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Herman Miller Essay

1147 words - 5 pages

Herman Miller, Inc. is primarily concentrated in the business and institutional market. Herman Miller is one of the leading players in the US office furniture industry with a 12% market share. Over the last several years, the entire industry has experienced significant declines in sales due to poor macroeconomic conditions. However, Herman Miller has managed to outperform most of its competitors in terms of profitability, illustrated through strong operating margins and return on sales. Herman Miller has a strong reputation for high quality, innovative products, strong customer service, high customization, and reliability. This strong brand equity enables the company to ...view middle of the document...

With all of these factors, the overall Competitive Rivalry can be rated as High.

Threat of New Entrants
Herman Miller specializes in the design and manufacture of high-end office furniture. The company has established itself as a premium manufacturer of these products. With research and development costs being over $20 million a year, most companies are not capable of entering into this high end market. With the future of the industry currently looking to be on the downside due to prolonged effects of the recession, most potential new entrants will be driven away from investing into the office furniture industry. Also, Herman Miller’s high-end product line would be difficult for competitors to imitate due to high research and development costs, and moderately high capital expenditures needed to start up. These factors would determine a Low Threat of Entry.

Threat of Substitutes
There are a number of available substitute products in the office furniture industry. Customers can easily switch to another product because of price, service, or several other factors. These factors determine the Threat of Substitutes to be high.

Bargaining Power of Suppliers
The items used in healthcare furnishings are standard throughout the industry. Suppliers are plentiful and manufactures can easily switch suppliers.
Bargaining Power of Buyers
Customers of office furniture have a number of companies to choose from, and an even larger variation of products to choose from. Buyers can choose between a large range of prices and quality to suit their needs pertaining to office furniture. This would drive the Bargaining Power of Buyers to be high.

Key Success Factors
After performing an industry analysis, we have found areas where Herman Miller can increase their sales revenue. The key success factors include:
• Very low customer switching costs
• Many available substitutes for office furniture
• Increasing input costs

Internal Analysis
Herman Miller has a leading market position bolstered by strong brand equity. Its strong brand equity has enabled the company to leverage its brand across multiple lines of business, extending customer reach. Herman Miller is the third largest player in the office furniture industry and has 12% market share. The company has received number one rankings in five of nine attributes surveyed by “Fortune.” These include innovation, people management, use of corporate assets, social responsibility, and quality of products and services. Herman Miller’s brands are acknowledged for their sheer design and quality.
Herman Miller has a wide and diverse distribution channel covering multiple target markets. The company’s distribution channels consist of independent contract furniture dealers and licensees, independent retailers, owned contract furniture dealers, and direct customer sales. Overall, the company has 260...

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