Question

Read and answer the following questions below

Barracuda Inc. is a lamp-fixture manufacturer that is considering an entry strategy into the U.S. home-furnishings manufacturing industry. The existing landscape consists of many players but none with a controlling share. There are currently 2,500 home furnishings firms, and only 600 of those have more than 15 employees. Average net profit after tax is between 4 and 5 percent. While the industry still primarily comprises single-business, family-run firms that manufacture furniture domestically, imports are increasing at a fairly rapid rate. Some of the European imports are leaders in contemporary design. Relatively large established firms are also diversifying into the home- furnishings industry via acquisition. Supplier firms to the home-furnishings industry are in relatively concentrated industries (such as lumber, steel, and textiles). Retailers, the intermediate customer of the home-furnishings industry, have been traditionally very fragmented. Customers have many products to choose from, at many different price points, and few home-furnishing products have strong brands. Also, customers can switch easily among high- and low-priced furniture and other discretionary expenditures (spanning big-screen TVs to the choice of postponing any furniture purchase entirely).

1. Your challenge is to use the five-forces framework to summarize the opportunities and threats facing Barracuda as it considers entry into the home-furnishings manufacturing industry. Which threats are greatest to current incumbents?

2. how intense is competitive rivalry likely to be among incumbents of the home-furnishings manufacturing industry?

Answer 1

Answer:- From the point of view of five force models, we can conclude that the most prominent threats can be seen as the bargaining power of the customers, constantly increasing the presence of important and absence of economic power related to the suppliers. Along with the above-stated traits and the highly uneven industry nature can result in the near perfect completion in which almost no player in the market will be having any kind of competitive advantage. There can be some specific opportunities in some special niches which will largely be based on the inherent strengths of the new players entering the market. If we talk about large markets, the opportunities can be seen for the major organizations for having an industry consolidation and to have stronger and power and thus they will be having greater power on customers and suppliers.

Answer:-

As we can see that the industry can be seen as having a structure which is very close o the perfect completion it will indicate the existence of high rivalry among the players. There will be major exit barriers for the larger organizations especially looking at the moderate growth rate, greater fixed costs, absence of any kind of differentiation and overall lower profitability in the market. Thus the level of competition in the industry can be further increased by the entry of new players in the industry.