Herman Miller Case Study

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Herman Miller

1. Do a 5 Forces analysis of the office furniture industry. In Porter’s Five Forces Model, the forces are listed as Risk of Entry, Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitutes, and Rivalry among Established Firms. For Herman Miller, the rivalry between the established firms is high, and the most important force in their industry. Design is the key feature in the furniture industry, so the company that can come out with new and favored designs will win out in market share and profits. The company that is able to continually win the design battle will have the opportunity to establish brand loyalty and clout, creating a buffer for future downfalls in the economy, entry of new firms, and threat of substitutes. The furniture industry is in its mature stages, and in the current U.S. market, it is relatively low-tech and has little room for extravagant profits and returns. This allows for high barriers to entry because any prospective entrants would be coming into a well-established industry that is barely growing, and could soon to be going into decline thanks to telecommuting and the falling of the traditional office. The bargaining power of the suppliers can be low- to- moderate depending on the future of the industry. Where the firms stand now, suppliers have low bargaining power because there are many viable sources for the raw materials needed in Herman Miller’s furniture. If the industry grows into high-tech fabrics, additional technologies integration, or other sweeping advancements, then supplier bargaining power could drastically rise due to lack of suppliers capable of offering such unique products. Conversely, the bargaining power of buyers is high due to the large- volume nature of most office furnishing purchases. When the buyer of an industry is capable of huge, frequent purchases, their negotiating power is high because without those revenues the industry would be reduced immensely. And lastly, the threat of substitutes was relatively low. When furnishing an office, a company has little choices in what to furnish with. There are many options on designs, colors, materials, etc., but there are few to no substitutes for a desk and a chair. 2. What is Herman Miller’s Opportunity and Threat analysis? Herman Miller has many viable opportunities and few threats to have to worry about. One opportunity in which the company created for itself is an empowered workforce. By encouraging the voicing of ideas, and opinions, Herman Miller has opened itself up to an infinite pool of creative designs not only in its products, but in its corporate environment. Employees are the people working each day within the company, so they are the most likely to find ways to improve the company from the inside and make Herman Miller stronger and more profitable. Another opportunity is found in the global market. Many countries are rapidly growing and expanding such as China and Russia, and those countries are developing enterprises and have a viable need for office furnishings. By tapping into the global market of growing countries, Herman Miller stands to gain long-term partners and establish a reputable name for itself before the country is as company-driven as ours. A final opportunity presents itself through the recent recession as competing firms fail. When a firm fails in a mature industry, those still around are able to scoop up and split the market share left by them. Herman Miller is known for innovations, so by keeping on the cutting edge they are on the frontline to collect abandoned market shares. But, a downturned economy presents a threat to them if not maneuvered carefully. Herman Miller has proved itself highly capable of handling a poor economy as they did during the Great Depression, the September 2001 attacks, and the recent recession in 2009. And the final threat comes in the form of the diminishing traditional office building. More and more workers are...
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