StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Operations Management: IKEA Analysis - Assignment Example

Cite this document
Summary
This assignment "Operations Management: IKEA Analysis" discusses performance measures for IKEA. The assignment considers cost leadership strategy in order to earn profit and position itself distinctively in comparison to competitors. The company is strategically using its contacts and resources…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER98% of users find it useful
Operations Management: IKEA Analysis
Read Text Preview

Extract of sample "Operations Management: IKEA Analysis"

? IKEA of the of the Table of Contents Table of Contents 2 Introduction 3 IKEA’s Marketing 3 Value Chain 3 Intangible Products 4 Customers 5 Performance Measures 5 Reference 8 Introduction IKEA is renowned Dutch furniture retailer which has strong Swedish origin and the company is headquartered at Delft, Netherlands. Ingvar Kamprad has founded IKEA during the year 1943 and the Swedish furniture retailing giant has established its presence over 33 countries across the globe (IKEA PS, 2012). IKEA’s Marketing Place or expanded distribution is probably most important marketing mix element for IKEA. For example, in last 60 years the company has penetrated in almost 35 countries by establishing more than 300 retail outlets with the help of joint ventures, foreign direct investment, merger-acquisition, franchising etc. Euromonitor International (2009) has reported that, IKEA has the capacity to earn more than €20 billion annually from its retail operation. When it comes to value delivery, the company delivers value to customers in the form of readymade furniture, functional home furnishing items and tailor made home furnishing solutions. Low price and Scandinavian stylish design can be treated as unique selling proposition (USP) for IKEA (IKEA PS, 2012). Value proposition of IKEA is not limited to its ability differentiate its product offering through innovation but also includes its ability to position itself as a unique brand among its target segment. For example, IKEA targets customers who are ready to engage with the brand and participate in the selling process. These customers are ready to self transport and self assemble the furniture parts in order to get quality furniture products at affordable price. IKEA designs its product for customers after conducting detailed market research for understanding the needs and wants of customers. In some cases, the company establishes strategic partnership with local players in order to understand desired value proposition for local customers. For example, IKEA has established partnership with Ikano Group in order to penetrate in Malaysian and Singaporean furniture market (Ikano Group, 2008). The strategic partnership has helped the Swedish furniture retailer to deliver value to Malaysian and Singaporean which can satisfy their needs and wants. Value Chain Von Krogh & Cusumano (2001) and Nickerson & Zenger (2005) have stated that IKEA uses different sources in order to deliver value to customers. For example, the company has established more than 45 purchasing centers and trading offices in order to collect resources from suppliers (Tarnovskaya, Ghauri & Elg, 2006). Suppliers of different parts of furniture has to sign a contract with IKEA which is states that, all suppliers are expect to adhere all the legal norms, environment act, ethical norms of their respective country while sourcing the supplies. For example, in Russia, supply managers of the IKEA check all the shops of potential entrepreneurs or suppliers in order to find the right suppliers (Tarnovskaya, Ghauri & Elg, 2006). Throughout the supply chain the Swedish furniture retailing giant tries to ensure that their suppliers behave in socially, environmentally and ethically responsible manner. For example, in Poland, IKEA has opened its purchasing offices and supplier base that are capable of sourcing supplies in 20% cheaper rates in comparison to their European counterparts while the IKEA has also forced its supplier base in Scandinavian region to reduce carbon emission in the supplying process. Overall, it can be surmised that IKEA is successful in maintaining the three verticals of value delivery process, 1- delivering affordable products to customers (economic), 2- delivering product which can satisfy the social and cultural dimension of customers and 3- decreasing carbon footprint throughout the value chain in order to offer environment friendly products to customers. Intangible Products Core values of IKEA can be classified as biggest intangible asset for IKEA. However other research scholars such as Nickerson & Zenger (2005) have argued that IKEA’s value proposition such as quality of the product, brand name, trust factors, responsive customer service, ability to innovate products in accordance with need of customers etc can be treated as intangible products. Apart from IKEA, other firms such as Starbucks, Wall-Mart also uses the intangible benefits or the service aspect in order to create entry barrier for competitors. For example, Starbucks provide the ambience and atmosphere inside its store in order to provide the feeling to customers that they are being preferentially treated by the staff inside Starbucks store. In such context, customers will not only buy coffee products from Starbucks but also seek for the unique experience they would get inside the Starbucks store. Conjoint effort of tangible and intangible benefits helps companies to increase loyalty among customers and subsequently, these loyal customers show lack of interest to switch to competitor’s brand and ultimately, the company achieves competitive advantage over its competitors. Companies like Zara, Starbucks, Disney not only sells product but also offers the exotic experience to customers. Interesting fact is that, these companies include the intangible experience factors while pricing the overall product package. As a result, when the intangible benefits help these companies to create a loyal customer base then these companies automatically covers up the overall product costing (including tangible and intangible benefits) through repeat purchase of customers. In this way intangible benefits help companies to increase its bottom line. Customers According to Tarnovskaya, Ghauri & Elg (2006), IKEA believes in volume of sales rather than selling small amount of merchandise in high value. The company emphasizes on cost leadership strategy in order to earn profit and position itself distinctively in comparison to competitors. For example, in China the company has used the concept of low cost resource sourcing from domestic suppliers and manufactures them in bulk amount through lean manufacturing process. Conjoint impact of lean manufacturing and economies of scale have significantly reduced the manufacturing cost for IKEA up to a great magnitude and ultimately give them the opportunity to make profit despite selling products at low price. In Europe, IKEA uses its long standing relationship with suppliers in order to decrease the overall value chain cost so that they can be able to make profit from low price offering (Ying, 2005). The company is strategically using its contacts and resources in order to decrease its cost of operation which is basically supporting the economies of scale concept. IKEA is optimally supplying its product to market in order to decrease its chance to stack merchandises in its inventory beyond its capacity and the process also helps them to decrease inventory cost (Ying, 2005). Hence it can be inferred that low cost strategy of IKEA is not odd from the theoretical model of supply-demand economics. Performance Measures According to Edvardsson, Enquist & Hay (2006), companies using values-based service need to create performance indicators or performance measures in order to ensure that they can deliver value in holistic and sustainable manner. In such context, performance measures for IKEA can be depicted in the following manner. Process Measure Performance Management Criteria Environmental Manufactures need to decrease the use of toxic material, non-degradable, paper and emission of green house gases by 50% within next three years. Suppliers will be asked to source environment friendly materials and specialized training will be provided to workers in manufacturing facility in order to increase their awareness regarding benefits of eco-friendly production. Social The company should increase its investment in corporate social responsibility activities. Employees will be encouraged to work in rural areas in CSR projects and employees will be sent to NGO’s for once in a year in order to work for unprivileged section of the society. Economic Lean manufacturing and total quality management (TQM) should be used to decrease cost and errors in the manufacturing process. Specialized project management team will be hired for reengineering the manufacturing process in order to decrease cost of manufacturing and offer low cost products to customers. Cultural Local managers will hired for its international manufacturing units who have detailed knowledge of the local culture. These managers will lead the market research team for conducting market research on local customer’s preference, needs and wants. Local talents would be given specialized training in order to help these new recruits to understand the core values of IKEA. Reference Edvardsson, B., Enquist, B., & Hay, M. (2006). Values-based service brands: Narratives from IKEA. Managing Service Quality, 16(3), 230-246. Euromonitor International. (2009). Furniture and furnishings stores - Indonesia, euromonitor international. Retrieved from http:// www.portal.euromonitor.com.ezproxy.lib.rmit.edu.au/passport/ResultsList.aspx. Ikano Group. (2008). The ikano group: Where we come from. Retrieved from http://www.ikanogroup.com/the-group.html. IKEA PS. (2012). Ikea ps collection?2012. Retrieved from http://www.2013catalog.com/files/IKEA_PS_2012_Collection.pdf. Nickerson, J. A., & Zenger, T. R. (2005). Being efficiently fickle: A dynamic theory of organizational choice. Organization Science, 13(5), 547–566. Tarnovskaya, V., Ghauri, P., & Elg, U. (2006). Market driving supplier strategy: IKEA’s global sourcing network in two developing market. Retrieved from http://www.snee.org/filer/papers/482.pdf. Von Krogh, G., & Cusumano, M. A. (2001). Three strategies for managing fast growth. MIT Sloan Management Review, 42(2), 53–62. Ying, P. (2005). Marketing across cultures: A case study of IKEA Shanghai. Lund University: Centre for East and South-East Asian Studies. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“IKEA Analysis Report (Operations management)1 Assignment”, n.d.)
Retrieved from https://studentshare.org/management/1479533-ikea-analysis-report-operations
(IKEA Analysis Report (Operations management)1 Assignment)
https://studentshare.org/management/1479533-ikea-analysis-report-operations.
“IKEA Analysis Report (Operations management)1 Assignment”, n.d. https://studentshare.org/management/1479533-ikea-analysis-report-operations.
  • Cited: 0 times

CHECK THESE SAMPLES OF Operations Management: IKEA Analysis

IKEA's Leadership and Management

The paper utilized SWOT as an environmental model in the analysis of the internal and external environment.... This paper analyses the internal and external environment of ikea Lakeside so as to identify the major challenges experienced in the organization.... ikea is a privately owned company that specializes in the production of furniture such as beds and desks.... ikea was founded in 1943 by Ingvar Kamprad in Sweden.... ikea is recognized world wide for its wide variety of products, flat storing, affordability as well as high class models....
22 Pages (5500 words) Essay

The Operation Management at Wal-Mart

Operation Management Table of Contents Executive Summary 3 Introduction 3 Operational Issues 5 Research Methodology 8 Analysis 9 Findings 13 Conclusion 14 Recommendation 15 Works Cited 17 Appendices 18 Executive Summary Wal-Mart has established itself as a giant player in the retail industry and has maintained an enviable operations management process since its inception.... The company should pay critical attention to improve on the operations management processes and deal with the critical factors underlying the issues in the operations management of Wal-Mart....
14 Pages (3500 words) Essay

Strategic Management - Ikeas Idea of Strategy

The author of the paper "Strategic Management - ikea's Idea of Strategy" will begin with the statement that ikea is a manufacturing company of furniture and accessories using a Scandinavian modern style.... ikea is a privately-owned, international, and retailer of affordable home products.... ikea stands for Ingvar Kamprad, Elmtaryd, Agunnaryd.... The correct pronunciation of ikea is 'IPA' which sounds like 'idea'....
23 Pages (5750 words) Essay

Strategic Management and Pestel Analysis of Ikea

The author of the paper "Strategic Management and Pestel analysis of Ikea" will begin with the statement that at the political level, IKEA faces considerable opportunities and challenges as a global furniture retailer.... ikea received cultural backlash from French citizens on picket lines that disrupted trading with 26 French retail stores.... ikea must continuously deal with political angst in certain countries where it operates and, since the company's supply chain is global, becomes a target of political objectives....
12 Pages (3000 words) Research Paper

Operation Management in Ikea to meet eco-friendly product for customers

Ying (2005) reported that IKEA changes its operations management and value chain elements in.... In this report, the researcher has selected ikea as the sample organization for understanding their operation management that can help them to develop eco-friendly product for customers.... KEA is renowned multinational Dutch furniture retailer having Swedish origin and the company was founded by Ingvar Kamprad in 1943 (ikea PS, 2012).... From operational perspectives, product portfolio of the company includes customized home furnishing solution, assembled furniture, home furnishing products and large furniture (ikea, 2013a)....
14 Pages (3500 words) Coursework

Quality Management as a Reflection of Customer Expectation

The company website displays over 12,000 products to customers, along with clear pictures of ikea range of products, in order for the latter to gain interest in the company products.... The number of visitors, who visit ikea's website every day, has been recorded to about 470 million in 2013.... It has been identified that in 2013, ikea has been the largest user of wood, as the company has been noted to use about 1% of the total wood available on the earth....
10 Pages (2500 words) Assignment

Operational Management at Ikea Company

Such an approach is the foundation of Ikea's stores in modern times as well (operations management, 2000).... This study focuses on operational management at ikea Company.... ikea is also known for its sophisticated design, logistics and distribution concepts (Larcon, 1998).... The ikea Company presents its operations in thirty-eight countries worldwide with a portfolio of products of twelve thousand pieces.... The philosophy of ikea store operations dates back to the times when the founder operated through the catalog and to satisfy customers' needs, created the showrooms of the furniture where each customer could purchase the item....
12 Pages (3000 words) Literature review

The Operations and Process Management Systems of IKEA

ikea is considered to be the world's largest manufacturer of furniture.... ikea is a retail outlet which sells flat pack furniture,.... ikea, Ingvar Kamprad Elmtaryd Agunnaryd is the company selected for this study.... ikea is considered to be the world's largest manufacturer of furniture.... ikea is a retail outlet which sells flat pack furniture, bathroom accessories, kitchen accessories and bedroom sets etc....
17 Pages (4250 words) Research Paper
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us