IKEA Porter’s Five Forces Analysis

3/17/2016

IKEA Por ter ’s ’s Fi ve For ces Anal ysi s - Resear ch M ethodol ogy

IKEA Porter’s Five Forces Analysis Posted on October 13, 2015 by 2015 by John Dudovskiy  Porter’s Five Porter’s  Five Forces model is “a generic framework that deconstructs decon structs industry structure into five underlying competitive forces or or va riable riables” s”[1] [1].. These forces are represented in figure belo figure  below: w:

Porter’s Five Forces Threat of new entrants entrants to  to furniture and home appliances manufacturing industry is significant. There are no or minimum legal or regulatory regulatory barriers barriers to enter the indus try and knowledge barrier barrierss are not substant ial as well. However, the new market entrants would not be able to benefit benefit from from the economies of scale to the sa me extent as IKEA at least during the initial s tages of operations. The access to d istribution channels represent represent a notewor noteworthy thy barrier for for new market entrants as  well. It can be argued, that although the threat of new entrants into the furniture and home appliances ind ustry in general is significant, the threat of new entrants to pursue cost leadership strategy is insubstantial due to immense role of the economies of scale.

Bargaining power of buyers is buyers  is huge. IKEA customers are generally price sensitive and this situation increases their  bargaining power. The competition competition is int ense and as such, there is a long list of furniture retailers retailers people can buy from. Moreover Mor eover,, th e absence of switching costs for buyers buyers fuels th eir bargaining power to a significant extent.

Bargaining power of suppliers is suppliers  is insubstantial. IKEA has 1002 suppliers in 51 countries[2] countries [2] and  and the lack of  differentiation between differentiation between products d elivere elivered d by s uppliers increases IKEA’s bargaining power. Along with p urchasing products and supplies for low prices, IKEA exercises its great bargaining power to impose its CSR programs on its suppliers. For example, thanks to the push by IKEA, its suppliers improved their energy efficiency by 19% in FY2014 compared to FY2010. FY2010.[3] [3]… …  IKEA Group Report  Report  contains  contains more detailed discussion of IKEA Porter’s Porter’s Five Forces. Moreover, Moreover, the report illustrates a n application of SWOT, PESTEL and Value-Chain analytical frameworks and discusses IKEA’s marketing strategy and  company’s ap proach towards Corporate Social Responsibility (CSR).

http://r esear ch- m ethodol ogy.net/i kea- por ter s- fi ve- for ces- anal ysi s/

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3/17/2016

IKEA Porter ’s Five Forces Analysis - Research Methodology

[1] Nemati, H.R. & Barko, C.D. (2004) Organisational Data Mining: Leveraging Enterprise Data Resources for Optimal Performance, IGI, p.29 [2] Yearly Summary 2014, IKEA Group [3] IKEA Group Sustainability Report (2014)

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