Unit 6 Strategic Management Sample Assignment

Task 1

PESTEL Analysis:

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 economic policies or profit margins of IKEA constitute the economical factors. government's control over interest rates and 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 the launch of technologically advanced 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 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.

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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 goals and objectives, it has to look forward to giving the least advantage to the buyers over bargaining. The more the bargaining, the less 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 the company's bargaining power. It has to purchase resources at the lowest price possible so that the production cost is achieved at a 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 companies's products at a 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 IKEA. This rivalry in the furniture industry is a measure of competitiveness in the market.

Opportunities and Threats Analysis:

Analyzing the threats and opportunities of IKEA is described ahead: -

Opportunities: IKEA is the leading furniture supplier and manufacturer in the UK.

• With the growing world, it has opportunities for 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 and 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 of the 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 increases 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.

Task 2

IKEA is the well-known brand which provides satisfactory services to its customers. Firm focuses on utilization of resources effectively and hate wastage. For entering the new Chinese market, it will require several resources:

Financial Resources: The Chinese market is well-established and competitive market. There are many organizations which are working well in this area. IKEA needs funds and monitoring resources so that it can enter such a complex environment easily. Sufficient financial resources will support firms to establish in such China easily. It will help to market a product and to use attractive marketing techniques so that people take interest in the well-designed furniture and buy its products (Battisti 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 expectations 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 and skills of individuals help to accomplish the objective of firm. For entering the Chinese market, IKEA will require talented people who can handle operations in international market significantly. Though IKEA has number of skilled people in the workplace who are capable of managing business successfully. But it needs such human resources who can operate business and can handle quarries of other cultures effectively (Lee, Lin and Cheng, 2013).

Physical Resources: For entering the 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 itself in Chinese market easily. In the absence of outlets in visible place or insufficient raw materials, firm may fail in international market.

Information Resources: If IKEA enters the Chinese market, then it will require some educational and information resources. Before entering a 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 prepared and to take such strategic decision through which it can gain profit in new market as well (Lee, Lin and Cheng, 2013).

Technological Resources: The Chinese market is well-established market so IKEA needs some advanced machines and technologies so that it can compete with such big competitors. Because old, obsolete machines will not give optimistic results to the cited firm.

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Task 3

3.1

Vision

IKEA concentrates on needs and wants to users, so its vision is to make daily life better for all. Its next vision is to offer well-designed furnitures at affordable rates so that most 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.

Mission

IKEA has 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 the skills of workers.

To be the world's 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.

3.2

Task 4

SWOT Analyse

IKEA is an international brand and working well in the corporate world. Since 1943, its growth has been tremendous (Rubach, 2013). With the use of SWOT analysis, 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.

Strengths

IKEA is using innovative strategy in the workplace to gain higher market share in such a complex corporate 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-priced products to service users. So that most 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, 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 et al.).

Weaknesses

Competition is high; some companies, such as Walmart and 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. The 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 policies. It can not avoid these in the workplace. Due to unfavourable policies, it sometimes feels difficult to produce quality products (Peltier, 2016).

Opportunities

IKEA has sufficient financial resources; it can expand in international market easily. Due to increasing economic conditions, it has great opportunity to enter a 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, the 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).

Threats

Increasing competition is the biggest threat; it can harm over all industries to a great extent. Financial crises can harm the overall business of an entire industry. The firm will have to modify its operation accordingly. Government policies can be amended at any time, so in such a condition, IKEA has to mould its operations according to the authorities guidelines. It harms the overall profit of the company.

Recommendations

IKEA should consider certain factors while entering the Chinese markets. These factors are the pricing strategy, marketplace expansion, and 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 more 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 a full-proof market analysis of China.

Conclusion

This report encloses the detailed strategic analysis based on three critical tools: PESTEL, SWOT, and Porter's five forces model in IKEA. The 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.

References

• Battisti, W. P. and et al., 2015. Good publication practice for communicating company-sponsored medical research: GPP3. Annals of internal medicine. 163(6). pp. 461-464.
• Cairns, G., 2014. A critical scenario analysis of end-of-life ship disposal: The “bottom of the pyramid” as opportunity and graveyard. Critical perspectives on international business. 10(3). pp. 172-189.
• Cavalcante, A. S., 2013. Understanding the impact of technology on firms' business models. European Journal of Innovation Management. 16(3). pp. 285-300.
• Hill, C. W., Jones, G. R., and Schilling, M. A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
• Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education.
• Iyoha, F. O., 2012. Company attributes and the timeliness of financial reporting in Nigeria. Business intelligence journal. 5(1). pp. 41-49.
• Lee, C. C., Lin, T. T., and Cheng, P. C., 2013. The determinants of the transportation outsourcing strategy for the express delivery company.Service Business. 7(2). pp. 207-225.
• Paliwoda, S., and Thomas, M., 2013. International marketing. Routledge.
• Peltier, T. R., 2016. Information Security Policies, Procedures, and Standards: Guidelines for Effective Information Security Management. CRC Press.

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