Michael Porters five forces Analysis is a tool for the structural analysis and shape the
competitive structure of the company. The objective of strategic planning is to modify
these competitive forces such that the companys position is improved. Management can
decide how to influence or to develop industry characteristics, based on the information
given by the Five Forces model. There are:
2.1 Threat of New Entrants: New entrants to an industry can raise the level of competition,
thereby reducing its attractiveness. New entrants frequently bring additional capacity to an
industry. Thus it is possible that prices will be bid down and industry profits diminished. In
the knitwear industry, new entrants could quickly enter the industry because it costs little
in time or money to enter the market and compete effectively, and there are few economies
of scale in place, or have little protection for the key technologies, so that new competitors
can quickly enter the market.
2.2 Threat of Substitutes: Substitutes are new products (or services) that are quite different
than the original product or service. A threat exists when a products demand is affected by
the price change of a substitute product. When the demand for a product declines due to
either lower prices of better performing substitute product, low brand loyalty, new current
trends or low switching cost. There is a high threat of substitutes in the knitwear industry
such as sweater, cardigan and cashmere or other dressing and the fashion trend change in
every season, people wants to buy the fashionable clothing and make the elastic of the
