Assignment Case Study IKEA

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IKEA Operations

IKEA is a company that is based in Sweden and deals in the manufacture, sale, and supply of furniture. The company also sells home accessories and appliances. IKEA is a multinational company with operations in over 30 countries across the world and almost 300 stores. The company has been dubbed as one of the best in the furniture industry due to its excellent services and top quality products that are highly competitive. The company’s operations are different from those of most of its competitors. This gives it a competitive advantage over the rivals. The difference in operations has been the key to IKEA’s success.

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The outstanding furniture sold by IKEA makes customers take longer in IKEA stores than in rival stores. The extra time spent may go up to 2 hours. This is an indication that the stores have goods that are interesting for the customers. The stores are also well stocked (Parker, 2012). Further, the furniture is well displayed, making it attractive to customers. The company records high sales compared to its close rivals. One of the reasons why IKEA sells more is the cost at which it sells its furniture. The costs of selling are low due to the innovation in the company’s operations. For instance, the company sells furniture as self assembly flat packs. This has the effect of reducing the production cost, transportation cost, as well as the holding cost. The retailing costs are also reduced by the fact that the customers are required to pick furniture directly from the warehouse. This reduces the general operational cost and the price at which the furniture is sold to the customers.

The design of the store is the other feature that makes IKEA’s operations different from those of the competitors. Accessing the store beginning from the parking bay is easy, making the process of ordering and picking items easier. Customers are met with a notice that directs them on how they should move once they enter the store. This makes it easy for shoppers because they can easily get what they want, pick it with ease, and move the item to the order section. There is a special section for displaying small furniture. Customers can directly pick the items from this section. On the other hand, conveyer belts have been fitted to aid in moving larger furniture to the checkout section. It is at the checkout points where the customers make payments for their purchases (Kandampully, 2011).

The furniture is moved to the exit section once it has been paid for. The exit point is designed in a way that vehicles can be loaded directly as they pick the purchased items. Customers are helped by the company’s employees to load their items. Therefore, any customer can easily pick an item of any size since the conveyor belt will move the item to the exit point. This further improves the shopping experience for customers. In addition, there is a playground where parents can leave their children to play while they are shopping. There are supervisors who watch over the children in the playing arena and they can call the parents with the help of a loudspeaker in case the children get any problem. This further makes it easier for shoppers who are parenting. It makes shopping at IKEA an experience that everyone enjoys. Not many retail shops have such services. This makes IKEA’s operations different from those of its rivals, a factor that gives it a competitive edge.

As customers are shopping, they are allowed to make decisions in their own time without being pressured by the sales representatives. There are information points all around the stores where customers can get help that enables them make their own decisions. Giving the customers enough time to make their own decisions is important in that they do not feel pressured or influenced to buy an item they do not like. They, therefore, feel more comfortable shopping at IKEA due to the freedom accorded by the sales representatives.

Finally, the company has a large network of suppliers that further makes its operations to be different. IKEA is approximated to have about 1,300 direct suppliers, with an additional 10,000 sub- suppliers. Further, there are about 26 distribution centres that help in the sale and transport of goods. The supply network is important to the company since it facilitates movement of goods from the purchase of raw materials to the finished products that are then availed to the customers. The supply is empowered to engage in product development that improves customer satisfaction. The products are developed to maximize customer satisfaction and make IKEA’s operations different. This gives the company a competitive edge over its rivals. The operations managers are skilled and knowledgeable such that they understand the market and the customers well, thus they offer what is required by customers to maximize sales (Pycraft et al., 2000). The managers know how to manage design and production that are right for the customers.

IKEA departments

The furniture in IKEA stores is arranged in departments according to its use. The bedroom department is where all bedroom furniture is stocked, while the kitchen department is where any kitchen furniture is stocked. There is the dining department for stocking dining room furniture. There is also the youth room, laundry department, bathroom, living room, workplaces, as well as lighting and small storage departments. Each of the department is stocked with the furniture related to it. This makes it easy for customers to shop and employees’ operations are made easier.

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Work Breakdown structure

New Furniture Work break down structure refers to the order with which work in various departments is divided among employees in an organization. The large jobs are divided into smaller components that can be accomplished by each employee. The breakdown of work and the division is done based on the skills of each particular employee. As such, each employee is assigned a task that he is capable of performing to his or her best. Work Breakdown might lead to specialization and hence better organizational performance. Well structured work breakdown gives IKEA a competitive advantage over its close rivals. The following is the Work Breakdown structure of IKEA:

Work Breakdown structure

Major problem in running IKEA’s operations

Despite its success, IKEA also has some issues that make it difficult for the management to run its operations. These are issues that are likely to threaten the company’s success if they are not addressed. It is, therefore, important that for the management to identify the issues and find the best way to address them so that it can make the running of the company an easier task.

One of the issues is that there is overcrowding and long waiting times due to the large number of customers who walk into the IKEA stores each day to purchase goods. This might reduce the efficiency and effectiveness of service providers. It might also affect the convenience of customers because most customers do not like to wait for long in the queues (Ferrell, 2011). Customers are likely to walk away to other stores where they will not wait for long. The management must try to address this issue urgently; otherwise, it will become difficult to run the company’s operations.

The large number of customers is difficult to manage. This calls for extra employees to help in the operations. The effect of this is that it will increase the operating costs for the company, thereby lowering the profitability. The parking area may be small for the increasing number of customers. Therefore, there will be a need for the parking to be redesigned to accommodate the customers’ vehicles with ease. It requires sound decision making to do this, a task that is not easy to execute. The space for children to play in may also need to be increased.

Reference List

Ferrell, OC 2011, Marketing strategy: Texts and cases, 6th edn, South-Western Cengage Learning, N.S.W., Australia.

Kandampully, J 2012, Service management: The new paradigm in retailing, Springer, New York, NY.

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Parker, D 2012, Service operations management: The total experience, Edward Elgar, Cheltenham.

Pycraft, M, Singh, H, Philela, K, Slack, N, Chambers, S, & Harland, C, 2000, Operations management, Southern African Edition, Pearson Education South Africa, Cape Town.

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