Question

External Analysis

Evaluate the underlying structure of the Footwear Industry and the forces that shape competitive interaction.

Choose three of Porter’s 5 Forces that you feel are most important to the Footwear Industry.For each Force, explain why you feel that force is critical for industry health and profitability (minimum of 100 words for each force).

Answer 1

The primary 3 forces of Porter’s 5 Forces that are critical for the footwear industry are:

• Barriers to Entry: The barriers to entry in this industry are quite high. This is because the initial capital requirement to set up business in this sector is huge. This industry is primarily capital and labor intensive. Also brand identity and loyalty is appreciated in this sector. Consumers usually stick to their trusted brands and rarely opt to try something new. Almost all existing companies in this industry have patented their designs. The scope of innovation in this sector is quite low. So, the inclusion of patents and other intellectual rights have limited the scope of entry in this sector.
• Threat of substitutes: The threat of substitutes has increased with the millennials ruling the society. This is because most of the millennials are substituting their footwear or active shoes from comfortable flip flops and sandals. This has considerably reduced the market of footwear sector. Also as the switching cost is quite low, so consumers do intend to switch to a substitute in case of any minute discomfort. So, we can conclude that the threat of substitutes in this footwear sector is moderately high.
• Rivalry within industry: As was already stated, the footwear industry is colored with customer loyalty. The existing companies take it as a challenge to takeover the trusted consumer umbrella from each other. The companies spend heavily on marketing and advertising and try to highlight their differentiated offering. Every company tries to come up with innovative features in their products, which may help in attracting the customers of rival company to their umbrella. Price elasticity of the products is also employed to poach the customers towards business. Hence, the rivalry within industry can be considered to be quite high in this sector.