Analysis Of Porter 's Five Forces

Better Essays
Porter’s Five Forces
The Treat of Entry
The children’s-products and services industry is one of the highly profitable sectors in the UK because the total UK children’s wear market alone worth around £5.91billion in 2011 with a 6.5% growth from the previous years (keynote 2011). This shows that markets such as these are highly profitable and they can attract new firms easily; on the other hand it can decreases the profitability for all firms within the market and then creates a higher level of competition. the threat of entry is largely dependent of the barriers to entry within the market itself. Generally when volume of production increases, the average cost per unit decreases with economies of scale. One of the barriers of entry for Mothercare and its competitors is the economies of scale which they can exploit in order to provide lower prices to consumers or generate higher profits. Therefore, in order for a company to compete directly with Mothercare, it would need to have enough capital to produce goods at near the same volume than the market leaders. But Tesco PLC and other large supermarkets were able to penetrate and become strong competitors in the market because of the large capital they have. Also, In 1990 ASDA launched its ‘George’ (Brand republic 2006) range and was instantly able to provide quality clothing at cheap and affordable price because they had many outlet and capital which gave them advantage of large economies of scale. The Bargaining Power of
Get Access