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ANALYSIS FOR FOOTWEAR INDUSTRY Assess the power of Buyers Circle one of the following. 1 = low, 5 = high, or N/A if it doesn’t apply to your industry.
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 buyer’s purchase represent a significant fraction of the buyer’s 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 buyer’s product or services? If not buyer power is typically high 1 5 2
Buyer’s bargaining power is high because of having different varieties and large suppliers in numbers. 3 4
Product Cost versus Total Purchases
Buyers always try to find different product from suppliers.
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
there are many organized and unorganized brands exist in markets which are offering different variety and quality. 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. Are there any substitutes for your supplier products? If not suppliers are typically powerful. Same case is here in shoe industry. Result: Whenever bargaining power of buyer will high. 5 = high. or N/A if it doesn’t apply to your industry.Buyers Information Does the buyer have complete information on the product he may purchase? If so buyer power is typically high 4 Buyers can have complete information because of the technology. artificial leather etc but to some extend these can be used. competition between the competitors will be higher as well in order to provide quality and low price. the suppliers are typically powerful. Industry is important to suppliers. BARGAINING POWER OF SUPPLIERS. ANALYSIS FOR FOOTWEAR INDUSTRY Determinants Defining Question Assess the power of Buyers Circle one of the following. .g. 3 Presences of Substitute inputs 3 Importance Relative to Customer. Is your industry an important customer the supplier group? If not suppliers are typically powerful 3 Suppliers play a major role but they are many in numbers so they can’t monopolize the market. because suppliers are large in numbers. There are substitutes of product e. 1 = low.
Same situation goes with the shoe industry here buyers are more powerful comparing with suppliers. so some times suppliers can take advantage. Buyers use to ask for the differentiation of product. . suppliers are typically powerful 3 Result: suppliers can be powerful by increase the prices of materials. Switching Costs How costly is it for you to switch from suppliers product? If switching costs are high. 4 Forward Integration Can the supplier produce the product you make? Is there a threat of forward integration? If so.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. 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. suppliers are typically more powerful. 4 Product Differentiation 4 Here quality is essential. because it involves high risk and heavy investment. so buyers sometimes would be powerful in bargaining. but when they are large in numbers and they face high competition between their competitors then the situation can be different.
Explanation Industry growth How slowly or quickly is the industry growing? If it is a slow growth industry.INTENSITY OF RIVALRY ANALYSIS FOR FOOTWEAR INDUSTRY Determinants Defining Question Assess the power of Buyers. 5 = high. Fixed cost is high due to problems given above so competitors like china shoe manufacturer offer low cost and gets advantage over rivals. there is likely to be more intense fights among rivals for market share. It’s not critical because many unorganized brands doing businesses and earning profits. If so. thus posing a significant threat 4 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. How costly is it for your buyer to switch between providers? Low 1 Demand of footwear is high but due to some problems like energy crisis. perceived difference? Brand identification by buyer reduces the threat of rivals. Circle one of the following. lack of technology and bad quality of raw material etc industry growth rate is slow. 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. 1 = low. Market is vast and lots of variety 5 Brand Identity 2 Switching Costs . 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. or N/A if it doesn’t apply to your industry. Is branding critical for your Rival’s success? Is there actual vs. rivals will typically be tempted to cut prices to ensure sales. 3 Fixed Cost Does your business have a high fixed cost? If so.
1 exists in market so switching cost for buyers will be low 4 Diversity of competitors 4 Corporate Stakes Exit Barriers How high are the rival’s corporate stakes? What do rivals stand to lose (e. new technology and other alternatives. 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. 5 Result: As the entry barriers are low so there are many competitors exist in market. companies must struggle to capture and retain customers. profits. bata.g. diversify and gain market position.g. e. Are there a large number of firms of equal size and power. so the threat from competitors is greater. Due to the country’s current situations industry growth rate is slow and for that competition is very fast because of multinationals players. Sometimes companies sacrifice their profits in order to compete.g. 3 There are some brands and firms targeting almost the same target market Competitors are diversified. 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. The intensity and volatility of the rivalry increases when firms select alternative strategies that may sacrifice short-term profitability. they invest lot of money on advertisements. decision-making power)? Strategic stakes are high when several firms in an industry take great risks to expand. E. Exit barriers for well established and well organized brands are always high because of their image.g. Are exit barriers low or high? High exit barriers make it costly to abandon a product. etc. when an organization has specialized assets that cannot be easily sold off. . e.Concentration and balance switching costs typically increase rivalry. their assessts and money which they already invested. When a customer can freely switch from one product o another. some of them offered soft leather shoes like hush puppies. some offered low cost product like seervis.
4 Product Differentiation Brand Identity Do new entrants need to differentiate by spending heavily on advertising. so brand identity is not so important as quality is important.THREAT OF NEW ENTRANTS. Do new companies need to spend heavily on brand identification to gain customers loyalty? Brand identification is typically a barrier to entry 5 1 Switching Costs Does the buyer have to pay to switch from one supplier’s product to another? High switching costs are typically a barrier to entry. product should be different from others. market is attractive in term of profit and new entrants must have experience in order to compete in market. 1 = low. There are many unorganized brands exists in the market and they are earning high margin profit. 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. 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. In order to get the sustainable competitive advantage. There are many unorganized brands . Circle one of the following. 2 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. or N/A if it doesn’t apply to your industry. ANALYSIS FOR FOOTWEAR INDUSTRY Assess the power of Buyers. 5 = high. customer services or product differences to overcome existing customer loyalty? Product differentiation is typically a barrier to entry.
Government policies. favorable locations and government subsidies. so there is edge for new entrants to enter in market and establish their business where there is no major competitor. . 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. a strong commitment to the industry. Such costs advantages are typically a barrier to entry for a new entrant. Also. such as antitrust regulations. established company may have passed a learning or experience curve. they may retaliate against new players who would threaten sales growth. if the industry is growing slowly. 3 1 are entering in market and doing their businesses where there is no major brand exist. access to raw materials. Established firms may have a history of retaliating. and illiquid assets employed in the industry. 2 Cost advantage Government policies Expected Retaliation Established companies have cost advantages over new rivals because they may have already obtained proprietary product technology. 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. Entry barrier is low and new entrant and unorganized brands are opening their outlets in different areas. 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. In addition. resources to fight back.market size) in order to compete? Huge capital requirements are typically a barrier to entry 3 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. can help to preserve or limit competition. 2 Result: As there are low entry and exit barriers for the new entrants.
Consumer will have to wear shoes rather than anything else. 1 = low.THREAT OF SUBSTITUTION ANALYSIS FOR FOOTWEAR INDUSTRY Assess the power of Buyers Circle one of the following. 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. 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. 5 = high. As there is no threat of substitute to the footwear industry N/A Result: There is no threat of substitute to the footwear industry. or N/A if it doesn’t apply to your industry. .
These firms face a lot of competition within this group as well as from the other which is nearby. 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. . In middle of map. These are four strategic groups. They face little competition from the other strategic groups in terms of lower price and lower quality. In the lower left corner an unorganized brands fall. They focus on a very narrow product market. we have showed two brands named Borjan and hush puppies.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. 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. They also target a narrow market. They face little bit challenges from most of the international brands but little rivalry from other strategic groups. which provide expensive shoes for elite class. In the top left corner Fayva shoe brand exists. In this mapping there are some companies/brands we have identified for mapping.
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