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Furniture Industry External Analysis Report

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Updated: Nov 14th, 2018

Furniture industry is one of the most recognized industries that specialize in the manufacture of products for use in public and residential places. Historically, furniture production has been mainly handicraft in nature. Globally, the furniture making companies have mainly concentrated on the small scale furniture production.

It is presently adopted as a large-scale business and countries including the USSR have now adopted the machine production of furniture on a large scale. Evaluation of the furniture production in USSR reveals that the speedy development in this industry has been mainly attributed to the increased quality of its products. A variety of new furniture manufacturing companies have consequently emerged.

There have been significant technical advancements especially in the Soviet East and Siberia including the introduction of standardization measures, establishment of the automation technology and enhanced furniture designs and models. These have generally facilitated the increase in the specialization and general volume of furniture production (Maskell 98).

The wooden furniture industry is increasingly engaged in the production of items aimed at increasing comfort and beauty of the human environment. The furniture industry has proved to be very substantial in the in the present economy with nearly more than eighty five industries in the European Union.

It has emerged one of the largest since 1995 and it has created several employment and job opportunities for more than a million individuals. It also registers as one of the industries that have maintained steady employments for decades since 1987 (Maskell 98).

The general environmental analysis

The overall global market for furniture can be approximated to about AUD 100 billion today. The Australian furniture market registers a growth of approximately 7 percent yearly. This makes it a fairly developed market. There are however a variety of challenges due to the ever increasing world competition in the sector.

The sector appears fragmented and provides smallest amount of products for export. The main export markets include Hong Kong, Singapore, Japan and New Zealand. The Australian imports are estimated to be about AUD 1.3 billion. The most important providers in the Australian market include Italy, Malaysia and China (Tischendorf & Enander 8).

The five forces framework

The attractiveness of the industry can be effectively evaluated using the five forces framework. This begins by identifying the outstanding threats that have significant amount of impact on the furniture industry business in Australia and how it affects the overall business strategy in Australia.

Firstly, there is a threat of intense business segment rivalry due to the large number of equal competitors. There is also a slower development than expected. Some other identified fears include the threat of possible entrants such as import duties which estimates to a value of about five percent for a firm to set up sales offices and to import the furniture products from overseas (Tischendorf & Enander 8).

The slow rate of development creates fear in the new potential investors in the industry preventing them from starting the business. The next important threat relates to the supplier and buyer bargaining powers. The high switching costs due to client demands is a major factor.

Most customers stick to one company for purchase the furniture products because they find it much easier to obtain services such as repairs, warranties among other issues. There are several furniture suppliers that produce the same product quality. This implies that there is intense rivalry between the producers in the industry.

So it becomes essential for each company to identify the best possible business strategies that can help it outperform the competitors which include the Fritz Hansen, SteelCase, Unifor, Herman Miller and Vitra. All the rival companies are multinational corporations (Tischendorf & Enander 8). The analysis reveals that the industry has a high profit potential because the companies maintain very high surplus rates and the high profits are strongly linked to the high market and customer demands.

Works Cited

Maskell, Peter. Competitiveness, localized learning and regional development: Specialization and prosperity in small open economies, London: Routledge, 1998.Print.

Tischendorf, Silke, and Enander, Marion. Wilkhahn Asia Pacific, a strategy and performance evaluation of an international commercial furniture company, Munich: GRIN Verlag, 2003.Print.

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