Analysis of the Sporting Goods Industry

Analysis of the Sporting Goods Industry

Driving forces of change in the sporting goods industry
Various driving forces of change are necessitating revolutions in the sporting goods industry as can be observed from current market trends in the industry. For instance, this industry is facing a slowdown. The slowdown is majorly attributed to the decreased participation of individuals in the industry. This has been caused by increased involvement of kids in video games rather than real ground gaming. Therefore, most of the sporting goods customers became adults rather than kids hence a shift in the target market. Fashion changes and interests are also imminent in the sports industry. Every new day is associated with new fashion styles hence some of the sports goods run out of fashion a while after their release. Companies in this industry also need to identify future potential markets for exploration. For instance, the Asia-Pacific region is currently the largest new market for sporting goods and equipment.
Technological changes is also another major driving force of change in the sporting goods industry as most of the new athletic and sports equipment need to be highly technically improved. For instance, new apparel that can measure changes in body conditions such as pulse rate and breathing rate are replacing the old ones. New technological equipment in the industry also includes smartwatches such as the Samsung Galaxy gears, Apple smart watches, and Sony Smartwatches that can measure heartbeat and breathing rates have been discovered.

The increased involvement in sports and exercise by most individuals across the world has also necessitated designing of a broad variety of sports apparel and footwear for both men and women.
Relevant economic trends & forecasts
Economic forecasts of trends and future events help companies in making sensitive financial decisions helps companies remain financial relevant and secure in the long-run as they also maintain a competitive edge over their rivals. Total revenue invested in the sporting goods industry has been on the rise over the last years over its growth to a billion dollar industry, manifesting high investments in the industry. For instance, the industry’s revenue capacity as of 2010 was 121.39 billion US dollars and has been on the rise ever since. Increased prices of products in this industry such as swimwear, footwear, sports equipment and facilities due to the production of technologically advanced products. This future prospects further increases and demand for high capital investments in the industry (Lipsey, 2006).
Market trends & forecasts
The market for sporting goods is broad and distributed all over the world. Customers for sporting goods include individuals, organizations and companies, athletic and sports clubs such as football and golf clubs, and learning institutions. Over the recent few years, there has been an increased involvement of individuals of all ages in sports. Sports engagement has also increased as new sports are also being discovered (Qing-ming, 2008). These incidences have increased the market stretch for the sporting goods industry. Sports are also being brought in the world arena as a unifying factor thus great involvement by several companies hence more market for sporting goods. For instance, Nike, Puma, and Adidas have contracted several sports clubs across England, Spain, France, Italy and Germany in providing footwear, training and game kits, sports equipment such as training facilities.
Industry analysis
Major competitors
The Sporting goods industry is a large and diversified industry and consists of several large-scale players who exist as competitors. For instance, some of the key rivals in providing sports apparel, footwear and equipment are Nike, Adidas and Puma as they are involved in similar products. Dick’s Sporting Goods, Sports Direct International and FGL Sports are also major competitors in providing sporting equipment across major markets in the world.
Herfindahl-Hirschman Index (HHI) (Market Concentration)
The sporting goods industry has many players involved. This industry is fragmented as each player has a target market or products. For instance, Nike and Adidas have specialized in sports apparel and footwear, while other companies produce swimwear and sports equipment. According to the Herfindahl – Hirschman Index, low market concentration is characterized by man competitors hence limited market share for each player (Qing-ming, 2008). The HHI for this industry would be quite low. For example, assuming that the industry has four players with market shares of 20, 20, 30, 30, the HHI would be (20^2+20^2+30^2+30^2) = 2600, as compared to a completely concentrated market (monopoly) whereby the HHI index is 100^2=10,000 where no competition is involved.
BCG matrix & explanation
BCG Matrix can be referred to a corporate planning tool that analyses the potential of a business brand portfolio by using relative market share. This matrix has four cells and classifies businesses into stars, question marks, cash cows and dogs. The sporting goods industry mostly consists of stars as most companies in this industry have large markets in the robustly growing industry. These industries grow into cash cows as they possess low relative market share as the industry continues to grow.
Ansoff’s matrix & explanation
Ansoff’s matrix is a marketing planning tool that is used by most businesses in evaluating the market growth of a certain product. This is done by first identifying whether the market or product is new or existing. This matrix involves four alternative growth strategies that are; market penetration, product development, market development, and product or market diversification. All these four strategies are involved in the sporting goods industry as companies are involved in developing new markets for most of their existing products, coming up with new products targeted for the still existing markets, as well as developing new products targeted for the newly identified markets. Nike, Adidas, Jordans, are all involved in exploring new markets and flooding them with new footwear, while also designing new footwear for the currently existing markets.
Five forces analysis
The five forces revolving around any business are customer bargaining power, supplier bargaining power, substitute products, the threat of entry and competitive rivalry. Competitive rivalry in the sporting goods industry is characterized by many competitors who are actively involved in the industry. Entry in the sporting goods industry is hard considering the large capital investment and high competition in the industry (Qing-ming, 2008). Most customers of the sporting goods industry have high buying power and thus high pricing and quality are attached to these products. Purchases in this industry are in bulk. Suppliers determine the cost of production, and might eventually narrow a business’s profit margin. The sporting goods industry thrives well considering the presence of several suppliers hence many options to choose from as well as a low supplier bargaining power.
Critical success factors
Success is the sole objective of any business in existence. The success of companies in the sporting goods industry can be attributed to various factors such as customer satisfaction and this forms the sole objective for all businesses (Lipsey, 2006). Another critical success factor in the sporting goods industry is the quality and diversity of products. Apparel, footwear and other equipment by most players in this industry are of high quality. Also, these products are diversified. For instance, key shoe producers in this industry design new shoes every day to satisfy the different needs of their customers.
Summary of findings
The sporting goods industry is a fragmented industry with multiple players with each striving to maintain and expand its market share. The industry is characterized by diversified goods and players that define its complex nature. Therefore, a proper analysis of market trends is one of the most fundamental aspects of growth and maintaining a competitive advantage in the sporting goods industry. Businesses should identify their competitors as the engage in any business and come up with strategies to fit in the market (Lipsey, 2006). Companies in this industry should also be ready to adapt to the various forces of change that frequently occur in this industry. Businesses should as well analyze their critical success factors well before venturing into business.
References
Lipsey, R. A. (2006). The sporting goods industry: History, practices and products. McFarland.
Qing-ming, Z. (2008). Study on the Present Situation and Development Countermeasures of China’s Sporting Goods Industry [J]. Fujian Sports Science and Technology, 1, 003.