Porter’s

Five Forces
Sportswear Industry

BY: SREEHARSHINI.R 19BBA250

PORTER’S FIVE FORCES
PORTER’S FIVE FORCES
How easy it is for new
Threat of new Entrants
businesses to set up shop?

Supplier bargaining How much power do

power suppliers have?

How many firms compete

Internal competition and how much is the market
growing?

How likely are customers to

Threat of substitutes
switch to the alternatives?

Customer bargaining How much power do buyers

power have?
 NIKE

Nike, Inc. is an American multinational corporation that is engaged in the design,

development, manufacturing, and worldwide marketing and sales of footwear, apparel,
equipment, accessories, and services.
 THREAT OF NEW ENTRANTS

New entrants or new firms can disrupt Nike’s industry environment. This element of the Five Forces Analysis identifies
the extent of new entrants’ influence on firms in the sports shoes, apparel and equipment market. The following
external factors contribute to the weak threat of new entrants against Nike Inc.:

● High cost of brand development (weak force)

● High economies of scale (weak force)
● Moderate cost of doing business (moderate force)

The high cost of brand development makes it difficult for new entrants to succeed in competing against large firms like
Nike Inc. Also, the high economies of scale provide Nike with a competitive edge against new entrants, considering
the company’s global production and distribution network for its athletic shoes, apparel and equipment. The moderate
cost of doing business further limits new entrants’ ability to disrupt the industry environment. Based on this element of
the Five Forces Analysis, the threat of new entry is a minor concern for Nike Inc
 SUPPLIER BARGAINING POWER

Suppliers affect Nike’s business through the availability of raw materials. This element of the Five Forces Analysis
tackles suppliers’ influence on firms and the industry environment. In Nike’s case, the following external factors
create the weak bargaining power of suppliers:

● High overall supply (weak force)

● Large population of suppliers (weak force)
● Moderate size of individual suppliers (moderate force)

The high supply minimizes the effects of individual suppliers’ actions on Nike’s business. Similarly, the large
population of suppliers reduces the impact of individual suppliers’ demands on large companies like Nike Inc. The
moderate size of individual suppliers supports a moderate degree of suppliers’ influence. Nonetheless, this element
of the Five Forces Analysis shows that Nike experiences only a weak force representing the bargaining power of
suppliers. As such, suppliers are among the least significant concerns determining Nike’s strategies in the sports
shoes, equipment and apparel industry environment.
 INTERNAL COMPETITION

Competition determines how Nike Inc. maintains its share of the sports footwear market. This element of the Five
Forces Analysis shows how competition influences the industry environment and the performance of individual firms.
The following external factors create the strong force of competitive rivalry in Nike’s case:

● Low market growth rate (strong force)

● High aggressiveness of firms (strong force)
● Moderate number of firms (moderate force)

The low market growth rate is partly due to firms’ high market penetration and market saturation. This condition creates
a strong force, as Nike and other companies compete for a market that grows slowly. In relation, firms are highly
aggressive in competing for bigger market shares. Also, there are only a moderate number of firms that significantly
impact Nike. Based on this element of the Five Forces Analysis, the external factors that lead to strong competition
requires Nike Inc. to focus on market development and product development to ensure competitive advantage and a
growing share in the global athletic shoes, apparel and equipment market
 THREAT OF SUBSTITUTES

Substitutes pose significant threat against Nike’s performance as a leading player in the global athletic shoes market. This
element of the Five Forces Analysis identifies the force of substitution on the business and the industry environment. The
following are the external factors that maintain the moderate threat of substitution against Nike Inc.:

● Moderate availability of substitutes (moderate force)

● Moderate performance per price of substitutes (moderate force)
● Low switching costs (strong force)

The moderate availability of substitutes imposes a moderate force against Nike, as customers have considerable
alternatives to Nike’s products. In relation, customers have a moderate likelihood of considering substitutes because of
the moderate performance of substitutes compared to Nike’s sports shoes, apparel and equipment. The low switching
costs further add to that likelihood. Nonetheless, this element of the Five Forces Analysis shows that substitutes exert
only a moderate force against Nike Inc.
 CUSTOMER BARGAINING POWER

Nike’s customers directly affect business performance. This element of the Five Forces Analysis shows how consumers
determine business competitiveness and the industry environment. In Nike’s case, the following external factors contribute
to the moderate bargaining power of customers:

● Low switching costs (strong force)

● Moderate substitute availability (moderate force)
● Small size of individual buyers (weak force)

The low switching costs make it easy for customers to buy sports shoes other than those from Nike. The moderate
availability of substitutes also enables customers to buy other products instead of always buying from Nike. However, the
small size of individual customers minimizes their individual forces on the company. These external factors lead to the
moderate bargaining power of customers. This element of the Five Forces Analysis shows that the force of customers is a
major consideration in Nike’s strategies for the athletic footwear, apparel and equipment market.