Explained Stylish Garment's competitive strategy based on Porter's five forces:
The viability of Stylish Garment's competitive strategy can be analysed based on Porter's five forces. According to Michael Porter, industries can sustain different levels of profitability as influenced by five forces, namely:
Rivalry among industry players
Threat of new entrants
Threat of substitute products
Supplier bargaining power
Buyer bargaining power
By analysing these five forces, Stylish Garment's competitive strategy can be explained according to how it is positioned in the industry and its response to these determining factors in terms of its applied competitive strategies. An analysis of each of these forces related to Stylish Garment's competitive strategy are discussed below:
FORCE 1: Rivalry among industry players
A background of the intensity of competition helps in assessing the practicality of Stylish Garment's competitive strategy.
Structure of competition: Stylish Garment operates in an industry with many competitors. It faces stiff competition locally within China and globally from competitors like Hongkong, Taiwan, Singapore, Korea and Thailand. New competition is also expected from companies located in Indonesia and Malaysia. As per Exhibit 6, Stylish Garment ranks 8 among its direct competitors who are more or less small or equally sized size firm. Considering the number of competitors, it is expected that rivalry is intense. Also, there is no clear dominating market leader thus market share is more or less equally distributed adding to the tight competition.
Industry costs: Stylish Garment operates in an industry wherein high fixed costs are inevitable, thus, encouraging all competitors to manufacture at full capacity with lower overhead costs. Considering the number of players in this industry plus the high industry costs, it is expected that players will compete fiercely, possibly cutting prices.
Degree of product differentiation: The fact that Stylish Garment's products are not necessarily commodities does not compound to the competition however.
Switching cost: Buyers in this industry have low switching costs thus it is easy to lose customers.
Strategic objectives: Considering Stylish Garment's drive to pursue progressive profitability, it can thus be deduced that there is a pervasive outlook of aggressive growth within the key players in the industry, adding to the degree of competition.
Exit barriers: Considering the high fixed costs of this industry, exit barriers for firms tends to be high, thereby intensifying rivalry. The firm must compete.
Based on the points above, it is apparent that Stylish Garment operates in a hypercompetitive industry. It is seen that Stylish Garment's strategies to survive in the industry include:
Increasing its sales by...