IKEA Current Operations and Future Strategies

IKEA Current trading operations and Future StrategiesIKEA was founded by Ingvar Kamprad in the year 1943. It started as a short town Swedish article of article of piece of article of furniture compevery that was founded on the principles confused monetary values and serious woodland. This simple idea was able to transform the physical composition on with strategical humpment and excellent decision making. It now has over 250 lineages and a nominal head in 30 countries. IKEA has become an foreign giant with whom local furniture companies fuck off to struggle against. The fundamentals of the organisation did not change drastic bothy with expanding upon just the composition did adapt to the culture and practices in the multitude countries. The strategy was simple, give the people ruggeder price comp bed to the peers, al mortified them to determine the lumber, do no compromise on the eccentric, keep on court from e actu distri providedively(prenominal)y possible angle and induce them feel happy near the leverages they do (10 Keys to IKEAs Low Prices, 2009).This made their brand strong and helped in vertical and horizontal integration and expansion. IKEA chief(prenominal)tained strong ties to its home country. Its colors are a representation of the Swedish flag and its name is the initials of its fo under(a)s name along with the initials of the town he was born in. The brass instrument has use policies that cast off dumbfound researchers and lead to various analyst studying its reasons for success.TASK 1 screening OF THEORIES AND STRATEGIESWhen IKEA was first created, its owner had the vision of making it an international giant. He had started international get throughings and proceeded for a quick expansion strategy of the presidential term. No new(prenominal)(a) furniture company has had such an exponential growth in single a few age. First, it expanded from a small town to ambits all over Sweden. This was not an easy task. The brass instrument had no look upons of managing so many stemmas as yet through the excellent entrepreneurship of its founder, his strategy and planetary vision, the formation grew strong. The inserts main concern would be to find ways in which they could diminish be. They started with minatory electricity be during day time by porta windows they used energy saving lights and did not have a enceinte profit margin in the start. They then expanded to Germany, France and separate European nations. at one time they expanded to other countries, they maintained the same policies and livestock strategies in every stash away. This was done through impeccable wieldment practices, which further helped the organization escaped instals in other continents. IKEAs business model became famous and the store called for existenceity. Their execute analysis and operational strategies are unique. All of their decisions have been prospering and their management of inventory, st aff and stores is one of the best in the world. IKEA used to purchase raw materials from manufacturers but after it expanded internationally, it started its own output company. This resulted in saving be as strong as making advanced designs reach the stores faster with the least amount of compromise on quality (Ikea How the Swedish retailer became a global cult brand, 2005).They started economies of scale by starting a convergenceion company near its stores. These companies were generally fixed in areas where labor was low-priced and it would be cheaper to ship the effectuals. They in like manner used a very opposite style of grocerying technique which severe on making people happy and reaching out on their base emotions.Most of the stores which sold products at lower prices were considered to have cheap quality corresponding Wal-Mart in that respectfore IKEA had to use a vision of denote to put the simple message across that the quality was not compromised in the d eal.They did so by hosting customer parties, sending free samples, giving considerable discounts and maintaining a happy customer care benefit. This outgrowthd their grace. They as well took busy participation in local events and helped the community, change magnitude their goodwill and gross revenue. IKEA believed in unalterable innovation which is one of the reasons for its strong presence. It comes up with furniture pieces that are guileless and as easy as late. This adds to its brand presence along with rotation of furniture so that the customers are never medical prognosising the same amour each time they visit. another(prenominal) strategy that IKEA came out with was to keep massive inventories in its stores. This would mean more space and more wastage as well as high inventory management court save compared to the cost of maintaining the stores, the predicted sales were higher(prenominal). This made them even more famous because they were the unaccompanied store which was capable of holding huge inventories allowing customers to buy any product by just entering the store. They managed to do so by holding politic line products. These products would them have to be assembled by the customer thus they were made in an easy to assemble manner. By holding flat torsk products, the organization could store one thousand thousands of product. These strategies enabled them to increment their trade region (Ikea Components is Setting working Business Targets, 2011).COST ANALYSIS OF CURRENT OPERATIONSIKEA is a privately held organization. It has seen an increase in cost over the last couple of years and is struggling to survive given the recent global recession and low sales turnover. Although its new and mod strategies have increased sales and helped them puddle profits, the margin of profits and the sales turnover has decreased along with increase in the cost of raw materials and operations. An increase in sales fromEuro 21534 million i n 2008 to a Euro 21846 million in 2009 is considered slow notwithstanding considering the bulls eye conditions, it is above its peers. IKEA demand to find more ways to cut costs in army to generate healthier results. It has started doing so by creating solar powered lamps etc and exploitation solar power and saving on electricity. Its costs increased from Euro 7078 million in 2008 to Euro 7198 million in 2009. Reducing its costs will also be another challenging for the organization (Process compendium Model, n.d.).OPERATION MANAGEMENT ISSUES IN PRODUCT DESIGN OPERATIONSIKEA is potently linked to its product and organization design. The process from which production starts until it reaches the stores and makes sales is very applaudable for an international giant like IKEA. Although the operation process has been commendable there are still a few loopholes in the process. The main problem concerning IKEA is its inventory storage. Warehousing costs are on the high. The organiza tion stubnot afford to store thousands of products for each different store. This would not only mean high cost of storage but also wastages in products. Once the product gets old, it of necessity to be replaced by other more advanced products. This makes the lifecycle of the furniture short and increases the wastages that the organization will have to incur.Currently IKEA ships the undesirable goods to other stores where it baron have a high demand moreover this not only adds to the risks of no sale but also increases the cost of shipping. Since it produces flat line furniture, the place taken up is not a lot but the store has expanded into all departments of housing and emplacement furniture and then has to bear a high cost of storage. A good option available to the organization is to display goods in the store and ship the goods later to the customers through mail. This would help in preventing storage costs, cost to keep inventory management and save on any loving of wast ages. The organization buttocks also concentrate on re using the unsold furniture into other products. Since the organization owns its own production company, it tail re use the unsold pieces of furniture and make other innovative products. Currently it does not pay too much caution into re using and re cycling however if it wants to keep costs low it of necessity to consider this alternative (SWOT Analysis and Sustainable Business Planning, 2011).Another Operation management issue with IKEA is that the organization is highly large. It not only necessarily to concentrate on maintaining the current stores but also on expansion into other countries. IKEAs expansion into India and other developing countries is on the hold. It has been extremely conservative in its approach to expansion and trying to be as well cautious. A good example is its indecision over opening stores in china. Once the company decided that China would be a good market, its management was scared to take the ri sk of entering a market where consumers were traditional and other furniture retails offered cheaper products.However, the expansion went very well and China has been a very good turnover for the organization. The government too was joyous with IKEA. Hence IKEAs management needs to take more risks and consider global expansion while maintaining the quality of products and service given and lowering costs.By using process model analysis on the organizations approach to its day to day operations, the following full point graph was developed. A process devolve chart is required in array to recreate the design of the organization and understand the process in a simplified manner.The flow chart contains these symbols and meaningOperationsInspectionTransportationDelayStorage flowchartThe above flowchart shows that there is a lot of time that is futile in the transportation of the goods as well as in inspection of the products. Waste recovery has not been given a lot of attention as required and time spent on planning needs to be increased in order to develop products that lead the furniture market. Analysis models using classifier analysis, location analysis, cost and duration analysis and mental imagery analysis have shown that the organization has been using all possible forms of increasing business however there is more scope and a lot it peck do to advance its current standards. It does not utilize its resources like space for storage, merchandise for customers and discipline employees for better customer satisfaction and higher sales. It is very conservative in its approach to location and store openings and production company locations. It needs to get more aggressive in order to build a stronger more stable and more profitable brand.The boilersuit design of the organization is excellent with importance given on lowering costs the only problems are inventory management and cautious expansion. mental faculty 2QUALITY MANAGEMENTIKEAs simple business s trategy of low prices has created a lot of trouble for the organization. By lowering prices, the quality of products offered take down and although the organization has been thriving to maintain its quality it has sometimes been unable to meet international standards. The products are also a little under quality but their quest for lowering prices has also modify their quality of service offered. Customer care does not get proper attention and the workers do not have the time or resources for proper international training (Levine, 2010).The organization is barely scrapping through with the quality required which has adversely affected the business. The sales have gone down and prospective sales from elite group consumers have seen a sharp decline. Another noticing factor on quality management is the advertising campaigns that the organization holds. They are unable to research well on the market because of universe very cost conscious and have therefore missed out on their targe t customers in their merchandising plan. Because IKEA is an international brand, it not only has to consider international policies but in order to do well in the host country, the organization also needs to pay special attention to the customs and traditions of the host country. It has been failing to do so correctly resulting in profits dwindling below expectations in sure regions and countries like the United States (Levine, 2010).IKEA is a privately held organization, hence information on IKEA is difficult to attain. IKEA follows a very difficult parry service with delays and sometimes refusal to take back the goods purchased by consumers. This reflects back on their credibility and goodwill. For any organization that works directly with customers, service needs to be impeccable especially for an international organization like IKEA however IKEA has not been very good with its quality management approach. The organization has however taken a lot of shouts to maintain its Cor porate affable Responsibility (CSR) and taken many steps to make a contrariety in the host country.IKEA can take many steps to improve quality. The organization can adopt TQM (Total Quality Management) in its operations in order to ensure quality. It needs to spend money on its processes however the returns it could possibly earn are strengthly higher than the costs. The organization needs to adopt a six sigma approach to management and strategically increase the quality of products and service provided. This should increase collectively in all the stores. It has been seen that just about of the sales come from EU nations which makes up of about 50% of its sales with only 5% coming from North America. This is a potentially untapped market and IKEA needs to improve quality and assure the consumers of its products and quality so as to increase its potential in not only the markets it already has a presence in but also the markets in which it plans to open stores.IKEA can use the t heories for quality value in order to manage the quality. Management stresses on the following important principles and theories for quality improvement that IKEA can use to its advantage.1. Develop customer localise in each step of the process and train employees to provide the best customer satisfaction. IKEA depends on its consumers and it needs to prove to the consumers that they can depend on IKEA as well.Customer focus is very important internally as well as externally in the workings of the organization.2. Leadership. The international size of the organization makes it difficult for them to manage and lead the process. Leadership is required for each different store and all the leaders need to have a similar set of rules, aims and accusatorys. This can be done by training each leader of the store together. With the values that needs to be used in the organization.3. Process establish quality management. One possibility of quality management states that if each process in the organization deals with the optimum use of resources and time, the overall outlook of the organization will be much different.4. Decision making approach of the organization needs to change. The management needs to realize that they can no longstanding be over cautious in their approach if they want to get together all the market share and potential sales if they continue macrocosm conservative.They need information that is correct and they need to work slowly because of their upright size but they also need to take an aggressive persona in this slow recession filled economy in order to survive and compete.5. Continual improvement in quality. Quality management is not a onetime approach, the organization has to imbibe it into its day to day workings, tally the quality and give holdback on the improvements done. The constant feedbacks would be supplied along with the advantages that the organization achieved due to the process of quality management.IKEA can also use the Cr osby theory of quality management which stresses on zero errors, prevention of errors, quality world an adherence to requirement and quality as being a price paid for non conformity. It sets goals for lower period of days so that the results would show, it requires total loading from the upper management, encouragement to the employees, training given accordingly, creating incentives for high sales, determining the costs for quality etc.TASK 3IKEA being the worlds leading furniture retailer does not utilize its force or use readiness management to its advantage. It uses Data Core Virtual Storage Solutions globally considering its size. The new version uses auto provisioning which is allocation of products to its demand, auto failover which is mirroring and using high accessibility in its products and snapshot give-up the ghosts which means creating backup for all the information that is feed from all its stores worldwide. The software is the latest and expected to improve the management of inventory. forwards the implantation of the software, IKEA struggled with its return stove management. It sometimes had over supplied products and sometimes there was a lag in products which diminished demand. Since it is not an internet establish supplier, it needs to keep a good amount of product as reserves. It needs to create a balance between oversupply and under supply so as to let down wastages. IKEA has tried to take advantage of the technological improvements to sort out its supply chain management. The organization had preliminary used JDA system in 2006 to solve its problems in supply chain management (IKEA Services, 2011).For an organization like IKEA the primary concern in capacity management are as follows1. It needs a technology that can forecast with a massive level of accuracy based on past results and future market environment the market demand and supply movements. This forecasting accuracy will help the organization improve its functions and save millions of dollars in shipping, storage and recycling.2. It needs an approach that improves the sales forecasts and predicts consumer behavior. The predictions need to be translated into sales figures so that the organization can plan on expansion and innovation. 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 foresight of problems earlier they occur. A large organization is prone to have problems in its supply chain management and capacity management however if it is in a position to predict the changes and challenges well ahead of time, it can be better prepared for the threat or even to a certain extent help prevent it. This is an integral part of management function through whichthe organization can gain further market share and capital.4. Transportation and logistics methods need to be simplif ied with each consignment being traceable so that the management can better predict the product whereabouts and avoid loss in transportation. With the rise in fuel costs the management needs to carefully lay out its supply chain management as well as logistics problems. With over 12000 products and 250 stores in 30 countries the organization needs better capacity management solutions (Supply Chain Management, 2006).IKEA store layout is in the form of a maze. The consumers need to walk through different custom rooms build to give them an idea of the product they might like. The stores are therefore multi layered with additional space given for storage.This has be to be a good thing because this selling strategy makes the customers view all the products and increases sales. It does however have the following disadvantagesIt wastes a lot of its store spaceIt confuses the customers who find it difficult to return to the product they liked beforeIt irritates consumers who are looking f or a particular product and have to go through the entire store for it and it wastes a lot of time which consumers do not prefer.However, this marketing strategy is important but it can be improved upon to avoid the above hindrance. There are many other store formats that the organization can select from instead of its free flow layout. An image of the store layouts is mentioned below.Therefore IKEA can select a football field layout or a spine layout to avoid confusion. Having different layout on each store can also be helpful and avoid any wastage of space. Since the organization has 20000 products they need to be displayed in an arranged format with furthermost importance given to layout so that they appear attractive for the customers to buy. The lighting also should be set up in a way that enhances the qualities of the products. The benefits of having a store layout are that it helps the customers organize their wants. It has been proven in countless studies that a good displ ay of the products makes the customers more inclined to buy the products. This means that a layout can make or break a sale hence needs attention from the upper management (Waters, 2011).CONCLUSIONIKEA has a great future ahead. It needs to take an aggressive role in this market because its sales are now stagnant and costs are on a rise. It has used the best method for inventory management along with supply chain management it can further expand its authorisation over the other furniture retailers by becoming a public company instead of staying private and add additional funds to its disposal. The has been Orthodox and conservative in its approach to management so far but it needs to change its policies into being more innovative not only in the products it makes but also in the strategies it follows. The company has great potential and a business plan that matches no other organization in the world. It size and its success by far have been commendable. It company also needs to chan ge into being more web based which would reduce the cost of transportation and logistics.It has a lot of potential and a goodwill that precedes every country it decides to open a store in, however marketing is also an important feature IKEA needs to look into. Its current marketing strategies were effective in an expanding economy where people where ready to spend however in this current recession the only way IKEA can make more sales is through advertising its fundamental business objective low cost. It needs to cash into the recession and increase sales by lowering prices and making its products quality checked. IKEA also has a lot of improvement to do in the customer care area where it is lacking coffin nail due to its policy to lower costs. The organization needs to train its employee so that they are more efficient and better equipped to make a sale.To conclude I would like to add that IKEA has great potential not only in its existing countries but other countries where it doe s not have any stores. It needs to tap into the sales before some other organization does.