Business Environment of IKEA and Coca-Cola - Essay Example

? Business Environment number Company Background and Business Environment of IKEA and Coca-Cola IKEA IKEA is d partly after its owner, Ingvar Kamprad and partly on the areas of his childhood home, Elmtaryd, Agunnaryd. It was founded in Sweden and commenced operations in 1943, selling Scandinavian design home furnishings and goods, based upon the notion of cheap but stylish design philosophy. IKEA has operations in more than 230 stores in 33 countries and is serving in excess of 410 million customers per year. IKEA is well known for its products having a special feature of flat packing and easy to assemble products that reduce transportation costs. IKEA has more than 1,500 suppliers spread around 50 plus countries, and it uses online and mail order selling tactics. The company’s success lies in resourcing the right manufacturer for a precise product. The suppliers and designers pose a threat of customizing some of IKEA’s products to sell them for a better price in the market due to IKEA’s cost-cutting strategies and low profit margins. The company, however, has been enjoying steady growth in sales each year due to its store expansion and continuous price cut strategies, despite a maximum of 10% operating profit in home furnishings (Jones, 2008). Coca-Cola Coca-Cola is one of the world’s top notch organisations offering refreshing soft-drinks in the non-alcoholic beverage category. Four of the world’s top five brands in soft-drinks belong to The Coca-Cola Company (TCCC). These brands are Coca-Cola, Diet Coke, Fanta and Sprite. It also licenses a number of other brands and drinks for sale, amounting up to 3,500 in more than 200 countries. More than one billion carbonated drinks produced by TCCC are consumed each day. The formula for Coke was invented in 1886, primarily for the purpose of medicinal usage, by pharmacist John Pemberton of Atlanta (Hoovers, 2012) To analyze the business environment and variations in the market, we need to use the PESTLE method. PESTLE is short form for Political, Economic, Sociological, Technological, Legal and Environmental, all of which determine the ever fluctuating market (Morrison, 2007). PESTLE Analysis of IKEA and Coca-Cola Political Political analysis studies the existing and possible effects of political pressures. IKEA is an organisation that is successful in both international and domestic business. It is a Swedish based company that has set world-wide brand recognition, and has gained popularity by retailing Scandinavian design furniture with flat packaging and “do-it-yourself” trend (Analysis on IKEA, 2010). Government plays a vital part in the operation of manufacturing Coca-Cola as it is a non-alcoholic beverage falling under FDA. If the company does not meet the regulation requirements laid out by the government, then the government has the authority to impose fines on such companies. The changes in laws and regulations may also affect the organisation’s entry in another country. In order to enter the emerging and developing countries, the company needs to study its political conditions and changes, with respect to the government and internal markets, as it affects the penetration ability of the company. Both Coca-Cola and IKEA endlessly watch and observe the regulations and policies laid out by the government (Analysis on Coca Cola, 2009). Economic Economic analysis studies consist of both the national and local economy, and its impact on the world. This also comprises of the inflation rates and issues related to recession. In order to own customer loyalty, different strategies are being adopted by IKEA, keeping in view the current trends and economic changes. IKEA also adopted other styles in its furniture product category, such as dinnerware and rugs, in order to compete with the changing economic conditions and boost market performance. The company needs to analyze key issues involved in the economic conditions and every aspect of business, in order to spawn high performance (Analysis on IKEA, 2010). The sales of non-alcoholic beverages in countries other than the US are higher. There has been improvement in the economy of major international markets for the soft drink companies, like Germany, Japan and Brazil. These economic improvements will play a vital role in the growth and success of not only Coca-Cola, but also for the entire non-alcoholic beverage industry (Analysis on Coca Cola, 2009). Sociological analysis Changes in society, like changes in attitudes and customer lifestyle, affects the organisation. Sociological analysis studies these affects, as well as the social contributions of the organisation. IKEA makes its contributions in the society by providing opportunities to the people and its employees by offering benefits and remunerations, such as pensions and insurance plans. The company also ensures that it will stick to its original notion of providing high quality and stylish furniture at low prices (Analysis on IKEA, 2010). Some sociological factors have dragged the revenues of Coca-Cola down. This is because of the age range of consumers in the US is between 37 and 55, who are getting more and more health conscious. Large groups of population, known as the baby boomers, are also getting old and concerned with their longevity. These groups demand healthier beverages, which in turn will decrease the demand of carbonated drinks such as Coca-Cola (Analysis on Coca Cola, 2009). Technological Quality systems and technology are in use by IKEA for proper scheduling, promoting shorter queues, and staffing. It is because of these systems that IKEA intends to be more productive, and is in a position to warrant the correct number of staff in the right place and time, to match the trading patterns in stores. Also, in order to keep customers happy, and to create a well-organized store environment, the company is optimizing everything from the supply chain to managing the staff (Analysis on IKEA, 2010). Technology plays an important role in product improvements, advancements and innovation. It also helps improve the marketing and production of the products. With the advancement of technology comes the introduction and innovation of new products. In the case of Coca-Cola, due to technological advancements, a new product namely, cherry Coke was created. Even though the product was new, people still preferred the old taste of Coke (Analysis on Coca Cola, 2009). Legal IKEA strictly implements legal compliance, and applies laws and regulations firmly in the areas relating to social and environmental conditions. The company maintains a list of rules and regulations according to law, and demands requirements to be scheduled accordingly with the procedures (Analysis on IKEA, 2010). The Coca-Cola Company takes extensive care of the legal aspects, both at the national and international level. All the invention and new products go through the patent process regularly, along with all the applicable rights as per the nature of the industry (Analysis on Coca Cola, 2009). Environmental Environmental analysis studies the national, local and world-wide environmental issues. Both IKEA and Coca-Cola, being International entities and a multinational, strictly watch and monitor the laws enacted by the government relating to environment. These factors include water, air and noise inspections, which is part of legal and environmental documentation and authorities (Analysis on Coca Cola, 2009). IKEA’s Mission Statement “Ikea's mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them” (IKEA Mission Statement, 2009). IKEA’s Values The elements that IKEA values strongly are humbleness and willpower, leading by Example, daring to be different, togetherness and enthusiasm, cost consciousness, constant desire for renewal and lastly to accept and delegate Responsibility (IKEA, 2010). Key Objectives of IKEA To evaluate IKEA’s competitive priorities; To describe IKEA’s process for developing a new product; To identify IKEA’s features contributing to creating exceptional value of customer; To define important criteria for selecting a site for an IKEA store. The Coca-Cola Company Mission The mission of Coca Cola focuses on refreshing the consumers, instigating optimistic moments of life for the consumers by the brands of the firm and creating value and difference everywhere (Coca-Cola, 2010). The Coca-Cola Company Values The values of Coca-Cola are to have quality, passion, integrity, collaboration, innovation, accountability and leadership (Coca-Cola, 2010). Key Objectives of the Coca-Cola Company The objectives of the organisation are as follows (Coca-Cola, 2010). Profit: Ensuring that shareholders receive maximum return and profits from the firm along with the fulfilment of all responsibilities. People: Providing an excellent place for people to work. Portfolio: Providing people with a wide range of brands that satisfies the needs of everyone. Partners: Partnership network should be strong and mutual loyalty should be built amongst partners. Planet: To make a difference to the world. Productivity: To be an efficient and effective organisation (Coca-Cola, 2010). Coca-Cola Group of Stakeholders Stakeholders are the people who are most affected by the business. Listening to the views of the stakeholders, and understanding their concerns are crucial for any business. Goals are shared; mutual understanding is built through open discussions, and constant relationships (Coca-Cola Enterprises INC, 2006). There are many stakeholder groups that are impacted by the business. We have identified the stakeholder groups that are most impacted by the business. Diverse communication methods are used, along with different strategies to keep the stakeholders educated and to meet their objectives. Following are three groups of stakeholders that are identified for The Coca-Cola Company. Investors, Shareowners and analysts They are the interested parties who seek or publish financial and other business performance information about the company. To meet their objectives the company engages them in annual report, annual shareowners meeting, regular webcasts and conference calls, investor conferences, and shareowners can submit proposals for inclusion in the annual proxy statement and to be voted on at the annual shareowners meeting (Coca-Cola Enterprises INC, 2006). Suppliers There are 84,000 suppliers who provide the company with ingredients, packaging, promotional materials and other goods and services. The company engages the suppliers in suppliers guiding principles program, supplier management process, industry initiatives and supplier diversity programs (Coca-Cola Enterprises INC, 2006). Governments and Regulatory Authorities These are the decision-makers and implementers at local, national and international levels in the country, where the company does business. The company engages with them in briefings and meetings, industry associations and joint products, and plant tours and open houses (Coca-Cola Enterprises INC, 2006). Responsibilities and Strategies of the Coca-Cola Company There are many responsibilities of a company, especially with regards to social and environmental impacts. Among the top responsibilities of the Coca-Cola Company, following are some of the important ones. Health, Wellbeing and Nutrition The Coca-Cola Company products have an impact on people's health and wellbeing. They recognize the responsibility to make the impact as positive as possible by encouraging people to be active and healthy, and by helping them to choose the right products to fit their lifestyles (Coca-Cola Enterprises, 2011). They achieve this by providing nutritional information, marketing their products and supporting programs that encourage well being and healthy lifestyles. Their strategy is divided in to four main areas: responsible sales and marketing for children and schools, choice of products, communicating product nutritional information and promoting healthy lifestyle. Water Use Water is a precious resource and a main ingredient of all the Coca-Cola products, as well as used for manufacturing purposes. In order to use water in a responsible manner, policies have been placed for water conservation and re-usage. These policies and programs are active at all of the manufacturing sites (Coca-Cola Enterprises, 2011). Energy and Climate Change Climate change is a very pressing issue recognised by Coca-Cola Company. They work hard to reduce their energy use and emissions across all of their operations, so as to minimize the climate impacts (Coca-Cola Enterprises, 2011). Packaging and Recycling Packaging is the most visible environmental issue, and the Coca-Cola Company is working to reduce impacts by light weight packaging, increasing its recycled contents and encouraging consumers to recycle more (Coca-Cola Enterprises, 2011). These were just some of the main responsibilities of the Coca-Cola Company. All the other responsibilities are also dealt with proper firm strategies and actions. Conclusion The paper discusses about the business environment of IKEA and Coca-Cola. The PESTLE analysis has been conducted for both organisations along with highlighting the mission, values and objectives of both the firms. The responsibilities and strategies of Coca-Cola have been discussed and it reflects that Coca-Cola is a highly responsible organisation. References Analysis on Coca Cola, 2009. PESTLE Analysis on Coca-Cola. [online] Available at: [Accessed on 29th March 2012]. Analysis on IKEA, 2010. PESTLE Analysis on IKEA. [online] Available at: http://ivythesis.typepad.com/term_paper_topics/pestle-analysis-for-ikea/ [Accessed on 29th March 2012]. Coca-Cola, 2010. Mission Statement and Company Values. [online] Available at: [Accessed on 29th March 2012]. Coca-Cola Enterprises INC., 2006. Corporate responsibility and sustainability review. [online] Available at: [Accessed on 29th March 2012]. Coca-Cola Enterprises, 2011. Identifying the key issues. [online] Available at: [Accessed on 29th March 2012]. Hoovers, 2012. The Coca-Cola Company. [online] Available at: [Accessed on 29th March 2012]. IKEA Mission Statement, 2009. IKEA Mission statement. [online] Available at: [Accessed on 29th March 2012]. IKEA, 2010. Our Values. [online] Available at: [Accessed on 29th March 2012]. Jones, C., 2008. IKEA: Company profile. [online] Available at: [Accessed on 29th March 2012]. Morrison, M., 2007. PESTLE Analysis introduction. [online] Available at: [Accessed on 29th March 2012]. Read More