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Operation Management of IKEA Company

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    How might IKEA’s operations design is different from that of most conventional furniture retail operations? Discuss the operations design while analyzing the positive contributions towards customer satisfaction and company’s growth. Being one of the famous brands for furniture, IKEA has its own operations design that had been proven successful based on the growth of the company throughout the years of business. IKEA’s vision is clear which is ‘to create a better everyday life for the many people’ and aims to offer well-designed and functional furniture at a very low price that as many people as possible will be able to afford them.

    Unlike other convention furniture retail, IKEA stores are located at the most strategic location in major cities with high population density to capture as much target audiences in that area (Ikeafans, n. d). The designs of IKEA stores are large in size (Fabian, 2006). It features not just the showrooms but also other facilities such as a large car park to accommodate large volume of vehicles and ease customer frustration to find parking space. Where else conventional furniture retails are small and usually does not such facility. In terms of product, IKEA offers a wide range of furniture for home and workplace use.

    By providing a wide selection of furniture, customers can choose the furniture that best suit their style and purposes that creates value for customers (Jacobson, n. d). It is vital to have a wide range of selection for customers to choose because everyone does have different needs and wants especially in Malaysia that consist of multi racial people and also different culture. As compared with other conventional furniture retail, there are limited choices for customers due to the size of the store that could not provide as much variety of furniture as IKEA does.

    One can easily recognized the design of the furniture that IKEA offers because of its modem, simple and yet functional design. The design of IKEA furniture take space efficiency into consideration where customer does not have to worry if the furniture will take up a lot of space of their house and looks bulky. Some of the designs also allow customer to assemble their furniture in many ways allowing them to DIY according to their style. Furniture is usually designed in a ‘flat pack’ for easy transportation that customer pick up home and assembles at home (Wisegeek, n. ). This eliminates the need of having large transport to move the furniture from the warehouse to customers house and also reduce workforce to carry heavy and fully assembled furniture into customer’s house. This contributes to IKEA’s cost efficiency concept that able to offer furniture at a very low price. Whereby customer might have to pay extra charges for transportation and labor work if they purchase their furniture from other conventional furniture retail.

    The whole IKEA stores are built based on self-service concept therefore every part of the store is designed to guide customers throughout the whole buying process. In the entrance of each IKEA stores, there are large notice boards providing advice to customers who never been to IKEA and information such as the location of the specific type of products that customers are looking for. Catalogues are also provided to provide further details and illustrations. Although IKEA stores are designed on self-service concept, customers can at any time request for assistance for sales representative if needed (IKEA, n. ). This would encourage customers to make their own decision to choose what they really like instead of other conventional furniture retail where sales representative suggesting products that might not fit the needs and wants of customers. Besides that there is a specially designed space for children to play and a small cinema where parents can leave their children to have fun under supervised environment so parents can have a better shopping experience (IKEA, n. d). There is also ‘pushchair’ available for parents to keep their children while shopping.

    Most conventional furniture retail failed to provide these facilities for customers due to limited space and also poor operation management. Therefore IKEA operation design is relatively different from other conventional furniture retail store in term of the design of its store, buying process, products, services and facilities provide. IKEA’s cost leadership strategy has set the company apart from other conventional furniture retail stores making it one of the world largest furniture manufacturers.

    Critically analyze the possible key problems in running an operation like IKEA. IKEA’s operation design may also face possible key problems although the current operation design seems to work well for the company. One of the key problems in running an operation like IKEA will be the nature of the operation design that based on self-service concept. The problem arises when customers describes the store layout resembles a “rat maze“ (Zed,2012). It would be troublesome for some customers to follow the instructions on signboards, brochures and catalogues.

    Moreover customers may feel frustrated and disappointed when they when the shopping experience is not up to their expectation and worst when customers were unable to assemble the furniture at home. Secondly IKEA’s ‘cost conscious’ concept offering furniture at a price lower than expected may create faults thought by customers that the quality of furniture offered by IKEA may be inferior compared to other higher priced furniture offered by other furniture retail store (Wognnugh, 2007).

    This is because consumers general idea is that the quality of goods are reflected by the price tag it carries, meaning expensive goods are generally good in quality. Lastly IKEA’s low cost competitive advantage can be easily mimicked if new competitors decided to apply the same strategic as IKEA by offering low cost furniture. New competitors might gain part of IKEA’s target market share by targeting the same segment of consumers IKEA targeted. The low cost battle between IKEA and its competitors also may cause IKEA’s profit maximization to decline, thus may also affect the growth of the company.

    Discuss the ‘operations function’ within IKEA and how it is different from the ‘sales function’ as a core activity of any retail businesses. IKEA’s ‘operation function’ can be described as a body or department within the company that manage various or most operation planning towards the product and service that IKEA offers. IKEA’s operation function can be analysis using the 4 V’s of operation model. This model consisted on 4 dimensions namely Volume, Variety, Variation and Visibility can be use to differentiate IKEA’s operation function from other sales function that other retail business adopted (Graelaws, n. ). In terms volume, IKEA does have a high volume of products to offer compares to any retail business. By producing product in a high volume it would allow IKEA to achieve economic of scales, which in turn would help the company to attain its objective to provide furniture at a very low cost. Secondly variety, IKEA has a wider range of furniture and other products available in its store compare to other retail stores. This allows its customers to have more selectable choices to suit their needs and style. Therefore the level of variety is high in IKEA.

    Thirdly variation, IKEA has a high level of demand variation that is flexible to adapt its customer demands. Demands are predictable due to the environment around IKEA and usually peak during weekends. Lastly in the aspect of visibility, IKEA has a high visibility level where customer is provided with catalogs, guides and customer services. Using the five performance objectives, how IKEA might engages itself in satisfying customers and enhance competitiveness? Performance objectives can be referred as a statement of a specific output or desired end result (USC, n. d).

    There are five performance objectives that IKEA can take into consideration to engage itself in satisfying its customers and also to enhance its competitiveness against its competitors. These five objectives are quality, speed, dependability, flexibility and cost. IKEA’s performance objectives can be described as such: – Quality IKEA had committed to offer their customer with the best quality of products and services that customers can rely upon. Each products offered by IKEA aims to provide its customers the highest standard of technical or functional quality in order for IKEA to gain their customer’s trust on their brand.

    IKEA features uniquely designed furniture that customers can assemble in different ways without compromising its functionality and durability despite the relatively low price tag. Besides quality products, IKEA also offers quality-shopping experience to their customers by providing helping customer service and also other facilities for customers for enjoy while shopping with their family. Speed In terms of speed, IKEA aims to provide their customer a smooth and enjoyable shopping experience without spending too much time for customer to make purchase on products.

    The buying process designed ensures that customers are guided throughout the whole shopping process. IKEA’s “flat packed” furniture enables customer to pick up the product they desire with ease without having to wait for an assistance to help. The availability of products are constantly monitored by staffs to avoid customers to wait for the re-stock process. There are also many billing counters for customers to bill their items. This way customer does not have to wait in a long queue to pay especially during peak time.

    The large parking space provided also helps customer to load their purchased product into their vehicles. Loading and unloading services are also provided to smoothen the buying process. Dependability Customer also seeks for dependability from IKEA to fulfill their needs. In IKEA store, there are a lot of choices that customer can make when purchasing furniture. Besides that IKEA also have a high volume of stock stored to avoid case where customer could not purchase their desired furniture because it runs out of stock.

    Apart from that, customer also can view products offer by IKEA through its website and catalog provided by IKEA. This way, it increases the dependability level of customer towards IKEA for product information and also new product promotion. Flexibility In the aspect of flexibility, IKEA aims to provide its customer with variety designs of furniture. This provided customer the flexibility to choose which type of design that suit best in their home or office setup. Furniture offered by IKEA are mostly designed for customer to assemble at home.

    By involving customer in the furniture assemble process, it provides customer the option to assemble their furniture according to their style thus provides customer with more flexibility to assemble furniture in many ways. IKEA also take custom orders from its customer to custom-made furniture according to its customer’s needs hence provides its customer with a great flexibility. Cost IKEA has always emphasized on its low cost strategy that leads to the company’s success. Stated as one of the company’s vision, which is a strict cost-consciousness in all areas (Bergmark, 2002).

    This low cost strategy aims to offer customer furniture at a very low price that most of the people can afford to buy while maintaining the quality. IKEA is able to offer products at a low cost because the company focuses on the material used and also the manufacturing cost. Besides that, IKEA also can lower the cost through its advantage of economic of scale. Therefore by offering quality products at a cheap price, it creates higher value for customer with the amount of money they spent.

    References

    1. Fabian Suarez. (2006). International Business Strategy IKEA. Available: http://www. ctuarisk. be/files/IkeaSite. pdf. Last accessed 10 April 2012. 2. Graelaws. (n. d). The Four V’s of Operations. Available: http://graelaws. wordpress. com/mba/operations-and-process/the-four-vs-of-operations/. Last accessed 10 April 2012. 3. IKEA. (n. d). All Products. Available: http://www. ikea. com/my/en/catalog/allproducts/. Last accessed 10 April 2012. 4. IKEA. (n. d). Store Experience. Available: http://www. ikea. com/ms/en_IE/customer_service/shop_experience. html. Last accessed 10 April 2012. 5. Ikeafans. (n. d). 10 Keys to IKEA’s Low Prices. Available: http://www. ikeafans. om/ikea/ikea-why-ikea/10-keys-to-ikeas-low-prices. html. Last accessed 10 April 2012. 6. Jan Wognnugh. (2007). Does IKEA make low-quality furniture?. Available: http://www. helium. com/items/129109-does-ikea-make-low-quality-furniture. Last accessed 10 April 2012. 7. Lauren M. Jacobson. (n. d). IKEA Case Study. Available: http://laurenmjacobson. wordpress. com/case-studies/ikea-case-study/. Last accessed 10 April 2012. 8. Marina Strauss. (2010). How IKEA Seduces Us. Available: http://www. theglobeandmail. com/report-on-business/rob-magazine/how-ikea-seduces-us/article1577517/page4/.

    Last accessed 10 April 2012. 9. Thomas Bergmark. (2002). The IKEA Way On Purchasing Home Furnishing Product. Available: http://www. bwint. org/pdfs/iwayma. pdf. Last accessed 10 April 2012. 10. USC. (n. d). Performance Management Planning. Available: http://www. usc. edu/dept/source/performance. htm. Last accessed 10 April 2012. 11. Wisegeek. (n. d). What is Flat Pack Furniture?. Available: http://www. wisegeek. com/what-is-flat-pack-furniture. htm. Last accessed 10 April 2012. 12. Zed. (2012). IKEA – The Rat Maze. Available: http://marketzeal. com/ikea-the-rat-maze/. Last accessed 10 April 2012.

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