Case Scenario 3: Barracuda Inc.
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 presently 2500 home furnishings firms, and only 600 of those have over 15 employees. Average net profit after tax is between 4 and 5%. While the industry is still primarily comprised of 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 (like 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).
-(Refer to Case Scenario 3) Given the characteristics of buyers (customers) in the U.S. home furnishings manufacturing industry (many products to choose from, few home furnishing products have strong brands, and customers can easily switch among high and low-priced furniture), buyers would be considered weak and their effect would be to make the industry more atrractive.

Question

Quizplus · Accepted Answer

Buyers are considered strong because they have many choices, can easily switch between products, and there are few strong brands, which makes the industry less attractive.