The success of any business depends on how effectively its products compete in the market. The competitive advantage is dictated by the company’s resources and strategies employed, such as corporate level strategies and business level strategies. This paper analyses the competitive structure of the industry where Furniture Heaven Company operates, using the Porter's Five Forces analysis. Also included are the company’s corporate level strategies, business level strategies, and a contingency plan in case the unexpected happens.
Furniture Heaven Company manufactures and sells furniture of various types. The furniture industry has, for a long time, been very lucrative due to the ever rising demand of furniture. With the new technology, various designs can now be made to suit the needs of various consumers.
Threat of New Entrants
The furniture industry is heavily regulated by various bodies including the Environmental Protection Agency (EPA), Consumer Product Safety Commission (CPSC), United States Department of Agriculture (USDA), Federal Trade Commission (FTC), and Customs and Border Protection (CBP) (NCSCI 2012). To enter into the furniture industry, a company must comply with the requirements of these bodies. This makes it difficult for new companies to enter into the industry. Besides, the scarcity of resources, especially wood with is the major resource, makes it more difficult for new companies. Companies that have been in the industry have a major advantage of experience and the understanding of how market works. This might prove more difficult for new firms.
Power of suppliers
Wood suppliers have a major say in the furniture industry as wood has no alternative and the companies cannot do without it. However, there are various suppliers of wood. Besides, wood can be imported. This weakens the power of suppliers.
Power of buyers
Buyers are not powerful in the furniture industry. This makes it difficult for the buyers to reduce the prices significantly. Every buyer is mindful of the product’s value, and it’s the value that dictates the price.
Availability of substitutes
As much as furniture exists in various types and value, there is no perfect substitute of furniture. Besides, shifting from wooden furniture to metallic ones can be more costly. In addition, the substitutes cannot offer similar value as the wooden furniture.
Furniture industry has a high degree of competition between firms. To win customers, the design (appearance), price, and how the furniture is marketed, must appeal to the customers. The cost of competition is very high.
This analysis herein reveals that furniture market is fairly difficult to enter; suppliers and buyers are relatively weak; there are few substitutes, if any; and rivalry is very high. Firms are likely to generate fairly high returns in this industry. However, when firms remain innovative, build strong brands, and improve their production system, significant profits can be realized.
Corporate Level Strategies
These are the strategies that address the entire scope of the organization. For Furniture Heaven Company, the three Corporate Level Strategies are directional strategy (defines the orientation in terms of growth and stability), portfolio strategy (defines the industries and markets where the firm operates) and parenting strategy (defines the coordination of activities, transfer of resources, and cultivation of capabilities among business units and product lines).
Business Level Strategies
These define the firm’s actions and commitments in gaining competitive advantage by exploiting the core competencies in the market. For Furniture Heaven, cost leadership strategy and differentiation strategy are most appropriate.
In case things do not work as expected, the company can diversify its product and service offerings (concentric diversification). This would increase the company’s appeal to customers.
Franklin Furniture Institute. Improving Curb Appeal in the Furniture Industry. Web. October 31, 2012. http://www.ffi.msstate.edu/pdf/curbappeal.pdf
National Center for Standards and Certification Information (NCSCI). A Guide to United States Furniture Compliance Requirements, 2012. Web. October 31, 2012. http://gsi.nist.gov/global/docs/furniture_guide.pdf
Thomas, Joe. “Strategy Levels.” Encyclopedia of Business, 2nd ed. Web. October 31, 2012. http://www.referenceforbusiness.com/management/Sc-Str/Strategy-Levels.html