Five Forces Model Of Porter's Competitive Rivalry: Ikea
6. Porter Five Forces
The five forces model of Porter is an instrument, which makes it possible to analyse the current industry a company has entered or is trying to enter. This analysis is subdivided into different groups, the five forces, through each force it is possible to show the amount of influence they have on the company. (Creativecreation, N/A)
6.1 Competitive Rivalry
Ikea operates in a highly competitive industry, in which the company competes on an international level. The industry can be described as a low priced furniture market, with big name competitors like Walmart and Office Depot, but also smaller local stores (Wille, 2001). The industry for furniture is led by a few big companies, which excludes an industry that has equality
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Furthermore, the opportunity for entry is high because of the low brand strength of many companies in the industry. However, the many opportunities that make it easy to enter the industry may be the reason of the high intensity of competition and ultimately make the industry unattractive to new players. The industry offers the possibility to use economies of scale easily and also requires substantial initial investment when entering. However there is a requirement of high capital and patience. With big companies like IKEA, a new competitor needs to invest a higher amount. To stand any chance a new entrant needs long-standing relationships with their clients, and the selection of a suitable location for stores which would also be a competitive gain. This all requires the before mentioned patience and capital. The industry of IKEA knows little to no regulations, and has fairly low switching costs with retailers on a small scale. Through these opportunities the threat of new entrants may seem high, but because of the competitive intensity the threat is moderate. (Marketline Advantage, …show more content…
Firstly, branding is more or less unimportant to end-consumers, who are more concerned about the quality, price or product design. Secondly, companies like IKEA have succeeded to maintain long relationships with retailers worldwide. Furthermore, bigger companies might possess their own manufacturing factories. IKEA has Swedwood Manufacturer, a personal manufacturing company for their own designs. However, for smaller companies there is a dependence on suppliers, which makes supplier power higher. Most manufacturers are specialized into a certain product type and with them having small to medium sized operations retailers gain more bargaining power. Having the focus more on Ikea, the supplier power will be considered low, with the argument that because of the integration of manufacturing within the company external suppliers get a weaker bargaining power. (Marketline Advantage,
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