Porters Five Forces Model
Threat of new entrants:
Travel and adventure outdoor clothing and equipment retail industry shows high barriers to entry because of high brand loyalty to existing brands in the industry. At the same time, the existing large firms have the absolute cost advantages that enable them to serve the customers at low prices that increase barriers for the new entrants in this industry.
Along with this, these large firms like Kathmandu also have large economies of scale due to mass production that provides cost advantages and causes high barriers to the new entrants. In addition, switching costs for the customers are high that cause limitations for the new entry firms in the market (Beedie, 2012).
Moreover, there are high government rules and regulations along with the high capital requirements for the new entrants that make it difficult for them to enter the market. Based on all these aspects, it can be stated that there are higher entry barriers for the new entrants in this industry that cause low threat of the new entrants to the firm operating in this industry (Smith, 2014).
Rivalry among established companies:
There is high intensity of competitive rivalry in travel and adventure outdoor clothing and equipment retail industry. it is because there are high number of the competitors including Mountain Design, Macpac, Torpedo7, etc., which compete each other based on specialty outdoors, lifestyle and general merchandise segments (Kathmandu Holdings Limited, 2019).
The increasing numbers of people who like to travel also increase the demand and growth of the industry that attracts the more competitors nationally and internationally in this sector (Annual Report, 2018).
There is possibility for the competitors to differentiate their travel outdoor clothing and equipment products that enable them to compete with each other. In addition, there are high industry exit barriers for the firms that also cause high competition for the firms in the industry.
The bargaining power of buyers:
Buyers can be said moderately powerful in travel and adventure outdoor clothing and equipment retail industry. There are many buyers who purchase these products but at the same time there are a large number of the sellers for these products in the market.
Buyers cannot switch the suppliers at low cost, but purchase from multiple sellers at once that increase their bargaining power. The presence of large number of customers and large number of competitors show the moderate bargaining power of customers in this industry (Black and Bricker, 2015).
Along with this, the firms in the industry like Kathmandu also target their customers especially travelers based on quality and varieties that reduces their bargaining power.
The bargaining power of suppliers:
In travel and adventure outdoor clothing and equipment retail industry, the bargaining power of suppliers is high because there are few substitutes of these products and are important for the buyers.
However, the mass purchasing by the large firms is effective to reduce this bargaining power. In addition, there are several large producers for supplying the materials as it also reduces the bargaining power of the suppliers.
Good relationship with the suppliers by the firm like Kathmandu can be helpful to reduce the bargaining power of the suppliers (Annual Report, 2018). So, overall, it can be stated that the bargaining power of the suppliers is moderate in context of this industry.
Long term contracts with the suppliers by Kathmandu enable it to make the business sustainable and reduce their bargaining power (Kathmandu Holdings Limited, 2019).
Threat of Substitute products:
There are few substitutes in the market for the travel and adventure outdoor clothing and equipment. There is less number of products which comes closer to fulfilling a similar function to the original product that reduces the competitive threat of the substitute product.
Apart from this, the low existence of substitute products may not create price limits on the original products of the firms operating in this industry (Neirotti, 2012). Due to lack of the substitute’s products, it can be depicted that there is low threat of substitute products for the firms in this industry.
This section involves the environmental analysis of Kathmandu Holdings Ltd. However, it is a New Zealand based company which deals in offering product range covering outdoor and travel clothing equipments.
It function its business in Australia, New Zealand and UK etc. The company involves in-house design process which create technically designed original product. However, the product portfolio is designed as per the customer needs from experienced adventurer to entry-level explorer (Smith, 2014).
Moreover, to obtain more detail about the firm internal and external environment, the below mention elements addresses:-
Customers: – The customers of Kathmandu are the sports persons or Adventurer travelers who have an interest in performing adventures. However, it is found that more than 50% of the Europeans or US adults travelling population or approx. 147 million people involves in adventure trips in their lifetime.
Moreover, the biking lovers also consider as a key customers of Kathmandu that largely purchase the sportswear from the Kathmandu stores (Reynolds and Nancy, 2012).
Competitors: – The Travel and adventure gear market in Australian and New Zealand are fragmented and comprise of wide range of retail formats. However, Specialty outdoor industry retailers are the Mountain Designs, Snowgum and Macpac in both Australia and New Zealand.
Online retailers also offer competing products and give high threats to Kathmandu Limited. Thus, these key players put pressure on firm to bring innovation in its business process and products.
Suppliers: – Kathmandu makes its supply chain sustainable through participant with ethical fashion report. It extracts 80 percent raw materials such as cotton from the local people by contacting them directly. Besides that, collaboration strategy is also used to improve the supply chain of Kathmandu.
This partnership strategy also helps the firm to save large expenses of distribution and logistics channel (Annual Report, 2018). Thus, this way firm able to collect the raw material. It also consists of its own manufacturing unit where it processed the raw material into the final goods and then through its stores it made available for customers.
Labor: – Kathmandu consists of 1,998 employees and ranked first position among the top competitors. This becomes possible due to strength and capabilities of its workforces. Moreover, firm give special focus to training and development of employees.
This allows the human resources to gain necessary skills and overcome their weaknesses. It results in development of work with high expertise. That’s why, Kathmandu Limited able to grab first position among key competitors.
Regulators: – The regulators of Kathmandu limited are the government which keeps an eye on firm functioning whether it involves the proper employment law and customer protection laws. In regards to regulate the firm, Kathmandu presents its annual and sustainability report to government.
Besides that, firm itself conduct the auditing of firm in order to analyze the areas where it need to bring improvement and achieve specialization (Annual Report, 2018). Thus, these regulators assist the firm to understand the current position in market and accordingly it makes decision and strategies for bring more achievement in future.
On the basis of this analysis, it can be stated that Kathmandu is performing well in NZ, Australia and UK market and give strong threats to its key customers. Now, firm needs to expand its business in more location like developing countries.
This section involves the external factor that could affect the travel and adventure firms like Kathmandu in near future. On the basis of these factors, industry can take best decision.
Political: – New Zealand consists of stable government and it has strong rules and regulation which imposed on every sector. This area could assist the travel and adventure industry in term to perform its business operation in a more proper manner in near future.
However, the restrict rules and regulation may affect the new entrants in regards to implement its function in New Zealand market (Annual Report, 2018). Moreover, NZ labour laws are quite strict and availability of labour tends to be expensive.
It may influence the travel and adventure outdoor clothing and equipment industry in a way to increase the expenses and labour cost to company when they hire large number of staff for the stores in NZ market.
Economic: – The economic situation of NZ is excellent in government as it consist of stable economy, right standard of living and availability of resources etc. However, the rates of the product tend to be economical in NZ due to which people easily afford to buy such products.
Similarly, the inflation rate in country is less and this give rise to the low unemployment level in country. So such significances in NZ environment can contribute worthy for the Travel and adventure gear sectors that want to capture larger market of NZ (Annual Report, 2018).
They can easily tap the local people of NZ due to increased purchasing power of consumers which allows them to afford the sports and adventure clothes easily. Thus, the economy of NZ supports the industry to properly run their business.
Social-cultural: – The social factor of NZ is quite appropriate in term to have enough demand of products and services. But economy of country is largely depending upon the others to export goods and services.
However, country is also depends upon UK and USA for the advanced technology (Lynch, Moore and Minchington, 2012). This could affect Travel and Adventures industry in regards to incorporate the technology into the business as they need to pay more for attaining right set of system and processes.
Moreover, the high demand of product could assist the adventures firm to offer the sports gear to target market (Hudson, 2012).
Technological: – The country is made enough developments in various technological products such as introduce IT technology by largely use of internet in urban and rural area.
This factor could assist the traveler and adventure industry move largely on the social-site and online practice to perform the business. Moreover, there are various technology which is still untapped by NZ market and it depend upon other country (Dahiya and Batra, 2016).
So this create problem for industry in term to high cost of product and services. Overall, NZ market could properly support the adventure gear retail industry to easily perform the functions.
Environmental: – The country focus over the sustainability practices grows day-by-day and this put pressure on different industries to take initiatives for eliminating the environmental issues.
However, Travel and adventure retail industry also need to introduce new activities which support less pollutants and encourage the eco-friendly environment (Mills, 2014).
Legal: – NZ government change after every three years and they are quite strict for the rules and regulations. Moreover, labour laws and consumer protection law are quite important for firm to adhere in NZ market.
In regards to this, Travel and Adventure gear retail industry requires to focus more on the legal regulations like labour protection act, workplace safety act and fair remuneration act for satisfying its stakeholder. These activities could assist the firm to sustain over the longer duration (Annual Report, 2018).
Moreover, the international business community has a full cover in NZ and this allows the international players to easily perform the business operation without fear of legal implications in the business activities.
Such area could also affect the local players of Travel and adventure retail sector in regards to increase competition in NZ business environment (Robinson et al., 2016).
The above analysis clearly demonstrate that NZ is growing market and it support the travel and adventure outdoor clothing retail business in term to high demand and supply. Moreover, the political environment of country also assists the industry to perform the operations in a effective manner.
Overall, the economy stability of NZ proves to be worthy for travel and adventure retail sector in both current and future business.
Annual Report 2018. [Online] Available at: https://www.kathmanduholdings.com/wp-content/uploads/2018/10/KMD-AR-2018-online-final.pdf (Accessed: 9 April 2019)
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