Marketing and operations management at ikea

IKEA Vs. Tesco Operations_management

OPERATIONS MANAGEMENT 7

Outline

Introduction
Management is understood both in terms of its purpose, as those activities that take place to ensure that the primary company’s objectives, as outlined by its strategic plan, are accomplished. It is also understood as an assembly of senior employees answerable to performing this operation. Management can be better understood as all that is requisite to positioning a company in a way that will see into its long-term survival in a competitive industry. Again, an operations management model is a company’s way of expression on how it produces unique value.

The idea of operations management, just like strategic management, builds on this definition of strategic planning, recognizing that although planning is the prelude of operations management, it is insufficient if not followed by the deployment and implementation of the plan and the evaluation of the plan in action. Strategic management is a systems approach to identifying and making the necessary changes and measuring the organization’s performance as it moves toward its vision’. A company will realize its goals and vision if it applies operations management strategies with practice, forbearance, allegiance, hard work, and administrative learning. With each modification of the operations management plan, high-ranking employees will become better and more capable of deploying the plan, implementing updates, and evaluating organizational performance.

Market orientation is the basis of marketing. It sets on satisfying the market through an apprehension and reception to local needs. Those needs include final and intermediary customers, contenders and macro-environment. According to Narver and Slater (1990), market orientation leads to master operation. Because of the retail industry’s direct reach with the market and clients, it is logical to consider market orientation as a concept to evaluate the successes of IKEA and Tesco. This paper compares operations management of the two companies; it takes a closer look into marketing and corporate strategies. The paper further examines the appropriateness of the applied strategies and frameworks for each company in relation to its target customers and best practice. In so doing, this paper evaluates the mix of managing operations concepts and frameworks, which IKEA and Tesco apply to ensure their survival and market leadership.

Ingvar Kamprad Elmtaryd Agunnaryd (IKEA)
IKEA was founded in Sweden in 1943. It is a privately held, and deals globally in home products retailing handling pack furniture, accessories, and bathroom and kitchen products. The company distributes its products by its retail outlets. By this May (2010), IKEA had 313 shops in 37 countries. Most of these shops are in Europe, North America, Asia and Australia. The IKEA Group its own owns 276 shops in 25 nations. The rest 37 shops in16 territories are possessed and run by franchisees outside the IKEA Group. IKEA comprises of more than one management teams and its affordable prices and marketing strategy makes is the world's largest furniture retailer.

IKEA Marketing Strategy
IKEA has a long custom in marketing communication concentrating chiefly on printed media, which has demonstrated its values and achievement to the company for many years. The company currently uses other media to a snowballing degree such as Television, radio, and internet centered communication. The company’s marketing strategy is organized into a single marketing mix comprising of four diverse areas of concentration:

i. The product range is the company’s terminus a quo. All other performed marketing communications are used to strengthen and amplify the IKEA product range.

ii. The store is the company’s retailer principal medium for highlighting and putting across IKEA’s range of products, its low monetary value and its concept.

iii. The IKEA catalogue is the chief marketing contrivance, which singly takes about 70% of the company’s yearly marketing budget. The IKEA catalogue is developed in 38 various editions for 28 countries and in 17 languages. In 2009 alone, 110 million catalogues were put into circulation. Lightly, this number was threefold higher than that of the Bible! 13 million copies were circulated in the UK alone. The IKEA catalogue is distributed in stores and by mail.

iv. The company advertising, public relations and other kinds of communication are accompaniments to the IKEA product range, stores and showrooms and catalogue. They are used to spear-point the penetration of the company’s target market.

The UK Marketing Department

The company’s advertising in the UK is aimed at raising cognizance of the IKEA brand and driving traffic to its product stores. IKEA reports that some people love their ‘unique style of retail advertising, some hate it, but everyone who sees [its] advertising has a strong opinion and subsequently it provokes conversation and debate.’ Despite holding some of the most controversial television ad blitz in the UK, the company has elicited awareness of its brand, let people cognize that it is different to other competing home endowing companies, and most crucially, enhanced sales. The company’s advertising management comprises of all facets of advertising and brand communication ranging from television advertising and sponsorship to radio and magazine promotions. For IKEA, advertising is managed to back many various areas of the business, together with brand cognizance, catalogue drops, store themes, and store openings.

Brand Research
To hold on to the forefront of a liquid market, IKEA needs as much research on its customers, the home furnishing industry and its competitors, as possible. The company undertakes many diverse fields of market research. It then in its management considers both internal and external reports, accounts and statistics when designing any communication or marketing operation.

Room Magazine
Room Magazine is the company’s European magazine that is accessed in all its stores in Europe. Additionally, it is mailed out to 150,000 IKEA Home Card bearers in the UK. Room Magazine is filled with content on IKEA clients’ lifestyle features and how they live, company product news, and home tips and ideas. Just like the catalogue, Room Magazine is centrally produced, but each every company’s participating country has control over what number of pages it requires to communicate its country-specific messages to its customers.

Food Services

IKEA has restaurants which are significant in giving its customers eating and relaxing places while they are shopping. The company has three various concepts providing food in its stores in the UK. The major restaurant serves dishes grounded on its Swedish heritage, with traditional meals including Gravadlax and meatballs in combination with Lingonberry flavor. The company also has bistro areas which serve localized snacks including; pizza in Italy, hot dogs in the UK, and baguettes in France. Observably, the company’s Swedish food markets are located in all its stores. This operations strategy encourages customers to fetch to their homes a taste of Sweden. The rich range of Swedish traditional dishes helps the company’s customers to realize the company’s Swedish origins, which also lives up to its low price promise to its customers.

Internet
The company manages a global website, IKEA.com. This is a place where anybody interested in its products can have a synopsis of IKEA as a company. From IKEA.com, its visitors can also get access all its local websites across the world. One of the chief tasks of IKEA.com is to exhibit product selective information and availableness. The company’s operation management ensures that this information is regularly updated. To further market this company, its background and store information has to be known. IKEA.com is there to serve this need as well. On the website, every store has its own space displaying its contact details and mapping, events, discounted offers and additional local information.

Com-in
Com-in works in an active manner to safeguard the company’s competitive advantage; Com-in achieves that through the development of the company’s retail concept, and the store as a media. All Com-in experts come from either an interior design setting or visual merchandising, and are accountable for product presentation or the company’s product offers, by use of all current varieties of presentation media and proficiencies. The Com-in operation department provides the stores with inspiration and vitality. The operation works hand in hand with the store sales and logistics departments to ascertain that the company’s customers see something new and exciting all the time, and desire to return again and again.

Public Relations
The chief concern of public relations is to defend the company’s corporate identity. Its other role is to communicate the company’s vision, brand values, business idea and concept, and trademarks. Public Relations inform journalists of news and information within the company by use of press releases, information on the company’s websites, catalogues and product launches. By so doing, the company is able to communicate with a vast audience. The company, on IKEA.com acknowledges that all its ‘policies live up to this standard from the products [it sells to its] internal travel and recruitment procedures’. All facets of the company’s operations management in marketing work hand in hand to furnish coherent messages to its customers as well as strengthening its brand identity. The company again states that by centering on communicating crucial messages of its concept, its vision, and business idea, it can work together to create its vision of ‘a better everyday life for the many people.’

IKEA Corporate Strategy
Corporate social responsibility (CSR) is a wider concept and is not fixed to supply chains, but to the organizations’ complete treatment of mankind as well as the surroundings. While CSR is a well-laid down concept, there is no universal agreement on the meaning of CSR in practice. An exact definition of CSR is subtle because numerous notions and positions about the type of the relationship among business and society waver with the applicable matters of the day. Moreover, it has been argued that the problems with arriving at a meaning of CSR partly ought to do with the difficult of deciding operationally the managerial significance of such a definition. This is therefore the major problem looking at companies' differences in profitability, size, societal impacts, products and resources.

Through IWAY, IKEA is ready to deal with matters related with corporate social responsibility and ethics. The IKEA code of conduct defines the prerequisites that the company places on its suppliers of their products and services. It bases that suppliers are responsible for conveying its message to their workers and sub-providers. IKEA stands that The IKEA its suppliers must at all times abide by the most exacting demands, whether they are instituted by IKEA or are relevant pertinent land laws.

In reference to corporate social responsibility and ethics, IKEA’s IWAY outlines a few comprehensive requirements in relation to its operation management:

i. The company does not engage children in labor, nor does it allow its suppliers and business partners to,

ii. IWAY does not put the company in a position to apply forced or bonded labor; it does not allow the company’s affiliates either,

iii. The company encourages and follows a transparent and authentic records of working system for duration of work and remuneration,

iv. IKEA has an insurance policy addressing work linked medical treatment such as due to accidents. In the same spirit, its suppliers must make available a salubrious and innocuous working setting,

v. To ensure that health and safety issues are addressed continuously, IKEA requires its suppliers to offer health and safety education for their workers,

vi. IKEA demands that its suppliers must warrant their constructions are safe, have sensible privacy, are not noisy and have amenities for individual, hygiene in cases where suppliers provide their workers with accommodation,

vii. IKEA does not expect its suppliers to forbid their workers from exercising negotiation activities,

viii. IKEA does not anticipate its suppliers to accept corporal punishment, intimidations or other kinds of intellectual or bodily coercion.

As IKEA takes its responsibility in the social arena, it ensures that the environment is safer, in collaboration with its suppliers. For instance, its suppliers put efforts to cut down on energy consumption, and avoid air, soil and water pollution. They as well must be certain that their workers who handle chemicals and other risky waste are competent and are regularly trained.

However, as this paper will indicate later, IKEA has had a rough side of things in the process of managing its operations. In the mid-1980s, IKEA found itself in an environmental trouble that had substantial consequences on its furniture line. According to tests carried on some of the company’s particle-board furniture products demonstrated that formaldehyde emissions outmatched the standards defined by the Danish environmental law. This was a blow to for the fact that IKEA extensively used particle-board in making its furniture products. That meant that in case the particle-board from one of IKEA’s products breached the environmental standards and was considered hazardous, then all products made of particle-board could be so considered. The company faced negative publicity, which called for quick and smart response. IKEA was not pulled back by its customers’ complaints, but rather embarked on devising better and convenient means to replace diesel in order to preserve the environment and minimize the utilization of wood in its furniture products. This is an example of a good operations management in cases of controversy.

2. Tesco plc.
This is a British international grocery and general merchandising retail chain. It is the UK's largest supermarket chain, and it has its headquarters in the Tesco House in Cheshunt. Tesco has grown organically over time, and also through acquisitions. Currently, it operates over 800 stores. Tesco in the beginning specialized in food and drink. It has since diversified into many other industries including electronics, renting DVDs and CDs, telecoms, financial services, clothing, home, health, car and dental insurance, and retailing. It also deals in music downloads, software and Internet services.

Tesco Marketing Strategy
Tesco’s customers include local communities, families, single people, governments, environmentalists, general workers, and managers. Like other large retailers such as IKEA, Tesco gets goods from its suppliers into regional distribution centers. It then prepares and delivers them to stores. Tesco’s marketing strategy is clear; its growth is being tracked from four platforms:

i. Its main UK grocery business,

ii. Non-food,

iii. International extension and retailing services such as financial services,

iv. The Internet business and telecommunication packages.

Tesco makes use of its firm unwavering core to keep the business flourishing as it ventures into novel riskier areas of development. The company is winning in the non-food market by offering its products below cost price. The company uses this marketing strategy with the aim of creating its brand a cost leadership. Unlike IKEA which sells its products at a cheap price but with a profit, Tesco sell below the cost price to gain support and make its brand to be widely recognized. This to the company is to successfully differentiate its line of clothing so that it can charge a premium price, later. However, for the reason that a marketing strategy will involves analyzing markets and products, and that a strategy is enforced through marketing maneuvers which call for detailed decisions about elements such as price and distribution; Tesco has to resolve on its model of market entry. It has to look into its own stores, Internet marketing or joint venture with an established national retailer.

Unlike IKEA’s four marketing areas discussed before in this paper, Tesco carries out its marketing strategy with the following objectives:

i. Aims at a targeted 10% profitability operating margin,

ii. Aims at a 20% Swedish Market share target,

iii. Desires a high customer advocacy; that is, the number of clients who recommend the company’s branded clothing which may lead repeat business,

iv. Wants to be a respected company; it aims at having a large number of its community stakeholders respecting it,

v. Targets its employee motivation; that is, the number of its workers who feel motivated to deliver the company’s goals.

In contrast to IKEA’s objectives, Tesco’s management seeks to directly satisfy its workers. Also, the company sets quantifiable targets. It for example states that it aims at getting 10% profitability operating margin and a 20% Swedish market share. Such specific targets can help any company to know when it is headed to achieving its objectives and when its operations are declining. A company can then adjust its operations management to do what is necessary before its financial duration comes to a close.

Tesco’s operations management emphasizes on customer needs through its values and philosophies:

i. ‘No one tries harder for customers’, and

ii. ‘Treat people how we like to be treated.’

Copies of those values are circulated through the company’s internal marketing strategy. The distribution is also done through the company’s newspaper to its employees. But, notably, this pair of values originates from the UK. Similar to how IKEA prepares dishes according to the localities in which it has set up its stores, Tesco needs to realize of a demand for country-specific exercises. This can support the company’s local corporate unity.

When it comes to innovation, like IKEA, the company is equally developmental; Tesco is reputed for advanced information solutions. For instance, its concepts of ‘Clubcard’ loyalty scheme as well as its web sites are a demonstration of the company’s innovation. This is the UK’s largest retailing company; it consequently has a significant number of customers on which it can perform analysis. The company is in a good position to carry out a precise customer survey because most of its card holders are regular customers who visit Tesco stores weekly.

Tesco’s marketing strategy is also related to target choice. The company decided to venture into markets in Eastern Europe and South East Asia where it found local competition to be soft and manageable. This marketing strategy was in one way evading completion from the markets dominated by other expanding heavyweights such as Wal-Mart. The company has also made use of opportunistic events, through different entry modes so as to develop brand knowledge. This is also in contrast to IKEA which has mostly banked on Television, Newspaper and catalogue distribution to its subscribed customers; Tesco target all!

Tesco Corporate strategy
Liptrot (2005) is worried on how Tesco is capable of appealing to all market segments. This company has achieved this through a strategy of using its own-brand products, whether it is home, food, telecom beverage, clothing, or financial services, to stick its corporate brand to the market. The company markets itself by the phrase "The Tesco Way" to depict its core intentions, values, principles, and objectives. Another chief part of the company’s successful corporate strategy has been its innovatory utilization of technology. For instance, Cio.co.uk (2010) reports that Tesco is among the first companies to introduce self-service till where cameras are used reduce queues.

Tesco is also set to protect its corporate brand. In Thailand, Tesco has of late been applying a policy of establishing defamation proceedings to protect its corporate image. For example, in November 2007 the company an academic and a previous minister Thailand for civil libel and criminal defamation. Tesco is maintained that the academic and the former minster compensate £1.6 million and £16.4 million respectively in addition to having two years in prison (Leigh and MacKinnon 2008).

Another way that Tesco is enhancing its corporate management is through social corporate responsibility. The company is committed to corporate social responsibility by contributing 1.87% of its pre-tax profits in 2006 to charities in local community organizations. This is a good corporate move to make the population feel closer and be associated with such a gigantic company. However, Tesco’s strategy has not gone without criticism; Intelligent Giving (2007) has condemned the company for directing all its staff contributions to Tesco's Charity of the Year.

In addition, Tesco has ever been on the negative side when managing its operations campaigns. One recent example is its use of “Change for Good” in its 2009 advertising. “Change for Good” is a UNICEF trade for charity, which the agency uses for charity purposes but not trademarked for commercial or retail usage. UNICEF reacted by saying, ‘it is the first time in UNICEF’s history that a commercial entity has purposely set out to capitalize on one of our campaigns and subsequently damage an income stream which several of our programs for children are dependent on”. The agency further called on the public having the children’s welfare at heart, to think carefully on whom they ‘support when making consumer choices’ (O'Halloran 2009).

Conclusion
This paper has established that it requires smart moves of a company in order to gain and keep customers and hence grow its profits and expansion. It requires innovative thinking and provision of working solutions to any targeted market. From analyzing IKEA’s marketing strategies, it is clear that for a company to succeed in its operations, it has got to formulate a marketing mix in order to appeal to a wider audience. For instance, the paper demonstrated that instead of using a single medium to communicate to existing and prospect customers, a company needs to use Television, Internet, print, radio and word of mouth. IKEA has been recognized to following this strategy.

Tesco was not left behind. It was seen as a company that has applied management operations of ‘out of the box’ nature. It takes advantage of events to exhibit its presence while ‘inserting’ its marketing communication to the audience. The company was also seen demonstrating extreme operations strategies such as selling some of its products below the cost price. Finally, its attempt to use UNICEF’s trademarked slogan, which put it on the dark side of business, is an example of how companies manage their operations to keep leadership in the market.

Operations management is a very crucial business arm. If well made use of, it can help the company to gigantically and globally grow, however if wrongly handled, it can taint the corporate image and put the company in jeopardy.

References
Cio.co.uk 2010, ‘Technology helps Tesco beat crunch’, viewed 16 July, 2010, .

Food Manufacture 2007, ‘Tesco to Focus on reducing its Suppliers' Input Costs"’, viewed 16 July, 2010, .

Intelligent Giving 2007, ‘Intelligent Giving criticises Tesco's staff giving policies’, viewed 16 July, 2010, .

Johnson, Scholes, and Whittington 2005, ‘Exploring Corporate Strategy Text and Cases’, 7th edn., FT Prentice Hall.

Liptrot 2005, ‘Tesco: Supermarket Superpower’, BBC viewed 16 July, 2010, .

MacKinnon and Leigh 2008, ‘Tesco Sues Critic Of Its Expansion In Thailand For £16.4m Damages’, The Guardian, viewed 16 July, 2010, .

Narver and Slater 1990, ‘The Effect of a Market Orientation on Business Profitability’, Journal of Marketing.

O'Halloran 2009, ‘Unicef Accuses Tesco of Misusing Charity Slogan’, The Irish Times, viewed 16 July, 2010, .