Analytical Essay on IKEA: PESTEL Analysis

Ikea is a well know home furnishing retailer company around the world founded in Sweden in 1943 by Ingvar Kamprad, and until today the company is a private limited company own by an organization controlled by the Kamprad family.

IKEA is one of the most successful retail companies in the world. Ikea has grown rapidly since founded in 1943 and today it is the world’s largest furniture retailer with 433 furniture superstores in 50 countries and is visited by more than one billion costumers recorded just last year 2019 and 2.8 billions of visits to IKEA website, and to help the costumers of IKEA, they have 211,000 co-workers worldwide recorded.

The company inexpensive, elegantly designed goods, arranged in mega-stores in the shape of a warehouse, generated sales of €41.3 billion in 2019, well above the €10.4 billion sold in 2001 as shown in the graph below. (Statista, 2019)

Pestle analysis

The frame tool bellow will be used to analyse Ikea macro environment. This analysis consists in evaluate the macro environment factors and the impact they may have in a company. Therefore, there are two important factors to consider, the political economy and the stability of the country, where the political economy can also be legal political.

In these aspects, favourable conditions can be made for international companies with the possibility of creating jobs and contributing for economy growth. (Academy, 2020)

Political

IKEA functions currently in 50 countries which all legislations are different some may share similar legislations but that is not common, and it can either promote the company or restrain. Although there is something that all countries share which is the benefit from political stability, where without it economic stability would not be possible.

For instance supply chain can be most affected by the government attitude in order to import and export foreign goods, the government can make this process difficult depending how approachable they are with these matters, and IKEA depends on these to remain stable and maintain their revenue.

Economic

The economy plays a big role in every company, depending on how well or bad the economy is doing this will affect the profitability and revenue the company will gain.

As seen on the graph shown below the recession in 2009 led costumers purchasing to decline as people were forced to cut living costs due to many losing jobs and companies closing.

Although at the time Ikea as managed to stay stable due to their price strategy. (Statista, 2019)

Social

This factor is very important as social and cultural rights are very well known and spoken on. If not communicated correctly can be taken out of context or miss led and this creates scandals that many times are curtail to companies.

For instance, in an extensive research it was found that in a Russian IKEA catalogue , the company removed a couple from the same sex from their magazine, as in Russia homosexuality is still considered dishonourable, although IKEA has change the appearance of its catalogue it was not to shame homosexuality but to accommodate the general thinking of the Russians.

Technological

Technology as developed tremendously along the years and its now the main focus on almost everything and companies cannot survive without it as it is used in for customer service, finance, marketing and many more essential work places.

IKEA is still using their paper catalogue to showcase their products although they have adapted to the to the online catalogue where people can view their products from home and shop from home and to provide accuracy the company offers on their website the facility to build their rooms on an online platform to vision how the product would look or fit in their homes.

Environmental

IKEA is well known for their eco-friendly projects, as the company supports the environment, this is very important for the company image.

it was found that IKEA as contributed with more than $1 billion for renewable energy in poorer nations.

The company has also advertised their goal to make their stores energy renewable and to also make the materials they use such as cotton and wood to be sourced from sustainable recourses.

Legal

Every company subjected to legal threats, and IKEA is not different. The company must obey and respect the laws and relegations of the countries they operate in, if these are taken slightly can cost the company a lot of money and their reputation.

Labour laws and legislations are a major concern but not the only concern as IKEA has faced some really bad experiences with product quality, where it has caused death, because of situations similar to this IKEA needs to ensure the safety of their products.

Companies may recover from scandals like this monetarily, but their reputation might not.

Analysis of the Business Scenario

According to (WorldPopulationReview2020) Netherlands as a population of 17,129,622 habitants, and it is expected to grow until 2034. Although the country is still growing at a slow rate of 0.22% per year. The country it is not an extremely religious country as half of the population is not affiliated to a religion, on the other hand the other remain half has some diverse of religions.

From the information acquired from statista, it was established that Netherlands economy is in great position as it is a stable economy.

As shown in the graph below GDP in Netherlands has been growing since 2017 gradually and also shows that it is expected to continue to grow. GDP it is currently in $863.45 billions with +1.6 of growth since 2018. (Statista, 2019)

Although overall inflation has increased across most of the countries it has strongly decreased in Netherlands.

It was found that Netherlands outperformed other leading economies in the retail growth as in value and volume. The country has also shown an outstanding performance in December 2019 where retail sales in the country rising by 5.1% in value and by 4.2% in volumes it can be seen in the graphs below. (Mintel, 2020)

References

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3. Encyclopedia Britannica. 2020. IKEA | Swedish Company. Available at: [Accessed 3 May 2020].
4. IKEA Foundation. 2020. About | IKEA Foundation. Available at: [Accessed 7 May 2020].
5. Investopedia. 2020. Porter’s 5 Forces Definition. Available at: [Accessed 11 May 2020].
6. Newstatesman.com. 2020. Western Economies Set To Endure Worst Recession In Postwar History. Available at: [Accessed 10 May 2020].
7. Parliament.uk. 2020. Available at: [Accessed 10 May 2020].
8. Reports.mintel.com. 2020. European Retail Briefing – February 2020 – Market Research Report. Available at: [Accessed 9 May 2020].
9. Reports.mintel.com. 2020. IKEA Sees 8% Year On Year Sales Growth. Available at: [Accessed 8 May 2020].
10. Statista. 2019. Number Of Employees Of The IKEA Group Worldwide 2019 | Statista. Available at: [Accessed 2 May 2020].
11. Statista. 2020. Business Environment – Netherlands | Statista Market Forecast. Available at: [Accessed 10 May 2020].
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