1. Threat of new entrants: By providing numerous set of luxury and affordable furniture the company catered to a large set of audience. Moreover, through catering to every market segments along with offering furniture products at the lowest prices the threat from new entrants is eliminated as the company succeeded in construction barriers as regards to protecting its market share.
Bargaining power of suppliers: Through elimination of furniture wholesalers from the supply chain the company has successfully reduced the leveraging power of suppliers as the company has direct transactions with the furniture manufacturers. Thus the issues pertaining to wholesale transactions along with the subsequent commissions of wholesalers are mitigated.
Bargaining Power of Buyers:
Otsuka Kagu eliminated cost escalations through different sets of cost cutting measures; moreover the company sold products at guaranteed lowest prices and furthermore offered reduction in sales price of its furniture in order to match the lowest price offered in the whole of Japan. Through segmentation of product offered in its stores and by expanding the price range from low priced furniture to high priced ones, the company is able to prevent the buyers of furniture from exerting any form of pressure upon the company.
Industry competitors: The Company reduced the rate of completion both from existing competitors along with new entrants through robust supply chain mechanism ensuring timely delivery of furniture products. Moreover, the reduction in overall costs by elimination of wholesalers brought the breakeven point of the company lower than its existing set of competitors.
Substitutes: As the company manages to procure products both from national and international manufacturers, the substitutes in terms of furniture products are managed as the company offers both expensive lines of luxury products along with low priced line of furniture.
Through implementation of aforementioned strategies Otsuka Kagu was able to mitigate the risks arising from suppliers of products as well as addressing issues of cost management.
2. Nitori has had an effective product procurement strategy in place ahead of Otsuka Kagu’s decision to get supplies directly from the manufacturers. Moreover, Nitori realized the price difference of western style furniture as compared to Japanese furnishing products and decided upon importing such products from abroad. In addition the company focused upon developing customized set of furniture from its manufacturing plants in Indonesia and Vietnam. While Otsuka was reeling under the aftermath of global financial crisis, Nitori availed the benefits of a favorable exchange rate towards importing goods at a reduced price tag. Further, Nitori availed quality management procedures through recruiting personnel with wide experience in quality maintenance of products.
While Otsuka focused upon bringing multiple sets of products under one roof, Nitori’s objective was to bring affordable western furnishings onto Japanese households. One focused upon catering to different market segments while the other focused on market creation for western furniture. Even though both companies has sizable market share, the revenue generating avenues differed.