IKEA: External and Internal Factors Impacting Operations Management

This report delves into the operations management of IKEA, a furniture manufacturing company. It begins by explaining how external and internal factors, such as vision, globalization, and government regulations, influence IKEA's operations. The report then explores the impact of corporate social responsibility (CSR) on IKEA, highlighting how CSR initiatives enhance customer relations, profitability, and cost savings. Furthermore, it examines how operations managers respond to CSR demands and how the company utilizes technology and software like Supply Chain Management (SCM) to improve efficiency. The report includes an external and internal environmental analysis using the PESTEL framework, considering political, economic, social, technological, and environmental factors. The analysis covers how IKEA manages its supply chain. Finally, the report evaluates quality systems and how operations management adds value throughout the supply chain, concluding with a summary of the key findings and implications for IKEA's operational strategies.

Unit 25-Principles of
Operation
Management
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Table of Contents
INTRODCUTION ..........................................................................................................................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 .............................................................................................................................14
REFERENCES..............................................................................................................................16
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INTRODCUTION
Operations management is determined as administration of the different business
practices in order to create high level of efficiency that are possible with a company. It is
determined with converting raw material as well as labour into the finished goods and services as
efficiently as achievable in order to maximize profit and market shares of an
organisation(Bawiskar, 2020). There are several functions through which operations
management encompasses such as implementing, planning, supervising, production of good and
services. The respective report is based on the case study of IKEA which is a furniture
manufacturing company and they are involved in several operations such as wood purchasing,
recruitment, regular training and many more. The respective report include topics related to
external and internal factors which impact on operations of respective company. Moreover it also
include affect of CSR practices as well as it also include role of operations function, evaluation
of several quality system which add values to existing supply chain system.
TASK 1
P1 Explain how external and internal factors of the business environment impact upon
operations.
Operations management is considered as the administration of several different business
activities conducted by a company in order to attain their desire goal. There are several benefits
of operation management which are attain by a company such it help in converting raw material
into finished good, it also help in ensuring that all the management activities are conducted in
best manner. This leads to attainment of desire goal as well as objectives in effective manner.
Business environment is considered as all factors that can be internal as well as external and that
impacted on the company's functions such as employees, demand, customers, management,
supply, regulations and rules related to business and many more. There are main five
components of the business environment such as social, economical, political, technological and
legal (Boudaghpour and Sabooteh, 2020). It is essential for a company to conduct evaluation and
analysis of these components as that will help in developing effective decision so that they can
attain their desire goal successfully. In context of IKEA, there are several external as well as
internal factors of the business environment impact on operations, from which some are
mentioned below:-
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Internal factors of business environment
Internal factors of business environment is considered as factors which impact on the
company operations and functions at the internal level. These factors can be control by a
management by developing decision accordingly or change it. Some of the main internal factors
of business environment which impact on IKEA operations are mentioned below:-
 Vision of company – The vision statements of IKEA is to develop cost effective system
so that they can sustain in the market for long time. In respect of this they are planning to
opt for cost effective strategies as well as equipments and they are also planning to adopt
recycling method so that they sustain in market by enhancing their profit (Calandro,
2020). According to this internal factors it is essential for respective company manager to
develop proper strategies as well as execute in the best manner for attaining respective
vision.
 Business operations – The respective company is manufacturing and selling furniture
according to the demand as well as requirement of customers at potential marketplace.
Respective company also perform several other functions which help them in developing
affordable products or furniture such as purchasing of wood and fabric, recruiting of
workers, planning for location, layout of furniture factors and many more. In respect of
this internal factors it is essential for respective company manager to develop strategies
and plans accordingly.
External factors of business environment
External factors refers to those factors which impact on a company operations and
functions from the outside. These factors are uncontrollable by the management so they need to
develop strategies and plans accordingly. It is also essential for manager to conduct market
evaluation on regular basis so that they can determine changes according to which strategies can
be developed. Some of the main external factors of business environment in respect of IKEA is
given below:-
 Globalisation – In current time in order to expand or grow business every company is
adopting globalisation. In respect of IKEA while adopting globalisation they experience
several factors which impact their business and that will be essential for them to develop
strategies according to them (Caldera and et.al., 2020). In order to adopt globalisation
company need to opt several aspect such as technology, effective supply chain process
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and many more. Due to this external factor respective company need to develop strategies
and plan so that they can attain their desire goal successfully.
 Government – It is one of the main external factor which impact on the company
operations and functions. IKEA is operating in furniture manufacturing and selling
industry so it is essential for them to develop strategies and plans according to rules,
regulation and policies because through that they able to conduct business operations
more effectively in potential market. Moreover these rules also impact upon the
operations because manager need to update policies which affect process and procedure
of working at respective company.
P2 Consider how operations are influenced by corporate responsibility and how operations
managers respond
Corporate social responsibilities is considered as activities or practices which is
conducted by a company in order to support environment as well as society. In current time it is
essential for each and every company to conduct corporate social activities for the society and
environment (Canbolat and Erbey, 2020). CSR activities are beneficial for both company as well
as community. There are numbers of CSR practices which a company may conduct such as
reduce carbon footprint, improve labour policies , charity, volunteering in community,
participating in fair trade, social and environmentally investment and many more. Through these
activities companies able to support society as well as they also able to enhance their goodwill,
market value, profitability and many more. In respect of IKEA their several operations are
influenced by the corporate social responsibility from which some are mentioned below:-
 Develop better customers relation – By conducting CSR activities respective company
able to develop better customers relations which help in conducting more effective sales
operations. It is so because CSR practice will increase goodwill in market as well as it
also increase customers loyalty which aid in enhancing sales successfully.
 Increase profitability and value – CSR activity also help IKEA in enhancing their profit
and market value which leads to conducting every business operations in effective
manner. This will be possible because company have proper funds through which they
can buy resources successfully.
 Do cost saving – By conducting CSR activity IKEA able to cut the cost which leads to
enhance in saving or profit (Khashe and Meshkati, 2020). For example by adopting solar
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panel respective company able to reduce their electricity bill as well as it also enhance the
positive brand image. Through that saving respective company able to adopt more
effective resources for conduct other operations in effective manner.
These are the main aspects which show how IKEA business operation get impact by their
corporate social responsibility. In addition to this, CSR activities will help respective company in
gaining several benefits such as increase in goodwill, market value, customers relation,
profitability ratio, sales, retention of employees and customers and many more. While this
manager of the respective company plays main role so that they can attain their desire goal and
objectives successfully.
In this operations manager of IKEA will respond like they develop strategies as well as
plans so that they will attain their desire goal as well as objectives in successful manner. In
respect of operation manager of respective company they will develop strategies related to
implementation of solar power panel so that their electricity bill get reduce and that amount can
be used in other operations and functions of company (Kidd and et.al., 2020). In addition to this
respective company operations manager may also conduct changes in the manufacturing process
that will include adopting of recyclable or reusable raw material. In addition to this they also
ensure that the waste produce in production will be reuse in next process or other operations.
Operations manager of respective company must also implement business ethic in the operations
in order to ensure that all the work are conducted in ethical and legal way. In addition to this
their are several positive impact of the new technologies on the operational management system
and processes such as that help in conducting business in effective manner as well as it also leads
to accomplishment of work properly with no or minimum wastage (Komarova and et.al., 2020).
This will also help in saving resources as well as time which leads to sustainability and enhance
effectiveness and management flows. There are several software system which a company may
adopt for conducting business operations effectively such as Enterprise Resource Planning
systems (ERP), Supply Chain Management (SCM), New-Product Development
(NPD) and Customer Relationship Management (CRM). From these SCM i.e. supply chain
management help in management supply process in effective manner so that customers will get
proper products or services on time and in effective ways.
From all these software supply chain management (SCM) is one of the most useful
software which help firm in attaining their predetermined goal successfully. Supply chain
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management is considered as method which help in handling entire flow of production of
products and services. This process is initiate from raw components in order to deliver the final
products to the potential customers. There are several activities which are involve in the supply
chain management which help respective company in attaining their desire goal successfully
such as packaging, farming, manufacturing, designing as well as transportation.
P3 Conduct a valid external and internal environmental analysis of the business environment for
an organisation
External environmental analysis:
In order to conduct analysis of external environment IKEA opt for PESTEL analysis
which is mentioned below:-
 Political: IKEA is conducting business in several nations due to which they need to
follow several political forces so that they run business smoothly. Political stability help a
company in maintaining economic stability which enhance profit, sales and market value.
IKEA want to expand itself in Asian market but its supply chain is present in Europe
which show that their will be negative impact of political conduction.
 Economical: Economic condition of every nation is different and it is essential for a
company to conduct elevation of that so that they develop strategies accordingly
(Lytvynov and et.al., 2020). In respect of IKEA analysis of economic factor is impact
positively because that help in developing decision.
 Social: This factor change on continuous basis due to which company need to conduct
evaluation regularly and develop strategies accordingly. In respect of IKEA, this will
impact negatively because respective company manager need to develop new design and
strategies for fulfilling specific demand.
 Technological: Currently technology change operational functions of each and every
business including marketing, human resource department, finance, customers services
and many others (Mawle, 2020). In respect of IKEA, technology help them in improving
their operations, process and functions in effective manner. This will also help in
developing more attractive furnitures as well as it also aid in minimising wastage.
 Environmental: In order to sustain in the market it is essential for company to adopt
strategies related to environment benefit. In respect of IKEA, they must adopt strategies
which are beneficial for the environment such as they recycle waste material, they also
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opt material which not harm environment. In addition to this they may also adopt for
solar power for electricity generation which is effective for environment as well as
company as it save their funds by reducing electricity bill.
 Legal: It is essential for a company to follow legal aspects of nation as that will help in
conducting business operations smoothly. In respect of IKEA, they are operating at the
different nations and it is essential for them to follow all legal aspects of nation related to
specific industry. It is so because that will help them in conducting operations effectively
as well as properly.
Internal analysis:
In order to conduct international environment analysis IKEA opt for the SWOT analysis
which is mentioned below:-
Strengths Weaknesses
 IKEA adopt innovation on regular basis
which help in attractive more and more
customers.
 Respective company provide their
products at the affordable price which
help in retaining customers for long
time.
 The presence of respective company is
at the world wide level which enhance
sales and profit successfully.
 Respective company products are know
as the low quality due to low cost at
some places which impact on their sales
and profit (Obrecht, 2020).
Opportunities Threats
 IKEA has opportunity to expand their
business at the other locations like
Brazil, Malaysia and Mexico (Patel,
Sedeek and Wilson, 2020).
 Respective company can also expand
their products like related to food and
beverages.
 Competition is the main threat which is
experienced by respective company
because they are operating at the
several different location. For example
Walmart.
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TASK 2
P4 Explain how operation functions support organisational strategy and decision-making
Operations management involves various functions that ensure that business processes
are conducted in an effective manner. It is one of the important components within the
organization. Various functions of operations and how they support organizational strategy as
well as decision-making is explained below –
Managing Projects – This is one of the many functions of operations management as lot
of business processes take place within an organization (Popović and Popović, 2020). Operations
management ensures that different projects are managed in an effective manner and the desired
output is achieved.
Management of Finance – The operations department at IKEA also takes care of
finance. The financial activities can be related to either sales and managing the payments.
Continuous Evaluation – There are continuous evaluations that are carried out in order
to make sure that all business processes are being carried out effectively in terms of productivity.
Also, any areas of improvement are also identified.
Determining future sales – Operations management also plays an important role in
forecasting future needs as well as buying pattern of the customers. As a result, products are
manufactured based on the same.
Continuously improving processes – One of the other functions of operations
management is to focus on improving processes continuously. This not only helps in delivering
an improved and high-quality output, but also help the company attract a greater number of
customers.
Decision-making is another important component for the organization as it allows the
management of IKEA to make informed decisions as well as achieve its goals and objectives.
The operations manager in the respective company is responsible for making all the important
decisions relating to the inventory as well as operational process (Terziev, 2020). This helps in
supporting the organizational strategy as well as promote effective informed decision-making.
The different aspects of operations management that contribute to the improvement of decision-
making process are explained below –
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 Different processes that will be involved in achieving the final output, therefore it is
important to make effective decisions when it comes to deciding the quality as well as the
quantity of goods.
 This is done with the help of operational capacity and help in the quantity of goods as
well as services that are to be produced within a particular frame of time.
 Next, the processes that will be involved in turning the raw material to the finished goods
are also decided upon. This ensures that quality goods are produced.
 It is important to set quality standards as they help in encouraging the employees to
perform productively and be more competent.
 HRM or Human Resource Management should be done as it will help in fulfilling the
requirement of more employees. It will also assist in dealing with a situation of ever
staffing within the workplace (Yu and et.al., 2020). As a result, the overall operational
efficiency will be maintained and different business processes will take place smoothly.
 Lastly, making decision regarding the stock needed for the inventory is also an important
aspect and should be done based on the level of production as well as amount of sales.
Different types of planning Operational planning: This is considered as a helpful of tools in order to states the strategic
objectives that firm have. Moreover, it is regarded as operational planning is procedures of
deciding in advance of what is to be performed to attain the tactical business goals. This
assists IKEA to align different operational activities such as plan for different processes,
resources that will be required, people who will be required to carry out the jobs etc. with
the organizational goals and objectives. Strategic planning: It is considered as planning for attaining the vision of firm. Moreover, it
is systematised procedures of envisioning the expected future as well as transmitting it into
widely described objectives as well as sequences of steps to attain them. This assists IKEA
to direct daily decision as well as also determining progress and changing approach while
going forward.
 Tactical planning: This is considered as procedures of highlighting plans of business for
coming year. It differs from strategic planning as it encompasses long term objectives which
show the directions of firm as well as their intent highlighted into their mission statement.
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This assists IKEA operations team to have clear defined steps for attaining objectives at
specified time and short term results.
P5 Explain different types of control and planning methods in application to different
organisational examples
Both control as well as planning are necessary to ensure that business operations are
carried out in an effective manner. Both planning as well as control are needed at all levels of
management.
Planning Methods
IKEA has adopted certain planning techniques in order to ensure smooth functionality of
different businesses. Some of the planning methods that help the respective company in
achieving its operational goals and objectives are described below –
Planning for warehouse facilities – The store operations of IKEA are supported by high
flow facilities and low flow warehouses. There is a facility wherein the storage of products is
automatic. The revenue system is also there that is used for bringing the unnecessary costs down.
Maximum and minimum proprietary systems – The company has different store
logistic managers that help in managing the inventory (Zaitsev, Butarovich and Smirnov, 2020).
They re-order the stock items whenever there is a need. Two types of settings, minimum as well
as maximum proprietary systems. The minimum system indicates the minimum amounts of
products that are available before new ones are ordered. On the other hand, maximum settings
that indicate the maximum amounts of products that can be ordered at one time.
Operational Planning – This method of planning allows the company to align different
operational activities with the organizational goals and objectives. This includes planning of
different processes, resources that will be required, people who will be required to carry out the
jobs etc. As a result, desired output is obtained in an effective way and it is ensured that goals
and objectives are achieved with high operational efficiency as well as effectiveness.
Controlling Methods
The different types of controlling methods that the managers of IKEA use in order to
maintain the efficiency of the different business activities. Some of the methods are explained
below –
Internal audit – Internal auditing is referred to as a technique that is used in operations
management. This helps in identifying any mistakes or errors that may have occurred during the
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transactions (Κωνσταντή, 2020). An internal audit is an important component that allows
effective management of financial resources of an organization.
Controlling the budget – There are different types of budgets that IKEA can prepare in
order to control the expenses that are related to its inventory as well as other operational
processes. The main aim of controlling the budget is to ensure a proper regulation of the
activities as well as manage the finances of the company in an effective way. With a budget, the
company will be able to measure its current performance and implement necessary options.
Direct supervision and observation – This is one of the oldest control methods that is
used by almost all companies. The operations manager can supervise the different operational
activities and the performance of employees. This helps in getting a better understanding of what
improvement techniques can be implemented. Also, observation is a method used for controlling
the different processes as well as the production of goods.
Top down approach: This is considered as traditional of project management approaches.
This calls for whole decision to be developed through project manager. When a project is
managed from top level to downwards, the breaks down framework as well as project plan are
generally accomplished through project manager individually. So, this approach assists IKEA
manager to focus upon planning part in this decision making is centralised. Also, it is helpful in
determining the roles and accountabilities of whole top to down staff.
Bottom up approach: This is rapidly obtaining popularity, mainly into sector in which
project intent to include new challenges which needs unique solutions. The company like IKEA
utilises respective approach in order to gain high staff involvement which is helpful in improving
morale as well as responsibility. Also, in this there is less chance of problems in future as
capabilities of workers are undertaken at outset.
P6 Evaluate quality systems and how operations management can add value throughout the
supply chain
Quality management is an important component of operations management that helps an
organization to achieve its goals and objectives in an effective way (Ruan, 2019). There are
different techniques of quality management that are used in IKEA that ensure an efficient
operational management. Some of the same are explained below -
Total Quality Management (TQM) – TQM is a quality management technique which
ensures that the customers are satisfied and that they receive high quality goods and
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