Porter developed these (5) forces to be a framework in where a business
strategic manager can gain that competitive edge over its rival firms. Even though it may be viewed as simplistic, it is a powerfool tool in understanding where power lies in any given buisness situation..With such understanding ,you can see where your strengths and weakness are and how you can avoid taking the wrong steps.
1) Threat of New Entrants.
2) Bargaining power of suppliers
3) Bargaining Power of Customers
4) Competitive Rivalry between existing players
5) Threat of Substitutes
Competitive Rivalry among Existing Players.
Competiton among existing rival firms is said to be very HIGH. They want to dominate the market, so therefore there prices are considered to be Price elastic.If they dont follow the law of supply and demand, they can loose out on market share.
Threat of New Entrants
To enter into such a market should be relatively easy. There aren't much Barriers, such as law and regulations. Hence to enter in such a market is LOW. However, we must take into account that there are brand preferences that customers would prefer. Every firm wants to be in fashion and if a firm takes and innovative approach, they can dominate the marketin coming periods. With regards to start up capital,it may be little costly because start up is labor and capital intensive.
Threat of Substitutes.
A customer can easily deviate and switch to a new footwear just as quick, depending on if the price is right, its uniqeness and its quality.With so much resources available it is very easy to replicate a firms own product.Hence threat of substitutes are HIGH.
Bargaining Power of Suppliers.
In this indusrty, Suppliers may have very little power. Suppliers have MEDIUM control.Lets just take UnitedStates as an example, with our seasons winter, summer , fall and spring, firms can choose to outsource or manufacture their own products.
Bargaining Power of Consumers.
Consumers have very HIGH control in this market. Because of so much substitues and competitors, consumers have a lot of options in where to puchase their products
5 comments:
As you mentioned consumers have lots of choices in the footwear industry but even with all the competition there is plenty of opportunities. Consumers are constantly looking for the new design, fashion and comfort in the footwear they purchase. The market is constantly searching for the next new thing. Although brand loyalty is high, fashion comes first. Therefore, if your product offers something new, consumers would not mind switching over. The footwear industry is very segmented; there are many choices depending on what type of footwear one is interested in purchasing. The industry is more focused on the product itself. Shoe stores generally follow a generic model it would be interesting to see if a new concept could be applied to the footwear industry.
I agree with amarilys, I think in modern day, the footwear industry is emphasizes shoes that are fashionable. The industry might be relatively easy to enter because anyone with a design and materials can make a shoe, however I think it’s difficult to remain in the industry. This is because the footwear industry fluctuates a lot; people are constantly looking for new styles, designs, better technology to make better shoes. People purchase on brand loyalty, so it is important to establish a brand name in the industry so when consumers want to purchase a particular type of shoe (ex. Sneakers), they’d think of a particular brand (ex. Nike).
I think the bargaining power of buyers is medium. It could be high because there are many, many different shoe styles buyers could purchase as an alternative without any switching costs. However, it could be low because sometimes people just find that one “perfect” pair of shoes that is irreplaceable, which may push them to buy the shoes.
Thanks for the analysis of the shoe industry. It is ironic how competitive this industry is and yet for some footwear they can charge ridiculously high prices for certain shoes. Just goes to show that even in a market that is highly saturated there can still be alot of business be made when targeting a niche.
As I was reading you Porter’s 5 on the footwear Industry I was asking myself, Why would anyone want to enter this Industry? Competition among existing rival firms is said to be very HIGH, Threat of New Entrants is Low and Threat of Substitutes is high.
Then I remembered a story that aired on CNN about the CEO of Puma. In the 1990’s the brand was going nowhere, now it’s one of the hottest brands of shoes out there. They had slowly started working with sports clubs and athletes to get deals. In a matter of years Puma was known as a athletic brand second only to Nike and Adidas.
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