKEA furniture. are manufactured abroad and then imported to different countries. When IKEA opened its doors in China in 1998, it could not set the appropriate price for its products, both for the company and the consumer, because it was burdened with heavy taxes on imported products, as China exports almost All. . Today, around 22% of the IKEA range is produced in China.Economica. Country Growth Rates It would be interesting for IKEA to choose countries with high growth rates to open or even expand, as these high growth rates impact the salaries of the country's employees and, therefore, the sales of the country. 'IKEA. Economic Recession The conditions of the global economy determine how much any company will earn because it controls people's purchasing power, even if IKEA manages the prices of its products well. This may be why IKEA entered the Chinese and Indian markets, which were least affected by the global recession. Exchange RatesUnstable exchange rates will impact business operations, especially since most of IKEA furniture is manufactured overseas, so these unstable exchange rates between EUR and USD and d Other major currencies will affect IKEA's revenue. Interest Rate Interest rate is a very common risk for businesses with an interest bearing asset in the form of loans, if it is variable it would constitute an economic risk for any business. Personal tax rates, unemployment level and inflation rate IKEA's revenue will be directly affected if personal salary taxes in the country, unemployment level or inflation rates are high.Scio-Culturala. Different TastesPeople around the world may have different tastes which IKEA is forced to accommodate. When the company entered the United States in 1990, executives were confused about how many vases they were selling before learning from store employees that Americans used the vases for drinking, not putting in.flowers. Different thinkingAgain, people can also have different thinking and the company follows the best procedures to make profits. In November 2013, French authorities put IKEA and two of its executives in France under investigation for espionage allegations because they obtained their employees' police records. to check their past, they may have hired private detectives.c. Different culturesMaybe what is acceptable in Sweden is not acceptable elsewhere. In Saudi Arabia, IKEA was criticized for its literature in removing women from its Saudi catalogue. Age of consumers The age of IKEA's consumers is between 20 and 30 years old, so IKEA must take this into account when preparing the designs and manufacturing of its products and must find a way to attract different ages to maximize your income. Adoption of technological changesTechnological changes have an impact on business performance, efficiency of the company and its employees. IKEA has an up-to-date website including catalogs, checking items before going to stores, ordering online and contacting customer service, IKEA must continue to adopt these technological changes.b. Increasing connectivity around the worldThe growing number of Internet users "A new report from a United Nations agency says 47 percent of the world's population now uses the Internet" could help companies like IKEA expand further, Simply anyone connected to the Internet can enter IKEA website and check out its products and even place an order.Environmentala. Environmental laws regarding natural resources like wood As a giant furniture retailer, IKEA relies on wood in its business and therefore must comply with environmental laws regarding wood. All IKEA wood is sourced in accordance with the IWAY Forestry Standard, which prohibits wood from sources involved in forest-related conflicts or illegal harvesting.b. Use renewable energyTo have a positive impact on the environment and be part of the solution to climate change, by 2020, IKEA will produce as much renewable energy as it consumes using renewable sources (100 %).c. RecyclingIKEA uses recycled materials - wood, plastic, paper and metal - wherever possible to protect the environment. Legal noticesHealth and safety, equal opportunities, advertising standards, employment laws, consumer rights and laws, tax laws. IKEA must ensure that the company's activities and operations do not violate the rules and regulations established by the governments of different countries. IKEA had a problem with workers in India wanting to work overtime contradicting its internal daily limits (8 hours). Porter's Five Forces AnalysisPorter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths. Threat of EntryThe threat of entering the market and stealing IKEA's stockIs low to moderate, there are relatively low barriers to entry into the furniture market, but new entrants will not be able to benefit from the same economies of scale, cost advantages and product differentiation as those achieved by IKEA at least during the initial operating period. If a new player enters the market, it will take time, effort and investment to compete fiercely with IKEA. So, the threat of a new entrant is quite low. Threat of Rivalry Competition in the furniture industry is moderate, although IKEA has many competitors like..