According to Porter‘s Five Forces
For all times footwear has been a basic necessity and just recently it has become a matter of fashion and prestige, thus making huge changes in footwear industry: it expanded and became well differentiated. Therefore, in order to perform and compete effectively, companies have to analyze their external environment. This paper will concentrate on Porter’s five forces that shape competition in Lithuanian footwear manufacturing industry. Rivalry
A decade ago there were much more footwear manufacturers in Lithuania. However, right after Lithuania joined the European Union, footwear imports from China to the European Union increased eight times. It caused huge profit losses for Lithuania’s footwear manufacturers and many of them withdrew from the market. Today there are two main footwear manufacturers UAB “Sabalin” and UAB “Lituanica”, a few smaller manufacturers such as UAB “Paliūtis” and UAB “Evenida” and there are also some individual businesses which do not mass-produce but manufacture shoes just for individual orders. As we can see there are not many Lithuanian companies but their competition creates the rivalry a positive sum. The largest companies UAB “Sabalin” and UAB “Lituanica” produce leather shoes for the whole family and export most of their production to other European countries, especially to Great Britain, Latvia and Finland (http://www.lituanica.info/m93-1.html, http://www.visalietuva.lt/imones/info/sabalin-uab). Smaller manufacturers concentrate on specific footwear production such as boots and working shoes or take orders from Lithuania’s companies and produce big quantities of specific safety shoes or shoes which are part of employees’ uniform. Footwear manufacturing usually is not their only scope so when they have hard times in shoes manufacturing, they concentrate on other fields. For example UAB “Paliūtis” produces not only boots but also other rubber and plastic production (http://avalyne.paliutis.lt/index.php), UAB “Arnesima” produces safety working shoes and, in addition, they offer safety gloves, waterproof clothes and etc (http://www.arnesima.lt/). Individual businesses do not have a great demand because Lithuanians prefer custom boots just for very important occasions, for example, weddings or when the foot is not standard and they cannot find suitable shoes in shoe stores. However, the main competitors for footwear manufacturers in Lithuania are Chinese footwear producers. According to UAB “Lituanica” director D. Keltuva, just the leather they use for a pair of shoes costs the same as the finished Chinese pair of shoes. To become more competitive, Lithuanian manufacturers cut their prices; however, it was impossible to become equivalent competitors because Chinese labor force was far and away cheaper. Besides, young to middle-age Lithuanians are concerned about fashion and prestige so Lithuanian manufacturers are unable to compete with designers’ shoes or well known brands. UAB “Sabalin” director Regina Arcišauskaitė claims that her manufactory orients to segments from middle to high prices and to middle class people; however, this company does not aim for luxurious or fashionable products’ segment. New entrants
Recently not a single bigger footwear manufacturing business has been started. The main reason is the economic recession, which has caused the decrease in footwear sales. Another reason is still huge competition from China. However, today shoe shops “Lietuviška avalynė” and “Dolita” report that sales in Lithuania are constantly increasing and people, especially elder ones, prefer more expensive, but quality Lithuanian shoes from natural leather and fur. Besides, Lithuanians have turned back to small boutique shops and prefer shopping in places which offer unique products and comfortable surroundings. This probably will cause an increase in number of small shops, run by small businesses...