Operations Management: IKEA Company Overview and Operation Strategy

This report discusses the operation management of IKEA, including its company overview, target segment, and operation strategy. It highlights the operations objectives of dependability, cost, quality, flexibility, and speed, and how they contribute to the company's competitive edge. The report also discusses the supply chain process of IKEA.

Operations Management
IKEA

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Table of Contents
Introduction................................................................................................................................2
IKEA Company Overview.....................................................................................................2
Target Segment of IKEA Company.......................................................................................4
Operation Strategy of IKEA...................................................................................................7
Operations objectives.............................................................................................................8
Dependability.....................................................................................................................8
Cost....................................................................................................................................9
Quality................................................................................................................................9
Flexibility.........................................................................................................................10
Speed................................................................................................................................11
Supply Network process......................................................................................................11
Conclusion................................................................................................................................13
References................................................................................................................................14

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Introduction
Operation management is majorly focused towards planning, establishing, and managing the
frameworks of manufacturing, production, or offering services (Quacquarelli Symonds
Limited, 2014). As this concept is delivery focused it ensured that the company successfully
transfer inputs into outputs in a well-organized manner. Operations are said to be the major
function of a company along with marketing, human resources, supply chain, and finance.
This report is majorly focused towards the concept of operation management and how it is
suitable for a company to offer long-term profitability because this concept helps in
enhancing the productivity (MIT, 2018). Along with this, operation management support in
the optimum utilization of the available resources which leads to huge profits of the
company. The report will highlight major operations of IKEA Company, its customers, and
supply chain process.
IKEA Company Overview
IKEA is one of the multinational growths founded in Swedish that makes and trade furniture
which is ready to assemble, home accessories and kitchen appliances. The company is the
largest furniture retailer in the world. It was established in 1943 (IKEA, 2018). The name of
the company is an abbreviation of the initials of Ingvar Kamprad, Elmtaryd, and Agunnaryd.
The company is famous for offering its modernist designs in different kinds of furniture and
appliances, along with this company’s work of interior designing is mostly linked with eco-
friendly simplicity. Additionally, the company is famous for putting its major attention on the
cost control, regular development of the product and operational details. IKEA possesses a
corporate culture which is complex and is managed by the different foundations of
Liechtenstein and Netherlands (IKEA, 2017).

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Contribution
I am working in IKEA as the head of the operation department and looking towards all the
present and future process of the business. My key focus in the department is to concentrate
on the implementation of the project in the company. I have been provided the responsibility
of an effective team which involves skilled and experienced members. Being the head of the
department it’s my major responsibility to take care whether the desired goals are being
fulfilled or not. In order to meet the requirement and strategies of the company, I am putting
my efforts to make policies of improving services that will result in increasing customer
loyalty. I am right now focussing towards the supply chain process of the company to offer
best quality and service to the customers.
Department Contribution
The operation department of the IKEA is very much focused towards evaluating the macro
and microenvironment factors that affect the business in long run. Some of the tools that are
supporting the department in analyzing those factors are PESTLE Analysis and SWOT
Analysis. The department plays a critical role in managing the resources of the company. The
inaccuracy of the inventory, buying, and supply is vital to the job. Responsibilities in terms of
human resources involve hiring employees, planning development of the staff, determining
needs, overseeing employee's assignment of employees and planning staff development. The
department is very much specific proper planning of the strategies and their implementation,
therefore, they regularly conduct meetings in order to discuss the progress. All the individual
members of the department are invited by the heads to offer their ideas so that fruitful
decisions can be made. The department set some objectives and goals and introduce policies
for different departments in the company. For instance, the duty of the operation manager is
to do forecasting of the sales and planning sales promotion (Farnan, 2018).

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Target Segment of IKEA Company
IKEA segmentation includes a set of subsequent decisions of marketing that establish the
essential of the marketing strategy of the company. Segmentation means distributing the
population into various groups depending on their common or similar characteristics and
traits (Wedel and Kamakura, 2012). Targeting is comprised of selecting particular groups
recognized as an outcome of segmentation as customers for the brand (Weinstein, 2013).
Positioning refers to the selection of the marketing mix the most attractive to the target
customer segment (McGhie, 2012). There are different kinds of positioning that business can
use like multi-segment, imitative, mono-segment, anticipatory, standby, defensive, stop-gap,
and adaptive. The type of positioning that IKEA Company makes use of is mono-segment
and according to that, it makes a petition to the wants and needs of an individual segment of
the customers that are very much conscious about the cost of the product and like to have
products that prove the value for money (Pontefract, 2016). The following table shows the
target market, segment, and positioning of the company in the market:
Segmentation type Criteria for Segmentation Target customer segment of
IKEA
Demographic
Gender Females and males
Age 23 and older
Life-cycle stage Recently married couples
who are young and have no
children
A married couple who are
old and living without their
children
A married couple who are

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old and retired and living
without their children
Child under 6 six years of
age
Child of age 6 or over
A married couple who are
old with dependent children
Bachelor stage young and a
living single away from
home
Occupation Professionals, students, and
employees
Psychographic
Lifestyle Explorer
Resigned
Mainstreamer
Struggler
Social class The middle class, working
class, and lower class
Geographic
Density Urban
Region Asia, Russia, Europe,
Australia, and America
Personality Determines and Easy going
Degree of Loyalty Switchers

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Behavioral
Soft core loyal
Hard core loyal
User Status Potential users, regular users,
non-users, and first-time
users
Benefits sought Cost-effectiveness
(Dudovskiy, 2017)
IKEA Company is focused towards catering the services by fulfilling the requirement of the
customers, therefore, they design their process and start with identifying the needs of the
customers in the market and their expectations (IKEA, 2017). Hence IKEA involves in a
repeated cycle of market research about the customers and to know more about their lifestyle
and what advantages customers are looking for from the variety of furnishings of the
household, what are their perceptions about the existing products that company is offering
and various other things. IKEA Company has regularly been aware of the significance of a
thorough analysis of the needs of the customer. For instance, because the primary market of
IKEA is various people and not just some privileged people (IKEA, 2013). The company
offers major concern to the designing of the furniture which offers a solution to the people
who live in compact and small homes. The function and form of the designed furniture by
IKEA is driven by the requirements, needs, and expectations of the customers.
IKEA Company regularly puts its efforts to offer practical and beautiful furniture at a low
and reasonable price. This states, for instance, that the designers of IKEA operate with the
unit suppliers of the production to do the designing of the furniture in a form that makes the

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maximum of the reasonable use of the accessible production capacity and meet the
expectations of the customers (Business case, 2018).
Operation Strategy of IKEA
The mission of IKEA is to provide a variety of items for home furnishing with good function
and design, durability and excellent quality; at low prices that maximum of the population
can afford to purchase them (IKEA, 2012). Founder Ingvar Kamprad the founder of IKEA
has an innovative strategy to design and make functional furniture that was very inexpensive
and easy to build, obtain it disassembled at the stores and make them visible on the
showroom with tickets of deep explanation which will eventually make the existence of the
sales officer unnecessary (Jurevicius, 2013).
The customers of IKEA basically invest maximum time in the stores as compared to the time
they invest in the competitor's stores. IKEA differentiate itself from its competitors by its way
of organizing and establishing the stores. Doing shopping in the stores of IKEA becomes an
unforgettable experience for everyone. Stores of IKEA are double of their warehouses. The
stores are constructed for the furniture's browsing which is laid out and displayed in the stores
the way that furniture will be placed or set in the home. Shoppers like to visit the stores
because they get all the items under one single roof.
IKEA’s operation strategy is well-matched with the strategies by connecting with its
objectives of performance. The performance objectives mean flexibility, cost, quality and
speed, which indirectly or directly affect the effectiveness of various other strategies.
Though, all the operations of furniture retailer might be comparable because in that they
convert resources (input) into finished products (output). However, they vary in four major
aspects i.e. the output’s volume, the output’s variety, the difference in the demand of the
output, along with this the degree of visibility that they have.

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Operations objectives
There are different operations objectives such as dependability, cost, quality, flexibility, and
speed which are highlighted by the company depending on the requirement of the customers
and compactor’s strategies and hence result in attaining the competitive edge for the
company. For IKEA Company these operation objectives can be defined in a subsequent
way:
Source [https://www.slideshare.net/GaganSharma3/ikea-operational-startegies]
Dependability
IKEA’s operations are also providing dependability or reliability to the firm by performing
activities on time. The operations of the company are dependent as IKEA has foreseeable
opening hours. The goods proportion out of stock is retained to least by the system of simple
reorder. They make efforts to speed up the new stock arrival if there is the occurrence of
stock-outs or evaluate the buffer and reorder capacities in that case when there is a change in
the sales pattern.

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Cost
The cost objective involves the thought of performing activities cheaply. The effectiveness of
speed, flexibility, quality, and dependability directly influence the cost objective along with
operation strategy and strategy of the low price. Operations of high quality decrease the time
and cost to repeatedly doing things. Quick operations decrease the inventory and enhance the
customer's flow, which can support in increasing the sales of the company and decreasing the
overheads cost. Dependable of reliable operations upsurges the efficiency and predictability
of the operations. Flexible operations accept to change and modify operations in order to
offer a response to the wants and needs of the customers without indulging any additional
costs (Trade gecko, 2018).
The operations also help in attaining the cost objective with the support of various
approaches. Sweden's central warehouse is fully automatic and involves only 3 staffs because
the concept of self-service reduces the requirement of the workforce and this effectively
reduces the cost (Industry Drive, 2018). Along with this, the cost is reduced through global
sourcing because there is no requirement of high investment. The usage of the system of
stock control can be utilized as management information system in order to observe the
pattern of sales to provide a fast response. Fast response helps in saving the cost in organizing
the resources in unforeseen conditions.
Quality
The IKEA’s operations got success in attaining the quality advantage by performing the right
things. Their products and services are formed to conformance to the specification with the
proper performance that suit for the purpose of the customers. The stores of the company are
designed in clean, tidy and unique layout ensuring their brand identity. The employees of the
company are in less contact with the consumers however they are helpful and friendly
whenever needed. The supporting facilities of the company like self-service restaurant,

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crèche, and child care also offer quality service to the consumers. Hence, the consumers
observe the services and products as receiving value for money along with additional benefits
(IRCA, 2018).
Flexibility
The IKES’s operations are capable enough to get change fast as per the requirements of the
customer which reflects that they possess a flexible advantage. The operations of the
company enable service or product flexible because they have the capability to establish new
service and products. The strategy of global sourcing makes them receptive to the wants and
needs of the customers. Their creative sourcing strategy leaves most of the design up to the
suppliers and it benefits in the establishment of a new product. The operation of the company
enables mix flexibility and is capable to offer a variety of services and goods. The variety of
products is wide which includes home furniture to the office accessories and furniture, from
childcare furniture to the self-service restaurant. Though self-service restaurant, crèche, and
childcare products are said to be supporting facilities customers get satisfied due to these
added facilities. The thought of mix and match is very fruitful in proposing mix flexibility.
Units of storage in a specific range with colors and sizes and each of them can be adjusted
with the wooden or glass doors and shelves. The units are also used as stackable so that range
of procedure is possible. The furnishing area of office provides various styles of services and
consumer can pay the money and delivery is provided to him. In stores lift and wheelchairs
are also available such that customers who are disabled get access to various floors.
The operations also enable flexibility of volume as they have the ability to change the output
level. The global sourcing enables to adjust the volume to the operations rapidly. In all the
stores of the company, it is the management teams' duty to decide the level of stock of every
product. It reflects that the individual stores are responsive to the variations in the demand in
their particular location.

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Moreover, the operations enable flexibility of delivery because they are capable enough to
alter the delivery time of the product. The management of the stores might try to speed up the
entrance of new stock if there is a phase of stock-outs. The flexibility objective helps IKEA
to offer their services with the variety of choices. They can meet the expectations of their
customers and are capable to react on the changing wants and needs of the customers (Davis,
2018).
Speed
The IKEA's operations are providing the business an advantage of speed by performing
activities faster. The designing of the store is done with an exclusive layout with parking and
warehouse facilities. The consumers can easily identify the stores by its blue and yellow
identity. The customers can easily part their vehicles in the parking area without wasting their
precious time. There is a play area for the children such that their parents can focus on their
shopping.
Supply Network process
IKEA possess 46 offices of trading service in around 32 countries. In 16 countries company
has its 28 distribution centers that deliver products to the stores of IKEA. Moreover, to have
the IKEA products suppliers across the world, IKEA purchases goods from Swedwood. It is
an industrial group which is owned by IKEA. Swedwood products are comprised of wooden
components and furniture and have hired 13,000 people in nine countries. The top five
countries of purchasing are Poland, Germany, China, Italy and Sweden with 20% of share.
The company purchases its products from five countries which are comprised of 1,300
suppliers. The monitoring of the production of the IKEA products is done by the co-workers
of the trading service offices. This allows them to evaluate new ideas, discussion of the prices

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and assess quality at the time of observing working and social conditions among the
suppliers.
The foundation of the relation of the IKEA with the suppliers is of offering products of low
price in the environmentally and socially responsible friendly way. All the products of IKEA
are produced according to the particularly framed code of conduct “the IKEA Way on
Purchasing Home Furnishing Products” (IWAY), which also offers the basis of the
relationship of the company with the international suppliers. Before initiating any business
with the suppliers of IKEA need to meet IWAY standards. IKEA's representatives of the
trading office regularly consider suppliers in the company's corporate material.
IKEA Company manufactures some products internally and majorly depends on its supplier's
network. These partnerships with the suppliers are entrenched intensely in the corporate
history of IKEA, and the oddity of these connections has become one of the parts of the
culture. The suppliers of the company enable to make innovative and exclusive designs
involving materials which are environmentally responsible and the operative utilization of
resources and interpret them into bottom-line results. The main suppliers make use of
connections with the IKEAS in order to remain innovative because innovation is the sole
choice if suppliers of the company desire to gain a powerful buyer (Abouhenidi, 2014).
Another feature that should be focused is the procedure that initiates the regulation, which
has prompted IKEA to operate with the main suppliers in order to fulfill the new
requirements. They create products of high quality which influence competitors of IKEA to
match their material and design, innovations along with economic efficiencies. Moreover, the
improved skills of the suppliers and volume make them competitive, allowing them to
increase their business with new and existing buyers. Subsequently, the industry is inspired to

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exceed and match the example of IKEA, there is success or win of the natural environment as
pollution is decreased and the benefit of the customer is by buying a product of better quality.
Source [https://www.slideshare.net/GaganSharma3/ikea-operational-startegies]
Conclusion
IKEA has successfully earned the reputation because of its exclusive and unique idea of
business and offering to the specific segment, it's business and corporate level strategies that
are dissimilar from its major competitors in the market and are supported by its strategies of
operation. Among different operation objectives such as dependability, quality, cost,
flexibility, a speed which are highlighted and kept on the priority by the company depending
on the requirement of the customers and strategies of the compactor and hence try to attain
competitive edge for the enterprise. IKEA has selected flexibility and cost as the competitive
edge. It has attained edge on the basis of these parameters by creating a strong network of
supply and investing in the procedures and technologies. The above report has successfully
highlighted major operations of the company that helps in reflecting the success and effective
strategies of the company.

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