Ikea External Audit

Economic Forces

The global economic and financial crisis that happened in 2007-2009 is an example how external economic forces can affect business environment. However, IKEA suffer less negative impact of the crises compared to other businesses, this is because IKEA’s cost leadership strategy.

Another economic factor that directly affect IKEA’s revenues is exchange rate fluctuations between major currencies, especially between EUR and USD. Additional economic factors consist of interest rates, tax rates and the level of unemployment.

IKEA’s revenues are also indirectly affected by the inflation rate of the countries where it operates.

Social, Cultural, Demographic, and Natural Environment Forces

To assert its position in the global market, IKEA reach out to countries by acknowledging their different culture. An example of this would be, at 2005, IKEA made 250.000 plastic placemats in commemoration of the year of rooster in China.

Political, Governmental, and Legal Forces

Nowadays, to protect the domestic economy, many countries enforce regulations such as foreign ownership rules which stated that foreign company have to take a local business partner. The new partner could take more than 50% of its business and this is not always acceptable to its board. Moreover, regulation such as safety law also needs to be fulfilled if IKEA wish to penetrate the local market.

Currently, IKEA has about 400 stores around the world, the number of countries with 10 or more IKEA stores is twelve and mostly located in Europe. Thus, political, governmental, and legal forces are not something new for IKEA. As it operates in countries with diverse situations, it has to conform to taxation polices, social welfare polices, and to the foreign trade organization, such as EU and WTO.

Technological Forces

IKEA make use of the technological development to sustain its cost leadership strategy. IKEA also known to be very particular