Operation management is majorly focused towards planning, establishing, and managing the frameworks of manufacturing, production, or offering services (Quacquarelli Symonds Limited, 2014). As this concept is delivery focused it ensured that the company successfully transfer inputs into outputs in a well-organized manner. Operations are said to be the major function of a company along with marketing, human resources, supply chain, and finance. This report is majorly focused towards the concept of operation management and how it is suitable for a company to offer long-term profitability because this concept helps in enhancing the productivity (MIT, 2018). Along with this, operation management support in the optimum utilization of the available resources which leads to huge profits of the company. The report will highlight major operations of IKEA Company, its customers, and supply chain process.
IKEA is one of the multinational growths founded in Swedish that makes and trade furniture which is ready to assemble, home accessories and kitchen appliances. The company is the largest furniture retailer in the world. It was established in 1943 (IKEA, 2018). The name of the company is an abbreviation of the initials of Ingvar Kamprad, Elmtaryd, and Agunnaryd. The company is famous for offering its modernist designs in different kinds of furniture and appliances, along with this company’s work of interior designing is mostly linked with eco-friendly simplicity. Additionally, the company is famous for putting its major attention on the cost control, regular development of the product and operational details. IKEA possesses a corporate culture which is complex and is managed by the different foundations of Liechtenstein and Netherlands (IKEA, 2017).
I am working in IKEA as the head of the operation department and looking towards all the present and future process of the business. My key focus in the department is to concentrate on the implementation of the project in the company. I have been provided the responsibility of an effective team which involves skilled and experienced members. Being the head of the department it’s my major responsibility to take care whether the desired goals are being fulfilled or not. In order to meet the requirement and strategies of the company, I am putting my efforts to make policies of improving services that will result in increasing customer loyalty. I am right now focussing towards the supply chain process of the company to offer best quality and service to the customers.
The operation department of the IKEA is very much focused towards evaluating the macro and microenvironment factors that affect the business in long run. Some of the tools that are supporting the department in analyzing those factors are PESTLE Analysis and SWOT Analysis. The department plays a critical role in managing the resources of the company. The inaccuracy of the inventory, buying, and supply is vital to the job. Responsibilities in terms of human resources involve hiring employees, planning development of the staff, determining needs, overseeing employee’s assignment of employees and planning staff development. The department is very much specific proper planning of the strategies and their implementation, therefore, they regularly conduct meetings in order to discuss the progress. All the individual members of the department are invited by the heads to offer their ideas so that fruitful decisions can be made. The department set some objectives and goals and introduce policies for different departments in the company. For instance, the duty of the operation manager is to do forecasting of the sales and planning sales promotion (Farnan, 2018).
IKEA segmentation includes a set of subsequent decisions of marketing that establish the essential of the marketing strategy of the company. Segmentation means distributing the population into various groups depending on their common or similar characteristics and traits (Wedel and Kamakura, 2012). Targeting is comprised of selecting particular groups recognized as an outcome of segmentation as customers for the brand (Weinstein, 2013). Positioning refers to the selection of the marketing mix the most attractive to the target customer segment (McGhie, 2012). There are different kinds of positioning that business can use like multi-segment, imitative, mono-segment, anticipatory, standby, defensive, stop-gap, and adaptive. The type of positioning that IKEA Company makes use of is mono-segment and according to that, it makes a petition to the wants and needs of an individual segment of the customers that are very much conscious about the cost of the product and like to have products that prove the value for money (Pontefract, 2016). The following table shows the target market, segment, and positioning of the company in the market:
|
Segmentation type |
Criteria for Segmentation |
Target customer segment of IKEA |
|
Demographic |
Gender |
Females and males |
|
Age |
23 and older |
|
|
Life-cycle stage |
Recently married couples who are young and have no children A married couple who are old and living without their children A married couple who are old and retired and living without their children Child under 6 six years of age Child of age 6 or over A married couple who are old with dependent children Bachelor stage young and a living single away from home |
|
|
Occupation |
Professionals, students, and employees |
|
|
Psychographic |
Lifestyle |
Explorer Resigned Mainstreamer Struggler |
|
Social class |
The middle class, working class, and lower class |
|
|
Geographic
|
Density |
Urban |
|
Region |
Asia, Russia, Europe, Australia, and America |
|
|
Behavioral |
Personality |
Determines and Easy going |
|
Degree of Loyalty |
Switchers Soft core loyal Hard core loyal |
|
|
User Status |
Potential users, regular users, non-users, and first-time users |
|
|
Benefits sought |
Cost-effectiveness (Dudovskiy, 2017) |
IKEA Company is focused towards catering the services by fulfilling the requirement of the customers, therefore, they design their process and start with identifying the needs of the customers in the market and their expectations (IKEA, 2017). Hence IKEA involves in a repeated cycle of market research about the customers and to know more about their lifestyle and what advantages customers are looking for from the variety of furnishings of the household, what are their perceptions about the existing products that company is offering and various other things. IKEA Company has regularly been aware of the significance of a thorough analysis of the needs of the customer. For instance, because the primary market of IKEA is various people and not just some privileged people (IKEA, 2013). The company offers major concern to the designing of the furniture which offers a solution to the people who live in compact and small homes. The function and form of the designed furniture by IKEA is driven by the requirements, needs, and expectations of the customers.
IKEA Company regularly puts its efforts to offer practical and beautiful furniture at a low and reasonable price. This states, for instance, that the designers of IKEA operate with the unit suppliers of the production to do the designing of the furniture in a form that makes the maximum of the reasonable use of the accessible production capacity and meet the expectations of the customers (Business case, 2018).
The mission of IKEA is to provide a variety of items for home furnishing with good function and design, durability and excellent quality; at low prices that maximum of the population can afford to purchase them (IKEA, 2012). Founder Ingvar Kamprad the founder of IKEA has an innovative strategy to design and make functional furniture that was very inexpensive and easy to build, obtain it disassembled at the stores and make them visible on the showroom with tickets of deep explanation which will eventually make the existence of the sales officer unnecessary (Jurevicius, 2013).
The customers of IKEA basically invest maximum time in the stores as compared to the time they invest in the competitor’s stores. IKEA differentiate itself from its competitors by its way of organizing and establishing the stores. Doing shopping in the stores of IKEA becomes an unforgettable experience for everyone. Stores of IKEA are double of their warehouses. The stores are constructed for the furniture’s browsing which is laid out and displayed in the stores the way that furniture will be placed or set in the home. Shoppers like to visit the stores because they get all the items under one single roof.
IKEA’s operation strategy is well-matched with the strategies by connecting with its objectives of performance. The performance objectives mean flexibility, cost, quality and speed, which indirectly or directly affect the effectiveness of various other strategies. Though, all the operations of furniture retailer might be comparable because in that they convert resources (input) into finished products (output). However, they vary in four major aspects i.e. the output’s volume, the output’s variety, the difference in the demand of the output, along with this the degree of visibility that they have.
There are different operations objectives such as dependability, cost, quality, flexibility, and speed which are highlighted by the company depending on the requirement of the customers and compactor’s strategies and hence result in attaining the competitive edge for the company. For IKEA Company these operation objectives can be defined in a subsequent way
Source [https://www.slideshare.net/GaganSharma3/ikea-operational-startegies]
IKEA’s operations are also providing dependability or reliability to the firm by performing activities on time. The operations of the company are dependent as IKEA has foreseeable opening hours. The goods proportion out of stock is retained to least by the system of simple reorder. They make efforts to speed up the new stock arrival if there is the occurrence of stock-outs or evaluate the buffer and reorder capacities in that case when there is a change in the sales pattern.
The cost objective involves the thought of performing activities cheaply. The effectiveness of speed, flexibility, quality, and dependability directly influence the cost objective along with operation strategy and strategy of the low price. Operations of high quality decrease the time and cost to repeatedly doing things. Quick operations decrease the inventory and enhance the customer’s flow, which can support in increasing the sales of the company and decreasing the overheads cost. Dependable of reliable operations upsurges the efficiency and predictability of the operations. Flexible operations accept to change and modify operations in order to offer a response to the wants and needs of the customers without indulging any additional costs (Trade gecko, 2018).
The operations also help in attaining the cost objective with the support of various approaches. Sweden’s central warehouse is fully automatic and involves only 3 staffs because the concept of self-service reduces the requirement of the workforce and this effectively reduces the cost (Industry Drive, 2018). Along with this, the cost is reduced through global sourcing because there is no requirement of high investment. The usage of the system of stock control can be utilized as management information system in order to observe the pattern of sales to provide a fast response. Fast response helps in saving the cost in organizing the resources in unforeseen conditions.
The IKEA’s operations got success in attaining the quality advantage by performing the right things. Their products and services are formed to conformance to the specification with the proper performance that suit for the purpose of the customers. The stores of the company are designed in clean, tidy and unique layout ensuring their brand identity. The employees of the company are in less contact with the consumers however they are helpful and friendly whenever needed. The supporting facilities of the company like self-service restaurant, crèche, and child care also offer quality service to the consumers. Hence, the consumers observe the services and products as receiving value for money along with additional benefits (IRCA, 2018).
The IKES’s operations are capable enough to get change fast as per the requirements of the customer which reflects that they possess a flexible advantage. The operations of the company enable service or product flexible because they have the capability to establish new service and products. The strategy of global sourcing makes them receptive to the wants and needs of the customers. Their creative sourcing strategy leaves most of the design up to the suppliers and it benefits in the establishment of a new product. The operation of the company enables mix flexibility and is capable to offer a variety of services and goods. The variety of products is wide which includes home furniture to the office accessories and furniture, from childcare furniture to the self-service restaurant. Though self-service restaurant, crèche, and childcare products are said to be supporting facilities customers get satisfied due to these added facilities. The thought of mix and match is very fruitful in proposing mix flexibility. Units of storage in a specific range with colors and sizes and each of them can be adjusted with the wooden or glass doors and shelves. The units are also used as stackable so that range of procedure is possible. The furnishing area of office provides various styles of services and consumer can pay the money and delivery is provided to him. In stores lift and wheelchairs are also available such that customers who are disabled get access to various floors.
The operations also enable flexibility of volume as they have the ability to change the output level. The global sourcing enables to adjust the volume to the operations rapidly. In all the stores of the company, it is the management teams’ duty to decide the level of stock of every product. It reflects that the individual stores are responsive to the variations in the demand in their particular location.
Moreover, the operations enable flexibility of delivery because they are capable enough to alter the delivery time of the product. The management of the stores might try to speed up the entrance of new stock if there is a phase of stock-outs. The flexibility objective helps IKEA to offer their services with the variety of choices. They can meet the expectations of their customers and are capable to react on the changing wants and needs of the customers (Davis, 2018).
The IKEA’s operations are providing the business an advantage of speed by performing activities faster. The designing of the store is done with an exclusive layout with parking and warehouse facilities. The consumers can easily identify the stores by its blue and yellow identity. The customers can easily part their vehicles in the parking area without wasting their precious time. There is a play area for the children such that their parents can focus on their shopping.
IKEA possess 46 offices of trading service in around 32 countries. In 16 countries company has its 28 distribution centers that deliver products to the stores of IKEA. Moreover, to have the IKEA products suppliers across the world, IKEA purchases goods from Swedwood. It is an industrial group which is owned by IKEA. Swedwood products are comprised of wooden components and furniture and have hired 13,000 people in nine countries. The top five countries of purchasing are Poland, Germany, China, Italy and Sweden with 20% of share.
The company purchases its products from five countries which are comprised of 1,300 suppliers. The monitoring of the production of the IKEA products is done by the co-workers of the trading service offices. This allows them to evaluate new ideas, discussion of the prices and assess quality at the time of observing working and social conditions among the suppliers.
The foundation of the relation of the IKEA with the suppliers is of offering products of low price in the environmentally and socially responsible friendly way. All the products of IKEA are produced according to the particularly framed code of conduct “the IKEA Way on Purchasing Home Furnishing Products” (IWAY), which also offers the basis of the relationship of the company with the international suppliers. Before initiating any business with the suppliers of IKEA need to meet IWAY standards. IKEA’s representatives of the trading office regularly consider suppliers in the company’s corporate material.
IKEA Company manufactures some products internally and majorly depends on its supplier’s network. These partnerships with the suppliers are entrenched intensely in the corporate history of IKEA, and the oddity of these connections has become one of the parts of the culture. The suppliers of the company enable to make innovative and exclusive designs involving materials which are environmentally responsible and the operative utilization of resources and interpret them into bottom-line results. The main suppliers make use of connections with the IKEAS in order to remain innovative because innovation is the sole choice if suppliers of the company desire to gain a powerful buyer (Abouhenidi, 2014).
Another feature that should be focused is the procedure that initiates the regulation, which has prompted IKEA to operate with the main suppliers in order to fulfill the new requirements. They create products of high quality which influence competitors of IKEA to match their material and design, innovations along with economic efficiencies. Moreover, the improved skills of the suppliers and volume make them competitive, allowing them to increase their business with new and existing buyers. Subsequently, the industry is inspired to exceed and match the example of IKEA, there is success or win of the natural environment as pollution is decreased and the benefit of the customer is by buying a product of better quality.
Source [https://www.slideshare.net/GaganSharma3/ikea-operational-startegies]
Conclusion
IKEA has successfully earned the reputation because of its exclusive and unique idea of business and offering to the specific segment, it’s business and corporate level strategies that are dissimilar from its major competitors in the market and are supported by its strategies of operation. Among different operation objectives such as dependability, quality, cost, flexibility, a speed which are highlighted and kept on the priority by the company depending on the requirement of the customers and strategies of the compactor and hence try to attain competitive edge for the enterprise. IKEA has selected flexibility and cost as the competitive edge. It has attained edge on the basis of these parameters by creating a strong network of supply and investing in the procedures and technologies. The above report has successfully highlighted major operations of the company that helps in reflecting the success and effective strategies of the company
References
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