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Porter’s five forces

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Porter’s five forces

  1. 1. PORTER’S FIVE FORCES
  2. 2. Porter’s five forces: • Porter's five forces analysis is a framework for industry analysis and business strategy development formed by Michael E. Porter. • It determines the competitive intensity. It also determines the ultimate profit potential of the industry
  3. 3. Entry barriers Powerful suppliers Powerful buyers Substitute products Jockeying for position /Intensity of competitive rivalry
  4. 4. Apparel industry • Apparel industry primarily concerned with the production of yarn, and cloth and the subsequent design or manufacture of clothing and their distribution. The raw material may be natural or synthetic using products of the chemical industry.
  5. 5. The Industrial processes • Cotton manufacturing • Synthetic fibers- rayon nylons and polyesters • Natural fibers- sheep, goat, rabbit, silk-worm flax, Hemp, Jute sisal
  6. 6. In 2002, textiles and apparel manufacturing grew huge. The countries with the largest share of their exports being textiles and apparel were as follows: • Bangladesh: 85.9% • Macau: 84.4% • Cambodia: 72.5% • Pakistan: 72.1% • El Salvador: 60.2% • Mauritius: 56.6% • Sri Lanka: 54.3% • Dominican Republic: 50.9% • Nepal: 48.7% • Tunisia: 42.4%
  7. 7. Michel porter’s five competitive force model for Apparel industry
  8. 8. Entry barriers
  9. 9. • Economies of scale apparel industry is high • Industry will buy raw materials in bulk for further production when raw materials buy in bulk the average cost will reduce
  10. 10. Product differentiation : High • Product differentiation will be high for new entering industry in terms of brand identification, brand loyalty, quality, consumer service and advertising to overcome by strong existing one and who are first in market Eg :Harpa and calvin klein
  11. 11. Capital requirement: High • Apparel industry need huge capital requirement for plant & machineries, land, raw material and advertisement endorsing and startup losses.
  12. 12. • Comparatively the Government policies are few for apparel industry to startup , they required license for textile mill , import & export etc Government policy – Less
  13. 13. Conclusion for entry barrier • When the firm’s financial aspects are strong it can enter apparel industry easily, legal aspects play a role when the manufacturing is into textiles. • Over all entry barriers for entering into apparel industry is not so difficult too.
  14. 14. Powerful suppliers: • Suppliers refer to the firms that provide inputs to the industry. • Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of inputs like labour, raw materials, services, etc or the costs of industry in other ways.
  15. 15. The supplier’s power is high • When it is for unique product Ex: Fur • When it is for less product differentiation Ex: Silk
  16. 16. Conclusion • Suppliers have high bargaining power when the supply is for unique and un differentiated products.
  17. 17. Powerful buyers: • Buyers refer to the customers who finally consume the product or the firms who distribute the industry’s product to the final consumers. • Bargaining power of buyers refer to the potential of buyers to bargain down the prices charged by the firms in the industry or to increase the firms cost in the industry by demanding better quality and service of product.
  18. 18. Power for buyers • When they buy in bulk Ex: Manufacturer Whole seller • When they can find alternative suppliers: Ex: Levies, Spykar, Pepe jeans etc
  19. 19. Conclusion • Bargaining power of buyers is high when they by in huge quantity and also when there are more number of suppliers to the market
  20. 20. Substitute product • These are the alternative products/ brands satisfying the similar need of the customer • Substitute products affect when the switching cost is high Ex: Levis and Pepe jeans • Switching for quality, durability and status Ex: Luiviton, Gucci
  21. 21. Conclusion • Substitute product affects when the switching of brand takes place. • It also affects for the factors like quality, status symbol etc
  22. 22. Rivalry among current competitors • Rivalry refers to the competitive struggle for market share between firms in an industry. • Extreme rivalry among established firms poses a strong threat to profitability. • Competition is high in apparel industry
  23. 23. • Competitors include numerous apparel designers, manufacturers, distributors, importers, and retailers • Ex: competitors like • Nike, Puma, Reebok and Adidas • Biba and Global Desi • Peter England, Van Heusen, Louis Philip, Arrow, Allen solly
  24. 24. Conclusion • Apparel industry is facing huge competition • Due to such intensive competition survival of a new entrant is hard.
  25. 25. Final conclusion • Apparel industry is one of the booming industry • The above factors determine that the entry barrier for a new entrant in apparel industry is high. • It is difficult for a new entrant to enter and exit easily, because it will have to face the initial losses
  26. 26. • It is very difficult to match the service level of the established competitors of the market for initials. • Gaining the customer loyalty is too difficult and involve huge time, cost to achieve it.

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