Porter for Textile

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Jaypee Business School
A constituent of Jaypee Institute of Information Technology (Declared Deemed to be University u/s 3 of UGC Act) A-10, Sector 62, Noida (UP) India 201 307 www.jbs.ac.in

ECONOMICS OF STRATEGY - 13MCEC05 PORTER FIVE FORCE ANALYSIS – TEXTILE INDUSTRY

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Submission date – September 13, 2013

Word count – 3804

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Five Forces Analysis Template
1) Factors Affecting Rivalry among Existing Competitors To what extent does pricing rivalry or non-price competition (e.g., advertising) erode the profitability of a typical firm in this industry? Characterization Future (Current) Textile industry has high degree of specialization. Developed countries attempt to specialize in high quality products whereas 1. Degree of seller concentration? developing countries are producing lower quality products. Main differentiator is price which significantly differs between these groups. Growing demand of products due to growing population leads 2. Rate of industry growth? to growth of this sector. At the same time we find large number of distributors, importers. The price gap will continue to widen. Majority of the products will be produced in the countries of Southeastern Asia, where labor costs are much less than in developed countries. They will have to close or re-profile to produce exclusive high quality products. Competition between distributors will increase. It will not be feasible to sustain retail growth on the long run. It will lead to disappearance of few distributors and mergers among others.

There is no such significant 3. Significant cost differences among firms? difference in cost among firms as basic cost of raw materials is almost same. Presently this industry is not able to fully utilize its capacity. It is 4. Excess capacity?

This trend will more or less remain the same as commodity market is highly stable.

The abundance of cheap labor force and access to the new

not working at its full capacity. It technologies can make this

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more efficiently.

create extra capacities.

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can work and deliver its products

sector very competitive and

Majority of the firms must operate on the large production 5. Cost structure of firms: sensitivity of costs to capacity utilization? scale. Minimum orders exceed the needs of any individual retailer. Many small distributors cannot afford to order full production batches.

In order to keep economies of scale firms need to forgo small orders. Two trends are equally possible: appearance of the new smaller/leaner players on the market or substitution of the highly priced product. For any quality product, produced in developed countries

There are varieties of products in the market for textile industry. Terms by which individual 6. Degree of product differentiation among sellers? Brand loyalty to existing sellers? Cross-price elasticities of demand among competitors in industry? customers sometimes differentiate products differ from the intensions of the industry. This trend is more visible in countries, where consumers are more knowledgeable and have more sources to educate themselves.

there exists a lower cost in developing countries. The number of so-called knock-offs grows in number and in quantity per article. Cheap labor and materials make these products viable inexpensive substitutes. For example, high quality yarns, such as Eros and Mexico are priced at $10-15CAD, their low cost analog Matrix made in China is retailed at $4.99CAD and even more discounted in the larger retail chains.

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Buyers usually have limited additional costs of switching from one product to another. Substitutes or equal quality 7. Buyers’ costs of switching from one competitor to another? products are available. Distributors as buyers invest into promotion of the new products. Switch may cause them to forfeit potential benefits of selling a product for longer period of time. Prices and terms of sales transaction is...
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