IKEA: An Analysis of Operations Management, Strategies and Competition

This report provides a comprehensive analysis of IKEA's operations and logistics management. It begins with an introduction to IKEA, a multinational company specializing in ready-to-assemble furniture, and explores how IKEA competes within its business area. The report then delves into the four processes of operations strategy: formulation, implementation, monitoring, and control, examining how IKEA utilizes each stage. It identifies different competitive strategies IKEA might employ, including cost leadership, differentiation, and focus, and discusses how these strategies align with different operational objectives. Furthermore, the report highlights the contributions of operations management to IKEA's strategy improvement, emphasizing its role in enhancing efficiency, reducing costs, and adapting to market changes. The analysis covers IKEA's market position, competitors, and the importance of operations management in achieving and maintaining its competitive advantage in the global furniture market. The report concludes by summarizing key findings and offering recommendations for future strategic development.

Logistics and Operation Management
1

Table of Contents
INTRODUCTION ...............................................................................................................................3
1. Ways in which IKEA compete within its business area...............................................................3
2.Four processes of operations strategy stages ...............................................................................4
3. Different competitive strategies IKEA might employ using the different operations objectives 6
4. Operations management contribution to the IKEAs' strategy improvement ..............................6
CONCLUSION and RECOMMENDATIONS....................................................................................7
References............................................................................................................................................8
2

INTRODUCTION
Operation management is a process which includes administration of business practices for
developing high efficiency products and services within the company. It gives emphasis to the
conversion of raw materials into the high quality products as per the demand of customers for
increasing profitability. The main aim of logistics and operations management within an
organisation is to develop proper commodities in right amount and quality and to distribute them to
the right place at the right time. This consists of design, implementation and management of the
systems for proper and effective deployment of raw materials. Physical facilities, personnel and
many more (Langabeer II and Helton, 2015).
For the proposed file IKEA, a multinational group of companies which produce ready to
assemble furnitures is taken into the consideration. The report includes processes of operations
strategy like formulation, implementation, monitoring and control. Along with this, it also consists
of competitive strategies which is used by the taken firm.
1. Ways in which IKEA compete within its business area
Company Introduction:
IKEA is a multinational firm which produces and sells ready to assemble furnitures which
includes beds, chairs, appliances, desks, home accessories and many more. In 2008, it was the
world's largest furniture retailer. The organisation is popular at international level due to its modern
architectural designs for different furnitures and appliances. Along with this, the work related to the
interior design of the enterprise is generally associated with the eco-friendly simplicity. IKEA gives
focus to the cost control, operational details and continuous product development. The firm offers
upto 12,000 products to the customers at affordable prices. IKEA offers furnitures in the area of
living room, bathroom, kitchens, dining, outdoor, home office and many more. Now, the
organisation is successful in grabbing the attention of diverse people from the various countries. In
2010, IKEA opened new 12 stores in around 7 nations which results to overall 318 stores in 38
countries. In present, the firm is operating business in 41 nations with more than 318 stores (Lai and
Wong, 2012).
Market position:
With the changing time, IKEA changes its marketing strategies with product range for
attracting large number of customers. Before producing any product, organisation conducts market
research effectively for understanding changing needs and expectations of the customers. This also
leads to know about present situation of market as well. IKEA is at leading position worldwide due
to the production of goods in diversified areas like furnitures, home appliances, etc. It is one of the
3

biggest furnishing company at international level and due to this, it needs lots of wood. The largest
market for the cited firm is in Germany with 44 stores than United states with 37 stores. Sales
volume of this private company is around $24 Billion, from which $3 Billion is only from United
States. On the other hand, as per the evaluation of the IKEA itself around 533 million people visit
its store last year. All these records represent leading market position and global recognition of the
firm. The five world's largest IKEA stores are at Sweden, China and Germany (Carter and Liane
Easton, 2011).
Competitors:
IKEA is an international brand and working at leading position. Due to this, organisation has
many competitors. These include Walmart, ASDA, Tesco, Barn Furniture, Conrin, Cratel and
Bareel, Ethan Allen and many more. All these competitors are using different styles and
functionality for gaining competitive advantages at global level. But it is difficult to implement all
the strategies and styles like IKEA for producing effective and high quality commodities. Conrin
focuses to the new low cost with respect to the furniture line whereas Carel and Barrel offers
furniture in high prices. Ethan Allen gives emphasis to the more upscale market. Thus, each and
every organisation is trying their level best for accomplishing their objectives and building
competitive advantages (Wong and Lai, 2011).
2.Four processes of operations strategy stages
Operation strategy refers to the pattern of decisions which shape long-term capabilities of
any type of operation which helps in producing high quality products and services. It is the tool
which leads to help organisations in developing commodities as per the customer needs and
expectations. The four processes of operations strategy stages are as follows: Operations Strategy Formulation: IKEA performs a series of steps in sequential order in
this stage of operations strategy. The two steps which are performed by the organisation
includes environmental scanning and continuous implementation. In context to
environmental scanning, IKEA gives emphasis to the external environment which can affect
its performance. In this, firm understand the requirement of customers, market trends,
competitor's strategy, etc (Dekker, Bloemhof and Mallidis, 2012). After this, all the
decisions which are taken by collecting external information are implemented in the next
step named continuous implementation. The other steps followed by the company in
between external analysis and implementation are value assessment, vision and mission
formulation, internal analysis, functional and business level strategy formulation. In such a
manner, operation strategy of the firm is formulated effectively. IKEA develops strategy for
4

producing creative, unique and innovative furnitures for gaining competitive advantages. It
takes raw material in bulk which results to lowers the cost and due to this, able to offer
commodities in affordable price to the customers (Subramanian and Ramanathan, 2012). Operations Strategy Implementation: After the formulation of creative and effective
strategies, IKEA implement them by converting strategies into the action. In the first stage,
organisational climate is set by the organisation as per the strategy. It includes cooperation,
development of the employees, extent of commitment, dedication and many more. After
this, operating plans are prepared by the higher authorities for achieving the objectives
properly (Stadtler, 2015). This helps IKEA in implementation of developed strategies in
appropriate manner. In this stage, organisational structure of the firm is properly analysed by
the top management. As it is necessary to have such structure which can contribute in
accomplishing strategic objectives. Managers of the firm make sure that all the business
units should be interrelated, good relations between supervisors and subordinates, delegation
of roles and responsibilities to the right person, etc. After all this analysis, developed
strategy is implemented by the IKEA within the working environment. This is reviews by
the senior employees periodically for identifying effectiveness (Cronin Jr and et.al., 2011). Operations Strategy Monitoring: In this stage, management team of IKEA uses its annual
operational plan for reviewing the progress towards the accomplishment of strategic
objectives. It is essential for workers to keep all records of whatever processes and activities
they are doing during operational implementation (Barratt, Choi and Li, 2011). Along with
this, managers of operation department ensures that activities are kept within the parameters,
processes are consistent, internal and external changes which can need some adjustments.
On the other hand, allocation and utilisation of resources are also monitored by the
management. Such as use of wood for producing furnitures. This all processes are required
to be as per operational plan of the firm. Proper monitoring helps IKEA in determining
loopholes while accomplishing the strategic objectives (Gunasekaran and Ngai, 2012).
 Operations Strategy Control: In this, control system is followed by IKEA for handling the
performance of operations and making adjustments into the processes for improving them.
The actual performance of all the operations are measured by the organisation and compared
with the formed plan. If they are not appropriate and posses some gap in such case, changes
are made to the strategies for improving and gaining the desired performance (Galindo and
Batta, 2013).
5

3. Different competitive strategies IKEA might employ using the different operations objectives
There are four types of competitive strategies, IKEA can use for its different operational
objectives. These are as follows: Cost Leadership: This business strategy is easy for organisations to explain and discuss and
difficult to implement for achieving operations objectives. In this, companies provide their
products and services to the customers at the cheapest prices. It is difficult to offer
commodities at low prices and for this, IKEA has to remove wastage, recycle products,
purchase in bulk, etc. This strategy results to gain competitive advantages as customers like
to purchase quality products in low prices. IKEA can rise its consumer base with the help of
this competitive strategy (The 3 Different Types of Strategies in Business, 2015). Differentiation: In this, organisations prove customers that they are different and better
from their competitors. There is no link of this strategy with the price of products instead of
this, it gives focus to the innovation and uniqueness. IKEA is following this competitive
strategy by offering different, creative and innovative furniture goods to the customers. In
this, company is able to charge high prices of the high quality products. It is essential to
have consumer loyalty and trust (Barratt, Choi and Li, 2011).
 Focus: In this, companies neither give emphasis to the differentiation nor to the cost, they
focus on small portion of the market. In this, firms fulfil the need and expectation of fewer
people instead of all. It is necessary to have good and effective advertisement and promotion
strategy for reaching to such segments and making them to purchase the products (Pasin and
Giroux, 2011).
From the above, Cost leadership and differentiation strategy is best for IKEA. Company can
increase its profitability and market share with the help of these strategies.
4. Operations management contribution to the IKEAs' strategy improvement
Operation and strategy improvement is necessary for any organisation. It leads to handle the
loopholes by implementing effective and proper changes to the required areas. This is only possible
with the help of operations management because of this, companies are able to achieve their
objectives of gaining profit and increasing customer base (Dekker, Bloemhof and Mallidis, 2012).
IKEA is able to make changes and improvements into its processes and activities with the
help of operations management. With the help of operation management, organisation is able to
work according to the present need and expectations of the customers. It can develop an effective
operation plan having all the information about the budget, required raw materials, alternatives for
handling problems, etc. Management of operations leads to proper conversion of input to the high
6

quality desired output. It reduces wastages, costs and set up sustainable programs which accomplish
dependable results (Christopher, 2016). This helps in proper allocation and utilisation of resources
which results to effective implementation of all the operations for production of furnitures or other
home appliances. Along with this, company is able to improve its operational efficiency by ensuring
the effective and proper utilisation of limited and available resources for production. Use of
operation management provides firm an opportunity to improve the conversion cost, unit cost
reduction and increase in throughput for generating higher yields (Operational Improvement, 2016).
With the help of operations management, IKEA is able to give emphasis to asset
optimisation, quality improvement, safety performance, project execution, supply chain, process
improvement and many more. This all factors help enterprise in improving its strategies with
respect to the operations and productions. In addition, by evaluating each and every strategy time to
time organisation is able to maintain flexibility, reliability, etc along with inventory management
and value engineering (Schönsleben, 2016).
CONCLUSION AND RECOMMENDATIONS
From the above it is concluded that, IKEA is one of the leading organisation which is
offering quality and unique products to the customers. There are many competitors of the firm like
Walmart, ASDA, Tesco and many more. At the time of strategy formulation, IKEA gives emphasis
to the vision, mission, internal and external analysis, etc. This results to develop effective and
proper strategy for gaining competitive advantages. After this, developed strategies are
implemented, monitored and controlled by the firm for achieving decided strategic objectives. On
the other hand, competitive strategies like Cost leadership and differentiation can also help IKEA in
enhancing customer base at international level with profit margin.
IKEA needs to use both differentiation and cost leadership strategies for increasing its
customer base. Along with it, by reducing the utilisation of woods firm can contribute in
maintaining safe and clean environment. With the help of effective operation management,
organisation can properly allocate and utilise woods which will result to reduce the consumption of
them for furniture production. On the other hand, firm can use alternatives as well for maintaining
green and eco-friendly environment. This will attract environment concious people towards the
products of the IKEA.
7

REFERENCES
Books and Journals
Barratt, M., Choi, T.Y. and Li, M., 2011. Qualitative case studies in operations management: Trends,
research outcomes, and future research implications. Journal of Operations Management.
29(4). pp.329-342.
Carter, C.R. and Liane Easton, P., 2011. Sustainable supply chain management: evolution and future
directions. International journal of physical distribution & logistics management. 41(1).
pp.46-62.
Christopher, M., 2016. Logistics & supply chain management. Pearson Higher Ed.
Cronin Jr, J.J. and et.al., 2011. Green marketing strategies: an examination of stakeholders and the
opportunities they present. Journal of the Academy of Marketing Science. 39(1). pp.158-174.
Dekker, R., Bloemhof, J. and Mallidis, I., 2012. Operations Research for green logistics–An
overview of aspects, issues, contributions and challenges.European Journal of Operational
Research. 219(3). pp.671-679.
Galindo, G. and Batta, R., 2013. Review of recent developments in OR/MS research in disaster
operations management. European Journal of Operational Research. 230(2). pp.201-211.
Gunasekaran, A. and Ngai, E.W., 2012. The future of operations management: an outlook and
analysis. International Journal of Production Economics. 135(2). pp.687-701.
Lai, K.H. and Wong, C.W., 2012. Green logistics management and performance: Some empirical
evidence from Chinese manufacturing exporters. Omega. 40(3). pp.267-282.
Langabeer II, J.R. and Helton, J., 2015. Health care operations management. Jones & Bartlett
Publishers.
Pasin, F. and Giroux, H., 2011. The impact of a simulation game on operations management
education. Computers & Education, 57(1), pp.1240-1254.
Schönsleben, P., 2016. Integral logistics management: Operations and supply chain management
within and across companies. CRC Press.
Stadtler, H., 2015. Supply chain management: An overview. In Supply chain management and
advanced planning. Springer Berlin Heidelberg.
Subramanian, N. and Ramanathan, R., 2012. A review of applications of Analytic Hierarchy Process
in operations management. International Journal of Production Economics. 138(2). pp.215-
241.
Wong, B.K. and Lai, V.S., 2011. A survey of the application of fuzzy set theory in production and
operations management: 1998–2009. International Journal of Production Economics.
8

129(1). pp.157-168.
Online
Operational Improvement. 2016. [Online]. Available Through: <http://www.kepner-
tregoe.com/operational-improvement/>. [Accessed on 27th July 2016]
The 3 Different Types of Strategies in Business. 2015. [Online]. Available Through:
<http://advantagefamily.com/content/different-types-of-strategies-in-business>. [Accessed
on 27th July 2016]
9