Principles of Operations Management: IKEA Business Analysis Report

This report provides a comprehensive analysis of IKEA's operations management. It begins with an introduction to operations management, defining its role in business efficiency and customer satisfaction. The report then delves into how external and internal factors, such as economic conditions, social trends, and internal workforce dynamics, impact IKEA's operations. It explores the influence of corporate social responsibility (CSR) on IKEA, examining how the company addresses issues like environmental sustainability and ethical sourcing. Furthermore, the report includes a PESTLE analysis, evaluating the political, economic, social, technological, legal, and environmental factors affecting IKEA's business environment. A SWOT analysis is also conducted to assess IKEA's strengths, weaknesses, opportunities, and threats. The report also examines how operations functions support organizational strategy, different types of control and planning methods, and evaluates quality systems throughout the supply chain, providing a holistic view of IKEA's operational strategies and challenges. The report is a detailed case study of IKEA's operations, suitable for students studying business, management, and related fields.

Principles of Operation
Management - Part I

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P1. Explain how external and internal factors of the business environment impact upon
operations....................................................................................................................................1
P2. Consider how operations are influenced by corporate responsibility and how operations
managers respond........................................................................................................................2
P3. Conduct a valid external and internal environmental analysis of the business environment
for an organisation.......................................................................................................................3
LO 2.................................................................................................................................................5
P4. Explain how operation functions support organisational strategy and decision-making.....5
P5. Explain different types of control and planning methods in application to different
organisational examples..............................................................................................................6
P6. Evaluate quality systems and how operations management can add value throughout the
supply chain................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Operations management is undertaken as an effective area of management which is
related with controlling and designing the overall procedure of production in terms of
redesigning the business operations and other products and services. It also tends to include the
effective responsibility for making sure for the business and its operations regarding the few
resources that are required and effective in order to meet the needs and requirements of
customers (Attaran and Gunasekaran, 2019). It is undertaken as the business practice in order to
make the highest level of efficiency in an organisation and also concerned with transforming
materials into finished goods and services which is important in terms of increasing profit in
company. To carry forward this report, IKEA is considered which is a Swedish multinational
group located in Netherlands and also design and sell kitchen appliances and home accessories
and also founded in 1943 in Sweden. Moreover, report covers the external and internal analysis
and also consider effective operations which is influenced by the corporate responsibilities.
Moreover, it also explain the operations functions to support the organisational strategy and also
explain various types of controlling and planning methods to evaluate the quality system.
LO 1
P1. Explain how external and internal factors of the business environment impact upon
operations
The performance of each and every organisation is influenced by several internal and
external factors and also understand ways to tackle business and also flourish it at the time of its
weak performance. In terms of this, people also have different levels of income undertaking its
purchasing capacity and requirements (Bittencourt, 2019). In terms of this, the population of UK
tends to prefer affordable prices due to its economic crisis. Along with this, they also tends to
purchase products for the socio cultural beliefs in which social groups belongs from the
traditional norms and values. For this, IKEA is trading its 180 stores in around 23 countries.
Moreover, products of IKEA sold in various countries including Russia, China, America and so
on.
Despite from this, population also need to keep fluctuating as it is useful for IKEA in
order to increase its production according to fluctuating demand. Along with this, the biggest
weapon of IKEA is the pricing policy for the desired product which is incredibly affordable for
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the prices. In regard of this, there has been rise in the number of people who visit at the IKEA
stores. The value of employees, nature and effective communication tends to impact the
operations of company and for this, it is important to have effective manpower which is
motivated, talented and hard working in order to get effective result as compared to the
demotivated workforce.
Moreover, high performing workers does not have effective talent and also work better
collectively in order to collaborate with the ideas and resolutions. Besides from this, internal
factors tends to impact the objectives and requirements of customers and also have major impact
on the business (Chen Palma and Reyes, 2019). In terms of this, IKEA also need to consider soft
components such as culture and image of company as it hugely influence the operational
activities which is the part of administrative process. These factors also impact the ability of
company in terms of reaching towards the business plan that influence the change for customer
demand and technological evolution.
Operations management is undertaken as the significant area of management which is
related with effective management of business practices in terms of creating effective efficiency
and tends to gain most prominent and productive outcome. For this, the operations management
tools are related with transforming raw materials into finished products and services which is the
most effective and efficient and tends to increase profit with full efficiency.
Benefits of operations management: Competitive advantage: Business tends to depict the competitive power which is helpful
for the effective operations management. Ikea is prominently surrounded by external and
internal factors that tends to lead towards the competitive values. Operations management
is helpful for company to understand the prominent factors that can improve competitive
standing of company in market.
 Manufacturing edge: Operations management tends to deal with the effective raw
materials and also change them into finished commodities prominently. Changing ways
for effective manufacturing lead the company towards saving the huge sum of money and
other concerning resources for the long period of time. Therefore, Ikea is benefited by
effective operations management for company as it can hold effective manufacturing
edge in industry by making the product cheap and best quality.
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P2. Consider how operations are influenced by corporate responsibility and how operations
managers respond
Organisations face pressures from their stakeholders including governments, consumers
and employees that plays important role in addressing for the wide display for various issues
such as social, environmental and governance and also consider ranging from the climate change
for human rights. For this, CSR refers to the contractual procedure in order to define the
relationship among stakeholders in terms of driving the decision making process in order to set
the expectations to get agree for the commitments among business and society (Crane, and Noon,
2019). For this, CSR is undertaken as the decision making process that leverage the management
procedure undertaking the network of actors to manage conflicts and also coordinate with
effective activities. Moreover, CSR is an institution looking for ways in order to eliminate the
occurrence of potential conflicts for the given stakeholders community.
Moreover, objectives for the corporate social responsibilities are tends to spread
awareness for the human issues and put pressure on company in order to opt significant policies
and procedure that put emphasis on eliminating practices that are harmful for various segments.
For this, IKEA need to anticipate future CSR problems in its operations and undertake several
initiatives in its daily operations. For this, IKEA need to focus on its recruitment and retention of
talented employees for the effective operations and also helpful to remove waste from the
manufacturing process. Moreover, customers also need to improve their view for the brand and
enhancing their reputation.
Away with this, manager of company should have effective response in order to take
major initiative for CSR activities and it also tends to support transparency through internet and
other global communications. For this, they need to undertake effective ways which is useful in
making the operations of IKEA more effective and responsible undertaking the benefits of
society.
Impact of new technologies:
There are significant systems that can help management and managers in terms of
keeping with the changes taking place regarding the technology by executing significant system
into action as the operations management tool. For this, the manager of Ikea make effective use
of Enterprise resource planning system to fulfil the corporate responsibilities.
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It is undertaken as the significant and integrated management of the main business
process considering the real time and also mediated by effective technology and software. It
refers to the type of software which company use in terms of managing daily business activities
including procurement, accounting, project management, risk management and so on that report
for the financial result of Ikea. The ERP system of Ikea ties together for the multitude of business
procedure and also enable the flow of data among them. Moreover, by undertaking the shared
transactional data of Ikea from multiple sources, ERP system tends to eliminate data duplication
and offer data integrity with single source. Along with this, the ERP system of Ikea is critical in
terms of managing thousands of businesses for all the size of company.
P3. Conduct a valid external and internal environmental analysis of the business environment for
an organisation
PESTLE Analysis Political: The stores of IKEA open in around 41 countries and also abided by several
rules and regulations. For this, only few countries share similar bills or political influence
as it is beneficial for the political stability (de Sousa Jabbour, 2018). Moreover, without
economic stability it is not much possible and because of this IKEA may lose profits
from its one location. In terms of this, the unfriendly government tends to import and
export foreign goods and IKEA also depends on variable relationships in order to remain
stable. For this, good relation is a blessing for IKEA in terms of opening international
brands. Economical: IKEA is also impacted by the international laws and some of them have big
brand names but still suffering from the recession. As most of the people lost their job at
this time. In response of this, consumers also make things conscious for the buying
decisions and people also need to upgrade furniture, mattress, couch and so on (Guha and
Kumar, 2018). Along with this, IKEA is highly influenced by the strong and weak dollar
as most of the US brand tends to lose their money and most of the jobs are opening up for
sales and also rise again to earn suitable profitability. Social: IKEA need to keep its rules more close for each and every marketing material
and its efforts are not well received. For this, IKEA tends to eliminate the same sex
couple from their magazines and after this, company shift from the appearance of their
catalogue in terms of suiting the general thinking of Russians. Furthermore, IKEA also
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tends to receive women from the Saudi Arabian catalogue and all these done by company
after considering the needs and preferences of customers. Technological: For this, company also tends to showcase various products and also tends
to checkout the offerings of company online. For this, every business should have
effective and functioning website in which its customers find their current offerings, sales
and home décor on the website (Holweg, 2018). It also tends to allow for the placing
orders through online as the aim of company is to provide realistic experience for their
customers and also make their stores effective in terms of maintaining similar experience
through online. Legal: IKEA need to follow an ratio of norms and laws for every country in which they
operate and also consider the physical stores in terms of getting up-to-date consider their
labour laws which is important. For this, IKEA also landed for the latest news due to poor
quality of commodities as many items also fallen and resulting for injuries and death
(Kumar and Jha, 2019). Moreover, these kind of devastation also tends to impact the
families and other communities. For this, IKEA also need to make sure for their products
that are safe and also tends to recover monetarily regarding their reputation. Environmental: IKEA need to invest in the eco-friendly products and also put more than
1 billion dollar towards the renewable energy in underdeveloped nations. Moreover, the
aim of their store regarding the full renewable energy which is useful in terms of
achieving effective investing for the solar and wind panels and also shift their materials
as well in terms taking from the sustainable sources.
SWOT Analysis Strengths: IKEA prominently knows regarding their strengths and organisation need to
provide products as per the want of customers. In regard of this, customers want should
be the collection of affordable furniture for the home appliances. In terms of this, the
designers of IKEA tends to create stylish and new designed products for the decorative
items. For this, products are developed for the easy transport and capable in order to
finish for the assemble piece (Rosin, 2020). Along with this, the inexpensiveness of
IKEA products is the true strength as it helps in maintaining the cost effectiveness in
order to enhance the desire of customers.
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 Weaknesses: Here, employees have their complaint regarding the poor treatment for
brand that tends to face ridicule for the advertisement techniques. IKEA need to recall for
the dangerous products considering the injuries. Moreover, the products of IKEA is also
known for being lesser quality and also seems for offering the inexpensive products
(Rudani, 2020). As company has great quality expectations which can become the
opportunity for other organisations in which they tends to offer both quality and cost
effective furniture and other kitchen appliances. Opportunities: IKEA exist in only 38 countries which is relatively the low number. For
this, company has many opportunities in terms of expansion by making its operations
more effective as IKEA barely featured for developing countries. Moreover, online
shopping is becoming more famous prominently considering the sport to accentuate their
sales which is offered by more products through online.
 Threats: Competition in the furniture products is growing and only few firms are capable
to face it as walmart offer inexpensive home products. Moreover, depending on the
prominent lawsuits from the customers as some of its customers get injured by IKEA's
products that put negative impact on the image and sales of company (Slack and
Brandon-Jones, 2018). For this, company does not require lawsuit to crush for business
as IKEA need to be aware for being viewed online to countercheck the perception.
LO 2
P4. Explain how operation functions support organisational strategy and decision-making
Operations management focus on the prominently managing the procedure in order to
distribute the products and other services. It include various activities that are associated with
product management and closely related with product line. Operations management is
prominently concerned with operations in an organisation and include managing purchase,
quality control, inventory control, storage and so on (Srai and Lorentz, 2019). For focusing on
the great deal is the efficiency and effectiveness of processes. Moreover, operations management
also include substantial measurement and identification of internal process.
In regard of this, operations management is more concerned regarding running business
day by day and other operations effectively as much as possible. It is important for the company
and other manufacturer in terms of effective products for the customers and other products and
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services. In regard of IKEA, to effectively deliver the products and services more fast, they need
to be more competitive for the business regarding its survival. In terms of this, operating the
managerial activities prominently influence the decision making and concerning process for the
evaluation of alternative course of action the tends to generate problem for arriving the most
effective course of action. In regard of this, it tends to describe various factors considering risk
and uncertainty that are as follows: Description: This step tends to represent the significant factor which is descriptive and
need to smoothly run business to accomplish goals and objectives. For this, it include
prominent management concepts that tends to allow company for handling the tactics and
set decisions (Torlak, Demir and Budur, 2019). Plan: It relies on the prominent areas of management that should be developed and for
this, effective planning is require in management for the assessing the appropriate course
of action, it is important for IKEA to make suitable plans that leads to support the
decision making and organisational strategy. Organise: It depict the arranged factor in which management should be well organised in
terms of putting things into practices for the effective course of action and also decide for
the prominent functioning. Direct: Under this function it is helpful for the management to support and supervise the
goals and objectives of company and also tends to involve effective evaluation and
reporting for the actual job performance (Vazquez-Martinez, 2018). In this, IKEA need to
give proper guidance to their employees in order to direct and provide guidance to their
employees. Control: It is the last function which include development of performance standards and
its prominent actions are based on the objectives of company. It also tends to include
evaluation and also report for the actual job performance as it is important to compare
both the factors in an effective way.
Different types of planning: Operational: These plans are all about how things should be happen in an effective
manner by undertaking the prominent guidelines that are helpful in terms of
accomplishing the mission. This type of planning tends to describe the day to day running
functions of Ikea. In relation with Ikea, it tends to create with the specific event that occur
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only at once including the marketing campaign. It depicts the ongoing plans that consider
various rules and regulations for the effective running and functioning of company. Tactical: This planning is quite supportive for the strategic plan and leads to include
various tactics that are used in terms of executing the strategic plan. For this, effective
tactical plan for Ikea represent the significant questions that should be answered and also
take proper accomplishment of goals that are set for the strategic plan. Moreover, in Ikea
these plans are concerned with proper functionality and responsibility for the lower level
departments to fulfil the parts of strategic plan. In relations with Ikea, they need to create
a set of prominent actions that take shorter amount of time including the narrow scope for
the strategic plan that helps in bringing company more closer towards the long term goal.
 Strategic: These plans are designed for the whole company and begin the mission of
company. For this, top level managers like presidents and CEOs tends to design and
execute strategic plans considering the desired future and undertake the long term goals
of company. In context of Ikea, these plans look ahead in which company wants to reach
towards the peak within 5 – 10 years and these plans are also provided by top level
managers who serve as the framework for the lower level planning.
P5. Explain different types of control and planning methods in application to different
organisational examples
Controlling is considered as one of the significant function which is goal oriented and
types of control techniques include both modern and traditional control techniques. As
controlling is helpful for the managers in order to eliminate the gap among the actual
performance and objectives. For this, comparing tends to offer visibility for the activities that are
performed as per the strategy. Various types of control techniques in management is mentioned
as under: Budgetary control: Budgeting represent the prominent plans and expected results by
using numerical information. Moreover, budgetary control depicts controlling regular
operations for executing effective budgets (Wakeman and Langham Jr, 2018). It is useful
of IKEA because it helps in understanding and expressing the results for the project and
task in numerical form. In regard of this, IKEA tends to opt sales budget in order to
explain the distribution for their targets and the aim of budgetary control is to regulate the
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prominent activities to regulate the activities in terms of laying down the appropriate
course of action which should be follow for specified period of time. Standard costing: It is more similar for the budgeting in same way that depends on the
numerical figures that represent the standard costing which relies for the standard and
recurring cost (Walters, Nickerson and Hall, 2019). For instance, this technique can be
opted by Pepperfry as it is useful for the managers in order to record their cost and other
expenses for each and every activity and also compare them with standard cost. In regard
of this, controlling technique is also useful for Pepperfry as it helps in realising the
effective activities which is profitable. Financial ratio analysis: Each and every business company need to represent its
financial performances with the help of effective reports including balance sheet and
profit and loss statement. For example, it is opted by Walmart, as they prominently
compare their financial reports with others in order to show the financial performance of
company in numerical terms. In terms of this, Walmart tends to consider comparative
studies for the financial statements including changes for the assets, capital, profits,
liabilities and so on. Along with this, financial ratio analysis is helpful in order to
understand the solvency and liquidity status of business.
Various approaches: Top-down: This approach is undertaken as the effective system that tend to formulate
without going into prominent details of each part. As every part tends to define the more
details by representing the details until the whole specifications for the details are enough
to validate the approach. In terms of Ikea, it depicts the comprehensive factors on the
grounds of decision making. This approach tends to identify the effective picture and
significant components of Ikea.
 Bottom-up: This analysis is completely different as it tends to focus on the specific
characteristics for the micro attributes for the individual stock. It also tends to invest
regarding the concentration of business to sector. In relation with Ikea, it tends to seek to
identifying the profitable opportunities and significant attributes regarding the valuation
for the comparison in the market. It begins with the effective research considering the
level of company and also focus on the analysing the key attributes.
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P6. Evaluate quality systems and how operations management can add value throughout the
supply chain
Supply chain quality management include effective delivering for the best quality
services and products to customers by undertaking the collaborative quality management for the
supply chain by this members including the supplier and purchaser. It tends to define the system
based approach for effective performance which is the improvement that leverage the
opportunities in order to develop upstream and downstream linkage for the suppliers and
customers. Moreover, to gain competitive advantage and enhance the business performance,
company need to monitor its internal efficiency in order to manage the chain and network. Supply chain management: It is considered as an effective approach for IKEA in order
to evaluate the integrated supplies, manufacturers, retailers and other products that are
developed regarding the right quantities at right period of time. Moreover, the mutual
goals for eliminating the system for the wide cost and also tends to satisfy the customer
service needs and requirements (Bittencourt, 2019). Furthermore, in other words, supply
chain management for IKEA tends to synchronises the process of company with its
suppliers and other customers undertaking the goals to match the services and
information with the demand of customers. Quality management: Quality is undertaken as the essential factors for company
regarding its relationship among suppliers and customers (Chen Palma and Reyes, 2019).
For this, quality is more critical for IKEA in terms of participating for global suppliers
that are able to meet quality needs. Effective management of quality practices tends to
include prominent design of product and decisions towards the final customer needs that
result for less product and process variations.
 Value chain analysis: It is undertaken as the process in which company identifies the
primary support and concerning activities that tends to add value towards the final
product and after that identify the prominent activities in order to eliminate cost and
increase differentiation. It represent the internal activities in which Ikea engages in terms
of transforming inputs into the outputs. In relation with Ikea, this analysis tends to look
towards the activities that changes the inputs for the effective product and services into
the output which is valued by the customer.
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CONCLUSION
By considering the above discussion it is identified that Operations management is
prominently concerned with planning, organising and supervising the manufacturing and
production for the provision of services. Moreover, it is identified that both internal and external
analysis is conducted in terms of fulfilling the significant requirements of company that has huge
impact over the business environment. It also tends to describe the corporate responsibility and
support the functions of organisational strategy. It also depict various types of functional support
and organisational strategy and also explain various types of planning and controlling by
evaluating quality system.
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