of Study: To Conduct Potter’s Five Forces Analysis of Clothing Industry
Intensity of Existing Rivalry
Large industry size:
The clothing industry is a very large industry. There are
many famous brands which are available
in the market like, H & M, Tommy Hilfiger, Macys, Hollister, Aerospatiale.
So for a new entry it is very tough to stay in the market. Large industry also
has large amount of profit margin. So a person can earn handsome amount of
profit with satisfying customer’s demand.
Fast industry growth rate:
Clothing is a primary need of a
person. A person will stop buying new clothes but never stop wearing clothes.
So demand of the clothing would be stable. The person would buy one pair
instead of two, but he would buy.
Exit barriers are low:
Clothing industry has a large amount of the profit ratio. So
when it comes to stay in the market, the seller could stay in the market with a
few sell also. Because the clothing depends on the seasons. Like in the summer
time you cannot sell winter jackets to your customers. If you are selling, you
have to close your business in the short period. So it depends on you. If you
are very creative, you can stay in the market. Compare to other industries,
exit barriers are very low.
Bargaining Power of Suppliers
Large number of substitute inputs:
As mentioned above, clothing
industry is very big industry. And with the variety of brands, customers have a
lot of choices to buy the product. So with this factor, customers can control
the prices. In the economic terms, when the prices are increasing, demand will
automatically decrease. And for a long term customer will switch to the other
High competition among suppliers:
In the monopoly market, seller
has benefit to decide price of the product. However, when it comes to clothing
industry, it cannot be monopoly market. Because there are a lot of sellers are
available in the market. So if seller increase the price, customer will find
another substitute. Like an example, if the price of tea is increasing day by
day, customer will switch to the coffee. On the same side, when there are too
many suppliers are available in the market, every seller tries to attract the
customers with lowest price.
Threat of Substitutes
Variety of Brands:
the clothing industry there are a lot of substitute are available in the
market. So Price can control by the customers. If a brand increases the price,
customer will switch to the substitute to buy the product at a same price which
he was paying before.
Bargaining Power of Customers
Product is important to customer:
When the product is important to
the customers, the will pay any amount to get that product. As mentioned above,
clothing is a primary need of a customer. So any how customer will buy the
clothes. And when the product is more important to the customer, customer will
buy more. So customer will satisfy with the product. In future customer will
definitely come back.
Large number of customers:
Large numbers of buyers will lead
to the more selling. Moreover, more selling will help to increase the profit
margin. On the customer side, they can decide the price. Because the amount of
buyers are very high so if the seller wants to increase the price, the buyers
has the options to buy the product from different seller.
Threat of New Competitors
Strong brand names are important:
who are already in the market are very famous that if another seller wants to
start the business he has to give them proper fight. Because these guys are
already in the market so it is very hard to beat them.
Customers are loyal to existing brands:
On the same side, customers are
also loyal to the brand. So they won’t prefer any other brand to buy the product.
They are stick to the product until anything happens to the product. So for the
new seller it is very hard to enter in the market. Stable customer ratio also
leads to the maximizing in the profit.