The macro-industry environment for Newton Running, using Porter’s 5 forces model
The following provides the porter’s forces analysis for the Newton Running shoe company. The analysis has been performed for the macroeconomic environment for the company in terms of the threat presented from substitute products, the threats presented by the established rivals, the threat of new entrants as well as the bargaining power of the suppliers and the customers.
The threat of Substitute Products
The threat of substitute products for Newton Running is very strong, as although the products manufactured and sold by the company are specifically for the niche ultra running and extreme marathon market, the brands like Nike, and Adidas have alternative substitute products which are much recognized by the market for their brand identity and appeal. Moreover, the shoe giants also have huge budgets for research and development which increases the threat of substitute products being manufactured by them.
The threat of New Entrants
The threat of new entrants for the Newton Running company is also increasing as the barriers to entry into the market have been decreasing with the advancements in technology that have been taking place. The presence and the development of businesses on the internet have greatly reduced barriers to entry for new entrants by making it easier for the new entrants to contact the customers through the internet and directly sell to them. This reduces the marketing and sales efforts required in terms of the capital and funds required.
The Intensity of the Competition/ Rivalry
The shoes being sold by Newton Running are specialized, high-end running shoes that are specifically made for extreme running and marathon runners. This requires an extensive amount of research and development. However, despite this, many companies providing similar products to the customers have sprung up. These pertain to Spira which is based in El Paso and is employing guerrilla marketing tactics to promote its products. Other companies include LOCO from New Hampshire and Zoot Sports which has been operating in the market for about 25 years now providing specialized footwear for athletes. Zoot Sports has been using technological innovations to provide the market with comfortable and stress-relieving running shoes which improve the performance of the customer. This presents that the competition for the Newton Running company is getting intense as more and more companies enter the market.
The Bargaining Power of Customer
Specialized running shoes like the ones manufactured and sold by Newton Running are very personal and important to the customers. They are not a purchase made on a hunch, as a result, a lot of consideration and analysis goes into their purchase on part of the customer, as a result, the current customers of Newton Running are more likely to stay loyal to the company and its shoes if the company keeps on providing the customers with innovative and suitable products. The buyer switching cost is very high when it comes to specialized running shoes therefore they are less likely to switch easily. Moreover, the buyers in the market are not sensitive to price as they are willing to spend a large amount of money on good running shoes which benefit them.
The Bargaining Power of Suppliers
The established suppliers in the industry are involved with the big giants of athletic footwear like Nike and Adidas. As a result, it is difficult to get resources from them or work in accordance with them. Instead, companies like Newton Running have to work with the more diverse and freelance suppliers in the market. This does increase the bargaining power of the suppliers as they are few and far between.