IKEA Porters Five Forces Analysis

Porters Five Forces model is a generic framework that deconstructs industry

structure into five underlying competitive forces or variables (Nemati and Barko,
2004, p.29). These five underlying forces are competitive rivalry among existing
firms, bargaining power of suppliers, bargaining power of customers, the threat of
new entrants into the industry, and the threat of substitute products and services.

IKEA Porters Five Forces Analysis

Rivalry among existing firms is intense in the global market of discount furniture
and the major players in the industry include Euromarket Designs Inc, Galiform plc,
Wal-Mart Stores Inc, Argos and others. However, currently IKEA is the undisputed
market leader in the industry of discounted furniture in the global scale.
The threat of new entrants into the industry is low, and the chances of
emergence of new competition for IKEA is insubstantial as the current market is
saturated and significant amount of financial investments and expertise are
required to become a discounted furniture retailer in a global scale.
The bargaining power of IKEA customers is strong, as the competition is
intense and the customers have a wide choice of alternative options offered by
global furniture retailers, as well as, local furniture producers.
However, the threat of substitute products and services is low as there are no
too many products and services available that can substitute the demand for
furniture, home appliances and a range of other products offered by IKEA.
IKEA suppliers do not possess substantial bargaining power as there are
numerous factories around the globe with the capabilities and resources to form
partnership with IKEA. At the same time, IKEA pursues the strategy of forming
strategic long-term relationships with its suppliers.