The Importance Of A Firm Within A Business Network

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The aim of a firm within a business network is above the normal profit or at least normal profit which means when the revenue is equal to cost. Sometimes, a firm could achieve above normal profit through differentiation, lower cost and information advantage. A good performance in a company with high return have to think about the position in the business network which contains upstream such as find raw material, downstream which involves the process of make the raw material find during the upstream stage into a finished product. In this essay, IKEA will be the example to analyse the importance of good position in business network to a company.’ 2.0 Positioning in the network 2.1 Porters Five Forces According to Mindtools(2016) that five…show more content…
IKEA has relatively low supplier powers it has approximately 1380 suppliers in around 54 countries and IKEA has multiple sources in a modular fashion to implement procurement. During the production process, IKEA do not reply on less number of manufactures but all the design are completely modularized, so that different modules can be assigned to different manufacturers. By doing so IKEA could also reduce the risk and reduce the power of supplier. In addition, threat for a new entrant for a home and furniture industrial is important. There has no legal restriction for a new business to enter the market. However it is very hard for the new business to make profit from economics of scale as same as IKEA in the early stage of running business. IKEA has been became a successful entrant and perfectly turn the business into an international furniture market due to their good performance in the market ,at the same time, IKEA also stop other competitors from entering the market. Therefore, the threat for new entrant for IKEA is quite low. Next, as long as the bargaining power of buyers is concerned, there is a very low pressure for IKEA as in the U.K., most of the customers are very price sensitive which will definitely increase their buying power. Since IKEA has a lot of competitors in the U.K. which will cause IKEA simply make amendment on price such as John Lewis. Although
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