ikea and acme case study
TRANSCRIPT
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PRIFYSGOL CYMRU UNIVERSITY OF WALES Operations Management
TABLE OF CONTENT
INTRODUCTION……………………………………………………………………...….2
BACKGROUND …………………………………………………………………………...3
FIFTEEN OPERATIONAL DIFFERENCES…………………………………………....8
POLAR DIAGRAM ANALSIS……………………………………………………………16
FOUR V’s………………………………………………………………………………...…19
BIBILOGRAPHY AND REFERENCES…………………………………………………23
Mr. Abhishek Gokhale, London SAM (ST0006096)
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PRIFYSGOL CYMRU UNIVERSITY OF WALES Operations Management
INTRODUCTION
In this case study I am discussing how the functions of the operation are carried out in IKEA and
ACME. It was interesting to know how the two extremely different company’s one a very large
firm with big brand name I.e. IKEA and another one ACME very old historic British company
caring the values and culture till date. I have also explain how IKEA and ACME carry out their
supply chain what are the major differences operation wise within the company. It was very
interesting to do the case study and it points out how the operation differences in the company
actually is and how both the companies operationally are different from each other. I am also
thankful to Prof Adrian G for his continuous support and guidance which was a great help in this
case study.
Background of IKEA and ACME
IKEA
Background in brief
IKEA is a franchise-based chain of household furnishings' stores, first opened in Sweden. The
owner and franchiser of the IKEA system is based in the Netherlands, and there are stores in 25
countries
The IKEA Group has 154 stores in 25 countries (as of August 2002). Last year 286 million
people visited the IKEA Group’s stores around the world. The IKEA catalogue was printed in
118 million copies in 45 editions (23 languages). The IKEA Group is the largest franchisee of
Inter IKEA Systems B.V. which owns the IKEA Concept. IKEA has since expanded to
worldwide sales of more than $3 billion from 119 outlets in 24 countries (see Table 1). In fact,
the second store that IKEA built was in Oslo, Norway. Today, IKEA operates large warehouse
showrooms in Sweden, Norway, Denmark, Holland, France, Belgium, Germany, Switzerland,
Austria, Canada, the United States, Saudi Arabia, and the United Kingdom. It has smaller stores
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in Kuwait, Australia, Hong Kong, Singapore, the Canary Islands, and Iceland. A store near
Budapest opened in 1990.
Organization Operational Strategy
The company’s Strategy is mainly to increase their retail outlets and expand its operations in as
much countries as they can in order to increase their market share and profits. The strategy of the
company also is to lower its operational cost and expenditure of the company. IKEA also works
on to increase the profit for the shareholder and investors. Their strategy is also to give cost
effective and quality products to the customer's.
Products Strategy
IKEA product range is developed to be extensive enough to have something that appeals to
everyone and to cover all functions in the home. The products are modern not trendy so they are
practical enough for everyday use. The products are also designed to be assembled by the
customer's rather than being sold pre- assembled. Since IKEA is a Swedish company and in
Sweden the culture of the people staying is basically to use light colored furniture. IKEA has also
adopted the same style and has introduced light colored furniture’s in the market.
Pricing Strategy
Even though IKEA household products and furniture are designed in Sweden, they are largely
manufactured in developing countries to keep down costs. Price is the most crucial factor for
IKEA who seek to make a better everyday life available to the many not just to the few. IKEA
believe a low price is linked to the happiness of finding just what you need for your home. In
addition, the joy of being able to own it without having to forsake everything else.
Mr. Abhishek Gokhale, London SAM (ST0006096)
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Marketing and Communications Strategy
Marketing and communication of IKEA plays a vital role in company’s success. The statements
which are used by IKEA for its Vision, business idea and market position provides an idea of
how IKEA marketing communication is worldwide.
Vision statement for IKEA is “To create a better everyday life for the many people."
Our business idea is "To offer 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."
Our market positioning statement is "Your partner in better living. We do our part, you do yours.
Together we save money."
IKEA communicates these statements through its advertisement and encourages the customers to
experience thee IKEA concept; we are building the IKEA brand. The IKEA brand is the sum total
of the emotional and rational values that consumers associate with the IKEA trademark and the
reputation of our company. The brand image is the result of over 50 years work by IKEA co-
workers at all levels all over the world.
Distribution Strategy
IKEA has a decentralized distribution system in which 25 different countries which it operates.
With suppliers in 50 countries, roughly 2/3 of purchasing is from Europe with about 1/3 from
Asia. A small amount of products are produced in North America. Comparatively little
production actually takes place in Sweden, though it still remains the fourth-largest supplier
country (behind China, Poland and Italy). China accounts for about 2.5 times as much supply as
Sweden. For most of its products, the final assembly is performed by the end-user (consumer).
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Functional Structure of the organization
The IKEA corporate structure is divided into two main parts: operations and franchising. Most
of IKEA's operations, including the management of the majority of its stores, the design and
manufacture of its furniture, and purchasing and supply functions are overseen by INGKA
Holding, a private, for-profit Dutch company. Of the IKEA stores in 36 countries, 235 are run by
the INGKA Holding. The remaining 30 stores are run by franchisees outside of the INGKA
Holding
ACME
Background in brief
Acme whistles is known to be the one of the largest whistles manufacturing company is the
world. Whistles where originated or we can say they discovery of the whistle was done by
ACME. Talking about variety ACME has more than 93 authentic and genuine Acme Whistles
including many world’s first. The company was initially started by Joseph Hudson a farm
worker in Derbyshire who moved to the city of Birmingham as it was the industrial revolution
and he was a trained toolmaker. The company started at his back house and the business was
very small until he got his first every large scale of business from The London Metropolitan
Police to replace the police rattle a means of communication used for patrolling.
In the next 135 years Acme manufactured and patented over 93 different whistle designs. The be-
low mentioned are some of the first few companies which ACME started its whistle manufactur-
ing for:
The Metropolitan Police Whistle
The Acme Thundered
The Acme Siren
Silent Dog Whistle
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Scout Whistle
Life Jacket Water safe Whistle
The Tornado
By the end of the year 2000 sales had reached huge numbers. The famous Acme Thundered
whistle alone had sold over 200 million with the many other whistles of the range adding dramat-
ically to its total.
Today the modern whistles of ACME such as Tornado 2000 and the Cyclone are used in top class
sporting events around the globe. Here are just a few of the sporting bodies, safety organisations
and security organisations who use Acme whistles:-
NATO forces
Royal Life Saving
Society
International Moun-
tain Rescue Council
Boy Scouts of
U.S.A
Singapore Police
Canadian Hockey
Hong Kong
Lifeguards
Association
N.F.L
N.C.A.A.
FIFA
UN
FIMBRA
FINA
Whistle development never stops at Acme and the new sports whistle, a new dog whistle and a
new animal sound effect are under development for launch during 2005 – 2006.
The new SportzWiz of ACME is an electronic signaller with many applications. A state of the art
attention grabber.
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Over recent years Acme has increased its export turnover to include 119 countries. Acme pro-
duces six million whistles in 83 varieties - exporting them to 119 countries around the world ac-
counts for 85% of its £9 million annual turnover
Sales may now be in millions to every corner of the globe but some things never change. Joseph
Hudson used to insist on blowing every whistle himself personally before it left the factory.
Today we have a machine that fulfils this task. EVERY ACME WHISTLE IS INDIVIDUALLY
TESTED AND GUARANTEED.
Organizational Strategy
Here I am discussing the organizational strategy in terms of Operations. Organizational strategy
of ACME is mainly focused on satisfying the customer needs and customizing the product
according to their needs. Since Acme is a very small company, the company’s strategy is
innovation and creativity. Acme strategy is since they are a very small company they need to be
creative in order to survive into the market.
Pricing Strategy
ACME products are priced according to the sound the whistle makes, how hard or easy it is to
blow and the frequency of the sound.
Marketing and communications Strategy
ACME doesn’t have a retail out unlike IKEA hence its customer’s are mostly corporate customer
like for example NATO forces, Royal life saving society, International Mountain Rescue
Council, FIFA, Canadian Hockey. Marketing of ACME is very different than that of IKEA
mainly because of its customer base and it doesn’t have any retail outlet second for individual
customers they can buy it from ACME websites. Marketing is mainly targeted on corporate
clients and communication is based accordingly.
Mr. Abhishek Gokhale, London SAM (ST0006096)
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Distribution Strategy
ACME has a centralized distribution system. Its factory is located in Birmingham and it is its
only manufacturing factory, ACME manufactures and distributes its products to its customers
around the world from UK.
Functional structure of the organisation
The functional structure of ACME is very informal and unstructured. It has a very basic
functional structure which has a few changes since it started mass production. As in case of any
organization each department is functionally divided based on the functions which they are doing
in the organization.
FIFTEEN OPERATIONAL STRATEGIC DIFFFERENCES BETWEEN IKEA AND
ACME
1. Manufacturing Difference
In a company manufacturing is defined as a process in which the Inputs are transformed
into output; the process takes place in 3 step process which is Input, transformation and
output. In case of IKEA it is a large company as compare to ACME so the manufacturing
process in on a wider scale and the raw materials for manufacturing is mainly wood as
IKEA is one of largest retail furniture outlet which is transformed into furniture which
then the customer has to assemble at their home it’s more of a self assembling kind of
furniture where as in case of ACME the raw material used is mainly plastic and fiber but
the only change is that the final product in ACME i.e. the output is ready to use and is the
final product in the hands of the customer. IKEA on the other hand gives pieces of
furniture which needs to be assembled by the customer in the home.
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2. Organizational Structure
Structure of the organization in case of IKEA and ACME both is functionally divided.
IKEA employees within the functional divisions of an organization tend to perform a
specialized set of tasks, for instance the engineering department would be staffed only
with software engineers. This leads to operational efficiencies within that group. As a
whole, a functional organization is best suited for IKEA as it is a producer of
standardized goods and services at large volume and at low cost. Where as in case of
ACME coordination and specialization of tasks are centralized in a functional structure,
which makes producing a limited amount of products or services efficient and
predictable. Moreover, efficiencies can further be realized as functional organizations
integrate their activities vertically so that products are sold and distributed quickly and at
low cost. For instance, in ACME start making the components it requires for production
of its products instead of procuring it from an external organization. It is not only
beneficial for organization but also for employee’s faiths. Summarizing this point we can
say that IKEA and ACME organization is functionally divided still IKEA functions are
very much structured and each and every functions role and responsibilities is properly
demarcated unlike ACME it is more unstructured and employees are more flexible and an
employee attends more than one functions or responsibilities in the company.
3. Creativity of the Employee
In this section I am talking about the creativity of the employee's of IKEA and ACME.
IKEA is more kind of autocratic kind of and organization in which mostly the decision
taken is by the management and employee's creativity is not taken into consideration. In
case of ACME it is entirely opposite the employee's are free to share their ideas and put it
forward to the management. ACME encourages employee’s creativity and motivates
them for their creativity. ACME also reward the employee's for their creativity. Since
ACME is a very small company they need to be creative in order to survive in the current
market condition.
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4. Market Visibility
Talking about the market visibility of IKEA and ACME., IKEA as a brand has a bigger
market visibility than that of ACME because of the main reason that IKEA has retail
outlet and their customers are mostly retail who come to the stores of IKEA to shop for
the products. In case of ACME their main customer's are corporate clients so the market
visibility of ACME is very less as compared to IKEA.
5. Mode of Business Operation
Operation plays a major role in any company’s success as operational fictional are
important to make or break down a company. In case of IKEA. Business operation is the
ongoing activity involve in the running of a business for the purpose of producing value
for the stakeholders. In case of IKEA mode of business operation is mainly very large as
compare to ACME as IKEA is acquiring assets for its retail outlet which are really huge
and all over the world so the overall share price of IKEA is more and return to the
shareholder and investor is more, so the mode of operation for IKEA is harvesting of
value from asset owned by a business. As in case of ACME it has only one manufacturing
outlet which is in UK and the mode of business operation for ACME is based on
production and increases the total production and gets new clients for its product.
6. Innovation in the organization
ACME is a very innovative company as compare to IKEA in IKEA mostly all the
furniture’s made by them are customized and in comparison to the current furniture
market trends. In case of ACME the company is very innovative and always tries to
customize its products according to the customer needs. IKEA also depends on customer
feedback but very less and mostly make the furniture’s according to the latest style and
trends.
7. Total Quality Management or TQM of IKEA and ACME
TQM implementation is very crucial for any company and implementation of TQM takes
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a very long time in any given organization. There are five different approaches for TQM,
we now look how IKEA and ACME has applied this approaches in their day to day
operational functions
The transcendent approach – views quality as synonymous with innate
excellence. Using this approach, quality is being defined as the absolute –
the best possible, in terms of the product’s or service’s specification. This
kind of approach is mainly used by IKEA as it is a bigger brand and need
to build its brand image among the customer's. IKEA is using this kind of
approaches in order to gain the maximum market share and get a
competitive advantage over its competitors. ACME is not using this
approach as its customer's are mostly corporate.
The manufacturing-based approach – It is concerned with making
products or providing Services that are free of errors and that conform
precisely to their design specification, is defined as a ‘quality’ product
provided it has been built or delivered precisely to its design specification.
ACME is mainly using this kind of approach as it is a small company and
it gives customized products to its customers.
The user-based approach – is concerned with making sure that the
product or service is fit for its purpose. This definition demonstrates
concern not only for its adherence to specification. But also for the
appropriateness of that specification for the customer. This quality
specification may not be appropriate, however, for the customer whose
main need is a good sleep. In case of IKEA the product is fit for its
purpose but way the products are being sold is not all using this approach
it is sold separately and the customer's need to assemble it at home for its
final use. Where as in case of ACME the final product is fit for its purpose
duly tested and can be used directly by the its clients.
The product-based approach – views quality as a precise (and
measurable) set of the characteristics which will satisfy customers. This
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kind of approach is used by both the companies as the furniture which
IKEA manufactures and the whistles which ACME manufactures both are
designed to satisfy the customer's need properly.
The value-based approach – takes the manufacturing definition a stage
further and defines quality in terms of cost and price. This approach
contends that quality should be perceived in relation to price. A customer
may well be willing to accept something of a lower specification quality, if
the price is low. In case of IKEA the product are design for the lowest cost
in the market with a high quality this is also one of the approaches that
IKEA uses. ACME on the other hand products are not that cost effective
and it doesnt use value based approach in case of their manufacturing of
whistles.
8. Technology
Technology wise IKEA is far more ahead of ACME. IKEA is a global organization with
operation around more than 25 different countries so the Information Technology of
IKEA has to be world class. IKEA has a major focus on its Information Technology
which supports its operational function and intern responsible for IKEA's growth. IKEA
has a dedicated IT department which takes care of all its IT related requirements like
software, opportunities to streamline its process and improve its old processes. ACME
doesnt have a dedicated IT department like IKEA but has an IT has a major role to play in
ACME as well. ACME has just one production unit and is not depended so much on IT or
creating new software’s for its purpose most of the IT functions in ACME are outsourced.
IT also helps IKEA in designing software’s which intern help in easy of shopping for the
customer's. In the case of ACME the old tradition of blowing the whistle from the mouth
has changes and now they have machines that blow the whistle to check whether it
working properly or now. ACME as a company is very less depended on IT.
9. R&D
ACME invests lot of money in its research and development department unlike IKEA.
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Since ACME is a smaller company it needs to spend lot of its money and efforts in
research and development. IKEA products are mainly design looking at latest trend and
which are very cheaper. Selling the good at a cheaper cost is the main motive for IKEA.
R & D has been a constant feature of life at Acme as we constantly strive to improve the
performance of even our most powerful whistles. Standing still is not an option,
customers requirements are constantly changing and we are always happy to look at
special needs. This test rig was specially designed to check operating pressures on
whistles and limits for overflowing. You can just see the Acme 477/58.5 Thundered and
below an industrial whistle being tested.
10. Risk Factor
ACME has a larger risk of closing down unlike IKEA as ACME is a very small company
and their core business and the clients are also very less as compare to IKEA. IKEA on
the other hand has risk management team which calculates the risk involve in any
decision taken by the management for the organization and then the final decision is
taken after evaluating the risk involve. ACME since it is a smaller company risk
department is not there in the organization and most of the decision taken by them are
taking the consensus of the important people involve in the management which is not at
all is a calculated risk, this is very risk for an organization.
11. Product Opportunity
Today's IKEA range consists of 9,500 home furnishing articles, designed to be functional
and good looking but at a low price. Each item is developed by IKEA of Sweden, which
is also responsible for giving each product its unique name, such as BILLY and
KLIPPAN. ACME has a huge range of products it has around 93 different whistles but
the opportunity for the product is very less as in case of IKEA the range of products is
high and the opportunity for each and every product of it is very high. ACME is able to
customize its product according to its customers need but that is not there in the case of
IKEA. IKEA has a retail outlet where all its products are being showcased but in ACME
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an individual customer can purchase its whistles online. IKEA stores are very big with
children play area and lots or direction on how to use the store and how to shop. IKEA
stores are self serviced stores and customer has to do shop and there is self checkout
system where the customer's pay using the machine for the products they have bought.
12. Location
IKEA has operation in more than 25 different countries this means IKEA is a global
company and its location is worldwide the top five countries where IKEA operation is
and the amount of sales it is generating is Germany 16%, USA 11%, France 10%, UK 7%
and Italy 7%. IKEA has 28 distribution centers and 11 customer distribution centers in
16 countries. Using flat packs, transporting goods where possible by rail and sea, and
utilizing fuel-saving techniques allows us to be cost-effective and environmentally
friendly. ACME on the other hand has only one factory outlet and no retail store so
location wise ACME is only located in Birmingham UK.
13. Inventory
Inventory of ACME again is only in Birmingham and it doesnt have any other inventory
so the in ACME it is an centralized inventory system from where ACME distributes all its
products to all its clients across the country. As in case of IKEA the inventory system is
almost opposite I.e. the inventory is decentralized and it has inventory all across the
country. There is an another group of IKEA I.e. Wedgwood group which is part of IKEA
takes care of its inventories The Wedgwood Group is an industrial group of IKEA. The
Wedgwood Group is the IKEA industrial group. Wedgwood produces wood-based
furniture and wooden components in 46 production units in 10 countries. Wedgwood’s
primary task is to ensure production capacity for IKEA. This is accomplished by
establishing and operating sawmills component and furniture production units’
strategically located relative markets and/or raw materials supply. Wedgwood has nearly
50 production units and offices in 12 countries in three continents.
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14. Economies of Scale
Economies of scale, in microeconomics, are the cost advantages that a business obtains
due to expansion. As in case of ACME the expansion of the company is very less so the
economies of scale for the company is very less as in case of IKEA the economies of
scale is very large as the company is on continuous expansion.
15. Time Management
Time management plays a vital role in IKEA growth and time is give the top most
priority in case of IKEA as in case of ACME time is not given so much importance.
Different Contrasting market requirements of IKEA and ACME.
The market requirements of both IKEA and ACME is very different from each other as one
company customer's are retail customer's and has retail outlet where as ACME supplies its
products on large scale to its corporate clients.
Customer differences of IKEA and ACME
The customer's of both IKEA and ACME has huge differences, IKEA has more retail customer's
as compare to ACME which has retail customers. As I have discussed in earlier topics ACME
customers are mostly large organization that mainly uses whistles like for examples FIFA,
London Metropolitan Police etc these order bulk whistles from ACME. Where as in case of
IKEA customer’s comes to IKEA retail shops to buy IKEA's furniture so as you can see there is a
huge difference in both the customer's of IKEA and ACME.
Operational Functional Differences
Operation wise also both the companies differ from each other function wise if you see there are
19 different functions in IKEA consisting of all the various kinds of department like for example
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bathroom, bedroom, cooking, living room etc. the employee's also are functionally divided and
each employee has its own functional role and responsibilities in IKEA which fixed and it doesnt
changes until he gets promoted or management decides to change it for some reason. In case of
ACME even though the department is functionally divided the employee's are flexible and move
between different functions as when there is requirement.
Organizational Cultural and Structural Differences
Culturally if you see both the organization are totally different ACME has and old history and it
carries its values, cultural and traditions from more than 100 years. IKEA is a much modernized
company with very modern culture and the company is just recently started. If we talk about the
structure of the company IKEA has a taller organization structure where as ACME has a flatter
structure but in both the cases role and responsibilities of employee's in IKEA is well defined
where as in case of ACME it is not.
Fictional Responsibilities and processes necessary within IKEA and ACME
Functional responsibilities are basically are based on the function which an employee's is
carrying out in an organization for egg if the department of an employee's is customer service
then the employee has to deal with customer complains
POLAR DIAGRAM ANALYSIS OF IKEA AND ACME and how it can be improved.
Description of a Polar Diagram
It basically describes the operating performance objectives specially relates to satisfying
customer requirements and market demand to improve the organizational organizational
competitiveness in the market. The performance objectives for any operation can be measured
with the following parameters: Quality, speed, Dependability, flexibility and cost.
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Quality
Quality basically prevents errors causing wasted time and effort, therefore saving cost.
IKEA
Talking about the quality for IKEA is to
make its furniture durable, easy to assemble
as the assembly is mostly done by the
customers at home, all parts are made to
specification, Stores should be kept clean
and tidy, and most important the layout of
the store should be in a way that customers
can easily find the parts of the furniture they
are looking out for.
ACME
Quality for ACME should be that the look
of whistle should be attractive and the
performance also should be efficient enough
for the user.
Speed
Meaning of speed is different for different organization. The basic definition is time passed
between a customer asking for a product or service and getting it in a satisfactory manner. Speed
is a major parameter for measuring a company’s performance. It reduces the need to manage
transformed resources as they pass through the operation and therefore reduces inventory,
minimize risk saving cost.
IKEA
In case of IKEA speed is not a major factor
as it IKEA is a company where they want
the customer to relax and have a good time
while roaming around the store to feel it
more like a leisure stroll. So the time taken
for the total transaction of going to the store,
making the purchases and returning is quite
a bit of time on an average customers spent
2 hours in an IKEA store. IKEA also ensure
the immediate availability of goods and also
try to minimize the time to find out the parts
from the shop floor after choosing a
particular product.
ACME
Here also in the case of ACME speed is not
the key factor as they are big organization
so they are depend on more whole sale than
on retail so the focus on the time between
clients requesting a consignment of a
particular specification and receiving it kept
to a minimum.
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Dependability
This factor explains the customer's dependability on the company. It prevents lateness causing
disruption and wasted time and effort gives stability and therefore reduces cost.
IKEA
Not a major factor in case of IKEA but like
the opening hours is very important for
IKEA, constant availability of parking, or
buy car roof rack to take your product home
easily and also keeping reasonable time to
finds parts of the product from the shop
floor or ensure help if customers cannot find
it by themselves.
ACME
ACME dependability depends on timely
delivery of the consignment to the clients
and on-time delivery to individual
customers in case of is online sells.
Flexibility
In an operation’s scenario flexibility means an ability to change the products and services it
brings to the market.
IKEA
IKEA has different flexibility; service
flexibility for IKEA is the introduction of
new designs and products, Mix flexibility
of IKEA that it has a wide range available.
Volume flexibility is the ability to adjust the
number of customers served. Delivery
flexibility the ability to obtain out-of-stock
items (very occasionally)
ACME
Product and service flexibility in case of
ACME is the introduction of new design or
promotions. Mix flexibility that it has wide
range of goods stocked in respect of its
industry. Volume flexibility is the ability to
adjust the volume of production. Delivery
flexibility is the ability to reschedule
manufacturing priorities.
Cost
The cost of producing products and services is obviously influenced by many factors such as
input costs, but two important sets are The 4 V’s: volume, variety, variation, visibility and the
internal performance of the operation in terms of quality, speed, dependability, flexibility.
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Polar Diagram
Polar diagrams are used to indicate the
relative importance of each performance
objective to an operation or process.
They can also be used to indicate the
difference between different products and
services produced by an operation or
process.
Polar diagram IKEA vs. ACME
A brief discussion on the implications that each Operations Characteristic might have on
The Company Performance when a change happens in:
(A) Volume and Variety in IKEA and ACME outputs and (B) The Variation and Visibility in
the customer demands and Outputs, respectively. Although all operations are similar in that they
all transform input resources into output products and services,
Operations differ in four important aspects:
1. The volume of their output
2. The variety of their output
3. The variation in the demand for their output
4. The level of visibility which customers have of the production of the product/service
(i.e. the degree of customer contact)
The Volume Dimension:
HIGH VOLUME: IKEA
As IKEA is operating just like a warehouse, it produces a high volume of furniture and
products that could be self-assembled. The fact that IKEA can also be found in other
Mr. Abhishek Gokhale, London SAM (ST0006096)
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PRIFYSGOL CYMRU UNIVERSITY OF WALES Operations Management
countries allow for economies of scale and hence, IKEA is able to bring costs down with
its high-volume production.
Tasks are repeated frequently. It makes sense to specialize:
One specialist person is assigned to one job. This leads to the systemization of the work
where the standard procedures are set down in a manual, with instruction on how each
part of the job should be carried out.
It gives low unit cost; the fixed costs of the operation are spread over a large number of
products or services.
LOW VOLUME: ACME WHISTLES
The degree of repetition will be low.
The number of staff will be low (possibly only one person).
Individual staff is likely to perform a wider range of tasks. It is less open to
systemization.
Less feasible to invest in specialized equipment
For all of these reasons, the cost per unit product/service is Likely to be higher (even if
the price is comparable)
The Variety Dimension
High-Variety: IKEA
The 'Swedish' design emphasizes bold colors, styles and functionality. The company
promotes products to be modular, allowing different variations of the same basic product
to be customized to produce greater variety. This allows IKEA to provide greater variety
for its products without holding large amounts of stock.
It must be relatively flexible. High requirement on the knowledge and skill of its staff.
The variety on offer by the service allows it to match its services closely to its customers’
needs.
A high unit cost will be incurred
IKEA's furniture is 'value for money' with a wide range of choice. It is designed to be
stored and sold as a 'flat pack' but is capable of easy assembly by the customer.
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PRIFYSGOL CYMRU UNIVERSITY OF WALES Operations Management
IKEA's philosophy is not to 'hassle' customers but rather let them make their shopping
decisions in their own time. Only if a customer wants advice will the staff offer to help
and guide them around the showroom.
Low-Variety: ACME WHISTLES
Little flexibility is required from the operation
All is standardized and regular.
The lack of change and disruption in the day-to-day running for the operation results in
relatively low costs.
The Variation Dimensions
High variation: IKEA
A marked variation in demand levels is that the operation must change its capacity in
some way. For example,
Hire extra staff.
Predict the level of demand it is likely to receive
All these have an effect of increasing the cost of products.
Low variation in demand: ACME WHISTLES
Demand is relatively in level.
The organization can plan its activities well in advance.
Staff can be scheduled; products and services can be provided in a regular and pre-
dictable manner.
This results in a high utilization of resources and thus relatively low costs.
Mr. Abhishek Gokhale, London SAM (ST0006096)
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PRIFYSGOL CYMRU UNIVERSITY OF WALES Operations Management
The Visibility Dimension
Visibility means how much of the operation’s activities are exposed to its customers. Customers
processing operations have more of their activities visible to their customers than most material
processing operations.
High–visibility operation: IKEA
In the case of IKEA, though it adopts the self-service concept in their stores, it actually
maintains a high level of contact with their customers.
To facilitate shopping, IKEA provides catalogues, tape measures, shopping lists and
pencils for writing notes and measurements.
Its customers experience most of its `value-adding` activities.
Customers in this type of operation have a relatively short waiting tolerance.
It requires staff with good customer contact skill.
Customers are actually in the operation they can ask what they like.
It is not easy to achieve high productivity of resources, and tend to relatively high-cost
operations.
Low–visibility operation: ACME WHISTLES
Its customers experience less of its activities, and operations.
Most of the process is more factories like.
It does not requires staff with good customer contact skill
Since its low contact nature, the variation in demand is lower than those with high-
contact nature, and will have lower costs in operations.
It does not have stores resulting in very less visibility; it sells online so only internet
based customers having visibilities.
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PRIFYSGOL CYMRU UNIVERSITY OF WALES Operations Management
BIBILOGRAPHY AND REFERENCES
BOOKS
Prof Nigel Slack , Dec 2004, 4th Edition, Dr Stuart Chambers, Robert Johnston, Operations Management, UK.
WEBSITES
IKEA History, Organization Strategy, Functional structure, Dated 20th April 2010
www.ikea.co.uk
ACME History, organization strategy, Functional structure, Dated 20th April 2010
www.acmewhistles.co.uk
Quality of ACME : http://www.cheathouse.com/essay/case-study-acme-
whistles#ixzz0m5JJruSg
Dated 23rd April 2010.
JOURNALS
Michael Bourne, John Mills, Norman Faull, 2009, Emerald International Journal of Opera-tions & Production Management, Issue 9, pp 944-946, viewed 24 April 2010, http://www.emeraldinsight.com/
M. Rungtusanatham, F. Salvador, C. Forza, T.Y. Choi, 2009, Supply-chain linkages an
operational performance: A resource-based-view perspective, Issue 9, pp 1084-1099
Shannon W. Anderson, L. Scott Baggett, and Sally K. Widener, The Impact of Service Opera-tions Failures on Customer Satisfaction: Evidence on How Failures and Their Source Affect What Matters to Customers MANUFACTURING & SERVICE OPERATIONS MANAGE-MENT 2009 11: 52-69, published online before print January 4, 2008, DOI: 10.1287/msom.1070.0193
Mr. Abhishek Gokhale, London SAM (ST0006096)
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Mr. Abhishek Gokhale, London SAM (ST0006096)