PORTER’S FIVE FORCES MODEL

abhishreshthaa

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MICHAEL E. PORTER’S FIVE FORCES MODEL

Industry Competitors:-

Rivalry amongst existing Firms –

• A larger number of firms increase rivalry because more firms must compete for the same customers and resources. The rivalry intensifies if the firms have similar market share, leading to a struggle for market leadership.
In the shoemaking industry the competition faced is not only from the local SSI’s in India, but also from the SSI’s from other countries. However there is enough demand to support all the units.


• High fixed costs result in an economy of scale effect that increases rivalry. When total costs are mostly fixed costs, the firm must produce near capacity to attain the lowest unit costs. Since the firm must sell this large quantity of product, high levels of production lead to a fight for market share and results in increased rivalry.


• High storage costs cause a producer to sell goods as soon as possible. If other producers are attempting to unload at the same time, competition for customers intensifies.

This situation is very true in this industry since SSI’s do not have much of the storing facilities.


• Low levels of product differentiation are associated with higher levels of rivalry. Brand identification, on the other hand, tends to constrain rivalry.


Since it is an SSI it does not have any brand of its own hence the rivalry has increased.


Threat of Substitute Products or Services:-


Substitute products refer to products in other industries. To the economist, a threat of substitutes exists when a product's demand is affected by the price change of a substitute product.


Shumaker mainly manufactures casual shoes. Casual shoes can easily find a substitute product in the form of floaters and sport-shoes. However they do not affect the industry majorly but only in a moderate way
 
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