Its global presence means that the brand is subject to several forces. In this era of globalization, from political to economic, social and technological, there are several forces that affect the brands and their business. IKEA is also affected by these forces. The maker of home furnishing products is known for its low prices and great quality products.
Conclusions are also made. Introduction and Company overview IKEA, a global furniture retailer, is established on the concept of offering wide range of functional, well-designed and low-cost home furnishing products.
The sales turnover is recorded as The rate of corporate tax tax that corporation pays on its profits and not on income impacts profits, hence lowering after-tax income.
Hence, IKEA regional profits are subject to regional tax laws. It is also learnt that corporate tax rate impacts the structure of the business.
IKEA business structure, a subsidiary model Interview by Gareth Bell, propels its subsidiaries to abide by regional tax laws. Some of the major reasons for imposing tariffs and trade barriers such as protecting local employment, new industries, consumers, retaliation and national security, tariffs increase the prices of imported products into the country Kourdoumpalou and Karagiorgos, This benefit the local producers who are not forced to reduce their prices, however local consumer pay higher prices Reynoso, ; Rindel et al.
Considering the case of IKEA and its reliance on local manufacturers for its products rather than importing products into the local market, tariffs and trade barriers seemingly have little influence on its business profits.
As an example after the fall of communist government in Poland, political situation drastically transformed, affecting the buyer-supplier relationship of IKEA. For example, rapidly growing economies provide higher standard of living and higher employment rate.
In particular with the emerging economies showing high potential of economic growth, provides a promising future Thelander, for corporation such as IKEA.
In regions such as India and China popular for their low-cost yet skilled labour, provides IKEA with a wide profit margin. For instance, high inflation rate such as in the UK BBC News, deforms consumer behaviour, destabilising markets and generates avoidable shortages of resources Zentes and Schramm-Klein, Similarly, in countries with high inflation rate, trade unions demand higher wages, distorting the entire value chain.
As an example, ageing population is less likely to buy furniture Mintel Oxygen, where as younger generation would demand trendy furniture that should also add value to their purchase. As an example, a major shift of rural population to urban areas due to job creation indicates higher demand of less costly products for new families to get settled.
RFID helps businesses to reduce their cost of operations through inventory shrinkage, smart labelling, self-stocking, efficient checkout process etc.
In addition, technological innovations in the retail sector like consumer mobile payment, and mobile gift cards promises consumer to experience easier, and reliable means of payment Reynoso, Therefore local governments ensure that environment can be protected, compelling businesses to meet specific standards to reduce the adverse affect of business activities.
Compliance with these regulations is one of the most essential success factors. This means that products that are manufactured must comply with the consumer protection legislations of respective country of operations. In the UK, Sale of Goods Act requires products to be sold in good quality with no faults or problems, should serve the purpose, and must be described for the purpose they serve legislation.
So the additional costs come from changing business practices, compliance with the law, damaged reputation and image within the consumer market etc. Even though the company was complying with local laws against advertising women in Saudi Arabia, nevertheless accusation of contradicting with its Group value i.
Competitive rivalry among firms IKEA operates in an extremely competitive industry, defined by many other lowpriced, good quality furniture manufacturers namely Galiform, Euromarket Designs Inc.
Nonetheless, global recession had affected the furniture industry, one of the hardest hit industry then other sectors. As a result previously premium-priced furniture manufacturers Dreams UK is now reported to increase its market share Mintel Oxygen, against IKEA, thus making competition even fiercer.
However, considering that furniture is now low spending priority according to consumer behaviour affected by recession, competitive rivalry is likely to diminish.
Threats of new entrants This force is considered weak and the probability of development of new competition for the furniture retailer is insubstantial, due to market saturation, high amount of capital investment, and skilled labour required to become a global giant in discountedDIY- furniture manufacturing sector.
Other factors such as suffering of pricy-labelled household items and furniture considered as a low spending priority Mintel Oxygen, due to recessed economies, further weakens this industrial force.
Bargaining power of suppliers This force is weak because suppliers of IKEA are constantly competing to maintain their relationship with the global giant who can easily access resources and capabilities in the form of potential suppliers, seeking opportunities to form affiliation with IKEA.
However, IKEA values to create the strategic relationships with suppliers, to empower its suppliers in certain extent excluding their bargaining power. Therefore, this weak industrial force in case of IKEA actually sanctions the corporation to optimise resources and maximise its profits.
Bargaining power of buyers This force is strengthening by factors such as intense competition, and wide choice of substitute products. Nevertheless, the threat of substitute products is weak because of IKEA unbeatable expertise in manufacturing low-cost, good-quality flat pack furniture.
On the other hand, buyer power is also controlled by IKEA growth strategy of opening its stores 3. Threat of substitutes As mentioned above, threat of substitutes is weak force here.
IKEA specializes in manufacturing functional, low-cost, good-quality furniture.PESTEL analysis and Porter's five forces model; By Fathi Salem Mohammed PESTEL analysis is a useful tool for understanding the “big picture” of the environment, in which you are operating, and the opportunities and threats that lie within it/5(8).
IKEA: SWOT analysis Essay This paper looks at IKEA, one of the global leading furniture retailers and a very successful brand. It examines the environment in which IKEA operates using SWOT, PESTEL, Porter’s 5 Forces and Value chain analyses to inspect the attractiveness and competitiveness of the industry.
Ikea's Pestel & Porter's 5 Forces Analysis. Title: IKEA 1 - Introduction IKEA is definitely a store that comes to mind when shopping for furniture. IKEA Group Report contains a full analysis of IKEA Porter’s Five Forces Analysis. The report illustrates the application of the major analytical strategic frameworks in business studies such as SWOT, PESTEL, Value Chain analysis and McKinsey 7S Model on IKEA.
SWOT, PESTEL, Porter’s 5 Forces and Value Chain Company Overview PESTEL Analysis PESTEL (Political, Economic, Social, Technological, Environmental and Legal) analysis is a business measurement tool that is used . a pestel/pestle/pest analysis of ikea IKEA operates its more than stores in various parts of the globe.
Its global presence means that the brand is subject to several forces.