“Sizing Up the Active-Wear arket”
Final case study
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1. Apply Porter’s five forces model to determine the overall attractiveness of the women’s apparel industry. Within the context of Porter’s model, how would you categorize the growth potential for the industry as a whole? What is the average pricing trend in women’s apparel, and what are the main factors that are leading to this trend? Where is channel power concentrated, and why?
Intensity of Rivalry: the intensity of competition in this industry is high. As we can see that many brands are competing for shelf space and market share. Even though the industry was moderately concentrated, players offered similar products and most of them were looking if not applying growth strategies.
Threat of New Entrants: There is low entry barrier with competitive pricing in the apparel industry due to the ease of outsourcing production in developing countries. Although there are restrictions and regulations. With outsourcing production, it eliminates capital expenditure and any overhead associated with manufacturing cost. Hence, with low barrier, industry player are pushed to vertically integrate. The appeal of the women’s apparel within the industry will be continuously low due to the increase imitation established of companies with various brands.
Threat of Substitute Product: with this model is relatively low as there are very few equitable substitutes for women’s apparel. Hence, customers switching to substitutes are less likely to happen because there are not many apparel to substitute women’s suits. However, with Harrington’s Active wear line, customers can choose to switch to other alternatives than wearing an active wear.
Bargaining Power of Supplier: I would say for this force that it is moderate because there is willing and cheap labor overseas. More retail outlets integrating backwards (providing margins of about 10-20% higher). The relationship Harrington have with suppliers, gives them a greater advantage in that fact that they manufacture apparels for themselves. Hence, there is close proximity in easy monitoring.
Bargaining Power of Buyer: There are two main costumers and they are the retail and the wholesale costumer with a different target area in apparel to customers and variety of items to choose from, the power for buyers is relatively high. The demand for product is elastic, although customers are loyal to Harrington Collection. Retailer will grant customers discounted prices in order to sell their products at a competitively low price. With this option, end users are able to switch based on low switching cost. The women’s apparel market though, is a consumers market. The consumer has the greatest power with so many product offerings by so many competitive firms. The preceding forces all interact, enabling the consumer to choose the best quality good offered, and to receive this good for the best price.
Although there is a lot of competition within the market, there is always a segment that has a greater power and influence. This influence is exacted by the specialty store division of the women’s apparel market. With more than 50% of market sales coming from this division, price power is situated here. Therefore, channel power is concentrated in specialty-stores, who have the power to influence other branches and types of stores. Manufacturers in the apparel industry devise ways of keeping abreast with the changes in terms of offering wholesaler prices to items in order to survive within the global competition. The average pricing trend in women’s apparel is reasonable priced less than $100. Reason being, in the early 2000s, the economy was faced with an economic downturn which affected the apparel industry significantly, causing customers to become price sensitive on purchasing less expensive...
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