IKEA is a Swedish multinational conglomerate which design and sell ready to assemble furniture, home appliances, kitchen appliances, and other products. The company is spread across the globe and believes in providing the better lifestyle. This is the straightforward business idea which has shared values and culture (IKEA, 2021). Here is the PESTEL analysis of IKEA.
Political Factors
As IKEA is operating across the globe, over 41 countries, it is important for the company to follow the rules and regulations of each. IKEA to consider the political stability of the country for successful operations. Political disability might cause the loss in revenue for the company. One of the main examples of this can be strict policies for importing and exporting of goods, which demotivates the company in entering in that country. It is necessary for IKEA to remain stable in order to prevent its revenue from risk.
IKEA is considering entering in the Asian market after analyzing the relationship between India and China. However, running operations in Pakistan is still not into consideration due to political disability and custom charges (Frue, 2018).
Economic Factors
The GDP, per capita income, purchasing power, employment rate, and inflation has great impact on IKEA’s business operations. These factors are responsible for the economic slowdown. IKEA has successfully managed its prices very well. This helps in reducing the pressure arise due to economic fluctuations. However, IKEA still needs to be careful with this factor. Due to Covid, many country is facing with employment issues and people are price sensitive. IKEA’s prices are affordable and low as compared to competitors; the sales of IKEA are not affected negatively (Pratap, 2017).
Social Factors
Before entering in new market, it is important for the company to understand the cultural and social factors. IKEA analyze this factor very well, but still had to face backlash, when its photo-shopped pictures of women in Saudi Arabia for promotion. Furthermore, understanding the social trend of every country, it is operating in is very important. Producing the furniture or accessories according to the trend will boost the sales. As people prefer to buy online, it is important for IKEA t have social presence and keep updating the websites to increase the sales (Shaw, 2019).
Technological Factors
Technology is becoming very important these days. From finance to marketing, customer service to human resource, hence everywhere, businesses need information technology for providing better services to their consumers. IKEA always focuses on providing the experience to its customers through digital channels which feels like convenient shopping experience. IKEA has increased the expectations of consumers and focus on providing best customer service. Ikea believes that customer service leads towards more sale. Cognitive intelligence and artificial intelligence which have enabled the retailers for understanding consumer behavior (Pratap, 2017).
Environmental Factors
As people are more considerate towards environment and climate change, it becomes a big responsibility for the companies to provide the services and products which are sustainable and environmentally friendly. IKEA recently released its 2030 sustainability strategy which highly focuses towards recycled and renewable materials. It is very difficult for IKEA as it has 400+ stores across the globe, but it is determined to achieve this. Moreover, IKEA is also investing in wind and solar panels and sourcing cotton and wood as sustainable sources (Frue, 2018).
Legal Factors
Legal factors are always risky for businesses as rules and regulations changes with the period of time, and any hassle with laws can be costly for the companies. IKEA have faced several issues over furniture in past. Hence, IKEA now make sure its products are safe from any lawsuits and has patents. Although IKEA had recovered financial loss but the damage on the goodwill was big. Before starting business in any new country, it is important for IKEA to consider the legal factors (Shaw, 2019).
Conclusion
To conclude the PESTEL analysis of IKEA, it is seen that company is performing very well by considering all the factors and expanding its operations. It is also intended to enter in Asian markets. This helps IKEA is evaluating the critical factors which can affect the business adversely.
References
Frue, K. 2018. PESTLE analysis of IKEA. [Online], Available at: https://pestleanalysis.com/pestle-analysis-of-ikea/, [Accessed on: 25th April, 2021].
IKEA, 2021. About us. [Online], Available at: https://about.ikea.com/en/about-us, [Accessed on: 25th April, 2021].
Pratap, A. 2017. IKEA PESTEL analysis. [Online], Available at: https://notesmatic.com/2017/04/ikea-pestel-analysis/, [Accessed on: 25th April, 2021].
Shaw, A. 2019. IKEA Pestel analysis. [Online], Available at: https://www.marketingtutor.net/ikea-pestle-analysis/, [Accessed on: 25th April, 2021].