IKEA Operational Effectiveness

IKEA Operational Effectiveness



IKEA Operational Effectiveness

Introduction

The process of developing a strategic plan seems onerous to many of us and of little value to others. In our experience we have found that the fault lies not in the concept of strategic planning but rather in the process of developing the plan itself. In order to move beyond the traditional methodology to create organizational effectiveness, strategic planning must consist of a clear process for planning that involves all levels of employees as well as customers. This paper Critically examine, Micheal Porter argues that “operational effectiveness is not strategy” and it also analyzes the IKEA Operational Effectiveness.

Discussion

For almost two decades, managers have been learning to play by a new set of rules. Companies must be flexible to respond rapidly to competitive and market changes. They must benchmark continuously to achieve best practice. They must outsource aggressively to gain efficiencies. And they must nurture a few core competencies in the race to stay ahead of rivals. Positioning - once the heart of strategy - is rejected as too static for today's dynamic markets and changing technologies. According to the new dogma, rivals can quickly copy any market position, and competitive advantage is, at best, temporary.

But those beliefs are dangerous half-truths, and they are leading more and more companies down the path of mutually destructive competition. True, some barriers to competition are falling as regulation eases and markets become global. True, companies have properly invested energy in becoming leaner and more nimble. In many industries, however, what some call hyper competition is a self-inflicted wound, not the inevitable outcome of a changing paradigm of competition (Slack, Chambers and Johnston 2004).

The root of the problem is the failure to distinguish between operational effectiveness and strategy. The quest for productivity, quality, and speed has spawned a remarkable number of management tools and techniques: total quality management, benchmarking, time-based competition, outsourcing, partnering, reengineering, change management. Although the resulting operational improvements have often been dramatic, many companies have been frustrated by their inability to translate those gains into sustainable profitability. And bit by bit, almost imperceptibly, management tools have taken the place of strategy. As managers push to improve on all fronts, they move farther away from viable competitive positions (Slack and Lewis, 2002).

IKEA Case

Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value. Ikea, the global furniture retailer based in Sweden, also has a clear strategic positioning. Ikea targets young furniture buyers who want style at low cost. What turns this marketing concept into a strategic positioning is the tailored set of activities that make it work (Hayes, Robert and Steven, 1984).

Consider the typical furniture store. Showrooms display samples of the merchandise. One area might contain 25 sofas; another will display five dining tables. But those items represent only a fraction of the choices available to customers. Dozens of books displaying fabric swatches or wood samples or alternate styles offer customers ...