Textile industry has high agree of specialization. Developed countries attempt to specialize in high quality products whereas 1 . Degree of seller concentration? Developing countries are producing lower quality products. Main differentiator is price which significantly differs between these groups. Growing demand of products due to growing population leads 2. Rate of industry growth? To growth of this sector. At the same time we find large number of distributors, importers. The price gap will continue to widen.

Majority of the products will be produced in the countries of Southeastern Asia, where labor costs are much less than in developed countries. They will have to close or re-profile to produce exclusive high quality products. Competition between distributors will increase. It will not be feasible to sustain retail growth on the long run. It will lead to disappearance of few distributors and mergers among others. There is no such significant 3. Significant cost differences among firms? Difference in cost among firms as basic cost of raw materials is almost same. Presently this industry is not able to fully utilize its capacity.

It is 4. Excess capacity? This trend will more or less remain the same as commodity market is highly stable. The abundance of cheap labor force and access to the new not working at its full capacity. It technologies can make this more efficiently. Create extra capacities. 2 can work and deliver its products sector very competitive and Majority of the firms must operate on the large production 5. Cost structure of firms: sensitivity of costs to capacity utilization? Scale. Minimum orders exceed the needs of any individual retailer. Many small distributors cannot afford to order full production batches.

In order to keep economies of scale firms need to forgo small orders. Two trends are equally possible: appearance of the new smaller/leaner players on the market or substitution of the highly priced product. For any quality product, produced in developed countries There are varieties of products in the market for textile industry. Terms by which individual 6. Degree of product differentiation among sellers? Brand loyalty to existing sellers? Cross-price elasticity of demand among competitors in industry? Customers sometimes differentiate products differ from the intentions of the industry.

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This trend is more visible in countries, where consumers are more knowledgeable and have more sources to educate themselves. There exists a lower cost in developing countries. The number of so-called knock-offs grows in number and in quantity per article. Cheap labor and materials make these products viable inexpensive substitutes. For example, high quality yarns, such as Eros and Mexico are priced at $10-1 CAD, their low cost analog Matrix made in China is retailed at $4. CYCAD and even more discounted in the larger retail chains. 3 Buyers usually have limited additional costs of switching from one product to another.

Substitutes or equal quality 7. Buyers’ costs of switching from one competitor to another? Products are available. Distributors as buyers invest into promotion of the new products. Switch may cause them to forfeit potential benefits of selling a product for longer period of time. Prices and terms of sales transaction is quite observable 8 Are prices and terms to sales transactions observable? Due to high transparency owing to increased use of technology in textile market. Price of the product consists of labor costs, price of materials and supplementary costs, such as shipping etc.

Any producer can 9. Can firms adjust prices quickly? Intro labor and supplementary costs. Adjustment of the raw material component is problematic because it is based on the prices in the commodity markets. The number of products is limited and when all new products are brought to market, the market itself will stall. Distributors will be pressed to stay with the product because they will not be able to find an alternative. This trend will not change in the future as firms become more technology-oriented. The situation on the market will not change in the future because of the commodity component.

If the market becomes more global then it might be possible to adjust he costs by placing order with the equal quality, lower cost seller. 4 Orders from distributors to manufacturers are often large and seasonal. The goal of the large order is to offset shipment and importing charges. Orders 10. Large and/or infrequent sales orders? From consumers to stores are also infrequent. They are based on the ability of the individual to accomplish the project for which product and patterns were ordered. The labor is largely unskilled and production facilities are little 11. High industry price elasticity of demand? Ore than buildings – no special structures are needed. Thus the price elasticity of demand for textiles is elastic. This trend might change in the future with use of skilled labor and sophisticated production facilities. The trend will remain the same in the future because it is based on the seasonal demand. There are no defined cooperative prices. Stores keep prices at MSP level for the different 12. History of “cooperative” pricing? Reasons. Distributors do not sell same products and similar products are usually priced based on the common benchmarks. The trend will remain the same.

There is no evidence that distributors will settle for a share of the same product. At present exit price is very high among the manufacturers and distributors alike. The former have invested in the equipment and continue to invest in 13. Strength of exit barriers? Upgrades, computerizing etc. The latter usually invest heavily in the large quantities to product to achieve economies to scale. Exiting business will mean big losses for this group. Current trend shows that the number of the distributors is likely to increase whereas the number of manufacturers will remain relatively stable.

Smaller distributors will have lower exit barriers and will make distribution segment f the market more volatile. 6 2) Factors Affecting the Threat of Entry To what extend does the threat or incidence of entry work to erode the profitability of a typical firm in this industry? Characterization (Current) Economies of scale are minimal. If there is little improvement in 14. Significant economies of scale? Efficiency as scale (or size) increases, a firm entering a market won’t be at a disadvantage if it doesn’t produce the large volume that an existing firm produces.

Customers have little brand loyalty. Without strong brand 15. Importance of reputation or established brand loyalties in purchase decision? Loyalty, a potential competitor has to spend little to overcome the advertising and service programs of existing firms and is more likely to enter the industry. Start-up costs are low for new businesses entering the industry. The less commitment needed in advertising, research and 16. Entrants’ access to distribution channels? Development, and capital assets, the greater the chance of new entrants to the industry.

Such expenditures act as a barrier by reducing the profitability of new The number of distributors will increase in the future. Manufacturers, who seek alternative distributors will be able to find them easier Distributors and sellers of the new brand invest in consumer education remains in future. Future Distributors order the products in larger batches when Delivery costs will increase. Increase when manufacture shifts towards remote areas with cheaper labor force. 7 entrants. Access to inputs is easy. Entry by 17. Entrants’ access to raw materials? Ewe firms is easier when established firms do not have favorable access to raw materials, locations, or government subsidies. Incumbents in the Presently industry have advantage over 18. Entrants’ access to technology/know-how? New entrants because cost of the knowledge is cumulative by nature and cannot be easily transferred. One of the most common Factors that allow incumbents to 19. Entrants’ access to favorable locations? Earn positive economic profits, while making it unprofitable for new entrants. Conditions tort market penetration today is celebrity status to the distributor brand.

New smaller distributors slowly penetrating existing markets. This trend will continue in the future Existing firms may have cost advantages not available to potential entrants regardless of the entrant’s size because these advantages can include access to the best and cheapest raw 20. Experience-based advantages of incumbents? Materials, possession of patents and proprietary technological know-how, the benefits of learning and experience curve effects, having built and equipped plants years earlier at lower costs, favorable locations, and lower borrowing costs.

Page In future firms have favorable access to raw materials, locations, or government subsidies more restricted than it is even today. Techniques will push new entrants towards creation of low quality knock-offs. Knowledge of the tastes of customer base will give incumbents an advantage over he newcomers both in retail and in distribution. In the future the difference between the new and established mills will more likely lessen. 8 The production process is easily 21 . “Network externalities”: demand-side advantages to incumbents from large installed base? Learned.

Just as competitors may be scared away when the learning curve is steep, competitors will be attracted to an industry where the production process is easily learned. Government agencies can limit or even bar entry by requiring licenses and permits. National 22. Government protection of incumbents? Governments commonly use tariffs and trade extractions (antiquating rules, local content requirements, and quotas) to raise entry barriers for foreign firms. Incumbent will want to signal its toughness by pricing low and deterring entry. A sufficiently low price will also signal low costs, again deterring entry.

From the other hand the incumbents deem their market share fairly safe because of the perceived brand loyalty on all buyer levels. This trend will continue for a while but must subside due to either lack of demand. In near future National government uses tariffs and trade restrictions to raise entry barriers for foreign firms. 23. Perceptions of entrants about expected retaliation of incumbents/reputations of incumbents for “toughness”? It will be hard to unite the incumbents in any segment of the industry therefore entrants will not fear any retaliatory action in the future. 3) Factors Affecting or Reflecting Pressure from Substitute Products and Support from Complements To what extend does competition from substitute products outside the industry erode the profitability of a typical firm in the industry? Characterization (Current) Future Nowadays, Fabric and cloth Currently fabric various mills cloth are and material are dad of artificial getting filaments. There is a growing established which is benefited supply of these filaments due to cheap labor by which throughout the world.

As the inexpensive substitute fabric and price of these filaments goes cloth material will be grown and down; the prices of the 24. Availability of close substitutes? Manufactured. Like nowadays substitutes will also decrease. There are many Chinese made Also, as the price of natural substitutes domestic fibers and raw materials is fabrics/cloth which is better in generally on the higher side, quality and less costly. These manufacturing natural fiber will Chinese dad fabrics are getting be expensive. And there will be very popular among the markets. O possibility to produce a less expensive substitute for the fibers in the market. For our 10 In future there will be many more substitutes due to new Presently fabrics made out of natural fibers carry a status equal to the status of natural fibers. The substitution is possible but it 25. Price-value characteristics of substitutes? Will be undesirable for the consumer. It is possible to substitute natural fibers by their lower quality equivalents. This substitution does not lead to a decrease in value but will diminish nonuser satisfaction. Evolving technology and there price will drop sharply.

By this there will be two fabrics in the market- natural fibers(expensive) and substitute fibers(cheaper). Obviously these cheaper substitutes will be relished by low income consumer where as the expensive natural fiber will be used by high income groups. Therefore the market will be divided into two levels. And this will lead to deeper drop dip in value of the substitutes. At present fibers price has limited elasticity. There are set prices for certain brands of fibers. If prices increase at the manufacturer end of he product chain distributors will not be 26.

Price elasticity of industry demand? Able to match the increase and will likely look for substitutes. In the search of new substitutes retailers switch from one distributor to another. It is the reason for fragile relationship between retailers and distributors. Establishment to two levels in market will lead to the increase in price elasticity. Suppliers of expensive products will keep prices high. Then they can also reduce the prices with the decrease in their no. Of customers. At the same time, the price elasticity of demand of heap substitutes will decrease because of the low price only. 1 Textile industry is one of the developing industry, textile and 27. Availability of close complements fabric making has many substitutes. These substitutes are due to innovations and change in technology. As innovations and change in technology will continue in future, the no. Of substitute products will increase only Latest developments in fabric making procedures and techniques has been accompanied with a large no. Of products which are complementary to the fabric 28. Price-value characteristics of complements? Making..

Majority of these products are relatively inexpensive but their price/value is still questionable. Such items as needles with interchangeable tips, special wool shampoos can be attractive for novices but not for experienced knitters and designers. The number of complements will almost remain the same but they will be geared more towards the experienced designers and makers. 12 4) Factors Affecting or Reflecting Power of Input Suppliers To what extend do individual suppliers have the ability to negotiate high input prices with typical firms in this industry?

To what extend do input prices deviate from those hat would prevail in a perfectly competitive input market in which input suppliers act as price takers? Characterization (Current) At the present state the industry dynamics resembles a chronometer. There are many different yarn cultivators and Earlier there were trend that to move yarn mills to the areas with cheaper labor. These areas produce a lot of natural fibers, many textile mills. In Europe and especially cottons. This trend North America there are very 29. Is supplier industry more concentrated than industry it sells to? Ewe common TTY traders, which EAI w n delivery to Attlee trot the growers to the mills. The other point of concentration is distribution. From the retail perspective there are very few yarn distributors if compared to the yarn retail outlets. Will eliminate the need to have traders/concentrators of the natural fibers. On the other hand, it was mentioned that the number of distributors is likely to grow in the future. This trend will somewhat increase distributor/retail ratio. 13 Individual retailers purchase very limited quantities of yarn as compared to the overall volume of a single distributor. Pakistan, 30.

Do firms in industry purchase relatively small volumes relative to other customers of supplier? Is typical firm’s purchase volume small relative to sales of typical supplier? Have relatively lower supply of locally grown long staple cotton. Moreover, low cotton prices due to a bumper cotton crop would enable India to lower its production cost and sustain pricing pressure. Ontario works with more than 100 stores, each of which purchase from $100 to $10,000 CAD worth of yarns during a high knitting season (November – March). Majority of retail outlets are courted by the suppliers rather than opposite.

Yarn mills are more inclined to deal with the specific traders because they have access to a specific fiber source and the type of yarn they 31 . Few substitutes for suppliers’ input? Use are specific and the production of the yarn e. G. If cotton is required in other countries the highest producer is India where they can get it at cheaper and countries, like China and Pakistan, have relatively lower supply of locally grown long staple cotton. In the future, the growing number of suppliers will lead to a higher specialization of products sold by a single yarn distributor.

Mentioned exclusivity of brand supply may lead to a situation when yarns from one supplier will be more desirable by retailers. And bargaining power of supplier will be limited Suppliers have very limited ability to dictate prices on the markets. With the increase in the number of distributors each one of them will be selling less per store. Hence the future market trend will be on higher side. 14 These investments are nonexistent in the yarn industry. 32. Do firms in industry make relationship-specific investments to support transactions with specific suppliers?

Majority of retail outlets are courted by the suppliers rather than opposite. Access to a specific fiber source. Yarn mills and agents are presently seeking direct 3. Do suppliers pose credible threat of forward integration into the product market? Relationships with the retailers. Retailers can drop prices significantly by forgoing distribution markups. Excess and specialization of distributors in the future will draw tee to them towards the retail markets. There is a number to deterrence in business approach between retail and distribution, which will make this transition very rocky.

There is evidence of price discrimination especially in the low-tier artificial filament yarn market. Because of the low profit 34. Are suppliers able to price discriminate mongo prospective customers according to ability/willingness to pay for input? Yield on these yarns, manufacturers and agents are willing to accept lower profit margins in exchange for the higher volumes. It is very common among the manufacturers, who work directly with large retailers, such as Wall-Mart Reduction in costs of artificial fiber yarns will bring prices lower and make price discrimination impossible.

From the other hand, lucrative yarn markets may see larger fluctuations in price because of the exclusivity of product . Brand supply may lead to a situation when yarns from one applier will be more desirable by retailers and they will be willing to invest into more exclusive relationship with this supplier 15 5) Factors Affecting or Reflecting Power of Buyers To what extend do individual buyers have the ability to negotiate low purchase prices with typical firms in this industry?

To what extend do purchase price differ from those that would prevail in a market with a large number of fragmented buyers in which buyers act as price takers? Characterization (Current) 35. Is buyers’ industry more concentrated than industry it purchases from? Distributors as buyers are more encountered than the fiber manufacturers they are buying from. The opposite can be said about the relationship between retailers and distributors. It is expected that the number of distributors will increase.

This will reduce the concentration of distributors and decrease the influence of distributors as buyers. Future 36. Do buyers purchase in large volumes? Does a buyers’ purchase volume represent a large fraction of the typical seller sales revenue? Distributors often seek rights for exclusive distribution over a certain territory. This makes Increased number of distributors will lock each one of them with the specific hem buy cloth of specific brands supplier or a group of and makes in very large volumes. Suppliers. Distributors will be more specialized, which will bring more competition 37.

Do firms in industry make relationship-specific investments to support transactions with specific buyers? Nutcrackers and agents invest heavily into building special relationship with buyers: distributors and retailers alike. Distributors also invest into relationship with the retailers especially new distributors, who don’t have established customer base. On distribution/retail level. Increased number of . Distributors will increase intention between brands of fabric. With the limited buyer capacity, distributors will have to make more effort to entice retailers to buy products they distribute.

Increased investment in buyers may strain capabilities of certain suppliers and force them out of business. 16 38. Is price elasticity of demand of buyers’ product high or low? Presently price elasticity of demand for the buyers is relatively low. Increase in price of the product will move both distributors and retailers away from the product. They will be searching for substitutes, which will allow both distributors and retailers to peep profit margin at the present level. With the increasing number of suppliers and exclusivity of distribution, described above, the price elasticity will increase.

Exclusive distribution of expensive fabrics will create a group of products with practically no equal substitutes, which will certainly allow for more price elasticity before consumers make decision to 39. Do buyers pose credible threat Latest developments in the of backward integration ? Industry have shown that buyers actively seek vertical integration with the makers of the product in order to reduce product costs. Distributors also seek integration with the mills in order to create so-called white label products they intend to distribute under their own brand name. Abandonment of locking Current overpriced products. Suppliers with the exclusive distribution agreements will continue into the future. More distributors of fine expensive fibers will be in the direct relationship with the manufacturers. This integration trend will also create a number of equal quality substitutes, which in contradiction to the previous trends will dilute the market and may lead to price decrease. 17 40. Does product represent significant fraction of cost in buyers’ business?


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