Michael Porter’s Industry Forces Model
Reebok International, Ltd. (1995): The Nike Challenge
Case Authored By:
Thomas L. Wheelen, Moustafa H. Abdelsamad, Shirley E. Fieber, and Judith D. Smith
Threat of New Entrants
Barriers to Entry
The athletic shoe industry is slowly becoming a global oligopoly. There are many barriers to entry preventing new entrants from capturing significant market share. Large athletic shoe manufacturers enjoy economies of scale that create cost advantages over any new rival. Today’s athletic shoes are highly technical. An extremely large capital investment is required for new firms to open athletic shoe factories and …show more content…
In the event of backward integration, Woolworth’s would be subject to some of the high barriers to entry. Plus, they would have to continue to sell their competitors products because retail shoe sales are the core competency of their corporation. Buyers have high switching costs in regards to opportunity cost. If an athletic shoe retailer decided to drop one of the popular athletic shoe brands, their sales would fall due to high consumer brand loyalty. Most buyers have a medium profit margin so price sensitivity of buyers is moderate. In the athletic shoe industry, price increases pass to the consumers. The overall impact from buyer’s bargaining power to profit potential is moderate.
Bargaining Power of Suppliers
Athletic shoes are manufactured primarily from raw materials including rubber, leather and nylon. These materials could be classified as commodities, where the manufacturing process adds to their value. For this reason, the suppliers have limited bargaining power, and little impact on profit potential.
Threat of Substitute Products and Services
Athletic shoes are designed to improve comfort and personal safety during periods of increased movement. Substitutes for athletic shoes are using other forms of shoes, or going barefoot. A large population of athletic shoe consumers wear athletic shoes strictly because they are comfortable. Comfortable dress shoes or sandals are equally