BEM 2007 Operations Management 2014

Case Study IKEA Operations in Practice

With over 210 giant stores operating in more than 30 countries, and sales of
around 15 million Euros, IKEA sells a wide range of well-designed, functional
home furnishing products at prices so low that as many people as possible will be
able to afford them. This IKEA concept guides the way IKEA products are
designed, manufactured, transported sold and assembled, or, put another way, it
guides all aspects of its operations management.
The name IKEA comes from the initials of the founder: Ingvar Kamprad, I and K,
plus the letters of Elmtaryd and Agunnaryd, which are the names of the farm and
village where he grew up. In the 1950s Kampard, who was successfully selling
furniture through a catalogue operation, built a showroom in Stockholm. Not in
the centre of the city where land was expensive, but on the outskirts of town.
Rather than buying expensive display stands, he simply set out the furniture as it
would be in a domestic setting. Instead of moving the furniture from the
warehouse to the showroom area, customers pick up the furniture from the
warehouse themselves. The furniture is usually designed to be stored and sold as
a flat pack which the customer assembles at home. The stores are all designed
around the self-service concept that finding the store, parking, moving through
the store itself, and ordering and picking the goods should be simple, smooth and
problem-free. At the entrance to each store are large notice boards which
proclaim IKEAs philosophy and provide advice to shoppers who have not used
the store before. Catalogues are available at this point showing product details
and illustrations. For young children, there is a supervised play area, a small
cinema, a parent and baby room and toilets, so parents can leave their children in
a supervised play area for a time. Customers may borrow push chairs to keep
their children with them.
Parts of the showroom are set out in room settings, while other parts show
similar products together, so that customers can make comparisons. IKEA likes to
allow customers to make up their minds in their own time. If advice is needed,
information points have staff who can help. Every piece of furniture carries a
ticket with a code number which indicates the location in the warehouse from

BEM 2007 Operations Management 2014

where it can be collected (For larger items customers go to the information desk
for assistance.) After the showroom, customers pass into an area where smaller
items are displayed and can be picked directly by customers. Customers then pass
through the self-service warehouse where they can pick up the items they viewed
in the showroom. Finally the customers pay at the checkouts, where a ramped
conveyer belt moves purchases up to the check out staff. The exit area has service
points and often a Swedish shop with Swedish foodstuffs. Because of the way
IKEA organises its store operations, customers often spend two hours in the store
far longer than in rival furniture retailers. A large loading area allows customers
to bring their cars from the car park and load their purchases. Customers may also
rent or buy a roof rack.
Extract from Slack et al (2010) Chapter 1

IKEA has its entire range of 9500 products custom-designed and then
manufactured by one of its 1380 suppliers in 54 countries. All these products are
sold under the IKEA brand name and share a typical Scandinavian design simple
elegance achieved by clear lines and natural materials. This is probably one of the
most interesting aspects of IKEAs international expansion, which started in 1973,
when the country entered the Swiss market. IKEA has remained quintessentially
Swedish. Most products are of Swedish design, all have Swedish names, the store
restaurants serve Swedish food and the company culture strongly reflects such
Swedish values as equality, honesty, openness, modesty, reliability and simplicity.
IKEAs store formula also embodies many of these qualities. While the aircrafthanger-sized stores benefit from scale efficiencies, IKEA has been able to create a
quality atmosphere through human-scale dimensions in the store lay-out. Visiting
an IKEA store is intended to be more like a day out for the entire family than a
shopping trip.
In its expansion to other markets, IKEA has not been culturally insensitive, but
rather guided by the philosophy to keep it simple, as this means lower cost. In

BEM 2007 Operations Management 2014

practice this philosophy has led to a standardise-unless approach to each
national market first try it the global way and only when this doesnt work, look
for an intelligent local solution. It is usually not difficult to find an expensive local
alternative, but with a global mindset and some creativity, a simple international
standard can often be found. The result has been an assortment that is 95%
globally standardised, store formats that are largely identical and the supply chain
that is globally leveraged.

Extract from De Wit B and Meyer R, (2014), Strategy process, content and
context, South Western Cengage Learning: Andover