Management and Operations Report: IKEA's Brexit Strategy and Analysis

This report examines IKEA's management and operations, focusing on its organizational structure, which is identified as a functional structure, and how it functions effectively, considering the effects of Brexit. The report suggests the contingent management approach as a modern method to help the company navigate Brexit. A STEEPLE analysis is conducted to understand the external environment and identify an innovative strategic objective. The report covers IKEA's introduction, organizational structure, the impact of Brexit, strategic environmental analysis, and the company's current innovative strategic objective in light of Brexit. The conclusion summarizes the key findings and references the sources used in the analysis.

MANAGEMENT AND
OPERATIONS

Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Briefly Introduce the organisation...............................................................................................1
TASK 2............................................................................................................................................2
Identify the organisational structure of the company and analyse how this structure could help
the company function effectively, considering the possible effects of Brexit.............................2
TASK 3............................................................................................................................................3
Suggest one modern management approach that could help the company, with Brexit
imminent......................................................................................................................................3
TASK 4............................................................................................................................................4
Using the STEEPLE framework, conduct a strategic environmental analysis of your chosen
company and identify one current innovative strategic objective of the company in the wake of
Brexit...........................................................................................................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Operations management is an area of management concerned with designing and controlling the
process of production and redesigning business operations in the production of goods or services.
IKEA is a Swedish founded multinational group that engaged in the business of selling ready to
assemble furniture, home accessories and kitchen appliances. The IKEA is founded in the year
1943. The IKEA was founded by Almhult Sweden. The Headquarters of IKEA is located in
Leiden, Netherlands. The Company has generated revenue of $,090.6 Crore. Report will lay
emphasis on the organizational structure. It will also provide STEEPLE framework.
TASK 1
Briefly Introduce the organisation.
Ingvard Kampard founded IKEA in 1943 which is mostly in mail-order sales business. It is
operating in 52 countries and established as global destination store for home furnishing
appliances, ready-to-assemble furniture, home accessories and kitchen products. IKEA has
become the world's largest furniture retailer. It is famous for their modernist designs, interior
design work following with eco-friendly steps (Grant, Trautrims and Wong, 2017).
Scope and scale of IKEA is generally focused on key values such as surrounding quality,
heritage, market difference, customer loyalty and sustainability. The environmental measures
taken by IKEA includes: replacing of PVC, minimizing the use of formaldehyde, cadmium and
chromium and using recycling materials. It is expanding its business in smart home project also
by providing wireless charging furniture and creating Sonos smart speaker technology into
furniture. They are moving their business in solar photovoltaic system also. They started renting
the furniture to the customers also which is helping them to grow their business more faster.
Sales volumes estimated by privately held company is $24 billion.
Market value of IKEA has grown so bigger that they are operating in 52 countries and in
fiscal year 2018, the total sale was about $44.6 billion. The website of IKEA contains 12000
products and the 2.1 billion visitors have been seen on websites 2015-2016. according
Bloomberg Billionaires Index, the estimated net worth of $58.7 billion, making them the eighth
richest person in the world. The reason of this much profit is that the IKEA is provide all goods
and services at low prices and a huge range of products and the purchasing factors influence
customers to buy and as a result becoming the best company in worldwide. Its key competitive
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advantages is that they have extensive knowledge about the customers (Hitt, Xu and Carnes,
2016).
IKEA founder Ingvar Kampard was born in 1926 and the company name is acronym
based on its name, grew up on the farm called Elmtaryd in the town Agunnaryd in Smaland
which is located in the south of Sweden. Its interest was always been in to develop the business.
Therefore, by creating its own resources IKEA was founded in 1943 and helped him to become
independent.
TASK 2
Identify the organisational structure of the company and analyse how this structure could help
the company function effectively, considering the possible effects of Brexit.
Organisational structure is the structure which contains hierarchy within an organization
which tells the individual about its job, its function and where to report within an organization.
The establishment of this structure helps to operate organization and assists an organization to
achieve goals for the future growth. There are three main types of structure which includes:
functional structure, divisional structure and the combination of the following two matrix
structure. IKEA follows functional structure for their company. Functional structure includes
undertaking like supervision, direction, managing and allocation of responsibilities.
The structure of IKEA is unique. The trademark of IKEA operates large number of companies.
The organizational structure of IKEA can be defined as hierarchical reflecting and massive size
of the business that includes 340 stores in 28 markets worldwide. Functional structure is used
because of lack of flexibility, communication gap between management and employees and
delay in decision making.
IKEA used this functional structure to improve the franchisee system and clarify roles,
IKEA range, supply and production activities were moves to the new inter IKEA group. The
franchisees hold by IKEA are independent of Inter IKEA Group. They both have the same
founder and heritage but work under different management and owners. By applying this
functional system the flexibility of IKEA is increased and adaptability in global marketplace has
been improved. Due to the effects of Brexit, consideration of making more products by IKEA in
the UK as prices have been rises. Furniture import prices rises 13.7% in UK, that increase was
driven by the effect Brexit. In the UK, the sales of IKEA have rose by 5.8%, with the help of
opening of two new stores. Due to the falling of currency of Pound has made it more expensive
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to import goods. Europe produces 60% of the Ikea's products with a little proportion are made in
UK. By providing 1300 jobs in UK, IKEA has increases it production by opening stores in
Sheffield, Greenwich, Exeter, South London. The most important trading partners of Sweden is
UK both in imports and exports or goods and services as UK is a safe and highly attractive
market considered to Sweden.
TASK 3
Suggest one modern management approach that could help the company, with Brexit imminent.
The modern management approach that could help the company with the Brexit imminent can
follow contingent management approach. This approach is based upon the assumption that there
is no best way to manage or solve problems. It is a creative approach which searches constantly
appropriate methods and management for the different situations or circumstances. As the Brexit
movement enters UK will be set to leave from European union in March 2019. the important
trading partners for Sweden is UK as it is a safe place and highly attractive marketplace.
Contingency management can help the management in the following ways:
1. It will help IKEA in understanding the complex organization as it main aim is to focus on
multivariate nature of organization. This approach can provide the framework to
problems where every solution depends upon the environment solution.
2. It will help the managers to improve their skills in different situations. As in Brexit
situation, IKEA can rise their import and export prices and can establish more shops in
UK to increase their productivity (Holweg and et.al., 2018).
3. The organization's adaptability provides insights to both external and internal
environment. It helps adopts the structure which is helpful for the organization which is
adaptable to the environment. IKEA has varieties of products on their websites nearly
12000 products and can lower the prices to attract more customers.
4. Brexit can be considered as an issue but for many organization with the help of
contingency approach it can help them with the exposure of market access, movement of
people and new opportunities. As IKEA in UK is opening more stores and are providing
1300 jobs to the people.
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5. As Brexit will put organization to take some complicated decisions and may be lengthy
also. To resolve this contingency approach helps the organization to provide planned
motivational and leadership approaches to motivate the team and with leadership
motivation management can make big decisions for the company (Mahadevan, 2015).
6. This approach is more practical as the solution comes after the complete analysis of the
situation. It will give IKEA to solve the issue of Brexit that can be planned with the
proven contingency planning method.
TASK 4
Using the STEEPLE framework, conduct a strategic environmental analysis of your chosen
company and identify one current innovative strategic objective of the company in the
wake of Brexit.
The STEEPL/PESTEL/PESTLE analysis provides us the detailed information about the
complete external analysis of the IKEA company. The six external factors that PESTLE includes
political, economical, socio-cultural, technological, legal and environmental creates a major
impact on IKEA. The companies who are multinational and are operating across geographies are
subjected political and legal factors, the companies have their own policies and regulations,
therefore ready-to-assemble furniture IKEA is no exception.
1. Political: the brand is getting affected by the political controversies.
2. Economical: due to Brexit there is impact on currency which led to increase in prices and
increasing economic growth.
3. Social: providing employment to refugees by providing training and creating jobs.
4. Technological: Investment in smart house by providing wireless charging furniture and
photo voltaic systems.
5. Legal: To enter a new market IKEA having barriers and regulations like India.
6. Environmental: IKEA is focusing sustainable, renewable and social responsibility by
reducing PVC, minimizing use of formaldehyde etc.
To identify one current innovative strategic objective of the company in the wake of Brexit is
following the strategy of going sustainable innovation to the business model to improve lives.
The commandments of IKEA brand for doing business and not wasting resources. IKEA is
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moving is business into smart home design by using wireless charging furniture and using the
sustainable materials. Reduction of PVC, formaldehyde etc. in their materials led to
sustainability. Another strategy is purpose driven growth, recycling of material is one way to led
to sustainability and another is digitalization efficiency which helps the company to increase
their production through e-commerce. They are investing in Augmented Reality and VR set to
transform their sales. They follow strategies which does not compromise with price, quality,
function and environment. They are creating better life for their customer and around the world
by providing furniture with low prices with best designing and functioning. For IKEA the growth
is continuous development in business and IT and more advance IT landscape, usage of data
analytics to shape customer journey and experience in retail. They are using technology not to
get rid of people but to reduce waste and helping in increasing efficiency and precision and that
gives opportunity to co-workers to grow and develop more human and less robotic skills critical.
CONCLUSION
From the above study it has been summarised that management and operations has helped
the organization in growing and expanding their business.
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REFERENCES
Books and Journals
Grant, D.B., Trautrims, A. and Wong, C.Y., 2017. Sustainable logistics and supply chain
management: principles and practices for sustainable operations and management. Kogan Page
Publishers.
Hitt, M.A., Xu, K. and Carnes, C.M., 2016. Resource based theory in operations management
research. Journal of Operations Management. 41. pp.77-94.
Holweg, M. and et.al., 2018. Process Theory: The PLu,
Laudon, K.C. and Laudon, J.P., 2016. Management information system. Pearson Education
India.
Mahadevan, B., 2015. Operations management: Theory and practice. Pearson Education India.
for the future.
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