IKEA Firm’s Operations and Supply Chain Management

Throughout the decades of its presence in the market, IKEA has been operating under the idea of providing a selection of products for home furnishing that are affordable and accessible to the majority of people and not a selected few. This goal is accomplished by combining functionality, quality, design, and value. Therefore, the company’s competitive priorities are concerned with offering the lowest prices, offering a wide variety of products, and working within the realms of the international market expansion strategy.

Cost-effectiveness is among the key competitive priorities for IKEA as the company has been capable of offering low prices because it has combined the economies of scale and technology integration into different business processes. Specifically, the design, manufacturing, packaging, and distribution allow the company to offer products that are usually 30 to 50% less expensive compared to competitors’. Increasing the range of products that belong to IKEA’s portfolio is another competitive priority because it enables customers to follow new launches and anticipate the release of upcoming collections.

Finally, the international market expansion strategy is a competitive priority that is manifested through the company’s continuous capturing of new markets and countries. Besides physical stores where customers can come and shop, there are also pick-up and order points in multiple locations. All of the abovementioned competitive priorities are made possible by IKEA’s continuous work collaborating with supplies. By doing so, the organization ensures that all suppliers that manufacture items work under acceptable conditions and implement environmentally sustainable practices.

IKEA’s process of developing a new product is complex and multi-dimensional, involving multiple steps ranging from design to price selection. The team behind every product includes designers, product developers, and purchasers that work together to create an item with the perfect combination of quality and affordability. While the designers are responsible for creating an appealing-looking product that also has value and a purpose, purchasers will use their expertise to determine which suppliers can offer the best quality for the right price. For example, one of the most popular IKEA products, the FÄRGRIK mug, is made in such colors as green, blue, and white, which cost to produce less than red because the pigments are more affordable.

After the price is identified, IKEA chooses manufacturers and suppliers that can meet the demand for quick and high-quality production. Working with suppliers, the company may make slight changes to the design or packaging of the product to store, transport, and display them more efficiently. By choosing the proper manufacturer and selecting the best price for the product in question, an internal competitive process is carried out to finalize the best design that will guarantee the best level of functionality that customers expect in addition to the excellent quality.

Finally, the packaging of the product in question is developed based on collaboration with the suppliers. The best IKEA packaging is such that it takes minimum space to allow for quick and convenient distribution across the stores and pick-up locations. The company’s packaging has become highly popular because it is often flat to maximize the use of space and make its transportation more efficient and convenient.

By achieving this, IKEA can increase the percentage of the fill-rate target at the containers that it ships, thus ensuring that larger quantities of products are delivered to shops and get stored efficiently. Overall, the key to the process of developing a new IKEA product lies in the efficiency and sustainability of the choices made for that specific item. It is important for the company to make sure that both customers and the organization benefit from the item that is being introduced to the market.

Beyond the affordable prices, the IKEA concept entails providing a complete product experience to customers within the company’s stores. Therefore, the company’s aim is not to make sure that customers purchase one to two products at the stores, and that’s it. Instead, the shopping experience has been developed to be highly interactive and immersive so that visitors spend more time in IKEA stores.

Among the main attractions are the perfectly-designed modern room expositions that showcase the various ways in which IKEA products can be styled at apartments. Also, flat-packed boxes with furniture are available for purchasing in the warehouse section of the stores so that customers can buy them and take them home without the need to order truck delivery. The reasonable prices set on IKEA products do not put customers off, which increases the likelihood of them purchasing more items.

The most essential criterion for selecting a site for a new IKEA store is the rapid rate of population growth in that area. Because the main target audience of the company includes young and middle-aged families, new stores are likely to open in areas where this group dominates; besides, the presence of shopping malls and entertainment facilities nearby is beneficial as customers visiting them can see that there is an IKEA and will be more likely to visit. Finally, IKEA usually focuses on areas where there is not much competition while also considering the importance of being close to its distribution centers to keep costs low.

Reference

Jacobs, R., & Chase, R. (2021). Operations and supply chain management (16th ed.). McGraw Hill.

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BusinessEssay. (2023) 'IKEA Firm's Operations and Supply Chain Management'. 19 January.

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BusinessEssay. 2023. "IKEA Firm's Operations and Supply Chain Management." January 19, 2023. https://business-essay.com/ikea-firms-operations-and-supply-chain-management/.

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