The Indian textile industry is one of the oldest and most significant industries in the country.

It accounts for around 4 per cent of the gross domestic product (GDP), 14 per cent of industrial production and over 13 per cent of the country's total export earnings. In fact, it is the largest foreign exchange earning sector in the country. Moreover, it provides employment to over 35 million people. The Indian textile industry is estimated to be around US$ 52 billion and is likely to reach US$ 115 billion by 2012. The domestic market is likely to increase from US$ 34.6 billion to US$ 60 billion by 2012. It is expected that India's share of exports to the world would also increase from the current 4 per cent to around 7 per cent during this period. Textile industry provides one of the most fundamental necessities of the people. It is an independent industry, from the basic requirement of raw materials to the final products, with huge value-addition at every stage of processing . Infact , it is estimated that one out of every six households in the country directly or indirectly depend on this sector. Here we analyze the sector's dynamics through Porter's five-factor model. 1) Threat of New entrants Indian Textile Industry is very dependent on personal contacts and experience. The new actors would have to bring some kind of client base along with the new establishment. Product differentiation may constitute a barrier of entry as manufacturers are heavily dependent on references and word of mouth. Without any established client portfolio it is difficult to attract, endure increased costs in creating sample collections to show potential customers. Hence, in startup phase costs are not only associated with the manufacturing required but also with the costs for designers and creating samples. In the sense of reference dependency, barriers of entry are considered as very strong. As the new entrant has limited experience in textile manufacturing and there are no built up relationships with customers, they might experience disadvantages relative to the established competitors. Governmental policies do affect the business environment to some extent. An example of this is subsidies, which are offered to companies establishing production in certain regional areas. In addition to these potential barriers of entrance, new entrants may have second thoughts about entering the new market, if existing manufacturers may retaliate on new entrants. The Indian textile industry though, has such a large population of manufacturers so any new actors may hardly be noticed by the competition, which minimizes the risk for retaliation.

the supplier group lacks switching costs and has a low level of product differentiation. Asian countries such as India. And Thus. The large number of available suppliers in India gives an initial indication of a weak bargaining position for the supplier group. India. This leads to great possibilities for textile manufacturers to scout the supplier group for best terms and prices for production. in particular. Hence. mainly due to rapidly changing social and economic structure of the countries worldwide. . Hong Kong and Japan have emerged as major players in this particular industry. Hence. the bargaining power for the Customer is improved. US and European markets dominate the global textile trade accounting for 64% of clothing and 39% of textile market. Differentiation can be considered as especially important in the Indian textile industry since contracts are usually set on short-term basis and are rarely set more than six months ahead. In past few years. For that reason. India's textile export (at US$ 15 bn in 2005) is expected to grow to US$ 40 bn. wherein it has competitive edge against its neighbors. As a result. capturing a market share of close to 8% by 2012. Additionally. the bargaining power of customers is strong. With the dismantling of quotas. Although China is likely to become the 'supplier of choice'. Differentiation is accomplished either by quality or service. there is a need to tie the customer to manufacturers without the need of explicit contracts. There has been increase in production and supply of textile products in last few decades globally. mainly due to their changes on economic front and infrastructure developments. is likely to benefit from the rising demand in the home textiles and apparels segment. Such behavior weakens the bargaining power for suppliers and as a result pushes prices down and makes prices similar among suppliers. it is of importance for a producer of apparel to differentiate their products or production so it will not compete with price as primary mean. 3) Bargaining power of suppliers (supply scenario) India is a country where we have numerous players in textile industry which all are varied in terms of size and power.2) Bargaining power of customers (demand scenario) Global textile & clothing industry is currently pegged at around US$ 440 bn. other low cost producers like India would also benefit as the overseas importers would try to mitigate their risk of sourcing from only one country. global textile trade is expected to grow (as per Mc Kinsey estimates) to US$ 650 bn by 2012 (5 year CAGR of 10%). manufacturers can contact a large number of suppliers and play suppliers against each other. The two-fold increase in global textile trade is also likely to drive India's exports growth. especially after the removal the trade related tariffs and non tariff barriers in 2005. china.

Hence products within the apparel segment can act as substitutes but the general conclusion still stands. By this process the supplier obtains knowledge on what customers downstream in the value added chain demands. An example of this is how suppliers and manufactures interact in activities such as research and development (R&D). there’s no substitute to apparel. Hence.An advantage which the Indian Suppliers group have capitalized on is. when there are recessions in the business cycle apparel prices will drop significantly in price. 4) Threat of substitute products When using such a broad term as Textile. For example. Due to their ability to integrate forward in value added chain. Of course. textile as a perishable product group is in the risk of temptations to cut prices when demand slackens. they have achieved a better bargaining position towards textile manufacturing. the overall rivalry within the industry gets companies to expand their customer base in order to keep profits up. there are variations in types of clothing and material. As previously seen. there are obvious reasons for identifying substitute product groups proves difficult. Deep relationships between manufacturers and suppliers illustrate how important the textile manufacturing industry is for the supplier group. . Additionally. It is a massive sector with thousands of companies producing apparel. 5) Competitive rivalry within the industry The textile manufacturing segment in India is made out of numerous manufacturers which all are varied in terms of size and power. companies in the textile and apparel sector have established forward to create vertically integrated company groups. It is therefore reasonable to believe that such expansions may occur on the behalf of competitors if possible. and thereby increase the rivalry in the industry. Both these factors exemplify and indicate that the rivalry between manufacturers is high. Variations in textile segment can also be identified as trends in fashion and styles. The apparent high growth rate of total textile exports indicates that the rivalry between manufacturers is low. The growth rate is high in some product segments but even negative in others. As Indian apparel manufacturers are pressured to lower prices in order to stay competitive with companies abroad. the rivalry between apparel manufacturers is diverse since they enjoy different growth rates.

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