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1. Please explain IKEA'S activity-system maps? What is the benefits for IKEA?

2. Provide examples of another company and how these companies implemented their strategies using operation and supply chain management.

STRATEGIES ARE IMPLEMENTED USING OPERATIONS AND SUPPLY CHAIN ACTIVITIES-IKEA'S STRATEGY LO 2-3 All the activities that make up a firm's operation relate to one another. To make these activi- ties efficient, the firm must minimize its total cost without compromising customers' needs. Explain how operations To demonstrate how this works, consider how IKEA, the Swedish retailer of home prod- and supply chain strategies ucts, implements its strategy using a set of unique activities. IKEA targets young furniture are implemented. buyers who want style at a low cost. IKEA has chosen to perform activities differently from its rivals. Consider the typical furniture store, where showrooms display samples of the merchan- dise. One area may contain many sofas, another area displays dining tables, and there are many other areas focused on particular types of furniture. Dozens of books displaying fabric swatches or wood samples or alternative styles offer customers thousands of product varieties from which to choose. Salespeople escort customers through the store, answering questions and helping them navigate through the maze of choices. Once a customer decides what he or she wants, the order is relayed to a third-party manufacturer. With a lot of luck, the furniture will be delivered to the customer's home within six to eight weeks. This is a supply chain that maximizes customization and service, but does so at a high cost. In contrast, IKEA serves customers who are happy to trade service for cost. In addition to using sales associates, IKEA uses a self-service model with roomlike displays where fur- niture is shown in familiar settings. Rather than relying on third-party manufacturers, IKEA designs its own low- cost, ready-to-assemble furniture. In the store there is a self-serve warehouse, where customers can pick up prod- ucts themselves and take them home the same day. Much of its low-cost operation comes from having customers service themselves, but IKEA offers extra services, such as home delivery, assembly, kitchen planning, and in- store, by-appointment interior design consultation. Those services align well with the needs of its customers, who are young, not wealthy, and likely to have children. Exhibit 2.3 shows how IKEA's strategy is imple- Used with the permission of Inter IKEA Systems B.V. mented through a set of activities designed to deliver it. Activity-system maps such as the one for IKEA show how a company's strategy is delivered through a set of tailored activities. In companies with Activity-system maps a clear strategy, a number of higher-order strategic themes (in darker green) can be identified Diagrams that show how a company's strategy is and implemented through clusters of tightly linked activities. This type of map can be useful in delivered through a set of understanding how good the fit is between the system of activities and the company's strategy. supporting activities. Competitive advantage comes from the way a firm's activities fit with and reinforce one another. exhibit 2.3 IKEA-Stylish Low-Cost Furniture Self-transport by customers High-traffic store layout Explanatory catalogues, informative displays and labels Suburban locations with ample parking More impulse buying Limited customer service Self-selection by customers Ease of Limited sales staffing transport and Most items in inventory assembly Self-assembly by customers Ample inventory on site "Knock-down" kit packaging Increased likelihood of future purchase Year-round stocking Modular furniture design Low manufacturing cost Wide variety with ease of manufacturing In-house design focused on cost of manufacturing 100% sourcing from long-term suppliers Activity-system maps, such as this one for IKEA, show how a company's strategic position is contained in a set of tailored activities designed to deliver it. In companies with a clear strategic position, a number of higher-order strategic themes (in darker green circles) can be identified and implemented through clusters of tightly linked activities in lighter circles). The themes here all relate to reducing operations and supply chain- related costs, which are important for the firm's success. Based on Harvard Business School Press, from On Competition by Michael E. Porter, Boston, MA, 1998, p. 50