Innovation of Management
Table of contents
Contents Page
- I) Description of the business
Overview —————————————————————————-2
History —————————————————————————-3
Ownership Structure ———————————————– ————-4
Types of products ———————————————————-5
The key competitors —————————————————————5
Current information ————————————————————–6
- II) LATEST PRODUCTS
LATEST PRODUCTS ——————————————————————7
Sketch of new product ————————————————————-9
Innovativeness of Ikea ————————————————————12
Success of Ikea ——————————————————————— 15
III) Experience
experience and idea generation process ————————————-21
report on assignment process—————————————————22
CHALLENGES——————————————————————————–23
REFERENCES———————————————————————————25
Part 1
Description of the business
Overview
IKEA is a privately held Dutch international low cost home furnishings retailer. The retailer has Swedish origins, and maintains a Swedish identity for marketing purposes. The official philosophy of IKEA is “To create a better everyday life for the majority of people”
The company distributes its goods through its retail outlets, which sell contemporary furniture; IKEA follows the unconventional but often-copied principle that most of its furniture and accessories are made with the idea that the purchasers assemble the goods themselves.
The chain has 235 stores in 33 countries; most of them in Europe, the rest in the United States, Canada, Asia and Australia. More than 20 stores opened during 2005. IKEA is one of the few store chains to have locations both in Israel and in other Middle Eastern nations.
History of IKEA
IKEA was founded in Älmhult, Sweden in 1943 by a person named Ingvar Kamprad, then 17. Citing from Wikipedia free encyclopedia, the company name consists of the first letters in his name in addition to the first letters of the names of the property and the village in which he grew up: Ingvar Kamprad Elmtaryd Agunnaryd. “…This acronym is incidentally similar to the Greek word οικία [oikia] (home) and to the Finnish word oikea (correct, right).
Originally, IKEA sold pens, wallets, picture frames, table runners, watches, jewelry and nylon stockings or practically anything Kamprad found a need for that he could fill with a product at a reduced price. Furniture was first added to the IKEA product range in 1947 and, in 1955, IKEA began to design its own furniture. The company motto is: “Affordable Solutions for Better Living”.
At first, Kamprad sold his goods out of his home and by mail order, but eventually a store was opened in the nearby town of Älmhult. It was also the location for the first IKEA “warehouse” store which came to serve as a model for IKEA establishments elsewhere and on March 23, 1963, the first store outside Sweden was opened in Asker, a Norwegian municipality outside Oslo. (The store was located in the same building which houses the Bellevue hotel, about two km from the present site at Billingstad/Slependen, which opened in 1975. The store in Asker is currently undergoing a major expansion and remodeling.)”( Wikipedia, The Free Encyclopedia,2006)
Mission
Ikea’s mission is to offer a wide range of home furnishing items of good design and function, excellent quality and durability, at prices so low that the majority of people can afford to buy them. The company targets the customer who is looking for value and is willing to do a little bit of work serving themselves, transporting the items home and assembling the furniture for a better price. The typical Ikea customer is young low to middle income family.
Ownership of IKEA
Operating strategy
Ikea does not have its own manufacturing facilities. Instead, it is using subcontracted manufacturers all over the world for supplies. All research and development activities are, however, centralized in Sweden. In order to maintain low cost, Ikea shoppers are Pro-sumers – half producers, and half consumers. In other words, they have to assemble the products themselves. To facilitate shopping, Ikea provides catalogs, tape measures, shopping lists and pencils for writing notes and measurements. Car roof racks are available for purchase at cost and Ikea pick-up vans/mini trucks are available for rental Ikea’s success is based on the relatively simple idea of keeping the cost between manufacturers and customers down. According to Ingvar Kamprad, the founder of Ikea; “To design a desk which may cost $1,000 is easy for a furniture designer, but to design a functional and good desk which shall cost $50 can only be done by the very best. Expensive solutions to all kinds of problems are often signs of mediocrity.” .Costs are kept under control starting at the design level of the value-added chain. Ikea also keeps costs down by packing items compactly in flat standardized embalages and stacking as much as possible to reduce storage space during and after distribution in the logistics process.
Top Competitors
Top competitors of IKEA International A/S are the followings;
Key Numbers
Key financials for IKEA International A/S
| Company Type | Private |
| Fiscal Year-End | August |
| 2005 Sales (mil.) | $18,088.6 |
| 1-Year Sales Growth | 17.3% |
| 2005 Employees | 90,000 |
| 1-Year Employee Growth | 7.1% |
Industry Information
Primary and secondary industries for IKEA International A/S
Home Furnishings & Housewares Retail (primary)
Current Information: Latest news
IKEA opened its second store in Japan in Kohoku, Yokohama, on Friday 15th September. IKEA officials said the 40,000-square-meter store focus on providing a solution for typical Japanese housing, family-owned stores and local businesses. IKEA Kohoku filled with smart and affordable ideas to furnish your dream home.
Ikea is particularly concerned about the U.S. since it’s key to Now U.S. managers are paying close attention to the tiniest details. “Americans want more comfortable sofas, higher-quality textiles, bigger glasses, more spacious entertainment units,” says Pernille Spiers-Lopez, head of Ikea North America.
Ikea is also seeing more competition than ever. In the U.S., Target Corp. (TGT ) has recruited top designer Thomas O’Brien to develop a range of low-priced furnishings, which were launched in October. Kmart has been collaborating with Martha Stewart on its own furniture line. An Ikea-like chain called Fly is popular in France. In Japan Nitori Co. has a lock on low-cost furniture.
Perhaps the bigger issue is what happens inside Ikea. “The great challenge of any organization as it becomes larger and more diverse is how to keep the core founding values alive,” says Harvard Business School Professor Christopher A. Bartlett, author of a 1996 case study. Ikea is still run by managers who were trained and groomed by Kamprad himself — and who are personally devoted to the founder. As the direct links with Kamprad disappear, the culture may start to fade.
For now, the founder’s legacy is alive and well. The Klippan couches are selling briskly. New lines of foods, travel gear, and toiletries are due soon.
Part 2
Latest products – Coffee tables
In brief:
- Coffee tables with storage
- Coffee tables that can double as a TV table
Orson and Blake Zen Coffee table
Long and low is the new coffee or TV table; or one that serves as both. The current trend for Coffee table is for long and low designs. There’s an abundance of what would traditionally be viewed as TV tables doubling up as coffee tables. Storage tables with drawers or compartments on the side.
This coffee table is available in both timber and coated finishes. It is long and low to the ground making it perfect for either a coffee table or TV stand. You decide.
Suitable for: Asian inspired rooms.
Price: RM443 (natural), RM475 (coated)
Orson and Blake Zen Coffee table
Target Market
Our target markets are small family, bachelor and working people who can afford to buy this product and wanted a kind of simple life because it is a good choice if you need a small space to work in many different ways. We also target on international market. On 12 September 2006, the population of people around the world is about 6.6 trillion. From this population, we can estimate how many products we should produce to satisfy the demand.
Promotion
We will promote this product by using banners, electronic media (television, radio, and internet), magazines, newspapers, road sign, and showroom, just to name a few. We plan to hang the banners in residential areas, universities and colleges, hypermarket and mega mall. Meanwhile, for road signs are to be placed at strategic places to show the direction to IKEA store. Besides, we provide 5 pillows for free as a promotion for the first hundred customers.
Quality product
Orson and Blake Zen coffee table is characterized by high quality and superior comfort. This table can quickly convert it from television table and coffee table to a dining table. To turn it into a dining table, just drag the foot end forward and fold it down. Now it becomes the television table, coffee table and dining table at the same time. When you want to return it to an original table, first, lift up the first stage. then pull it into the original one. The design is so simple that it will be a pleasure to live with, everyday and night.
step 1
We change the position of the leg from the center to the sides to make it more stable.
Step 2
Add on to pieces of rubber woods, which its attach by the ensile and become 1 meter dining table to make sure the user have a safe distance between the televisions.
Step 3
Add on the support leg to stable the dining table.
Step 4
You can fold in the first stage of the wood and pull it back into the original one.
Step 5
This is the complete set of this product.
Innovation of I K E A
Marketing Strategies
Ikea’s innovative marketing strategies and its efficient and effective management skills make Ikea the world’s leading furniture company .Using flat IKEA packaging that takes up little transport volume .Using railroads for long-distance transportation. Maximizing the efficiency of shipments, reduce the number of transports and the number of empty transports, make maximum use of cargo vehicle space, utilize return transportation, and avoid rush-hour traffic. Choosing transportation companies that meet EC-standards on emissions and noise.
Good Design, Good Function and Good Quality, with Low Prices
Kamprad’s vision has been the driving force behind IKEA’s success. IKEA hires its own designers, who have received numerous awards over the years. Kamprad believes that the company exists not just to improve people’s lives, but to improve the people themselves. The self-service store design and ease of assembly of their furniture are not merely cost controls, but an opportunity for self-sufficiency. This vision is reinforced in their advertising and catalog, as well.
Technological innovations
IKEA has developed several technologically innovative features such as special equipment, the layout of their outlets, and the design of their furniture. And lastly, to reinforce the concept of going to IKEA as a day out (fun shopping), services such as childcare and a restaurant have been added.
Strategic innovations
The roles a customer is expected to play differ from the roles that competitors expect their customers to adopt. Customers use a catalogue at home to scan and select what they want to buy. The customers then have to pick up, transport, and even assemble the furniture themselves. In many ways they operate as important co-producers.
Process revolutions
IKEA has been able to reproduce its formula in many countries. In doing so, the company has been able to profit from economies of scale and to build a strong image.
Competition
IKEA has now become known worldwide for its innovative and stylish designs. Almost all IKEA products are designed to for flat packaging, which reduces shipping costs, minimizes transport damage, increases store inventory capacity, and makes it easier for customers to take the furniture home themselves, rather than needing delivery. But the original reason for it was competitive pressure from IKEA’s competitors to their suppliers, who actually boycotted IKEA, forcing IKEA to do it themselves.
Innovation through designing
When Ikea challenged 28 designers to create a special collection of home furnishings using recyclable or unusual materials, it led to some pretty unique ideas. How about an armchair made from fishing nets? Or a table made from plastic soda bottles, plus a chair woven out of banana leaves?
On Oct. 7 ,2005, Ikea unveiled its fourth PS (short for Post Scriptum) collection of its favorites — some 40 items, ranging from furniture to storage to decorative accessories. It took more than two years for these new offerings to go from the design board to the shop floors, but Ikea sees the investment as crucial for staying on the cutting edge.
PS is about “raising the level of Ikea’s design,” says Global Design Chief Lars Engman. Seeking inspiration from all over the world, designers were given free rein to experiment with unconventional materials, techniques, and production methods. Take a look at some of the results. (Capell, 2000, ¶ 5)
SUCCESS OF IKEA
The following are some of the main factors which contribute to success of Ikea.
Efficient technology
Improving and using technology in the most efficient way is important to be able to offer good design at low prices. A smart solution for IKEA was to implement ReadSoft’s data capture software for incoming goods invoices. It certainly helped IKEA to minimize costs and maximize efficiency in administration. “In their business, value for money is a key success factor. They find the most efficient way to capture the vast flow of invoices within the entire organization and discovered that ReadSoft was the natural choice.
Enhanced security
A constantly growing number of IKEA suppliers mean a growth of incoming invoices. IKEA wanted a centralized invoice control, at only four places in the world. When implementing ReadSoft’s software it was mainly aimed for goods invoices. But it was very important that the software could grow with the organization and the needs. The vision was to use it for any incoming invoice. ReadSoft’s technology was able to add customer value without doing any changes to the core product. That way, a production environment does not need to change unless there is a need for a new functionality.
A customized, smart solution
It’s a very smart solution. It’s essential for them to be able to have full control of the vast flow of incoming invoices. IKEA is constantly growing and they have systems helping them in a trouble-free way. Restructuring the invoice process has been very friction free. ReadSoft’s product for scanning and interpretation is a very smart solution. They have had it customized; ReadSoft has been able to solve all our specific needs. They have had no big problems. It has been a smooth process and we have gotten a lot of help from ReadSoft.
Global Strategy
Ikea’s success is largely attributed to their global strategy. Ikea ignores the traditional concepts of furniture retailing, where products are geared to local tastes. Ikea is considered a global retailer rather than a multinational because they offer the same Swedish products in almost every market. They have had rapid expansion, and the manufacturer holds the risk with their private labels. This is because Ikea manufactures almost all of their products. Furthermore, Ikea uses strong centralized management to integrate its whole divisions, include stores and manufactures over the sea.
However, a company is neither 100 percent “pure” global nor 100 percent multinational and a few minor adjustments have been made in certain markets. For that matter, Ikea has created several innovations to fit it into a single market throughout the world. For example, the Swedish design was slightly altered in the U.S. Larger pieces of furniture had to be constructed because Americans are typically larger than Swedes. In the Japanese market, Ikea had to implement multi-purpose pieces of furniture because of their smaller living spaces. In addition, Japanese consumers have tendency to want more of a combination of color schemes whereas the European market desired the pure traditional colors. Another example of its innovative efforts to fit consumer’s tastes is in the children’s line throughout the world. They designed a changing table that transforms into a bookcase.
Manufacturing and Distribution
Ikea can offer high quality products at low prices are their efficient methods of distribution and their close relationships with manufacturers. They have cut out the need for distribution by offering flat-packaged items that are warehoused in the stores and picked up by the customers on site. The customer is spared shipping, storage and assembly costs resulting in dramatically lower product prices. The retailer aims to have as short a distance as possible between customer and supplier, and is very dedicated to its relationship with suppliers. When it comes to manufacturing Ikea has an advantage because of the extra support it provides its suppliers. They act as equal partners with their manufacturing firms. If a smaller factory is having problems, they have been known to pull a line from a larger one to keep the little guy in business. In addition, Ikea has in-house designers to control a new line from start to finish. The designers aid the manufacturer in finding the most cost-effective methods. In the long run, this saves everyone money.
Promotion/Advertising Techniques
Ikea has modified and changed their advertising techniques. Formerly, Ikea used to focus on setting themselves apart by stating what they are not. For example, they do not participate with “sales” because their prices are always lower than the competition. They claim having fewer salespeople keeps the cost of the furniture down. They used television, magazines, billboards and newspapers, but all markets had the same advertisements. Ikea no longer uses this technique. Ikea now has different commercials for different regions in the world. This is another example of how their global strategy had to be altered.
Ikea’s catalogs have played a primary role in advertising success. The catalogs are convenient and attractive. They emphasize the quality of design and illustrate practical home furnishings. The catalog is issued to a wide range of potential consumers within close geographic proximity of the target area and is usually distributed before the opening of a new store. The catalogs do not offer Ikea’s entire product range. The sales from direct mail is not a big portion of Ikea’s total sales, the catalogs are a key factor to invite customers into the stores.
Ikea advertisements contradict the traditional image of the Swedish culture whereas conservative and seriousness are the norm. Sometimes advertising campaigns are even more outrageous.
Value chain
The value chain approach identifies two major activities- primary and secondary. Primary actives include production, marketing, logistics and after-sale functions. Secondary activities, on the other hand, are identified as support processes to primary activities. These include, firm infrastructure, Human Resource Management. Technology development and procurement. The ultimate purpose of the firm is to add as much customer “value” in each of the primary activities.
Ikea has modified the value chain approach by integrating the customer in the process and introducing a two-way value system between customers, suppliers, and Ikea’s headquarters (refer appendix 1). In this global sourcing strategy, the customer is a supplier of time, labor, information, knowledge and transportation. On the other hand, the suppliers are customers, receiving technical assistance from Ikea’s corporate technical headquarters through various business services. The company wants customers to understand that their role is not to consume value, but rather to create it.
Ikea’s role in the value chain is to mobilize suppliers and customer to help them further adds value to the system. Customers are clearly informed in the catalogs of what the firm’s business systems provide, and what they are expected to add to the final process. In order to furnish the customer with good quality products at a low cost, the firm must be able to find suppliers that can deliver high quality items at low cost per unit. The headquarters provides carefully selected suppliers with technical assistance, leased equipment and the necessary skills needed to produce high quality items. This long-term supplier relationship does not only produce superior products, but also add internal value to the suppliers. In addition, this value-chain modification differentiates Ikea from its competition.
Organizational Structure
The present organizational structure can be defined as highly functional with a global market strategy. In such a structure, Ikea is able to maintain centralized control over functional activities and at the same time take advantage of low cost and enhanced quality from international suppliers. In addition, control over strategic direction is enhanced and functional redundancies are minimized. In order to ensure efficiency in the logistics process, the organization has integrated purchasing and distribution processes under one umbrella function referred to as “Wholesale”.
Strengthening the IKEA culture
Maintaining a strong IKEA culture is one of the most crucial factors behind the continued success of the IKEA concept. Strengthening the culture of an organization requires people to understand and translate values and concepts into the right daily behaviors and actions. To achieve this, Inter IKEA Systems teamed-up with Celemi. In close cooperation, Celemi and IKEA developed a five day leadership program about the “IKEA Way” of doing things. Hands on activities and team discussions enable managers to discover what the IKEA Way means in practice. Through the managers, key elements of the program can then be shared with all co-workers of IKEA.
Conclusion
Ikea is a successful retailer in many countries in the world. With their continued expansion, they are more than likely to become even more prosperous. However, with all of their expansions, there are some possible concerns for the future. One of those concerns is that the saturation point in the number of stores may have been already reached in some countries. Demand for markets like this have to face many changing factors in the environment. These include birth rates, the latest trends, and age breakdown. Ikea will continue to be a leader in the furniture industry and will experience success for many years to come.
Part 3
Experience and idea generation process
A significant activity of this course is a group project, which will span the new product development process. Teams of ten students were formed, and each of us will meet to discuss the flow of our assignment projects development process. We have built a case very early in the semester and convince our teammates and myself that it will lead to an interesting project.
The assignment project process is generally considered to be a combination of the following stages:
- information gathering
- problem definition
- idea generation
- concept evaluation
- analysis
- detail design
- evaluation
We began with the information gathering stage of the process. Now that we are focused on the learning center, we found out as much as we can about our company IKEA, and the challenges that they face.
REPORT ON OUR ASSIGNMENT PROJECT MEETING
GROUP MEMEBERS
Priyashini Muthu (Leader)
Aminath Nazima Adam
Hama Devi
Khairunnisa bt. Shaharuddin
Lee Wey Kit
Nik Noor Asyikin
Nurul Akmar
Suthasrinny Radhakrishnan
| ACTION ITEM | PERSON RESPONSIBLE |
| 1. Set-up working groups. | Priyashinee Muthu |
| 2. Send web links (URLs) to all the group members. | Suthasrinny Radhakrishnan |
| 3. Notes taken from the working groups on 20th June 2006. | Aminath Nazima Adam |
| 4. Send ideas and needs for this assignment. | All the group members. |
| 5. Develop a draft for this assignment. | Nik Noor Asyikin
Nurul Akmar |
| 6. Post the PowerPoint presentations and group meetings. | Hama Devi |
| 8. Send work tasks and time lines by working group. | Lee Wey Kit |
| 9 Submit a proposal to the IKEA Company to let them know that we will be there as education purpose. | Khairunnisa bt. Shaharuddin |
| 10 Develop draft strategic plan and submit the ides. | All the group members. |
| 11. Prepare our assignment well and submit it according to our plan. | All the group members. |
| 12. Pass up or final report of this assignment. | All the group members. |
Challenges
It is very difficult and certainly imprecise to try to summarize our assignment in our group. However, we effectively understood the fundamental of our project and challenges that we faced during finishing of our task. The few challenges that our group faced are:
- Arrangement of meeting because of our tight schedule. Each of our members is very tight with their other subject timetable. In order that, we had a tough time in arranging the suitable time for the entire member to turn up for the Innovation Management meeting.
- Dividing the task according to each individual preference. This is another problem we faced during discussion in our meeting. There are 5 questions to allocate to our members. So we divided each question for 2 members.
- Arrangement that were made to go to IKEA Company. Five of our member went to the Ikea Company. They hard a hard time to go there because of the tight time management, but some how they manage to go to the Company.
- Preparation for presentation. In our last meeting, all the group members gathered and practice on their task in order for us to prepare well on the presentation day.
Strategic Plan Discussion
Mission Statement has been drafted and will continue to be discussed. The Vision Statement, Long-Term Goal, and Supporting Objectives were discussed. There was concern that the goal statement did not mention societal applications, though they are mentioned in the Vision Statement. The tentative solution is to adopt three sets of linked goals that will be effective for different audiences: Long-Term Operational Goal, Long-Term Developmental Goal (the present Long-Term Goal), and Long-Term Scientific Goal.
Challenges Faced in a meeting
Starting a new job in a new environment, mean starting everything fresh. We have to start learning about our new assignment requirements, learned about the social norms and make new friends. At the same time we get to know IKEA very well and founder it. Meanwhile, we come with our own ideas and solution to solve the problems for our assignment.
Reference
- Brege, S.,Johansson, E. ,Pihlgyist, B. (2005).The Innovation System that beats the System. Vinnova Analysis, 2003-01477.Retrieved, September 01,2006, from http://www.vinnova.se/upload/EPiStorePDF/va-05-01.pdf
- Capell, K. (2005). Ikea ; How the Swedish Retailer became a global cult brand. Business week Online. Retrieved 02:30, September 01, 2006, from http://www.businessweek.com/slideshows/?campaign_id=ss_slide
- Guest, G. (2006). Michigan Business. Retrieved September 9, 2006, from http://www.freep.com/apps/pbcs.dll/article?AID=2006606030331
- Howard,T. (2004) Money: Ikea builds on furnishing business.USA Today,Retreived 10 September 2006 from http://www.usatoday.com/money/industries/retail/2004-12-28-IKEA-usat_x.htm
- IKEA. (2006, September 19). In Wikipedia, The Free Encyclopedia. Retrieved, September 01, 2006, from http://en.wikipedia.org/w/index.php?title=IKEA&oldid=76655929
- Readsoft. (n,d). Document automation powering your business efficiency. Retrieved 10, September,2006,from.http://www.readsoft.pt/international/success_stories/invoices/ikea_incl.htm