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Ikea Operation Management Case Study
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  • Country: Australia

IKEA is known for its top-notch furniture products. It is renowned for its inventive business strategy and how it has upscaled itself. IKEA was founded in Sweden in 1943. It has expanded to become a global company. Today it has numerous stores in more than 50 nations, including Australia. 

How Did IKEA Do It?

The company has a distinctive operation strategy. Since its launch, it has placed a strong emphasis on sustainability. It offers its customers a variety of products and makes them cost-effective.

This case study investigates the operations management of IKEA. We will focus on the methods adopted by IKEA which made it a global furniture giant. Let's understand what we can learn from IKEA!

Operational Strategies Of Ikea

IKEA focuses on some particular points under its operational strategy. It includes supply chain management, sustainability, innovation, and cost-effectiveness. Every aspect of IKEA's operations works on these principles.  

1.    Cost Efficiency

IKEA is known to provide high-quality products at affordable prices. Let's learn how it does so:

  • Flat-pack design: This particular furniture style lowers the cost of storage and shipping. IKEA also saves labour expenses by letting customers put together their own furniture. It allows customers to customise their furniture. 

  • Economies of Scale: IKEA buys raw materials in bulk. This allows them to bargain and negotiate at lower prices.  It has a large-scale production and needs material in bulk. It supports lower prices with suppliers leading to a cut in cost. 

  • Lean Manufacturing: IKEA uses lean manufacturing techniques. It reduces waste and boosts productivity. This involves keeping inventory levels to a minimum and simplifying logistics. it also streamlines the production processes.

2.    Innovation in Products

The core of IKEA's product strategy is innovation. It is known for its product deliveries. The company is always trying to produce items that are economical, and functional. It also works on their appeal ensuring they are aesthetically beautiful. Some of their Important components  are:

  • Democratic Design: This principle of IKEA focuses on the overall design. It promotes making beautiful designs that are useful and reasonably priced. It also ensures they are durable and of superior quality.

  • In-House Design Teams: IKEA has employed a team of designers. They work closely with engineers and suppliers. Together they develop innovative products. Working together ensures low-cost production and more effective designs. 

  • Client Input: IKEA regularly seeks client input to improve the quality of its products.  It has established a feedback loop which helps it to keep track of product performance. It also helps them to meet the needs of customers.

3.    Management of the Supply Chain

Efficient supply chain management is a key feature of IKEA.  The business uses a number of tactics to keep its supply chain running smoothly. Some of them are:

  • Global Sourcing: IKEA has a strong network worldwide. It uses this network to buy the best resources at affordable prices. This chain keeps the prices down and guarantees a consistent supply of goods. 

  • Supplier Relationships: IKEA has built lasting relationships with its suppliers. It frequently collaborates with them to enhance their practices and production procedures.

  • Distribution Centers: IKEA has built many distribution centres. This promotes effective services in its stores. These centres cut lead times and improve inventory control.

4.    Sustainability

An important part of IKEA's operational strategy is sustainability. The business is dedicated to promoting environment-friendly strategies. It adopts and supports sustainable practices. Some of them are mentioned below:

  • Sustainable Materials: It uses FSC-certified wood and recycled materials to produce its furniture. The company aimed to source all its wood from sustainable sources By 2020. 

  • Energy Efficiency: IKEA makes investments in renewable energy sources. Its setup promotes energy-efficient technologies. It uses solar panels as a source of energy. It aims to generate more renewable energy than it uses. 

  • Waste Reduction: From production to retail, IKEA strives to reduce waste. To achieve this it has adopted programs to upcycle and recycle items. It follows limited packaging and focuses on recycling resources.

IKEA's Operations in Australia

IKEA's activities in Australia are a reflection of its global strategies. It considers the local market to customise its goods.  IKEA Australia's operational strategy has proved to be successful. It meets the unique demands of Australian customers. Let's see how it has achieved this:

Store Network

You can spot IKEA stores in every Australian city including Sydney, Melbourne, Brisbane, and Perth. These stores offer a comprehensive shopping experience. One can find dine-in areas, showrooms, and kid's play areas. This gives a pleasant experience which retains the customers. 

  • Store Layout: IKEA stores in Australia are designed in accordance with the traditional IKEA format. This includes a one-way layout that leads customers through several departments. Customers are encouraged to explore the entire store. They can discover new products this way and add them to their cart. 

  • Customer experience: Providing a seamless customer experience is a top priority for IKEA Australia. It offers a variety of services like home delivery assembly support, and tools. This support helps with designing kitchens and wardrobes.

Internet Visibility

IKEA just didn't invest in its physical locations. IKEA Australia has established a strong online presence. Customers can browse products and make purchases. They can also schedule in-store pickup or home delivery. The company offers a strong e-commerce platform. Let's see how it does so: 

  • Omni-Channel Strategy: IKEA Australia offers a seamless shopping experience by combining online and offline channels. Consumers have the option to go for website shopping. They can also wander through the store and finish their purchases. 

  • Click and Collect: This online ordering service enables users to select their items and pick them up from specified locations. They can first select their order and then directly pick it up. It has been especially well-liked during the COVID-19. 

Local Modification

IKEA has modified its services to cater to Australian customers. It has altered its product range and marketing tactics. This includes:

  • Product Selection: IKEA offers customised products and services. They are tailored to meet the regional preferences and way of life in Australia. For instance, it has launched outdoor furniture collections that are appropriate for Australia's environment.

  • Marketing Campaigns: IKEA Australia collaborates with well-known celebrities to promote their brand. They also focus on regional themes to understand the local preferences. These market campaigns help it connect better with the customers. The company uses both traditional and digital advertising platforms To reach a wide audience. It promotes better interaction and feedback. 

Opportunities and Difficulties

IKEA still has a lot of opportunities to promote itself. On the other hand, despite its success, it has an array of problems. Let's have a deeper look:

  • Competition:There are many domestic and foreign competitors. It is hard to compete with the many furniture and home products brands. To be a step ahead and retain customers, IKEA needs to constantly innovate. It needs to constantly modify its strategies to offer better services. 

  • Differentiation: IKEA sets itself apart with its distinctive product designs and reasonable prices. Its all-inclusive shopping experience attracts customers. The company must stick to its high-quality services. This helps it to maintain a competitive edge. 

  • Sustainability goals: IKEA has established high sustainability goals. This brings both opportunities as well as challenges. The business must strike a balance between its sustainability goals and operational costs. Often realising these goals comes at a high cost. The company should ensure to avoid this. 

  • Sustainable Sourcing:  it might be difficult to make sure that all products are supplied responsibly. reaching these goals improves IKEA's brand recognition. It draws in customers who care about the environment.

  • Digital Transformation:The emergence of digital technologies and e-commerce has opened many opportunities for IKEA. They can upscale their business processes. It also helps to elevate consumer satisfaction.

  • E-Commerce Expansion: IKEA can work on its e-commerce platform. This will bring in more customers and offer a more comfortable ordering experience. The company can make investments in logistics and digital infrastructure. 

  • Digital Innovations: The company can also include AI-driven customer support. It can use augmented reality (AR) for product visualisation. Using these businesses may improve customer satisfaction and speed up processes.

Conclusion

Today, IKEA stands as a global furniture retailer. The company provides customers with high-quality, and reasonably priced items. all of it because of its focus on supply chain management, product innovation, cost-effectiveness, and sustainability.

IKEA has successfully tailored these tactics to the Australian market. Its operational strategies have helped it to attract a large number of customers and revenue. It helped to face many difficulties like competition and sustainability goals. IKEA's strategy offers students insightful information on efficient business methods.

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