Porter’s Five Forces Analysis of IKEA 

IKEA is a furniture-manufacturing Swedish multinational company. Ingvar Kampred started the furniture company in 1949. Today, we’ll discuss Porter’s five forces analysis of IKEA; bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.

Substitutes and Competitors of IKEA

• William Sonoma
• Sears
• American Furniture Warehouses
• Home Depot
• Ashley Furniture Industries
• Pepperfry
• Tesco
• Cb2
• American Woodmark
• Bed Bath Beyond

Unique Features and Selling Points of IKEA

• Stylish and affordable furniture items
• Flat-packaging and self-servicing furniture
• Variety of furniture for different kitchens, bath, drying, outdoor, living, etc
• Unique designs
• Worldwide network of furniture franchises
• Strong brand name

Porter’s five forces analysis of IKEA would analyze the bargaining power of suppliers and buyers; the threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management. Here’s IKEA Porter’s five forces analysis of the furniture manufacturing business as follows;

Porter’s Five Forces Analysis of IKEA

Let’s discuss Porter’s five forces analysis of IKEA as competitive forces in strategic management and they’re as follows;

Bargaining Power of Suppliers in IKEA

The bargaining of suppliers is Moderate in IKEA as a competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in the IKEA Porter’s five forces analysis of furniture manufacturing business are as follows;

I-Raw Material & Supplies

Some of the main items, raw materials, and supplies required for the production and manufacturing of furniture for IKEA are as follows;

• Tools and equipment
• Wood
• Cloth
• Plastic
• Nail, hammer, nut, and bolt
• Accessories

II-Regional Suppliers

The raw supplies and materials for furniture production aren’t rare items. But they are easily available in some regions and completely rare in other regions like dessert. The carriage and transportation would increase the per unit price. In case of limited availability of suppliers, it increases their bargaining and IKEA has to pay whatever they demand.

III-Long Term Contracts & Diversifying

Normally, IKEA builds a very healthy professional relationship with the wood log suppliers to ensure the smooth availability of raw supplies and materials. The furniture brand prefers to partner up with a wide range of suppliers to decrease its reliance on one or few; it gives the brand an over bargaining the terms and conditions of the demand.

Bargaining Power of Buyers in IKEA

The bargaining of Buyers is Higher in the furniture manufacturing business as competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in the Chocolate business 5 forces analysis of IKEA are as follows;

I-Variety of Furniture Options

While procuring furniture for the house, office, or any other space; customers have multiple options and a plethora of furniture designs and styles to choose from. The easy availability of various designs and customized furniture options increases the bargaining power of ordinary customers.

II-Online Marketplace

There are multiple e-commerce platforms and a plethora of furniture sellers in the online marketplace targeting customers worldwide. Customers check out the designs, styles, product quality, and prices of various brands before making the final decision.

III-Low Switching Cost

Customers could easily switch from classic design of furniture to modern furniture designs without incurring a lot of cost. It further increases their bargaining power.

Threat of New Entrants in IKEA

The threat of new entrants is Moderately lower in the furniture manufacturing business as competitive forces in strategic management. Some of the main factors impacting the threat of new entrants in the furniture manufacturing business five forces analysis of IKEA are as follows;

I-Economies of Scale & Investment

In order to make the furniture business profitable, the new entrant would have to invest a significant amount of capital resources in mass-scale production. It means renting a heavy production facility, employees, and many other running costs and expenses. Collectively, they decrease the threat of new entrants.

II-Unique Designs

IKEA invests a significant amount of capital resources in creative furniture designs, flat packaging, and other efficient methods and practices. On the other hand, new brands don’t have the luxury of investing in creativity and innovation for product development.

Threat of Substitutes to IKEA

The threat of substitute products and brands is moderate to higher in IKEA as a competitive forces in strategic management. Some of the main factors impacting the threat of new substitutes in the IKEA five forces analysis of the furniture manufacturing business are as follows;

I-Multiple Alternatives

There are multiple furniture brands operating their business in the global market. They all offer unique designs and styles of furniture for customers with differentiated pricing. Customers could easily find their required design of furniture relevant to their spacing requirement and budget.

III-Brand Loyalty

IKEA has been operating its furniture business in the market for the past over 75 years. The company has a long history and years of serving customers; it gives a unique branding edge to the furniture brand to maintain the trust and confidence of customers.

Competitive Rivalry in IKEA

The competitive rivalry among furniture manufacturing companies is very high as competitive forces in strategic management. Some of the main factors impacting competitive rivalry in the IKEA Porter’s five forces analysis of the furniture manufacturing business are as follows;

I-Tough Competition

The furniture items providing market has become highly competitive over the years with multiple furniture brands offering unique designs and styles. IKEA is facing tough competition from competitors like Home Depot, American Furniture Warehouse, Ashley Furniture Industries, and others. They all have earned a significant market share, and their market presence has made it difficult for the furniture brand to maintain its market share.

II-Differentiation

IKEA and other competitive brands are developing unique furniture designs and styles for various places. Their objective is to differentiate their offering and furniture items from the competitors; they do so in terms of price, designs, styles, quality, material, and finishing. All of these factors would impact the buying decisions of the customers.

Conclusion: IKEA Porter’s Five Forces Analysis Furniture Business |5 Forces Analysis of IKEA

After an in-depth study of Porter’s five forces analysis of IKEA; we have realized that IKEA is the world’s leading retail furniture brand. If you are learning about the IKEA 5 forces analysis of furniture manufacturing business; then you should keep in mind the abovementioned bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.