TOPIC:

“Porter’s Five Analysis of Lingerie Industry”

A Case study of the German market

By:

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Analysis of Germany’s Market Lingerie Industry

Table of ContentsINTRODUCTION 2

PORTER’S FIVE FORCE MODEL 2

THREAT OF NEW ENTRANT 2

THREAT OF SUBSTITUTE PRODUCTS 2

BARGAINING POWER OF BUYERS 2-3

BARGAINING POWER OF SUPPLIERS 3

INTENSITY OF COMPETITVE RIVALRY 3

CONCLUSION 3

REFERENCES 4

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Analysis of Germany’s Market Lingerie Industry

INTRODUCTION

The lingerie industry has experienced a tremendous change over the years, owing to the

development of modern technologies which has improved the designing of innovative products,

changing customer behavior, availability of more brands and increased awareness. Thereby

resulting in a highly competitive landscape (research & markets, 2013). The German lingerie

market has seen a constant annual growth of 0.4% over the period of 2009-2013 and it’s been

forecasted to reach a %1.9 by 2018 (Mintel, 2014).

To sustain a long term profitability and maintain competitive advantage, companies have to

respond strategically by analyzing success factors based on the market demands (Porter, 2008).

The porter’s five model is an analytic tool used by industries to assess and influence profitability

by examining the industry’s underlying structure in terms of five competitive forces (Porter,

1985).

PORTER’S FIVE FORCE MODEL

THREAT OF NEW ENTRANT

The German lingerie industry is dominated by indigenous brands which have established

themselves and have a good but highly competitive market shares hence competition is

extremely fierce within the existing brands but relatively easy for new brands to enter into the

market as the “retail German market is the third largest economic sector” (HDE 2001). It has

however reduced the risk of an unstable economy and with the government laws considered

relaxed, it aids an easy entry for brands into the industry (Slininger, 2012). Also, due to the

various growth of investors and bank offers, capital required to lunch a brand can be easily

obtained. Consequently, threat of new entrants is low.

THREAT OF SUBSTITUTE PRODUCTS OR SERVICES

Lingerie comprises a wide range of products. However, there’s almost no substitute for its

products, except a customer inclines to go without them. Thus, the threat of substitute product is

very low

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Analysis of Germany’s Market Lingerie Industry

BARGAINING POWER OF BUYERS

The bargaining power of buyers is relatively high due to the fact that the industry is evolving

with both local and international brands. Prior to now, much importance to brands were not

given by customers but with the evolution new brands, customers have become brand conscious.

However, “businesses are always seeking to maximize returns on investment while the buyers

want to use the lowest price to purchase products or services” (Porter, 1985). Generally, larger

percentage of customers are less concerned about brand names as regard to price.

BARGAINING POWER OF SUPPLIERS

Kotler and Keller (2009) argued that supplied products being a company’s greatest assets gives

leverage to the supplier to have some form of bargaining power. As stated earlier, customers

have become brand conscious which puts pressures on brands to ensure high quality products are

supplied. Also, the evolving industry requires the availability of more manufacturers which are

not relatively few. Though the industry is flushed with manufacturing outsourcing companies so

suppliers have little or low bargaining power in the industry.

INTENSITY OF COMPETITIVE RIVALRY

The intensity of competitive rivalry in the German lingerie is highly competitive. Research

shows that the leading brand Triumph Global Sales AG holds a market share of just 12.4% as at

2013 and the other brands with a different of 2% market share (Mintel, 2014) which may be

factored to price, new products, service improvements or numerous competitors .

CONCLUSION

Through the application of the porter’s analysis, this report sought to reveal the significant

aspects of the industry’s competitive environment. Thereby noting where a company stands

versus the customers, suppliers, competitors, entrants and substitutes (Porter, 2008). More so,

understanding the structure of the industry enlightens the managers as to what strategic actions to

employ in order to maintain a competitive advantage (Ward & Peppard, 2002).

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Analysis of Germany’s Market Lingerie Industry

REFERENCES

HDE, (2001). German Retail Federation. [online] Available at: <

http://www.einzelhandel.de/servlet/PB/ -

s/1yd948d1296z7j1jph53svwuzig1855uw7/menu/1063765/index.html> [Accessed 1 Apr. 2015].

Kotler, P., Keller, L.K. (2009). How Can Education Policy Improve Income Distribution?: An

Empirical Analysis of Education Stages and Measures on Income Inequality. The Journal of

Developing Areas, 43(2), pp.51-77.

Lingerie Market: Focus on Design & Fashion Trends. (2013). 1st ed. [ebook] USA: Research

and Markets, p.1. Available at: http://www.researchandmarkets.com/reports/591022/ [Accessed

1 Apr. 2015].

Lingerie-Germany. (2014). Mintel Market Sizes. Mintel Group Ltd, p.12.

Slininger, R. (2012). Moving Victoria Secret to Germany. [online]

http://rachelslininger.weebly.com. Available at:

http://rachelslininger.weebly.com/uploads/1/2/3/6/12365811/victoria_secret_germany_recomme

ndation.pdf [Accessed 1 Apr. 2015].

Porter, M. (2008). The Five Competitive Forces that Shape Strategy. 1st ed. [ebook] Havard

Business Review. Available at: http://www.exed.hbs.edu/assets/documents/hbr-shape-

strategy.pdf [Accessed 1 Apr. 2015].

Porter, M. (1985). Competitive Strategy: Techniques for Analyzing Industries and Competitors.

Free Press.

Ward, John., & Peppard, Joe. (2002). Strategic Planning for Information Systems. Wiley.

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