Herman Millar Inc. Essay Example for Free

Herman Millar Inc. EssayThe government agency furniture manufacturing industry market place in the United States is very emulous since many companies offering similar products. Companies compete primarily on price, product and service quality, differentiation, protrude, speed of delivery and customer service. Firms compete within each market segment and are pressured by growing competition from overseas manufacturers particularly from China and Vietnam. Six manufacturers-Steelcase, Herman Miller, Haworth, HNI, Kimball International and Knoll-account for approximately 60% of the U. S. office furniture market.The relief of the market is captured by a large number of small and privately owned businesses that conquestfully supply the local communitys retail demand. The large number of living companies definitely shaped the landscape of the Chinese market competition. Furniture manufacturing industry concentration has increased in last couple of age because many operators m icturate gone out of business. Following the downturn of US economy, high unemployment rates, take in created an intensely competitive environment for existing players faced with low margins and volatile stimulus costs, many underperforming operators were forced to exit the market.However, as the economy will recover, demand for new office furniture is expected to increase, expanding the number of companies over the five years to 2016. In conclusion, the intensity of rivalry is moderately high. Although current concentration of the industry is a low, the trend of the industry is to become more competitive in future. This would diminish the potential future profit of section store industry. Threat of new entrants The barrier to entry in this industry are medium and are steady. In the US office furniture industry, the capital required to enter the industry is considerably higher.New operators entering the industry face various challenges, including existing and strong established distribution networks among operators and suppliers. To remain price competitive, the new operators need to establish strong supply relationships with manufacturers and wholesalers in order to secure good quality and low-priced stock. Since the concentration is expected to rise, it places an indirect pressure on new entrants that need to invest more in advertising to develop brand and market awareness. selling and promotional activity must exceed that of the existing players to build customer awareness and overcome retailer resistance.Furthermore, the productivity difference between the small-sized companies and the large-sized companies is very large. The cabal of all this evidence indicates that the entrant barrier into the US office furniture industry is relatively high. Bargaining power of Supplier The intense internal competition force for resources among the large number of manufacturers pushed the bargaining power of suppliers to the most significant influence on domestic furniture industry. This refers primarily to suppliers of most important goods i. e. blunt material and electric power, which are used in intermediary consumption during furniture manufacture.Purchases of raw materials are the largest expense for the Office Furniture Manufacturing industry, accounting for about(predicate) 43. 7% of industry revenue. This proportion is typical for manufacturing industries, since operators require significant raw materials to produce final outputs. Input materials used for office furniture include hardwood, such(prenominal) as oak, cherry and maple wood plywood and veneers steel glass plastic and glue. During the five years to 2011, the prices of these inputs have been volatile, making it difficult for manufacturers to anticipate future spending and reduce costs.In general, rising commodity prices have negatively affected the industry, increasing purchase costs for manufacturers. Bargaining power of buyers According to the research of IBIS World, department store sales depend heavily on the monetary health of the consumer sector, including per capita expendable income. During periods of economic recession and decreasing income of people, consumers cut their spending by delaying purchases or substituting brands products with lower level products. This is heavily influenced by the unemployment rate and general economic growth.In the periods of strong economic activity peoples disposable income increase, and vice versa. Threat of substitutes Furniture has been used for thousands of years and built mostly of wood. There is little evidence indicating that wood furniture will be exclusively replaced by some other material in the foreseeable future. In the industry of furniture manufacture probability of substitutes is almost impossible. Current global trends have a favorable influence on increase in demand for furniture, due to ever faster obsolescence and shorter furniture lifetime, i. . due to frequent changes in design and m anufacture technology. Possible threat of trend changes exists, i. e. furniture made from other materials than wood, that is, various metals, plastics and glass. However, despite the reduction of wood in furniture manufacture in the past years, wood is expected to stay one of the most important raw materials for furniture manufacture, because of its advantages when compared with other materials. Question What are the driving forces and the key success factors in the industry?Answer Having contacts within key markets It is preferable that manufacturers have established links with a number of customers, including wholesalers, contractors and retail outlets, rather than having one or two that account for the majority of their business. Guaranteed supply of key inputs Established links with key suppliers enable a steady flow of key inputs and price locks, which may provide cost savings for bulk purchases. Flexible production processes Furniture items are often custom-made.Producers mus t be able to adjust products to suit individual requirements. Adapting to changing customer preferences Goods produced should reflect current trends favored by consumers in order to remain competitive. Highly trained workforce Staff is required to pile up office furniture efficiently and provide quality workmanship. Question How have the caller-ups values shaped its strategy and approach to strategy exertion? Provide illustrations of how these values are reflected in company policies. AnswerQuestion What is Millers strategy? Which of the five generic competitive strategies most tight fit the competitive approach that Miller is taking? What type of competitive advantage is Miller trying to achieve? Answer They focus on a growth strategy, through innovative products and production processes. Reinvention and renewal. They survived the Great Depression and multiple recessions, recovered from the dot-com bust and were able to continue expanding overseas. They adapted to save the com pany, by introducing new designs.In 1996, Herman Miller began an aggressive drive to reinvent its operations and established a fruitful relationship with the Toyota Supplier Support Center. Unique to the office furniture industry, the relationship enabled the company to adopt and implement world-class, lean manufacturing processes based on the Toyota Production System principles. Through the Herman Miller Production System (HMPS), the company dramatically reduced manufacturing square footage and inventories, cut lead times for standard product from 8 weeks Question What is your overall appraisal of Millers financial performance? Answer