Marketing and operations management at IKEA

Arab Open University

Faculty of Business Studies

B207A- Shaping Business Opportunities I

If you look at a range of management textbooks, you will notice that a very high proportion have IKEA, the Swedish furniture company, as one of the prime examples of a successful organisation. Everyone who has visited an IKEA, in almost any country, has noted the unique approach to self-service, whereby the customer spends potentially many hours viewing displays of furniture and then collects the modular components from the warehouse next to the tills before leaving, taking home their purchases to assemble them themselves. There is no doubt that the business model applied by IKEA is regarded to be one of the most successful for a retailer in the past 20–30 years. Consumer demand remains strong and when IKEA opens a new store, it tends to generate much interest. A few years ago IKEA opened a store in Edmonton in Greater London. On the day an estimated 6,000 people tried to attend the store opening and the panic to obtain sales bargains became so intense, one customer was stabbed in a fight over a discounted sofa.

Academics are always keen to highlight IKEA’s success, but it is interesting to note the unintended functional bias in these perspectives.

In their introductory text to marketing, Dibb and Simkin (2013, p. 42) use IKEA in their first chapter, stating:

Low prices have been the key to IKEA’s success, but price alone cannot create an international long-term marketing success story. Products are updated consistently to match consumers’ expectations and lifestyles. In-store service and staff training are integral to the IKEA shopping experience. Store sites are chosen to maximize catchment areas, to make access easy for shoppers and to bring the brand name to the attention of the whole community … Promotion emphasizes the ‘style without expense’ philosophy and the IKEA name … IKEA has a forceful, well-directed marketing strategy actioned through primarily one tightly developed marketing mix for the core superstore operation. The result is a successful, expanding company, satisfied target customers, highly motivated personnel and unhappy competitors.

In contrast, the operations management perspective is well-represented by Slack et al. (2011, p. 3), who state:

Operations management is a vital part of IKEA’s success. IKEA shows how important operations management is for its own success and the success of any type of organization. Of course, IKEA understands its market and its customers. Just as important, it knows that the way in which it manages the network of operations that design, produce and deliver its products and services must be right for the market … Consider just some of the activities that IKEA’s operations managers are involved in.

Arranging the store’s layout to give smooth and effective flow of customers (called process design)

. Designing stylish products that can be flat-packed efficiently (called product design)

. Making sure that all staff can contribute to the company’s success (called job design)

. Locating stores of an appropriate size in the most effective place (called supply network design)

. Arranging for delivery of products to stores (called supply chain management)

. Coping with fluctuations in demand (called capacity management)

. Maintaining cleanliness and safety of storage area (called failure prevention)

. Avoiding running out of products for sale (called inventory management)

. Monitoring and enhancing quality of service to customers (called quality management)

. Continually examining and improving operations practice (called operations improvement)

Importantly, these activities are only a small part of IKEA’s total operations management effort. But they do give an indication, first of how operations should contribute to the business success and, second, what would happen if IKEA’s operations managers failed to be effective in carrying out any of its activities.

Essay Question:

Use the above text and external resources to discuss IKEA’s competitive strategy. How do the marketing strategy and operations strategy at IKEA support the competitive strategy? In your answer make sure to answer the following main points:

1-   Competitive strategy at IKEA

2-   Marketing strategy at IKEA (Target market, marketing mix and positioning)

3-   Operations strategy at IKEA (operation design)

4-   Relationship between competitive, marketing and operations strategy.

General instructions for students:

TMA weight: 20% of total course grade.

Cut-off date: Check LMS

Plagiarism: It’s imperative that you write your answer using your own words. Plagiarism will be penalized depending on its severity and according to AOU plagiarism policy.

Format:  you are expected to write your answer in an essay format: introduction, body paragraph(s) and a conclusion. Failing to do so could result in the deduction of up to 4 marks from your total TMA mark. Write one essay for each question and make sure to label your answers.

Word count: your answers are expected to be within the specified word count. A 10% deviation from word count limit is acceptable. Not adhering to specified word count could result in the deduction of up to 4 marks of your total TMA mark.

Referencing:  You are expected to use the Harvard referencing style for in-text referencing and list of reference at the end. Failing to do so could result in the deduction of up to 4 marks of your total TMA mark.

E-library:  You are expected to use E-library sources to support your answers. A minimum of 3 sources is required. Failing to do so could result in the deduction of up to 4 marks of your total TMA mark.

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