Lithuanian Footwear Manufacturing Industry Analysis According to Porter‘S Five Forces

Lithuanian Footwear Manuf be activeuring exertion Analysis According to porters beers Five Forces Introduction For all quantify footgear has been a basic necessity and just recently it has drive a matter of port and prestige, thus making huge changes in footgear industry it expanded and became swell variantiated. Therefore, in direct to perform and compete effectively, companies select to analyze their external environment. This paper will concentrate on Porters five forces that shape competition in Lithuanian footwear com/chapter-practice/manufacturing industry. competition A ten-spot ago on that point were much more footwear manufacturers in Lithuania.However, right after Lithuania joined the European Union, footwear imports from China to the European Union increased eight times. It caused huge profit losses for Lithuanias footwear manufacturers and many of them withdrew from the market. Today there argon two main footwear manufacturers UAB Sabalin and UAB Lituanica, a a some(prenominal) smaller manufacturers such as UAB Paliutis and UAB Evenida and there be in addition some individual businesses which do non mass- stupefy merely manufacture position just for individual orders. As we bottomland go out there atomic number 18 non many Lithuanian companies but their competition creates the rivalry a positive sum.The largest companies UAB Sabalin and UAB Lituanica produce strap spot for the whole family and export most of their production to other European countries, especially to capacious Britain, Latvia and Finland (http//www. lituanica. info/m93-1. html, http//www. visalietuva. lt/imones/info/sabalin-uab). Smaller manufacturers concentrate on specific footwear production such as boots and working shoe or take orders from Lithuanias companies and produce big quantities of specific safety shoes or shoes which argon part of employees uniform.Footwear manufacturing usually is not their solely scope so when they learn hard times in shoes manufacturing, they concentrate on other fields. For example UAB Paliutis produces not only boots but also other rubber and plastic production (http//avalyne. paliutis. lt/index. php), UAB Arnesima produces safety working shoes and, in addition, they offer safety gloves, waterproof clothes and etc (http//www. arnesima. lt/). Individual businesses do not have a abundant demand because Lithuanians prefer custom boots just for ery distinguished occasions, for example, weddings or when the foot is not standard and they great dealnot pay off suitable shoes in shoe stores. However, the main competitors for footwear manufacturers in Lithuania are Chinese footwear producers. According to UAB Lituanica director D. Keltuva, just the leather they use for a pair of shoes costs the resembling as the finished Chinese pair of shoes. To become more competitive, Lithuanian manufacturers cut their wrongs however, it was impossible to become equivalent competitors because Chinese labor fo rce was far and away cheaper.Besides, young to middle-age Lithuanians are concerned close to fashion and prestige so Lithuanian manufacturers are unable to compete with designers shoes or well known brands. UAB Sabalin director Regina Arcisauskaite claims that her pulverisation orients to segments from middle to high prices and to middle class people however, this company does not aim for luxurious or fashionable products segment. New entrants Recently not a single larger footwear manufacturing business has been started. The main reason is the sparing recession, which has caused the decrease in footwear sales.Another reason is ease huge competition from China. However, today shoe shops Lietuviska avalyne and Dolita report that sales in Lithuania are constantly increase and people, especially old ones, prefer more expensive, but quality Lithuanian shoes from natural leather and fur. Besides, Lithuanians have turned back to small boutique shops and prefer shopping in places whi ch offer ridiculous products and comfortable surroundings. This probably will cause an increase in number of small shops, run by small businesses owners or upstart entrants who will be willing to fill this niche.Lithuanias government form _or_ system of government is favorable to bran-newfangled entrants and offers a lot of ways to start a new company. The main requirements for new business entrants are quite high government taxes and the initial capital in some cases. However, new entrants face one huge barrier to entry. Most Lithuanians do not trust Lithuanian production they do not think about the quality and price and choose fashionable foreign footwear. Moreover, incumbents have already survived through Chinese invasion and recession so they have a lot of experience.As presently as the newcomers face the first difficulties they might get lost and go bankrupt just like many other Lithuanian footwear manufacturers did five years ago. This might discourage them from entering this market. wholeness more important barrier is that in order to open a new footwear manufactory a huge amount of initial capital is needed. New entrants need new premises, inventories and qualified employees. This whitethorn also deter a lot of newcomers from entering this market. Substitutes Shoe market in Lithuania is tremendous.You can see shoe shops everywhere and shoes in various styles, colors, designs and prices are brought there from a lot of different countries. There are a lot of other shoe stores which offer quality footwear. These shops gain return because customers are exposed to a great choice, meanwhile people can merely see Lithuanian shoe shops in shopping centers or in the streets. Moreover, Lithuanias youth tends to wear mainly sports shoes and frequently replace them with new ones. They wear them both in summer and in winter, so they are not looking for quality and long lasting shoes which are rather expensive.In this age of new technologies another substitu te is available for everyone online shops or eBay. Lithuanians buzz off it cheaper to order something from overseas than to buy it in topical anaesthetic shops. This phenomenon is also applicable to footwear. Most of the online shops have return policies so people are not acrophobic to buy and, if it is necessary, to change the item. Finally, parents tend to buy footwear for their children in second-hand shops. They see no need to slip away huge amounts on shoes when their childs feet are constantly growing. The same trend is seen among elder people.Pensions in Lithuania are relatively low so the pensioners cannot afford new quality shoes. Therefore, they go to second-hand shops where they can find almost new and really quality foreign footwear they even can find branded shoes in very good condition. Since the price is still a very important factor in choosing shoes, nowadays most Lithuanians try to find substitutes which could offer suitable quality and price ratio. Power of s uppliers Today Lithuanian footwear manufacturers buy raw cloths mainly from Lithuanian companies, for example, leather impact companies AB Siauliu Stumbras and UAB Naturali oda. There is a great variety of available leather and other raw worldly suppliers in Europe so footwear manufacturers are not dramatically dependent on their suppliers and can easily switch their suppliers since switching costs are low. However, leather processing companies depend on economic situation and cattle ranches. The manager of leather processing company TDL Oda Vidmantas Simkus explains that when economic crisis occurred, the demand for meat change magnitude thus the number of grown cattle also decreased.It resulted in lack of raw leather material last year and was the reason for double increase in price. Respectively, Lithuanian footwear manufacturers had to buy more expensive raw materials, their product prices increased and they became less competitive in shoes market. Besides, footwear manufact urers are not the only ones who use leather for their production. Coats, gloves, hats, handbags and some bijouterie are made from leather so leather processing companies have some power to choose whom to sell their production to and in this way to adjure the prices. Power of buyersFootwear is necessary for every person so they cannot avoid buying shoes. However, they can choose where and what word form of shoes to buy. Generally, in footwear industry buyers do not have a lot of power, but in Lithuania their power is significant. Since there is great variety of imported shoes and just a some Lithuanian footwear shops, the buyers choices determine which shoe shops (and thus which manufacturers) will survive. There are very few shops in Lithuania which sell both foreign and Lithuanian footwear Lithuanian footwear is sold in the main in special stores.Since Lithuanians do not trust Lithuanian production, their preference might cause unsuccessful person for some shops. It would mean that Lithuanian footwear would be sold just outside the country. Individual businesses owners are greatly dependent on the buyers because they are their main customers and if they are not willing to pay for authentic custom shoes, these businesses are sure to face a lot of difficulties. On the other hand, Lithuanian footwear in export countries has a lot of loyal customers who recognize products quality and reasonable price.UAB Lituanica director Kestuts Deltuva says that their sales abroad are constantly increasing and they have a lot of new orders and now they are having a very busy season. Conclusion All things considered, Lithuanian footwear manufacturing industry is full of opportunities. Rivalry among Lithuanian footwear producers is rather weak. Since they do not intensively compete in Lithuanias shoes market, it creates some opportunities for new entrants. This industry is open for new entrants who should consider different strategic plans and try to put up the demand for both quality and fashionable footwear in Lithuania.The main problem that Lithuanian footwear manufacturers face is a great variety of substitutes shoes of different brands, styles and origin are easily accessible, and also different places and ways of acquisition are available. Suppliers do not have significant power however, buyers are the main force which determines which companies will survive in Lithuanian footwear manufacturing industry. References June 27, 2005. Avalynes gamintojai siekia ES apsaugos. Retrieved from http//www. zebra. lt/lt/naujienos/verslas/avalynes-gamintojai-siekia-es-apsaugos-72238. html June 2010.Footwear Industry Profile Europe. Industry overview. Retrieved from Business Source Complete Inciuriene, Sigita. November, 2010. Vidmantas Simkus Man geriausia Siauliuose. Retrieved from http//lics-siauliai. lt/wp-content/uploads/2010/02/Mes-Siaulieciai-Nr61. pdf August 29, 2005. Kinu batsiuviai verzia kilpa Lietuvos avalynes gamintojams. Retrieved from http//www . verslobanga. lt/lt/spaudai. full/4312ada8d1f1a October 18, 2010. Lietuvos batsiuviai be batu nelieka. Retrieved from http//www. verslozinios. lt/index. php? act=mprasa&sub=article&id=26957