Micro-External Environment - Bedroom Furniture in Europe - Essay Example

? Micro-External Environment Bedroom Furniture in Germany Mintel Oxygen has reported that bedroom furniture products in UK can be segregated into various sub products such as fitted bedroom furniture and freestanding bedroom furniture. Analysis of features and benefits of portfolio and unique selling proposition (USP) of bedroom furniture can be explained in the following manner. Product Portfolio Features and Benefits Unique Selling Proposition (USP) Fitted bedroom furniture Fitted bedroom furniture includes built-in drawer, wardrobe, fitted bedrooms etc. Customers can place bed as an integrated part of fitted bedroom with the help of this product. Fitted bedroom furniture can help customers to place their bedroom furniture in systematic and space efficient manner. Non fitted bedroom furniture Non fitted bedroom furniture includes wardrobes, dressing tables, chests of drawers bedside tables which can be assembled by customers. The product offers the opportunity to assemble and customize bedroom furniture in accordance with the convenience of customers. (Source: Mintel Oxygen, 2012) Market line (2012a) has reported that bedroom furniture segment contributes a significant portion to furniture & floor coverings industry of Germany. Brief snapshot of the industry can be explained in the following industry. Market Value Value Forecast Category Segmentation Market Competition Value of furniture market (including living & bed room, kitchen, office and floor covering) in Germany is $47.5 billion. The market is growing at a rate of more than 1% and value of market is expected to touch $50 billion by 2016. Living room and bed room furniture contributes 51.7% of total value of the furniture industry in Germany. Market for bedroom furniture is highly fragmented due to presence of large number of retailers. (Source: Market line, 2012a) Value bracket for German bedroom furniture industry can be segregated on the basis of consumption pattern. Bedroom furniture contributes 13% of total market composition. Only 10% of buyers of bedroom furniture prefer high priced premier and luxury products in the country (United States Agency International Development, 2006). Brassington and Pettitt (2007) have stated that customer segmentation is required in order to define significant differences between customer groups which help marketers to design more focused marketing strategy. Customers can be segmented on the basis of their buying pattern. It has been reported by United States Agency International Development (2006) that two major customers segments are present in German bedroom furniture market such as 1- customers who prefer fitted bedroom furniture and 2- customers who prefer customized and non-fitted furniture. Following diagram can be used in order to segregate the customer group in accordance product consumption. (Source: United States Agency International Development, 2006) United States Agency International Development (2006) has reported that more than sixty percent of the transactions in the German bedroom furniture market can be characterized as business to consumer (B2C) type of transactions. Although the trend is different for categories like seating/upholster, parts etc. Political condition of Germany is stable which creates favourable environment for bedroom furniture companies planning to invest in the country. Lynn (2010) has pointed out that Euro zone crisis has decreased gross domestic product (GDP) growth of Germany which has affected the demand for furniture products in Germany. Lifestyle trend of Germany has segregated the consumer segment into “singletons” and “best agers”. Singletons are young professionals with high purchasing power who prefer to purchase customized non-fitted bedroom furniture due to space constraint while “best agers” are couples with children who prefer to purchase fitted furniture for their family home (CBI, 2006). German government provides specialized benefits like tax rate reduction, funding to manufacturing companies who emphasize on research and development activities but there is a very little opportunity to avail such benefits to non manufacturing companies like bedroom furniture retailers. Buyer power for bedroom furniture market is moderate due to two reasons such as negligible switching cost and high degree of fragmentation among retailers. Supplier power of the market is strong due to the fact that retailers are dependent on suppliers for diversifying design and quality in the offered merchandise. Threat of new entrant is high due to the fact that a new player can open a bedroom furniture retail outlet in Germany by spending minimum amount of infrastructural cost (Market line, 2012b). Homemade furniture, second hand furniture can be valid substitute of bedroom furniture which is being offered by retailers. There is possibility that customers can purchase furniture directly from manufacturers while there is another possibility that they might purchase second hand bedroom furniture from Freecycle Network. Hence threat of substitute is strong for bedroom furniture market in Germany. Bedroom furniture retail industry in Germany is hypercompetitive due to presence of both local retailers and big players like Bauhaus (Germany), Hofner Mobel (Germany), Beter Bed (Netherland) and IKEA (Sweden). Bedroom Furniture at Russia Market Value Customer Segment Market Competition Substitute Product Industry Trend Macro Environment Factor (PEST) More than $1.3 billion and market value will touch the mark of $2.4 billion within 2016. “Singletons” and “best agers” are two major customer segments. Nature of the market is consolidated due to the fact that the players like IKEA (Sweden), Beter Bed (Netherland) and Carpetright (UK) hold more than 50% of the market share. Freecycle Network is the major substitute to traditional brick and mortar retailers. Members of Freecycle Network can sell old and second hand furniture to other members through online platform. Online retailing of both fitted and non fitted bedroom furniture is the latest trend in Russia. Volatile economic condition of Russia has decreased spending capacity of customers which results in decreasing the demand for high priced product like bedroom furniture. (Source: Market line, 2012c) AMA Research (2012) has reported that UK domestic bedroom furniture market contributes 12% of furniture market in the country. The research firm also stated that delivery channel for UK bedroom furniture market comprise of independent retail outlet, furniture multiples, specialist stores, catalogue merchandiser, variety stores, departmental stores, online mail order channels etc. It is evident from the above analysis that market composition of UK, Germany and Russia are almost similar hence UK based bedroom furniture companies can follow their domestic marketing strategy in foreign shores like Germany. Saunders et al. (2009) have stated that every analysis should be backed by sufficient amount of primary and secondary research. The study has used various secondary databases such as Market line, Mintel Oxygen in order to analyze market condition for bedroom furniture retailing in countries like Germany and Russia. The researcher has also used case studies of different companies like IKEA, Beter Bed etc in order to address pertaining issues of the assignment. Reference AMA Research., 2012. Domestic Bedroom Furniture Market Report - UK 2012-2016 Analysis. [online] Available at: [Accessed 14 January 2013]. Brassington, F. and Pettitt, S., 2007. Essentials of Marketing. 2nd ed. London: Prentice Hall Financial Times. CBI., 2006. The Domestic Furniture Market in Germany. [pdf] Available at: [Accessed 14 January 2013]. Lynn, M., 2010. Bust: Greece, the Euro and the Sovereign Debt Crisis. Hoboken, New Jersey: John Wiley & Sons. Market line., 2012a. Germany - Furniture & Floor Coverings. [online] Available at: [Accessed 12 January 2013]. Market line., 2012b. Germany, In-depth PESTLE Insights. [online] Available at: [Accessed 14 January 2013]. Market line., 2012c. Eastern Europe - Furniture & Floor Coverings. [online] Available at: [Accessed 14 January 2013]. Mintel Oxygen., 2012. Bedrooms and Bedroom Furniture – UK. [online] Available at: [Accessed 12 January 2013]. Saunders, M., Lewis, P. and Thornhil, A., 2009. Research Methods for Business Students. 3rd ed. New Jersey: Pearson Education. United States Agency International Development., 2006. EU Furniture Market Study – Summary. [pdf] Available at: [Accessed 14 January 2013]. Read More