South African Furniture Industry

The global furniture market was worth US$463 billion in 2013, with consumption growth expected to exceed 3% in 2014. Traditional furniture-making countries continue to account for over 70% of the global market. For example, the EU accounts for around half of the world's furniture production. This is possible because of its long-established production capacity, advancement in science and technology, funding, and rich management experiences. Developing countries and regions like China, Southeast Asia, Poland and Mexico have built upon their competitive advantages and have gradually obtained around 30% of the world market.

Furniture is a classic buyer-driven value chain, and for many product segments there are few scale or technology barriers to entry in production. As a result, lead or governing firms that set prices, delivery schedules and quality standards are to be found at the apex of the chain. To the extent that any firms in the chain are able to systematically situate themselves in rent-intensive segments of the chain, it is the buyers who largely control these entry barriers. However, since buyers will attempt to protect their own sources of rent, the assistance given to producers to support their upgrading is unlikely to give them the capability to encroach on the buyers' own rents.

The furniture value chain is becoming increasingly global. From the perspective of the buyer, there are four distinct globalizing categories. The first involves firms that have little or no part in production or in the organization and coordination of global production networks; they buy furniture either directly from producers in arm's length relationships, or through specialized purchasing firms. These are usually independent furniture stores, many of which are small or medium-sized and serve local markets.

These firms purchase directly from suppliers and often provide assistance with upgrading and sourcing. In addition, they make extensive use of marketing and brand names. The third group includes manufacturing firms in importing countries which purchase semi-finished components. The fourth group includes firms in importing countries that have production subsidiaries in low-income economics; Steinhoff of Germany being one example of such firm with a South African holding. 

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