DOES NITORI’S ROAD LEAD TO THE WORLD?

-COMPARATIVE ANALYSIS OF NITORI AND IKEA-

KAORI AYABEDepartment of Regional Development StudiesSchool of Regional Development StudiesToyo University

Introduction

Furniture is one of necessary items for living our life. “Brown” and “square” were old image of furniture .Recently furniture becomes more stylish.Nitori is one of well-known furniture company, and will start their business in the U.S in 2013.I wonder if Nitori can make success in the U.S..

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Statement of the Problem

1. Will Nitori be a good global company like IKEA?2. How is the state of Nitori's balance sheet?3. Nitori has enough strategy to defeat rival

companies in the U.S?

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Research Methods

1. Financial Analysis of Nitori2. Ratio analysis between Nitori and IKEA3. Porter’s five forces analysis4. Specialized Strategy

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Overview of the Recent Trends of Furnishing Industry

Japanese Furniture IndustryThe Furniture Industry is classified into one of the Interior Industry segments. The home furniture market had been decrease with the decrease of demand for newly built homes and new families.

Furniture Industry Scale Ranking Based on Sales (Source: Yuho! Industry Ranking)

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Name Sales1 Nitori Holdings Co.,Ltd 3312 Nafco 220.33 Shimachu 159.54 Otsuka Kagu Co.,Ltd. 54.45 BALS Co.,Ltd. 33.36 CASSINA IXC. Ltd. 3.4

Billion Yen

Global Furniture IndustryThe European Union (EU) furniture industry accounts for about half of the world's furniture production.The world furniture industry has been growing.The furniture industry is expected to grow by 20 per cent a year especially India, Brazil and Russia

Global Trade in the Furniture Sector (Source: Furniture, 2012)

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Overview of Nitori

Founder: Akio Nitori from HokkaidoEstablished: in 1967 in SapporoStore: 212 stores in Japan, 5 stores in Taiwan and will start

business in LA, the U.S in 2013 Vision: To present Japan and the whole world with the abundant home decoration that is as splendid as that of Europe and the U.SSPA (Specialty Store Retailer of Private Label Apparel): meaning a company conducts all processes in-house from acquisition of raw material to manufacturing, distribution, sales and consumption 7

Overview of IKEA

Founder: Ingvar Kamprad from SwedenEstablished: in 1943 in AgunnarydStore: a total of 287 stores in 26 countriesVision: to create a better everyday life for the many peopleFlat-Packing System:

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1. Financial Analysis of Nitori

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Ratio of Nitori and Japan Furnishing Industry Average in 2011 (Source: Nitori’s Annual Securities Reports of 2012, Zenkoku Zaimu Shohyou Bunseki Toukei)

2. Ratio analysis between Nitori and IKEACompare these ratios: profitability, liquidity, and solvencyProfitability Niotri ≒ IKEASolvency Nitori ≒ IKEA Big difference in Liquidity ratio (Current ratio) Possible reasona)IKEA keeps currents assets to deal with the risks and issues coming upb)Europe financial system lead the global company to have current assets (Ex: H&M)

11Nitori 91.82% 82.01% 70.75% 88.85%IKEA 169.55% 177.20% 176.47% 196.09%

3. Porter’s Five Forces AnalysisFive Forces

Bargaining Supplier’s Power

Bargaining Power of Buyers

Threats of New Entrants

Threats of Substitutes

Rivalry within the Industry

LOW

HIGH

HIGH

LOW

HIGH12

Generic Strategy Cost Leadership and Differentiation

Nitori: SPA IKEA: Flat packing system

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4. Specialized Strategy

Logistics:6 distribution centers→ 78 delivery centers→ stores

Quality Control:PDCA cycle

Sales Floor:

Wide, open space

Logistics:28 distribution

centers and 11 customer distribution centers in 16 countries.Design:

Scandinavian style Sales Floor:

Like a big labyrinth

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• Nitori • IKEA

5. Conclusion

How to compete with IKEA in the U.S?

Logistics system

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Thank you for your attention.

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18Location of Nitori’s Distribution Center in Japan (Source: Home Distribution and Tourism in Japan)

19IKEA Sales floor (Source: Intelligence of IKEA’s Furniture)

Nitori IKEA

Vision (Roman)

To present Japan and the Whole worldwith the abundant home decoration

that is as splendid as that of the Europe and the USA

To create a better everyday life for the many people

Layout of storeWide open space

Shopping time average 20 mins

Like a labyrinth with one primary pathResutaurant

Play room for kids

WarrantOffering 1-year or 5-years

quality assuranceOffering 5-years, 10-years, 15years,

and 25-years quality assuranseDesign Nitori head offi ce IKEA head offi ce

Designer Designers from Nitori FreelanceRight of Design Nitori is Holder IKEA is holder

Producer Nitori Partner Company

Country of OriginIndonesia, Vietnam,

China, JapanCountries of the world

Sales methoddisplay in the store and delivery

customer also can take away

Cash and Carry*(Some countries, including Japan, are able

to deliver to the customers)Assembling Finished Furniture Do It Yourself

Online Sale 〇×

(Some countries, however, sale online)

Distribution basesShanghai → 6 distribution centers in

Japan

28 distribution centers and 11 customer distribution centers

in 16 countries*Cash and Carry= buy product at the store and take away the purchase from the store

Summary of Nitori and IKEA (Source: Imura, 2012 and from This Study) 20