Social factors

            The society is consumer society where people prefer spending than saving which is highly favorable for the luxury goods industry since, companies can attract more customers by giving them more appropriate, innovative and differentiated products. Moreover, the average income of people is above average as compared to third world countries and due to this people can afford luxury items easily. Finally, the population of the region is getting extremely brand conscious which is very favorable for the industry.

Technological Factors

The technological factors are very charming for the industry since, the pace of technological change is very high and people are shopping for products online using the internet. In addition, most of the companies don’t have many physical stores and they are delivering the goods to retailers and wholesalers or directly to the customers who reduce the cost of show rooming for the companies as well.

Moreover, the major global player across the industry have a significant learning and experience curve through which they have achieved economies of scales which help them to reduce their fixed cost however, it is not easy to achieve by new comers. In addition, this industry requires a specialized knowledge which is not easy to be meet by the new entrant which is also a favorable factor for the industry. Furthermore, the there are several barriers to entry present in the industry which reduces the threat of new entrant.

Rivalry among the industry member

            The rivalry among the industry members is moderate since, the industry is being dominated by some huge players and the competition is based on differentiation not prices. The basic element of the competition is innovation differentiation and brand equity which is very good for the industry members. Since, if the competition is based on prices the growth of the industry members will stop therefore, rivalry based on differentiation is favorable for the industry. However, majority of the industry members have a similar characteristic that they have long history over 100 years of serving and belong to Europe.

Bargaining Power of Supplier

            The industry has been dominated by few large players and due to this they accounted for a large portion of their suppliers’ revenue. This is the reason that the bargaining power of supplier is quite low over the industry members. Moreover, majority of the components and formulas are being generated in house due to which the industry members don’t need the support of their suppliers a lot. In addition, the product supplier by the supplier is not a unique thing but commodity and there are numerous options available for the industry members. Overall, all these factors reduce the bargaining power of supplier over the industry members.

Bargaining Power of Buyer

            The bargaining power of buyer is also low since, the industry is working on differentiation and innovation due to which the product supplier by the industry members is a specialty not commodity. Moreover, the customers of the industry are not price sensitive and the offering of all the industry members are differentiated which is a very favorable factor for the industry. However, the customers of the industry are brand conscious and loyal therefore, it can be said that they possess a lower power of bargain over the industry members……………….

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