Internal And External Factors Affecting IKEA In The UK Market Essay.

IKEA's Strengths

IKEA is a multinational company, with its origin in Sweden. The company specializes in ready to assemble furniture’s. Ingvar Kamprad is the owner of IKEA and founded the company in the year 1943. The business model of IKEA has been developed by paying attention to the needs of the customers and selling the products at low process, and this has helped the company to grow globally. IKEA has about 151,000 workers and 345 stores in 42 countries (Al-Zghool). This paper intends to discuss about the internal and external factors affecting IKEA especially in context to its UK operations, followed by the leadership style best suited for the company to suit the changing needs of the environment, and analyzing the CSR activities that the company has been involved in.

Strengths

The strength of IKEA are as follows-

The biggest strength that IKEA has is their thorough knowledge about the customers, the company understands the purchasing factors that affects the buying pattern of the customers, and accordingly they manufacture their products to suit the needs of the customers (GURL, 2017).

The second strength is that IKEA focuses on constant innovation that helps them to cut down on their cost.

Thirdly, IKEA has a brand reputation, and a strong market presence that helps them to penetrate in the market more properly.

IKEA’s relationship with the supplier is also quite strong. The IWAY approach is used to integrate the supplier to the supply chain. This gives a competitive advantage to the company.

Weaknesses

IKEA is a multinational company that means it is present in different location in the globe, it becomes impossible for them to maintain the same standard throughout. Though IKEA tries a lot to maintain a uniform standard throughout, but at times they cannot because of the size of the company and hence it is the biggest weakness.

IKEA focuses on the Cost Leadership Model, and at times the quality of the product is affected because of this. The cost of many inputs and raw materials has gone up and has affected the profitability of the company and in this condition sometimes it becomes an issue to maintain the quality of products simultaneously (Phadermrod, Crowder, and Wills, 2019).

Lastly, there are certain scandals related to environment concerns about IKEA especially related to their operations, and the company faces issues in communicating the policies to the stakeholders and this can also be regarded as the weakness the company has.

Opportunities

The first opportunity IKEA may have been the opportunity to expand their business in various other developing nations which they have not entered till now. It has been reported that the retail market has grown by five percent and this can prove to be a great opportunity for IKEA and its revenue. IKEA can expand its business to countries like Brazil, Mexico, Indonesia and Malaysia and increase its presence for future growth.

The online retail sales accounts for about 17% in UK, the sales in the online has been growing constantly, IKEA has approximately about 870 million customers to their website, they can exploit this opportunity to increase their sales.

IKEA's Weaknesses

Threats

Talking about threats the low-cost business model has been replicated by many revivals, its means IKEA needs to continuously focus on innovation and stay ahead in the competition to survive. There are many local companies that has understood the techniques used by IKEA to survive, this proves to be threat (Sarsby, 2016).

The average income of the people has increased, it means that people might not prefer to buy low quality or low-priced products, which is what exactly provided by IKEA. It may be possible that people might prefer those retailers who provide high end products and prefer products of IKEA less because of quality (Vlados, 2019).

Political Factors

There are many factors that help to maintain the stability of the country for instance the rule of law, effective government policies, low level of corruption and man y more. If any government of any country are strictly adhering to these factors, they can be regarded as the stable and successful one, and the government of UK is one of them. UK in most of the cases ranks as one of the countries having most stable government. UK has a strong economy and also a permanent member of the UN and thus it has a great influence over certain global issues like political, economic, social, cultural and many more. Britain was a part of the European Union for quite a long time, this had created a situation of uncertainty in UK (BBC, 2020). Finally in the year 2020, on 24^th of February Britain came out of the agreement and it was believed that this would help in regaining prosperity, and would also create employment opportunities and eradicate corruption that was slowly cropping up in the country’s political scenario.

Economic Factors

In the year 2019 the GDP that was estimated in UK was around 2.744 trillion US dollars, that showed that UK’s economy stands in the 6^th position throughout the world. The per capita income of UK in the year 2019 was around 41030 US dollars which made UK stand in the 20^th position in the world as per their per capita income (House of Commons Library, 2021). The economy of UK is quite diverse and this is the sole reason behind its success. The market of the country is quite diverse and thus providing equal opportunity to all the business to grow and develop.

At present, the inflation rate in the UK is 1.94% and in 2019 it was approximately 1.7%. It has expanded by around 3.1% by 2017. The Bank of English is of the view that, it should not go over 2% (Inman, 2021). As indicated by some financial experts, the augmentation in the inflation rate is finished and more changes will not be seen in the coming years.

Social Factors

It is believed by the Office of National Statistics that the number of inhabitants in the UK will reach around 74 million by 2039. Currently the birth rate is more than the death rate and subsequently the labour market and medical facility would be a preferred choice. It will create more opportunity for the existing and the new organization to set up their base and fulfil needs of more customers. This fact cannot be denied that UK is the world's greatest customer market. Insurance agencies, land, and medical care businesses have acquired a great deal of benefit in the past populace rise.

Opportunities for IKEA in the UK Market

Technological Factors

UK is technologically quite advanced and so it gives extraordinary freedoms to business people to incorporate innovation in their business. Each innovation and advancement add to the nation's economy (Worldometer, 2021). In the recent days UK is gaining more growth in the tech field. British technology organizations are prevailing over Indian, Japanese, Korean and American foundations.

Legal Factors

The organizations that are operating in UK need to follow the Employment Act 1996. It is very important to follow this act in various situations for instance the lowest pay permitted by law, occasion pay, maternity or paternity leave, this act secures their freedoms. Then again, the Equality act 2010 safeguards individuals from being victimized due to their race, sexual orientation, shading or some other contrasts (OEC, 2021).

Environmental Factors

Developed countries face environmental issue because they are highly industrialized, and even they cannot deny industrialization as it would affect their economic growth. Government, private enterprises, and other foundation associations have been making strides and spreading awareness about reusing, less plastic waste, and eco-accommodating items and administrations. UK faces various natural calamities one of them is changing climate. Yet, the British summer draws in travellers from everywhere the world. The travel industry in UK earns around 127 billion pounds consistently (OEC, 2021).

UK in most of the cases ranks as one of the countries having most stable government. UK has a strong economy and also a permanent member of the UN and thus it has a great influence over certain global issues like political, economic, social, cultural and many more. Moreover, it also withdrew its name from the European Union thus they have regained prosperity and will prove to be great opportunity for IKEA as the government will be able to strongly support the business. Simultaneously economic factors can also prove to be an opportunity for IKEA as the GDP and the per capita income is quite high that means people of UK are capable enough to afford the products manufactured by IKEA. Technological factor, environmental factor and the legal factors may prove to be a threat. IKEA in order to remain in the competitive market needs to be consistently work on their innovation, or else there is high chance that they might have to get out of the competition, almost all the companies in UK are technological advanced. If by any chance the laws related to environment and employment are neglected, there is high chance that IKEA may face criticism, affecting image of the company (Sin et al., 2021).  

The clear vision is the biggest strength that IKEA has that helps them to provide value to the customers, whatever the market situation is, that has created a strong positioning in the market and helped them fight back the threat and weakness and work more on opportunities so that they can perform better than their competitors and handle with the criticism they face at times with CSR activities. In addition to that IKEA uses KPI to measure their strengths and also improve their relationships with the suppliers, so that they can negate the weakness and threat and turn them into opportunities. To maintain their image in the CSR activities IKEA has implemented the “Green” business model that has provided them with a huge opportunity in order to attract more customers towards their business, the negative image of the company has been change with the positive one, by the help of the model (AYODELE). The company knows that people of UK are ethical customers, and are more inclined to products that are eco-friendly, not only it has helped the company to increase their customer base, but also has helped them to get support from the government. This is how IKEA uses its strength and transform threat and weakness into opportunity.  

Threats for IKEA in the UK Market

 The democratic leadership/management style can be said to fit the needs of IKEA. There are many reasons to it the democratic leadership style urges the staff to partake in decision making in the interest of the business. Regularly administrators might counsel workers or could ask them their perspectives on an official decision. Subsequent to being approached to include their viewpoints or ideas the employees of IKEA might feel like that they have a more prominent significance to the business, consequently they are bound to invest more energy into their work. It is contended that through permitting employees to partake and counsel their directors the co-workers might feel that they have accomplished objects/goals with their inputs. The final outcomes are that the employees will feel more inspired and an eagerness to work more diligently (Al Khajeh, 2018). Democratic based administrative styles rely intensely upon solid communication between each level of management. The leaders should have the option to clarify thoughts and comprehend what other employees are trying to say. This means that that Ikea would take towards its administration style due to the more laid-back climate and the proficient correspondence procedures (Spinoglio, 2020). It will encourage employees to take part in democratic leadership style in the interest of the business choices. Continuous communication with employees or ask their ideas on an official choice and the directors should have the option to clarify thoughts and comprehend associate input (Fiaz, Su, and Saqib, 2017). Subsequently, they will bound to invest more energy on their work.

44% of millennial employees say that they are probably going to work more diligently when their manager tunes in and holds customary meetings with them, as per a new Gallup research (Vasilescu, 2019). They are not exceptionally useful when working in an excessively various levelled setting and frequently need to leave for a more adaptable organization young representatives desire opportunity and need to be effectively associated with key turn of events and the dynamic cycle. They need to feel important, which is the reason they ought to follow democratic based leadership. Democratic leaders will engage them to utilize their craftsmanship to work more earnestly and stay faithful to the organization, in this way working with business development (Goleman, 2017).

In the present competitive world, organizations need to perform better to prevail upon clients. Through perusing on the web audits and utilizing different assets, customers realize precisely how a specific organization looks at to its rivals. In such a situation democratic leadership style will undoubtedly perform better. This is on the grounds that it is portrayed by informed business choices and supporting devotion amongst employees. Such employees are utilized to opportunity, have better work relations, and discuss better with customers. The employees can capitalize on their qualities to get the work done, and, accordingly IKEA will hold existing customers and prevail upon new clients, making more income and guaranteeing development (Heath, and Tillin, 2018).

The present world is portrayed by consistent developments that make new business sectors and regularly lead to the dislodging of business arrangements. An organization like IKEA has shown that it is feasible to develop inside a brief time frame. It has developed dramatically and turned the whole market on its head inside only a couple of long periods of entering the business. Among different reasons, this gigantic achievement is on the grounds that the organization authority embraced a culture that will give employees the opportunity to settle on creative choices. Democratic leadership helps in educating the employees that will assist the employees with adapting to extreme disruptions, accordingly guaranteeing consistent development (Pearson, and Rost, 2021). 

The Stable Government and Strong Economy of the UK

In the year 2007 IKEA was rebuked for using minors and illegal logging by its employees for use in the supply chain. In a meeting arranged by BBC IKEA was rebuked for refusing to join Rugmark, now known as Good Weave International, which certifies with an imprint that no child labour was used in the assembly of its products. As a result, stating that Rugmark signatories, which include global organizations, were by the same token ""If you have been to India, you will realise that large numbers of these mats are delivered in the homes of people," Dahlvig then the CEO of IKEA clarified. He said that floor coverings are made in countries like India and if anyone has been there, they would have realized that large numbers of these rugs are made in the homes of people. These are family business where children are also involved by their families to learn the skills so that by the time, they are matured they can be self-sufficient (Barnett, Henriques, and Husted, 2020).  Dahlvig was then asked why IKEA did not take its production somewhere else to which he answered he does not think it is a good idea. They should not leave because it is difficult to be somewhere else. Dahlvig went on to say that there is an economic rationale for it as well "From a natural and social standpoint, he believes that all global corporations coming to developing nations and providing might have an impact. Because they are present in such a situation, they may influence and affect how persons generate and how things are completed, therefore hastening the course of events." This discussion is very instructive in terms of IKEA's thought and implementation (Cosmo, and Yang, 2017). Many international organizations do not go beyond striving to avoid negative publicity and taking the path of least resistance by indiscriminately partnering with groups that seem good to the general public. IKEA stands out in this area, according to all sources. It really goes out and investigates the origins of the problems and then takes action to address the problem. IKEA, through its IKEA Foundation, which "focuses on protecting children from child labour, providing a better life for expatriate children, and empowering young women and girls."

The internal stakeholders for IKEA are the employees, owners and the management. For instance, Marianne Barner can be one of the stakeholders that IKEA has. Marianne Barner being the area manager of for the carpets has interest in the success of the business, because the salary and her entirely depended on IKEA’s success. The external stakeholder of the company are the suppliers, shareholders, government, local communities, and the NGO’s.

Looking at IKEA it can be stated that a multinational company can be a multi-billionaire company if they adhere to the CSR policies. IKEA has proactively worked to minimize the harmful social and environmental issues by using funds, energy and investing time. IKEA believes in “doing good business, while being a good business.” IKEA strictly adheres to the CSR objectives and has ingrained it in their management, unfortunately IKEA cannot control every aspect of its business and hence it is thus not completely immune to criticism related to CSR (Laurin, and Fantazy, 2017).

The Diversity of UK's Market

What distinguishes IKEA from some of the other multinational firms is that it has more effectively integrated its CSR aims into its administrative thinking and business duties. While not immune to infringing reactions, IKEA does not succumb to unaware strains for void quick arrangements and exposure, instead taking proactive steps to definitively resolve the concerns by devoting time, resources, effort, and assets (Morsing, and Roepstorff, 2015). While regularly creating CSR arrangements, their enthusiasm to go beyond basic implicit norms should be obvious in their effort and time spent collaborating with suppliers to establish a consistent environment. Ikea’s long-term partnership strategy with its suppliers fosters quality, administration, cost, as well as environmental and social responsibility, while aiding them in establishing optimum circumstances for producing high-quality items (Hahn, 2015). IKEA may seek specified quality, affordability, and social responsibility from its inventory network by participating in a continuous advancement process with its sources rather than ephemeral links.

Conclusion

Thus, it can be concluded by saying that political stability, economic condition, social factors can prove to be an opportunity whereas the technological, legal and the environmental factors can be a threat. Clear vision, KPI as a metric, and green business model has helped the company to turn threats and weakness into opportunity. Democratic leadership style will benefit the company as it involves the employees into decision making process. Once the employees feels that they are valued by the company their level of efficiency increases and thus positively affecting business. Lastly, IKEA has faced certain amount of criticism related to the CSR activities, because being a multinational company it is not possible for them to control and manage all business firms all around the world, but still, they try their best to adhere and implement new CSR policies in order to maintain their image and minimize any societal issues.  

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