Strategic Operation Management Report: IKEA Store Expansion Project

This report provides a comprehensive overview of IKEA's strategic operation management, focusing on the planning and implementation of a new store in a semi-urban area. It begins with an introduction to IKEA's business model, its market, and its competitive landscape. The report then delves into the purpose of the project, which is to increase profitability through greater accessibility and affordable products. It outlines the deliverables, including a store offering diverse furniture and customization options, as well as sales and marketing initiatives. The core of the report examines operational management strategies, emphasizing the need for efficient inventory and workforce management, including the implementation of lean management and a semi-hierarchical matrix structure. Key objectives are identified, such as securing a physical space, constructing the store, recruiting staff, and conducting marketing activities. Standards and control measures are proposed to ensure project success, alongside a detailed action plan and timeline spanning six months. Human resource planning, including the organizational structure and staffing requirements, is presented. A comprehensive budget plan, covering operational, human resource, marketing, and legal costs, is provided. Finally, the report offers recommendations for successful project implementation, including stakeholder involvement, time and resource management, and the maintenance of operational integrity.

Running head: OPERATION MANAGEMENT
Operation Management
Name of the Student
Name of the University
Author note

1OPERATION MANAGEMENT
Table of Content
Introduction................................................................................................................................2
Purpose.......................................................................................................................................2
Deliverables................................................................................................................................2
Operational management strategies...........................................................................................3
Objectives...................................................................................................................................3
Standards and control measures.................................................................................................4
Action planning and timeline.....................................................................................................4
Human Resource planning.........................................................................................................5
Budget plan................................................................................................................................7
Recommendations......................................................................................................................8
References:.................................................................................................................................9

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Introduction
IKEA is a interior decorator company that has major focus on “well-designed”
wooden furniture production. The aim of this company is to produce furniture for home as
well as office usage with affordable price. IKEA has around 200 stores in 30 countries. IKEA
stocks around 9500 items in its store for sale. With the increasing number of national level as
well as local level competitors and the globalised consumer preference, the competition level
of the target market is also increasing for IKEA. Expanding the business through increasing
the user accessibility is the strategy of this company.
Purpose
The purpose of this project is to open a new store in a semi urban site where people
can easily access the high quality and affordable products offered by IKEA to make their
residential and office premises beautiful. The core concept of this strategic intervention came
from the “Place” strategy of 5P of marketing mix (Product, Price, Promotion, Place, and
People) (Kerzner & Kerzner, 2017). The purpose of this project is to increase the profitability
of the business from the communities of semi-urban areas by providing their affordable
product and greater accessibility.
Deliverables
This new store will offer the potential customers verities of furniture with beautiful
design. This operational site will be also used to take special manufacturing order from the
customers who will want to customise the product as per their choice. The store will have
some sales and marketing worker, who will directly communicate with customers to make a
healthy consumer relationship (Too & Weaver, 2014). Marketing team will also execute
promotional activities to draw attention of the local and regional peoples. The delivery
service will be also available where, customer can set their delivery location online.

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Customers can even purchase the products online through the regional portal or website of
IKEA.
Operational management strategies
Operational management is a major part of any business, which includes the
management of workflow, physical properties, finance and human resource. In this case,
opening a new store needs a systematic assessment of requirements, that includes the
requirement of workforce, the requirement of operation, the requirement of time, the
requirement of procedures and the requirement of capital (Hill & Hill, 2017). These are the
major question that IKEA needs to solve in this project plan. For a semi urban based store, a
company needs a efficient inventory management system that could help the organisation to
maintain flow of incoming logistics and sold items without making any waste. Hence, for this
new store of IKEA, the company requires to implement the lean management strategy where
the ready to sell products will be delivered to the store to keep a minimum number of buffer
stock. The semi hierarchical matrix workforce structure will be also helpful for IKEA where
the integrity within different departments will be stronger.
Objectives
The following objectives are the milestone that needs to be done by the project management
team of the IKEA, who will be responsible to successfully implement the project:
 To secure the physical space or plot of the new store compiling with legal system and
land purchasing and licensing
 To develop the physical structure assessing the scope of building store that will have
an office, store room, show room and transaction counter
 Making contract with civil contactor to build the premise
 To recruit ample number of workforce for forming the efficient workflow

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 To estimate cost and potential revenue from the store
 To conduct marketing and promotional activities to make people aware of this new
store
Standards and control measures
Standards and control are very essential part of project implementation, through
which the activities can be controlled in précised order, without overdoing or neglecting any
activity. To control the project implementation team an effective monitoring system will be
required, through which the project manager of IKEA will receive a real time feedback
regarding the project progress, obstacles to overcome the boundaries. The performance
measures can be further segregated into two categories namely financial measures and time
measures. Through financial measures it can be found which activity will need to achieve
goal in minimum cost (Hornstein, 2015). On the other hand the time measures will help to
control the duration and sequence of the activity to finish the projects within the deadline.
Action planning and timeline
The following timeline has been developed considering the major activities needed to
establish a new IKEA store in the chosen semi urban area with the ample number of services
for the customers. The major activities that will be require for this project are Stakeholder
communication, Project planning, Human resource allocation, Budget planning, Purchasing
land, Developing construction, Finalising building and facilitating, Recruit new employees,
Set up logistics, Assessment evaluation and Project finalisation.

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Project finalising
Assessment and evaluation
Set up logistics
Recruit new employees
Finalising building and facilitating
Developing construction
Purchasing land
Budget planning
Human resource allocation
Project planning
Stakeholder communication
01-05-19 31-05-19 30-06-19 30-07-19 29-08-19 28-09-19 28-10-19
From the project action plan it can be interpreted that the total amount of time
required to successfully establish a new operational IKEA store at a target location is
approximately 6 moths. The deadline of the project will be 31-10-2019.
Human Resource planning
The human resource planning is the process of allocating and managing personnel to
some particular activities through individual allocation or group based allocation. In a
internationalised company which such huge employment structure will need group based
allocation technique. The organisational structure and hierarchical system are two essential
factors of human resource planning (Samset & Volden, 2016). As a start-up operating hub of
a global company, the workforce will need effective cooperation, coordination and
informational as well as operational integrity. The matrix organisational structure will allow
such workforce development, which could lead to integrated operational management with
higher efficiency.

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This new IKEA store will require workforce for 4 major departments namely
Marketing, Sales and Consumer relation, Inventory management, Accounting and facility
administration. Hence the human resource structure of this organisation has been presented in
following table
Level 3 Level 2 Level 1 Responsibilities
General Manager
Sales and
consumer relation
Manager
Sales employee 1 Handling consumer during
purchasing, post purchasing
services
Sales employee 2
Sales employee 3
Sales employee 4
Consumer service 1 Tele communication service for
customersConsumer service 2
Marketing
Manager
Marketing staff 1 Market research and physical
promotionMarketing Staff 2
Digital Marketing
Staff 1 Digital and online market research
and promotion
Digital Mare stuff 2
Finance Manager
Accountant 1 Accounting, payroll, budgeting
Cashier 1 Working in cash counter
Cashier 1
Logistics manager
Store keeper 1 Working in store room, handing
equipments, moving products,
assembling parts
Store keeper 2
Store Keeper 3
Trucker 1 Transporting products from nearest
warehouse, delivering products to
customer
Trucker 2
Facility and
administration
Sweeper 1 Cleaning
Technician 1 Fixing technical issues in office
premises
In house staff 1 Supporting activities
IT staff 1 Taking care of network and
telecommunication system

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TOTAL
workforce
needed
6 Management
employees
22 Ground level
staffs
Table 1: Staff requirement
Budget plan
The budget plan or cost estimation has been presented in the following table
considering the major factors of costs and their sub categories. The major factors are
operation, human resource, promotion and legal activities.
Factors Expenditures
Operational cost
Transportation $5,500
Communication $1,000
Contractual work $12,000
Purchasing land $515,000
Constructing building $750,000
Miscellaneous $1,500
$1,285,000
Human Resource cost
Recruiting employees $5,500
Training and development $2,500
Payroll and compensation (first months) $352,000
WHS compliance $45,000
$405,000
Marketing and promotional cost
Print media $25,000
Satellite media $150,000
Online/digital media $1,500
$176,500

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Legalisation cost
Licensing $56,000
Contractual process $25,000
Legal advisors $75,000
$156,000
TOTAL $2,022,500
Table 2: Budget
According to the cost estimation, the required budget to establish a new IKEA store at
target semi-urban location is AUD 2,022,500.
Recommendations
Throughout the project planning and implementation process, the project management
team and the decision making authority of IKEA, must keep some principles incorporated.
These are those recommended factors for this project establishment:
In requirement analysis for financial, human and physical resources all primary
stakeholders must be involved, which will allow specific and appropriate requirement
assessment.
During planning stage, the project management team should keep track of their
regular expenditure as well as the time investment in each sub activities. The accurate time
and resource management will prevent bankruptcy and deadline missing (Hill & Hill, 2017)
During and after establishment of the new IKEA store, the information sharing and
the operation integrity should be maintained which will be the key to the successful
implementation of project plan. Cooperative working culture and collaborative coordination
should be also maintained.

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References:
Hill, A., & Hill, T. (2017). Essential operations management. Macmillan International
Higher Education.
Hornstein, H. A. (2015). The integration of project management and organizational change
management is now a necessity. International Journal of Project Management, 33(2), 291-
298.
Kerzner, H., & Kerzner, H. R. (2017). Project management: a systems approach to planning,
scheduling, and controlling. John Wiley & Sons.
Samset, K., & Volden, G. H. (2016). Front-end definition of projects: Ten paradoxes and
some reflections regarding project management and project governance. International
Journal of Project Management, 34(2), 297-313.
Too, E. G., & Weaver, P. (2014). The management of project management: A conceptual
framework for project governance. International Journal of Project Management, 32(8),
1382-1394.