Porter's five-factormodel.1)Threat of New entrants
Indian Textile Industry is very dependent on personal contacts andexperience. The new actors wouldhave to bring some kind of client base along with the new establishment. Product differentiationmay constitute a barrierof entry as manufacturers are heavily dependent on references and wordof mouth. Without any established client portfolio it is difficult to attract, endureincreased costs increating sample collections to show potential customers.Hence, in startup phase costs are notonly associated with the manufacturingrequired but also with the costs for designers and creatingsamples. In thesense of reference dependency, barriers of entry are considered as very strong. As thenew entrant has limited experience in textile manufacturing and thereare no built up relationships withcustomers, they might experiencedisadvantages relative to the established competitors.Governmentalpolicies do affect the business environment to some extent. Anexample of this is subsidies, which areoffered to companies establishingproduction in certain regional areas.In addition to these potentialbarriers of entrance, new entrants may havesecond thoughts about entering the new market, if existingmanufacturersmay retaliate on new entrants. The Indian textile industry though, has such alargepopulation of manufacturers so any new actors may hardly be noticed by the competition, whichminimizes the risk for retaliation
2)Bargaining power of customers (demand scenario)
Global textile & clothing industry is currently pegged at around US$ 440 bn.US and European marketsdominate the global textile trade accounting for64% of clothing and 39% of textile market. With thedismantling of quotas,global textile trade is expected to grow (as per Mc Kinsey estimates) to US$650 bnby 2012 (5 year CAGR of 10%). Although China is likely to become the'supplier of choice', other low costproducers like India would also benefit asthe overseas importers would try to mitigate their risk of sourcing from only one country. The two-fold increase in global textile trade is also likely to driveIndia'sexports growth. India's textile export (at US$ 15 bn in 2005) isexpected to grow to US$ 40 bn, capturinga market share of close to 8% by 2012. India, in particular, is likely to benefit from the rising demand inthehome textiles and apparels segment, wherein it has competitive edge againstits neighbors.Hence,the bargaining power of customers is strong. For that reason, it is of importance for a producer of apparel to differentiate their products orproduction so it will not compete with price as primarymean.Differentiation is accomplished either by quality or service. Differentiationcan be considered asespecially important in the Indian textile industry sincecontracts are usually set on short-term basis andare rarely set more than sixmonths ahead. Hence, there is a need to tie the customer tomanufacturers without the need of explicit contracts. And Thus, the bargaining power for theCustomeris improved.
3)Bargaining power of suppliers (supply scenario)
India is a country where we have numerous players in textile industry whichall are varied in terms of sizeand power. There has been increase inproduction and supply of textile products in last few decadesglobally, mainly due to rapidly changing social and economic structure of the countries worldwide. In