To understand more about the industry that Able Group is
entering, industry analysis is conducted by analyzing trends, dynamics,
problems, and opportunities in the industry and market. With this, precaution
and strategies could be done earlier.
Definition of
Industry
An industry is a basic category of business activity.
Our business is under the category of furniture industry, where we sell light
and affordable fold-able table as our trademark. In addition, our business
involve in the furniture industry by distributing the product using e-shopping.
The industry that Able Group chose (furniture
industry) is an almost pure competition in the industry. Pure competition is a
market characterized by a large number of independent sellers of standardized
products, free flow of information, and free entry and exit. Each seller is a
"price taker" rather than a "price maker".
To make an industry analysis, Porter’s Five Force
Analysis is used as it is a good exercise for industry. There are five factors
that affect the industry: power of suppliers, power of customers, ease of
substitution, barrier to entry, and industry rivalry.
Power of Suppliers
The analysis of supplier power typically focuses first
on the relative size and concentration of suppliers relative to industry
participants and second on the degree of differentiation in the inputs
supplied. In this industry, suppliers including Able Group have less power as
they aren’t able to charge customers significantly different prices in line
with differences in the value created for each of those. This is because of the
big amount of the suppliers in the furniture industry.
Power of Customers
Buyer power is one of the two horizontal forces that
influence the appropriation of the value created by an industry. Similar to
power of suppliers, the most important determinants of buyer power are the size
and the concentration of customers. The buyer power is moderate due to the
number of buyers as the product is not popular yet in the community.
Ease of Substitution
The threat that substitute products pose to an
industry's profitability depends on the relative price-to-performance ratios of
the different types of products or services to which customers can turn to satisfy
the same basic need. The threat of substitution is also affected by switching
costs – that is, the costs in areas such as retraining, retooling and
redesigning that are incurred when a customer switches to a different type of
product or service. Since the customers of Able Group could hardly find the
substitution for the product, this indicates that the industry is good for Able
Group to possess the customers.
Barrier to Entry
The power of a company to dictate the price is also
affected by the ability of new company to enter the industry market. Both
potential and existing competitors influence average industry profitability.
The threat of new entrants is usually based on the market entry barriers. There
are some strong barriers to enter this market which are limited supplies of
this product in the market. Hence, new company might have problem of getting
product with lower cost as the suppliers have strong power to influence the
price. As a result, Able Group as the company that is already exists in the market
will have more power to dictate the price compared to new entrants.
Industry Rivalry
The intensity of rivalry, which is the most obvious of
the five forces in an industry, helps determine the extent to which the value
created by an industry will be dissipated through head-to-head competition.
Industry rivalry is important since it is only one of several forces that
determine industry attractiveness. If there are a lot of suppliers that offer
equally attractive products and services, then the power to dictate the price
in the industry will be decrease. On the other hand, the suppliers can often
have tremendous strength when the suppliers can offer the products that no
other supplier can offer. However, Able Group could only offer 3 types of
fold-able table which could also be found in the market. Hence, Able Group has
less power to dictate the price compared to big companies.
Industry segmentation
Segmentation is the process of dividing or portioning
according to the need. The goal of segmentation is to simplify. There are 3
segments in our industry according to the particular domain; our industry can
be segmented by the nature of the product, location and customer.
Product segmentation
Our industry only focuses on retailing fold-able table
that created specially to use on bed which varies from other corporation in the
furniture industry. We have various products, which are Wooden Fold-able Table
on Bed, Luxury Aluminum Fold-able Table on Bed, and Plastic Fold-able Table on
Bed.
Location Segmentation
Our industry segmented to deliver of product at
University of Malaya as our targeted market is students.
Customer Segmentation
Our industry segmented to the customers that include
students, officers and children to optimize our profit. As this customer group
has the most probability to use our product as their daily use.
What are current
trends and important developments?
The current trend of the furniture industry is the
digital retail environment, a website is no longer considered an extra; rather,
it’s a necessity. In addition, many furniture retailers use special online
offers, such as coupons, to attract customers to their web stores and to their
brick-and-mortar locations. Coupons can require registration prior to
activation, providing retailers with an opportunity to gather consumer data,
and they offer a measurement of whether or not an offer is attractive and,
ultimately, successful at driving sales.
Who are the largest
and most important players?
The largest players and most important players in the furniture
industry are IKEA, Lorenzo, Tao Bao, Seamens, Sears and Bob's Discount
Furniture.
What problems and
challenges is the industry experiencing?
The major problem faced by furniture industry is
global warming, which is an important issue today. One way to reduce global
warming is to preserve forests and plants. Many furniture products use wood as
a raw material. Therefore the furniture industry is expected to be an industry
that is expected to be responsible for forests and plants. Using certified wood
and using forest resources and timber in a responsible manner to improve wood
sustainability is an important piece in this. Besides that, the consumers
nowadays will be more and more demands for the product to be more
environmentally friendly.
The furniture industry faces many challenges which
require it to change and be innovative in order to remain competitive.
Companies are looking to designers to deliver innovation, to establish and
build brands, and to improve production systems and sales. Nowadays, a
company’s greatest natural resource is the ingenuity of its employees.
Designers are being used more strategically across businesses to help companies
grow and compete more successfully in global markets. The traditional laws of
markets and competition for the industry are now being challenged by global
trends—environmental issues, growing economies and social sustainability, to
name a few. Greater economic, educational and cultural objectives must be met
if a company plans to improve its competitiveness. Examples of these objectives
include the quality of designs, the national image of the company and the
social value of the products. With today’s rapidly evolving market, staying
ahead of the game can bring a whole new serving of trends to the table.
What national and
international events influence our industry?
In September 2008, the global economy was still under
a dark cloud caused by America’s subprime crisis. The negative conditions
continued due to the debt crisis of the euro-zone countries, substantial
appreciation of oil prices and high unemployment, which caused consumer
condense in the economy to remain shaky. During recession, the furniture demand
has decreased in all large furniture markets (i.e. those selling more than US$
10 billion of furniture at retail prices), with the exception of China and
India. Under these circumstances, there is a great concern for insiders of the
global furniture industry and investor to know where the furniture industry
will go since it is closely related to the housing industry.
What are growth
forecasts?
According to the latest report in February 2012 from
Global Industry Analysts Inc. (GIA), although the global economy is faced with
many unstable factors, the demand for varieties of furniture products is ever
increasing thanks to the changing lifestyles of consumers, the increase of
disposable income, diversified choices of luxury furniture and dramatic growth
of urbanization together with the impact of Western countries. Asia and
emerging markets become the new support for growth. With the steady improvement
of the economy and living standards, Asia will become the long-term growth
point of the global furniture market. Globalization and changed consumer behavior
are contributing to the increasing demand for luxury furniture in emerging
markets, such as China, Russia, India and Brazil.
