Free IKEA Company Analysis Essay Sample
The IKEA Company is a multinational organization operating in more than 42 countries around the world. The company was founded in 1943 in Sweden, and it designs and sells furniture, home appliances, accessories and small motor vehicles. The company was founded on the idea of offering a wide range of well-designed furniture and home accessories at low prices. The operations of the organization are mostly in retail from the various stores across the world.
In the UK, the IKEA Company has more than 18 stores, and it is expanding with targets on the UK high streets. The management of the organization is based on organizational sustainability taking into consideration the environmental and economic issues as it expands. The company is also a non-profit organization. The founder, Ingvar Kamprad created a philanthropic Stichting Ingka Foundation to further the advancement of the advancement of interior designs. The foundation owns a private Dutch company while the Ingka holdings owns majority of the stores on the franchise level. This analysis will discuss the various issues in the UK and how they impact on the operations of the IKEA company operations.
The macro-environments in the UK include political issues, and they have an impact on business operations in the county. Political issues include tax policies, fiscal policy, trade tariffs, etc. that the UK government imposes on any given fiscal year. The tax posed by the UK, for instance, is 30% of the business profit. This means that the IKEA profits are subjected to 30% tax. The taxes reduce profits, and this affects the company. The other political factors in the UK that affect the operations of the IKEA Company include the trade tariffs and trade restrictions. The UK imposes trade tariffs and trade restrictions to protect the new local industries, promote local employment and national security. Since the IKEA Company has no realistic match, and the company sells its products at low prices, imposing tariffs on these imported goods will increase the price of the products in the UK market. This will be an advantage to the local manufacturers who will sell their products to match the price of the IKEA company hence fair competition.
Political issues in a country go hand in hand with the economic issues, and they affect the operations of a business in almost the same way. Economic issues affect the business decision making and operations based on factors such as economic growth rate, interest rates, inflation rate, etc. Since 2009, the interest rates in the UK have been kept at a historical low of 0.5%. The Bank of England reduced the interest rates to ensure banks lend at a lower interact rat. Lower base rates lead to low-interest rates paid by businesses on borrowings. Thus, the IKEA Company enjoys the low-interest rates when borrowing from the UK banks. Since the economic crunch of 2008, the low-interest rates in the UK are ensuring economic growth and thus increased consumer spending. An increased consumer spending will increase sells from the IKEA store hence increased profits.
The cost of labour in the UK is high, and this affects the profit margin of the IKEA organization. To survive in the market with high labour costs, the company manufactures most of its products in China where the cost of labour is low, and it imports the finished products to the UK market. The company, however, was affected in 2012, due to the high inflation rates experienced in the UK. The high inflation rates changed the consumers behaviours causing destabilization in the market. This had negative impacts on IKEA, and it contributed to reduced profits.
The UK is among the large markets for furniture, and it is a big market for the IKEA organization. However, due to the since 2008 economic crisis and the current economic conditions, there has been a decline in property prices due to high unemployment rates.
Advancement in technology has also had an impact on the IKEA operations in the UK. Technological factors have affected the cost quality of outputs. These advancements have helped the company in advertising and increased sales. For instance, the IKEA Company has an online retail store where customers in the UK can buy and pay for IKEA products online and wait for delivery to their homes. The delivery of products bought using online payment has also been made easy through technological changes in the mode of transportation. Since the company sells goods for self-assembly, it is easier to carry these goods in flat-packs reducing the risk of damage while delivering the furniture.
The company also has utilized the use of social media as a tool for marketing its products in the UK. Social media platforms such as Facebook and Twitter are among the various social network channels that the company is using to market its furniture products and interacting with potential customers. The social media gives a platform where the buyer can directly ask questions about the furniture like prices and new products availability, hence increasing the accessibility and sales in the UK market.
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The IKEA furniture designs are based on the Swedish designs that were used during the foundation of the company. With the increased technology in the UK, the company is using computer software to design and develop designs used in the UK market.
There are also social issues in the UK that have direct and indirect impacts on the IKEA Companys operations in the UK. The UK media is among the most influential Medias in the world, and lately, there have been concerns about environmental issues in the society. There have been concerns about the increased deforestation, water depletion, and global warming. Since the IKEA Company manufactures products mostly from wood, the increased concern about deforestation and global warming have become a challenge to the companys future growth prospects. The population changes in the UK are other factors affecting the revenues of the IKEA Company in the UK.
Considering the sustainability strategy of the IKEA organization, the company considers different social responsibilities i.e. ensuring balanced employment opportunities for the people in the UK and also to contribute towards social development in the form of donations. Social sustainability of an organization helps it to give back to the society and also increase its goodwill to the people. The organization gives an opportunity to the disabled people to gain experience and knowledge to enhance their future job prospects. Through its course for the people with disabilities, it has helped in meeting the lack of experience for people with disabilities in the retail industry; this has helped in increasing the company, goodwill and hence increased sales. The IKEA organization also has a foundation in the UK that is dedicated to saving children from child labour.
The legal system in the UK has also had had an influence on the operations of the IKEA organization. Since the IKEA organization deals with furniture made from mostly timber, there are various legal requirements that the organization must adhere to. Since the UK is a member of the EU, there are some EU legal rulings regarding furniture, product safety, carbon emission standards, environmental obligations, and employee working conditions. The regulations are to help the business to operate safely without causing damage such as fire or injury to the workers. The regulations concerning furniture in the UK, apply to all persons in the business supply chain. These laws affect the business in a positive way has they help in bringing order into the furniture industry and ensures fair competition.
Recent regulations concerning furniture in the UK include the new copyright protection law. The law is set to make it illegal to manufacture and sell copies of mass-produced designs after 2020. The law is stipulated to give copyright protection to designs like those given to works of art. Currently artistic designs are given protection for only 25 years, and the law is seeking to increase the protection period to 70 years. The IKEA organization in the UK will benefit from this new law as it will give copyright protection for the IKEA designs, a move that will encourage the designers and ensure the cutting edge designs of the company are protected.
Also, the organization is sensitive to the environmental factors that might impact on its operations in the UK market. Due to the growing concerns from the environmental authorities in the UK over the exploitation of natural forests and environmental pollution, the organization has adopted sustainability strategies by recycling most of its waste materials to produce energy. It has also adopted the production of a model chair (OGLA) that is made from plastic waste.
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The IKEA organization is a multinational company dealing in furniture and home appliances. The company was founded in Sweden, but it has various stores around the world. In the UK, the company has over 18 stores across the country. The operations of the company in the UK are affected by various issues ranging from political issues, economic, social, technological and legal issues. To survive in the European market and especially the UK, the organization has come up with strategic plans involving the said issues. For instance, the organization has utilized the technological advances in the UK to promote it produces, also through social involvement, the company has managed to create a good public image hence increased sales. However other issues such economic crunches have led to reduced profit margins for the organization.