IKEA and ACME Case Study

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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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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.


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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.


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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


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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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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.


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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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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


http://www.acmewhistles.co.uk/

http://www.ikea.co.uk/

http://www.amazon.co.uk/s/ref=ntt_athr_dp_sr_3?_encoding=UTF8&search-alias=books-uk&field-author=Robert%20Johnston

http://www.amazon.co.uk/s/ref=ntt_athr_dp_sr_2?_encoding=UTF8&search-alias=books-uk&field-author=Dr%20Stuart%20Chambers

http://www.amazon.co.uk/s/ref=ntt_athr_dp_sr_1?_encoding=UTF8&search-alias=books-uk&field-author=Prof%20Nigel%20Slack

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Documents

IKEA and ACME Case Study