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Sportswear Merchandise in UK Essay


Introduction

Businesses operate in industries characterised by unique attributes, which emanate from interaction between internal and external forces. These forces interact in both predictable and unpredictable ways. Silber and Kearny (2010, p.110) argue that the ‘interactions are both complex and uncontrollable’. Action oriented business executives have an obligation to understand the industry in which their organisations operate.

Subsequently, business executives should put sufficient efforts to understand and utilise the complex interactions between businesses for the success of the organisation. Gaining insight on the prevailing industry dynamics gives business executives perceptivity on the business model and strategies to implement.

The retail industry is among the most dynamic industries in the world. According to the Euro Monitor (2013), the retail industry is characterised by inconsistent consumer preferences, intense competition, and short product life. This paper analyses the retail industry. The analysis mainly focuses on sportswear merchandise. Considering the large size of the global sportswear industry, the paper focuses on the UK market.

Industry analysis

Industry structure

The sportswear industry is comprised of the apparels and the athletic footwear industry. The industry is labour intensive; consequently, firms in the industry undertake their production activities in low-wage countries. According to a Press Release by PRLOG, the UK fashion industry is very price-competitive.

Moreover, the industry is characterised by high market demand. It is estimated that approximately 90% of UK citizens under the age of 35 years, which covers 75% of the total population, purchase from the fashion industry. This high market potential has led to remarkable increment in the intensity of competition (Euro Monitor 2013).

Campbell and Craig (2005, p.72) accentuate that understanding ‘the underlying structures of a company’s industry, now and in the future is a core discipline in strategy formation’. Understanding the prevailing level of competition is one of the ways through which CEOs can gain insight on the most effective strategy to adopt.

CEOs should take into account the Porter’s five forces. The five forces assist in organisations’ efforts to determine the long-term profitability of the industry. Below is an analysis of the forces that shape competition in the UK sportswear industry.

Threat of entry: (high)

The major industry players include Nike, Puma, Adidas, Under Amour, and K-Swiss. Currently, Nike ranks as the leading industry player in the global sportswear industry. Nike has gained substantial market dominance over the past years. In 2011, the firm’s revenue amounted to $ 23 billion. Moreover, the firm’s global market share increased to 4.6% in 2011 to 3.7% in 2006.

The firm’s market share is expected to increase to 6.3% by 2017. The firms’ growth illustrates the industry’s potentiality (FashionMag 2011). The threat of new entrants in the industry is relatively high due to the low manufacturing cost. Most sportswear products in the UK are imported from emerging economies such as China. Subsequently, the barriers to entry into the industry are relatively low.

New firms are increasingly entering the industry in their pursuit to exploit the prevailing market potential. It is projected that the sportswear market value will grow to 8.6% by the end of 2015 (FashionMag 2011). The high threat of entry has significantly reduced switching cost.

Supplier bargaining power: (low)

There are a large number of suppliers in the sportswear industry. Moreover, the suppliers have not differentiated their raw materials. Consequently, their bargaining power is relatively low. Lack of differentiation enables the firms to switch between suppliers at a minimal cost.

The main raw materials for the industry include rubber, cotton, and leather, which are readily available in the market. Despite the low supplier bargaining power, the leading conglomerates such as Adidas and Nike have a distinct bargaining power (British Fashion Council 2011).

Buyer bargaining power: (high)

The industry is characterised by high buyer bargaining power emanating from the large number of sportswear consumers. Consequently, the industry players such as Nike and Adidas must differentiate their products in order to attain the desired market share and sales revenue.

The high buyer bargaining power has stimulated the industry players to implement mechanisms aimed at nurturing a high level of customer loyalty. For example, Nike Incorporation has developed nikeid.com, hence providing consumers with an opportunity to customise their footwear and apparel designs.

Threat of substitute: (Low)

According to the British Fashion Council (2011), the buyers’ propensity to substitute sportswear is relatively low due to the little alternatives that consumers can switch to in their purchasing trends. The products and performance specification of each brand makes the threat of a substitute to be low. For example, football players cannot wear boots when playing football.

Rivalry: (high)

The large number of industry players has led to an increment in the degree of rivalry. Large firms such as Adidas AG, Callaway Golf Co., Amer Sports, and Nike Incorporation dominate the industry. As aforementioned, Nike Incorporation is ranked as the largest sportswear company in the industry; on the other hand, Adidas has gained substantial market position as it has been in existence for over 60 years.

These firms have undergone remarkable growth over the past two decades. The firms have attained substantial market recognition by integrating effective marketing strategies such as Internet marketing and electronic commerce. The use of emerging technologies has enabled the large firms to maximise their sales revenue.

Nike Incorporation plans to increase its market dominance in the European region by exploiting the Winter Olympics, the Super Bowl, and the World Cup (Marketing Week 2013). Below is a summary of the competitiveness of the sportswear industry in the UK.

A summary of the competitiveness of the sportswear industry in the UK.

Competitive analysis

The sportswear industry is characterised by intense competition emanating from the adoption of effective strategic management practices. The industry has experienced a high level of consolidation over the past few years. In 2013, Nike sold Umbro, which is one of its brands, to Iconix. Subsequently, Nike positioned itself as the official sponsor of international renowned international football clubs.

The Adidas-Reebok merger is another example of the strategic changes in the industry (Euro Monitor 2013). The collapse of JJB, which was a sportswear retailer in the UK, led to the entry of new firms such as Matalan. Other major retailers include Sports Direct and Sporting Pro.

Sports Direct ranks as the leading sportswear retailer in the UK. On the other hand, Sports Pro has attained an optimal market position by carrying other brands such as New Balance, Adidas, Reebok, Nike, and Asics. Moreover, the firm has established over 5,400 stores.

The high market potential in the industry will stimulate market growth significantly. For example, Nike and Adidas announced their plan to expand their store network over the next few years (Joseph 2013).

Goldfingle (2013, par. 12) argues that with ‘the brands’ interest in becoming retailers, the sportswear market could look very different and more competitive in five years’ time’. Appendix 1 illustrates the brand positioning in the UK sportswear industry. The positioning map has been based on the age of the respective brands and their affluent amongst the consumers.

Macro environmental forces

The competitiveness of the sportswear industry is also influenced by external forces, which emanate from political, social, technological, social, economic, and environmental factors. Consequently, business managers should evaluate the environment in which their businesses operate. Below is an analysis of the major external forces.

Political structure and trends

Expansion of firms in the retail sector is subject to the land system policies adopted in the UK. The UK government influences operations of firms in the retail sector through the land-planning system. The UK government has instituted tight restrictions on green-field and off-centre development.

The policy has made it extremely difficult for retailers intending to expand in other areas of the UK by establishing retail outlets. The UK government also controls operations of the retail sector through the Competition Commission, whose objective is to safeguard the consumers’ interests.

Economic structures

The prevailing economic structures in a country have a remarkable impact on the success of a particular industry. The UK has experienced a significant economic growth over the past decades. The 2008 global economic crisis adversely affected the country’s economic performance.

However, the government has been very committed to improving the country’s economic performance. In 2011, the country’s Gross Domestic Product (GDP) averaged £329.1 billion. Moreover, the country’s GDP increased with a margin of 1.5% during its 2009/2010 fiscal year. This trend shows that the economy is undergoing an upwards spiral economic growth, which is predicted to be sustained in the future.

Social environment

There is a significant change in the consumers’ purchasing patterns in the UK. This trend has arisen from the increment in the consumers’ disposable income (Pahl & Mohring 2008), which is mainly evident amongst the female gender. It is estimated that approximately 30% of female consumers in the UK have the highest personal disposable income.

The industry is also characterised by rampant socio-cultural and lifestyle changes. For example, consumers are appreciating leisure, which is a positive trend with regard to consumption of sportswear products such as apparels and footwear.

Technological environment

The United Kingdom is among the most technologically advanced states in Europe. The country is characterised by well-integrated communication systems. Over 52 million citizens use the Internet. This aspect presents a perfect opportunity for retailers in the British sportswear industry to undertake online marketing.

Moreover, the growth of smartphones has also changed the consumers’ shopping trends. Consumers are increasingly using smartphones in their purchasing processes, for example in information search. It is estimated that approximately 28% of citizens in the UK owned smartpones by 2010.

Environmental

The United Kingdom is comprised of a number of islands. The UK government is committed towards environmental protection. Consequently, the UK government has instituted strict guidelines aimed at curbing environmental pollution emanating from the supply chains of different industries.

One of the issues that the UK government is concerned with relates to carbon dioxide emissions. Strict regulations have been implemented in an effort to minimise the amount of carbon dioxide emitted from business operations (Brooks et al. 2004).

Trends

The industry is characterised by a number of trends. First, consumption of sportswear products in the UK has increased significantly. The following are some of the main market trends.

Fabric technology – technological innovation and development are some of the major drivers of change in the industry. The emergence of different fabric technologies has allowed the industry players to dominate their respective market niche.

The technologies have enabled the industry players to be innovative, hence improving their ability to design and produce high quality and comfortable sportswear products. The development of fabric technology has influenced the consumers’ level of satisfaction.

Growth of sports – The UK has experienced a significant increment in the number of consumers who are appreciating different indoor and outdoor sports. For example, the UK consumers prefer engaging in active leisure compared to mainstream sports.

Consumers are increasingly purchasing sportswear products in an effort to enhance their performance. In 2008, the UK government adopted the Sports Strategy, as a component of the country’s agenda to motivate over 1 million citizens to participate in sports by the end of the 2012/2013 financial year.

This aspect presents a high growth potential amongst the various industry players. Sportswear retailers can improve their performance by exploiting this trend (Business Wire 2013).

Comfort, support, and breathability- most consumers in the industry are inclined towards achieving a high level of comfort and breathability in their process of making a decision on the sportswear product to purchase (Business Wire 2013).

Increased competition – the sportswear industry is expected to undergo a significant increment in the intensity of competition. Growth in the intensity of competition is expected to emanate from the high rate of market consolidation.

The industry players are appreciating the importance of mergers and acquisition in an effort to develop a strong competitive position. A study conducted by Business Wire (2013), shows that the UK sportswear industry will experience remarkable growth despite the effects of the recent global crisis on the UK economy.

Health conscious- consumers are increasingly emphasising on healthy sportswear apparels and footwear products. The UK government is encouraging citizens to get involved in different leisure and sports activities in order to minimise cases of obesity.

Conclusion

The UK sportswear industry is characterised by high market potential, as evidenced by the intensity of competition. The industry is characterised by both large and small enterprises. However, it is dominated by large enterprises such as Nike, Adidas, Reebok, Sports Direct, and Sports Pro amongst.

This report shows that consumers in the UK are adopting different indoor and outdoor sports as a part of relaxing. Moreover, the UK government is encouraging its citizens to engage in different sports in order to minimise cases of obesity and stay healthy. This move presents a high market potential for firms in the industry.

Despite these market trends, the industry is characterised by a high rate of change in consumer tastes and preferences. Consequently, the management teams of the major industry players must undertake continuous product development and improvement in order to meet the market demand.

Working in the industry will provide me with an opportunity to attain my goals as a manager. The dynamic nature of the industry will require the application of different managerial practices.

Reference List

British Fashion Council: The value of the UK fashion industry 2011. Web.

Business Wire: . Web.

Brooks, I., Weatherston, J. & Wilkinson, G. 2004, The international business environment, Prentice Hall, London.

Campbell, D. & Craig, T. 2005, Organisations and the business environment, Butterworth – Heinemann, New York.

Euro Monitor: . Web.

FashionMag: UK sportswear market value to grow 8.6% by 2015 2011. Web.

Goldfingle, G. 2013, . Web.

Joseph S. 2013, . Web.

Pahl, N. & Mohring, W. 2008, Successful business models in the fashion industry: a strategic audit of H&M compared to Zara, Grin Verlag, Norderstedt.

Silber, K. & Kearny, L. 2010, Organisational intelligence; a guide to understanding the business of your organisation for HR, training and performance consulting, Pfeiffer, San Francisco.

Appendix

Appendix 1: Brand positioning of the UK sportswear industry

Brand positioning of the UK sportswear industry.

Source: (Marketing Week 2013)

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IvyPanda. (2019, October 7). Sportswear Merchandise in UK. Retrieved from https://ivypanda.com/essays/sportswear-merchandise-in-uk-essay/

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"Sportswear Merchandise in UK." IvyPanda, 7 Oct. 2019, ivypanda.com/essays/sportswear-merchandise-in-uk-essay/.

1. IvyPanda. "Sportswear Merchandise in UK." October 7, 2019. https://ivypanda.com/essays/sportswear-merchandise-in-uk-essay/.


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IvyPanda. "Sportswear Merchandise in UK." October 7, 2019. https://ivypanda.com/essays/sportswear-merchandise-in-uk-essay/.

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IvyPanda. 2019. "Sportswear Merchandise in UK." October 7, 2019. https://ivypanda.com/essays/sportswear-merchandise-in-uk-essay/.

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IvyPanda. (2019) 'Sportswear Merchandise in UK'. 7 October.

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