IKEA’s Operations Management


 


            Operations Management is the set of activities that create goods and services through the transformation of inputs into outputs.


 


IKEA


            IKEA was created by  60 years ago. The Swedish company was based on the idea that as long as the price was right, customers would be prepared to travel out of town locations, queue, collect their purchases and assemble the furniture themselves ( 2005).


            IKEA’s mission was formulated by its founder, . The company’s mission is to offer wide variety of functional furniture for the house, of a quality and at a price affordable by a majority of people. The core principles of IKEA that seeks to achieve the mission are quality and economy. The principle of quality is applied at three points in the life of the IKEA products – creation, range and use.


1. Creation – IKEA designs its own products. Each product has a name rather tan a code because IKEA wants its products to be part of the family.


2. Range – Each item for sale in the stores, whether furniture or other products, is part of a coherent whole, designed in accordance with the expectations of a specific segment which can be young or old, high or low income, modern or classic, etc.


3. Use – IKEA furniture is submitted to three types of trial which test strength and workability as well as surface and resistance ( 1999). 


 


 


IKEA’s Transformation Process


            Transformation processes are used in all types of businesses. A transformation process uses resources to convert inputs into some desired output. Inputs may be raw material, a customer, or a finished product from another system. The different types of transformation processes are:



  • Physical (as in manufacturing)

  • Location (as in transportation)

  • Exchange (as in retailing)

  • Storage (as in warehousing)

  • Physiological (as in healthcare)

  • Informational (as in telecommunications)


 


IKEA’s Operations Strategy


            Operations strategy is the total patterns of decisions and actions which set the role, objectives and activities of the operation so that they contribute to, and support, the organization’s business strategy.


 


 


 



 


            The operations strategy of the company is founded on its mission of creating high quality products in affordable prices. IKEA’s business model is based on a simple idea: Furniture, if well designed, can be cheap without being ugly. The elements of the model include: attractive, low-cost, reasonable quality furnishings, limited variety, self-assembly; young-family-oriented suburban mega-stores with nursery and plenty of parking space; catalogue-driven self-service; and no costly advertising. These elements all keep expenses and prices down and they reinforce each other. Catalogue sales and limited variety make it easy to get along with fewer sales personnel. Standardization and focus on the product line make it possible to rely on suppliers that can be closely monitored and controlled by IKEA. Flat packages save space in transportation and warehousing. Suburban locations and large store reduce expenses, self-select for young families with cars, and reduce delivery costs (2005).


Transformation Process


 


             Because the furniture industry is highly competitive and fragmented, most (if not all) furniture retailers seek to create a sustainable competitive advantage. Differentiation is the strategy that furniture retailers employ. In the case of IKEA, sustainable competitive advantage was achieved because of the company’s added quality services. Potential purchasers try to find suppliers that offer them the greatest added value. As an added value and as a way to attract customers, IKEA offers superior customer service. IKEA meets customers with catalogs, tape measures, pens, and notepaper. The shortage of salespeople affords customers the opportunity to shop in freedom and to take notes. IKEA also offers services to parents while they shop such as the supervision of toddlers, infant-changing rooms, and attendants who warm baby bottles. Snack bars sell Swedish specialties at low prices. The strength of IKEA is its ability to shift a variety of cost burdens to the customer that might be found desirable or perceived as an added value. IKEA partners with its customers in ensuring that the customers save money by offering stylish, functional, low-cost home furnishings that customers must assemble themselves. Making the customers assemble their own furniture enables IKEA to save money on manufacturing and distribution, which they then pass on to customers in the form of lower prices at retail. To compensate for the customer having to do-it-themselves, IKEA offers other services that make this proposition attractive. These extra services include in-store child-care and play areas, restaurants, and longer hours of operations.


            IKEA does not have its own manufacturing facilities. Instead, it is using subcontracted manufacturers all over the world for supplies. All research and development activities are, however, centralized in Sweden. In order to maintain low cost, IKEA lets its shoppers to assemble their own purchases. To facilitate shopping, IKEA provides catalogs, tape measure, shopping lists and pencils for writing note and measurements. IKEA’s designs and styles are very popular to its customers because it is able to blend quality, stylish designs and affordability. These characteristics make IKEA products very attractive to the customers. The IKEA design approach according to  (2007) retains a strong Scandinavian identity seen in the use of natural wood, minimalist shapes, high technology, new materials and strong colors (as shown in the photos below). The company has extended the image of 20th-century Scandinavian Modernism and ensured that is has become an immensely widespread domestic living style.


IKEA’s design is made synonymous with middle-class taste and thereby becomes the vehicle by which visible signs of affluence are made accessible to people of modest means. Of special relevance is the fact that the IKEA emphasis on design gives expression to the centrality of style in the contemporary marketplace. IKEA products could be roughly described as interior European modernism done in Scandinavian style. But the company’s genius consists in joining the attractions of design to practicality and affordability along with versatility. By this means, it captures a broad demographic of consumers who can buy into a trendy middle-class lifestyle while gaining the satisfaction of purchasing highly functional and practical products at minimal cost (2008).


 


 


 



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