This made their brand strong and helped in vertical and horizontal integration and extension. IKEA retained strong ties to its home country. Its colors are a representation of the Swedish flag and its own name is the initials of its founders name combined with the initials of the city he was born in. The business has used plans that have baffled analysts and lead to various analyst studying its known reasons for success.
When IKEA was initially created, its owner got the vision of making it an international large. He had started international meetings and proceeded for an instant development strategy of the business. No other furniture company has already established this exponential growth in only a couple of years. First, it extended from a little town to chains all over Sweden. This is not a simple task. The organization had no method of managing so many stores however through the wonderful entrepreneurship of its creator, his strategy and global eye-sight, the business grew strong. The stores' priority is always to find ways in which they could decrease costs. They began with lowering electricity costs during day time by opening windows; they used energy saving lights and did not have a sizable profit margin in the beginning. They then expanded to Germany, France and other Western european nations. Once they expanded to other countries, they maintained the same regulations and store strategies atlanta divorce attorneys store. This is done through impeccable management methods, which further helped the organization open stores in other continents. IKEA's business model became famous and the store needed promotion. Their process analysis and functional strategies are unique. All of their decisions have prevailed and their management of inventory, personnel and stores is among the finest in the world. IKEA used to get recycleables from manufacturers but after it expanded internationally, it began its own creation company. This led to conserving costs as well as making new designs reach the stores faster with the least amount of compromise on quality (Ikea: The way the Swedish shop became a worldwide cult brand, 2005).
They started economies of range by starting a development company near its stores. These businesses were generally located in areas where labor was cheap and it might be cheaper to ship the goods. In addition they used a very different style of marketing technique which focused on making people happy and reaching out on their bottom emotions.
Most of the stores which sold products at lower prices were thought to have cheap quality like Wal-Mart; therefore IKEA possessed to use a great deal of advertising to place the simple subject matter across that the product quality was not compromised in the deal.
They does so by hosting customer functions, sending free samples, giving huge discount rates and keeping a happy customer support service. This increased their goodwill. They also took active contribution in local happenings and helped the city, increasing their goodwill and sales. IKEA presumed in constant technology which is one of the reasons for its strong existence. It arises with furnishings that are traditional and as well as new. This increases its brand existence along with rotation of furniture so that the customers should never be viewing the same thing each time they visit. Another strategy that IKEA came out with was to keep huge inventories in its stores. This might imply more space and more wastage as well as high inventory management costs however compared to the costs of retaining the stores, the predicted sales were higher. This made them even more famous because these were the sole store that was capable of having huge inventories allowing customers to buy any product by simply entering the store. They were able to do so by holding toned line products. The products would them have to be assembled by the customer hence these were made in an easy to assemble manner. By keeping level ling products, the business could store an incredible number of product. These strategies empowered those to increase their market share (Ikea Components is Placing practical Business Targets, 2011).
COST Examination OF CURRENT OPERATIONS
IKEA is a privately kept organization. It offers seen a rise in costs during the last couple of years and is battling to make it through given the recent global recession and low sales turnover. Although its new and innovative strategies have increased sales and helped them earn earnings, the margin of gains and the sales turnover has decreased along with increase in the expense of raw materials and operations. An increase in sales from
Euro 21534 million in 2008 to a Euro 21846 million in 2009 2009 is considered slow however considering the marking conditions, it is above its peers. IKEA needs to find more ways to spend less in order to generate healthier results. It includes started doing so by creating solar powered bulbs etc and using solar powered energy and saving on electricity. Its costs increased from Euro 7078 million in 2008 to Euro 7198 million in 2009 2009. Reducing its costs may also be another challenging for the business (Process Evaluation Model, n. d. ).
OPERATION MANAGEMENT ISSUES IN PRODUCT DESIGN OPERATIONS
IKEA is firmly associated with its product and organization design. The procedure from which creation starts off until it grows to the stores and makes sales is very commendable for an international large like IKEA. Even though the procedure process has been commendable there are still a few loopholes in the process. The main problem regarding IKEA is its inventory storage space. Warehousing costs are on the high. The business cannot find the money for to store thousands of products for every single different store. This would not only signify high cost of storage area but also wastages in products. Once the product gets old, it needs to be substituted by other more ground breaking products. This makes the lifecycle of the furniture brief and increases the wastages that the organization must incur.
Currently IKEA boats the unwanted goods to other stores where it could have a high demand however this not only increases the risks of no sales but also raises the expense of shipping. Since it produces flat line furniture, the area adopted is not a lot but the store has widened into all departments of casing and office furniture hence must bear a high cost of storage space. A good option open to the organization is to display goods in the store and dispatch the goods later to the customers through mail. This would help in stopping storage space costs, cost to keep inventory management and save well on any sort of wastages. The organization can also concentrate on re using the unsold furniture into other products. Because the organization owns its development company, it can re use the unsold furniture pieces and make other innovative products. Currently it does not pay too much attention into re using and re cycling however if it wishes to keep costs low it needs to consider this alternative (SWOT Evaluation and Sustainable Business Planning, 2011).
Another Procedure management issue with IKEA is the fact the organization is extremely large. It not only needs to concentrate on maintaining the existing stores but also on development into other countries. IKEA's expansion into India and other developing countries is on the hold. It's been extremely conventional in its approach to expansion and hoping to be extremely cautious. A good example is its indecision over beginning stores in China. Once the company decided that China will be a good market, its management was scared to take the chance of entering a market where consumers were traditional and other furniture retails offered cheaper products.
The above flowchart shows that there's a lot of your time that is squandered in the vehicles of the goods as well as in inspection of the merchandise. Waste recovery has not been given a whole lot of attention as required and time allocated to planning must be increased in order to develop products that lead the furniture market. Evaluation models using classifier research, location analysis, cost and length analysis and resource analysis have shown that the business has been using all possible forms of increasing business however there is certainly more scope and a lot it can do to improve its current criteria. It generally does not utilize its resources like space for storage, marketing for customers and training employees for better customer satisfaction and higher sales. It's very conventional in its method of location and store openings and development company locations. It needs to get more aggressive to be able to create a stronger more secure and much more profitable brand.
IKEA's simple business strategy of low prices has created a lot of trouble for the organization. By minimizing prices, the quality of products offered reduced and although the organization has been flourishing to keep its quality it includes sometimes been struggling to meet international standards. The merchandise are also just a little below quality but their quest for lowering prices has also affected their quality of service offered. Customer care does not get proper attention and the staff don't have the time or resources for proper international training (Levine, 2010).
The group is hardly scrapping through with the quality required which includes adversely affected the business. The sales have gone down and potential sales from elite consumers have observed a sharp drop. Another noticing factor on quality management is the advertising campaigns that the business holds. They are unable to research well on the marketplace because to be very cost mindful and also have therefore missed out on their goal customers in their marketing plan. Because IKEA is an international brand, it not only must consider international insurance policies however in order to do well in the coordinator country, the business must also pay special attention to the customs and traditions of the coordinator country. It's been failing to do this correctly leading to gains dwindling below anticipations in certain locations and countries like the United States (Levine, 2010).
IKEA is a privately kept organization, hence information on IKEA is difficult to realize. IKEA follows a very difficult return service with delays and sometimes refusal to get back the goods purchased by consumers. This demonstrates back on their credibility and goodwill. For just about any company that works immediately with customers, service needs to be impeccable especially for an international company like IKEA however IKEA is not very good using its quality management methodology. The organization has however taken a great deal of steps to keep its Corporate Friendly Responsibility (CSR) and taken many making a notable difference in the sponsor country.
IKEA may take many steps to boost quality. The organization can choose TQM (Total Quality Management) in its businesses to be able to ensure quality. It requires to spend money on its functions however the comes back it may possibly earn are potentially higher than the expense. The organization must take up a six sigma approach to management and strategically raise the quality of products and service provided. This will increase collectively in every the stores. It's been seen that the majority of the sales come from EU nations making up of about 50% of its sales with only 5% via North America. That is a potentially untapped market and IKEA must improve quality and assure the consumers of its products and quality in order to increase its potential in not only the marketplaces it already has a occurrence in but also the marketplaces in which it projects to open stores.
IKEA may use the ideas for quality improvement in order to manage the product quality. Management strains on the next important concepts and theories for quality improvement that IKEA can use to its edge.
1. Develop customer target in each step of the procedure and teach employees to supply the best customer satisfaction. IKEA depends upon its consumers and it needs to persuade the people that they can be based upon IKEA as well.
Customer focus is vital internally as well as externally in the workings of the organization.
2. Leadership. The international size of the business makes it problematic for them to control and lead the process. Leadership is required for each and every different store and all the leaders need to have a similar group of rules, aims and objectives. This is done by training each leader of the store alongside one another. With the values that needs to be used in the business.
3. Process based mostly quality management. One theory of quality management areas that if each process in the business deals with the most effective use of resources and time, the overall outlook of the business will be much different.
4. Decision making procedure of the business must change. The management must realize that they can no longer be over careful in their procedure if indeed they want to gather all the marketplace show and potential sales if they continue being conservative.
They need information that is true and they need to work gradually for their mere size however they also have to take an extreme role in this poor recession filled overall economy in order to survive and contend.
5. Continual improvement in quality. Quality management is not a onetime approach, the business must imbibe it into its day to day workings, control the product quality and give opinions on the advancements done. The continuous feedbacks would be offered combined with the advantages that the business achieved due to the procedure for quality management.
IKEA can also use the Crosby theory of quality management which stresses on zero errors, prevention of mistakes, quality being an adherence to necessity and quality as being a price payed for non conformity. It places goals for lower period of days so that the results would show, it needs total determination from the top management, encouragement to the employees, training given appropriately, creating bonuses for high sales, deciding the costs for quality etc.
TASK 3
IKEA being the world's leading furniture dealer will not utilize its capacity or use capacity management to its advantages. It uses Data Center Virtual Storage Alternatives internationally considering its size. The new version uses automobile provisioning which is allocation of products to its demand, automobile failover which is mirroring and using high availability in its products and snapshot functions this means creating backup for all the information that is give food to from all its stores worldwide. The program is the latest and likely to improve the management of inventory. Prior to the implantation of the software, IKEA struggled with its supply string management. It sometimes had over provided products and sometimes there is a lag in products which diminished demand. Because it is no internet based supplier, it needs to keep adequate product as reserves. It needs to make a balance between oversupply and under supply so as to reduce wastages. IKEA has tried out to take benefit of the technological improvements to straighten out its supply string management. The organization had earlier used JDA system in 2006 to solve its problems in resource string management (IKEA Services, 2011).
For an organization like IKEA the primary matter in capacity management are the following:
1. It requires a technology that can forecast with a great degree of accuracy predicated on earlier results and future market environment the market demand and offer moves. This forecasting correctness will help the organization improve its functions and save huge amount of money in shipping, storage area and recycling.
2. It needs an approach that improves the sales forecasts and predicts consumer action. The predictions need to be translated into sales results so that the organization can plan on expansion and advancement. All the departments in the organization are interrelated and using capacity management to its highest level could help create more potential from the other departments as well.
3. Another area where IKEA needs to focus on is the expectation of problems before they happen. A large company is susceptible to have problems in its supply string management and capacity management however if it's in a position to forecast the changes and troubles well ahead of time, it can be better well prepared for the menace or even to a certain scope help prevent it. This is a fundamental element of management function through which
the firm can gain further market talk about and capital.
4. Transportation and logistics methods need to be simplified with each consignment being traceable so the management can better forecast the merchandise whereabouts and prevent loss in travelling. With the surge in fuel prices the management needs to carefully lay out its supply string management as well as logistics problems. With over 12000 products and 250 stores in 30 countries the business needs better capacity management solutions (Supply Chain Management, 2006).
IKEA store design is in the form of a maze. The consumers need to walk through different custom rooms build to give them a concept of the merchandise they might like. The stores are therefore multi layered with additional space given for safe-keeping.
This has shown to be a good thing because this marketing strategy makes the clients view all the merchandise and rises sales. It does however have the next disadvantages:
It wastes a whole lot of its store space
It confuses the customers who find it hard to return to the product they liked before
It irritates consumers who are looking for a particular product and also have to undergo the complete store for it and it wastes lots of time which consumers do not like.
However, this marketing strategy is important but it can be improved after to enough time above hindrance. There are many other store platforms that the business can pick from instead of its free circulation layout. A graphic of the store layouts is mentioned below.
Therefore IKEA can decide on a grid design or a spine structure to avoid confusion. Having different design on each store can be helpful and avoid any wastage of space. Because the organization has 20000 products they need to be displayed within an set up format with greatest importance given to layout in order that they look attractive for the clients to buy. The lamps also should be set up in a way that enhances the attributes of the merchandise. The great things about possessing a store design are that it can help the customers plan their wants. It has been established in many studies that a good screen of the merchandise makes the customers more inclined to buy the products. Which means that a layout can make or break a deal hence needs attention from the top management (Waters, 2011).
CONCLUSION
IKEA has a great future forward. It needs to adopt an aggressive role in this market because its sales are actually stagnant and costs are on a rise. It includes used the most practical method for inventory management along with resource string management it can further increase its dominance within the other furniture stores by becoming a public company instead of being private and add additional money to its removal. The has been orthodox and traditional in its approach to management so far but it requires to change its procedures into being more innovative not only in the products it makes but also in the strategies it uses. The business has great potential and a company plan that suits no other corporation in the world. It size and its success certainly have been commendable. It company also needs to become being more online which would reduce the cost of travelling and logistics.
It has a great deal of potential and a goodwill that precedes every country it makes a decision to open up a store in, however marketing is also an important feature IKEA needs to consider. Its current marketing strategies were effective within an expanding current economic climate where people where prepared to spend however in this current recession the only path IKEA can make more sales is through advertising its fundamental business objective; low priced. It requires to cash in to the recession and increase sales by decreasing prices and making its products quality checked. IKEA also offers a lot of improvement to do in the customer attention area where it is lacking behind because of its policy to lower costs. The business needs to coach its employee so that they are more efficient and better equipped to produce a sale.
To conclude I'd like to add that IKEA has great potential not only in its existing countries but other countries where it generally does not have any stores. It needs to utilize the sales before some other organization does indeed.
