Shoe Industry

Political •Recent merger between Adidas and Reebok •Use of leather to make shoes by Bata, Red tape •India is not a sporting Country and hence lesser demand for sports shoes. •home market lobbying/pressure groups •Very few sporting events apart from cricket fixtures to attract customers Economic •Marginal share of 2.44 percent in global trade worth US$ 97.606 billion •Estimated target of 12 bn $ (7bn $ export + 5 bn $ domestic) trade by the year 2012overseas economies and trends •The Indian footwear retail market is expected to grow at a CAGR of over 20% for the period spanning from 2008 to 2011. Footwear is expected to comprise about 60% of the total leather exports by 2011 from over 38% in 2006-07 •Growing middle class and growing buyer power leading customers to look for branded shoes. •seasonality issues – sports is more of a rage in summers •Lack of targeting of market segments for kids and women Social

•lifestyle trends – upward shift •demographics •consumer attitudes and opinions changing favourably towards branded shoes •media views •consumer buying patterns •fashion and role models •buying access and trends •advertising and publicity Technological •Competing technology development •India offers benefits like low cost of production, abundant raw material, and a huge consumption market •research funding in design and requirements •manufacturing maturity and capacity •information and communications •consumer buying mechanisms/technology •innovation potential •technology access, licencing, patents

Porter’s Five Forces in the Indian Shoe industry

Reebok or Nike operates in the ‘upscale’ segment of the Indian footwear industry. This segment was analyzed using the Porter’s Five Forces model. For this, the five forces in the industry were identified: -Buyers – The buyers are sportsmen, amateurs, leisure walkers and other individuals looking for branded products. As there exists a large degree of product differentiation, people prefer to try out various brands. The loyalty may be generated only after all products have been tried out once or more.

-Suppliers – Since this is a product industry, suppliers for it would include retailers and manufacturers. Certain supplier groups enjoy the power of differentiated inputs.

-New entrants – New entrants would be big industrialists looking to enter this segment of the industry. Growth in foreign branded segments in India has attracted huge foreign players in this industry. Major international players in India include Nike, Reebok, Puma. These constitute a major part of the new entrants’ category.

-Substitutes – Substitutes include lower cost footwear, both leather and non-leather segments. Indian footwear industry is characterized by very high variety of demand. People in various segments prefer various types of footwear.

-Existing firms – Existing firms include Nike, Reebok, Puma, Bata etc. These firms provide stiff competition to each other and try to differentiate their products as much as possible to ensure that the customers remain loyal to their products.

Summary

The above figure rate each of the five forces on the amount of threat they pose to any player operating in the shoe industry, on a scale of 1 to 5. All of the five forces, prima facie, appear to pose the same degree of threat, near-about three. However, the degree of rivalry between existing firms, supplier power and threat of new entrants are a little bigger threat than the threat of substitutes and buyer power, as reflected in the figure.