Outsourced manufacturers of athletic footwear for leading global market players.
Brief background on athletic footwear industry:
The industry is dominated by a few large firms accounting for around 80% of the market share in which Nike is the clear market leader. Majority of other smaller players account for less than 5 % market share individually. The firms fight for market share through non-price competition, on strategies such as strengthening brand image, developing product innovation and identity, and expansion of Customer loyalty. The success of each firm is greatly dependent on its marketing campaign with the requirement of substantial investment in marketing strategy. Real household disposable income is an important demand factor for footwear. The leading firms manufacture most of the products from overseas contracted suppliers owing to cheaper costs. Nike, itself, manufactures all of its footwear from outside United States. This is a mature industry.
Risk Analysis: Following characteristics are present in the industry of contract athletic footwear manufacturers for leading global firms, in which PTSI operates in:
1. Rivalry among existing firms: High
This is a mature industry with high entry level barriers. It is driven mostly by non-price competition, product differentiation capability, quality control and cost efficiency. There is relentless pressure to reduce fixed costs. This increases rivalry when firms pass on manufacturing savings to Customers. Most firms have the means to manufacture the demanded output.
2. Threat of new entrants: Low
* High barriers to entry with the requirement of heavy capital investment.
* An outsourced firm has to secure a contract with a leading brand name like Nike, which is not easy for a new entrant as it has to establish its credibility and comply with the rigorous quality...