Any organisation need to consider both internal and external influencers that shape the overall industry dynamics in order for it to become a successful and profitable business. Industry dynamics is defined by Hauschild et al. (2011) as “the frequency, the magnitude and the irregularity of changes of customer preferences, of changes in the competitive situation and of technological changes during a certain time span and within the boundaries of an industry”. With this in mind, it can be agreed that the most significant factors which lead to organisational success is understanding competition and one way of evaluating this, is through industry analysis. As explained by Porter “to sustain long-term profitability you must respond...
Application of Porter’s Five Forces
The main objective of Porter’s five forces is to assess the attractiveness of an industry by analysing the five forces acting upon it. Once this is evaluated and understood, the business leaders should be able to analyse whether it has a high, medium or low impact on the industry attractiveness.
Porter (2008) suggested that the industry competition intensity is determined by the relative strengths of five forces which are competitive rivalry among existing competitors, the threat of new entrants, the threats of substitute products, the bargaining power of buyers and the bargaining power of suppliers.
Given the profusion of existing and newer market players of cloth manufacturers, it is unlikely that suppliers are able to compete in raising their costs due to the huge availability of supply. Suppliers are powerful if the organisations in an industry have few other sources of supply or if suppliers have many other buyers.
Bargaining power of the buyers
The apparel retail industry has a high bargaining power of customers and this is mainly due to the intensification of competition and the numerous amount and availability of apparel brands available for consumers to choose from. And since each product-line or brand is considered to have high competes, then consumers have the power to force retailers to reduce their prices by purchasing from their...
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