Industry Rivalry

Industry rivalry means the intensity of competition among the existing competitors in the market.
Intensity of rivalry depends on the number of competitors and their capabilities. For most industries,
the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. One
of the keys to success for an industry is their ability to understand their competitors actions and
marketing strategies. The degree to which rivalry exists among competitors varies between industries
and the market sectors within them.
When considering the textile industry, several factors that affect this rivalry have been identified.
(i)

Industry growth

According to the Sri Lanka Apparel Exporters Association apparel has been one of the fastest growing
categories in the world merchandise trade, having experienced an annual growth rate of 18% between
1985-1990, 7% between 1990-1997 and 12% in 2004. With the projected increase in the world
population and rising per capita income, the industry is expected to grow further.
It is evident that if the market is stagnant or has a very slow growth, it causes companies to fight for
market share. Thus rivalry would be intense. However in a growing market, companies are able to
improve revenue without having to extort the market share from others simply because of the
expanding market.
Therefore the trend of ever increasing growth rate of the textile industry is favourable to the producers.
(i)

Number of firms operating in an industry

Today China is the leading apparel producer with more than 40,000 factories. Following China, Hong
Kong has more than 10,000 factories; India has more than 28,000 factories operating at present while
Sri Lanka has approximately 1000 factories.
Considering this in a local context, MAS Holdings and Brandix Lanka has almost a similar share in the
industry as the leading apparel manufacturers in the country, both having 38 plants operating at
present. Minor manufactures like Penguin Group and Emjay International and Hidramani Group has
around 10 plants. With the existing growth rate of the industry, the number of firms and the number of
foreign investors are expected to have a large increase in the coming years.

According to Porters Five Force Model, a larger number of firms increase rivalry because more firms
must compete for the same customers and resources. The rivalry intensifies if the firms have similar
market share, leading to a struggle for market leadership. Therefore the presence of large number of
firms tends to intensify the competition.
(ii)

Brand ownership

In least developed countries like Sri Lanka, Bangladesh, Vietnam and Cambodia, manufacturers tend
to produce basic items. They do not have complete brand ownership, which will help a firm insulate
itself from the completion.
For an example in Sri Lanka, MAS Holdings produce clothes for brands such as Victorias Secret,
Triumph, Marks and Spencer, Banana Republic, GAP, Speedo and Nike. Its leading competitor,
Brandix Lanka also produces clothes for Victorias Secret, Marks and Spencer and Nike among other
brands. Thus this product homogeneity leads to greater rivalry.
(iii)

Exit barriers

High exit barriers place a high cost on abandoning a product. High exit barriers cause a firm to remain
in an industry, even when the venture is not profitable. A common exit barrier is asset specificity.
When the plant and equipment required for manufacturing a product is highly specialized, these assets
cannot easily be sold to other buyers in another industry.
Considering the textile and apparel industry, the special machinery used for stitching, cutting and etc.
cannot be sold to other industries resulting in the industry having high exit barriers. This causes an
increase in the competition within the companies to maintain their place in the market.
(iv)

Elimination of quotas
With the withdrawal of the Multi Fibre Arrangement (MFA),which governed the world trade

in textiles and garments from 1974 through 2004, imposing quotas on the amount developing
countries could export to developed countries, in 2005, textile and clothing exports from countries like
India and China to the West grew by 100% or more. Due to this increase in production, other
manufacturers were also driven to improve their productivity, since countries that do not reform to
increase their efficiency will face greatly increased competitive pressure, as other exporters currently

repressed by the quotas will also be liberalized. Thus the abolition of quotas has caused the intensity of
rivalry to increase.
Considering all the factors described above, it is evident that the intensity of rivalry is high in the
industry of textile and apparel.

N.Y.Kasthuriarachchi 100250P

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