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Unit 1 Business Environment Assignment Copy - IKEA
This program has been executed over the topic “Business and the Business Environment” with a motive gain the knowledge of the different types of organisations, the different aspects of the organisations and the manner in which the activities of the organisations are operated.In the first part of the program comparison will be made among the two companies so as to analyse the similarities and the differences in the various aspects of the organisation and a short essay which detailed information will be presented for IKEA. Second part of the program will discuss the analysis of the macro environment of IKEA with the help of the PESTLE analysis and analysis of the strengths, weaknesses with the help of SWOT analysis and analysis of the link between the strengths and weaknesses of IKEA with the external macro environment and a reflective analysis.
A. PowerPoint Presentation
About Mac & Jack's Brewing Company
Comparison between IKEA and MAC & JACK’s BREWING COMPANY
B. Short essay – IKEA
IKEA is one of the most popular furniture retailers of the world which is engaged in the designing and selling of thefurniture by focusing over the quality, price, durability and attractive designs. IKEA is operating at a large level and for the management of the human resource and the operations of the organisation it is using hierarchical structure. The operations of the IKEA are divided among the different levels of the organisation which are responsible for the execution of the operations of IKEA.The roles and responsibilities are delegated among the employees and the lower level employees are responsible or accountable to the upper level employees (Svenungsson, 2012). The objectives IKEA have been framed with a motive to provide quality products to the customers, providing high quality products to the customers all the time and valuing the customers for the creation of strong customer base. The functions of IKEA are effectively performed so as to produce the quality products. The major functions of IKEA are purchase, distribution, production and sale of the furniture products designed and produced by it. For the attainment of the objectives set by IKEA it has adopted various strategies which are focused over creation of diversity in the business so as to enhance the performance of the employees by generating team spirit, adoption of the operations and management styles as per the country, stability in the financial condition, flexibility in the operations and independence. The different functions are executed by separate departments so as to eliminate the chances of performing a task twice which leads to wastage of the resources of the organisation. The different functions of IKEA are communicating with each other in an effective manner so as to execute the operations in an effective manner without any delay and ensuring that the performance of the organisation is improving (Daunfeldt, et. al., 2015). The different functions of IKEA are performing the operations of the functions as per the set standards so as to maintain the quality of the products offered to the customers. Link between the different functions is essential as the link and communication helps in the flow of the information among these functions. It has adopted a flexible environment for the employees which have enhanced the performance of the employees. This interconnectivity between the different departments of the IKEA has helped in enhancing the performance and generation of the team spirit among the employees for the execution of the operations.This interconnectivity has benefited IKEA in different ways and it has helped in effective utilisation of the resources available with IKEA and effective flow of the information among the employees. For example: the production function of IKEA is dependent on the raw material without which the production cannot take place. For this purpose of communication with the other department it has adopted a formal channel of communication in which the mails are sent to the raw material department for the requirement of the raw material for the execution of the production function (Helmefalk, et. al., 2016).
Section 1: PESTLE analysis
PESTLE analysis will be used for the purpose of analysis of the impact of the external macro factors over the performance of IKEA. PESTLE analysis for IKEA is as follows:
- Political factors: political factors include the government and political parties and environment which create impact over the performance of the organisation. The rules and regulations of the country get affected due to the interference of these aspects of the political environment. The economic condition in United Kingdom is stable which provides a favourable environment to the business for the execution of the operations of the business. IKEA is operating in UK and is operatingin a suitable environment which has resulted into rise in the performance of IKEA. The political environment of United Kingdom is favourable for IKEA which has helped IKEA in enhancing its performance and the customer base (Kolios & Read, 2013).
- Economic factors: economic factors include the economic environment of the country which affects the financial condition of the business at large. Economic factors include the inflation rates, tax rates, exchange rates, level of employment, and gross domestic product of the economy, income level of the individuals and of the overall economy. The economy of United Kingdom is stable which has favoured the business environment of UK. Economic conditions also affect the purchasing power of the customers due to which the business and its performance gets affected. For example: in 2009 the sales of IKEA was dropped by 1 % and IKEA has eliminated the jobs of 5000 employees. And the revenues of IKEA were getting affected due to the change in the exchange rates and the inflation rates. The change in the economic conditions has also affected the prices of the raw material required for the production of the furniture of IKEA (Lindegaard, et. al., 2016).
- Social factors: social factors include the choice of the customers, taste, preference, purchasing behaviour of the customers and the trends of the market. All these aspects create negative as well as positive impact over the performance of the business. Social factors need to be analysed by the business regularly so as to analyse the trend prevailing in the market. IKEA is engaged in the designing, production and sale of the wide range of furniture products to its customers and for the purpose of designing the products it need to analyse the trends of the market and the taste and preference of the customers which helps in meeting the expectations of the customers. For an example: with the change in the trend in the market the use of the different materials for the production of the furniture has increased which can affect the performance of IKEA(Srdjevic, et. al., 2012).
- Technological factors: technology is one of the most crucial aspects which create huge impact over the performance of the organisation. The change in the methods or techniques used in for the designing and manufacturing the furniture can affect the performance at large. With the change in the technology the machine intensive techniques are being used by the organisations which enhance the performance of the organisation at the place of the labour intensive technique. For example: IKEA has started offering the products and services through the online mode due to which the customers get attracted towards IKEA as the designs can be viewed by sitting at homes. This innovation has enhanced the customer base of IKEA.
- Legal factors: legal factors include rules, regulations and laws which are framed by the government and the regulatory body of the country for the purpose of ensuring the conduct of the different entities as per the rules and regulations. These legal factors act as a framework within which organisation need to operate its activities. For example: Forestry legislation and regulations have been framed by the government of UK so as to ensure that the forest and the environment are protected from the harm. The reduction the forest will affect the planet at large and will leads to increase in the health issues in the humans. Laws have been framed for the purpose of maintaining the quality of the products offered by IKEA(Lindegaard, et. al., 2016).
- Environmental factors: environmental factors include the climatic conditions and the weather conditions which create impact over the business in positive as well as negative manner. For the manufacturing of the products IKEA need raw material and other resources and these resources are provided by the environment. IKEA is taking initiatives for the safety and security of the environment and is planning to use different types of material for the manufacturing of the furniture.
Section 2: SWOT analysis
IKEA is operating its business at international level which has helped in promoting the brand name.
The designs and the manufacturing process are as per the requirement of the customers which has enhanced the customer base of IKEA.
The use of the renewable resources as raw material for the manufacturing of the products has helped IKEA in fulfilling its responsibilities towards the society.
Effective communication in the different functions of IKEA has helped in enhancing the performance and maintaining the quality of the products offered by it.
The focus of IKEA is over the price, quality and durability of the products which has enhanced the satisfaction level of the customers and helped in creation of the strong customer base (Schirone, 2012).
IKEA is lacking in using the concept of diversity in its product range which act as a weakness.
Lack of a transportation facility the distribution channel of IKEA is getting affected.
Major dependency on European market has affected the performance of IKEA as the majority of its stores are located in Europe.
The market is growing for the furniture industry.
The demand of the customers is increasing for the innovative furniture products.
Increase in the online business has provided an opportunity to IKEA for enhancing the performance and for the expansion of the area of operation.
The increase in the level of competition affects the performance of IKEA.
The availability of the resources can act as a threat for IKEA.
The change in the trend of the market can also affect IKEA (Carrier, et. al., 2016).
Section 3: Analysis of manner in which strengths and weaknesses and external macro factors are linked with each other
Strengths and weaknesses of the organisationcreate impact over the capability of the business to grab the opportunities available in the business environment and dealing with the threats or the issues which affects the performance of the organisation in a negative manner. Strengths and weaknesses of an organisation are directly linked with the external Marco factors as these factors are not in the control of the business. Strengths of IKEA help in dealing with the adverse impacts of the business environment and utilising the positive impacts of the business environment for enhancing the performance of the business. There are various external macro factors present in the business environment which create impact over the performance of the business and the effectiveness of the business. IKEA is having a strong employee base which has helped it in dealing with the increasing demand of the customers for the products. IKEA has placed its focus over manufacturing of the products as per the demand and taste of the customers and for this purpose it is using the methods for analysing the trends and providing products at affordable prices. The weaknesses of the IKEA affect the performance and capability of the business in dealing with the adverse impacts of the external macro environment factors. IKEA need to analyse the market conditions so as to deal with them and improve the satisfaction level of the customers. Macro environment factors affects the performance of the business at large as these factors are outside the control of the business. For the purpose of dealing with these factors of the business environment IKEA need to utilise the strengths of the business in an effective manner.
B. Reflective analysis
Micro environment factors can be explained as those factors which create impact over the ability of the businessin providing products as per the requirement of the customers.These factors affect the business at small level and organisation can control the impact of these factors. Macro environment factors can be explained as those events or situations which affects the whole economy at large. These factors are not in the control of the business. This report has discussed the different aspects of the business environment and the impact of these aspects over the performance of the business (Julián, 2014). This report has analysed the business environment and the different factors of the business environment by using the different methods of analysis. For the analysis of the macro environment factors PESTLE analysis has been used which has analysed the political social, economic, technological, legal and environmental factors of United Kingdom so as to analyse the impact of these factors of over the IKEA and its performance. The different factors have been discussed in relation with United Kingdom which has helped in the analysis of the positive as well as negative impact of these factors over IKEA. For the analysis of the strengths and weaknesses of IKEA and opportunities and threats which can affect the performance of IKEA, SWOT analysis has been used. SWOT analysis has helped in the analysis of the strengths and weaknesses of IKEA which are internal part of the organisation and affects the effectiveness of the organisation in dealing with the external environment of the business. It has also discussed the opportunities and threats which are present in the external environment of the business which affects the business and organisations uses the strengths for dealing with the threats and utilising the opportunities available to it for enhancing the performance and developing a strong customer base. A link has been established between the strengths and weaknesses of the IKEA with the factors present in the external environment. These factors present in the external environment of the business are those which affect the economy of the country. From the analysis of all these aspects it has been analysed that IKEA is capable of dealing with the issues arising due to the external factors of the business environment. All these aspects discussed in this report have helped in the analysis of the business environment and the impact of the various elements of the business environment over the business and the performance of the business (Anderson, et. al., 2011).
This program has discussed the different aspects of two organisation and the different factors which create impact over the business and are part of the business environmentof the business. For the analysis of the external macro factors PESTLE analysis has been used which has provided information & knowledge of the environmental factors creating impact over the performance and effectiveness of IKEA.This report has explored relationship between the organisation and the stakeholders who have interest in the organisation and its operations. It has also explained the manner in which the external macro environment factors create impact over the decision making process of an organisation.
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