Five Forces Analysis of Puma

Bargaining power of suppliers:

The bargaining power of suppliers in the shoe industry is low. Their low bargaining power can be
attributed to several factors including small business size, fragmentation and lack of forward
integration. A large number of these businesses are small businesses that supply raw materials to
larger brands like Puma. Moreover, these businesses are fragmented and located in various
corners of the world. They do not have the capability for forward-integration either and all these
factors limit the bargaining power of suppliers. Moreover, a large number of these businesses
depend heavily on brands like Puma for their revenue. So, Puma exercises higher bargaining
power over its suppliers.

There are some more factors also that limit the bargaining power of suppliers. Larger suppliers
may enjoy a little higher bargaining power but most raw materials that shoe companies like
Puma need can be sourced from multiple suppliers. The suppliers also need to follow ethical
business practices and supply chain best practices since large businesses are focusing on making
their supply chains future proof and do not want to engage in business with suppliers that have a
poor record in terms of business ethics or human resources.

Bargaining power of buyers:

The bargaining power of individual buyers may be small in the shoe industry. However, the
overall buying power of consumers has kept increasing over time and is moderately high due to
several factors including the level of competition in the industry as well as the increased focus on
customer experience. Apart from that increased availability of information as well as the
availability of a higher number of substitutes has also led to growth in the bargaining power of
customers. Apart from popular brands like Nike, Adidas, and New Balance, there are several
more brands including local brands that compete with Puma. Together, these factors have led to a
higher focus on product quality and customer experience since the satisfaction of the customer is
important for growth and success. Overall, the bargaining power of customers is moderately
high. Some of the factors that limit the bargaining power of customers include product quality,
marketing, brand image, and popularity.

The Threat of substitutes:

The threat of substitutes in the shoe industry mainly arises from rival brands. Apart from the
larger brands with higher market share, there are also several smaller local brands with limited
market share and presence that compete with Puma. Nike, Adidas and New Balance are among
the main competitors of Puma but several other smaller local brands also make and sell shoes,
apparel and accessories at lower prices. The overall threat of substitutes is moderate. Some of the
leading factors that moderate the threat from the substitute products include product quality,
brand image, market presence and marketing strategy of the company. Puma is a well-established
brand that enjoys high brand awareness in most corners of the world and this is a leading factor
that helped it manage the competitive pressure and grow its market influence. So, the overall
threat from substitute products is moderate for Puma.

Threat of new entrants:

The threat of new entrants is moderate. It is mainly because the barriers to entry are not so high
and anyone with capital and know-how can enter the market and start a shoe business. However,
for the well-established brands like Puma that have a strong product portfolio as well as financial
strength and other sources of competitive advantage, new entrants are not a significant threat to
their market share. For a new entrant to grow into a major and market-leading business like
Puma or any of its leading rivals Nike or Adidas, it will not simply take a lot of capital and
excellent expertise but global expansion is difficult for a new player for multiple reasons. Some
of these barriers are political and legal in nature. However, there are operational challenges also
like establishing large manufacturing, sales, supply, and distribution network that would be
complex for a new entrant. Incumbent brands aggressively work to protect their market share and
grow influence in the market.

The Intensity of competitive rivalry:

The intensity of competitive rivalry in the shoe industry is high and it is why the level of focus
on product quality, marketing, and operational efficiency is also high. Nike has several leading
rivals including Nike, Adidas, New Balance, Reebok and many more, some of which are local
brands operating in regional markets. While products by the leading brands including Puma
enjoy high demand and popularity, competition is still one of the biggest barriers to faster growth
globally. It is why Puma focuses on sourcing good quality raw materials, excellent product
design, and marketing to attract customers. Retaining market share in a highly competitive
industry environment also requires a very heavy focus on customer engagement and customer
experience. The overall intensity of competitive rivalry in the shoes and apparel industry is high
and the factors that work in the favor of Puma include its strong brand image, the popularity of
individual products as well as marketing.