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IKEAPortersFiveForcesAnalysisResearchMethodology

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IKEAPortersFiveForcesAnalysis
PostedonOctober13,2015byJohnDudovskiy
PortersFiveForcesmodelisagenericframeworkthatdeconstructsindustrystructureintofiveunderlyingcompetitive
forcesorvariables[1].Theseforcesarerepresentedinfigurebelow:

PortersFiveForces
Threatofnewentrantstofurnitureandhomeappliancesmanufacturingindustryissignificant.Therearenoor
minimumlegalorregulatorybarrierstoentertheindustryandknowledgebarriersarenotsubstantialaswell.However,the
newmarketentrantswouldnotbeabletobenefitfromtheeconomiesofscaletothesameextentasIKEAatleastduringthe
initialstagesofoperations.Theaccesstodistributionchannelsrepresentanoteworthybarrierfornewmarketentrantsas
well.Itcanbeargued,thatalthoughthethreatofnewentrantsintothefurnitureandhomeappliancesindustryingeneral
issignificant,thethreatofnewentrantstopursuecostleadershipstrategyisinsubstantialduetoimmenseroleofthe
economiesofscale.

Bargainingpowerofbuyersishuge.IKEAcustomersaregenerallypricesensitiveandthissituationincreasestheir
bargainingpower.Thecompetitionisintenseandassuch,thereisalonglistoffurnitureretailerspeoplecanbuyfrom.
Moreover,theabsenceofswitchingcostsforbuyersfuelstheirbargainingpowertoasignificantextent.

Bargainingpowerofsuppliersisinsubstantial.IKEAhas1002suppliersin51countries[2]andthelackof
differentiationbetweenproductsdeliveredbysuppliersincreasesIKEAsbargainingpower.Alongwithpurchasing
productsandsuppliesforlowprices,IKEAexercisesitsgreatbargainingpowertoimposeitsCSRprogramsonits
suppliers.Forexample,thankstothepushbyIKEA,itssuppliersimprovedtheirenergyefficiencyby19%inFY2014
comparedtoFY2010.[3]
IKEAGroupReportcontainsmoredetaileddiscussionofIKEAPortersFiveForces.Moreover,thereportillustratesan
applicationofSWOT,PESTELandValueChainanalyticalframeworksanddiscussesIKEAsmarketingstrategyand
companysapproachtowardsCorporateSocialResponsibility(CSR).

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IKEAPortersFiveForcesAnalysisResearchMethodology

[1]Nemati,H.R.&Barko,C.D.(2004)OrganisationalDataMining:LeveragingEnterpriseDataResourcesforOptimal
Performance,IGI,p.29
[2]YearlySummary2014,IKEAGroup
[3]IKEAGroupSustainabilityReport(2014)
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