Entrepreneurship & Strategic Thinking

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Table of Contents

Abstract
PEST Analysis
Degree of Rivalry
Threat of new entrants
References

Abstract

This paper is about footwear industry of USA. It discussed the major market segments and respective target customer of the USA shoe market. The internal and external analysis of the industry will help to understand where US footwear industry is standing today and what its scope is.

PEST Analysis

Political: Political instability effect people thinking, if they are upset due to environment they will not make purchase so two years back when Americans banks were becoming defaulter people purchases less shoes.
Economical: American Economy is in recession so footwear industry is also down.
Social: Social People life style are now shifting toward their health and diet ,o many people are joining any kind of fitness activity ,so that they need sports shoes so there is a need for athletes shoes.
Technological: technology has change footwear industry positively and by improving manufacturing to reaching customer so US footwear industry has taken full benefit of technology.

Strengths

Increasing production facilities and new ways of marketing (weconnectfashion , 2010) .
Due to globalization easy excess to labor is possible now Nike can establish its manufacturing plant in India or China where labor cost is low.
Due to globalization, quick courier and shipments and efficient communication helps firm to tap new markets.
Today is age of specialization so new techniques are emerging to run the businesses (Just Style, 2011).
Due to latest technology leather and other raw material are convert in more new forms and shapes increasing their utilization (WeConnectFashion , 2010) .
Thanks to quick travelling and communication the access to raw material as compare to a decade before.
Now fashion designing is also a subject at institution so new blood is coming in this sector which is improving design, marketing and efficient manufacturing methods (WeConnectFashion , 2010).
Now government focus more on consumer goods export and foot ware is one of those.
Tax incentives are also enjoyed by the firms by setting units in Trade Free zones.
Due to Internet consumer can directly contact with customer so firm don’t have to indulge in long survey to get customer feedback.

Weakness

Although new technologies related to shoe manufacturing are invented but only big shoe firms can use as they can fulfill the cost by economies of scale (Just Style, 2011).
Big footwear firms have established units in many low labor cost areas but for medium and small firms it is difficult for them to operate outside of USA.
Firms with small capital consider it a expense to train its employees on new technological skills and market their product abroad.
Firms who are failing to attract international customer is due to lack of awareness of international standards and taste of different customer across the globe (WeConnectFashion , 2010) .
Firms who have establish themselves as Quality brand such as Nike , Nine West brown shoe, foot star don’t compromise on quality but struggling firm often overlook this factors (Just Style, 2011).
Economies of scale are also difficult to achieve by medium and small firms so there business is restricted in USA only.
Lack of awareness regarding latest marketing techniques also hinder in progress of manufacturer who are producing really good products (WeConnectFashion, 2010).
Firms who are struggling find it difficult to make on time deliveries to international customers.

Opportunities

Shoes’ being as in a common use so this industry never goes in decline always progressing.
Huge scope of finished leather in countries like India Bangladesh for the firms establishing units there.
Now more and more people are becoming fashion conscious especially in developing countries, everyone wants value for their money (Seiji, 1992).
Latest technology helps in reduce time of manufacturing and shipment and customer service (WeConnectFashion , 2010).
Product diversification will help companies to increase market as sports shoe firms can start comfort wear, comfort wear can go for niche market. According to Morton Research Company (1998), once customer build trust on one brand he will buy all type of product form that brand.
In luxurious and sports shoe customer can be retained through timely deliveries and high quality.

Threats

For big multinational shoe brands the presence of local brands in new country will make it difficult to attract customer.
Entry of foreign brands in local market (Just Style, 2011)
Though competition in availability of raw material.
Foreign Government restriction regarding the entry in their countries.
Improve and maintain good quality to meet international standards (WeConnectFashion , 2010).
Dynamic world of fashion as, trends change continuously.
Limited scope for the small family owned business to move to other location.

Porter Five Forces Analysis

This model provides five important forces which laid the foundation of an industry. In order to be competitive, firms have to use this model to check its market standing. Following is the Porter analysis to test where American shoe industry is at present:

Degree of Rivalry

If firms faces less number of rivals, it can make profit of its choice but in consumer industry such as shoe it is rare. There are numerous inter industry rivalry e.g. Fashionable vs. Comfort shoes. This industry is highly attractive to investors as people are becoming more and more fashion conscious and many new businesses are entering in this industry. The largest share is occupied by large firms such as; Nike, Nine West, Clair, Brown Shoes, Wall mart etc (Just Style, 2011) .

But presence of small and medium shoe houses is also there with existence of foreign brands like Adidad etc. So revelry among the firms is high, that’s why some are targeting niche market some have selected price conscious customer and some are offering casual shoes etc. Switching cost of customer is low, exit barriers in this industry are low for small business as they buy from other manufacturer and sell to customer.

But firms who have their own unit to manufacturer shoe and team to market and sell it their fixed cost is high and so exit barriers are high(Just Style, 2011). They will try there last to survive. There are specialized products such as niche, athlete’s shoes, casual, comfort shoes so differentiation is high in this industry.

Threats of Substitutes

Substitution refers to products in other industries. Shoe industry don’t have competitor so threat to substitute is low.

Buyer Bargaining Power

Number of Buyer of this industry are countless , so their bargaining power is also high , producer sets prices according to its target customers , if producer increases prices for price conscious customer it will result in loss of customer. The sports and niche market don’t compromise on quality, so producer have to maintain quality to retain its customer line (WeConnectFashion, 2010)

Supplier’s Bargaining Power

Switching Cost will be high for supplier as different raw material is needed for different type of shoes and so are manufacturing unit facilities. So it is difficult for medium and small produce to diversify. Suppliers of raw materials are many like China offer cheap raw material as compare to India: on other hand India offer more incentives to foreign manufacturers. In this way big chains can establish where they will be most competitive (Just Style, 2011)

Threat of new entrants

High entry barriers for those who want to target niche and sports market because these are specialized segments, presents firms have established themselves so well it may become difficult for new to take their customers. Also those who want to establish their own manufacturing units as this required huge investment and any failure in early period of business will affect them badly (Just Style, 2011).

Who want to target price conscious customer have to see how strongly wall-mart and Payless are holding their customer and how cheap the new entrant can offer (WeConnectFashion ,2010). Threat of new entrant is high as many fashion houses are also coming toward footwear industry. In casual shoes entry barriers are slightly low so one with small capital can work here.

References

Just Style.(2011). Footwear Manufacturing” U.S.Industry Report Feb 2011.

Morton Research Company.(1998). The U.S. shoe industry: a business research manual of the American footwear market. New York: Morton Research Company

Seiji, E. (1992). U.S footwear Industry. New York: Cornell University.

WeConnectFashion.(2010).USA Footwear Market Research Report. Retrieved from<https://www.weconnectfashion.com/>

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