A political factor
that can affect IKEA is Brexit, once the UK leaves the European union, problems
may arise for this company because they may not be able to operate in this area
because they are a global company so all of their stores are connected. The main
reason for Brexit is for the UK to be independent of all other countries so
they have to do everything themselves. The government may order the company to
remove their stores from the country because they do not want to be linked to
other countries, which is the whole purpose of Brexit to become independent.Other political factors that can
affect IKEA’s business include the level of bureaucracy, degree of corruption,
home market lobbying and import restrictions in markets where the global
furniture retailer operates. The company has been involved in
a series of issues on political grounds. In 2012, IKEA had to admit that
the company used prison labour in East Germany in 1970s and 1980s to produce
its products. Although IKEA offered formal public apology to those affected,
the incident caused a significant political controversy around the globe.
Moreover, allegations that IKEA founder Ingvar Kamprad was an active recruiter
for Swedish Nazi group has sparked controversy with negative effects on the brand
image.IKEA operates across more than 41 countries. The political forces are
there in every nation and affect the businesses. From supply chain activities
to sales, all of them are affected by the political forces. Political stability
leads to economic stability and in turn it means better sales and profits.
Apart from it, the government’s attitude towards the foreign brands and its
policies too matter. How friendly the government’s policies are, decides how
favourable the environment of a certain nation is for business brands.
Political instability on the other hand can disrupt the business environment.
It can also lead to supply chain disruption. In the past few years China
and India have acted to lower the political barriers for the foreign brands
which had led to increased presence of the international brands in these
markets. IKEA is planning to dominate the emerging Asian markets. The Red
Tape is always a major worry for the foreign brands operating in these markets.
As these barriers reduce slowly, India and China get to become the battleground
of big brands like IKEA. Moreover, IKEA’s supply chain activities can also be
disrupted by political instability. A large part of IKEA’s supply chain is
located in Europe and political disruption there can affect it deeply.