Characteristics

Current situation

Future trend

Main fixed costs

Administrative costs,

Rent costs

Administrative costs,

Rent costs

Main variable costs

Material, workers (production, sales) salary, logistic

Material, workers salary,

logistic

Economy of scale (scope)

Major chains can enjoy benefits of economy of scale due to their size. They reduce their fixed costs and also get lower price for materials by placing large orders. Small companies don’t have these benefits.

Due to further consolidation of small firms economy of scale will be available to more companies.

Are there minimum efficient scale (MES)?

What is the efficient growth mode?

Yes, there is MES but it is quite small, due to the industry specifics (one worker has a limited capacity, making more shoes would involve hiring more people, land, machines, etc).

Stays the same.

Sensitivity of costs to capacity utilization

Share of fixed costs is relatively low so costs are not very sensitive to capacity utilization.

The same.

Behavior of marginal cost

Marginal cost decline as we produce more

Exit barriers

Production facilities, abilities to produce with low costs, ability to buy materials at low prices.

Existing competition

Production facilities, abilities to produce with low costs, ability to buy materials at low prices.

Existing competition

Characteristics

Current situation

Future trend

Segmentation of customers

Sex-age segmentation.

The same.

Does a buyer's purchase volume represent large fraction of typical seller's sales revenue?

No.

The same.

Switching cost

Switching cost insignificant due to large number of players on the market. The only switching cost is searching cost.

The same.

Can buyers find substitutes for industry's product?

No. There are no substitutes for footwear.

No.

Price elasticity of market demand

Low elasticity in general.

Due to adoption of western life style owning more pairs of shoes can become normal so demand elasticity can increase.

Price elasticity of demand for typical firm

High due to low switching cost.

The same.

Price elasticity of various customers

High elasticity for high-quality woman shoes.

Will increase.

Price discrimination (actual and potential)

There is no price discrimination.

No.

Versioning (actual and potential)

There is no versioning.

No.

Bundling and Tie-ins (actual and potential)

There is no bundling and tie-ins.

No.

Are prices negotiated on each individual transaction or set as take-it-or-leave-it" for all transactions?

The price is the same for all transactions.

Will stay the same.

Do buyers pose credible threat of backward integration? (for B2B)

There is no B2B on this market.

The same.

Does product represent significant fraction of cost in buyer's business? (for B2B)

There is no B2B on this market.

The same.

Characteristics

Current situation

Future trend

Availability of close substitutes

As footwear is a basic necessity, the threat of substitutes to the market is limited. However, there is a

significant degree of substitution between segments of the market. For example, sportswear is often a

substitute for other more traditional footwear types. Overall, the threat of substitutes is moderate to weak.

There is no up-ward or down-ward trend of close substitutes in footwear industry.

Price-value characteristics of substitutes

Because firms try to use product differentiation strategy according to the needs of potential customer groups, they set a value pricing model for their products. But, season fashion affect a lot on the products produced, so actually a lot of characteristics are similar, and this make it difficult to set prices at a high level and can damage firm profit.

Future trend will remain the same, and the situation of fashion influence will always affect the product, despite price-value chain. The threat of too high price for relatively the same products will exist in future as well.

Price elasticity of industry demand

There are many substitutes of available in the market. Industry demand is elastic; increase in price would have great effect on the quantity demanded. Total revenue is more influenced by the lower quantity and decreases as price increases.

In the future time demand in footwear industry will be still elastic. Presence of close substitutes will not allow having inelastic demand. (In case if there were no other footwear brands available on the market, then demand would have been inelastic, it means that increase in price would have no or minor effect on the quantity demanded).

Availability of close complements

Footwear producers offer apparel and accessories to complement its athletic footwear products. It also offers footwear, apparel and accessories in collections

designed in a similar fashion or for a specific purpose.

There will be ongoing development of complements/ apparel/accessories in footwear industry. It is ranging from socks, sneakers, to umbrellas and bags.

Price-value characteristics of close complements

Price-characteristics of complements relatively are low

Same no change