1. Do a 5 Forces analysis of the office furniture industry.
In Porter’s Five Forces Model, the forces are listed as Risk of Entry, Bargaining Power of Suppliers, Bargaining Power of Buyers, Threat of Substitutes, and Rivalry among Established Firms. For Herman Miller, the rivalry between the established firms is high, and the most important force in their industry. Design is the key feature in the furniture industry, so the company that can come out with new and favored designs will win out in market share and profits. The company that is able to continually win the design battle will have the opportunity to establish brand loyalty and clout, creating a buffer for future downfalls in the economy, entry of new
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Also, the retention rate remains high, and therefore the company reduces costs associated with the replacement of workers with new hires. During the economic downturn of 2003, Herman Miller dropped its policy of life long employment and began a process of laying off workers. Obviously, this was done to minimize costs. However, Herman Miller explained this to their employees in such a way that workers felt moved and understood that this was necessary act for the company to do. During the economic downturn in 2009, Herman Miller cut wages of all employees by ten percent. The company laid off another fifteen percent of its employees, and suspended 401k benefits. However, due to its ability to turnaround, these cuts were ended within a year. Another way to minimize costs it lower production costs. As such, Herman Miller has a lean or just-in-time inventory system that keeps inventory costs low. Also, many of the component parts are outsourced to other companies. This trims down the production process as well as lowers the amount of inventory needed. Production at Herman Miller is assembly based, which keeps manufacturing time to a minimum and increases inventory turnover. Parts come preassembled to be assembled into the final product. Herman Miller should continue to minimize costs whenever the opportunity arises, or when the economy or market demands it. To continue with its JIT