QUESTION 1 Read the case below and answer the questions that follow. Case Barracuda Inc. Barracuda Inc. is a lamp-fixture manufacturer that is considering an entry strategy into the U.S. homefurnishings manufacturing industry. The existing landscape consists of many players but none with a controlling share. There are currently 2,500 home furnishings firms, and only 600 of those have more than 15 employees. Average net profit after tax is between 4 and 5 percent. While the industry still primarily comprises single-business, family-run firms that manufacture furniture domestically, imports are increasing at a fairly rapid rate. Some of the European imports are leaders in contemporary design. Relatively large established firms are also diversifying into the home- furnishings industry via acquisition. Supplier firms to the home-furnishings industry are in relatively concentrated industries (such as lumber, steel, and textiles). Retailers, the intermediate customer of the home-furnishings industry, have been traditionally very fragmented. Customers have many products to choose from, at many different price points, and few home-furnishing products have strong brands. Also, customers can switch easily among high- and low-priced furniture and other discretionary expenditures (spanning big-screen TVs to the choice of postponing any furniture purchase entirely).

Case questions a. Using the five-force framework, describe the opportunities and threats facing Barracuda Inc.as it considers entry into the home-furnishings manufacturing industry. Which threats are greatest to current incumbents? (10 marks)

b. How intense is competitive rivalry likely to be among incumbents of the home- furnishings manufacturing industry? (10 marks)