Porter Five Forces

Topics: IKEA, Profit, English-language films Pages: 2 (477 words) Published: February 28, 2011
Porter five forces.

Potential new entrants.

The home furnishing market is a big market with many players. IKEA is one of the biggest players in the market especially in Europe. The threats of new entrants is reduced by the tremendous amount of money needed to start up a home furnishing shop. IKEA has a big advantage to other home furnishing shops, they don’t just sell furnish but also kitchen and home accessories.

But IKEA doesn’t reach small town and villages, here is a change for new entrants. These entrants though are forced to start on a small scale.

Buyers bargaining power.

IKEA says, that every customer will experience the service and quality of IKEA. This experience is based on a nice day out with the whole family. IKEA has focused on the needs of the customer everything they decide and do is in the concern of the customers.

But there is little power for the customers, because of the low price segment of furniture. There are not that much alternatives for the same price if they buy at IKEA. Due through this fact IKEa has become stronger than its buyers.

Suppliers bargaining power.

IKEA has thousands of suppliers so that doesn’t make them dependent on one or two suppliers. Next to the suppliers IKEA has its own production factories and designers factories, this also provides a certain independence. So because IKEA has a lot of suppliers next to their own production and design factories, the suppliers have little or no bargaining power. But because of the high competition in this market, suppliers have enough companies to supply.

Threat of substitutes.

Because of the low price of the IKEA products, its not profitable to substitute the products. The profit margin of IKEA is already very low, if a company reduces the profit margin anymore no profit will be made. Its also hard for consumers to find the same service and quality in a product for a price as low as IKEAs prices. IKEA has another advantage, they are know for their...
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