Operations management at IKEA
Question 1
IKEA’s competitive strategy
IKEA adheres to the cost leadership strategy. The strategy emphasizes on quality products at affordable prices (Datta 2010). The company seeks suppliers to provide them with sub-assembled products at the least cost leaving the clients with the task to amass the products on their own. IKEA evaluates items low, ensuring that they are affordable to everybody. Besides, it treats consumers as a family, and this has contributed to its success.
IKEA’s operations strategy
The organization’s primary aim is to provide a spectrum of human outfitting products of good quality, good plans and capacity, and at an affordable price to cover all needs. IKEA’s activity is to adapt to huge volumes based on specialization and repeatability. The company focuses on two groups of consumers; youthful adults from low-medium earning households and business people who may be running small to medium ventures.
IKEA’s marketing strategy
The organization makes use of segmentation, geographic, and psychographic division to partition the market. The strategy aims at taking into account various elements of products in the dynamic business world (Ciribeli and Miquelito 2015). IKEA uses separated, focusing on a framework to satisfy the needs and specifications of consumers who seek value for their money. It focuses on providing value due to its preference for quality over quantity.
IKEA’s operations strategy aligns with their competitive strategy. The company aims at providing products at an affordable cost at a minimal effort. Taskforce at IKEA understands and works towards the organization’s objectives resulting in solid consumer loyalty. IKEA adopts technology devised to create advancement with a consumer-centered approach.
The company’s marketing strategy aligns with its competitive strategy. Its target market is low-medium earning individuals, which matches with its policy of offering products at low and affordable prices bearable for the target market.
Question 2
The 4Vs of operation at IKEA
Volume
The organization engages in large operations. Large scale production is an essential factor for reducing the costs of production (Celli, 2013). Besides, it has its production facilities strategically placed close to highways with big car parks. IKEA’s energy, operations, administration, and tax costs are all fixed. It enjoys large transactions in individual sales volumes and thus large profits. The organization emphasizes quality over quantity, providing value for profits and consumers’ spending. – Volume = high.
Variety
IKEA offers a wide range of products; however, its services are of low variety. Consumers assemble the products on their own, with a large portion of them packed in cartons. Consumers make their own choices, although staff members can advise them when necessary. Usually, consumers transport their purchases, but delivery is possible at times. – Variety = high.
Variation
The organization operates even during holidays and weekends, providing service throughout the day, making a high variation. Also, IKEA can project demand for products. The ability to predict demand enables businesses to provide more products during peak season and regulate during off-peak (Santin et al. 2015). The company lets clients perform most of the do most tasks, including assembly of products. – Variation = high.
Visibility
Consumers take responsibility for choosing products based on their own decisions, specifications, and tastes. The organization provides measuring tools to ensure customers buy furniture that meets their requirements. After selecting products, customers load them on their vehicles alone with less interaction with the company’s staff members. – Visibility low.
Impact of IKEAs 4Vs on the cost of operations.
IKEA produces a wide range of products in large volumes. Manufacturing in huge quantities reduces the costs of production (Kenton 2020). Besides, the absence of a variety of services means less staff and thus reduced production cost. Furthermore, letting the customers do most of the tasks from assembling to packing cuts on labor costs. Also, less customer-staff interaction reduces customer care costs.
Question 3
- Meaning of supply chain management
Supply chain management refers to controlling the flow of goods and services in a business (Christopher 2016). It incorporates every procedure that converts raw materials into finished products. Supply chain management includes actively streamlining the supply activities of an organization to gain a competitive advantage against rivals and maximize customer value.
- IKEA’s supply chain
The furniture powerhouse enjoys a lot of success due to its innovative supply chain strategy. Effectiveness in this function is the factor that provides organizations its a competitive advantage over rivals (Naslund and Williamson 2010). IKEA’s supply chain is streamlined, and it works towards meeting the needs of every relevant stakeholder involved. The company takes responsibility for the acquisition of raw materials, production, and delivering finished goods to consumers. The company designs products based on data analysis providing it fine details of customer needs. IKEA is consumer-centered rather than focusing on product quantity.
The organization identifies the kind of products customers want—subsequently, the organization endeavors to determine the requirements to manufacture each of the identified items. The establishment of requirements paves the way for the determination of relevant logistics and associated cost of production. Representatives of the company order the raw materials required from suppliers offering the best terms and assembles the materials in a central place or manufacturing facilities. Then, they distribute the raw materials and resources needed for manufacturing and kicks of the production exercise, taking into account the company’s quality standards. The company delivers the manufactured goods to various storage facilities in different locations and distributes them to stores form where customers access them. In case customers feel the products have not met their requirements, they can return them to the stores they purchased as per the associated purchase warranty.
References
Celli, M 2013, ‘Determinants of Economies of Scale in Large Businesses’, a Survey on UE Listed Firms.
Christopher, M 2016, Logistics & supply chain management. Pearson UK.
Datta, Y 2010, ‘A critique of Porter’s cost leadership and differentiation strategies’, Chinese Business Review, 9(4), p.37.
Ciribeli, JP & Miquelito, S 2015. Market segmentation by psychographic criteria: an essay on the main psychographic theoretical approaches and its relationship with performance criteria. Visión de Futuro, 19(1), pp.51-64.
Kenton, W 2020, Economies of scale, viewed 25th August 2020 at https://www.investopedia.com/terms/e/economiesofscale.asp.
Naslund, D & Williamson, S 2010, ‘What is management in supply chain management?-a critical review of definitions, frameworks and terminology’, Journal of Management Policy and Practice, 11(4), pp.11-28.
Santin, K, Sousa, LGS, Cardoso, BM, Antoniolli, PD & Argoud, ARTT 2015, ‘MRP implementation on supply management process: a Brazilian furniture industry case study’, European Journal of Business and Social Sciences, 4(01), pp.158-173.