Industry structure of luxury goods industry should be analysis from Porter’s five forces model which are threat of entry, threat of substitute products, the power of suppliers, the power of buyers and rivalry among existing competitors.
Threat of entry depends mainly on the entry barriers and the likelihood and capabilities of actual players to retaliate. The barriers of new entrants can be technological, financial, strategic and linked to the actual legislation. Also, in the luxury industry, most competitors already have established strong distribution channels. If the luxury brand do not have distribution channels, which will have bad effect on their plan of technological developments. The barriers of luxury goods industry cannot be overcome very easily. The main barriers are about financial capabilities, the difficult to build a brand capital and finally the complicatedness to be distributed in top retail shores. Therefore, there is lesser influence on threat of new entry.
The threat of substitute products on luxury goods industry depends on the willingness of customer to substitute and relative price and quality of substitutes. For luxury goods industry, threat is low. Because most of luxury goods are unique. And most customers are loyalty to the brand which they like.
.The bargaining power of buyers: most consumers in the luxury good industry are professionals who rely on mobile and expensive gadgets and expect seamless services every time they use them. The bargaining power of buyers in the luxury goods industry is relatively high because there are only few, large players in the industry.
Suppliers of luxury goods have relatively lower bargaining power because their products have yet to eastablish consistency in the market. This is in contrary to ordinary brands where these products have been able to secure the confidence of its customers worldwide.
The rivalry increase in...