LO1 Analyse the impact and influence which the macro environment has on an organisation and its business strategies

P1 Applying appropriate frameworks analyse the impact and influence of the macro environment on a given organisation and its strategies

Macro environment in general consists and considers the external environment in which an organization chooses to operate. This external environment of both big and small firms includes the functional elements like the political, technological, economical and social factors. The fluctuations and dynamic changes in which directly throws a light in the overall growth and success parameter’s of the entire business structure. Considering the mentioned organization in the scenario, IKEA, a giant industry and sector operating in the department of manufacturing furniture, is also irrespective of its status and other superior features, affected by these typical macro environmental elements (Elf, 2020). These impacts and influence can further be segregated into two categories namely the positive and negative ones. A detailed elaboration of which is discussed below:

Positive impacts: The superior and well to do impacts that a macro environment can posses on the overall working conditions of IKEA can directly or indirectly be related to the beneficial changes in the tax scale rates, laws and its implementations, generic business rules and regulations along with the timely legislations as applied upon the organization and its working procedure from period to period (Laurin, 2017). All the same, few of the social functional factors including the levels of customer satisfaction also holds the capability of bringing a positive impact upon the organization as a whole, which can in future assist it in capturing new markets along with increasing its customer base.

Negative impacts: The negative or the disadvantageous impacts and influence’s of the external macro environment upon the business of the organization can be the every growing and rapid dynamic changes and alternations in the technological related advances backed by major economical related factors such as the changes in the structure of taxation policy, major and the current time crucial factors like trends (which generally depicts the changes in the taste and preference pattern of the target audiences due to alterations and fluctuation’s in the external environment). Changes in the overall policies of the government along with its implementation patterns that are mainly included in the political factors when discussing about the external macro environment in detail (Jiang, 2018).

On the economic front, the entire performance executed by IKEA on a yearly basis also depends and relies upon the performance parameters of the economy the company is operating and running its overall business structure in. This factor in turn has the capability of affecting the business for a long term basis. For instance, owing to the sudden rise in: ‘inflation’ in the economy as a whole will not only level up the purchasing patterns of various citizens and the target audiences of the company but will also reduce the demand for different products offered by the company in the final consumer market. However, looking at the scenario positively, reduction in the import rates can thereby assist IKEA largely as after its implementation the organization would be able to purchase resources at a much lower cost which would thereby only assist the organization in delivering its products at a comparatively lower price range to its customers.

Moreover, for a well to do brands like IKEA it is all the more complicated as it is solely considered one stop shop for each of the arising household needs of various individuals in more than 40 countries of the world being routinely featured in the news for the influences being caused upon the company on the grounds of culture insensitivity making the company frame, alter and also build up new strategies owing to the constant changes in and fluctuations the macro environment Casadesus-(Masanell, 2019).

Further, for a firm as old like the IKEA it is bound to have issues as the typical macro external environment of the organization specifically revolves around controversies, ever arising challenges and growth bars focused on the time and again framed strategies of the firm.

M1 Critically analyse the macro environment to determine and inform strategic management decisions

The strategic management decisions of IKEA are most of the times stressed upon collecting the business gains in which the organization typically develops, competes and frames strategies for coordinating the entire portfolio of the business.

Since, organizations like IKEA are often viewed liable for creating, generating and fostering end to end value via their business operations the strategic management final decisions must be so framed that it ensures the business thrives in the long run in the competitive space.

Strategies are peculiarly concerned for fostering and nourishing a long lasting competitive edge for the organization’s ultimate products which is produced along with the services that are rendered to the target audiences. Considering the macro environment space of IKEA, along with the countries it operates in, IKEA’s management related decisions should focus upon what its target audiences want to purchase with IKEA telling and influencing their decisions as to what to purchase exactly (Baraldi, 2019).

Another critical macro environment element that has a sure shot impact on IKEA and its operations is the present time state of global economy, which in the year 2020 is highly suffering from the uncertain patterns of growth in both developing and developed markets of the world. Where the GDP rates are forming both the high and low bar graphs instead of constantly decreasing or increasing impacting the overall real time wage parameters in its different countries of operation thereby directly affecting the consumption patterns making it negative. For instance, if the target audience’s confidence level is weak due to constant degradation in their wage levels, then in such a scenario, it is bound to have a negative overall impact on the sales bar of IKEA. For dealing with the same, IKEA can and must utilize its age old strategies it uses to compete against some of its well to do competitors. Which is if the company’s rivals introduces any similar product to dominate the market space, IKEA initiates and takes over the competitor by introducing its own stripped down and even budget friendly pricing policy to deal and reply back to its competitors along with dominating the market space and creating a reputation for itself in front of its target audiences (Yadav, 2020). In case if IKEA utilizes the same strategy for dealing with it’s the challenges its macro environment poses at it, the firm is bound to flourish in the long run for having a polished and end to end capable strategically managed decision making policy.

LO2 an organisation‟s internal environment and capabilities

P2 Analyse the internal environment and capabilities of a given organisation using appropriate frameworks.

IKEA even in the contemporary present time is regarded as the globe’s one of the most triumphant worldwide level organization and therefore in order to enhance its performance levels, the firm not only assess its external and competitive space for revealing the key opportunities that stands forth the firm to take advantage of but it also takes initiatives to respond, alter and assess its internal surroundings for dealing and resolving any internal issue following an extremely proactive and dynamic methodology by utilizing its crucial strengths for mitigating its every emerging weaknesses. Though via its years of continuous strong performance IKEA has been capable of generating a strong identity and reputation for itself it still needs to take appropriate steps for retaining back its brand value (Wu, 2020). The correct analysis of these elements plays a significant role in the overall strategic management and planning procedure along with being closely coordinated in the environmental scanning procedure of the firm.

Considering the internal analysis of IKEA, key areas like the entire structure of the company, the cultural ethics followed by the organization, the generic values, beliefs and the other expectations are to be considered foremostly besides the resource analysis of the firm such as the skill set possessed by the firm, the competency levels and the valuable knowledge gained by the firm by its years of continuous performance.

Throwing light on the resources held by IKEA, it is very much evident and clear that the firm has been time and again capable to convert its given resources into its final peculiar capabilities. Where by its years of delivering end to end performances their competencies are now on a global basis regarded much more superior that the ones held by their competitors.

Furthermore, IKEA has also period wise uplifted and shown its full on potentiality in converting its abilities for framing and brining a difference in its profit charts. All the same, in the competitive space IKEA has been deemed as a successful organization owing to its durability, meaning the actual rate, gauging which the organization’s resources and capabilities either mitigate or is even regarded as becoming non competitive, where the rapidly developing technologies and concepts keeping in the mind the dynamic and ever changing scenario, most of the time a given firm’s core competency levels becomes obsolete but however, in regards to IKEA the durability of its competency is highly applaudable.

Another major strength of IKEA and its internal environment is its imitability, meaning the ultimate rate by which an organization’s resources and other such peculiar abilities can be imitated or copied by other leaders of the industry for dominating the market space (Ehsan Ullah, 2016). Here, yet again, the business model utilized by IKEA for years as of now along with its end to end magnitude is a crucial thing that has in turn assisted the organization on an overall basis to keep its competitors at bay levels quite strategically in so many years of its operations.

On the internal front, IKEA’s management is one such case of supreme management of the company’s finances along with having an impeccable procedure of accounting. Managing and balancing tasks and activities on the internal levels have not only been exasperating for IKEA but it has also assisted in showing a significant pathway to the organization towards creating and maintaining a set of activities which but only assist the firm in generating value in the competitive space (Kubiak, 2020).

The mentioned organization, internally takes cautions and crucial steps for involving each of the activities beginning from sourcing the raw materials from its strong supplier base towards moving the commodity for manufacturing the final output and thereby distributing it to its target audiences. The company’s superior management strategies on the grounds of value chain has proven to be one of the major factors behind its success which has period and season wise highlighted the firm’s capability to the general public.

The bargaining power and strategies utilized by the firm against its suppliers has assisted in making the firm cost effective which in turn works in their favour in the long run making them capable of selling their final commodities to their target audiences at a much affordable and a budget friendly price range.

M2 Critically evaluate the internal environment to assess strengths and weaknesses of an organisation‟s internal capabilities, structure and skill set

As mentioned, the resources of IKEA backed by its gained knowledge of years and its procedural tactics are few of its major strengths as it enhances the capability of its workers working in the respective areas for utilizing them effectively and wisely as the organization has each of its functional resources just in the required locations for enhancing its strengths. All the same, IKEA besides having physical and finance related abilities has also been successful in implementing the much needed and framed strategies for touching end to end perfection parameter’s on the internal front as well (Alänge, 2016).

However, apart from the aforementioned strengths, few of the issues and drawbacks of the company considering the internal operations of the firm are that IKEA faces timely issues from the various unions. These unions are apparently not very satisfied with the management of the company as they are never permitted or even consulted in any of the decision making sessions of the firm, in the contemporary world as reported this has created few issues for the mentioned organization as a whole causing a major barrier in its smooth operations.

Next, IKEA as per the reports published, faces issues whenever they plan to relocate and shift their stores to new location’s of the world, with its employees time and again speaking against the threat they feel against their job roles (Alrubah, 2020). Where rumours about store closure due to underperformance has generated a sense of risk amongst its working employees. Though IKEA fully understands and follows each and every strategy for satisfying its final target audiences yet this threat and risk consideration amongst its employees clearly indicates the weak mutual and internal environment of the firm being carried forward since years as of now.