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Porter's 5 forces analysis of NEXT Plc - Case Study Example

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Porter's 5 forces analysis of NEXT Plc

NEXT Plc is retail chain in Clothing specialising in Men's wear, ladies wear, Sports wear, Leisure wear, Children wear. Underwear Swimwear Footwear watches etc. NEXT products are highly trendy which sells at moderate prices. Clothing is targeted on stylish women and men in the age range 20 to 40. Home shopping and financial services are also provided. NEXT operates through 300 high street shops covering the UK and Ireland and also foreign markets. (http://www. next.co.uk)
The clothing market of UK is declining at present. Clothing is generally manufactured by low tech machines with cheap labour spread in third world countries. The industry is facing competition from high-tech machines that can stitch better quality products at faster speed and at lesser cost. Retail shops thrive in the market to sell these clothing. The market trend today is of opening retail chain stores and capturing the market with own favourite brands such as Next, Marks & Spenser, Gap, and Arcadia. These retail chain stores grow big and can afford costly high-tech machines but small retailers can not afford quick change to new technology. Highly exclusive designer boutiques cater to rich segment with exclusive designs. But consumer goods markets mainly thrive on middle class segment and therefore every big retailer concentrates to that market. . Other activities of NEXT include telecommunications software services and property management. Analysis of NEXT plc and its environment...
Environmental Opportunities
NEXT Retail accounted for the biggest 69% of revenue in 2000. More than 96% of sales came from the UK market. NEXT is ranked number one in the market in high street category and in providing mail order facility to youth group in 20-40 age. It is very difficult for the competitors to enter into the segment and grab the market share.
Environmental Threat : In spite of its well-entrenched position in the market there are some big brands like TESCO which is trying hard to snatch the market share by offering clothes stitched fro the low labour cost areas at dumping prices. Lewis 501 denim product at pound 20 is a burning example.
Bargaining power of suppliers: Suppliers in clothing industry are many and this is true for NEXT also. Supplier can be indispensable only when he holds monopolistic status. In case of NEXT's suppliers they don't enjoy such position and can't pull the company for increasing rates or other terms unless it is negotiated and accepted.
Bargaining powers of Buyers:
Buyers or customers have lots of power to discard a product in the shelf. In the modern world of marketing it is the value creation through brands, promotion, prices tags, product positioning, label, quality and store's image that retain clients. Generally clients don't bargain prices from a good outlet and believe to pay the tag prices accepting the quality of goods therein. NEXT has good image to project and should not expect consumers' reprisal unless the brand loses its value.
Threat of new entrants to the industry
Small brands are not capable to enter into the clothing chain market to compete with NEXT because of the capital- intensive nature of the modern clothing industry. Big labels do have strength of money, knowledge, expertise and marketing power to challenge NEXT. Donna Karan, Calvin Klein, Tesco, Marks & Spenser or some other brands from US can enter the market comfortable by opening ...Show more

Summary

Porter's 5 forces analysis of NEXT is related here with the micro-external environment. They consist of those forces close to the company that affect its ability to serve its customers better and make a profit. A change in any of the forces normally requires the company to re-assess the marketplace…
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