Five Forces of Industry

The following considers the industry forces according to Porter's Five Forces model.

Threat of New Entrants

High Pressure:

The fashion and apparel industries are very competitive. According to MarketLine the global apparel industry has grown by 5.9% in 2011 to reach a value of 3 049.51 billion USD.  Nonetheless the high pressure environment of the apparel retail industry hinders new entrants. The quasi-absence of switching costs permits customers from switching from one brand to another. Existing firms in the industry have an established foothold which makes it difficult for new entrants to break out.

There are relatively low capital requirements to enter the industry. On the other hand, larger capital requirements could be required in the event of a new entrant seeking to design, produce and promote a new line.

 .      Threat of Substitution

Moderate Pressure:

It can be agreed that accessories have more than the function of keeping warm. Accessories in the apparel industry can serve the function of representing a social class, environmental values and form an ideal way to express individual identity. This signifies that there are countless possibilities in terms of design, accessibility (brick and mortar stores and e-retailers) and prices.

In certain contexts counterfeit activities can be a problem. While counterfeit goods are associated for being produced in China, Vietnam and other Southeast Asian countries, the United States – and New York in particular, do have a strong counterfeiting presence. The Huffington Post (Dobnik, 13 June 2013) that New York City’s counterfeit apparel and fashion goods are produced in Chinatown and are distributed all over the city.

 .      Bargaining Power of Customers

Moderate pressure:

Despite the economic situation in the United States, both the retail and apparel industries continue to grow. Similarly customers have little or no switching costs between brands, which make for a certain amount of pressure on behalf of the customers. Individual customers do not have bargaining power in the industry; however common recourse can pull more weight. Customers in the industry can be price-sensitive.

 .      Bargaining Power of supplier

Low Pressure:

The nature of international trade has diminished the individual suppliers in the textile, fashion and apparel industries. Low-cost producers in China, Vietnam and Bangladesh have diluted the bargaining power of suppliers. Switching costs for retailers from one line to another and from one supplier is not very high. The risks involved in suppliers revolve around quality of the goods and reliability of the supplier.  Furthermore the lack of diversification of apparel suppliers diminishes their bargaining power since the number fashion retailers representing the values of the brand can be limited Several suppliers increase their bargaining power by coordinating licensing and partnership activities.

 .     Intensity of Competitive Rivalry

High Pressure

The global apparel industry is highly fragmented. The competition is fierce (Jones et al., 2011), as countless brands compete for market share.  A large number of brands seek to differentiate themselves via uniqueness and style to find a niche market. The intense competition of the industry can also trigger price wars, which further intensifies the industry. The fashion and apparel industry is often characterized by its advertising, which increases the intensity of the rivalry because of the difficulty to rise out of the clutter.

References:

Industry Profile: Global Textiles, Apparel & Luxury Goods, 2012. [pdf] London, UK: MarketLine. Available at: MarketLine, http://advantage.marketline.com/Product?pid=MLIP0468-0001 [Accessed 26 November 2013].

Jones, P., et al., 2011. Fashioning Corporate Social Responsibility. Emerging Markets Case Studies Collection.