Marketing and Business Operations - Essay Example

Marketing and Business Operations Table of Contents MARKETING 3 Product/ Service Overview 3 PEST Analysis 3 SWOT Analysis 4 Product Life Cycle (PLC) Analysis 5 Product Augmentation and Differentiation 6 Competitive Advantage 7 OPERATIONS 8 INTEGRATION 12 References 14 MARKETING Product/ Service Overview IKEA Furniture is private furniture retail chain in UK, which sells furniture and home products. The company was founded by Ingvar Kamprad in the year 1943, in Sweden. IKEA is best known for stylish, designable and easy to handle furniture. IKEA is one of the world’s largest furniture retailers. Their furniture is eco-friendly and simply designed. IKEA is one of the world’s largest furniture retailers and it sells furniture like beds, chairs, desks, home appliances, tables and accessories. The company also deals in customized furniture which is assembled according to the preferences of the customers. This study would be on the customized furniture segment of IKEA, where the customers would be offered furniture designed by them and price also would be allocated based on the quality of the raw materials (Bloomberg Business week, 2005). PEST Analysis Factors Analysis Political Due to the credit crunch prevailing in the economy, David Cameron, the Prime Minister of UK has taken initiative and lots of measures to diminish the fiscal deficit of the country. This augmented option for the customers might increase the sales of IKEA in recession too. Economical UK was also going through one of its deepest credit crunch. The retailers in the shopping centres and other departmental store and shopping malls were not getting adequate footfall in their shops. IKEA can reduce cost through its online custom design interface, and attract potential customers (Churchman, et al. 2012). Socio-cultural Most of the companies opted for down-sizing about 40 to 50 percent of the employees lost their jobs. Eventually this led to decrease of purchasing power of the people in the country. The standard of living and their lifestyle started degrading. The customers would find this application to be fun and convenient. Customers not opting for IKEA would start preferring IKEA’s products for this unique feature. Technological Big companies spend good amount of money on innovative technology. UK has a pool of skill personal who have knowledge and expertise related to technology. IKEA’s new augmented service is wholly based on technology. SWOT Analysis Strength Weakness Freedom of choosing own design Price would be based on the customer’s choice Customers would be able to see a 3D view of the finished product and decide quickly Product would be delivered at the destination (IKEA, 2011). The demand for readymade furniture might decrease The aged and middle-age might not trust or rely on this service Opportunities Threats Augmented service would differentiate the products of IKEA from competitors Expansion is possible in neighbouring countries at less cost through new augmented application on website (IKEA, 2012). Replication of the idea by competitors Trust of the customers towards a web-based application might be low compared to buying furniture from the store directly. Product Life Cycle (PLC) Analysis IKEA is one of the top furniture retailers around the world, and it is in the maturity stage of the product life cycle, so innovative models or Unique Selling Propositions (USP) are required in order to differentiate the product from that of the competitor. In this regard the augmented service of designing own furniture and ordering through phone or website would be an USP for IKEA. Though IKEA is still earning considerable profits, but this augmented service would differentiate IKEA in the cluttered market place. The PLC below would provide a better understanding of the stage at which the product is and would move to after introduction of the augmented service. Figure 1: Product Life Cycle Source: (Author’s Creation) Figure 1 is a diagrammatic representation of a PLC which is explaining the current position of IKEA’s products and the assistance that the business will get on adding the augmented service with its products. The ordered furniture would be delivered to the customer at the stated address within 5 business days. As for the online orders, the customer care executive would confirm the order by calling the customer within one hour from the order placed, so that false orders are not entertained. This would support IKEA’s business to go up rather than declining. Product Augmentation and Differentiation A product has certain primary attributes which is called the core product, but due to increasing number of product and competition in the market, companies are offering a host of diverse choices along with the primary or core product. These add-ons are called augmented products, in order to differentiate the product from the competitors. IKEA already offered the service of providing customized furniture based on the preferred design of the customers, but an augmented service would be provided to them in this regard which will make ordering customized furniture easy. IKEA would offer a unique application for mobiles as well as on website which will assist the customers to choose from variety of different option and design their own furniture. They can choose the colour, the design, price of each part based on the quality of the parts. For example if a customer want to have a table, he/ she can choose the top, its legs, wood quality, colour of the wood, design of the table top and legs, price of every parts based on the quality of every part. Competitive Advantage The major competitors of IKEA are Ashley, ASDA, and Bassett Furniture Industries among others. The brand awareness is must more than the size of the company because IKEA is not just a furniture merchant like the competitors, but it sells lifestyle to its customers (Hoovers, 2012). This signifies that IKEA is already a market leader, but now it would be offering something which is not offered by any of its competitors. IKEA would be grabbing attention by organising an online best design contest for furniture. In this the customers would be offered an interface like paint brush on the website and they can register their name and number and drawn and colour a piece of furniture. The best design would receive shopping vouchers from IKEA and his/ her design would be implemented and sold with his/ her name. This would a unique strategy of IKEA to introduce the augmented service for its customers. OPERATIONS This section would be evaluating the operational management theory that would be applicable in IKEA’s case study. An augmented service would be introduced by IKEA through its website as well as mobile apps, which would allow the customers to design their own furniture by choosing the different parts and colour, along with the price. However, an operational theory needs to be applied in order to plan the supporting functions. Lean production approach would be appropriate in this context. The objective of Lean approach is based on the basics of identifying efficient practices by removing waste that do not add any value to the finished product. The motto of introducing the augmented service is not only to differentiate the services and offerings from the competitors, but also to save cost and time of IKEA which can be utilised for various other development plans. The discussion would be mainly on the integration of lean theory, its significance and on an input-transformation and output model, which would be utilised to support the augmented online application of IKEA. This does not mean that the quality of the product is diminished with lean approach. The companies which implement lean approach to attain efficiency often adopt strategies which are focuses on customer values. Under lean approach, manufacturers monitor certain elements which can be avoided or controlled, such as, over production, lag time between the stages of production, inventory, materials, re-designing products too many times, and defects (Carreira, 2005). In the case of IKEA, the lean approach would be beneficial for the company because it can reduce its inventory and implement just-in-time delivery of product because the customers would be ordering customised designs, so the company can prepare the parts of the products displayed on the website and keep them ready, so that as the order comes, they can assemble them and deliver the finished goods on right time to the customers at their stated destination. This would assist the company to reduce their labour cost and assist in unnecessary production of excess furniture, which are not in demand. According to Ohno (1988, p. 9), there are seven types of wastage that should be avoided under the lean approach, which are discussed below: Over Production – Producing products more than the demands of the customers is called over production. Batching in order to save setups or production based on forecast may lead to over production. IKEA deals in readymade furniture, so the inventory of the company is usually high because it has to offer varied furniture designs to its customers. However, in this case they can manufacture furniture only when they receive online orders for it. The raw materials in this case would be the parts of the products displayed on the website. These can be assembled as per the demand that would be generated through the furniture designing application. Waiting – Waiting time in the whole production process should be reduced, so as minimise cost and save time. This is the reason why it is said in the previous point that the furniture parts should be kept ready, so that when order is placed, only the time of assembling, and furnishing it is required. Transportation – Transportation cost should be minimised by reducing the movement of goods that do not add value to the product. IKEA generally have large stores outside the town, so that they can stock great amount of products for their customers in large stores. However, if it has an assembling plant within the city, then it can easily delivery the ordered products quickly to the customers, and also save the transportation cost. Inventory – The motto of every manufacturing company is to reduce inventory. IKEA will get a scope to reduce its inventory through his new service because customers would prefer to have their own designed product, which means just in time manufacturing and delivery would be appropriate in this system. Motion – The organisation structure and unnecessary movement of people at workplace can be avoided. The human resource framework in IKEA can be better designed because customers preferring to order customised furniture would not visit the store rather order online, so the company will not have to maintain a huge workforce to conduct business (Taylor, and Brunt, 2001). Over Processing – Unnecessarily re-designing similar products may diminish the quality of the product. This might be totally a waste because the customers might not want such extra touch to the product, so this effort goes waste. IKEA in this regard would save resource and time because if it wants to change the designs, it can first do it virtually on the website. Defects – Attaining zero defects should be the goal because quality of furniture is a critical issue. IKEA would be also mentioning the price along with the quality of the wood and design, so the customers would have complete knowledge regarding the quality of the furniture they are ordering. Other than this the fitting is also vital in case of assembling the parts (Hobbs, 2011). After a comprehensive evaluation of the lean approach for the operational functions in IKEA, the focus would be on the analysis of an Input-Transformation-Output model which would describe the process, in accordance with Figure 2. Figure 2: Input-Transformation-Output Model Source: (Author’s Creation) Input – The inputs for an operational process may be the transformed resources, while few inputs have to be transformed. The transformed resources of inputs for IKEA would be the parts of the furniture, such as table tops, legs of chairs or tables, etc. The raw materials in the transforming stage would be the resources that would required for assembling the product. Apart from this, the designs and the workforce are also significant resources or inputs. Transformation – The transformation process comprises of implementing the designs of the customers and assembling the products by utilising the workforce and other available resources. Output - The output is the finished product (furniture) which needs to be delivered on time to the ordered location. The price should be in accordance to the price stated on the website, and the look and quality should be similar to the order placed (Pycraft, 2000, p. 10-12). INTEGRATION In order to review the operational performance of IKEA with the market requirements, a questionnaire survey has been done to collect primary data, so as gather customer’s reaction towards IKEA and its offerings and services. The sample size is 12, and the sampling technique utilised here is convenience sampling, so the respondents are mainly friends, family and class mates. The questionnaire survey consisted of mainly 10 questions which included question on dependability, flexibility, quality, and speed of IKEA’s products and services. Based on the research conducted, it was found that 9 respondents strongly agreed to the fact that IKEA really offered affordable furniture, and they also agreed that price is an important deciding factor, 3 agreed to both, but nobody disagreed. 1 strongly agreed and 7 agreed to the fact that IKEA offers quality furniture, while 4 respondents did not have any opinion in this regard. 6 respondents strongly agreed to the fact that IKEA must offer quality products, 5 respondents agreed, but 1 has no opinion about it. In case of flexibility in design at IKEA, 1 strongly agreed, 6 agreed, while 5 of them have no opinion. In this regard, 5 respondents strongly wished to have flexibility in terms of design and variety, 4 agreed to it, 2 were neutral, while 1 disagreed. 7 respondents agreed to the fact that IKEA offers only branded products, 1 strongly agreed to the fact, 1 was neutral, while 3 disagreed. About 7 respondents indicated that quality should not be compromised for price, 3 strongly agreed, and 2 respondents were neutral. Finally, the delivery of the products by IKEA is on time is strongly agreed by 10 respondents, while 2 respondents simply agreed. The polar diagram stated below provides a diagrammatic view of the data collected. Figure 3: Polar Diagram Source: (Author’s Creation) It reveals that the delivery system of IKEA is excellent and maximum number of respondents agreed to this fact, which reveals that one of the operational elements is working smoothly. In terms of price too most of the customers agree that IKEA offers affordable furniture. In terms of flexibility in design the customers are satisfied, yet they would wish to have flexibility to design their own products, so the augmented service of IKEA through website and mobile apps would be an answer to this question. As discussed in the marketing section above, IKEA is already in its growth stage. So the furniture offered by IKEA to its customers are reaping high profits, but in order to save the company from moving towards the decline stage an extension of the services would be appropriate. In case of furniture customers do not prefer to have branded products blinding as the survey reveals, but they wish to have flexibility in terms of design and better quality, which can be offered through the online furniture design application. References Bloomberg Business week, 2005. IKEA. [online] Available at: < http://www.businessweek.com/stories/2005-11-13/ikea> [Accessed 19 July 2012]. Carreira, B., 2005. Lean Manufacturing That Works: Powerful Tools For Dramatically Reducing Waste And Maximizing Profits. New York: AMACOM Div American Mgmt Assn. Churchman, L., et al. 2012. IKEA Marketing Plan – Part I. [online] Available at: < http://learn.senecac.on.ca/~kskhangura/IKEA_Part_1.pdf> [Accessed 19 July 2012]. Hobbs, D. P., 2011. Applied Lean Business Transformation: A Complete Project Management Approach. Florida: J. Ross Publishing. Hoovers, 2012. Top Inter IKEA Systems B.V. Competitors. [online] Available at: [Accessed 19 July 2012]. IKEA, 2011. Annual Report 2011. [online]. Available at: http://www.ikea.com/ms/en_GB/about_ikea/pdf/welcome_inside_FY11_20.01.11.pdf. [Accessed 19 July 2012]. IKEA, 2012. Our vision and business idea. [online] Available at: < http://www.ikea.com/ms/en_GB/about_ikea/our_business_idea/index.html> [Accessed 19 July 2012]. Ohno, T., 1988. Toyota Production System: Beyond large‐scale production. [online] Available at: < http://www.kellogg.northwestern.edu/course/opns430/modules/lean_operations/ohno-tps.pdf> [Accessed 19 July 2012]. Pycraft, M., 2000. Operations Management. Cape Town: Pearson Education South Africa. Taylor, D. H., and Brunt, D., 2001. Manufacturing Operations and Supply Chain Management: The Lean Approach. Connecticut: Cengage Learning EMEA. Read More