Assignment on IKEA PDF

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The internal, external and competitive environment in IKEA. Corporate social responsibility of the company. Energy Consumption by IKEA, sustainable sourcing, PESTLE analysis and description of the competitive environment of IKEA. Situational Analysis, market structure, demand, SWOT analysis, Porter'...

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Unit 1 Assignment 2

IKEA Introduction Ikea is a worldwide recognized home furnishing seller. The organisation has been in business since 1943 and developed quickly. The company built a great reputation and recognition, over the time. This could be supported by the fact that the company is currently the world’s leading furniture retailer and performs trades and sales in the EU (Statista, 2018). Most of the products sold within the company are influenced by the stakeholders, particularly the customers, so that it meets everyone’s requirements. There is currently over 9,500 products on the companies market, these consist of;  Home & office furnishing.  Equipment  Lighting  Accessories There are 18 outlets in the UK, the first one was launched in 1987. Over 60 years, IKEA grown from entrepreneur into a cluster of companies with 76 thousand associates. The foundation of IKEA and where it came from was Sweden. The company’s product are derived from different parts of the world – making it one of the most diversified and progressive organisations.

P4. The internal, external and competitive environment in IKEA. Internal The internal culture of IKEA is very friendly. IKEA is a Swedish company which bring the stereotypical perspective of citizens of Sweden as friendly and hard working. People enjoy helping out each other and living in close contact with the nature around them. These particular aspects based on IKEA creates the basics of IKEA’s internal culture. (IKEA) states that the firm has multiple key values which the company and the employees within it, follow. These consist of; Togetherness “Togetherness is at the heart of the IKEA culture. We are strong when we trust each other, pull in the same direction and have fun together.” – meaning that team work is one of the main factors, while working within the industry of IKEA

Caring for people and planet “We want to be a force for positive change. We have the possibility to make a significant and lasting impact - today and for the generations to come.” – Changes such as renewable energy replacement, and making the firm more eco-friendly.

Cost – Consciousness “As many people as possible should be able to afford a beautiful and functional home. We constantly challenge ourselves and others to make more from less without compromising on quality.” – IKEA tries to make their products cheaper and affordable for every person. The low prices lets the company have a bigger group of customers.

Simplicity “A simple, straightforward and down-to-earth way of being is part of our Småland heritage. It is about being ourselves and staying close to reality. We are informal, pragmatic and see bureaucracy as our biggest enemy.” – This shows that the communication between employees is informal and mostly conclude of simple tasks. Also suggesting that people working at IKEA have more of an open mind and are able to structure and schedule their work themselves.

Renew and improve “We are constantly looking for new and better ways forward. Whatever we are doing today, we can do better tomorrow. Finding solutions to almost impossible challenges is part of our success and a source of inspiration to move on to the next challenge.” - IKEA is trying to improve and change their company each day. This will allow lower prices to be put on the market for their products, and attract more customers because of the affordable price.

Different with a meaning “IKEA is not like other companies and we don’t want to be. We like to question existing solutions, think in unconventional ways, experiment and dare to make mistakes - always for a good reason.” – This point links to the social external factor of IKEA, where they removed same-sex-couple to get a better response from the Russians, but ended up backfiring, by people discriminating this decision. Which counts as a mistake on IKEA’s end.

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Unit 1 Assignment 2 Give and take responsibility “We believe in empowering people. Giving and taking responsibility are ways to grow and develop as individuals. Trusting each other, being positive and forward-looking inspire everyone to contribute to development.” – This shows that the trust factor within the company is high and everyone is truthful and have responsibility over their own decisions.

Lead by example “We see leadership as an action, not a position. We look for people’s values before competence and experience. People who ‘walk the talk’ and lead by example. It is about being our best self and bringing out the best in each other.” – Meaning that people can go up in ranks in the organisational structure (greater responsibility and power over others) but at the same time everyone is treated equally.

Corporate Social Responsibility of IKEA For many years, IKEA has focused on economising with resources. As the business is running, the company is constantly upgrading and changing ideas of products to use less resources and materials such as wood to make it cheaper and better for the environment (less deforestation). Such as; turning waste into resources, sourcing energy and materials in a responsible way and protecting natural resources. IKEA wants to create a better life for the future generation and communities touched by their business. They support education of children, help refugees and participate in different supporting programs via IKEA Foundation and in cooperation with UNICEF. In IKEA you can find lots of money-saving products and solutions in IKEA range to help people save energy and water, and reduce waste. IKEA focuses on three areas, which consist of;  Healthy & sustainable living – IKEA is looking into enabling people to generate renewable energy and reduce their home energy and water consumption, which would have a great impact. Water, food and air quality is also a big factor for people around the world. The impact of pollution and waste is already visible in everyday life for many people. IKEA is looking into making more sustainable, life affordable and appealing products. New ideas, solutions and innovations ways of making a better living for their customers. IKEA itself, provides healthy and nutritious food. The company does not only provide sustainable products, healthy food, solutions and services but supports their customers and give advice on how to make positive changes in their lifestyles. IKEA states “until now our focus has been on helping customers to become energy and resource efficient and reduce waste.” this shows that the company is helping the world to have a better environment and promoting a new mind-set for healthy and sustainable living.  Circular & climate positive – The global resource scarcity is already impacting IKEA’s business and, more important, the lives of people. IKEA is looking into develop responsible sourcing programmes, continue to improve resource utilisation and dramatically reduce greenhouse gases in absolute terms, independent of how much we grow the IKEA business. IKEA turns waste into resources, therefore zero waste goes to landfill. Making renewable and recycled materials with a positive environmental impact. IKEA reduced absolute green-house gas emissions to contribute to limiting global temperature which is currently increasing, instead the firm is aiming to only use renewable electricity and heat in IKEA operations and stores. Lastly, the organisation is forest positive, meaning that the company only takes materials, such as; wood from sustainable sources, to eliminate forest degradation and deforestation.  Fair and equal - IKEA has always been focusing on children and families. When making changes the organisation always keep children in mind, in their opinion doing this will create positive change and opportunities for families and communities. IKEA has gained the ability to directly support gender equality as well as rights and opportunities for elderly people, people with disabilities and other. As IKEA is a global industry, it can provide opportunities for migrant workers, refugees, and other groups who are moving away from their home by choice, necessity or force. The company provides emergency support, training and employment and work with others to create a change in the system that put people at risk. The company operates 340 stores in 28 markets around the world. The home improvement and furnishing chain aims to cause positive impact on local communities, where its stores are located. (Save the Children) IKEA organizes a packaging event in all of their stores in Sweden where customers and representatives from ‘Save the Children’ to produce more than 37,000 welcome backpacks filled with toys and other products for children. Furthermore, in the UK, IKEA has planted one million trees in communities across the country and in Australia, IKEA Perth and IKEA Adelaide employees help to improve the environment of which children live and develop.

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Unit 1 Assignment 2 Energy Consumption by IKEA:  Products sold by IKEA are 50% more efficient on average, compared to 2008.    

Buildings owned by IKEA increased 15% in efficiency in 2015 (Fiscal Year) compared to 2010 (Fiscal Year). The organisation also has over 700,000 solar panels installed on their buildings. The company owns and operates 327 wind turbines around the world and have invested in 730,000 solar panels on it buildings worldwide. Since 2009, the firm has invested 1.5 billion EUR into renewable energy and in 2015 the furniture seller committed another 600 million EUR for investments in wind and solar energy. In 2016 the company produced renewable energy equivalent to 71 per cent of the energy it uses in its operations.

Sustainable Sourcing:    

All cotton used by IKEA comes from sustainable sources. 61% of wood came from more sustainable sources in 2016. IKEA aims to source wood from 100 per cent sustainable sources by 2020. All fish and seafood sold by IKEA is bought from fisheries and farms certified by the ‘Marine Stewardship Council’ and the ‘Aqua culture Stewardship Council’. IKEA serves more than 100 million cups of coffee each year. The coffee range is certified by ‘UTZ’ as well as ‘EU Organic’.

(Wikipedia, 2018, https://en.wikipedia.org/wiki/IKEA - Accessed 21st November 2018)

PESTLE M3 – Effects of business environment on IKEA D2 – Situational Structure on IKEA (PESTLE) External Political – The Company operates in more than 41 countries, therefore the company must abide by the regulations of each. Some countries may have similar influences on the business but that not always the case. Political stability within a business is particularly important as without it, the economic stability is impossible. This means that the organisation would lose profits in one location over another, this is dependent on who is in charge and what role they have within the business. Furthermore, unfriendly government can make importing and exporting foreign products (goods) inconvenient for the business and make it a hassle. IKEA is dependent on relationships with the government. Good relationships will make the company remain stable therefore the revenue of the business is secure and is not at stake. Asian countries, such as; India and China have become more open to international companies, this creates an opportunity for the organisation to move into the Asian markets and expand their business. Many policies may differ from other countries but as stated (Europa) 85% of the product rules are harmonised in the EU, which means that the same rules apply in all European countries. For example, the European Union VAT, is value added tax on goods and services within the EU. Different countries have different amount of VAT, in Luxembourg it is currently 17%, while in Hungary it is 27%, meaning that wherever IKEA operates in, it has to follow particular product instructions in each individual country, such as VAT. Economical – Ikea is influenced by the worldwide economy, like every other organisation. Some big companies are still suffering from the 2007 recession. Thousands of people lost their jobs. This responded with consumers making conscious buying decisions. Items which were bought were based on the need rather than luxury. As IKEA is a company which sells furniture and other accessories which are not essential or mandatory. Which means that at the time many people did not spend money in their store. This put the company in crisis as there weren’t as many purchases, therefore the organisation had to get rid of employees to pay the bills and other necessary financial spending. To get purchases and be able to run their business, IKEA priced their wares

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Unit 1 Assignment 2 conservatively. From then onwards the prices of the furniture became cheaper and made the company the most popular globally. The inexpensive furnishing has been continued ever since. On the business side, IKEA is influenced by a strong and weak dollar. If the stronger the dollar gets, the more US brands can lose money, but now the economy has strengthened – while still recovering. This made more jobs for people and sales are rising again. Social – This is one of the rules businesses should follow. This will allow the organisation to suit the needs of the customers and will avoid offending any social values. IKEA is one the companies that keep this rule close, every product is affected by. However, the following effort is not always well-received. As an example, IKEA removed a same-sex couple from a Russian magazine. This change was applied because homosexuality is still considered shameful and dishonourable in the country. Therefore this was done to suit the general thinking and interpretations of the Russian culture. Whereas, in other countries homosexuality is more widely accepted and appeared to be a problem within IKEA’s business and reputation. Removing the couple from the magazine put IKEA in a bad position and lowered their reputation from the hate from the citizens. Another example, the organisation removed women from a Saudi Arabian catalogue, which had the same, negative impact on IKEA’s business, and once again put the company in a hot seat. Ikea monitors what is appropriate for a particular location, based on the countries’ culture and society. If the organisation would have printed the same magazine worldwide, it most likely face a bigger retaliation and backlash from each country. Which would end up with the business losing profits. Which is the main aim and objective of IKEA, like any other big company. One of the negatives on the company is the amount of one-star reviews on their products and the business itself. One of the biggest customer service review websites (TrustPilot) shows that the company’s rating is very low and is even below 2/10 stars. This could make the company lose customers therefore less profits and turnovers. The reviews mostly consist of products not being received, appalling customer service, or when products are delayed. Some of these problems could be the delivery driver or the delivering company itself which is used by IKEA but as IKEA’s name is on the package received by the customer, they’ll always be the one receiving the bad press Technological – In real time, internet is one the main things in the world and most shopping is done online. IKEA still to this day offers paper catalogues as well as an electronic one. This helps the business to keep people who are computer illiterate updated with offers, prices and new products. While also having a web copy of the catalogue, customers can access it at any time. Seeing live offers and other deals. Also any updates could be emailed to registered users of the website so customers are constantly up to date with new products and other important notices. Having a website for IKEA is highly important as most of the customers will be shopping online and would want to view the company on the internet, this will allow the shareholders to see the main factors of the company, the reviews on purchases, description and any other important information. People are able to view the closest IKEA store to them by allowing locations or typing their address. Their website has many useful factors, such as; searing products by a certain room (bathroom, bedroom, kitchen, etc...). Other searching filters could also be applied, an example would be, buying products below £10, which is achieved by changing the product’s price range. Online, IKEA aims to provide the best experience of viewing products for their customers. If people are unable to attend to their store, they can still experience similar observation online. Moreover, IKEA puts in effort to get the ideal customer satisfaction as it gains many benefits if the people are pleased with their purchases and the product quality. This leads to new positive reviews, customers may refer the store to other people, and finally brand loyalty, which is one of the most important factors in an organisation. The company puts in a big amount of effort into knowing their consumer base which is why IKEA is the biggest furnishing company to this day. Legal – Like all businesses, IKEA is required to follow laws and regulations of every government. As IKEA is a worldwide company which trades globally it is essential to obey the rules within each, particular country, otherwise it could possibly cause problems for the organisation which can end up with fines, restrainment, and

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Unit 1 Assignment 2 restrictions on the business or even banned from exporting or importing products to the country. Also, as IKEA is a physical store, staying-up-to-date with labour laws is essential. Example, IKEA was in the news because of poor product quality. (TheInteriorDesignAdvocate) Furniture and products provided by IKEA have fallen or tipped over, this ended up injuring people or children and has even ended up in fatal accidents. These situations ensured the organisation to carefully check and ensure that their products are totally safe. Otherwise, this may have a massive negative impact on their reputation which they may not recover from and also monetarily, which are affected by lawsuits. Environmental – IKEA is an eco-friendly company, which invests in it. (The Guardian) The organisation has gave over $1 billion towards renewable energy in poorer nations. IKEA’s aim is to have fully renewable energy in their store. This could be completed by investing in solar and wind panels. Another objective of IKEA is to use more sustainable sources for materials such as wood and cotton.

Competitive Environment of IKEA There is more competitive pressure if there are more rivals in the industry. In Europe IKEA does not have many number of rivals, which is where major revenue is generated from the business. This is achieved through IKEA’s unique cost leadership and product differentiation. Currently, IKEA is facing competition from B&Q, which is the largest DIY retailer in Europe and third biggest in the world. Also, in china; its biggest worry is that it is facing competition from many international and Chinese chains who are copying its products. Multiple stores in china have IKEA’s catalogue in their stores and tell their customers that they’re able to reproduce the same products and furniture at a lower price. IKEA’s online catalogue makes it easy to view and copy. Other IKEA’s competitors consist of;  Walmart  Amazon  Wayfair  Sears  Tesco  American Woodmark  Pepperfry (India)  Private label brands IKEA could be facing a substitute of their products, but it’s highly unlikely. Furniture made with wood can only be substituted by plastic furniture, but wood is bio degradable which is the reason wood is preferred over plastic. (Simplicity Sofas) states that “IKEA was the first company to unify manufacturing, distribution and retailing on a global scale”. One of IKEA’s innovations is, redefining home furnishing as a “lifestyle”, which is included in their catalogues as sections, rather than just individual products. The product mix expanded into furniture and other accessories or products, provided by the company, from the “lifestyle” approach. (Statista, 2018, https://www.statista.com/topics/1961/...