Political Factors Affecting Ikea Corporation
The world criticized Ikea corporation over its use of prison labor during the cold war era. The corporation admitted that it had used prison labor from East Germany from the period of 1970s to the 1980s. Ikea suffered a great brand reputation loss and triggered political pressures and controversies.
Another political factor that affects the Ikea Corporation is the disruption in the supply chain. The Asian markets in recent times have lowered resistance to the penetration of global brands. For instance, Ikea has now access to Indian and Chinese markets due to their flexible political policies. Giants like Ikea have the opportunity to flourish in these developing markets. Ikea can easily rule out the local manufacturers due to its increased quality and brand image. However, ensuring a continuous supply chain is necessary to carry out operations in these markets efficiently. As the supply chain markets of Ikea are based in Europe, any instance of political instability can disrupt the business.
China has declared Taiwan an integral territory of the Chine people and government. Ikea’s boxes represented the two nations as separate regions which caught an immense reaction from the Chinese public as well as from the Chinese government. Furthermore, other disruptive forces prevalent within the political factors are dishonesty and corruption in a state, and rigid bureaucratic approach penetrating the political arena.
Economic Factors Affecting Ikea Business
Currently, Ikea has developed business operations and chains around 52 countries in the world. Therefore, to carry out the operations of the company in a smooth and effective manner, Ikea must follow its rules and regulations. Profits and gains in the revenue are determined by the prevalent global economic conditions. In the same way, the recessions in the global economy caused an overall decline in purchasing capacity of the people. The product costs of Ikea have remained in the people’s hands thereby, Ikea managed the changing economic conditions.
People in many developing countries find it difficult to manage their economy against the rising dollar. The strong rate of the dollar against their countries can be dangerous for many international brands like China, or India as they would be unable to pay for the product’s price. Many companies like Apple, Nike Walmart, and more are vulnerable to the strong dollar in these markets.
The brand has gained more popularity due to its policy of affordable pricing for all. The public is aware that they can purchase quality items from Ikea at a low price and are full of modern style and equipment. Ikea has swept many markets due to its affordable economic policy. However, this policy is a restraint for the company when it comes to raising the price according to the rising prices of raw materials.
Social Factors Affecting Ikea
Socio-culture is the underlying psychology of people. The company must bear this in mind while it advertises its products. The cultures and values are variables that are changing with the change in regions. For example, Saudi Arabians criticized the company when it used women’s pictures to advertise its products. In the same way, Russians rebooked the company when it removed a lesbian couple from the magazine.
Likewise, social trends are culturally and socially prevalent in society and these trends must be followed by the company in order to successfully advertise and compete against rivals in the market.
The e-commerce stores have given the opportunity to express one’s mind in the review section. While reviewing the reviews of Ikea, one would find many reviews with one-star ratings and negative feedback. Therefore, the company must address these trends in order to win the hearts of the customers.
Technological Factors Affecting Ikea
The era of digitalization has reduced the need for brick-and-mortar stores. Customers can go to the digital stores online and can order their products. Customer satisfaction, however, is an important element that any e-retailor store must bear in mind. The utilization of personalized customer care could enhance customer experience and satisfaction in a great way.
The company has given access to e-commerce in an excellent way. One can easily go to the e-store by selecting the country and then choosing any product from the home décor settings available on the company’s official website. People who are bad at going into the traffic or those who are busy with their housework can easily order the products from the online stores.
The strategy of the company of ‘word of mouth’ has proved to be an effective way to augment the company’s brand image as well as to keep checking the new minds.
Legal Factors Affecting Ikea
Legal matters are not easy to handle. One law, if not understood and practiced properly, can become e great source of tension, and can consume time and resources. The company has faced problems due to the deaths by tipping over its furniture. These circumstances greatly disturbed the family as well as community systems. To avoid future lawsuits, the company must ensure the safety of its products in the long run.
The suffering caused to the money may not look that much for the big firm, however, the loss in the name and reputation of the company is nonrecoverable. Therefore, Ikea must devise a policy that ensures the safety levels of its products before they are sold in the market. As these laws differ from state to state, and the penetration of these laws through the company is the sine qua non, Ikea must devise a way to address these legal challenges.
Environmental Factors Affecting Ikea
These external factors are most important when we talk about sustainability and long-term stability of the corporation. These factors are related to the environment. These concerns, if followed in a true letter and spirit, have the capacity to increase the company’s revenue as well as the brand’s reputation. The quest of Ikea in the use of renewable energy resources and the investment of $1 billion for the cause is a laudable step. The company is trying to shift the use of in-store energy to renewable energy resources completely. Furthermore, in its pursuit of environmental conservatism, Ikea has invested in solar as well as wind energies. Lastly, the company is shifting its dependence on wood and cotton to more sustainable resources.
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