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BARGAINING POWER OF BUYER.

ANALYSIS FOR FOOTWEAR INDUSTRY Assess the power of Buyers Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry.

Determinants

Defining Question

Explanation

Concentration

Are buyer fragmented or highly concentrated (i.e. do a few monopolize the market?) If they are few and concentrated, then buyer bargaining power is typically high. Does your product buyers purchase represent a significant fraction of the buyers cost? If so, buyer bargaining power is typically high. Is the buyers product or serce a commodity? Is there branding critical to success? Is there any actual versus a perceived difference? If the product are standard or undifferentiated, buyers typically have high bargaining power Are Switching cost low or high? If buyers face few switching costs, their bargaining power is typically high. Do buyers earn low profits? If so they are typically more likely to bargain hard Can they make what you make themselves? Is there a threat of backward integration? If so the threat is typically high Is the product you offer important to the quality of the buyers product or services? If not buyer power is typically high 1 5 2

Buyers bargaining power is high because of having different varieties and large suppliers in numbers. 3 4

Product Cost versus Total Purchases

N/A

Product Differentiation

Buyers always try to find different product from suppliers.

Switching Costs

Profits

Backward Integration

N/A

Impact on Quality/ Performance

As the suppliers are too much in numbers so switching cost would be low. They are earning enough profit from their suppliers Investment and risk is high so buyers will not go for backward integration. Buyers do not compromise the low quality

Buyers Information

Does the buyer have complete information on the product he may purchase? If so buyer power is typically high

Buyers can have complete information because of the technology.

Result: Whenever bargaining power of buyer will high, competition between the competitors will be higher as well in order to provide quality and low price. Same case is here in shoe industry, there are many organized and unorganized brands exist in markets which are offering different variety and quality.

BARGAINING POWER OF SUPPLIERS.


ANALYSIS FOR FOOTWEAR INDUSTRY

Determinants

Defining Question

Assess the power of Buyers Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry.

Explanation

Concentration

Are you supplier are fragmented or highly concentrated? (do a few monopolize the market)? If an industry is dominated by a few companies, the suppliers are typically powerful. Are there any substitutes for your supplier products? If not suppliers are typically powerful.

Presences of Substitute inputs

Importance Relative to Customer.

Is your industry an important customer the supplier group? If not suppliers are typically powerful

Suppliers play a major role but they are many in numbers so they cant monopolize the market. There are substitutes of product e.g. artificial leather etc but to some extend these can be used. Industry is important to suppliers, because suppliers are large in numbers.

Impact on Quality/ Performance

Is your supplier product essential to the quality or performance of your business? If so suppliers are typically powerful Is the suppliers product or service a commodity? Is branding critical for success? Is there an actual versus a perceived difference? Suppliers with differentiated products typically have more bargaining power then suppliers selling commodities.

Product Differentiation

Here quality is essential, so some times suppliers can take advantage. Buyers use to ask for the differentiation of product, so buyers sometimes would be powerful in bargaining. It would be costly but not enough because of large number of suppliers but would not easy for every time to switch. This is not a big threat from suppliers, because it involves high risk and heavy investment.

Switching Costs

How costly is it for you to switch from suppliers product? If switching costs are high, suppliers are typically more powerful.

Forward Integration

Can the supplier produce the product you make? Is there a threat of forward integration? If so, suppliers are typically powerful

Result: suppliers can be powerful by increase the prices of materials, but when they are large in numbers and they face high competition between their competitors then the situation can be different. Same situation goes with the shoe industry here buyers are more powerful comparing with suppliers.

INTENSITY OF RIVALRY
ANALYSIS FOR FOOTWEAR INDUSTRY

Determinants

Defining Question

Assess the power of Buyers, Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry.

Explanation

Industry growth

How slowly or quickly is the industry growing? If it is a slow growth industry, there is likely to be more intense fights among rivals for market share.

Fixed Cost

Does your business have a high fixed cost? If so, rivals will typically be tempted to cut prices to ensure sales, thus posing a significant threat

Intermittent Overcapacity

Product Differentiation

How frequently is there a problem of excess capacity in your industry? Are there periods when there is excess capacity? Overcapacity often leads to price cutting. If so, there is typically a threat. Is your product or service a commodity? Typically the closer the product is to being a commodity the fiercer the intensity of rivalry. Is branding critical for your Rivals success? Is there actual vs. perceived difference? Brand identification by buyer reduces the threat of rivals. How costly is it for your buyer to switch between providers? Low

Demand of footwear is high but due to some problems like energy crisis, lack of technology and bad quality of raw material etc industry growth rate is slow. Fixed cost is high due to problems given above so competitors like china shoe manufacturer offer low cost and gets advantage over rivals. As demand is high and industry growth rate is slow so over capacity is not a threat Because of many competitors exist in market differentiation is a major threat. Its not critical because many unorganized brands doing businesses and earning profits. Market is vast and lots of variety

Brand Identity

Switching Costs

Concentration and balance

switching costs typically increase rivalry. When a customer can freely switch from one product o another, companies must struggle to capture and retain customers. Are there a large number of firms of equal size and power, all chasing after the same customer? If so rivalry is typically intense Are there competitors with different strategies and frame of reference? When competitors are diverse it is more difficult to establish the rules of game, so the threat from competitors is greater.

exists in market so switching cost for buyers will be low

Diversity of competitors

Corporate Stakes

Exit Barriers

How high are the rivals corporate stakes? What do rivals stand to lose (e.g. profits, decision-making power)? Strategic stakes are high when several firms in an industry take great risks to expand, diversify and gain market position. The intensity and volatility of the rivalry increases when firms select alternative strategies that may sacrifice short-term profitability. Are exit barriers low or high? High exit barriers make it costly to abandon a product. E.g. when an organization has specialized assets that cannot be easily sold off.

There are some brands and firms targeting almost the same target market Competitors are diversified, e.g. some of them offered soft leather shoes like hush puppies, some offered low cost product like seervis, bata, etc. Sometimes companies sacrifice their profits in order to compete, e.g. they invest lot of money on advertisements, new technology and other alternatives. Exit barriers for well established and well organized brands are always high because of their image, their assessts and money which they already invested.

Result: As the entry barriers are low so there are many competitors exist in market. Due to the countrys current situations industry growth rate is slow and for that competition is very fast because of multinationals players. Though the entry barrier is low but the exit barrier for organized brands is high so they will have to stay in market and will have to utilize their all resources in order to compete.

THREAT OF NEW ENTRANTS.


ANALYSIS FOR FOOTWEAR INDUSTRY Assess the power of Buyers. Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry.

Explanation

Determinants

Defining Question

Economies of Scale and experience

Does successful entry require that companies have significant economies of scale or experience? Barriers to entry are typically high when a aspiring company must cut costs in order to compete in a large-scale and/or experienced market.

Product Differentiation

Brand Identity

Do new entrants need to differentiate by spending heavily on advertising, customer services or product differences to overcome existing customer loyalty? Product differentiation is typically a barrier to entry. Do new companies need to spend heavily on brand identification to gain customers loyalty? Brand identification is typically a barrier to entry

Switching Costs

Does the buyer have to pay to switch from one suppliers product to another? High switching costs are typically a barrier to entry.

Capital Required

Does the new company need to invest large financial resources (relative to

As the entry barriers are low due to minor political and government influence, market is attractive in term of profit and new entrants must have experience in order to compete in market. In order to get the sustainable competitive advantage, product should be different from others. There are many unorganized brands exists in the market and they are earning high margin profit, so brand identity is not so important as quality is important. Though the buyer will have to bear some switching cost but as the market is very vast and there are many suppliers exist in market so could be benefit for the buyer as well. There are many unorganized brands

market size) in order to compete? Huge capital requirements are typically a barrier to entry

Access to Distribution

Do the new comers have access to distribution channel for product or services? Difficult access can typically be a high barrier to entry.

Cost advantage

Government policies

Expected Retaliation

Established companies have cost advantages over new rivals because they may have already obtained proprietary product technology, access to raw materials, favorable locations and government subsidies. In addition, established company may have passed a learning or experience curve. Such costs advantages are typically a barrier to entry for a new entrant. Government policies, such as antitrust regulations, can help to preserve or limit competition. Such policies can typically create a barrier to entry New entrants may decide not to enter a new market if existing firms are likely to retaliate. Established firms may have a history of retaliating, resources to fight back, a strong commitment to the industry, and illiquid assets employed in the industry. Also, if the industry is growing slowly, they may retaliate against new players who would threaten sales growth.

are entering in market and doing their businesses where there is no major brand exist. Entry barrier is low and new entrant and unorganized brands are opening their outlets in different areas. Already established companies have cost advantage but as I said there are any competitors exist in market so would not b easy for established companies to earn high margins. Almost nil political and government influence Established companies competing organized brands and fortunately for new entrants there are opportunities to open their businesses where there no major brand exist.

Result: As there are low entry and exit barriers for the new entrants, so there is edge for new entrants to enter in market and establish their business where there is no major competitor.

THREAT OF SUBSTITUTION
ANALYSIS FOR FOOTWEAR INDUSTRY Assess the power of Buyers Circle one of the following. 1 = low, 5 = high, or N/A if it doesnt apply to your industry. N/A

Determinants

Defining Question

Price performance

Switching Cost

Does the substitute offer a better price or performance? A substitute product or service is a threat to competition when it offers a higher performance at a given price or the same performance at a lower price. Is it costly for buyer to switch to the substitute product? When buyers must pay more to switch to a substitute the threat of substitutes is low.

As there is no threat of substitute to the footwear industry

N/A

Result: There is no threat of substitute to the footwear industry. Consumer will have to wear shoes rather than anything else.

Strategic Group Analysis:


Businesses that sell similar products or services to the same segment of the population are in a strategic group but the businesses would be in different strategic groups because of divergent customers. In this mapping there are some companies/brands we have identified for mapping. These are four strategic groups. In the top left corner Fayva shoe brand exists, which provide expensive shoes for elite class. They focus on a very narrow product market. They face little bit challenges from most of the international brands but little rivalry from other strategic groups. In the lower left corner an unorganized brands fall. They face little competition from the other strategic groups in terms of lower price and lower quality. They also target a narrow market. In middle of map, we have showed two brands named Borjan and hush puppies, who offer good quality product with high price and average in breath of product line. They face completion little bit more than the other groups. At the right side of the map there are other companies who offer different and broad range of products but with the different price range. These firms face a lot of competition within this group as well as from the other which is nearby.