Fashion Textiles Management - Essay Example

THE CASE STUDY OF ITALIAN PRATO TEXTILES/APPAREL PIPELINE Table of Contents Introduction 3 2. Analysis of the five/six forces of Prato Textiles/apparel 3 a)The threat for new entrance 3 b)Threat of substitute 3 c)Competitive rivalry 3 d)Bargaining power of supplier 4 e)Bargaining power of customers 4 3. How Prato Textiles/apparel can reshape the industry using five/six forces in its favour 4 f)The threat for new entrance 4 g)Bargaining power of suppliers 4 h)Threat of substitute 5 i)Competitive rivalry 5 j)Bargaining power of customers 5 4.Conclusion 5 5.References 6 1. Introduction There are two parts in this essay. Firstly, it analyses the Prato textile industry in Italy, and then discusses how it can reshape the industry in its favor. The organization major in woven textiles that makes up the 72%, the apparels section 16% and the knitwear constitutes 12%. The analytical model is Porters Six Forces Model, which includes the threat for new entrance, threat of substitute, competitive rivalry, bargaining power of suppliers and buyers. 2. Analysis of the five/six forces of Prato Textiles/apparel a) The threat for new entrance Analysis of this model assesses items like fragmentation of the industry, the involvement of the government in drafting and implementing supportive policies, and the level of growing domestic and export opportunities. For those existing companies, the entrance of new companies is a challenge. Because it may cause the loss of market share and the decrease of prices of products, and finally led the drop of profit. For these reasons, Prato can raise the entry barriers by four ways. Firstly, the economic scale needs to be expanding constantly. As significant economic scales makes it difficult for new companies to form any significant competitive advantage. To be specific, ccompanies with increased volumes of production can enjoy low production cost for every unit (at £7 per kilogram), because they can utilize technology or demand better terms from their supply chain, which describes the supply-side of the economic scale (Owen, 2003). b) Threat of substitute The model assesses the threat of product substitute depends on performance and availability of substitutes. The presence of several domestic and foreign brands increases the threat to substitute because consumers have a wide array of product for selection. In fact, the availability of fabrics with lower costs opens the market and increases the threat of substituting homemade products with the foreign brands (Bheda et al., 2003). However, with the market growth of foreign and domestic markets, it possesses a challenge to the existing players as other domestic organizations that are contemplating to make an entry. c) Competitive rivalry The rivalry intensity is determined by product differences, diversity of competitors, industry concentration, and the growth of the industry. When the intensity of rivalry is high, the profitability will go down due to the growth of the cost of competition and the decrease of product prices (Porter, 1980). Such moves are likely to make the sector less attractive for investment. The entry of foreign apparels and other sector players has reduced the growth of the company from 21% to 10% in 2008 (Owen, 2003). Although the market exist as an open retail segment because of the increasing number of foreign retail and domestic companies, the government play a significant role in ensuring home grown organizations get favorable incentives. d) Bargaining power of supplier When the suppliers are powerful, their bargaining power captures value because they can increase the pricing model and limit the availability of services. These tactics enable them to squeeze profits from the industry. However, there are some occasions when the consumer can benefit from the bargaining power of supplier. For instance, Porter (1980) ascribed that buyers benefit from the market when there was a high threat of integrating backward, larger purchase volume and a lower ratio of buyer-to-supplier. The Italian market affected all organizations in this sector. For instance, the existence of numerous outlets and high ratio of buyers-to-suppliers makes the segment exhibits properties of a suppliers market. The main factor that affects consumers bargaining power is the entry of foreign company in the market, especially if such organisations do not understand the local market hence increasing the chances of backward integration. e) Bargaining power of customers When customers are powerful (more bargaining power), they capture the market by forcing down the prices and increases the demand for quality services. The most interesting role is their possibility of playing industrial organisations against each other. The Prato organization operates in an environment that id conducive to a wide range of products and the increasing demand for both foreign and domestic markets. The domestication of its apparels, which are appreciated by the Italians, could lead to immense advantage. For Prato to remain relevant in retaining most of its market share they need to continue their operation in customized traditional items because customers build loyalty and preference to products that defines their identity (Bheda et al., 2003). 3. How Prato Textiles/apparel can reshape the industry using five/six forces in its favour f) The threat for new entrance Prato can gain this advantage because their policies in place ensure their cost of operation is low for every unit produced. In fact, the Prato offers a wide range of apparels, which makes about 16% of its turnover. The Prato can also strengthen on its supply-side by scaling up the volume and widening its market presence. Porter (2008) illustrated that consumption of product from larger companies is higher than products from smaller companies. Earlier entry of Prato plays advantage for its demand-side scale, which enable Prato has a long lasting and extensive operation in the market, and it can strengthen its superiority by establishing new customer base by understanding the depth of their knowledge and bridging the identified gaps (Kitty, 1999). Moreover, Prato can also form an advantage about by limiting the access to channels of distribution by seeking government intervention through enactment and implementation of polices that favour homegrown organisation. More specifically, Prato can engage the existing channels of distribution by offering favourable terms that cannot be met by the new entrance. g) Bargaining power of suppliers This model depends on factors like volumes, supply concentration, and the threats likely to occur from forward integration. The suppliers in Prato case are not concentrated, which makes them less powerful making it less threat for forward integration. The high fragmentation of textile and apparel supplier, as well as the high density of these suppliers, reduces their power for attaining scale economies (Owen, 2003). h) Threat of substitute Most of the domestic homemade product experience fewer threats of the substitute, especially for women clothing and other apparels. The advantage of the consumers in the Italian market is their preference for traditional clothing, which gives homegrown organisations an upper edge. If the foreign organizations were considering making a significant share of the market, they would need to diversify their models by incorporating the local tastes and conservative designs. Besides, the domestic organization needs to strengthen their local brands. However, the most appropriate approach of increasing the competitive edge for the changing Italian consumption is to embrace the self-service format (Ghoss, et al., 2010; Sinha, and Banerjee, 2004). i) Competitive rivalry The competition has became increasingly fierce in the Italian market because the presence of unorganised, domestic, and foreign retailers. The best way of remaining competitive is diversifying the product to meet the need of various consumers (Sinha, and Banerjee, 2004). Perhaps, one of the ways that Prato can leverage on is the improvement of its supply chain to meeting the customer demands hence increase loyalty to their products. j) Bargaining power of customers Prato can diminish channel clout by marketing their products to their target consumers, or ensure exclusive arrangement with retailers and distribution groups to achieve this strategy. Besides, Prato can ensure that their products form a significant fraction of customer spending, which play a significant part because when product forms a small fraction of the consumer costs, the latter has more bargaining power. These strategies reduce operating cost hence increases their profit margins. These strategies were reported by Porter (1980) and Ghoss, et al., (2010), as well as Sinha and Banerjee, (2004), when they opined that buyers are powerful when they are able to capture value in the market by demanding quality services, thereby forcing prices down. 4. Conclusion Prato organization is an example of successful textile and apparel organisation operating in the Italian market, which adopted Porters principles. Some strategies from the government that involves formulation and implementation of polices that favours home grown organisations have played a significant role in sustaining Italian clothing apparels like the Prato. However, continual investment in the supply chain will enable Prato maintain its market share and compete with emerging organisations. 5. References Bheda, R., Narag, A.S. and Singla, M.L (2003) Apparel manufacturing; a strategy for productivity improvement, Journal of Fashion and Management, 7(1): 12-22 Ghoss, P. Tripathi, V. and Kumar, A. (2010) Customer expectation of store attributes, a study of the organised retail outlets in India, Journal of Retail and Leisure Property, 9(1): 75-87 Kitty, D.G. (1999) Textiles and Apparel in the Global Economy, 3rd edn Englewood Cliffs, NJ, Prentice Hall. Owen, N. (2003) A comparative study of the British and Italian textile and clothing industries, DTI Economics Paper No.2 , Alan Cannon Jones, London College of Fashion Porter, M.E. (2008) The five competitive forces that shape strategy, Harvard Business Review, 1: 1-18 Sinha, P.K. and Banerjee, A (2004) Store choice behaviour in an evolving market, International Journal of Retail and Distribution Management, 32(10): 714-721 Read More