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Management Essays - Ikea Functions Management

How Does indeed Ikea Approach Procedures Management?


The main purpose of this newspaper is to concentrate on the how IKEA Company approached its operation management. Especially, it covers the next: how the company build and take care of customer requirements, second of all how does these customers requirements used for the business's product and services, then, third ranges the operational systems and functions it found in its operation, fourth contains capacity planning, process design, and product services/arranging, inventory and projects were monitored in the business. And, last but not least is on why and how monitoring and analysis of procedure were carried out by the company. This newspaper also provides empirical results and program of relevant ideas that will help readers to really understand how the company performs and what relevant ideas it applies.


In most companies nowadays whether it's local or multinational companies, they can be always confronted with big challenges. Difficulties those are sometimes insurmountable to triumph over like carrying on to be ground breaking or problems related to cost. These are two of the most common challenges that company continuously faced, but these problems can also be overcome only if the company functions in a way that it focus mainly in its main power and at exactly the same time concentrating on the right market, where they might know they have the advantage. In this newspaper with IKEA Company as the primary focus, it will give us just how typical multinational companies manage to operates. It'll include such techniques like customer requirements, businesses management, monitoring projects and other ideas and techniques applied in genuine operation. This newspaper also provides some important empirical results that will help to aid the theories and actual strategies applied by the business.

Historical History of IKEA Company

It had not been so long after the company founder INGVAR KAMPRAD created in 1926 and just 17 years later after that season, where at a very young age when INGVAR recorded the first IKEA Company and this was in July 28, 1943. Actually, the name of the business IKEA means (Ingvar Kamprad Elmtaryd Agunnaryd). Year or two later, the company got its first advertisement through an area papers, and then through aggressiveness available, Ingvar launched its first fine and modern line of furniture in 1948. Followed by starting of IKEA's catalogue and first furniture showroom in Sweden in 1951 and 1953 respectively.

Four years later, the real concept of the business's creation of smartly designed furniture at a very low price started in 1955 and three years later it was the world's first IKEA store opened. From those early on years the business started to grow and number of co-workers which started to be seen by the company in 1958 and per year from then on was the introduction of the business's self set up furniture. But, because the company want to ensure that they offered not only low price items, they began to find ways how quality will be executed. That is why by 1961, the company started to use quality testing in every its products.

Then the business sees opportunity to extend and by 1963, the business launched their first IKEA store outside Sweden and this is within Norway. Then from their on the company started to grow and stores outside increases and it was first penetrated in the Western european region. And by the business reaching the 90's, the business became design focused which is necessary in order to compete, but nonetheless the main theory and eyesight of the company to lower the purchase price and at exactly the same time quality is not from the plan and it consistently been the good thing about the business.

Like in 1997 specifically was the entire year for children, where the company is rolling out numerous products for kids but still innovative design continuous to work with the company. And by 2003, through its donations has helped a Swedish medical center to construct "The Kaprad House" which mainly facilitates for tumor patients. 1

How does the business create customer requirements?

Establishing customer requirements maybe is one of the main factors for success for any company on earth and whether it is local or multinational business. The primary reason is that it mainly focuses on how a company builds up the right product. It could very simple to say that it may only be about how exactly the company interviews or provide questionnaires or even conducting surveys just to know the important and appropriate requirement of the clients.

1 The IKEA Principle, 2007.

But, actually it is more than that and it requires a lot of work in executing such activity. That is also the problem with come companies, they might think that creating customer requirement is straightforward as like asking them when they visit the outlets, stores or even sometimes paying some formal appointments does not answers all these and in fact there are customers that could only accomplish survey forms out of persistence by some crews or professionals of the retailers. And the condition began as when the company started to count on these requirements and apply some strategies on it, finding it as the true problem and following that irrelevant alternatives were applied which only gives problem or worsen the condition of the company.

In theory, it is stated that establishing customer needs or requirements are mainly the work of the marketing division of the business and these group also knows that requirements of customers will come from different aspects available. Like one of the aspect is the fact that requirements may come from the frame of mind of the customer towards the merchandise which is molded by the experienced by the merchandise itself, like take for instance a product that is known for ore than 2 generations and the clients are well used to it, this means that the attitude of the customers towards that product and the years of connection with the product itself plays a big factor in understanding the requirement of its customers.

Secondly it can be as a result of the viewpoints or boasts of other customers, which is sometimes can also help the business in understanding the necessity of the customers, but this can only be applicable to products or services that were unveiled positively initially, because there are some new or old products that aren't well known and the products on the other side are definitely hard to examined its customer needs.

But there are a few more extreme ways on how to deal with customer requirements which is through immediate selling, these type of business has the greater benefits against others most of enough time. The reason is that they directly work with the clients and the business units will be the ones requesting what they need and following that, the direct vendor provides what best fit to their needs. Lastly is the fact company relies on advertising, this happens when the business present new product to the marketplace or sometimes before they add to the market by just permitting them to aware of the product which will be soon launched.

From the consequence of public acceptance structured from the reputation ratings of the advertisement, the business would then established it and later used it as a basis for customer necessity. But the latter may also be dangerous and major because sometimes the company maybe mislead on the attractiveness of the ad which sometimes does not think about the actual sales of the merchandise. Other theory that needs to be well followed in order to accomplish better requirement gathering is the fact company must recognize that there are three important factors that require to be looked at in establishing dependence on customers and they are by means of questions:

  • Who buys the product?
  • What they purchase?
  • And most of all, that they buy?

And these three questions can also immediately address the top concern of client satisfaction. Like in conditions of who purchases it, this concerns the kind of customer that could possibly and the ones who'll definitely buy the product. For customers that will definitely buy the product, there must be another strategy that'll be applied to them like may be giving them some small perks like through discounts maybe enough since these customers are considered the loyal ones. While for those customers that are potential and also have the probability of buying the product, strategy may be more aggressive like giving them discount rates or even concentrating on designs or even presenting additional incentives for buyers could also be used to strategize new and prospective customers. Secondly, concentrating on what the clients purchase is one question that companies must consider in establishing requirements.

In this question, the primary concentration is on directly understanding what the customers enjoy; these can be brought about by latest movements or specific needs for specific kind of customers. For most company's the latter seems to be easily been resolved by companies as they may easily analyze such requirements, but what is hard for companies to predict are the styles that will come and then for companies they only compete by who among them can be the first someone to introduce that craze to the marketplace. But sometimes these will not give any confidence on them, why is it more long-term impact is about how the company the business provide not only just the tendency but also quality and in conditions of price in order for customers to essentially appreciate the merchandise itself.

Lastly in conditions of how they buy, this pertains to how accessible and availability of the merchandise t the customers. This is been a big factor in establishing requirements because there are occasions that products have the very best quality and the price is within the budget, but credited to option of stocks and availability to the customers, it became a driving push for customer not to choose the product and instead they would settle to change their preference which becomes the challenge of some companies. Which means that consistencies is actually an issue as well, companies should always understand that if they give such quality and sure to be a hit product for his or her customers, it generally does not stop there and the business itself should prepare yourself and also be up for the task to produce as many products as it could in order to handle the demand for the product or services that they provide. That is why it is also important to handle customer requirements because it also helps in understanding its aim for customer. 2

For IKEA, a company that in everyday they operate, understanding and establishing customer requirement is vital.

2 Establishing Customer needs, n. d.

The reason mainly is the fact they offer products which should always look into the needs with their different kinds of customers. But, even although needs will come differently and uniquely, depending either on designs, price or even space or combination of both or all the products. As the key vision of the business mainly focuses on how to provide better life because of its customers and this is through their two main company purpose which is to provide whenever you can wide variety of products to choose from and at exactly the same time prices that are low that surely they can afford. As based from its main perspective, it obviously employs that the company's main theory is to essentially provide low prices home furnishing products.

This concept started out when INGVAR KAMPRAD an entrepreneur from Smaland province in southern part of Sweden got an progressive idea in mind. As a business owner he discovered that to become successful in the business, he saw that most people live simple and they live their life frugally and they really work hard. This only shows that individuals would only buy things that are essential to them and most individuals would consider buying not so luxurious and high price things. That is why from that observation, he made the feeling that to be able to satisfy these highly hard working customers to choose the products and be able to compete well in the market. That is why from that observation, he made an impression that to be able to fulfill these highly hard working customers to buy the products and be able to compete well on the market.

Then, what he did was an approach to find ways how to provide not only quality products but also providing them with a great deal of choices & most specially the purchase price is low, which customers will surely find way to fit on their budget which is until now the brand of the company that is why they became popular anywhere they operate in the world. That's the reason with this system or strategy that was applied by the business because the time when the company actually started. These were also the effective strategy that the business applied and is a quite effective way. That is true in fact even up to now that companies must understand that the necessity of the client should be satisfied and in order to do this there should be well consideration not only on the essential functionality of the merchandise but also taking into consideration on the price and quality of the product. 3

This only demonstrates the company right from the start knows what must be done to maintain the business and how they can in fact treat the concerns and requirements of the customers. And from this strategy by its founder and entire workforce that will work for the business, it was easy for the business to just innovate and be flexible on the various needs of these customers since the foundation were more developed. And because the company were jointly maintained by band of owners across the world, they also considered that just how they performs like specifically how they build requirements must maintain series with the global concept and practice of the company which continues to be starts with products that are not only quality but also sold in an exceedingly low price. That is why for just about any additional requirements like in conditions of additional features designs and even in terms of price are mainly originates from the actual dialog and relationship by the clients themselves through the store co-workers. Even the real store agreement and demonstration becomes a focal point in creating customer requirements.

How are customer requirements translated into products/services?

It holds true that creating customer requirement does not stop there and what the company needs to do is to translate these requirements into real product or services. For some companies these in addition has become a significant problem, maybe not simply because of the problem that some companies may proven the wrong requirements or it is just company's translate the mandatory products or services wrongfully.

3 The IKEA Concept, 2007.

Most specially customers nowadays are very smart and they easily switch their inclination and why is it difficult these days is that there are a great deal of products to choose from and one incorrect move can give a great deal of impact for the business which is something that company's must look into closely. There are actually many theories that can be applied in carefully and effectively translating customer requirements into products, But among the many theories, there exists one important theory that focuses how products are being prepared before it actually provides to the customers and this is what's being called as product planning framework. On this model or platform it implies that for companies to be successful in transforming requirements into products or services. In this approach it also tackles the over-all company strategy that should also be included in the actual development of the product and not only the requirement exclusively. Because there are cases that the company over-prioritize on the certain aspect in the merchandise planning where in reality it generally does not only need to independently prioritize but also have to manage how different factors relate with one another. Needs, 2004)

In it implies that it isn't only the comprehensive requirement together is important, instead it ought to be well collaborated with the other factors or aspects of product planning. And everything starts with understanding first the business strategy; these ought to be the starting place and then it comes after by three collaborative processes such as competitive business environment, which involves a careful understanding about how the company understand just how it will perform in order to be competitive and not just develop a service or product that only works the basic requirement of the customers instead it should be developed to address competitiveness, second of all in the band of process after understanding the main corporate strategy is the market dynamics, at this point company's must look into the several movements and market situations which might also become a major factor in the business.

Companies must check out the way market is moving and sensitivity towards these aspect gives a lot of leverage for the company even by the time of planning in the introduction of the product. Then, the third and last area of the three collaborative operations is development capacities; this includes the id of the company's capabilities of growing the real product. This example also a major impact for some companies because there are companies that even though they already determined and studied the market dynamics and the competitive business environment, eventually they discovered that they have no ability or capacity to get it done, so what they have to do is to just focus on likely to develop some products that are of their capacity to developed. These three techniques are also considered as market opportunity filtration system. Structures and long -term roadmap come next, which centers mainly on how the product can be developed product insurance policy and goals which is vital in conditions of building long-term success of the product.

There are also other factors that it certainly focuses like commercial or department value added, primary technology applied and other aspect that mainly focuses on the long-term success of the product. Detailed consumer requirements or product description comes next, where at this time, these only includes the in depth knowledge of users needs and all the information that it facilitates which includes things that were shown above, like information regarding what customers needs, who purchase the product and exactly how they buy it. This information will then be used for establishing a company case that will mainly utilization in providing a report which will be use to support the feasibility of the merchandise development and finally is the procedure of execution, that involves the actual technology of the merchandise or services.

But this may be applicable and beneficial to some products or services that are more developed in the industry or companies that already has its name and just continuous to explore for new opportunities. The reason is that we now have many failures that may be came across by companies who are producing new product on the market. One of the most common reason is the fact since they don't possess establish customer understanding and their data are occasionally not reliable and simply follows current market trends.

It demonstrates there are also some important factors that require to be carefully attended to by new companies or companies presenting new products in the market. These also show that we now have many instances that can add the ineffectiveness of translating customer requirements into product or service development. 4

For IKEA, in terms of translating customer requirements into products and services, it has always been the main focus of the company which is perform by the company through what the company called as IKEA's Main Range. As most companies would also envy how the company operates and exactly how they still provide good deal products even though there are a lot of economic issues that are taking place. But, the primary reason why the business is constantly on the survived but still keep up with quality and price is though its what they called as IKEA Range.

IKEA range identifies the formula about how the business operates and everything starts with its main idea of producing good deal products plus their effective development method that consistently been the priority gives big raise for the business since it's the major cost focused activities of the company and finally but not at all the least has been the progressive ideas and imagination of their people that up to now becomes a significant concern driving force in the success of the business as well. But in essence there are four basic factors how the IKEA range actually does and translates customer requirements and these includes: profile, design, features and the strategy they are doing for lowering the price tag on its product. In conditions of profile, the business continues to target the fundamental activities atlanta divorce attorneys home such as eating, sleeping, saving items and socializing however the company makes sure that their products predicated on these basic activities they will have to consider the limited budget and space of the majority of its customers. Quite simply, the business always aims to provide a product that first satisfies

4 Travelling Product Development with Customer Needs, 2004

the basic needs of their customers based on the typical activities in everyone's homes and then consider the restricted budget and limited space of homes of the clients.

In conditions of design, exactly like in the profile, designers of the business are always job to provide progressive ideas that consists of new and progressive designs and at the same time address low priced production cost, which may result to low price because of their customers. Despite the fact that this is a huge task for designers, still they manage to produce products that are not only stylish but also at low cost to produced and sell. These are two of the key secret of the business, they always find better ways how they can lower the creation cost through better designs, because to them is they'll still produce better design with low development cost, they can leverage against the competition and that gives both benefit for the business & most specially because of their customers.

In terms of functionality, the firms always consider beyond the basic features of its products. It constantly looks for value to its products, and with that it also implements strict quality assurance, in order for their customers not to say that their products are not merely low price and style but also durable. This only demonstrates the operation of products through quality can be an essential part of IKEA's business which should not bargain cost.

In terms of low price products, the company has implemented this plan by providing a variety of choices. With the many choices that they offered, there will definitely be a choice of the clients that is fit for his or her budget and not just a fit in the space they have in their homes. The company does not contend on a per item basis, they contend in terms of prices through selections and wide selection of designs and features of products that they offered which can be an added good thing about the company.

And as the way the company perform its actual way of translating customer requirements into real product development or services so when based on the style that were presented earlier, it plainly stated that there are clear proof that IKEA stick to its corporate strategy to offer products that are not only affordable but also has quality. This known requirements where further enhanced by progressive design by their designers that still carefully addresses the needs of the customers.

What functional systems and functions are in location to fulfill the Product/service requirements of customers?

It holds true that there are different functions or systems that need to be executed by company to be able to institutionalize the way on how the company satisfies product or services requirements. Because there are occasions where other company apply various ways on how they deal with requirements and these leads to inconsistencies in the information that the business generates. And for these very essential requirements not going to spend, company's should develop a well described process about how not only keep it but moreover fulfill these requirements through execution of the right operations and systems. For IKEA, the key idea for the company is to really see on how the store nationwide carries out the business enterprise and these are again centered from the business's IKEA range.

In the shown process by the business IKEA above, it distinctively showed that the business again mainly targets gratifying customer requirements through finding any possible ways how they will offer only the best and smartly designed products which is mainly the start and end of its processes. The first one as being the standard designs of the products that were studied by the company and the last one as the added inspirational designs, which mainly concentrates however on the progressive ideas that comes only from their mature designers, but what is important here's these designers stills checks the key global strategy of the business. While the one that separates the first and previous activities in the process is with regards to locating the best creation method that in addition has become the hidden knowledge key for success of the company.

This is basically because through these well designed production method, it gives the business enough leverage in applying cost because of its products. And all these three main processes is equivalent to IKEAS Unique process in gratifying customer needs. In fact there is even some strategy that the company implemented in the look of its stores globally that also put into the business's success globally. To include on their very unique and incredibly effective theory in operating the business, the business stores across the world operates in a manner that inspire all its customer on the true life look of the rooms and homes, this is in order for them to really start to see the real look of the products once it's installed. With big space stores that the company offers from its customers, and also encourage taking their time and letting them feel safe within the store.

Letting the clients actually sit, lie down, wide open and close drawers in their products, it adds more value because of their customers given that they can actually feel, see and hang on the products. Added to that is the assigned staff that is often prepared to assist the guest if indeed they need more information, most specially some technical details. Using the 9, 500 different designs and products to choose from, it will be provides a great travel experience and that provides customers a large possibility that there is always something that's right for the coffee lover, either in terms of budget or in terms of space. 5

In fact there's also proofs a show that these process has become an effective way about how the company continually develops not only in conditions of sales or profits but also in terms of stores and site visitors that stopped at every store it operates in the earth. First, in terms of sales there is a consistent upsurge in sales from enough time the company started out up to 2007, meaning no matter what and what size economic issues that comes in the global current economic climate, IKEA still have the ability to succeed and using its unique process in fulfilling the needs of the client, sales are always increasing.

In terms of quantity of site visitors that visited the stores worldwide, it also shows that number also boosts meaning customer understanding is improving which also improves the business's global sales. And with its 200 stores throughout the world and much more than 450 million visitors annually. This only implies that the business's stores and its own products are well recognized.

And the company where very competitive in widening its business globally, to be able to serve its clients better.

With these information that were presented, it only shows that the business using its unique process of gratifying the needs of these customers, it shows that they continually become extremely effective and almost all of their customers are really satisfied about the process and how they are being given the right attention by the business all together. Particularly in terms of the increasing quantity of visitors and the ongoing huge increase in sales of the business.

How are capacity planning, process structure, product/service arranging, Inventory, and projects, managed in the business?

In order for any company works not only founded from the business's current needs but also the near future and included to the people are some unforeseen requirements, capacity planning is obviously important. Actually theoretically there are three main steps for capacity planning, and they are: (1) company needs to determine service level requirements, (2) the company must review current capacity, and lastly, (3) company must plan for the future. For some instances that problem usually is the second and third. It is because of the reason that most companies usually know very well what are the things that they have to do, but the situation is the fact that either they know they are unable of doing their projects but helps to keep on getting some simply for the greediness of getting some merely to increase earnings or sometimes there are companies that basically doesn't know very well what their capacity are, and what happen is that when they actually perform the real projects then they found out that they are short in resources. Also, there are conditions that comes in the third step, where most companies both understand their assignments and effectively is aware of their capacity but still failed due to lack of anticipations or not being prepared to instant demand on the market which eventually resulted to failure as well. 6

In conditions of process structure, process scheduling, inventory and managing project in the organization, there are only two ways that can mainly labeled a business and these are either centralized or decentralized process. Centralized process comes up when procedures from the various branch or stores of 1 global company comes after the same global process and actually performs the procedure consistently. While the decentralize process entails an autonomy for each branch to execute their own process, but still follows the most notable main process. This can also be

6 How to do Capacity Planning, 2007.

known today as matrix type of corporation. For IKEA it actually carries out centralize and decentralize way of procedure or the business called it as for-profit and non-profit way of operation. Though it was originated in Sweden, the company operated in a very unique way, since it's main procedure is subdivided into two parts: (1)non-profit, and (2) for profit operations, where the latter or the key INGKA Foundation is found in Leiden in the Netherlands. Or in other way of representing it, the business structure may be look into as two different parts and they are: mainly procedures and the other an example may be franchising. Just to segregate the two, most the functions which covers management of the majority of its stores worldwide, design and creation factories of furniture as well as the purchasing of equipment are done and centrally monitored by the INGKA Holdings, which is probably the 36 countries it manages it handles the 235 stores worldwide while around 30 remaining stores are been able by the various franchises beyond your INGKA Holdings. Also, the INGKA Holdings is not also owned by an individual owner or company instead it is possessed by Stitching INGKA Groundwork which was set up by its owner, Kamprad in 1982 and that started out the strategy of the business to acquire applied the company for non-profit group. This non-profit business is handled by five users where INGKVAR as Chairman and included as people is his wide and lawyers. Using its taxes avoidance strategy in 2004, the company income is taxed and at the same time for the owners, Kamprad and his family cannot get profits directly instead they are doing collect a portion of its sales from the franchising contract between them and their partners.

But even with these very unique and sometimes categorised as sophisticated way of operation by the business, the over-all company that still handles the overall process is again dealt with by the INGKA Holdings, like in conditions of capacity planning, process improvements and others are still in the expert and supervision of the holdings. This only means that even although company is had by several owners in the several countries, still in terms of the over-all functions and processes, the mother company which is the INGKA Holdings is the main one manages it.

Explain why and exactly how monitoring and evaluation of businesses are carried out

As based from the discussion that were presented above regarding the way the company globally works, it only implies that obviously what sort of company monitors are also manage by the primary company and this is the INGKA Holdings, but also for franchisee's they generally have the power to manage their own branch however they need to check out the global IKEA process which is mandated by the Holdings. Even in monitoring just how on how the company's groundwork is also doing is also handled centrally. But, even though this was a strategy that were applied by the company and although it creates intricacy to some since every stores may be under the INGKA Holdings or being maintained as franchised, the company all together still has provided a proper deserve recognition that this deserves to be commended as a corporation that delivers importance to the surroundings and world change. That is through INGKA's Foundations, using its focus on innovative home design and structures has been named the world's major charitable institution with a online price of $33 billion, conquering the popular and richest couple on the globe Bill and Melinda Gates.

But, even although foundation net worth is huge, it does not reflect the true amount it actually provides or donates unlike its counterpart. This is proven as statement in 2005 shows that the business not only focuses in its own home country Sweden, specifically the Lund Institute of Technology with a quantity donated of $1. 7 million. This is far low from the donations that Gates Family has given which extends to plenty of $1. 5 billion in the same calendar year. Even though the company has been around the forefront of many projects for a cause like the following: (1) A Euro for every toy bought from 2006 for UNICEF which accumulates to 1 1. 75 million Euros. (2) Within the 2005 Tsunami, KEA Australia decided to match dollars for dollars co-workers donations and donated all sales of the IKEA Blue Carrier to the cause. (3) Pakistan Earthquake in 2006, IKEA gave 120, 000 blankets. (4) Lastly, it provided furniture for more than 100, 000 bridge academic institutions for both India and Liberia. 7


In this newspaper, it shows that IKEA even though the way it runs seem to be to be complicated and difficult to understand, still the company performs its operation effectively. That is mainly brought about by their unique way of creating and at the same time gratifying customer needs. With the company's main concentrate on developing products that aren't only with quality and almost all of all products that are low in price and put into that the wide variety of designs to choose from has made the company a most suitable choice for customers worldwide. This has also been an efficient drive for the company success, because internally, they always give attention to how they may think of developing effective creation method and highly ground breaking designs and that gives them better leverage against their competition worldwide that even franchisers finds complex doing business, still they were enticed with the continuous increase in progress sales of the company.


As centered from the study there are just two main recommendations that should be focus by the company to be able to fortify the success of the business. First, it is more on establishing a more concrete and logical global operations and the second reason is for the company to increase its support for the charity since that was the primary purpose of being a foundation since there is a significant criticism that even though that the INGKA Groundwork has a huge net price.


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