The fashion industry has penetrated the minds of the people which has turned out to be the most profitable industry in the world. According to the article by the British Fashion Council, frequent designing of fashions has been stimulated by the lifestyle of people in the UK, which has, in turn, created demand in the market. Also, it has been raised by the mega show that has created interests in the people to buy more.
Porter’s five forces
Bargaining power of suppliers
According to Grundy (214), the higher bargaining power of vendors is realized when goods available are in limited quantities. For instance, there few companies dealing with clothing due to the high cost of raw materials. The few suppliers in market hike the price of apparel hence, high bargaining power for suppliers. Also contributed by:
• The market has few suppliers.
• No alternative goods are ready.
• Huge supplier switching costs.
Bargaining power of buyers
Buyers have options: one can choose not to buy, or choosing from which supplier to purchase a product. For instance, a customer for apparel has many alternatives to choose from; one can prefer buying directly from the manufacturer or a retailer depending on his or her buying ability. The customer bargaining power is high when:
• Customers purchase in large quantities.
• Suppliers consist of small operatives.
• Suppliers maintain high fixed costs.
Competition from existing firms
Rivalry exists in every segment of the target market which implies that competition from existing firms has a significantly high impact on the fashion industry. Due to significant competition, firms in the UK such as New Look and George shifted sourcing of products for a low-cost advantage Bhardwaj and Fairhurst (166). Competition from firms exists when:
• Firms are of the same extent.
• Firms are of comparable strategies.
• Little or no differentiation between firms and their goods leading to price competition.
• The barriers to exit are high.
The threat of new entrants
Due to high costs and stiff competition from existing firms like New Look, entry to into the fashion industry for the new entrants is difficult. Possible barriers to entry include:
• The economies of scale where there is high initial investment costs or fixed costs.
• The cost advantage of existing firms.
• Lack of essential resources.
• Access to raw materials that are controlled by existing players.
Threat of substitutes
One of the factors influencing the demand of a fashion product such as apparel is the cost and quality of the alternatives. When the relative values of a substitute product decrease or its ability to satisfy the customer need increases, the growth of the fashion industry decreases. Substitute products therefore negatively affect the business profit of the industry by creating the price limit that the companies can charge without affecting their earnings. The threat of substitutes can be determined by the following;
• The brand dependability of customers.
• Increasing costs for customers.
• The relative price for performance of alternatives.
Key issues
Technology: Technology has enabled the fashion industry to change frequently against competitors through advertising through online platforms.
Government Support: Proactive policies by the government favor the emergence of new firms as well as boost up the existing firms by creating market conditions that tend to provide higher value to the customers. Competition would generate innovations which are vital to the fashion industry.
Customer Awareness: Consumer awareness implies that consumers get regular updates about the new products that are being innovated by the fashion industry.
Works cited
Bhardwaj, V., & Fairhurst, A. (2010). Fast fashion: response to changes in the fashion industry. The International Review of Retail, Distribution and Consumer Research, 20(1), 165-173.
British Fashion Council (2016). The Power of Fashion. Retrieved from www.britishcouncil.org/organisation/policy-insight-research/insight/power-fashion.
Grundy, T. (2006). Rethinking and reinventing Michael Porter's five forces model. Strategic Change, 15(5), 213-229.
