Porter’s Five Forces – A Practical Example

Okay. We’re doing great! So far, we’vecovered a great deal of important topics. We learned about the role of Strategyabout the purpose of a company’s goals mission and vision evidences about thedifferent stages of the industry life cycle model and about Porter’s fiveforces framework that’s awesome in this lesson we will reinforce what we’velearned about Porter’s five personnels simulation by applying it in practice our assignment willbe to analyze the world sportswear industry so let’s get started thesportswear industry is a mature market that proves no clues of refuse peopleneed apparel and desire wearing sports apparel in their free time both outsideand at home in the last few years the industry has suffered a continuous growthand the total market is expected to reach 180 billion dollars by 2020globalization financial increment positive fad and mode directions play a positiverole for the current growth the market is experiencing so if we have to imaginethe industry life cycle graph we verified earlier the industry is in this phaseright here where the market is still increasing but the industry is in itsmature phase and the companies in it are fruitful and generate stable cashflows the pasty is still changing and most companionships are happy right let’s take offour rosy glass now and look at the competitive environment in thesportswear industry shall we as you remember that’s the security forces at the verycenter of the Five Magnetisms pattern these are the companies contesting in theindustry there are a few mentions conspicuous at a global level NikeAdidas Asics Under Armour Puma and Lululemon are some of thebigger firms out there Nike and Adidas owned several other notable brands thatyou’ve probably heard of Nike owns speak while adidas owns the Reebokbrand there are probably thousands of other smaller firms vying at a locallevel proof that the industry is not converged is in its concentrationratio previously we learned media concentration fraction of the first fourplayers in an industry of over eighty percentage signifies the industry is highlyconcentrated well this is not the case forthe sportswear marketplace the combined share of the top four players in this chartaccounts for 38% of the total industry turnover the two world Beings in thisindustry are Nike and Adidas with a market share of twenty point one andtwelve top four percent respectively Asics and Under Armour terminated the topfour roster but have a significantly lower amount of sales 2.7 percent and 2.6 percentage of the total market the fragmentation of this busines and thepresence of a few cases global Whales necessitate the other challengers can compete withestablished global firebrands at a local level exclusively as with any evolve marketbrand names and sell acts toy an important role and smaller companiescannot keep up with the level of investments Nike and Adidas can affordthere isn’t a price for in service industries as the two top participates offerdifferentiated produces sold at a premium compared to the goods sold bylocal creators the driving force in this competition is symbol recognitionand tone insight the dangers of brand-new entrants is relatively small a newcompetitor isn’t likely to daunt supported participates Nike Adidas Asicsand Under Armour have invested billions of dollars in commerce communicationtheir firebrands are global therefore a brand-new entrant with substantial ends mustspend a lot of money to compete in the market in addition the new company mustinvest in human capital in terms of designer team’s yield personnel andother employees who have the necessary know-how for the creation of sportsapparel sold worldwide not an easy assignment right so the barriers to entry aresignificant if we consider the global market nonetheless new companies will have amuch easier task if they want to compete at a local level local competitionrequires a limited amount of resources and usually it is much easier to accessexisting distribution channels at a local levelif a company aspires to be a world actor perhaps the way to do it is byentering a smaller niche of the market this requires a smaller investment andallows targeting a specific need of patrons we will explore this topicfurther in the marketing module of this course but it fixes sensefrom a tactical view – right do not attack a large and establishcompanies with a full-scale strike because this is too difficult toorganize and Finance instead as a brand-new competitor target a particular marketsegment of customers and try to win a significant market share there ok greatwhat about replacement produces are they a big threat to the sportswear industryyes and no there will always be demand for informal sportswear attire howeverchanging customer savor and modes may influence this demand in a negative waysportswear is trendy who knows if 10 years from now this will continue to bethe case obviously other dres components are a valid substitute for sportswearclothing but for now there isn’t significant persuade come through here from thisforce right the remaining part two actions we must examine are the bargaining power ofsuppliers and customers let’s start with suppliers the primary raw materialspurchased by sportswear makes are cotton other types of fabric ethylenesynthetic materials and rubber large business like Nike and Adidas canobtain cheaper rates from suppliers which leads to a better coststructure compared to competitors such as Under Armour who buy smallerquantities of these products so smaller companies may have a harder timesourcing raw material at a price that is competitive one channel to circumventthis issue is by using alternative cloths which means also coming up withan innovative make the number of suppliers in the industry is relativelyhigh therefore we can conclude this force isn’t creating too much pressurefor corporations operating in the industry what about the bargaining power ofcustomers caused this is a business to buyers market where end customers aremillions of parties we can say clients cannot negotiate prices however it isalso true-blue that there was still hundreds and houses operating in the market customersknow they have plenty of alternative so right now the labels launches globalplayers have differentiated their makes to create makes of highquality and invest heavily in label rec goal corporations understand this is amarket in which the connection between sports fans and athletics whizs is strongrecently Nike ratified a 500 million dollar lifetime contract with LeBronJames one of its most famous testimonials by creating brandedproducts market participants distinguish their label and relate tothe exemplary sport achievements of their testimonies is about to change the maindriving force in the client firm relationship in the sportswear industryis perceived value and label identification okay so in summary we can say thesportswear industry looks very good at the moment launched symbols like Nikeand Adidas do not face too much competition in a global level they havea good relationship with both suppliers and clients and are not threatened bysubstitute makes and brand-new entrants in the near term this will do for now weprovided a holistic analysis of the sportswear industry this is how we applyPorter’s five thrusts framework in practice an stunning practice wasn’t itthanks for watching

As found on YouTube

Book Now For Environmental Consultingl In Newcastle

Leave a Reply

Your email address will not be published.