Esprit five forces sample essay
Esprit faces competitors such as H&M, Uniqlo, Zara, Mango, Giordano, and Gap. Esprit’s goal is to make its own enterprise gain advantage relative to its competitors. So when they implement their plan to achieve their goal, conflict occurs with their competitors. Competition is often manifested in the price, advertising, products, services and so on. Many “Fast Fashion” brands have different product lines. Their products are more innovative and stylish. Also those brands can meet the needs of middle-class consumers. Therefore those brands can occupy the market share and gain the market value. In 2011, Esprit lost more than 90% income from 2007.
It is because Esprit lost its brand positioning, continuously slipping in popularity, less consumer demand, lack of innovation and unable to meet diverse needs of consumers. To solve these problems, Esprit decided to exit its North American retail operation. They cooperate with new competent license partner instead. However, they did not give up on North America entirely. Because exit the competition is more costly than continue to participate in the competition. There are some reason will mainly affect Esprit such as economic factors, global strategy and emotional effects. Socio-political factors include asset specificity and costs of exit. Threats of Buyer’s Growing Bargaining Power
Esprit exists in fast fashion industry and there are few competitors in the industry. The products of fast fashion industry have similar style. Therefore buyers would have lots of choices. Buyers would like to get higher-quality products at an affordable price and this will affect the profitability of companies in the industry. In China market, China has a huge market size and demographic differences among provinces. However, China is a “Red Sea”. Esprit cannot get a desirable profit because there are too many competitors. This affect the buyers in China have more choices to make their own decision. Threats of Suppliers’ Growing Bargaining Power
Supplier bargaining power is the ability to influence the setting of price. Suppliers lower their material’s quality and value but raise up the price of input factors in order to influence the existing industry in profitability and competitiveness. Different supplier’s materials have certain characteristics and distinguishing features. Therefore the retailer cannot change the supplier suddenly without planning because changing the supplier may higher the cost. Also the one of the important reason is retailer hard to discover a high quality to replace the material. The strength of supplier bargaining power is mainly depends on what materials or input factors they provide to Esprit. When suppliers provide the input factors that the value occupy Esprit’s large proportion of the total cost of product and the production process is critical or seriously affect the quality of the product, the potential bargaining power of supplier is greatly enhanced. Threats of New Entrants
Barriers of entry include economies of scale, product differentiation, switching costs, capital needed, sales channels, natural resources, policies, geography, and so on. Some of these barriers are hard to breakthrough by means of copying or imitation. The possibility of new enterprises to enter the industry is depends on the entrant, estimated potential impact of interest rate and the required cost of the risk to take. Competitive access to the severity of the threat depends on two factors. One is the size and the other one is expected barriers to new areas of existing businesses respond to entrants. However, the fast fashion industry entry barriers are very low. Therefore there is a lot of competitors who almost sales the same products or services in order to gain the fast fashion market share. Esprit is being tough and very hard to survival in this market which has high competition of market share of raw materials and it may lower the profitability of a company in the industry. Threats of Substitute Products
Esprit and its competitor such as H&M, Gap’s products are very similar and their products are substitute products. The competitive of substitute products will affect the competitive strategy of the company in the fast fashion industry. The existing product prices and potential of increasing the profitability are limited by the user’s acceptability of the existing substitute products. Because of invades of substitute products, the existing enterprises must improve the quality of their products, reduce the cost in order to lower the price or make the products be more unique in order to prevent the loss and frustrated of sales. The lower price and higher quality of substitute product will produce a strong competitive pressure to the enterprises. The intensity of competition from substitute product can specifically observe by examining the sales growth, factory production capacity and profit expansion.
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