Sportswear Industry are developed mutual, there are lots of brands in the market. The main brands are Nike, Adidas, Under Armour (UA), and Columbia. The followings are going to discuss why it is so difficult for new firms to enter the sportswear industry.
Firstly, capital requirement is a high barrier for new firms. To commence a new business, it requires lots of capital for initial set up, development and design, promotion, establish distribution channels etc. Nowadays there are lots of well-known sportswear brands, such as UA, Nike etc.. They developed maturity and put much effort on their propaganda in order to help get their name out in public. For example, Nike invested $2300 million on advertising and promotion (Nike Annual Report, 2008).
Secondly, Economic of Scale seems a high barrier for new firms. Existing well-known brands had got breadth of market share. For example, UA got 43% of the total U.S. performance apparel business. Since they have large and stable customer base so they can be huge produced to s and then enjoy the Economic of Scale. For the new firm, they cannot obtain much customer base initially so cannot enjoy Economic of Scale.
Thirdly, product differentiation is a high barrier for new firm. Product differentiation due to product diversification, special design, customer loyalty, publicity etc.. For example, Nike is the leader of industry in product differentiation. Nike differentiated its products through diversification of products lines, continuous innovation and emphasize on high quality (Nike Strategic management, 2011). Also, existing brands are striving for a long time to fight for internationally recognized brand and customers’ loyalty through advertisement, endorsements, well-received publicity. For example, UA became a globally recognized brand in 2002 and their product transcends culture differences. Therefore, they got stable customer base and high customers’ loyalty on their products. For new firms, it is...