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Ladies Fashion Footwear Industry

The Ladies footwear industry has major brands like Stylo, ECS, Shu-8, Soul, Milli, Comely, Step-
inn, Marie Claire, Metro etc with hundreds of unorganized brands.

a. What is the current industry structure and how is it changing?

1. Industry is saturated by direct and indirect competition as there are several brands competing
with each other and on the other hand there are many unorganized brands also operating and
entering the market. So the industry will potentially keep on moving in forward direction to
progress in upcoming years.

2. If we check the whole industry of ladies footwear then there are few brands but large
unbranded store situated almost in every small and large market. These brands that emerged in
the market were somehow small retailers in the beginning but with the passage of time the
industry attractiveness made them grow their business. So many unorganized brands can turn
out to the big players in upcoming years.

3. Brands focus on competition among them rather than indirect competition by unbranded
stores. The basis for competition is market expansion in the current situation.

4. The industry is still very attractive and the investors are entering in the market both with low
and high investment.

5. Awareness of brands is only in urban areas because the brands are not targeting the non
wealthy areas but it was observed that people from such areas do visit the branded stores at
least once in a year for shopping on special occasions.

6. The want is the driver of industry as the fashion is the major basis of competition and ladies
are going for fashion.

7. The ratio of brands with unbranded sector is about 20% organized sector 80% unorganized
sector.

8. The brands are expanding their base for business in more areas for the maximum profit and
brand awareness. We analyzed it from the recent years growth by brands to the maximum
regions. As only Stylo has expanded in more than 20 cities around Pakistan.
b. Using the given format analyze each force independently?

Porters Five Force Model

Threats of new entrants:

1. The industry is very attractive in terms of profit which makes the multinationals to enter the
market as the entry barrier is quite low and there is almost nil political and governmental
influence.

2. The past analysis of industry proves that the unorganized brands managed to organize their
business and enter the market to penetrate so it’s quite obvious that there is a possibility for the
some unorganized brands to penetrate the industry by turning out to be good brands. The turning
brands can put some investment in the industry to gain the market share and increase their market.

3. It is very common that many unorganized brands are entering the market. We analyzed that many
of the unorganized brands are opening in areas where there is no major brands. So it’s possible for
the unorganized brands to enter the market. The initial investment will be quite lower for the
entrants and the profit margin is quite high. It was also observed that the suppliers/vendors had
opening their outlets on a low budget in various parts to make their own point of sale.

4. On the basis of our analysis we figured out that the organized brands need a lot of investment even
if the entry barriers is quite low but this will make them to stay in the market and exit barrier will
be high for such organized brands. However the unorganized brands have an edge to enter the
market very easily and then penetrate in the local market base where there is no major competitor
so for them the entry and exit barrier both is low.
Below is the entry exit table which represents the degree of risk involved for the organized and
unorganized sector based on our analysis from the market.

High Entry Low Entry

1 2
High Exit
Organized Brands

3 4
Low Exit
Unorganized Brands

Rivalry among competitors:

1. On the basis of our analysis we have observed that organized brands like Stylo, Soul, ECS, Shu-8,
Metro, Comely, Milli etc are in direct competition and are head to head in many locations to
capture the market share in the ladies footwear industry. Stylo Shoes Limited is penetrating with
the market expansion strategy and this is the success factor for them. On the other hand the brands
don’t feel it a threat from the unorganized sector and to compete with them they are not using any
specific strategy.

2. Product differentiation is not stable as the fashion in footwear industry is also changing very
rapidly. Also it is observed that the style are being copied by a little variation and then presented to
the final consumer from different brands.

3. Location based competition is another factor in the competition for the brands. We can clearly
indicate this thing from the market view. The brands are almost situated face to face in many
areas. Like in Lahore in the areas of Model Town, Liberty, Defense, Anarkali, Main Boulevard
Allama Iqbal Town we can see the saturated market with a lot of brands situated around each
other. The same is observed even out of Lahore in various cities like Islamabad,Jinnah super
market etc.
4. Region based competition is another factor in the competition for the brands. We have seen it
through our study that brands are looking for new regions to find new business. It is the basis of
competition now in the industry. Stylo Shoes is the brand that is operating large in terms of area.

5. Quality of material is the aspect that is most crucial for the brands to satisfy their customers. We
have found out that Stylo Shoes Pvt Limited has been importing the material from China, India etc
for the manufacturing of final product. They get the material by importing the goods and then
supply it to the suppliers/vendors to get the final output for better quantity. The same has been
observed by the ECS in the quality factor.

6. Appearance of outlet is another factor which is put into the competition. We checked that the
brands are all operating on a big floor with their outlet. All the brands are emphasizing on the
complete relaxed environment for their customers. All the outlets are spacious are very attractive
and well renovated.

7. None of the brand in the market is based on franchise business. The reason for that is the brands
are focusing on their business and to make it a success they are not trying to go for franchising as
due to this way they if this idea flops the business will go in deep trouble.

Bargaining power of buyers:

1. The buyer does not compromise the low quality of product from the suppliers/vendors as the
competition is based on quality.

2. Buyers have authority to easily switch off from one supplier to the other. We have analyzed it
from one company’s perspective as in case of delay in order Stylo Shoes cancel the whole order
and switch to the other supplier. This is clear evidence that suppliers do not exert pressure on the
buyer as the suppliers are too much in number.

3. Buyers are not likely to go for backward integration because investment is high and can create
more risk.

4. Buyer can get some stock on credit which in our terms shows the buyer has more power and they
get the stock on credit from the suppliers.

5. Buyers make contract with suppliers not to share the variety with competitors and this term is
legally binded by the contract.

6. Buyers influence suppliers in order to get the final product as per their demand.
7. Most buyers import the raw material and supply it to the suppliers to make the final goods.

8. Buyers have an edge to set the price of product that is given by the suppliers as they have complete
knowledge of the final product and the influence is also more from the buyer on the supplier
throughout the manufacturing process.

Bargaining power of suppliers:

1. The suppliers here are the manufactures of the shoes.

2. Supplier has less power to exert on buyers.

3. Suppliers are responsible for the delivery of the final product to the warehouse that is in the
contract.

4. Suppliers have a very less chance of forward integration because it involved high investment to
acquire the outlet and to renovate it and then get the staff and operate it to compete with the
existing buyers. The suppliers can substantially loose a huge some of business by this practice.

5. Supplier cannot switch easily the buyer because the buyers are getting the products in bulk
quantity and in case of any effort of exert the bargaining power on buyer it may make supplier to
lose a substantial buyer.

6. Almost every supplier is providing the final good for organize and unorganized sector but the bulk
buyers are the brands and they focus more on the brands rather than non branded sector.

7. Suppliers are operating on economies of scale for the manufacturing of shoes.

Threat of Substitute:

There is no threat of substitute to the footwear industry.
c. Discuss you overall understanding of the Industry dynamics. Which force is the most
dominant? How it is changing the industry? Is there impact of any environmental factor?

1. This market has very much potential in it. This industry is very attractive so entry level is very high.

2. Profit ratio is very high. Because the cost on the manufacture is too low so they sell it on higher profit
margin.

3. Suppliers are more, whereas bulk buyers are less so buyers can easily switch off the other suppliers so
the bargaining power is high for the buyers.

4. The risk in this business is very low as no one has yet faced a huge loss in this business.

5. Chances of market expansion are very much in this industry as still there is 80% of the market which is
not targeted by major brands and unorganized brands are operating in such areas.

6. Related and unrelated diversification will be another factor in the future as they can use it to capture the
customers. The related diversification in this scenario is the fashion bags and accessories that has been
adopted by many brands.

9. Peak and off peak season will be a major reason of industry expansion. We have seen that in the
industry, that the unbranded companies enter the market during the peak season. Now referring to peak
season is the occasions in the form of Eid, Marriages etc.

Which force is the most dominant?

According to the porters model bargaining of buyers are the most dominant because

1. The buyer does not compromise the low quality of product from the suppliers/vendors as the
competition is based on quality.

2. Buyers have authority to easily switch off from one supplier to the other. We have analyzed it from
one company’s perspective as in case of delay in order Stylo Shoes cancel the whole order and
switch to the other supplier. This is clear evidence that suppliers do not exert pressure on the buyer
as the suppliers are too much in number.
3. Buyers are not likely to go for backward integration because investment is high and can create more
risk.

4. Buyer can get some stock on credit which in our terms shows the buyer has more power and they
get the stock on credit from the suppliers.

5. Buyers make contract with suppliers not to share the variety with competitors and this term is
legally binded by the contract.

6. Buyers influence suppliers in order to get the final product as per their demand.

7. Most buyers import the raw material and supply it to the suppliers to make the final goods.

8. Buyers have an edge to set the price of product that is given by the suppliers as they have complete
knowledge of the final product and the influence is also more from the buyer on the supplier
throughout the manufacturing process.

There are two types of environmental factor that impact on industry.

1. Internal factor

2. External factor

Internal factor:

The organizational cultural that is observed in the industry is very strong they have
highly educated and trained staff and environment of trust and respect for others is present.

External factors:

Political factor:

Political influence has no impact in this industry as on our analysis no party has
political relations with the political parties.

Government factor:

If the government comes with attractive package for the industry and support
the industry then it will be a added benefit for the industry. On the other hand it’s quite possible the
taxes may also be imposed on the industry which can be a disadvantage.

Economical factor:
As it is the era of recession the inflation rate is high and due to this the profit
margin of the industry will be affected thus increase the expenses.

Social factor:

The social factor is of no harm to the industry in fact it’s the social factor in the form
of fashion that is moving the industry.

Technology:

The most of the organized brands are technology oriented. They use the latest
software for their IT department to comply with all the departments of the organization.
The advantage of using the technological aid is that the integration between departments is
done well which makes all brands work in a better position.

D. Forecast the following:-

I. Numbers of companies five years down the road:

Based on the last few years forecast we have concluded that some unorganized companies
had come in organized form which is a basis for some more entrants to come in the market.
If we say about the last year 2008 the industry had witnessed 2 new brands in the industry
which are Shu-8 and Soul. Moreover we can say that the unorganized companies are
putting in their resources to enter the market on a significant scale. For example the Milli
Shoes, Prime Naalain, Bobby Shoes etc are now operating on the organized pattern which
clearly depicts that many unorganized companies will enter the market by converting into
the well organized setup. So the expectances of new companies are about 2-3 per year for
the next five years.

II. Basis of Competition:

The current scenario of the industry shows that the organized brands are moving into a
tough competition on the basis of market penetration. All the organized brands are entering
the new areas that had not yet been covered by the competitors.
III. Emergence of New Type of Competition:

The new competition after the market expansion will be based on the diversification. As we
heard from the Stylo Shoes Pvt Limited they will come up with a completely new brand to
target the elite class and as a matter of fact they will charge the high prices.

IV. Which Force will become the most Important:

On the basis of our analysis we think that the bargaining power of buyer will remain at the
top as the manufacturers/suppliers/vendors are not well educated and they don’t have
resources to compete in the market as for that they need a lot of investment and highly
attractive location.

V. How the value is being divided among the players and who eats the maximum share
of the total value created:

The value is being divided on the basis of market growth as per our analysis and if we talk about
the progress of all the major competitors then everyone is focusing on the expansion. On the whole
knot the Stylo Shoes Pvt Limited had managed to gain the maximum share. The product is with
very little differentiation and that differentiation even does not last for a week.
Industry Analysis

Strategic Marketing Management

Submitted to:

Mr.Mobin ul Haque

Submitted By:

Waqas Afzal 094532-043

Rahman Siddique 094532-045

Ali Shaheen 094532-046

Abdullah Saeed 094532-023

Submission Date:

16-11-09