Ralph Lauren Porter Five Forces Analysis
Ralph Lauren Porter’s Five Forces analysis covers the company’s competitive landscape as well as the factors affecting its sector. The analysis focuses on measuring the company’s position based on forces like threat of new entrants, threat of substitutes, bargaining power of buyers, bargaining power of suppliers and competitive rivalry. Let us start the Ralph Lauren Porter Five Forces Analysis:
Quick Glance:
Threat of New Entrants:
The threat of new entrants in the Ralph Lauren Porter Five Forces Analysis can be explained as follows:
Threat of new entrants is low. In the high end fashion industry, capital investment is huge considering the high cost incurred in R&D, supply chain network, expensive luxury raw materials etc. For the new entrants the initial high investment is a discouraging factor. Apart from that, the premium fashion brands enjoy huge customer loyalty and brand reputation which is hard to emulate for the new entrants. Due to economies of scale, existing premium brands are successful in cutting the cost, which is difficult for new entrants to imitate.
In current trends however, 2C companies on internet are able to sell their apparels, accessories etc. easily which is the major threat for companies like Ralph Lauren. Ralph Lauren can tackle this by building capacities and launching new products and innovating in its R&D to attract new customers and retain its old customers. By colluding with other existing players to cut costs significantly, Ralph Lauren and other players in the high end fashion industry can discourage the new entrants.
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Threat of Substitutes:
Below are the threats of substitute products of Porter’s Five Forces analysis of Ralph Lauren:
Threat of substitutes is moderate. There are various substitutes available of which some are expensive while some are cheaper.
For substitutes that are cheaper and offer good quality, it can be a substantial threat to Ralph Lauren. To address this threat, Ralph Lauren can increase the switching cost of the customers to prevent customer defection. It can also improve its quality and focus on maximizing value for money by offering diversified differentiated products. By focusing on service orientation as well as product orientation, Ralph Lauren can attract and retain its customer base. For the substitutes that are expensive and provide good quality, Ralph Lauren can focus on not only improving its quality to top notch, but also working on its branding and customer loyalty. By operating on economies of scale it can further reduce the prices to prevent customer defection. This way Ralph Lauren can compete with its substitute products.
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Bargaining Power of Customers:
In the Ralph Lauren Porter Five Forces Analysis the bargaining power of the customers can be explained as:
Bargaining power of customers is low. Retail customers like Macy’s and Kohl’s have some degree of bargaining power, but customers do not have direct influence in bargaining. Due to the presence of multiple players in the industry and the availability of substitutes, Ralph Lauren has to innovate and offer its products at differentiated pricing with improved quality to sustain and compete with others. This way customers enjoy some indirect bargaining power. Ralph Lauren needs to follow the consumer trends and preferences to attract and retain them. By diversifying its products with new design and in new segments, Ralph Lauren can engage with a wide range of customers that will help the brand in reducing the bargaining power of buyer’s. With strong brand proposition and brand loyalty, Ralph Lauren can prevent the customer defection to its competitors and can serve its customer’s desires, even if the switching cost is low.
The threat of customer’s backward integration is almost negligible.
Bargaining Power of Suppliers:
Following is the bargaining power of suppliers in the Porter’s Five Forces analysis of Ralph Lauren:
Bargaining power of suppliers is low because there are huge no of suppliers in the fashion industry that offer low differentiated raw materials like fabric, buttons, trims etc. Ralph Lauren has a global manufacturing division with its suppliers operating Asia, USA, middle east and various other countries. There are few players that operate in the premium fashion industry so multiple suppliers cater to one fashion brand, thus suppliers are dependent on Ralph Lauren and other players giving them low bargaining power. Most of the supplies are outsourced with multiple vendor licensing certification and compliance programs to assure best quality standards. Switching cost for the brands is low and the threat of supplier’s forward integration is also low due to capital investments. Ralph Lauren tackles its suppliers through its expensive supply chain network. It also has alternative substitutes of its raw material, so that it does not have to rely on particular raw material and through this it enjoys higher bargaining power..
Competitive Rivalry:
The impact of key competitors in the Ralph Lauren Porter Five Forces Analysis is as follows:
Ralph Lauren operates in design, manufacturing and distribution of premium lifestyle products in five categories: apparel, accessories, home, hospitality and fragrances. The major competitors of Ralph Lauren are: Calvin Klein, Armani, United by Blue, Hackett London, Hanesbrands. The rivalry among the existing players is intense. Global fashion industry is projected to grow with a CAGR of 6 to 9% making this industry highly competitive for existing players to compete and attain greater market share. Differentiated in product offerings is moderate to low. Ralph Lauren can compete with its competitors by offering sustainable differentiation in its offerings. Ralph Lauren’s brand strategy of balancing between haute couture (sophistication) and classical lines(heritage) has aided in maintaining its appeal to a wide range of customers thereby earning competitive advantage.
Building a strong brand proposition of reputation and distinctive image across its range of products has helped Ralph Lauren in maintaining its customer loyalty and gaining competitive edge.
To conclude, the above Ralph Lauren Porter Five Forces Analysis highlights the various elements which impact its competitive environment. This understanding helps to evaluate the various external business factors for any company.
This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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