Industry Attractiveness the Athletic Footwear Thesis

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Nike, for example, operates in approximately 150 countries around the world. Also, there is room for brand and line extension. This leverages core brands and competencies to move into similar business. In recent years, Nike has built its Hurley and Cole Haan lines in recent years using their manufacturing and distribution competencies, and Reebok has expanded its core brand into ice hockey.

There are many threats to the industry, however. First, the slowing in the U.S. market has resulted in an increase in competition as growth prospects slow for the key firms. The industry is also subject to economic slowdown, especially the top firms, who generally operate with a premium pricing strategy. As most firms in the industry operate with a model featuring global procurement, they are at risk to increases in transportation costs, which cut into their margins.

Another risk is intellectual property rights violations. Two of the key global growth markets for athletic footwear are China and Russia, and both have terrible records with regards to protecting intellectual property. The result is a substantial threat to growth and profit prospects for major athletic footwear firms.

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The greater incidence of threats corresponds with the view that the industry is generally unattractive to enter. To put it simply, the easy money has been made and there is increasingly intense competition for whatever is left over. The industry is at risk of all types of economic troubles and it will be difficult for the industry to be as attractive in the future as it has been in the past. It is highly unlikely that any firm could enter the athletic footwear business and be able to build the same markets and economies of scale that the major existing firms have.

In the near future, the athletic footwear industry presents many challenges. Margins are still high, but competitiveness is increasing. The number of good opportunities is diminishing, while the number of threats is increasing. While existing firms are enjoying profits due to the economies of scale they have earned, it would be difficult for a newcomer to achieve these same strengths. Moreover, the intensity of competition indicates that existing players would be extremely hostile to any new entrant.

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