Lacoste Market Structure of Lacoste Inc. Market

Lacoste

Market structure of Lacoste INC.

Market structure

According to Michael Porter's Five Forces analysis, five external pressures shape the apparel market of which Lacoste is a part. Lacoste is a high-end sports clothing manufacturer, famous for its pocket 'crocodile' logo. However, despite the durability of the brand, Lacoste faces a number of challenges. The bargaining power of suppliers, the bargaining power of consumers, the threat of substitutes, barriers to entry, and degree or rivalry between competitors can all impact the high-end clothing market (Michael Porter's five forces analysis, 2011, Quick MBA)

Effect of new companies entering the market

Within the high-end sports clothing market, barriers to entry are moderate. It takes a tremendous degree of organizational might to achieve the status of Lacoste, and the company is large enough to operate on economies of scale. However, smaller, more 'boutique'-oriented firms can also produce high-end sports clothing for customers within the Lacoste demographic, focusing upon even more exclusive shoppers to draw away consumers wishing an even more distinct brand upon their clothing.

Gaining a competitive advantage is essential given that competitors within the high-end sportswear market include Ralph Lauren and its famous 'Polo' logo, Tommy Hilfiger, and other designer labels. All of these companies have a similar image and price point which has generated intense rivalry within the industry. Still, demand for luxury goods, despite the anxiety about the economy, has rebounded after the recession, given that consumers within the 'high end' of the market tend to be less affected by upward and downward trends in the economy, as their income is less salary-dependent. Lacoste may have lost some of its lower-end consumers, but its ability to capitalize upon high-end consumers who love the Lacoste brand should continue to buoy it even during rough economic times.

Prices

Lacoste's prices are clearly at the high end of the men's and women's sports clothing market, averaging around 70- 80 dollars or more, even for a very simple polo shirt. Lacoste's price range clearly indicates how its 'image' is more critical in selling its shirts than offering discounts. Still, the bargaining power of suppliers and buyers has a considerable influence upon price. Lacoste is sensitive to the price of fabric, labor abroad, and other input goods, as well as the price of fuel in terms of shipping its goods. Consumer demand also exercises considerable influence upon Lacoste, in terms of their willingness to spend at a premium.

Technology

Technology can be a critical component of gaining an edge upon competitors. It can enable a company to save on production costs, pass these costs onto consumers, and gain a critical edge on rivals. However, given that part of Lacoste's image is its exclusivity, there is only so far it can allow its price to drop. While it may not want to allow prices to creep up too high, technological advances and low prices that can be passed onto the consumer may only accrue a small, rather than a large advantage.