This is a marketing project.

1. 1.1 INDUSTRY PROFILE
The entry of international brands and changing consumer preference has
led to the emergence of furniture retailing in India. The large furniture
brands are characterised by huge expanses of dreamy designs, a
multitude of hues and steep prices. The size of the Indian furniture retail
market is increasing.
In fact, CSIL Milano has classified India as one of the 14 large furniture
markets in the world. This is in view of the fact that India has a middle
class population of over 400million, with a purchasing power on the
upswing. However, the furniture industry in India is not without its
worries.
The furniture sector makes a marginal contribution of 0.5% to India’s
GDP. Moreover, even if the production is increasing every year, it is
mainly in the un-organised sector. However, all is not bleak for the
industry. The office furniture segment boasts of better companies from
the point of view of better size as well as technological innovations. This
low rank may be explained by relatively high import duties and low
technological competency. Also, local tastes play a major part in demand.
The Indian Furniture market is
 worth about US$ 8 billion.
 Constitutes 0.5% of the total GDP.
 Employs 300,000 people.
 Highly unorganised – only about 15% in organized sector
Organised sector growing at 30% CAGR
 The Organised Sector includes domestic players as well as imports
 There are about 5000 firms in the domestic organised sector, and
nearly 10500 importers of furniture
 Products are classified based on material used, and consumer
segment
Wooden Home furniture is the biggest segment
 Key states for wood furniture: Gujarat, UP, Punjab, Kerala, Andhra,
West Bengal

2.  Household furniture designs are region-specific
 Increasing trend of imported furniture in affluent households
Imports worth about US$ 150 million, growing at 60% CAGR. Imports
are a rapidly growing segment, catering to urban, affluent households.
Key countries imported from:
 Italy
 Germany
 Spain
 Malaysia
1.2 COMPANY PROFILE
Reyami Interiors Pvt. Ltd., is a member of the AL Reyami group an
ISO 9001: 2000 company in the field of office furnishings head
quartered in Dubai. In just a little over a decade Al Reyami has grown
to a Rs. 2000 cr company with 27 group companies specialized in
providing total office solutions through offices in UAE, China & India.
Inspired by this success Reyami has forayed into the Indian market
offering a range of State – of the art premium Modular Furniture and
office Equipments from world’s prominent manufactures, futuristic
Interiors, Executive seating, flooring and turnkey solutions.
Reyami India, right from its inception has always been committed
towards understanding the market needs and offering solutions to
clients to make their work environment more inspiring, by providing
the finest office products and has risen to greater heights due to its
customer – focused business approach coupled with extensive
marketing activities and the combined efforts of its dedicated and
dynamic staff.
We believe our strength has been in anticipating and understanding
the market needs and producing optimum office furniture for various
tasks without compromising on comfort and quality.
The Reyami team in India is equipped to provide the expertise to
design and install quality office furnishings, keeping in mind the
growing needs of today’s offices in India.
Today Our presence has grown with or offices & Showrooms in
Bangalore, Chennai, Hyderabad, Madurai, Coimbatore , Kochi and

3. Mumbai. A joint venture manufacturing facility with Rockworth of
Thailand a premium Modular manufacturer, at Hosur near Bangalore,
and shortly we are opening in New Delhi, a testimony of our
commitment to the Indian Market
Reyami Interiors Pvt Ltd is a member of Dubai based Rs 1700 Cr AI
Reyami Group. With five Branches and upcoming factories at Chennai
& Coimbatore, Reyami is poised towards ambitious growth plans in
India. Core focus will be in end to end turnkey Interior solutions for
both Commercial Office and Hospitality Segments with complete
backward integration. In order to partner its ambitious growth plans
Reyami requires aggressive, hardworking & dedicated go getters in
the following functions at Hyderabad, Chennai, Bangalore, Kochi &
Mumbai.
1.2.1 HISTORY
The vision of Al Reyami Interior is to become no 1 company in Office
furniture by 2015 in India by the support of Parent company Reyami
Interiors, Dubai. For this the company is planning to make the
Company completely backward integrated solution by 2013. It helps
to achieve INR 25 cr by 3rd year of operation. This will help to support
Reyami Interiors, Dubai to achieve its targeted INR 100cr within three
years.
The upcoming projects of Al Reyami group are
TSI industries pvt ltd – Hotel furniture and sofa manufacturing-
Bangalore
Top worth India pvt. Ltd. – office furniture and chair manufacturing –
Bangalore
KPS Constructions – civil construction – Bangalore
KPS aluminium & glass pvt. Ltd. - Glass & aluminium manufacturing –
Coimbatore
KPS joinery – hotel furniture – Cochin
Reyami millennium pvt. Ltd. – furniture manufacturing – Pune
Reyami electronics pvt. Ltd. - Electrical &fire fight equipment
manufacturing – Bangalore.

4. This business plan is prepared to find the feasibility of the new
projects. It helps to identify the opportunity, threats, market that are
available to the company. By this plants the company will be able to
cover 70% of total office requirement already with own Branches.
1.2.2 BUSINESS HISTORY
Al Reyami Interiors is the flagship company of the Al Reyami Group
which consists of 27 companies having more than 7000 employees.
Today it has emerged as a multinational Company in its own right,
with offices in India and China, employing over 800 people.
The Company has a 60,000 sq ft state-of-the-art showroom in Dubai,
a modern 25,000 sq ft showroom in Abu Dhabi and a dynamic new
10,000 sq ft showroom in Sharjah.
Primarily to provide a wide range of Office Furniture, Interior
solutions and Equipment, the Company has followed an aggressive
path through sheer dedication and commitment to Quality at all times.
So much so that the Company`s allegiance to continuous
improvement has resulted in a ISO 9001:2000 certification, a proud
achievement for the Group.
Strength has been in anticipating and understanding the market
needs and offering solutions to clients to make their work environment
more inspiring. Today, it is acknowledged as a trusted provider of the
widest range of quality products and services in the Gulf region,
ensuring customer satisfaction at each customer interaction points.
The Company stands tall after a decade of its existence and foresees
greater opportunities in the years to come.
1.2.3 PRODUCT AND SERVICES
Al Reyami Advertising
Creating a clear, strong brand identity and
spotlighting the distinguishing features of your products and services
is how to stand out from the competition and make a lasting
impression with customers. Al Reyami Advertising is a corporate
communications company that provides a full suite of creative
solutions from print to online marketing media meeting the above
prerequisite. Our advertising, public relations and marketing services
deliver measurable results in both ATL and BTL, from concept to
completion, with one eye on our client's objectives and the other on

5. their budget, even under challenging tight deadlines. If your
communications must have an impact and deliver the right message
to the right audience, we've got the talent and the drive to get it
done.
Al Reyami Auto Leasing Automobile Service
With the phenomenal increase in the number of vehicles in
the region, the amazing progress of Al Reyami Auto Leasing has been
jump-started by the extraordinary spurt in the vehicle leasing
business in the UAE. In the auto-leasing sector, Al Reyami's high
standards of service, full-fledged fleet of vehicles, trained
professionals and routine maintenance of vehicles have been key to
the progress of the company. Our monthly or yearly leasing plan
provides you a hassle free solution to keep you on the move.
Al Reyami Fabrics Interiors Service
The fabrics used in interior furnishing have a tale of their
own. Al Reyami Fabrics offers one of the widest range in fabrics,
leather, suede and semi-leather for office and home furnishing. The Al
Reyami Group spares no effort in research, development, innovation
and styling to produce a scientifically thorough system that keeps re-inventing
the safety, durability and style of Corporate UAE.
Al Reyami Furniture Factory Interiors Services
The modern corporate workplace exudes a vibrant ambience. Al
Reyami Furniture Factory adds a touch of class to office interiors.
Creating a modern office requires good aesthetic sense along with an
understanding of ergonomics. Experienced professionals coordinate
with architects and civil engineers to ensure an avant-garde finish.
Customization is yet another specialization catered to Al Reyami
Furniture Factory where the focus is on creating work areas that
optimize use of space and minimize waste.
Al Reyami Interiors Service
Every voyage starts with an inspired vision of tomorrow. Since the
inception in 1994, with core specialization in office interiors, Al Reyami
Interiors has remained the springboard of success and growth for the
group. With a team of more than 2000 dedicated professionals and a
host of full fledged in-house facilities that include glass & aluminium
factory, joinery & shop-fitouts, furniture & furnishings,

6. electromechanical & electrical, signs & graphics etc. give us the
enviable position as one of the leading interior solution providers. The
ISO 9001:2008 certification by TUV vouches for the reputation in
exceptional customer satisfaction, excellent quality and reliability of
work which adds to the nimble execution. Our showrooms in Dubai,
Abu Dhabi and Sharjah with exclusive brands provide a wide range of
choice.
Al Reyami Printing & Publishing
Communications play a crucial role in the evolution of civilizations.
Print medium plays a catalytic role in the process. Al Reyami's state-of-
the-art printing and publishing company provides quality to the
communications explosion experienced by Corporate UAE. With the
modern multi-colour Heidelberg Speedmaster printing machine and
the latest in post-print finishing department, Al Reyami is committed
to maintaining its superiority in print technology.
Al Reyami Signs & Advertising
The innovative, conceptualizing and installation strength of Al Reyami
Signs is amplified by the massive logistical support of Al Reyami. Their
assortment of outdoor signage and lighting canvases for corporations,
multi-star luxury hotels, shopping malls, large departmental stores,
roof top signage, etc. is in tune with the breathtaking transformation
of the UAE landscape. They also offer specialized services for niche
clients looking for 3D signage, POP materials, outdoor signage’s, etc.
Construction Of Al Reyami Pool
The construction background of Al Reyami makes it easier for Al
Reyami Pools to implement highly client-specific requirements in
lifestyle and luxury for any industry. The G-unite technology is the
basis for every swimming pool project designed, installed and
maintained by Al Reyami Pools. Managed by a dedicated workforce of
trained personnel, they also specialize in water slides, infinity pools,
bubble pools and massage pools.
Construction of Al Reyami Builder
Every building begins with the planning of the project, it's design
and execution one brick at a time. Established as a civil contracting
company, we construct a diversified range of projects from
commercial & residential buildings to villas, hospitals and shopping

7. complexes. In addition to strict adherence to both safety and quality
standards, our team is well-skilled in project management techniques,
ensuring that resources are used efficiently and contracts are fulfilled
in a timely manner. We add to our repertoire of expertise the added
strength of experience in electro mechanics, technical services,
interior turn-key solutions and much more.
Construction of Al Reyami Building Material
Al Reyami Building Materials specializes in building materials that
does more than merely functional consolidation of buildings. They
maintain high standards of innovative solutions that showcase their
concern to provide high quality service. The installation of a
computerized Shade Demonstration section from 'Jotun Paints' is
evidence of their commitment to reaching out and serving their
customers better. Their expertise, which extends from partition
materials, a board and tiles, ceramic tiles, to electrical and plumbing
materials sums up their overall ability to provide end-to-end building
solutions.
Construction of Al Reyami Insulation Material
The structural safety of any civil structure depends on the quality of
the waterproofing carried out in the substructure and superstructure.
Al Reyami has ventured into this critical field with a quality
consolidated trademark and a definite sense of purpose. Within a short
period of time, the company has attained an approved applicator
status from almost all the major waterproofing and construction
chemical manufacturing companies in the UAE. The core business area
of this company is waterproofing of basements, substructures, wet
areas, swimming pools, roof and pile treatments. The product range
includes modified torch-on membranes, EPDM's, PVC & HDPE
membranes. The division has also diversified into other areas such as
epoxy and polyurethane floor coatings for car park decks, industrial
floorings, Polyurethane
Construction of Richmond General Maintenance
The importance of maintaining ambitious and critical construction
projects is the function of this specialized company. Their expertise in
maintaining commercial structures, factories, warehouses or even
private properties is matched by their reputation. The Richmond team
is a myriad mix of experts comprising interior designers, structural

8. consultants and quantity surveyors. They offer an incredible variety of
maintenance packages.
Construction of Rockworth Contracting
The inherent strength of Rockworth Contracting is in
identifying and adapting to newer trends and challenges in the
market, bringing them at par with upgrades as they emerge. The
experience of executing some of the prestigious projects in the UAE
also lends them credibility in partnering massive construction projects.
Construction of Styrene Insulation Industry
The skilled team and infrastructure of Styrene was established with
a massive 35,000 sq. ft. factory to find a thermal insulation concept
that would aid in energy saving and boost efficiency. Their first brand
Insolate is a revolutionary product that showcased the energy saving
properties of Expanded Polystyrene which they later adapted to
insulate a wide variety of construction materials. In addition to
insulating roof, walls, floor, pipes, cold stores, vehicles, etc. the finely
finished pieces can also be used for decorative purposes.
Hi-Tec Garage Automobile Service
Personalised service is what sets apart HITEC Garage which
specializes in everything that ensures the smooth ride of Corporate
UAE. Separate sections for electrical, mechanical, body workshop,
painting and polishing offer a classic experience for every car that rolls
out of HITEC. The CRM program ensures high quality customized
service along with a unique pick-up and delivery service anywhere in
the UAE.
Al Reyami Shipping & Logistics
Whether it is a fragile package or just inventory files, Al Reyami
Shipping carries its cargo with care and ensures peace of mind to its
customers. In an industry where the logistics of location is of utmost
importance, our success is based on our easy accessibility. We ensure
timely delivery of goods. Our specialization is exclusivity and we make
each delivery an experience. Some of our customized services are
ocean freight, air freight, land transport, removals and packaging, and
customs clearance.

9. Construction of Al Reyami Glass & Aluminium
The splendour of a civilization is often reflected in the grandeur of its
super structures.
Al Reyami Group's benchmark of quality is assured by Al Reyami's top
grade raw material suppliers and machinery from global leaders.
Powered by two fully-computerized units, Glass & Aluminium
fabrication is one of our key specialities. Raw materials from Dorma,
Lisus, Mab, Safe, Geze, Henderson, MBC, DLC etc. are finely handled
through fully-computerized processes of CNC machineries from
Tamglass, Lisec, Bavelloni, Metral SA, Altech, etc. to ensure that every
project is a symphony in quality.
1.3 Introduction To The Topic And Justification For The Choosing The
Topic
A market potential forecast is a core component of a market analysis. It
projects the future numbers, characteristics, and trends in your target
market. A standard analysis shows the projected number of potential
customers divided into segments.
The facts are sobering: the majority of small businesses fail within five
years of starting up. While there are many reasons that businesses fail,
including some that have nothing to do with an owner's skills, it’s also
possible that many of those same businesses collapsed simply because
they couldn’t get enough customers to buy their product or service. In
other words, the owners founded their business on a strategy of “build it
and they will come” where, unfortunately, the customers never came. In
fact, a recent study undertaken by the Blackbox seed accelerator found
that many tech start-ups failed because they focused more on their
product than on their potential customers.
1. Ask the Right Questions
As a first step to determining the potential market for your new product
or service, you want to focus on asking a couple of questions of yourself
first, says Victor Kwegyir, a business consultant, business motivational

10. speaker, and author of The Business You Can Start: Spotting the Greatest
Opportunities in the Economic Downturn. Some of the questions you may
want to begin with, Kwegyir says, include:
 Is this product or service I have in mind going to satisfy a market
need?
 Who are my potential customers, and where can they be found?
 What competition is out there? Is it direct or indirect, local, national,
or international?
 How distinct is my product from what is being offered by the
competition?
 Can the product stand the test of changing trends or take
advantage of it before it dies out?
 Does the law of the land allow for such a business to be
established?
 At what prices are consumers prepared to buy my product, and can
I make any profit at any stage?
2. Research the Idea
While it may seem obvious, using Google and other search engines
can be an effective way to gauge the potential market for your idea
and whether or not you’ll be facing competition. “Believe it or not,
you can do a simple keyword search using either Google keywords
or any reputable marketing software such as Market Samurai or
Magic Bullet to see if your idea already has a demand,” says Jesue
Walker, a serial entrepreneur and president of The Ultimate
Emergence Company. Once you have the keyword results in front
of you, click on them and pay attention to the right column of the
search, which lists the paid advertising. “Click on each of these and
see what they are offering,” says Walker. “This is your competition,
if any at all. Going back to the search page or keyword results and
[seeing] how many times a day and week this keyword is searched

11. for...is the beginning of finding out if you can gain at least one
percent to two percent of this market.”
3. Collect Feedback
Getting direct feedback via surveys or interviews can be another
very effective way to gauge interest in your product or service. The
easiest way to test a new business idea is by crowd sourcing your
idea first,” says Ian Aronovich, CEO and president of
GovernmentAuctions.org, a site that compiles and provides
information about government auctions of seized and surplus
merchandise from all over the country. “Get the perspective of a
large group that you already know is capable of giving you truthful
and helpful advice. Crowdsourcing is quick, easy, and you will get
an array of positive and negative criticism.”
You can also consider creating a video, says David Ciccarelli, CEO
of Voices.com, where you hire a professional to narrate the features
and benefits of your product or service. “Then upload it to YouTube
and see the response in the comments,” he says.
If your big idea is a new product, you might also consider pitching it
to a product development company like Edison Nation, which, for a
modest application fee, evaluates your idea based on the potential
market for it.
What you don’t want to do, however, is base your decision on the
opinions of your friends and family, says Lolo Siderman, the founder
of Gypsywing Media, a virtual ad agency based in Los Angeles. It’s a
mistake to ask people you already know, she says, because they
cannot be objective. “Of course they’re going to tell you it’s a good
idea,” she says.
4. Sell Something, Anything
While spending time in front of your computer conducting research
and gathering information can be helpful in ascertaining the
potential of your product or service, the truth is that the most
valuable feedback you can get is whether someone, regardless of
what they tell you, will actually hand over money for it. “It is
amazing how many people will spend years and hundreds of
thousands of dollars on concepts that people ‘really like’ without
ever asking them if they would buy it,” says Matt Ferguson,
president and CEO of Progressive Health Innovations. “Even better,
also ask the people selling in the space if they could sell it for a
certain price.”

12. The best way to get this kind of feedback, then, is to actually create
a prototype of your product or service, even in its most basic form
that you can shop around to retailers, distribution partners, or even
attendees at an industry trade show.
“I have found there is no sure way to gauge the success of a service
type concept except for biting the bullet and start doing it.”
There is actually a name for this kind of company-building
approach, Minimum Viable Product or MVP, which was coined by
entrepreneur and influential blogger Eric Ries. An MVP approach
would be, for example, launching a minimalist website where
customers are actually prompted to pay for your product or service
before it even exists as a way to guarantee the market potential.
That's how Scott Yates tested the idea behind his new
company, BlogMutt.com, a site that offers to supply content for
company blogs. “It was only when we had real businesses pull out
their credit card and sign up for $79—before we even had a site
working—that we knew we were on to something,” he says.
Similarly, you could post your product or service on a site
like Kickstarter.com, where you ask people to pledge money to
support you. A great example of this was the inventor of the TikTok
watchband mount for the iPod Nano; he raised $942,978 from
customers who pre-ordered his product idea.
5. Just Do It
The truth is, in the end, research can only take you so far, says
John Schulte, president and chairman of the National Mail Order
Association. “You might not get anyone to agree with me, but I
have found there is no sure way to gauge the success of a service
type concept except for biting the bullet and start doing it,” says
Schulte. “Many times you can spend just as much trying to research
something (and still not know for sure) as it would cost you to just
start doing it.”
1.4 NEED FOR THE STUDY
This project is an exploratory study to measure market potential of
furniture retail. Organization selected for which this study is
conducted this study is Al-Reyami Group. Al-Reyami group is
currently manufacturing and selling furniture to office segment.
They are planning to expand by serving residential segment also.
This project is aimed at measuring market potential of furniture
retail, especially residential furniture segment.

13. 1.5 OBJECTIVES OF THE STUDY
The research will be mainly focussed on measuring market potential
of furniture retail industry. But to cover this topic, I will have to
cover the following sub topics also:
 Categorization of furniture retail industry.
 External and internal factors that affects the market.
 Micro and macro environment factors of the market.
 Importance of concepts such as branding and supply chain
management of furniture market.
1.6 RESEARCH METHODOLOGY
1.6.1 RESEARCH DESIGN
“A research design is the arrangement of conditions for
collection and analysis of data in a manner that aims to combine
relevance to the research purpose with economy in procedure”.
Research design is the plan structure and strategy of investigation
conceived so as to obtain answer to research question and to
control variance. Decisions regarding what, where, when, how
much, by what means concerning an inquiry or a research study
constitute a research design.
1.6.2 SAMPLING DESIGN
Sampling methods are classified as either probability or non
probability. In probability samples, each member of the population
has a known probability of being selected. Probability methods
include random sampling, systematic sampling, and stratified
sampling. In non probability sampling, members are selected from
the population in some nonrandom manner. These include
convenience sampling, judgment sampling, quota sampling, and
snowball sampling. The other common form of non probability
sampling occurs by accident when the researcher inadvertently
introduces no randomness into the sample selection process. The
advantage of probability sampling is that sampling error can be
calculated. Random sampling is the purest form of probability
sampling. Each member of the population has an equal chance of
being selected. When there are very large populations, it is often
difficult or impossible to identify every member of the population, so
the pool of available subjects becomes biased. Random sampling is
frequently used to select a specified number of records from a
computer file.

14. 1.6.2.1Characteristics of a good sample design
 Sample design must result in a truly representative sample.
 Sample design must be such which results in a small sampling
error.
 Sample design must be viable in the context of funds available for
the research study.
 Sample design must be such so that systematic bias can be
controlled in a better way.
1.6.3 POPULATION
The sample universe is total number of furniture retail shops and
customers in Bangalore and Chennai cities.
1.6.4 SAMPLE SIZE
The sample size is 50 shops, and 50 customers.
1.6.4 SAMPLING TECHNIQUE
The method of selecting sample is random sampling method. I
choose the customers randomly so every item of the universe has
an equal chance of inclusion in the sample
1.6.5 TOOLS USED FOR ANALYSIS
The Instrument of my research is searching internet and
questionnaires, close-ended questionnaires. This method of data
collection is quite popular, particularly in case of large inquires.
Questionnaires consist of a number of questions printed or typed in
a definite order in a form or a set of forms. It is considered as a
heart of a survey.
1.6.6 LIMITATIONS
 The sample size of the customer was small, so it was not able
to convey the attitude of all customers. Same is the case with
furniture retail shops also.
 Respondents might have some bias views and this could have
affected the findings to a certain extent.

15.  Inadequate time was the major constraints during the project
work because of limited time span; I cannot consider each
and every aspect of products.

16. CHAPTER II
THEORETICAL FRAMEWORK &
REVIEW OF LITERATURE

17. Retailing
Retail Industry, one of the fastest changing and vibrant industries in
the world, has contributed to the economic growth of many countries.
The term 'retail' is derived from the French word retailer which means
'to cut a piece off or to break bulk'. In simple terms, it implies a first-hand
transaction with the customer.
Retailing can be defined as the buying and selling of goods and
services. It can also be defined as the timely delivery of goods and
services demanded by consumers at prices that are competitive and
affordable.
Retailing involves a direct interface with the customer and the
coordination of business activities from end to end- right from the
concept or design stage of a product or offering, to its delivery and
post-delivery service to the customer. The industry has contributed to
the economic growth of many countries and is undoubtedly one of the
fastest changing and dynamic industries in the world today.
Retail operations enable a store to function smoothly without any
hindrances. The significant types of retail operations consist of:
 Department store
 Specialty store
 Discount/Mass Merchandisers
 Warehouse/Wholesale clubs
 Factory outlet
Despite of the classification, retail operations should display following
characteristics to be successful:
 They have a clear vision
Firms with successful new retailing concepts tend to have a strong
vision that connects to a core customer group. There is clarity

18. around the offering, the identity of the target group, and the value
proposition. Enterprise-Rent-A-Car, for example, focused on the
need to support the car repair industry with rental cars, which
implies outlets spread throughout a city rather than having an
airport focus, a system tied to insurance companies and repair
shops, and an ability to deliver cars to users. Tokyo Hands is a one-stop
store for the hands-on customer who wants the stimulation of
a puzzle, a wood working product, or a decorating challenge.
There is a theory in marketing that if you connect with a core
segment, as long as it is of reasonable size, you will tend to have
not only a sales base but a clear message and a set of nodes that
can communicate and advocate for your concept. A clear vision
makes that connection.
 They evolve the offering
Most successful new retail concepts evolve over time, especially
during the early days. They do not arrive out-of-the-box but benefit
from changes which can be refinements or major changes in the
vision. IKEA, Zappos.com, Best Buy, L.L. Bean, Whole Foods Market
all started small in scope and ambition and expanded the vision as
they got traction and found things that worked. IKEA discovered
outsourcing assembly to customers when an employee had to
remove the legs for a table to get it in a car. Zappo's changed from
assortment to service as the key value proposition. Best Buy’s
policy of serving customer rather than selling components was
implemented over time. Pret-A-Manger, the enormously successful
U.K. sandwich chain, refined the concept over five years when it
was still a single storefront.
Retailers have a unique ability to experiment, try out many
concepts with modest investments, and wait until one hits. The
Limited tried out many concepts within an existing store and
created chains such as Bath and Body Works and Structure out of
those that showed promise. With different locations, experiments
are doable not only to refine the concept but to tweak it, keeping it
fresh and ahead of competition.
 They execute
The main reason that new retailing concepts fail may be execution.
The successful ones have been able to execute. That means they
have been able to deliver the value proposition consistently and

19. profitably.
The fast fashion pioneers, Zara and H&M, developed systems to
conceive, create, make, and deliver products on a real time basis.
Whole Foods Markets has the ability to source and handle organic
foods. IKEA has footprints, a presentation system, and a customer-assembly
offering they can deliver behind that would be almost
impossible to duplicate. Excellence in execution means that needed
resources in the form of people and capital have been accessed and
that capabilities and process have been put in place. The result is
formidable barriers to competitors.
 They develop a strong culture and set of values
In part because retail execution involves service and unique
offerings; it is hard to maintain excellence over time. It is too easy
to see the offering decline or become fuzzy. The successful new
retail concepts are almost always accompanied by extraordinarily
strong culture and values that provide energy and direction in the
early years and support the vision and its execution as the business
matures.
Zappos.com has been guided by ten values which include delivering
"Wow" service, being a bit weird and acting humble. Best Buy’s
Geek squad is about fun, humor and taking the stress out of dealing
with computers and entertainment systems. A vision-driven
organizational culture has enormous power to make the strategy
succeed. Because the culture involves values, programs and
leadership, it is hard to copy.
 They deliver emotional and self-expressive benefits
Most of these successful new retail concepts have gone beyond
functional benefits to deliver emotional or self-expressive benefits.
Muji, one of Japan’s top four retailing brands, is the no-brand brand
and is all about simplicity, natural, moderation, humility, calmness
and self-restraint. Muji is anti-glitz and delivers self-expressive
benefit to those that are beyond buying badge brands and have the
right values about sustainability. Whole Foods Market is a way to
express a love of food using natural and organic ingredients.
 They address a real unmet need
Developing a new concept is hard enough with wind at anyone’s
back. Many of the new retail concepts benefited from a market force

20. often based on a visible and meaningful unmet need. There was an
opportunity. The Geek Squad and the Apple Store captured the
unmet need to avoid the frustration of installing, using and
maintaining computer and entertainment systems. Tokyo Hands
addressed the need for a do-it-yourself segment to have a one-stop
store that supports that desire.
Many firms saw a trend emerge after they had gotten traction and
were poised to grow. Whole Foods Market saw a growing interest in
organic and natural foods when they were established and it was
late for others to climb on the bandwagon from a brand and
capabilities view. Muji benefited from an interest in sustainability
and a withdrawal by some from the glitz of designer brands.
 They scale
A successful retail concept needs to scale. Expanding the footprint is
difficult because it is costly, because it can involve adapting to a
business with added complexity, and because a good concept is
visible and others can run with it in different geographies. Several,
such as Whole Foods Market, have scaled by buying like-minded
companies with local strength. Others, such a Subway, have used a
franchising model. Most have used a combination of cash flow
streams and external financing to expand. In any case, there has to
be a proven model to scale.
 They integrate social and environmental programs into the
brand
It is remarkable how many of the successful new concepts
incorporate social or environmental programs into their offering.
They, of course, have the advantage of creating a brand rather than
adapting an established brand and thus can credibly build this
dimension into it. Whole Foods and Muji have broken through with
visible substance and are seen as sharing the values, interests, and
even the lifestyles of an important customer segment. Muji is all
about environmental sensitivity in their offerings and, in addition,
they developed a set of three large campgrounds that allow people
to enjoy nature that is undisturbed. Best Buy’s "Greener Together"
program implements their programs around recycling and
sustainability. The tagline "Whole Foods, Whole People, Whole
Planet" reflects the many programs at Whole Foods Market such as
using farmed seafood standards, wind power for an energy source,
and reusable grocery bags (Aaker 2011).

21. Many of these factors, while not unique to retailing, have a higher
incidence in this category. Few other categories have as many
opportunities to test, learn and evolve as retail. Further, retailers
have so many variables with which to work, including location,
ambiance, selection, visible policies and customer interaction.
The Emerging Sectors in Retailing:
Retailing, one of the largest sectors in the global economy, is going
through a transition phase not only in India but the world over. For a
long time, the corner grocery store was the only choice available to
the consumer, especially in the urban areas. This is slowly giving way
to international formats of retailing. The traditional food and grocery
segment has seen the emergence of supermarkets/grocery chains
(Food World, Nilgiris, Apna Bazaar), convenience stores and fast-food
chains.
It is the non-food segment; however that foray has been made into a
variety of new sectors. These include lifestyle/fashion segments
(Shoppers' Stop, Globus, LifeStyle, Westside), apparel/accessories
(Pantaloon, Levis, Reebok), books/music/gifts (Archies, MusicWorld,
Crosswords, Landmark), appliances and consumer durables (Viveks,
Jainsons, Vasant & Co.), drugs and pharmacy (Health and Glow,
Apollo).
The emergence of new sectors has been accompanied by changes in
existing formats as well as the beginning of new formats:
 Hypermarts
 Large supermarkets, typically 3,500-5,000 sq. ft.
 Mini supermarkets, typically 1,000-2,000 sq. ft.
 Convenience stores, typically 750-1,000sq. ft.
 Discount/shopping list grocer

22. The traditional grocers, by introducing self-service formats as well as
value-added services such as credit and home delivery, have tried to
redefine themselves. However, the boom in retailing has been
confined primarily to the urban markets in the country. Even there,
large chunks are yet to feel the impact of organised retailing. There
are two primary reasons for this. First, the modern retailer is yet to
feel the saturation' effect in the urban market and has, therefore,
probably not looked at the other markets as seriously. Second, the
modern retailing trend, despite its cost-effectiveness, has come to be
identified with lifestyles.
In order to appeal to all classes of the society, retail stores would have
to identify with different lifestyles. In a sense, this trend is already
visible with the emergence of stores with an essentially `value for
money' image. The attractiveness of the other stores actually appeals
to the existing affluent class as well as those who aspire for to be part
of this class. Hence, one can assume that the retailing revolution is
emerging along the lines of the economic evolution of society.
Theories of structural changes of retailing:
The evolution of RM has taken a fantastic transition from traditional
methods to modern thinking. Starting as primary or traditional
retailing with melas, fairs, jataras, weekly bazaars, rural fairs to mom
and pop shop kirana stores the journey further reached to public
distribution systems ( PDS) Khadi outlets, co- operative stores and
finally reached the level of shopping malls , bazaars, super bazaars
and special bazaars.
Traditional- melas, Fairs, weekly Bazaars, Rural fairs.
Indegenous- mom and pop, kirana stores Neighbor stores.

23. Contemporary- PDS, Khadi outlets, co-operative stores
Modern Retailing- shopping malls, Bazaars, Super Bazaars, Special
bazaars.
Retail store operations
When retail-marketing space is a best shopping zone for the
consumers, it is quite challenging to the businessman. It has to ensure
not only product availability but also make the shopping more creative
and pleasurable. Retail Management has to take care of various areas
like,
 Store administration and management- This involves cleanliness,
discipline, proper documentation, no objection certification for
various products and skilful management of products and
personnel.
 Inventory and stock management- It becomes the duty of the retail
manager to check day to day and time to time the stock so as to
ensure the product is made available at the counters. Not only the
expected product availability has to be maintained but also the
quality and shelf life has to be guaranteed. Inventory has to be
evaluated correctly and receipts have to be properly maintained.
With retail marketing shopping has taken a trendy and pleasurable
affair. With all these changes customer service has become the
most important service to be rendered in the marketing field. The
customer has to be given maximum possible choice with a blend of
perfect sales promotion from the side of the retailer. So the overall
picture of retail stores promotion has become a exclusive area of
management.
 Managing of receipts
 Theft management
 Customer service
 Sales promotion
 Employee morale

24. Retail Management is once again a wonderful economic activity that
creates a win win situation. It brings not only the success of the
businessman but also the success of both consumer and the
employees. This is possible only if there is product and price
satisfaction.
Characteristics and trends in retailing
 Interaction with the end consumers
 It enhances the volume of sales but the monetary value is less
 Customer service plays a vital role
 There is a tendency for automatic sales promotion
 With more outlets retail marketing creates visibility
 Location and layout plays a vital role.
 Creates employment opportunities to all age groups, gender ,
irrespective of qualification and religion.
 Generates job opportunities in flexi timings.
 Retail marketing creates a place, time and possession utility for a
product.

25. History of Retail Management:
Retail marketing started from Mediterranean regions and spread to
Egypt and Babylonia. For over 2000 years Retail marketing flourished
in Rome. After the destruction of Roman Empire retailing spread
across the globe and Romans are the first ones to conduct
sophisticated retailing. As sophistication and human relations go hand
in hand Retail marketing has got lot to do with the psychology of
human behavior. So retail marketing can be conveniently called has
psychology of marketing.
Trends in Retailing:
Retail Marketing is largely based on three Vs- Value, Volume and
Variety. Though the Retail marketing had the quantitative
development across the globe, the quality is no doubt being
compromised with the Globalization. International quality products are
competing with indigenized products. This variation in size, quality and
competition has made Indian market face ridiculous growth. As the
competition is between international and indigenized products, its
taking a great toll on both the sectors.
With the big giants entering the market, there is a grave competition
in the Indian Economy. After 1995 the great companies like Food
world, Reliance, Planet M, Music World and many others also entered
the retail market. The visibility and the craze to remain in the
forefront of business have made many of the giant companies to move
from manufacturing to front line retailing. With this Retailing has
become prominent giving world class shopping experience to the
customers under one roof.
Indian retailing, thus enjoys many unique features, is still done in a
primitive way. Barring a few exceptions, Indian retailers, particularly
FMCG retailers, are not in a position to implement world-class
practices of supply chain management. The concepts of Quick
Response or Efficient Consumer Response are unheard of in Indian

26. retailing. The two bases of modern retailing management, the
Electronic Data Interface and a mutually respectable partnership
among retailers and suppliers (the manufacturers) are missing to a
great extent in Indian context. Also, Indian marketing channel
members are performing some unnecessary tasks, which make the
channel structure heavy and inefficient. Though these inefficiencies
are observed in all retailing irrespective of industry, the symptoms are
more evident in Indian FMCG retailing. Inefficiency in retailing leads to
lower profitability of the retailers and lower service outputs for the
consumers.
Ways and means to strengthen the position of the retailing industry,
doing away with the causes for the inefficiencies, therefore, are to be
taken up in an urgent manner. Such measures may include
establishment of retailers’ co-operatives, merger and buy-out, use of
technology to the greatest possible extent, setting up of nonstore
retailing centers and increase in franchisee network (J.P.Bharathi May
26, 2010).
Indian Furniture Retail Industry
The Indian furniture retail market is one of the 14th largest furniture
markets in the world due to the rising purchasing power of the Indian
middle class population. This USD 8 billion industry has been growing
at 30% compound annual growth rate. According to a Cushman and
Wakefield report, the demand for residential spaces is forecasted to
hit 4.25 million units while the demand for office spaces is expected to
hit 400 million sq.ft. between 2010 and 2014 in India. Another major
segment is contract furniture which is driven by the increasing hotel
developments and tourism demand in the country.
The Indian furniture retail market has been classified by CSIL Milano
as one of the 14th largest furniture markets in the world due to the
rising purchasing power of the more than 400 million middle class
population. This USD 8 billion industry has been growing at 30%
compound annual growth rate in just the organized sector which
accounts for only 15% on the entire industry. According to a Cushman
and Wakefield report, the demand for residential spaces is forecasted
to hit 4.25 million units while the demand for office spaces is expected
to hit 400 million sq.ft. between 2010 and 2014. Another major

27. segment is contract furniture which is driven by the increasing hotel
developments and tourism demand.
All these factors, clubbed with the evolving consumer demographics
and increase in spending on lifestyle products bodes very well for the
Indian furniture industry.
India’s Position
According to India Now! More Than Ever, a report by Index Media
Consulting: India is ranked eighth in terms of consumption in the
world. The organized furniture industry is estimated at around US$8b
and is expected to grow at a Compound Annual Growth Rate (CAGR)
of about 25-30% annually. The modular furniture market in India,
estimated at about US$160m, is dominated by bigger players such as
Godrej and BP Ergo.
The market size of the international range of premium furniture is
estimated to be worth about US$20m, and is serviced by foreign
players. The current imports are mainly from Italy, Germany, Spain,
China, Korea, Malaysia, Indonesia, Philippines and Japan.
The furniture market in India is mainly concentrated in A-, B- and C-class
cities. It is estimated that the top 784 urban centres contribute
41% to the total consumer furniture market. A- and B-type cities
together contribute 33% of the total market.
There are about 5000 firms in the domestic organized sector, and
nearly 10,500 importers of furniture. India imports around US$150m
worth of furniture, growing rapidly and catering to urban, affluent
households.
India’s major players include furniture retailing giants Pantaloon,
Shoppers’ Stop, Trent, RPG, Vishal Retail, Reliance and Tata Group.
Industry names to watch include Godrej & Boyce Manufacturing Co, BP
Ergo, Featherlite, Haworth, Style Spa, Renaissance, Millenium
Lifestyles, Durian, Kian, Tangent, Furniture Concepts, Furniturewalla,
Zuari, N R Jasani & Company and PSL Modular Furniture.
In terms of furnishings, the Indian home furnishings market is
estimated at $3.5b and is expected to reach $5.6b by 2015, the report
continues. The luxury furnishings market comprises 3% of the market
and is growing at 25-30% per annum.

28. India has seen a shift in consumer profile for luxury furniture and
furnishings. Earlier, the main clientele were the usual suspects –
industrialists, Bollywood celebrities or luxury hotels. But now, CEOs of
multinational corporations and banks, real estate barons and well-heeled
socialites are the new consumers of luxury.
Key Indian brands include Roseby’s, D’decor Home, Dicitex, Maishaa,
Address Home, Onset, Ishatvam and Zaza Home. The key
international players in India include Pottery Barn, Macy’s, Ethan
Allen, Zara Home, Bloomingdales, Brun de Vian-Tiran, Versace,
Corneliani and Fendi Casa.
Furniture Industry Composition
As with the global market, home furniture is the largest segment in
the Indian furniture market, accounting for about 65 per cent of
furniture sales. This is followed by, the office furniture segment with a
20 per cent share and the contract segment, accounting for the
remaining
15 per cent.

29. Home furniture
Home furniture in India is available in a wide range, to cater to
different customer needs. A typical middle class urban Indian home
has five rooms (including kitchen and bathroom). About 25 per cent of
the urban population live in homes with five rooms or more, while 45
per cent live in houses with three rooms or less. About 16 per cent is
estimated to live in single-room homes. The type of furniture used
depends on the customer’s affluence and taste.The rich and upper
middle class is typically very attentive to design and quality, so price
is rarely a determining factor.
In general, European style furniture is only found in homes of the
urban upper class. Demand for furniture of international standards are
limited to the larger cities. It is also estimated that the wealthier
classes do not change furniture very frequently; the average life of a
piece of furniture is about 20 years and some craftsmen’s pieces are
used for as long as 50-70 years. Colonial furniture is still very
common in India, but the trend seems to be declining slowly.
Office Furniture
The office furniture segment caters to the commercial and office
space. This segment has witnessed rapid growth in recent years, in
line with the growth in the Indian economy and subsequent demand
for office space. The thrust on real estate and office construction is
expected to sustain in the near future, indicating continued growth for
the furniture industry.
Contract segment
The contract segment caters primarily to hotels and its growth is
consequently linked to growth in tourism and development of new
hotels.
There are around 1,200 hotels in India in the organized sector. More
than 10 per cent of these are in the 5-star and above categories.
Tourism in India is growing at a robust pace. As per the annual report
of Indian Tourism Department, there has been an increase of 8%
internal tourists, 10% growth in domestic tourism and 4.3% additional
hotel rooms has been added, in the financial year 2012-2013. These

30. trends indicate significant potential for growth in the contract furniture
segment.
Furniture Industry – Value Chain
The Indian furniture industry covers the entire gamut of activities,
from sourcing, manufacturing and distribution, to sales and after
sales.
In the Indian context, players are actively engaged in each of these
activities. Various types of raw materials are used for furniture making
in India. The key raw materials include wood, metal and plastic, with
bamboo and cane also being used in some cases.
Wood accounts for nearly 65 per cent of all furniture made in India.
This includes several types of indigenous wood, as well as imported
wood. India imports wood from various South East Asian countries
such as Indonesia, Malaysia and Myanmar. It also imports MDF
(Medium Density Fiberboard) boards from Europe.

31. Wood
India abounds in several tree species whose wood is used for furniture
making. Apart from indigenous material available in India, some types
of wood are also imported, in case the domestic supply is inadequate.
Popular wood types used in India include Walnut, Sandalwood, Teak,
Sheesham, Deodar, Ebony, Redwood, Rosewood, Red Cedar and Sal.
Teak accounts for almost 50 per cent of the total wooden furniture
produced, Sal and Deodar account for about 20 per cent and the
balance includes Mahogany, Cedar and other tree types. Bamboo
Material Boards (BMB) are increasingly being used in place of plywood.
India also has abundant rubber wood supply. Natural rubber
plantations cover 520,000 hectares with an additional 6,000 hectares
being replanted almost every year since 1994. The southern state of
Kerala produces 95 per cent of the total supply of rubber wood in
India. Although furniture making as an activity is spread across the

32. length and breadth of India, a few centers have become famous for
their exquisite carving, inlaying, turning and lacquering. Indian states
well known for woodwork include Gujarat, Jammu & Kashmir, Punjab,
Uttar Pradesh and Kerala.
India is one of the largest consumers of wood in South East Asia. The
country has sufficient availability of tropical wood, however, in recent
years, growing concerns about the environment and the need for
conservation of forests have led to reduction in the supply of wood.
India imports wood from various countries like Malaysia, Indonesia,
Myanmar, and Ivory Coast, etc. MDF boards are imported from
Europe, soft and hard wood are imported from Russia and other South
East Asian countries. Veneered panels are becoming increasingly
popular in India and are imported from the European Union and USA.
Domestic Manufacturing
Furniture manufacturing is driven by the designs chosen, the inputs
which come from in-house designers and market feedback.
Manufacturers consider several aspects related to the customer
(demography, lifestyle, motivation and aspiration, needs and
preferences), raw material (type, quantity and availability) and
internal capability (expertise, quantity and availability of labor,
production process complexity and delivery time) for developing
different designs, which in turn, determine the furniture’s
functionality, look and feel and value.
Furniture produced in India falls into two broad categories, depending
on the end user; domestic furniture meant for home use and
commercial furniture meant for the office and hospitality sectors.
Domestic furniture represents almost two-thirds of the total output.

33. The key success factors for each category vary. Manufacturers in the
domestic sector typically try to differentiate on the basis of design
variety and price, while in the commercial space, having a strong and
reliable brand is important.
Imports
Increased demand in domestic markets led to importing of furniture
from other countries. Increasing income levels and influence of global
lifestyle trends have also led to many urban, affluent Indians, moving
towards imported furniture.
European furniture manufacturing companies have been the first
entrants, with their premium products (mainly veneered) in India.
They were led by the K K Birla joint venture, Gautier, with Groupe
Seribo of France.
Furniture imports from other Asian countries have come in much later.
Barring a few, such as, Renaissance Home, Interior Espania, Pinnacle
Saporiti and Gautier, most of the imported furniture dealers sell their
products either under their own brand name or without any branding.
In recent times, import of cheaper furniture from South East Asian
countries has been increasing.
Distribution
Indian furniture companies operate both, through direct selling in the
market and distributors. Companies with a large local customer base
normally sell directly, without involving distributors. The larger
companies typically have their own commercial offices and showrooms
in all the larger cities in India. Many organizations prefer, however, to
operate via organized outlets.
For projects of large volume, companies typically sell directly to the
customer - the primary customer is often the ‘specifier’ (architects,
builders or project managers) or building owners/lessees who are
responsible for fitting out buildings and offices. Armed with the choice
of local and imported products, these purchasers exert significant
influence on the sector.
Retailers

34. There are a large number of furniture retailers and franchises spread
across the country. While the majority of retailers are small in size and
scale, large retailers usually operate in urban markets. One-stop
shopping chains for home building solutions have come up in large
cities, such as Arcus in Gurgaon and KSS Home Pro in Bangalore.
Another development has been the emergence of specialty furniture
chains, such as, Usha Shriram Furniture Industries, OCL, Pace
Furniture, Indoors and Renaissance Home. With the rapidly growing
and transforming retail sector, it is expected that the large retailers
will continue to expand their presence, leading to consolidation in
furniture retailing in urban markets.
Consumers Value Approach
The main value for a product to be acquired by the consumer is the
functional value. The utility of the product is the motivation of the
buying. The overabundance of adverts and products and the increased
purchasing power of the consumers are allowing the appearance of
new values around the product on top of the functional:
1. Social value: the furniture consumption reflects the social status.
Through brands and products the consumer is building up his own
identity and the companies should exploit the hidden aspirations and
self-concept of each consumer
2. Emotional value: everyone has his own experiences, sensations,
and give a clearly subjective value to the product that is only
recognizable and comprehensible by the consumer.
3. Circumstantial value: The same product can be evaluated by the
consumer in different ways. Other ways of increasing the consumption
are the occasions of granting an additional value to certain
extraordinary circumstances.
4. Novelty value: renewal and constant updating are parts of the
consumption´s driving forces. The attraction for novelties and
breaking the routines can be exploited by the companies for
guaranteeing the consumers´ attention and attraction for the sales
point.

35. Purchase Vs Consumption
Not only can the product create value for the consumer, but the
moment of furniture buying as well. The distributor is able to increase
the perceived value of the product at the stage of buying the product.
Currently in the focus of creating value for the consumer are the
product and the sales point. This is increasing the satisfaction of the
consumers at the moment of buying the product, but when the buying
process has been finished, the producer and the distributor are
breaking up their connection to the product and the consumer,
finishing their contribution to the value generation process in the
moment of the buying process.
Not only at the production and at the purchasing process of the goods
can be created a value to the product, but also at other stages of the
product´s life cycle is possible to generate value for the consumers.

36. Manufacturers In India
The Indian furniture industry is gradually transforming into a more
organized and competitive sector. The entry of global brands in the
sector, emergence of large retail players and the resultant
consolidation, are trends that highlight this transformation.
The figure below captures the current status of the Indian furniture
sector.
These trends indicate certain key capabilities that companies in the
furniture sector need to develop for success. They are briefly
discussed below:
Good Supply Chain Management
Home and furniture industry is extremely demand driven coupled with
high obsolescence. The products are also high value as well as
damage- prone.
To succeed in such a scenario, lean and responsive supply chain
capabilities with the right storage and handling Infrastructure needs to

37. be built in. It also requires customer service focus for Last Mile
Fulfillment and Direct- to- Consumer delivery.
Some of the key benefits of supply chain management are mentioned
below:
 To reduce bullwhip effect: As high uncertainty prevailed in the
furniture market demands, there will be variation in customer
orders and hence companies will adopt their own strategies to solve
the problem resulting in increased cost and poorer service.
 Rising Cost: With increasing volume, the cost will increase and
hence the labor and other costs rise and hence supply chain
management (SCM) should be adopted to reduce the cost in all
means.
 To manage the complexities involved in the furniture cycle flow as
technology advancement has already impacted the business.
 It is tough to manage the returns in the furniture industry when
ordering and delivering are inaccurate.
 Inventory handling is vital for furniture retails.
Supply chain strategy followed in companies varies according to the
industry in which it is operating and based on the products it
manufactures. According to furniture industry is a good example of
high uncertainty in demand and huge delivery cost since the retailers
can offer products of similar types distinguishing based on shape,
fabric, and color.
Strategies followed in a supply chain are,
* Pull strategy - Followed when uncertainties in consumer demands
are more.
* Push strategy - Followed when the delivery cost are more.

38. * Combinational - Push-Pull or Pull-Push, Organization decides based
on the demand and delivery cost of the business.
Furniture Business Through Retail Outlets
With advancement in technology, many companies have initially
moved away from push strategy to pull strategy. But in modern world,
most of the business which aims for customer satisfaction follows a
hybrid strategy (push-pull or pull-push) and in particular furniture
industry which does business via retail outlets follows "Pull-Push"
model aiming to provide large variety of customizable products.
In a Pull-Push strategy, some stages of the supply chain, typically
the production is based on pull strategy while the distribution activities
are operated in a push manner (Simchi-Levi, 2010).
Since long-term forecasts cannot be used for making production
decision, production strategy of furniture business via retails is based
on pull based manner. And economies of scale play significant roles in
distribution mechanism and hence it follows push strategy and this is
what many furniture retailers follow who does not keep any inventory
except the demo piece (Simchi-Levi, 2010).
Basic assumptions made in designing furniture business via retail
outlets supply chain are,
 Considering only the key raw materials such as wood, steel, cushion
and designing materials. Other raw materials which can also be
essential in furniture industry are plastics, adhesives etc.
 Retailers will reassemble the furniture packs at the customer end or
the customers can do it on their own as they are delivered flat
packs which are easy to reassemble.
The upstream, downstream & midstream activities of furniture
business via retail outlets supply chain are as follows,
1. Furniture makers upon receiving the orders from distributors (pull
strategy) will request Tier1 suppliers for fabrics.

39. 2. Tier1 suppliers will receive goods from Tier2 suppliers for example
Timber mills will get the wood materials from forest and reshape it
accordingly. Similarly Lathe shop will receive steels from the steel
manufacturers and shape it according to the furniture maker's
requirements and all these necessary goods will be supplied to the
Tier1 suppliers
3. Furniture makers will then make necessary products and dispatch it
to the distributors.
4. Distributors follow a push strategy where finished goods are pushed
to the retail outlets. Furniture makers will have a standard delivery
schedule based on aggregation of products.
5. Retailers will deliver and reassemble the furniture goods at the
customer's end upon request.
Major Risks
Major risks involved in this type of design are,
 Any change in the cost of raw materials will impact the whole
supply chain.
 Bad supplier relationships will impact the manufacturers
 Shortage of raw materials during production will impact the lead
time in delivering the requesting goods to the distributors.
 Uncertainty in consumer demands leading to more inventories held
at the retailers end.

40.  Customer's dissatisfaction in transporting and unpacking the
finished goods by the retailers at the customer end.
Furniture Business Via Mail Order
The world is changing and so the organization which needs to adapts
to the new trends in the business as a fact of transitional change. E-commerce
is common in today's business environment and many
industries including furniture industry started revolving around this
new type (Chaffey, 2002).
Basic assumptions made in designing furniture business via mail order
supply chain are,
the medium of business is through e-commerce
makers has its own warehouse facility
Furniture business via mail order uses a "Pull" strategy in which both
production and distribution activities are operated on a pull based
manner (Simchi-Levi, 2010).
The downstream activities of furniture business via mail order supply
chain are as follows,
1. Customers make direct order to the furniture makers either through
electronic email or mail services specifying their design requirements
of furniture they are interested in.
2. Makers will start their assembling process at the point of order and
request for the replacement of used items from the suppliers.
3. Finally packaging and prompt delivery of items to the end
customers.
Its upstream activities are,
1. Furniture makers will request raw materials from Tier1 suppliers.
For furniture, wood, steel, cushion materials and other designing
materials are the key raw materials.
2. Tier1 suppliers will have in stock of all the necessary items which
they would have purchased it from their Tier2 suppliers.

41. Major Risks
Major risks involved in this type of design are,
 Internal computer systems failure
 Slippage of timely delivery of goods
 Handling exchanges and returns
Major Differences Between Two Operations
Furniture business
through retail outlets
Furniture business
via mail order
Supply
chain
strategy
Production is based on
Pull and Distribution is
based on Push
Pull in both the
cases
Coverage
Concentrated geographic
location
Wide coverage
Response
time
Short, same day pickup
possible
Require minimum
lead time for
manufacturing and
shipment
Shipment Bulk and cost is lower
Parcel and
transportation cost
is huge
Inventory
Higher , Majorly depends
on the forecasting,
consumer behavior and
market conditions
Well managed
Sales
Revenue
Sales through retailers
must share some of the
products revenue with
distributors/retailers and
hence lower revenue and
Direct sales to
customers and
hence increased
revenue and margin

42. margin
Facilities
Need huge infrastructure
to hold wide varieties and
inventories
Less infrastructure
needed as products
are manufactured
and shipped on
order request
Product
Variety
Lower than other options
and not much
customizable
Customers have the
preference to
customize their
products based on
color, size and other
factors through
internet facilities
Returns
Easier as customers can
approach the local stores
for handling returns
Harder and the rate
of returns also high
in terms of mail
ordering since
customers are
unable to touch and
feel at the time of
ordering
New
product
entry
Slow Much quicker
Customer
Experience
Retail stores are open
only during business
hours
24/7 access through
internet
Table: 1 Differences between furniture business via retail outlets and
via mail order
Efficiency
It is evident from the above table that both models have several
advantages and disadvantages. It is a common fact that the decision
making process by customers in buying furniture is complex and
hence retail outlets have a slight upper hand than the furniture
business through mail orders (Oh, Yoon, & Hawley, 2004). But in

43. terms of holding inventory and cost associated with that, business via
online is better than the retail outlets. Thus both businesses are
efficient in some manner and each needs to follow the best practices
in their approach in order to satisfy all stakeholders and to achieve
customer satisfaction.
Make-Or-Buy
Make-or-buy decisions are related to the choice of selection between
producing an item in house or buying it from the outside suppliers i.e.
outsourcing. According to Burt et.al (2003) two main factors in making
this make-or-buy decisions are cost and production capacity and some
of the major elements involved in comparison are,
Make-analysis includes, Buy-analysis includes,
Increasing Inventory cost Price of raw materials
Direct labor cost Transportation costs
Increasing purchasing cost
Receiving and inspection
costs
Increasing capital cost Increasing purchasing costs
Factors favoring in-house, Factors favoring outsourcing,
Cost, less expensive to make the
parts
Cost effective
Better Quality Lack of expertise
Unreliable Suppliers
Insufficient production
capacity
Excess plant capacity in work house
Better inventory handling,
using JIT
Confidentiality, secrecy need to be
maintained on technology/process
Integration of branded parts
Political, social or economic factors
Internal patent rights and
restrictions on making it in-house

44. Table: 2 Factors and Elements influencing Make-or-buy decisions
Furniture business via retail outlets can themselves be a logistics
provider since they will be targeting the local customers within the
retail offices. Though outsourcing is possible here but with respect to
transaction costs, documentation and other paper works, having own
logistics would be a cost effective solution for retailers.
For furniture business via mail orders, outsourcing of web portal
development & maintenance and customer service operations are
evident. By this means furniture makers believe that the service
provided to the customers will be quality oriented and also reduction
in the costs as cheap laborers are available in India/China (O2I,
2009). Also the shipping of goods has to be outsourced in this
approach and hence strong relationships should be maintained
between the manufacturers and logistics provider in order to deal with
on-time delivery and handling returns.
Aggregate Planning
The set of process through which companies identifies the idle levels
of capacity, production, inventory, stock outs, subcontracting and
pricing decisions over a specific period of time. Its major aim is to
satisfy demands and thereby maximizing profits. Key operational
parameters involved in aggregate planning are (Pan & Kleiner, 1995),
 Production rate
 Workforce
 Subcontracting
 Overtime
 Machine capacity levels

45.  Inventory holding costs
 Stock outs/Backlogs
Furniture goods which are pushed to the retail outlets by the
distributor will be mostly generic or family product which is purely
based on long term demand forecasts. In this case forecasts will be
appropriate since the aggregation of demand for all of its end products
will be the actual demand of the product (Simchi-Levi, Kaminsky, &
Simchi-Levi, 2003).
For furniture business via mail orders, 'postponement' comes into
picture affecting aggregate planning decisions. This means that
delaying the product finish until its sale has been triggered through
online by the customers.
Globalization
Furniture industry has been a latecomer to the exports (online
business case) as furniture can be easily damaged while shipping and
cost associated with transporting were also high. Also manufacturers
have to deal with political and legal constraints while exporting. But
later companies started shipping the goods in a flat packs manner
where goods are assembled at the customer end by themselves. One
such company is Swedish furniture company IKEA which sells furniture
through online (ECS, 2009).
In both business approaches, raw materials imports for making
furniture have been practiced from last decade. Manufacturers used
letter of credit for purchasing inventories in olden days and currently
many new methods of purchasing inventories from overseas like bank
drafts has been practiced (TMCNews, 2007).
Strategic Alliance
Maintaining strong relationship with supply chain partners will ease
the operations of the company. In order to maintain an effective
relationship with supply chain partners, one must has to identify the
value chain and benefits associated for both within the relationship.
For both the business approaches since furniture makers cannot
involve in so called 'make in-house' of raw materials, they should

46. maintain a strategic partnership with their suppliers for continuous
supply of raw materials.
Since the furniture business via email orders needs minimum lead
time to deliver the products, it is better for them to adopt a just in
time (JIT) raw materials and inventory purchasing and supplying
mechanism from its suppliers. It can also have an alliance with online
providers for promoting and marketing their products.
Technology Impact On Furniture Industry
Today, there is a tremendous increase in usage of technology in the
supply chain management which serves a major key for maintaining
supplier-maker-customer relationships. There are three major phases
of IT involvement in the supply chain management (Hill, 2005).
Phase1 Mainframes
Mainframe computers were widely used in supply chain management
in earlier days. Applications include Materials Requirement Planning
(MRP) and Manufacturing Resource Planning (MRPII) through which
companies effectively manage the manufacturing process.
Phase 2 Software Applications
There are various software applications exists in today's world to ease
the actions of supply .chain management. Microsoft's word processor
and excel spreadsheets are widely used in making planning decisions.
Also other third party vendor software such as ERP, CAD, CRM and
many are available today in the market to ease the functions of
furniture designing, customer management, purchase ordering
process, inventory management and supplier management (TEC,
2010).
Phase3 E-Commerce
Networking computing between the suppliers/customer applications
through electronic data interchange (EDI), ordering through emails,
online bidding is getting increased day by day. The ordering
mechanism is done through online or electronic mail thereby
eradicating the distributors and retailers totally from the supply chain.

47. Phase1 and Phase 2 are widely applicable to furniture business which
runs through retail outlets whereas Phase3 is totally applicable for the
furniture e-business. Both the business has been benefitted from
technology advancement. Furniture business through online make use
of the software models for designing and virtually displaying the goods
which gives end customer a great look and feel effect. In terms of
distribution web tracking and advance ship notices are common in
online business while tracking of drivers through GPS is used in both
the business (Terry, 2007).
SCM is a significant technique in the world of business, when it
followed promptly, improvement in quality, cost, and flexibility of the
product and services are evident. It is clear from the evidences cited
above that both approaches: (i) furniture business via mail order and
(ii) furniture business via retail outlets have unique merits and de-merits.
Furniture business which runs its business through online has
used pull strategy, maintaining low inventories, and outsourcing the
distribution activities to gain a competitive advantage over the
traditional business. On the other hand, traditional furniture business
is widely accepted by the customers all over the globe due to the
visibility and flexibility it provides. Furniture makers like IKEA has well
demonstrated the SCM concept in its business and waved the path to
success and hence irrespective of the type of business, every company
has to identify and adapt the best suitable supply chain management
practices in their day to day business to compete in a global
environment.
Cost Minimization
Furniture manufacturers in India will need to cater to diverse tastes
and preferences across customer segments and geographies. At the
same time, with the industry getting increasingly organized and
competitive, margins are likely to be progressively under pressure. In
this scenario, the ability to manage costs through improved
manufacturing processes and minimizing waste is a key capability
requirement for players in this sector.

48. Branding
Brand name rules over the market and consumer’s minds. Enormous
resources, time and energy are spent in building and nurturing
brands. Brand distinguishes the products and services offered by one
seller from another.
Meaning Of Concept
 A Brand is a person’s gut feeling about a product, service or
organization.
 A brand defines the relationship customers have with organization.
 A brand is a promise organization make to its customers and to
themselves.
 A brand is shaped by experience customers have with the firm.
 A brand differentiates the product from similar offerings.
Traditional View
A brand is a name, term, sign, symbol or design which is intended to
identify the goods or services of one seller or group of sellers and to
differentiate them those of competitors.
Role Of Brand
 Signify quality
 Create barriers to entry
 Serve as a competitive advantage
 Secure price premium
Value Of The Brand
The value of a brand comes from its ability to gain an exclusive,
positive and prominent meaning in the minds of a large number of
consumers.
Brand Building
The establishment and improvement of brand’s identity including
giving the brand a set of values that the consumer wants, recognizes
and identifies with and trusts. Values developed in the process of

49. brand building includes psychological, physical and functional
properties that consumer desire and should always identify a property
that is unique to that brand.
Customization
Furniture manufacturers need to be able to customize their products
to meet different customer needs, while maintaining their cost
competitiveness. This could be a challenge, especially in the home
furniture segment, where the volumes for specific designs are likely to
be low. Practices like mass customization, where there are products
with standard shapes and sizes with customized exteriors and color
shades, will need to be implemented. Accurate demand forecasting is
a related capability, required to plan for raw materials and parts.
The Macro-environment
Political environment
Political factors can influence marketing decisions by determining the
rules by which business can be conducted. The relationship between
government and business organizations can have major implications
not only for the respective parties, but also other companies (Jobber
2004: 146)
Furthermore, for the foreign company entering into a new market, the
laws, rules and regulations need to be understood before the entry,
because Businesses to-day need to follow both official regulations and
also regulations pressed by spe-cial-interest groups. However, in some
cases, companies can even benefit from the newly established laws
(Kotler 2000: 151). A product related to public safety, such as bicycle
helmet, can be made mandatory for all citizens in which case the
manufacturer of this product naturally benefits.
Economical environment
The economic environment can have a critical impact on the success
of companies through its effect on supply and demand. Companies
must choose those economic influences that are relevant to their
business and monitor them. Three major economic influences should
be examined on the marketing environment of companies: economic
growth and unemployment, the development and implications of the

50. single European market, and the economic changes that are
accompanying the transition to market economies of eastern bloc
countries (Jobber 2004: 132).
The analysis of economical environment can let companies know the
financial situation of the target country in order to forecast the
potential market demand, the buying power and the foreign
investment situation in the target market.
Social and cultural environment
The population in developed economies is expected to be stable or
shrinking. A major demographic change that will continue to affect the
demand for products and services is the rising proportion of people
over the age of 45 in the EU, and the decline in the younger age
group. Moreover, within Europe, cultural differences have implications
for the way in which business is conducted which need to be
recognized when interacting with European customers (Jobber 2004:
138, 141).
Furthermore, understanding of the social and cultural factors is also
the way to know the customer needs for companies. If companies
know more the consumers life standard and their characteristics, it is
more convenient to make decisions on the customizing products.
Technological environment
Technology can have a substantial impact on people’s lives and
companies’ for-tunes. Monitoring the technological environment may
result in the spotting of opportunities and major investments in new
areas (Jobber 2004: 152). The key to successful technological
investment is market potential and technological change can also pose
threats to those companies that gradually find they cannot compete
effectively with their more advanced rivals.
The Micro-environment
Understanding consumer buying behavior
Understanding consumer behavior is important because European
consumers are changing. While average incomes rise, income
distribution is more uneven in most nations, household size is
gradually decreasing in all EU nations, more women have jobs outside
the home, the consumption of services is rising at the expense of

51. consumer durables and demand for (and supply of) health, green
(ecological), fun/luxury and convenience products is increasing.
Table 3: Choice criteria used when evaluating alternatives (Jobber
2004: 75)
For example, sell to consumers for personal consumption and
organizations for use in carrying out their activities. For both types of
buyer, an understanding of customers can be gained only by
answering the following questions:
1. Who is important in the buying decision?
2. How do they buy?
3. What are their choice criteria?
4. Where do they buy?
5. When do they buy?
Answer to these questions can be provided by personal contact with
customers and, increasingly, by the use of marketing research.
(Jobber 2004: 66)
Understanding the organizational buying behavior
Organizational buying concerns the purchase of products and services
for use in an organization’s activities. There are three types of
organizational market.

52. 1. Industrial market – e.g. raw materials, components and capital
goods such as machinery
2. Reseller market – e.g. mail-order companies, retailers and
supermarkets
3. Government market – e.g. government agencies buy products and
services to help them carry out their activities, e.g. purchases for local
authorities and defense
Understanding the market segmentation
Very few products or services can satisfy all customers in a market.
The company needs to find out their target group who needs their
products and services. Therefore to implement the marketing concept
and successfully satisfy customer needs. Different product and service
offerings must be made to the diverse customer groups that typically
comprise a market. The technique that is used by marketers to get to
grips with the diverse nature of markets is called market
segmentation.
Market segmentation consists of dividing a diverse market into a
number of smaller, more similar, sub-markets. The objective is to
identify groups of customers with similar requirements so that they
can be served effectively while being of a sufficient size for the
product or service to be supplied efficiently (Jobber 2004: 210).
There are three broad groups of consumer segmentation criteria:
behavioral, psychographic and profile variables which can be found
from the table 4 in detailed.

53. Table 4: Consumer segmentation methods (Jobber 2004: 214)
Since the purpose of segmentation is to identify differences in
behavior that have implications for marketing decisions, behavioral
variables such as benefits sought from the product and buying
patterns may be considered the ultimate bases for segmentation.
Psychographic variables are used when researchers be-lieve that
purchasing behavior is correlated with the personality or lifestyle of
consumers: consumers with different personalities or lifestyles have
varying product or service preferences and may respond differently to
marketing mix offerings (Jobber 2004: 213).
However, segmentation may not follow this logical sequence in
practice. Often, profile variables will be identified first and then the
segments so described will be examined to see if they show different
behavioral responses.
Understanding the competitors’ analysis
Companies who focus on competitors’ actions have been found to
achieve better business performance than those who pay less

54. attention to their competitors. It is important that companies know
where they stand or their position related to competitors. The
competitor analysis can learn about the competitors’ strengths and
weaknesses in order to be the better choice to match the consumer
satisfaction and to be able to create greater value than the
competition.
Figure 5: Competitor analysis (Jobber 2004: 682)

55. Identifying competitors
When the company identifies the competitors, the company should
select only companies that are producing technically similar products
are considered. This ignores companies purchasing substitute products
that perform a similar function (Jobber 2004: 682). Beyond these
current competitors the environment needs to be scanned for potential
entrants into the industry, especially for a new entrant who should
know the other new entrants information besides the existing
competitors.
Audit competitor capabilities
The company needs to know the background of competitors and the
special technologies which they are using for their products and
services. Regarding the marketing strategies such as the market share
and the positioning in the target group is an important part in the
competitor analysis.
Moreover, a precise understanding of competitor strengths and
weaknesses is an important prerequisite of developing competitor
strategy (Jobber 2004: 683). Strength and weakness analysis can be
obtained from marketing research sur-veys, recruiting competitors’’
employees by interviewing them or the secondary sources such as
trade magazines, newspaper articles and distributors.
Competitors’ response patterns
As we know that understanding competitor objectives and strategies is
helpful in predicting competitor reactions. Competitors’ past behavior
is also a guide to what they might do.
There are five types of competitors which is defined by Jobber (2004:
686)
1. Retaliatory competitors
This type of competitors can be relied on to respond aggressively to
competitive challenges; normally the role of this type of competitors is
the market leaders who often try to control competitor response by
retaliatory action.
2. Complacent competitors
Some markets are characterized by years of competitive stability with
little serious strategic challenge to any of the incumbents. This can

56. breed complacency, with predictably slow reaction times to new
challenges.
3. Selective
This type of competitors may respond selectively. Because of tradition
or beliefs about the relative effectiveness of marketing instruments a
competitor may respond to some competitive moves but not others.
2.3 SWOT analysis
A SWOT analysis is a structured approach to evaluating the strategic
position of a business by identifying its strengths, weaknesses,
opportunities and threats. Internal strengths and weaknesses are
summarized as they relate to external opportunities and threats (See
Figure 6).
Figure 6: SWOT analysis and strategy development (Jobber 2004:
45)
Once a SWOT analysis has been completed, thought can be given to
how to turn weaknesses into strengths and threats into opportunities.

57. A threat posed by a new entrant might call for a strategic alliance to
combine the strengths of both parties to exploit a new opportunity.
Because these activities are designed to convert weaknesses into
strengths and threats into opportunities they are called conver-sion
strategies. Another way to use a SWOT analysis is to match strengths
with opportunities. These are called matching strategies (Jobber 2004:
45).
In the company’s final internal and external environment analysis, the
SWOT analysis can be made for the conclusion of the environment
analysis part. The SWOT analysis should give the recommendation
how to convert weaknesses into strengths and threats into
opportunities.
Distribution channels
As the case company is a producer for consumer goods, here we only
discussed about the consumer distribution channels.
The figure 7 (Jobber 2004: 638) shows four alternative consumer
channels. Each one is described briefly below.
Figure 7: Distribution channels for consumer goods
Producer direct to consumer
Cutting out distributor profit margin may make this option attractive
to producers. This is kind of direct marketing such as direct mail,
telephone selling and internet online shop. This direct distribution
needs the producer has strong mar-keting position and financial

58. support in the target market and the producer need to know the
market very well.
Producer to retailer to consumer
This way is more economic for producers to supply retailers directly
rather than through wholesalers, meanwhile, consumers have the
convenience of viewing or testing the product at the retail outlet. E.g.
supermarket chain.
Producer to wholesaler to retailer to consumer
Wholesalers can buy in bulk form producers and sell smaller quantities
to numerous retailers such as small grocery or furniture shops. For
wholesalers, the threat is that the big retailers can buy directly from
producers and cut out the wholesalers.
Producer to agent to wholesaler to retailer to consumer
This long distribution channel is used by companies entering foreign
markets. The agent contacts wholesalers or retailers and receives
commission on sales.
The case company has successful entered into Southern European
market as a Foreign Direct Investor (FDI), the potential distribution
channel in Finland can be the same as the previous method as
producer to retailer to consumer.
PEST analysis
PEST analysis is very helpful tool for an organization to consider its
environment before beginning the marketing process. It involves
identifying the political, economic, social and technological influences
on an entity. Such external factors do not only promise additional
foreign earning for companies, it also involves further risks and
uncertainties. So it is necessary to have a look at all the factors in
order to proceed in a broader manner.
3.1.1. Political-Legal Factors
The political-legal environment has a huge influence upon the
regulation of businesses, and the spending power of consumers and
other businesses.’ Marketing decisions are strongly affected by
developments in the political and legal environment. This environment
is composed of laws, government agencies, and pressure groups that

59. influence and limit various organizations and individuals (Kotler, 2004,
P89).
According to Worthington, politics is a universal activity which affects
the business world in a variety of ways. Understanding political
systems, institutions and processes provides a greater insight into
business decisions and into complexities of the business environment.
Government interventions play an important role the way that a
company plans its marketing strategy. Government formal and
informal rules under which the companies should operate, such as tax
policy, employment laws, environmental regulations, trade restrictions
and tariffs and political stability (QuickMBA 1999- 2004)
3.1.2. Economic Factors
Economic risks relate to general or regional trends in economic
conditions that can have an adverse effect on a business organization.
Economic issues mainly include a centrally planned economy or free
market economy, controlling inflation, levels of economic growth,
reducing the unemployment rate, stable exchange rate, fiscal policy of
the government, monetary policy and a favorable balance of
payments. (Worthington & Britton 2003 p.83)
3.1.3. Socio-cultural Factors
Purchasing power is directed toward certain goods and services and
away from others according to people’s tastes and preferences.
Society shapes the beliefs, values, and norms that largely define these
tastes and preferences. The social and cultural influences on business
vary from country to country. Social factors to some extend have a
impact on the size and the marketing operation of the company. It is
very important that such factors are considered. Factors mainly
include: educational levels of the population generally, population
growth rate and age distribution among the society, occupational
structure of the population etc. (Worthington & Britton 2003)
3.1.4. Technological factors
Technology can affect many facets of an entity including the way it
conducts its basic operations, processes information, markets its
products, designs its manufacturing process and develops new
products. It is vital for competitive advantage, and is a major driver of
globalization. In the view of Janet Morrison, points should be
considered as the following: What is the level of technology education

60. and training which would influence the recruitment of skilled staff? Is
technological innovation encouraged? What funding is available, from
government and elsewhere, for technology development? How
computer literate is the society generally?
Figure 1: PEST Analysis
Source: Morrison, J, The international Business Environment,
page 24
3.2. Porter’s five forces of Competition Framework
In practice, the intensity of competition and the level of profitability
are determined by many varieties of an industry. Michael Porter of
Harvard Business School develops a very useful, widely used
framework for categorizing and analyzing these factors of an industry
known as Five Forces model. In essence, this model suggests that the
state of competition in an industry is determined by five basic
competitive forces: new entrants, suppliers, buyers, substitutes, and
competitors. (Bowman 1998)
Without an analysis, the key structure of an industry still remains
unclear. Hence, the five forces model provides a clearer view of the
industrial features that determines the strength of competitive
environment and industry profitability. This helps to assess the
industry’s attractiveness. (Porter 1980)
Knowledge about competitive force underpins the critical strengths
and weaknesses of a company and also highlights the industry trend
which yield either opportunities or threats. Each company has its own
unique strengths and weaknesses when it comes to handling the
industry structure which mostly changes gradually over time.
Therefore, industry fundamental analysis is a starting point for
strategic analysis as industry structure strongly influences the
formulation of competitive strategy. (Porter 1980) These five forces of
competition are based on three horizontal sources of competition from
substitutes, entrants and existed rivals and two vertical sources of
competition from the bargaining power of suppliers and buyers.
3.2.1. The barriers of new entrants

61. The threat of entry determines the degree to which the industry can
enjoy profit in the long run and protect the high profit levels of firms
in the market and reduce additional rivals from entering the market.
Mostly, new entrants cannot enter the new market with the same
condition of existing firms. The factors which are considered as
barriers of entry are, capital costs of entry, economies of scale,
customer brand royalty, government and legal policy, etc.
Empirical findings show whether entry barriers are effective in
opposing potential entrants depends on resources possessed.
However, effective barriers against new comers may be ineffective
against existing firms that spread from other industries (Charles and
Warren 2006).
Figure 2: Porter’s five forces of competition framework
Source: Charles and Warren p.74
3.2.2. The bargaining power of buyers