Porters Five Forces
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NIKE AND PORTER’S COMPETITIVE FORCES MODEL
Rivalry among existing players
Is there a strong competition among the existing players? Is there a dominant player or are all equal in strength and size? This rivalry usually results in struggle for competitive advantage among the rival firms. This struggle for competitive advantage normally requires a lot of the rival firms’ resources. Rivalry among firms depends on
The structure of competition.
Structure of industry costs
Degree of product differentiation
Strategic objectives
With rivals such as Adidas, Reebok, Puma, and others, Nike is operating in a very competitive industry. The situation is even more compounded by the recent merger between two of Nike’s closest rivals, Adidas and Reebok.
Entry of new competitors.
How easy or difficult is it for new entrants to start competing, which barriers do exist? Huge resources are also usually required to prevent the entry of new rival firms. With the advent of the Internet, countering the entry of new firms is a very difficult task as even faceless organizations can pool a surprise. Threat of new entrants depends on
Economies of scale
Capital / investment requirements
Access to industry distribution channels
Access to technology
Brand loyalty
The nature of all the above factors in the sports wears industry favor ease of entry.
Availability of substitutes.
How easy can a product or service be substituted? For instance, can users of sports shoes substitute other type of shoes for Nike brand? This threat is in addition to the one from rival firms. Threat of substitutes depends on
Quality. Is a substitute better?
Buyers’ willingness to substitute.
Relative price and performance of substitutes
Costs of switching to substitutes. Is it easy to change to another product?
The teens that constitute a sizable part of Nike’s market have the cell phones and other things competing for their money.
Customer bargaining power
The customer might get so powerful that it can unilaterally determine the terms of the transaction. This might lead to low margins for the seller.
Concentration. Are there a few dominant buyers and many sellers in the