Research Paper: Apparel Industry Analysis

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[. . .] Power of Suppliers

The power of supplier is low in the women clothing stores industry because there is large number of suppliers ready to offer their services. Baye, (2010) argue there will be a lower industry profits when suppliers have the power to negotiate favorably. In the women clothing stores, there is a concentration of suppliers making the power of supplier to be low within the industry. Supplier switching cost is another condition influencing power of supply in the women clothing store industry. Typically, the switching costs of suppliers are very low in the industry because a supplier can easily switch from one store to the other. For example, several women clothing producers are providing price discounts for suppliers who are ready to purchase large quantity of goods from their companies, and low switching costs increase a supplier's concentration within the industry.

Substitute/Complements

Baye, (2010) argue "the level and sustainability of industry profits also depend on the price and value of interrelated products and services." (p 10). Porter (2008) also point out that the presence of complement and close substitutes erode the industry profitability, however, the women clothing industry does not have substitute because no substitute exists for wearing clothes. Despite the absence of the substitute, recent technological breakthrough has led to intense of stiff competition within the industry given the buyer the power to switch from one store to the other.

Rivalry

The women's clothing stores operate in a stiff competitive landscape. Recent proliferation of online stores that spring up everywhere is one of the major reasons leading to the stiff rivalry among the industry operators. One of the reasons for the intense rivalry in the industry is the non-existence of the consumer switching costs. Moreover, large concentration of retail stores in the industry is another factor leading the intense rivalry in the industry. Bayed, (2010) argues that the concentration ratio is the major way to measure industry rivalry. The more the concentration ratio is closer to zero, the more intense the competition in the industry. Baye, (2010) carries out the industry analysis of the major industry in the United States and the findings reveal that Women's Clothing Stores has 13% concentration ratio, which is the lowest compared to other industry.

Data Collection and Tables

The paper collects data from the Bureau of National statistics, and database of the statista.com to evaluate the historical market data in order to determine the industry trends. The Table 1 reveals the sales data of the Women Clothing Stores industry over the last ten years between 2004 and 2013.

Table 2: Sales of Women Clothing Stores between 2004 and 2013 ($ Billions)

2004

$34.95

2005

37.08

2006

38.81

2007

40.29

2008

38.32

2009

35.89

2010

37.45

2011

39.37

2012

42.58

2013

41.57

Source: Statista (2014).

Fig 1: Sales of Women Clothing Stores between 2004 and 2013 ($ Billions)

Trends line (interpretation)

Fig 2: Trends line (interpretation)

The trends in the women clothing store as being revealed in the Fig 2 reveals that the market trends are slightly to increase in the next five years. However, the unemployment rates and recession is likely to affect the sentiments of the consumer demand for the women clothing and this may reduce the market demand for the women clothing. Moreover, the competition from the internet is also likely to affect the industry growth. Thus, there is a likely that the causation could reduce the performances of the industry if there is an increase in the unemployment rate and recession. However, the industry is likely to improve with the improvement in the country GDP.

Summary

The report carries out the industry analysis of the women clothing stores, and uses the Porter 5 Forces for the analysis. The findings of the report reveal that there is a stiff competition within the industry because of the low entry costs and online presence. However, the large players within the industry are able to set the price above the costs using the economies of scales and branding technique. The paper forecasts that the industry is likely to enjoy a slight growth in the next 5 years, however, the growth will depend of the U.S.… [END OF PREVIEW]

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