Discussion on Porter’s Five Forces Model and IKEA

First of all, the bargaining power of suppliers in terms of IKEA is quite low due to their low number, weak financial position, and small size which doesn’t all them sufficient or enough clout. In a way, IKEA can easily switch from one supplier to the other. Secondly, buyers’ bargaining power in terms of IKEA is insignificant as they hold sufficient and enough clout which becomes the reason why a lot of attention is paid upon retaining and attracting customers. IKEA concentrates a lot on promotion and marketing as well. Thirdly, substitute products’ threat for IKEA is considerably low. There are some elements that mitigate this risk or threat such as its brand image, strong relationship between brand and customers, reliable customer service, affordable strategy of pricing, and most importantly, presence of countless products at a single hub. Fourthly, the new entrants’ threat in terms of IKEA ranges from low to medium or moderate. Although new competitors can enter the market but they will not have a major impact on IKEA’s business. Fifth, the competitive rivalry’s level in the industry of home furnishing is almost moderately high. Sure this level is quite low in many other industries but there are many competitors in this industry for IKEA (Dobbs, 2014).

Competitive risks of IKEA

As analyzed by the Porter’s five forces model as well, the entrance of new competitors in the same industry poses a threat to IKEA. The goal of IKEA in terms of achieving more value is threatened by the entrance of many competitors. With the introduction of new products that offer a strong competition to IKEA can be quite threatening for the company. However, IKEA can tackle it by reducing costs and increasing quality of products.

References of Porter’s Five Forces Model and IKEA

Dobbs, M. E. (2014). Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review , 24 (1), 32-45.