Analysis of the Competitive Structure, Research Paper Example

Threat of New Entrants

The threat of entrants to the industry is for the desire and capacity to advance in the market share placing pressure on costs, prices, and the investment rates that are necessary for competition. The industry in South Africa is faced with immense threat of entrants because of the industry’s attractiveness.

Bargaining Power of Suppliers

Supplier power is high when the industry requirements such as labor, raw materials, and components of production are scarce. High supplier power can result in exertion of influence on the costs of raw materials that result in increased costs to the consumer. The influence on bargaining power of suppliers within the South African market is as a result of; the improved financial markets, improved infrastructure and airports, labor rigidity, brain drain, and domestic logistics. These factors therefore present a situation of decreased supplier power since producers acquire finances easily and the improved airports reflect the ease of importation of the production necessities.

Threat of Substitute Products

The threat of product substitute arises due to the high differentiation ability of the commodities. Therefore, the threat of substitute goods within the industry is immense and influenced by; film, art, and fashion industries, reducing costs of technology, resistance to cooperation among the existing producers, and increased penetration of technology.

Bargaining Power of Buyers

The increased rate of globalization leads to increased opening of markets and equally creation of new retailers from which buyers can choose. The increasing number of buyers switching suppliers within an industry is a reflection of effectiveness in competition. The bargaining power of consumers within the textile industry is affected by; the high income disparity, large informal sector, increased branding activities, favourable AGOA and EU trade, and high quality standards. Therefore, the industry experiences high bargaining power of consumers.

Existing rivalry amongst competitors

The rivalry among competitors within the industry is high as a result of both local and international competition. This immense state of rivalry is propelled by factors such as; minimal corruption, experience within existing businesses, and improving technology. The countries that lead in exports include; China, Taiwan USA, India, and EU27.

Conclusion

Boda skins require comprehending the kind of competitive atmosphere in which it operates so as to ensure its success in attaining its set objectives. Adequate information and full understanding of the environment is important for any company to gain competitive advantage over its competitors. An analysis of Porter’s five forces brings into perspective the dynamics of the industry and essential in increasing profitability and edging competition. Therefore, Boda Skins are able to leverage on the presented opportunities despite higher bargaining power of buyers.

References

Daidj, Nabyla. Developing Strategic Business Models and Competitive Advantage in the Digital Sector. , 2015.

Porter, Michael E. The Five Competitive Forces That Shape Strategy. Boston, MA: Harvard Business School Publishing, 2008. Print.

Porter, Michael E. “How competitive forces shape strategy.” (1979): 21-38.

Porter, Michael E. On competition. Harvard Business Press, 2008.