IKEA Operations Essay
IKEA Company is one of the few companies in the world with very clear as well as coherent philosophies. It is popularly known for its unique, low cost design. The firm embraces a unique philosophy of “do it yourself option (DIY)”. IKEA consistently delivers DIY products that customers usually purchase as parts and rebuild them at the location which suit them best (Slack, Brandon & Johnston, pp.23, 2013). The company, does not only offer furniture but also delivers complete set of products that go with given furniture. For instance, if a client orders a dining table, the company also offers him a chance to purchase other products such as cutlery, vases as well as lamp.
IKEA is globally recognized for carrying out ideal business where it offers a wide range of uniquely designed, functional home furnishing products at low prices that majority of consumers across the world can be able to afford them. The company is different from other furniture companies because it largely offers a wide range of well-designed array of home furniture at very low prices that up to the current competitive business environment remain to be widely affordable to diverse customers.
Additionally, unlike other furniture companies, IKEA uniquely adapt its presentation of its products, layout of its stores, home solutions offered as well as the prices depending on the national economic as well as cultural conditions of a given country it has oversea outlets in (Kling, Gofeman, pp.13, 2003). For example, in China, the company’s outlet uniquely reflects the layout of many Chinese apartments. By this, many people across the diverse universe are able to get attracted to IKEA outlets as well as afford the company’s products due to their strategic pricing and display.
Ikea is one of the globally known brands that hugely understand that achieving success globally calls for sacrifice, innovation from global teams. So, running a company similar to IKEA in different countries will be of huge benefit. First, from the consumer theorem, customers are becoming more sensitive to the price of commodity when making up a purchase decision (Slack, Brandon & Johnston, pp.20, 2013). An operation similar to IKEA implies that the company will be able to offer unique product at low and affordable prices. This in a large way will help the company to gain more revenue from increased sales.
A company that can run its operations like IKEA does in different regions will stand a much greater chance to easily penetrate in various market segments thus making it easier to achieve the firm’s goals. IKEA operations are flexible and changes with the changing demand and situations in different markets. In some markets the company targets mass market whereas in other markets, it distinctly segments its market (Kling, Gofeman, pp.21, 2003).
So, incase similar operations are adopted and run in different countries, this means they will perfectly do well across the globe despite the diversity of customers. Different customers in different oversea markets have different expectations and demands, so, adopting flexible operations similar to IKEAs will make it easier for the business to get strong foothold in different markets across the countries.
However, despite the fact that embracing IKEAs operations is advantageous as it helps a given business entity to gain market share in a more rapid manner, sometimes, going with the same kind of operations in different countries will be more problematic. For example, IKEA is a firm that is very famous for its flat pack furniture, where it uses the policy of “do it yourself” in its operations (Slack, Brandon & Johnston, pp.30, 2013). Under this, it leaves customers with a task of assembling the furniture themselves. So, going with the same operation policy in different countries will not be an easy thing. From the internationalization concept, it is evident that for firms to be successful in oversea markets depend on their ability to understand, respect and adhere to the local culture of different consumers in different countries.
So, going with the similar rigid kind of operation policy in different countries, may make the business face some resistance from different customers who may be having different kind of expectation. For example, many diverse consumers hate the “do it yourself” kind of operations and services. Some demand to be offered full service from packaging, transporting as well as to installation (McPhee, pp.24, 2014). So, in case a company intends to adopt such an operation strategy, in many countries, then automatically it will have to be ready to face strong resistance from various groups of customers’ indifferent regions thus making it vulnerable to lose the market to its competitors.
Additionally, IKEA has embraced unique operations, especially in logistics, where the company largely depends on growing countries as a source of its raw materials. Many of the company’s products are manufactured to emerging economies where the labor and other vital raw materials are relatively cheap (McPhee, pp.29, 2014). Then they are imported to European and other developed countries. So, in a large way, embracing this similar kind of operation may be very difficult in many countries. Many countries across the world have varying laws in different states which are distinctly ruled by different political parties. So, adopting such an action similar to IKEAs could make business unit operations especially the distribution as well as, the logistics a bit challenging.
IKEA supply chain
IKEA has over 40 trading service offices in 32 countries it operates in. The company largely gets its supplies from its 28 distribution centers in 16 different countries. Apart from having these main supplies all over the world, IKEA also purchases a large quantity of its products from Shedwood. Being an industrial group owned by IKEA, Shed wood produces wood based furniture and wooden components. Shedwood buys products from 1,300 suppliers in 53 countries. The co-workers in the trading service office widely monitor the production of IKEA products by its main distributors (Kling, Gofeman, pp.18, 2003).
In a huge way, this enables them to negotiate prices, observe social and working conditions among suppliers as well as, check quality of the product before they are distributed to the company for retail. The rationale of this unique relation between IKEA and its suppliers enables the company to effectively achieve its operational objectives of availing products that are of high quality at lower and affordable prices in a socially responsible and environmentally friendly way.
Secondly, the main IKEA suppliers manufacture their furniture’s in accordance to the company’s designed code of conduct. Mainly, all suppliers, follows the IKEAs designed code known as “The IKEA Way” (McPhee, pp.25, 2014). In a huge way, this helps IKEA to ensure the supplies they get from their numerous suppliers across the world meet their expected standard. IKEA, as a company manufactures very few product on its own. It is through its close suppliers that the company so able to make innovative designs featuring environmentally responsible materials as well as ensure efficient use of resources thus translating them into bottom line results.
Notably, IKEA largely embraces outsourcing strategy, where the company embraces manufacturing its main products in many developing countries, where the raw materials as well as labor are relatively cheap (Slack, Brandon & Johnston, pp.20, 2013). In a huge way, this allows the company a chance to lower production cost thus enabling it to come up with quality final product at a relatively lower cost. This unique business model in a huge way enables the company to achieve its set marketing goals of availing quality products at a lower price that is affordable to many.
How IKEA changes its customers from consumers to Prosumers
IKEA Company, main aim is to avail quality products such as furniture at a very low price to ensure many customers are able to afford it. To ensure it achieves this, the company came up with a very unique strategy of actively engaging its customers in the service delivery process of its products. The company began engaging its customers in a process of fixing different parts of a given product, such a table to suit their taste (Hitchens & Hitchens, pp.34, 2010). In a strategy known as “do it yourself”, IKEA engages its customers in the process of putting a given product such a table together after they purchases it. Immediately, the customer purchases a product, the company leave him or her to put its together themselves. In a way, this helps the consumers to develop a sense of pride to the object because of the work they personally engaged in to make it complete and render it usable.
The company, instead of selling a complete fixed product, mainly sells it inform of batches. The customer is left with unassembled product in their living room or any other place of their convenient. So, at that stage, the customer is expected to unpack it and put it together. By doing so, the company significantly engages their customer in a very active process of making their product complete and usable, thus converting them from being sole consumers to being part of the production process as well as part of being final consumers. In other they change them from being sole consumers to prosumers.
Hitchens, J., & Hitchens, P. 2010, Create the perfect brand. London: Teach Yourself. Kling K., Gofeman I. 2003, Ikea CEO Anders Dahlving on international growth and Ikea’s unique corporate culture and brand identity, Academy of Management Executive McPhee, J. E. 2014, Mastering strategic risk: A framework for leading and transforming organizations. Hoboken, New Jersey: Wiley. Slack, N., Brandon-Jones, A., & Johnston, R. 2013, Operations management.