Ikea 2

Case Study on Internationalization

Swedish Furniture Giant IKEA

PORTER’S FIVE FORCES MODEL ANALYSIS FOR IKEA

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Power of the Buyers - There is a little power because of the exiting low-price options. Furniture and other small items have an alternative and consumers have limited alternative choices that make the IKEA unique among its competitors. In addition, the low price strategy is another way of the company to response in buyer’s needs.

Power of Supplier - IKEA has its thousands of suppliers that set standards in delivering the materials. Once in a while, for some products, the IKEA bids for the contracts with multiple companies to craft the same products. Most of the suppliers work in IKEA and compete with other suppliers, and they have a little bargaining power. Because of the low-pricing, IKEA’s profit margin also affects the prices in raw materials than by prices in labor.

Rivalry - The IKEA’s furniture competitors’ offers different styles and functionality. Conrin targets a new low cost in terms of furniture line; Cratel & Barrel offers a furniture in a box which is subject in higher prices; Ethan Allen aimed at a more upscale market; Wal-Mart is equipped in a big box furniture that is categorized under the general store must-have-items, but don’t have much of a style. IKEA is the most successful in delivering the complete package for the customers that reflects on weak rivalries. 

Substitutes - There is no specific product that can be a substitute for the furniture but IKEA at least, have to keep up with the latest trends, to avoid becoming out of style. Another advantage is that, through their cutting and leading technology, IKEA could copy any new style fairly and move each the product into its stores.

New Entrants - Another furniture company is rolling on a low-cost strategy and should compete with the IKEA as the excellent company in delivering the furniture and house wares. IKEA stores do not reach many small towns and this is...