Question

Natalla's clothing company Natalia is planning to launch a company which will manufacture clothing for adults. The clothing will be sold directly to consumers from the company website. - A) Michael Porter's five forces of competition model proposes that companies need to understand the risk of new entrants. Are new entrants a risk for Natalia's company? Why? Explain your answer in no more than 2 bullet points. 1 mark for correct answer with valid explanation. - B) Explain how consumer purchasing power might influence Natalia's choice of target market. Explain your answer in no more than 2 bullet points.

Answer 1

A) According to Michael Porter's five forces of competition model, new entrants pose a risk to existing companies. Yes, new entrants are a risk for Natalia's company because:

- The clothing industry has low entry barriers, meaning it is easy for new companies to enter the market and compete with existing companies like Natalia.

- The competition may reduce Natalia's market share and revenue.

B) Consumer purchasing power can influence Natalia's choice of target market in the following ways:

- Natalia might target consumers with higher purchasing power who are willing to pay more for high-quality clothing.

- Natalia might choose to target middle-income consumers who are more price-sensitive and therefore, need affordable clothing.