Principles of Operations Management

This report explores the principles of operations management and how external and internal factors impact operations. It discusses the influence of corporate responsibility on operations and how operations managers respond. It also conducts a valid external and internal environmental analysis of the business environment for an organisation.

Unit 25 – Principles of
Operations
Management

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1. Explain how external and internal factors of the business environment impact upon
operations...............................................................................................................................3
P2. Consider how operations are influenced by corporate responsibility and how operations
managers respond...................................................................................................................5
P3. Conduct a valid external and internal environmental analysis of the business environment
for an organisation..................................................................................................................7
TASK 2............................................................................................................................................9
P4. Explain how operation functions support organisational strategy and decision-making.9
P5. Explain different types of control and planning methods in application to different
organisational examples.......................................................................................................11
P6. Evaluate quality systems and how operations management can add value throughout the
supply chain..........................................................................................................................12
CONCLUSION .............................................................................................................................13
REFERENCES..............................................................................................................................14

INTRODUCTION
Operations management is a practice which is undertaken for managing and controlling
all the functions of organisation in the most productive and efficient manner and reducing waste
to the minimal level. This is a procedure for bringing out highest level of efficiency through all
the functions and concerned with turning raw material into finished goods and service with
productive resources and maximizing the firms profitability (Ramírez, Seeliger and Di Pietro,
2016). The present report is developed over Ikea a Swedish brand that offers ready to assemble
furniture, home accessories and kitchen appliances and also home services in which the experts
are made available for assembling the purchase goods. Ikea was founded in 1943 which is
situated in Delft, Netherlands and serves in multiple areas around the globe. The report is
inclusive of internal and external analysis for identifying how these elements affects the
company's performance and its operations. As well as influence of Corporate Social
Responsibility (CSR) over operations of Ikea are examined too. In addition to it the support
provided by operation management to the organisational strategy and decision-making and
various monitoring and controlling measures are examined for identifying the potential of the
concept and its necessity. At last, quality and supply chain systems are examined which can add
value to operations management and its functioning.
TASK 1
P1. Explain how external and internal factors of the business environment impact upon
operations.
Business environment is refers to the surroundings in which an organisation is operating
and running its functions for accomplishing all goals and fulfilling the pre determined targets.
Business environment of every organisation is surrounded with number of factors which
influences the operations of the entity and affects their decision making. Every organisation is
unique form one another and work in their separate manners this implies that every company has
its own ways and tactics to manage or tackle the impacts being imposed by varied internal and
external factors (Bittencourt and et. al., 2019).
Operations Management is an area of management which is concerned with
administration of business practices for creating highest level of efficiency and gaining most
possible productive results. The operations management techniques are most concerned with

converting raw materials into finished goods or services in the most effective and efficient
manner which can lead to profit maximization and highest level of efficiency.
Benefits of Operations Management: Competitive Advantage- A business can lead to competitive power with the help of
operations management. Ikea is surrounded by internal and external factors which can
lead to competitive value. Operations management helps the firm in understanding these
factors which improves the firms competitive standing in the market (Bielecki and
Galińska, 2017).
 Manufacturing Edge- Operations management deals with raw material and changing
them into finished goods efficiently. Changing ways of manufacturing can lead firm
towards saving huge sum of money and other resources in the long run. Thus, Ikea will
be benefited as through operations management company can get hold of manufacturing
edge as well in the industry by making the produce cheap and of best quality.
Considering the evaluation above the External and Internal factors present in the business
environment are separate form one another. External Factors are those causing variation sin
business decisions and operations from the outside and these factors cant be ignored the
management of company have to take measures and implement them for handling the results
gathered due to the influences of the respective circumstances. On the contrary Internal Factors
are those that are generated within the firms due to past decisions and actions taken. These
internal factors can be measured and managers can take appropriate measures to reduce and
entirely remove their impacts over the operations.
There are number of external and internal elements which affects the operations of
businesses like Ikea such as cost, product quality, legal laws and regulations, economic
conditions, social trends, CSR, culture, stakeholder and many other (Chorafas, 2016). In case of
Ikea the circumstantial influence of varied internal and external factors is huge and evident as the
entity is dealing in number of geographical locations and are exposed to multiple environment
and competitive surroundings. Ikea is a global brand operating and offering their goods and
services in all over the world through their physical and virtual presence and by a effective
supply chain.
These factor present in business surroundings influence Ikea's operations and decision
making which ultimately imposes influences over the performances. For instance, in regards to

Cost, company is focused in a direction to reduce their costs of production function and which
helps them in becoming cost effective and a cost leader in market. Thus, it is an internal factor
that is influencing the long term manufacturing and supply chain operations of Ikea as for being
cost effective company's supply chain has to be productive too.
Moreover, Ikea is a market leader in the respective sector and its goodwill is based on its
creative designs, product quality and affordable prices. The products designs are inspired by
social trends and preferences of people. This is an external factor that is impacting the functions
of Ikea. The firm is able to offer best quality products with updated designs and in affordable
prices with the motive of making bulk orders and gain value form their operations. These are few
factual influences made by external and internal environment over the functionality, decisions
making and productiveness of Ikea showcasing their importance to be thoroughly studied before
making plans and at implementation stages (Ambekar, 2016).
P2. Consider how operations are influenced by corporate responsibility and how operations
managers respond.
Corporate Social Responsibility (CSR) is now known to be a fundamental activity of
business which is incorporated by owners and management in the organisational strategies and
plans for serving back to the society and contributing a little to the society. The Corporate Social
Responsibility is recently added in business portfolio in last few decades due to increasing
exploitation of natural resources and destruction being caused by business practices over the
environment and society. Thus, Corporate Social Responsibility (CSR) is defined as those
actions performed and activities undertaken by the organisation for contributing their part to
society and environmental well being.
In the present situation of business predictions and assumptions are not valued as the
market is dynamic which implies continuous changing business environment and practices
according to the requirements and needs arises (Reid and Sanders, 2019). Corporate Social
Responsibility (CSR) plays a major role in bringing change and raising the bars high for
effective and productive operations. Nowadays, population that is customers are becoming more
and more educated that is they are leading the change in societal context and which brings
changes in operations and management (Alsharari, 2019).
Stakeholders and major parties associated with the organisations put more emphasis on
purchase of goods developed with sustainable materials and with sustainable means. This

automatically influences and changes the operational practices of companies. Ikea have been
well aware of the fact that Corporate Social Responsibility (CSR) is the new trend flourishing in
the business world and ozone-friendly good and services is the new social trend. In favour of
these two factors the firm operations have completely changed and impacted. Ikea became more
focused over the fact of offering back what society is giving us to flouring and earn profits.
Thus, Ikea made changes and developed, which resulted in changing the manufacturing
processes and introducing complete restructuring of the product portfolio (DiGennaro Reed and
et. al., 2016). Ikea have developed its market image and goodwill as a sustainable producer and
manufacturer by converting all product lines into sustainable processes. Ikea made itself
sustainable by offering all raw material of its products from sustainable sources that is by
recycling the old furniture and producing a new best quality and designed furniture and other
offerings like home accessories and kitchen appliances. The operations of Ikea have completely
changed into more sustainable once and the organisation is well known for its reduced harm to
environment and more use of available resources in offering what people need and in affordable
prices.
Thus, it is clear that operations are affected and influenced by Corporate Social
Responsibility (CSR) as it is a primal concern of business owners as well as other related
stakeholders of company with most efficient results. The management or manager respond to
every requirement and request of the society and to customers associated with Ikea. Their
decisions related to management and operative style that are bringing more changes thorough
and underpinned support provided and information gathered.
Impact of New Technologies:
There are certain systems or software which can help management and managers in
keeping up with the changes taking place in technology by implementing those systems into
action as a operations management tool. The managers of Ikea make use of Customer
Relationship Management system for fulfilling their corporate responsibilities (Pheng, Shang
and Peter, 2016).
This is a technology used by management for keep in close touch with customers and
maintain their interaction for retaining and building a healthy relationships with potential buyers.
This system helps management and Ikea in building customer relationships and streamlining the

processes with the purpose of increasing sales, improving customer services by providing
appropriate support and inducing the profitability.
The Customer Relationship Management system enable the organisation to fulfil the
operation management purposes by offering higher profitability and a unique competitive edge.
The CRM system helps managers in focusing over the company's relationships with potential
buyers as well as in improving efficiencies which leads to higher gain in productivity. The CRM
system offers a single platform to customer of Ikea where they can find everything at one place
on a very simple, customisable dashboard which offers all the history purchases and transactions
as well as enabler in managing data with efficiency (Wijnhoven, Beckers and Amrit, 2016).
P3. Conduct a valid external and internal environmental analysis of the business environment for
an organisation.
In order to make appropriate internal and external analysis of Ikea, SWOT and PESTLE
framework are used. These tools are specifically established for conducting situational evaluation
of the organisation and gain insight about its current market position. Thus, Ikea's external and
internal analysis is presented below in table format.
EXTERNAL ANALYSIS:
PESTLE Model
Basis Description
Political Ikea is an international brand that is company has a diverse portfolio and
operates in number of countries and markets. Headquarter of Ikea is in
Netherlands but its exposure is wide. This results in more exposure to
different political environments and integration with them. Ikea has to
take measures to align its operations with countries and their political
requirements which is a tedious task when it comes to implementation
stage (Ahimin and et. al., 2019).
Economic Ikea is again exposed to number of economies and surrounded with
varied international laws and regulations that are compulsorily to be
followed. Ikea has its functions in 41 countries who has separate
economic stability and statistics. One major economic uncertainty
through which Ikea is suffering is weakening dollar in the US is under

recession and economy is suffering.
Social The social factor is positively influencing factor as Ikea's brand name
and goodwill is developed over its creative designs and sustainable
mean of operations. Company integrate and align social trends with
operations and product offering and it becomes its strength and
productive power.
Technological Technology is something which offered Ikea its success as without
technology company would not have been able to offer what it is
offering today to customers. Marketing is a major function of a business
organisation and Ikea is making optimal utilisation of the resource for
attracting most people and making them its potential buyers. Ikea is
present on all social handles conducting marketing campaign and
gaining attention of the public and most importantly of the target
audiences (Kwon, Kim and Martin, 2016).
Legal The legal factor is concerned with specific laws made by the
governments of particular country. Ikea also have to regularly posted
with the laws and changes in legal environment for being aware about
their management in relation to the laws. For instance, labour laws,
taxes and insurance polices are different and managers has to make
arrangements accordingly.
Environmental Ikea is a brand maintaining its ecological balance and works with the
motive of returning back what it is taking from the society. Ikea make
use of recycling processes and generate its raw material through
recycled goods and old furniture. The environmental factor is a huge
concern for Ikea and its part of their Corporate Social Responsibility
(CSR) policy. Thus, it has positive influence over the brand and
operations.
INTERNAL ANALYSIS:
SWOT Framework

Strengths Weaknesses
 Ikea's Brand Value is its primal
strength holding 46th position in the
world. It is also a part of top 10
retailers in the world placed at 6th
position.
 Its Products holds the biggest strength
as the designs and quality of good
produced by Ikea are premium and
makes it their primary choice (Walters,
Nickerson and Hall, 2019).
 The biggest and most common
weakness of Ikea is bringing
Standardisation and developing
Synergy in its operations around the
globe. Company deals in number of
countries and this makes it difficult for
Ikea to control and standardise the
operations across locations.
 Lacking in articulating and
communicating environmental policies
to stakeholder like shareholders,
customers and external public.
Opportunities Threats
 Focused approach of Value addition
and cost leadership is the major
opportunity for Ikea through which it
can not only get hold of existing
customers but new potential buyers will
be attracted as well.
 Another opportunity lies for Ikea is of
Expansion and Growth. It is already
planning to enter markets like China
and India with cost leadership strategy
and it is the leading opportunity which
Ikea holds.
 Ikea's competitive edge is its low cost
business model and it is becoming a
threats as it is easily being Imitated and
resulting in increasing competition and
rivals in market.
 Increasing competition is a threat and
Increasing online retailing is
becoming a bigger threat for Ikea as the
company is losing its Unique Selling
Proposition (USP) and their strategies
of effective functioning and being the
low cost producer are failing.

TASK 2
P4. Explain how operation functions support organisational strategy and decision-making.
The prominent focus of operations management is over increasing and inducing the
efficiency and productivity of organisation. In regards to the same operations management
involves number of practices and actions such as product management, overlooking production
processes and stay focused over reducing waste form manufacturing units. Operations
management plays vital and concerning role in accomplishing organisational strategies and plans
in the most effective manner and offering what's best for the entity and its functions.
The processes and practices undertaken through operations management purposes are
more concentrated over business operations on day to day basis that is regular activities involved
in the functions. Ikea is suffering in maintaining its competitive advantage as more rivals are
entering the market and imitating its business model. Ikea has to become more and more
competitive in relation to survival of the firm. For the same the managerial action play a vital
role as they are responsible for identifying an alternative plan and set of actions for solving the
generated problem and offering a long term solution for regaining and maintaining the
competitive edge of Ikea (Lindskog and et. al., 2016). This results in providing support of
operations to organisational strategies and decision making process. Some factors needs to be
examined for doing so that are concerned with risk and uncertain environment are as follows: Description is the step at which all the factors related to smooth running of business and
aligned operations are represented in favour or in direction to attain the respective goals
and organisational objectives for the longer period. Management of Ikea will be depicting
number of strategies for handling the situation and set decisions made earlier. Plan stage is referring to those areas which needs to be redesigned and strategically
planned again with efficiency and effectiveness. This is an important stage in which
Ikea's management have to go through thorough planning procedures to have a strategy to
regain their competitive power. Organise is the third phase through which management is suggested to stay organised
and implement plans for the alternative course of action developed for higher level of
functioning and attaining the competitive edge. Direct is the stage where employees are informed and clarity is provided to them about
the changes. Here employees are guided and supervised, Ikea's management needs to

develop effective communicating relations for themselves and employees for guiding
them properly and taking them to the right path for the sake of firms and its employees
benefits.
 Control is the last operations management function in which performance standards are
developed based on the overall objectives of company. Ikea will be supported as
predicted performance basis is in hands of the firm and modified action plan is developed
as well which results in higher level of support to management and functions.
P5. Explain different types of control and planning methods in application to different
organisational examples.
Planning and Controlling are major stages of operations management functions in
which new strategies are developed and according to it control standards are developed for
gaining insight about the improved efficiency and target achieved. Planning and Controlling are
crucial procedures that are defined as purpose oriented and beneficial in reducing gaps in
between the actual and targeted results. Thus, different types of planning and control techniques
suggested to Ikea are as follows: Budgets are the instruments which holds figures that are extracted from factual data and
interpretation is made. Budgets is a planning and controlling tool which enables the
management of Ikea to gain knowledge about the finances they have for particular tasks.
Basically, developing budgets for separate function enables leaders and managers an idea
about how they should spend the prescribed amount in favour of the pre determined goal.
This is a controlling measure too as managers will stay aware and put control on
expenses resulting in reduced waste and higher productivity (Seraphin and Thanh, 2020). Standard Costing is a similar tool like developing budgets and making decisions
accordingly. Standard costing phenomena used in manufacturing sector for gaining an
understanding about the variance or difference between actual and budgeted costs of
production. This toll enable management of Ikea to undergo a thorough evaluation of cost
for prescribing it to the production department. As well as it is a control measure too as it
helps in knowing difference between actual and budgeted amount of production cost
incurred and gain knowledge about the areas which needs improvement for reducing
wastage and inducing efficiency.

 Financial Ratios are too accounting tool which are used for gaining insight about the
past, present and future performance of company by comparison and in depth planning by
evaluating past and present data. Financial ratios is a comparative tool that will assist
management of Ikea to have better knowledge about the differences created and develop
more effective plans. Moreover, these plays role of controlling measures as from
comparative study managers can take respective measures to control costs where possible
and stay steady to its objective of becoming a cost leader.
These accounting measures or techniques will provide support and assistance to
management and leaders of Ikea for taking controlling measures for reducing any type of waste
as well as make optimal utilisation of resources available. Moreover, the techniques is focusing
over costs induced in production and manufacturing as well as overall costs of operations. This
will provide a complete overview to Ikea about the respective costs as well as overall expense
company will be incurring. It will then result in more productive approaches being adopted by
managers of Ikea to be productive and cost effective and attain company's objectives of being a
cost leader.
P6. Evaluate quality systems and how operations management can add value throughout the
supply chain.
Quality System is a formalised method which is used for documenting all the undergoing
processes in the organisation, all the procedures and responsibilities prescribed to each individual
for achieving the determined level of performances and objectives (Abubakar, Mutalib and
Abubakar, 2020). This is a supportive method of operations management enabling managers and
higher staff to effectively manage and regulate the functions of organisation. Quality systems
helps in coordinating and directing different activities of a process in the company and assist in
meeting with customers needs and requirements by improving the effectiveness and efficiencies
of processes on regular or continuous basis. The quality system is a systematic phenomena which
can help Ikea and its operations management team in building a efficient processes and develop
most effective outcomes at the end. This method can be implemented over supply chain of Ikea
as it is another very focused and crucial operations management area of the entity.
Supply chain is defined as a network developed between the company and its suppliers
for undertaking produce and distributing the goods and services to end consumers. There are
number of activities, people, information and resources involved in a potential supply chain.

Companies needs to manage their supply chain as it holds the whole process with appropriate
steps of changing the raw materials into finished goods and making them available to end users
or potential buyers.
The support quality systems provide to operations management for managing and
maintaining the supply chain of Ikea is very significant. Supply chain management system which
have been adopted and utilised by Ikea is global. The supply chain management developed and
used currently is taking care of designing, manufacturing and warehousing the goods produced in
Ikea's production department. The support quality system will provide to the global supply chain
management system of Ikea will be to different stages and steps involved. The quality system is
an operational management tool which if used will render more efficiency and productivity to the
supply chain as it is an on-going process which results in lower waste and induces the idea of
Ikea to stay stable and survive in market by being the lowest cost producer and manage their
competitive position of a cost leader (Lau, Ng and Acevedo, 2019).
Moreover, this quality system of operations management also make the supply chain of
Ikea more regulative and systematic where everything is documented and coordinative which
results in induced speed of functions and reduction of waste of time and resources. Global
Supply chain management is a tedious chore to perform with support of quality systems
management can easily meet customer needs more faster and their distribution channels will be
more efficient resulting more productive results and increased sales units.
Quality system:
The Total Quality Management which is also known as TQM is a continual process of
detecting errors and eliminating them form the systems and functions of organisation. The
management in Ikea can also make use of TQM for streamlining their supply chain as well as
improving their customers service quality resulting in offering higher level of customers
experiences.
The Total Quality Management system is aiming towards getting hold of all the parties
and units involved in Supply chain and other stages of it like manufacturing in order to reduce
errors in production that leads to lower number of dead and under quality stock and results in
better and most appropriate quality of goods reaching to consumers. The TQM system also
reduces the time of manufacturing bringing productivity to the table and improved supply chain

of Ikea that leads to faster goods delivery to customer and better shopping experiences (Goulding
and Abley, 2018).
CONCLUSION
In relation to the discussion conducted in above report and information gathered it is
concluded that operations management practices and phenomena is concerned with making the
most productive and potential use of resource available in functions of business and keep the
firm highly profitable. Business surroundings of a company is comprised of number of internal
and external component which imposes potential influence over the operational activities as well
as management decisions and in accordance to it managers respond and work further. In addition
to it Corporate Social Responsibilities (CSR) also tend to impact organisational strategy and
functioning providing support in number of areas to managers and accordingly they develop their
responses. Lastly, operations management practices support organisational strategy too and
enable it to attain the respective targets in the prescribed manner and in the productive form.
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