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TitlePorters five forces model- Textile Industry
TagsFashion & Beauty Industries Supply Chain Exports Clothing
File Size39.6 KB
Total Pages3
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Page 2

2) Bargaining power of customers (demand scenario)

Global textile & clothing industry is currently pegged at around US$ 440 bn.
US and European markets dominate the global textile trade accounting for
64% of clothing and 39% of textile market. With the dismantling of quotas,
global textile trade is expected to grow (as per Mc Kinsey estimates) to US$
650 bn by 2012 (5 year CAGR of 10%). Although China is likely to become the
'supplier of choice', other low cost producers like India would also benefit as
the overseas importers would try to mitigate their risk of sourcing from only
one country. The two-fold increase in global textile trade is also likely to drive
India's exports growth. India's textile export (at US$ 15 bn in 2005) is
expected to grow to US$ 40 bn, capturing a market share of close to 8% by
2012. India, in particular, is likely to benefit from the rising demand in the
home textiles and apparels segment, wherein it has competitive edge against
its neighbors.

Hence, the bargaining power of customers is strong. For that reason, it is of
importance for a producer of apparel to differentiate their products or
production so it will not compete with price as primary mean.

Differentiation is accomplished either by quality or service. Differentiation
can be considered as especially important in the Indian textile industry since
contracts are usually set on short-term basis and are rarely set more than six
months ahead. Hence, there is a need to tie the customer to manufacturers
without the need of explicit contracts. And Thus, the bargaining power for the
Customer is improved.

3) Bargaining power of suppliers (supply scenario)

India is a country where we have numerous players in textile industry which
all are varied in terms of size and power. There has been increase in
production and supply of textile products in last few decades globally, mainly
due to rapidly changing social and economic structure of the countries
worldwide. In past few years, especially after the removal the trade related
tariffs and non tariff barriers in 2005, Asian countries such as India, china,
Hong Kong and Japan have emerged as major players in this particular
industry, mainly due to their changes on economic front and infrastructure
developments.

The large number of available suppliers in India gives an initial indication of a
weak bargaining position for the supplier group.
Additionally, the supplier group lacks switching costs and has a low level of
product differentiation. This leads to great possibilities for textile
manufacturers to scout the supplier group for best terms and prices for
production. As a result, manufacturers can contact a large number of
suppliers and play suppliers against each other. Such behavior weakens the
bargaining power for suppliers and as a result pushes prices down and makes
prices similar among suppliers.

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