The athletic shoe industry is slowly becoming a global oligopoly. There are many barriers to entry preventing new entrants from capturing significant market share. Nike can enjoy economies of scale that create cost advantages over any new rival. Today’s athletic shoes are highly technical. An extremely large capital investment is required for new firms to open athletic shoe factories and conduct research and design to create a popular athletic shoe.
Nike has incorporated forward vertical integration into their corporate level strategy. Nike opened discount factory outlet stores in rural areas and retail stores in urban shopping Mecca’s. Monolithic athletic manufacturing companies utilise economies of scale by spending millions on product endorsements and advertisements by spreading the high cost over their entire yearly sales. The aggressive marketing campaigns turn their products into household names making it arduous for new firms to compete.
Athletic shoe manufacturers greatly attempt to differentiate their products from all shoe manufacturers. For example, Nike aggressively markets their shoes with a visible air chamber in the sole.
The capital requirements can be a high entry barrier to a new firm to the industry. However, an existing dress shoe manufacturer may enter the athletic shoe industry simply by re-tooling their manufacturing plant.
The Research paper on Nike Campaign Theory Product Athletic
... the product. Nike has definitely cornered the market in athletic apparel. Nike has created a power brand in the athletic market. Nike was the first shoe manufacturer to ... leading in sales in the athletic footwear and clothing industry. Bibliography Author Unknown. " Introduction " (web) Carmichael, Matt. "NIKE integration of TV, online a ...
Access to athletic shoe distribution channels is a moderate barrier to entry. This all depends on the status of the entering firm. If they are a start-up firm, it is extremely difficult to get shelf space at major shoe retailers. If the firm is currently in the dress shoe industry, and is entering the athletic shoe industry, they may use their existing connections to easily access athletic shoe distribution channels.
Switching costs are very low for the athletic shoe industry. Shoes are relatively inexpensive personal goods that are frequently replaced.
Cost disadvantages independent of scale are moderate. Many athletic shoe customers are brand loyal and are reluctant to try a new athletic shoe. Additionally, previous aggressive marketing campaigns have increased not only brand and individual product name recognition. Government policy is a low entry barrier, as all manufacturers in every industry are subject to factory safety laws.
Threat of Retaliation
The threat of retaliation is high in the athletic shoe industry. For example, if a small new competitor attempts to gain market share by dumping their products, the much larger computer firms are more capable of absorbing losses associated with driving the new competitor out of business.
The threat of new entrants to the profit potential of athletic shoe manufacturers is minimized through high entry barriers, but incumbent manufacturers must stay aware of other shoe manufactures attempting to enter the athletic shoe industry.
Rivalry amongst Existing Firms
In the athletic shoe industry, corporations are mutually dependent. A competitive move by one firm directly effects competitors, forcing retaliation or counterfeits. For example, Reebok’s expansion of the women’s walking shoe, inspired other firms to follow.
The number of competitors is stable, partially due to high entry barriers. This adds to the rivalry among existing firms. Manufacturers watch each other carefully and make appropriate countermoves to match a competitors move.
The rate of industry growth is stable, but the quest for global market share is eminent. Nike and Reebok are not as dominant globally, compared to the U.S. This increases global rivalry. Product characteristics are related to market share. Name recognition alone sells athletic shoes. The larger the market shares the greater advertising capabilities and hence increased name recognition.
The Term Paper on Ecommerce Industry Analysis Higher Education
Industry Analysis: On-Line Higher Education Industry Today's industries of Higher Education are witnessing a burgeoning interest in the use of the Internet. The rise of the Internet, by information technologies and business application, represents a large base of potential customers for e-commerce activities. Generally, it can be said that e-commerce is a highly significant way of conducting ...
Athletic shoe manufacturers relentlessly try to minimize fixed costs. Many shoe manufacturers reduce their costs by assembling athletic shoes abroad where labor is less expensive and tax laws are minimal. This increases rivalry, when manufacturing savings pass to the consumer.
Capacity has minimal impact on rivalry, because most firms have means to manufacture the demanded amount of athletic shoes. This ability to meet demand reduces market because most firms overproduce and drive down the selling price.
Low exit barriers and diversity among competitors has minimal impact on profit potential. If the athletic shoe industry becomes too unprofitable, firms could switch to other shoe markets. Additionally, diversity among firms is small because every firm follows one another.
The rivalry among existing firms is high where weak firms are easily acquired by fierce competitors. This may have a high impact on profit potential.
Bargaining Power of Suppliers
Athletic shoes are manufactured primarily from raw materials including rubber, leather and nylon. These materials could be classified as commodities, where the manufacturing process adds to their value. For this reason, the suppliers have limited bargaining power and little impact on profit potential.
Threat of Substitute Products and Services
Athletic shoes are designed to improve comfort and personal safety during periods of increased movement. Substitutes for athletic shoes are using other forms of shoes, or going barefoot. A large population of athletic shoe consumers wears athletic shoes strictly because they are comfortable. Comfortable dress shoes or sandals are equally interchangeable with minimal switching costs. If the athletic shoe is used for sports, then there are relatively few substitutes. Given these reasons, the threat of substitute products is moderate and the impact to profit potential is moderate to high.
The Term Paper on Potential Environmental Impact
I have been asked to put together a report for the potential construction project for The City Of Liverpool College. The current site being looked at is on Roscoe Street. I will be discussing the consequences which could occur to the buildings in proximity to the site location, and the people who could be affected. Body: During this part of the report, I will be discussing what problems could ...
Relative Power of Other Stakeholders
The U. S. government has low power over the athletic shoe industry. Many shoe manufacturers have plants outside the United States, where U.S. laws are not applicable. To minimize the relative power of other stakeholders corporations strategically locate their plants throughout the world. Forces driven by market demand are the only forces that may significantly affect profit potential. Therefore, the relative power of other stakeholder’s ability to impact profit potential is moderate to low.
Overall Assessment
The threat of new entrants to the profit potential of athletic shoe manufacturers is minimized through high entry barriers, but incumbent manufacturers must stay aware of other shoe manufactures attempting to enter the athletic shoe industry.
The rivalry among existing firms is high where tender firms are easily acquired by fierce competitors. This may have a high impact on profit potential.
The overall impact from buyer’s bargaining power to profit potential is moderate.
Suppliers have limited bargaining power and little impact on profit potential.
The threat of substitute products is moderate and the impact to profit potential is moderate to high.
The relative power of other stakeholder’s ability to impact profit potential is moderate to low.
The overall profitability on the industry is moderate to low level and could increase with future consolidation. This is because of high rivalry; many substitute products and a little buyer bargaining power.
