Operation Management on Ikea

In order to assess and give recommendations to IKEA, it is important to fully understand the operations and the values that drive the company, ant its philosophy. Since was founded in 1954 by Ingvar Kamprad the Swedish company’s vision of “creating a better life for the many people” inspired them to develop high quality and lower cost products in the furniture business, and almost a decade later, after they consolidate in the Swedish market, they made the decision to expand abroad opening stores in Northway and Denmark respectively (Exhibit 1). With a relatively rapid expansion the company needed to transmit their unique philosophy and created the testament of a furniture Dealer and trained ambassadors to help spread and secure the firm’s values (Exhibit 3). Furthermore, IKEA’s adopted another principle, the company preferred to focus on establish close ties with business partners and supporting their suppliers in a long-term relationship rather than just

In 1951, to reduce product returns, he opened a display store in nearby Älmhult village to allow customers to inspect products before buying. It was an immediate success, with customers traveling seven hours from the capital Stockholm by train to visit. Based on the store’s success, IKEA stopped accepting mail orders. Later Kamprad reflected, “The basis of the modern IKEA concept was created [at this time] and in principle it still applies. First and foremost, we use a catalog to tempt people to visit an exhibition, which today is our store. . . . Then, catalog in hand, customers can see simple interiors for themselves, touch the furniture they want to buy and then write out an order.”2 As Kamprad developed and refined his furniture retailing business model he became increasingly frustrated with the way a tightly knit cartel of furniture manufacturers controlled the Swedish industry to keep prices high. He began to view the situation not just as a business opportunity but also as an unacceptable social problem that he wanted to correct. Foreshadowing a vision for IKEA that would later be articulated as “creating a better life for the many people,” he wrote: “A disproportionately large part of all resources is used to satisfy a small part of the population. . . . IKEA’s aim is to change this situation. We shall offer a wide range of home furnishing items of good design and function at prices so low that the majority of

IKEA is an international company which designs house products and sells them in the form of ready to assemble furniture. It is one of the world’s largest furniture companies. It is founded by17 years old Ingvar Kamprad in Sweden in 1943. The most important fact about the company is the attention to control the cost of the products, which allows them to lower the prices. Even today they are continuing to expand in the world by looking forward to new product developments. The number of stores of IKEA in the United States is 14 at the moment and they aim to have 50 stores by 2013.

Being one of the leading Companies in Furniture, IKEA offers an extensive variety of decently composed, useful home outfitting products at costs that are reasonable to individuals who are attracted to their Swedish design. This is the real trick which led to IKEA’s success, advancement in product design development, targeting proper designers and suppliers to how they offer their products in IKEA stores. Over the past six decades, IKEA went from the cozy forested areas of southern Sweden to being a one of the largest competitors in the retail industry in over 40 countries around the globe. The story of IKEA began in 1926 when organizer Ingvar Kamprad is conceived in Småland in southern Sweden. He is raised on 'Elmtaryd' where he began his entrepreneur skills by selling matchsticks as a source of income where he discovered bulk purchases at discounted rates and learnt how to expand his inventory which in turn led to IKEA. IKEA expands their markets, for example, Japan and Russia. Everything from the

Ikea has established strong branding with wide range of stylish products. It focus on offering low-priced and affordable furniture. The furniture is easy to assemble and ship. It offers one-stop shopping and featured the amenities as playrooms for children and Swedish cafes, bank and enough parking spaces. It creates a friendly atmosphere and services to shop and design the store layout for a nice journey of shopping. It has strong global sourcing capabilities.

IKEA’s financial position in year 2014 has increase compared to the previous period of time. Due to Ikea’s solid financial position, the company is able to commit to considerable R&D expenses to further strengthen its global marketplace. It can play an important role of cushion in times of downturns and decrease in

Likewise people enjoy the services that IKEA offers its customers. Customers find much value in IKEA overall. They revel in the fact that IKEA has onsite promotions, low prices, unique designed furniture/products, incentives such as free shipping, in-store child care and play areas while customers shop, and many more other incentives such as an on site restaurant, extended store hours to compensate for the do-it-yourself approach, and free offerings to IKEA reward card members (Ferrell & Hartline, 2014). IKEA readily prepares its visitors for the IKEA experience by providing its customers with pencils, paper, tape measures, store guides, catalogs, strollers, and shopping bags. Value is essentially an very important aspect of IKEA. Furthermore,

The concept of IKEA today with catalogue marketing combined with a showroom where customers could see and touch IKEA products started in the 1950s. This concept indeed attract consumer even though some consumer tends to take picture instead of experiencing and purchase. The company's three distinct features were function, quality, and low price. IKEA turned a capacity problem into a new way of

IKEA’s vision is to design a better life at home. Making it affordable as possible so that many people could have admirable furnishing. IKEA use function, quality, design and value to obtain their customer needs. IKEA learn to synchronise the contingency of the supplier and needs of the customers. Using that strategy to sustain the low prices. In order to gain a good condition of a product, IKEA go in for highly automated production. Together with mass producing and keeping long-term relationship with the supplier, IKEA is able to prolong their vision and aim to serve their customers. (Ikea.com/sg)

The threat of substitute products and services is low as there are no too many products and services available that can substitute the demand for furniture, home appliances and a range of other products offered by IKEA. For instance the need for furniture or appliances (e.g. chair, mattress) for basic and decent accommodation is inevitable, unless the individual decides to follow

Ikea was successful in entering the furniture retail market in Sweden because it capitalized on good timing and original ideas. At the time of Ikeas initial phases, furniture prices in Sweden rose 41% faster than other household goods between 1935 and 1946. Ingvar Kamprad, the founder of Ikea Saw this as a great opportunity to offer quality furniture at a much lower price than other retailers, that the majority of people can actually afford. Ikea was also able to overcome adversity through creativity in business processes. When initially traditional retailers fought against Ikea’s ideas and banned them from selling at the Stockholm Trade Fair, the took orders or got names of customers in order to sell to them after the event. On another occasion, they overcame trouble with the retail cartel by establishing manufacturing sources in Poland instead of Sweden. This actually resulted in lower costs for Ikea and therefore allowed them to sell products at even lower prices than before. They also differentiated themselves from other companies not only through price but also through store design and location. Instead of locating in downtown hubs, Ikea set up its stores in areas with a lot of land to provide ample parking space which went hand in hand with their concept of cash-and-carry retailing. Furthermore, within the stores established many basic practices, such as wide

IKEA is known as one of the world’s largest furniture retailer that focuses highly on cost control, operational process and product development. IKEA differentiates itself from most furniture retailers by offering a wide range of well designed array of home furniture at very attractive prices that remain affordable to a large group of diverse customers. There are some unique features of IKEA as compared to most furniture retail stores (IKEA, 2012)

The vision of the IKEA Company is “To create a better everyday life for the many people”. They have also their business idea which is “to offer a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them”.

IKEA has also used extensive manual work in its planning processes and the planning was based on fragmented and unreliable Planning information.

There are two hundred and fifty three of IKEA FAMILYs over the world and five hundred and sixty five millions of visitors. The sales volume grow up to one point four billion Euro from 2007 to 2008. “Low price and good quality” is the most important thing to IKEA. Low price is not equal to poor quality, on the contrary, quality show the valuable brand.