Analysis of IKEA Operations Management

1240 words (5 pages) Essay in Management

23/09/19 Management Reference this

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IKEA Analysis Report

Operations Management: Solutions to Business Challenges

Marketing

IKEA. There is no explanation needed when those 4 letters are spoken. This company has steadily come up with new and innovative ways to create value for consumers and expand their market selection.  One specific thing that IKEA has done that has set them above the competition is brand and service. IKEA is a household name that nearly anyone worldwide would identify instantly and is one and the same with the concept of value, quality, and customer service. Founded in Sweden in 1943 by Ingvar Kamprad, IKEA has expanded to at this time operate over than 300 stores in 26 countries and selling $36 billion a year (Lutz, 2015). 

Ikea’s most valuable marketing tool is still its catalog, which is printed in greater numbers per year than the bible (Walgrove, 2014). It’s yearly catalog spreads all the countries Ikea operates in and is translated in every language.  However, the catalog simply alone wouldn’t be enough if it wasn’t associated with an idea that transformed the entire furniture buying and decorating experience.  According to IKEA’s website, “using either recycled or recyclable products helps with costs and efficiently creates a quality product for the customer.  Some of these products used are things like wood, cotton, natural fibers, plastic, paper, composite, and bamboo just to name a few.” (Ikea, 2019) Another signature idea is their website gives you the opportunity to custom design any specific area in your home, download the assembly instructions for assembly should they be misplaced, and order tracking options are also available. (Ikea, 2018).  What has encouraged loyalty from consumers is IKEA is dedicated to ensuring customer satisfactory by any means necessary. In the rare event that a customer does not find the specific piece of furniture they are looking for they will refer them to another company that sells that same/similar piece of furniture they are looking to purchase.

Value Chain

IKEA has a detailed set of operational standards that includes their value chain ensuing value for the shopper. IKEA suggest to customers what they want and need, low price with amazing quality, and this is masterfully executed through an impeccably managed framework of operational excellence. While executing these standards they must also support the company’s vision and or mission of “providing customers a quality and ethically made product for a fair price.” This is what has made IKEA stand above the rest.

Ikea’s supply chain is commendable. Individually every store holds close to ten-thousand items and continuously retains adequate amounts of inventory to supply any demand. After their yearly iconic catalog has been distributed it provides a guarantee to the customer that everything in it will be available at the printed price for the following year. IKEA depend on over many suppliers stretching across approximately 52 countries.  They try to reduce cost by using minimal and recycled material which will aid in savings on production and shipping. Additionally, another key concept that saves a lot on cost is the cooperation concept with the consumer. “While Ikea is obligated to sell quality products, it is the consumer’s responsibility to assemble them, and that saves on packaging and therefore shipping.” (Banker, 2014)

Intangible Products

An intangible product is a product that can only be recognized indirectly. Many times an intangible product is worth more than tangible items. Examples of intangible products are insurance policies, benefits, and bonuses.  Ikea has industrialized a process that not only makes it simpler and low-priced, but also offers benefits to the customer such as bottom-line prices and innovation. The notion of selling furniture that needs assembly creates a sense of collaboration between IKEA and the customer. 

Customer

To say IKEA cares for their customers is an understatement. They stand behind the quality of their merchandise. Customer loyalty, retention and satisfaction are what keep IKEA moving forward. Due to the relationships that have developed with thousands of suppliers Ikea provides quality upscale furniture and fixtures at a low price. The better the relationship the lower the cost which cuts costs on product and transportation. The designs must fit the taste and desires of the community at the place of operation and that may change from one place to another. The catalog specifies what the new and “go to” designs as well as the “locked” prices are each year. Those practices prove to be worth a lot to the customers since Ikea shows a steady growth every year (Driskill, Bermudez, McMahon, Ullah, 2015).

Performance Measures

IKEA must keep to many procedures of performance to hold their standing as the largest and most visited home-furnishing store. Even though quality and cost are major factors that must continuously be supervised, calculated, and kept to a strict standard, many other standards make up the overall operations at this business. Environmental products – over 71% of products found at IKEA are recyclable or made from recycled materials. Conservational practices include 70% less energy usage while being 30% more energy efficient. IWAY is the code of conduct that IKEA follows. This establishes the norm for their suppliers and industry specific materials and services.  Long-term relationships with vendors and suppliers. IKEA sets very strict standards for its vendors and suppliers. This allows IKEA to increase their competitive advantage by having continuous quality in their subcontracting products and services.

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