Porter 5 forces of Argentina Clothing Market - Essay Example

Threat of new entrants The apparel industry in Argentina is on the BOOM for past couple of years. The sector has presented a lot of opportunitiesfor investors. Over the period of last 5 years the apparel sector has steadily grown by 35% and the year of 2011 also looks promising in which it is forecasted that an increase of 6% is expected which will make this sector grow over $7 billion. Also a good sign here is that the consumption on domestic level is upbeat and the Argentinean government realizes the importance of key segment and makes further efforts to protect its growth and profitability. (Freeman) As the sector is on boom and presents so many opportunities for new entrants to grow with the growing sector hence there is a high risk of new entrants.

Mostly the Argentinean apparel sector will be target for international brands as in this case RAOUL. But to make the most of this growth and buoyant level of consumption from the domestic population the Government has imposed regulations and has raised import tax for imported brands in order to protect and develop the local apparel industry and to earn tax from international brands expanding into Argentina. Hence the threat is more from domestic and local apparel brands rather than other international brands expanding into Argentina.

Bargaining power of buyers : The bargaining power of buyers in Argentina is quite high as according to stats that all of the 100% apparel produced in Argentina , 80% are consumed and bought by local population and only 20% is exported showing that the people are satisfied with the local clothes and apparel being produced. Hence They have a strong say in the price setting factor and the type of quality they expect and want a shop keeper or apparel caterer to provide. Hence the Argentinean market is quite favorable for the people they have a lot of variety on a local scale and they derive the market trends.

Also the Apparel industry has started to focus on teenagers and adults up to the age of 30 which limits the population and squeezes the target market which gives more power to bargaining power of buyers according to the Argentinean consumer report. Focusing on this , RAOUL has as edge as it targets on Menswear and Womenswear also providing looks and quality that actually last which will make it less affected to the high bargaining power of buyers. Bargaining power of suppliers : The suppliers don’t have as much power as the customers have in the Argentinean environment.

As the economy is going through a bad phase and businesses are going down at the same time suppliers are suffering too as they need people and contracts to run their businesses to. Hence making them a little weak to business owners who come to them for logistic, manufacturing and other services. RAOUL can make use of this fact and can establish a local workshop or assembly line in Argentina where cheap labor can be hired to produce products at lower cost hence increasing the profit margin. Threat of substitute products & Competitive rivalry in Argentina clothing industry.

  There is a lot of threat of substitute products in the Argentinean clothing industry. The market has two major segments ; outlets and brands which offer genuine products and other which offer fakes. The problem here is that the population is badly hit by the financial crises faced by the world and their affordability has fallen down so they prefer buying clothes which are fake because they are much cheaper in cost and last as well as compared to their prices. (International) Hence RAOUL offering quality garments with comparatively higher prices than the fake apparel providers will make it face stiff competition from them.

References Freeman, Ivan Castano. Argentinas apparel industry upbeat on growth. July 2011. . International, Euromonitor. "Consumer Lifestyles - Argentina." 2009.