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SPORTS GOODS IN THE UNITED KINGDOM: ISIC 3693

Euromonitor International October 2010

SPORTS GOODS IN THE UNITED KINGDOM: ISIC 3693

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LIST OF CONTENTS AND TABLES


Sports Goods ............................................................................................................................... 1 Chart 1 Hierarchical Position of Sports Goods Industry ............................................ 2 Definitions..................................................................................................................................... 2 Attractiveness Index ..................................................................................................................... 3 Chart 2 Chart 3 Chart 4 Chart 5 Attractiveness Index of Sports Goods Industry Among Other United Kingdom Industries in the Category ............................................................. 3 Attractiveness Index of Sports Goods Industry Among Other United Kingdom Industries in the Category ............................................................. 4 Binary Diagram of Attractiveness Index ....................................................... 5 Attractiveness Index of Sports Goods Industry Among All United Kingdom Industries ...................................................................................... 6

Attractiveness Index: Explanation ............................................................................................. 7 Industry Growth/performance ....................................................................................................... 8 Chart 6 Chart 7 Chart 8 Chart 9 Chart 10 Chart 11 Chart 12 Chart 13 Chart 14 Chart 15 Chart 16 Chart 17 Chart 18 Chart 19 Chart 20 Chart 21 Chart 22 Chart 23 Chart 24 Chart 25 Chart 26 Chart 27 Chart 28 Chart 29 Chart 30 Chart 31 Key Industry Indicators 2004-2010 ............................................................... 8 Key Industry Indicators Annual Growth 2005-2010 ...................................... 9 Turnover of Local Producers and Nominal GDP 1997-2016 ........................ 9 Total Market Dynamics and the Role of Local Producers........................... 10 Imports and Exports 2004-2010 ................................................................. 10 Import vs Export Growth ............................................................................. 11 Turnover of Local Producers by Sector 2004-2010 .................................... 11 Industry Sectors Growth Indices 1997-2016.............................................. 12 Number of Local Producers by Size of Enterprises 2004-2010 .................. 13 Local Producers Turnover by Size of Enterprises 2004-2010 ................... 14 Buyers Expenditure on Sports Goods Industry 2004-2010........................ 15 Annual Growth of Buyers Expenditure 2004-2010 .................................... 16 Buyers Share of Sports Goods Market 2004-2010 .................................... 16 Buyers' Investment in Sports Goods Industry 2004-2010 .......................... 17 Bargaining Power: Buyers 2010 ................................................................. 18 Buyers: Households & GDP 1997-2016 ..................................................... 19 Buyers: Education & GDP 1997-2016 ........................................................ 19 Buyers: Education Spending on Sports Goods .......................................... 20 Buyers: Agriculture & GDP 1997-2016 ....................................................... 20 Buyers: Agriculture Spending on Sports Goods ......................................... 21 Main Industry Costs and Suppliers 2004-2010 ........................................... 21 Annual Growth of Main Industry Costs and Suppliers 2005-2010 .............. 22 Spending on Suppliers as Share of Total Industrys Costs 2004-2010....... 22 Bargaining Power: Suppliers 2010 ............................................................. 23 Suppliers: Plastics Products & GDP 1997-2016 ......................................... 24 Suppliers: Plastics Products Cost and Price Dynamics .............................. 24

Role of Imports and Exports ....................................................................................................... 10

Industry Sectors ......................................................................................................................... 11

Competitive Environment ........................................................................................................... 13

Buyers ........................................................................................................................................ 15

Suppliers .................................................................................................................................... 21

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Chart 32 Chart 33 Chart 34 Chart 35 Chart 36 Chart 37

Suppliers: Corrugated Paper, Paperboard and Containers & GDP 1997-2016 .................................................................................................. 25 Suppliers: Corrugated Paper, Paperboard and Containers Cost and Price Dynamics .......................................................................................... 25 Suppliers: Basic Precious and Non-ferrous Metals & GDP 1997-2016 ...... 26 Suppliers: Basic Precious and Non-ferrous Metals Cost and Price Dynamics ................................................................................................... 26 Supply Structure ( million, year 2010) ...................................................... 27 Bargaining Power of Buyers and Suppliers ................................................ 28

Bargaining Power ....................................................................................................................... 28

Bargaining Power: Explanation ............................................................................................... 29 Future Outlook............................................................................................................................ 30 Chart 38 Forecasts 2011-2016 ................................................................................. 30

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SPORTS GOODS IN THE UNITED KINGDOM: ISIC 3693


SPORTS GOODS
The UK sports goods market is highly dependent on consumer spending and demand is highest around major sporting events. With a peak of 9% in 2004 due to demand spurred by the summer Olympic Games in Greece and an even larger 12% hike in 2008 following the games in Beijing, the total market grew by 32% over the 2000-2008 period. A 5% drop was recorded in 2009 as demand faltered, but 2010 is predicted to produce a return to growth. There were essentially two types of buyers: households and industries purchasing sporting goods as investment items. The main buyer for the sports goods market is households, which increased its share of the market from 49% in 2000 to 52% in 2009, as more people put significant focus on leisure time, and demand quality and reliability from their sports equipment. The proportion was as high as 63% in 2006. Major B2B buyers made sporting goods purchases as long-term assets such as equipment replacement or upgrades. Sporting and recreational facilities as well as miscellaneous business service providers were the most significant among business buyers. The local sports goods manufacturing industry has been struggling in recent years. After growing by 30% from 2000 to 2006, the turnover of British companies has been shrinking ever since, losing 26% by the end of 2009. Increasing import penetration and worsening economic conditions exerted downward pressure on the industrys earnings. 16% of turnover of local producers was generated from fishing equipment and athletics equipment manufacturing. However, that represents a sizeable drop from 26% in 2000 a result of more dynamic growth in revenue from manufacturing of various other sports equipment. Import penetration in the UK market remained relatively stable at close to 40% throughout the review period. A rise to 43% in 2009 coincided with a 25% drop in turnover of the local industry. The demand for imported products increased towards the end of the review period, as the pound strengthened against the US dollar making imported products cheaper. Goods from the two biggest trade partners China and the US accounted for 58% of total imports. The competitiveness of British products overseas has been diminishing since 2000, as a result of unfavourable foreign exchange rates and strength of global non-British brands such as Nike, adidas, or Puma. Over the 2000-2009 period, the share of production output sold abroad shrank from 29% to 25%, although the proportion had been as low as 19% in 2006. The main export partners were France, Germany and Ireland, with similar shares of 13% in 2009. The local industry appears to be fairly fragmented, as total turnover is spread between micro, small, medium and large companies due to the speciality products British manufacturers are mainly restricted to. Some of the better-known British brands and companies include Umbro and Pentland Group (owner or stakeholder in brands such Speedo, Ellesse and Mitre among others). Labour costs took up an increasingly larger share of the sports goods manufacturing industrys costs. A 25% share in 2000 grew to 38% by the end of 2009. Supplies of plastic products cost the industry in excess of 7% on average throughout the period. All other suppliers had relatively fragmented shares in the total costs, not exceeding 4%. The diverse supplier base shielded the industry from significant supply price shocks and allowed for

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increasing industry profitability, with the profit margin as share of turnover EBIDA increasing from 13 to 22% over the 2000-2009 period. It is projected that the sports goods industry will decline by a further 1-2% in 2010, due to falling purchasing power of British consumers who are likely to reduce spending on nonessential items such as sport goods during the economic slowdown. However, the industry should exhibit the first signs of recovery in 2011-2012, as demand from households is expected to increase due to the upcoming summer Olympic Games, which will be held in London in 2012. Increasing import penetration and global giants entering markets for niche sports equipment are very real threats, which will further dampen growth of the local industry. Chart 1 Hierarchical Position of Sports Goods Industry

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DEFINITIONS
Category: D - Manufacturing Division: 36 - Furniture & manufacturing n.e.c. Group: 369 - Manufacturing n.e.c. Class: 3693 - Sports goods This class includes:

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Ski equipment and roller skates: cross-country skis snow skis ski-bindings, ski brakes and ski poles ice skates (including skating boots with skates attached) roller skates (including skating boots with skates attached) parts and accessories of ice skates and roller skates Water-sport equipment: water-skis, surfboards, sailboards and other water-sport equipment Athletics equipment: gymnasium, fitness centre or athletics articles and equipment Other sports equipment: leather sports gloves, mittens and mitts golf clubs and other golf equipment (including golf balls) articles and equipment for table tennis (including bats, balls and nets) lawn tennis rackets badminton, squash and similar rackets (including short-tennis rackets) balls other articles and equipment for sport and open-air games Fishing equipment: fishing rods, hooks and reels line fishing tackle, fish landing nets, butterfly and similar nets Exclusions: boat sails; sports clothing; saddlery and harness; sports footwear; weapons and ammunition; sports vehicles other than toboggans and the like; boats; billiard tables and bowling equipment; whips and riding crops.

ATTRACTIVENESS INDEX
Chart 2 Attractiveness Index of Sports Goods Industry Among Other United Kingdom Industries in the Category

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Chart 3

Attractiveness Index of Sports Goods Industry Among Other United Kingdom Industries in the Category

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Chart 4

Binary Diagram of Attractiveness Index

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Chart 5

Attractiveness Index of Sports Goods Industry Among All United Kingdom Industries

Source:

Euromonitor International

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Attractiveness Index: Explanation


The calculated index of attractiveness has two parts, evaluating: industrys performance in stable economic environment; industrys performance in turbulent economic environment and industrys resistance to economic downturn occurring. The first part of the index represents industrys performance in stable economic environment, based on historic evidence in the period of 2003-2007. It covers several criteria of industrys performance: Industrys historic growth: the compound annual growth rate of industrys turnover over the last 5 years. It shows the expansion / contraction rates of industrys turnover and reflects its recent development trend. Stability of products total demand: coefficient of variation of annual (year-on-year) growth indexes of products total demand. Coefficient of variation is a ratio between the standard deviation and sample mean. It complements the measure of average growth rates by giving the growth stability characteristic. Average industrys profitability: average EBITDA share of turnover over the last 5 years. Bargaining power of the industry as a buyer among its major suppliers: the importance of industrys purchases in the markets of its 3 major suppliers. The measure is calculated as the industrys average percentage share in its suppliers sales. It shows the industrys potential power to negotiate the prices and other supply conditions of its major intermediate purchases. Bargaining power of the industry as a supplier for its buyers: the average share of industrys production in the costs of its 3 major buyers. The measure is calculated as the industrys average percentage share in its buyers costs. It evaluates the potential power of the supplying industry to negotiate the price of its production and set other sales conditions. Barriers of entry into the sector: a share of big companies in the total number of companies within the industry (250 employees and more). The share of big companies is a proxy for entry barriers and concentration measure within the industry. Industry rivalry from abroad, foreign goods (imports) as an external source of competition: average annual import share in total domestic demand of the product, average over 5 years. It shows the local industrys opportunities (limitations) to supply the product for local market and satisfy domestic product demand. Global opportunities, exports as external possibilities for the industry: average annual export share in industrys turnover, the average over the last 5 years. It shows external industrys possibilities to supply the foreign markets with its production and implicitly demonstrates the competitiveness of industrys production abroad. The second part of the index reflects the industrys vulnerability in economic downturn and its likely performance when economic downturn occurs. It is based on several criteria: The forecasted economic growth: the compound annual growth rate of the industrys forecasted turnover for the next 3 years (2007-2010 or 2008-2011 is chosen depending on the timing of the downturn in the industry). It compares the industrys situation before and after the downturn, thus showing the average growth rates during economic slowdown. Industry's invulnerability to changes in investment climate: usually, the investment goods and services connected to investment goods are pro-cyclical, their reaction to changes of economic conditions are very sensitive. The degree of every product / services engagement into investment activities is based on its ratio of non-investment (intermediate) purchases of product to its purchases as of gross fixed capital. Industrys dependency on private final consumers: usually intermediate goods and services experience amplified fluctuations in their demand compared to final consumer spending

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categories, which exhibit lower volatility and are less sensitive to economic downturn. The average ratio of private final consumption expenditures to business purchases of the product is used to evaluate the sensitivity of the specific production category. The durability of industrys production: an additional measure of industrys sensitivity to economic downturn. The durability of the good is determined by the period length of its service / usability; for durable or semi durable goods the service period can be extended (contrary to non-durable goods) and thus the demand for durable or semi-durable goods would fluctuate more and react pro-cyclically in the light of economic changes. Industrys resistance to changes in countrys GDP: it is measured as the elasticity coefficient; how sensitively the industry reacts to changes in countrys GDP. Industrys dependency on other industries (forward linkage): the variable, measured as the horizontal sum of all coefficients of Leontiefs matrix inverse. It measures the cumulative output decrease in the sector, if the final demand for the production of all sectors were to decrease by one unit. In the phase of economic downturn, it is a measure representing the power of other industries to affect the industry of interest. Industrys ability to affect other industries in the economy (backward linkage): measured as the vertical sum of the coefficients of Leontiefs matrix inverse. It shows how much influence the industry has on other industries and how strong these links are. It measures the extent to which a unit change in the demand for the product of the sector causes production increases in all the sectors of the economy. Every industry that affects other industries strongly could be called the cornerstone of the economy and thus having more influence on the overall economic situation than the other industries. Being one of the key industries in the economy gives it additional strength and resistance to economic shocks. Each measure of industrys performance is compared across all industries in the country and is then attributed to a corresponding percentile judged on its performance (scale from 1 to 100). The better the value of criteria is the higher percentile the industry reaches. The percentiles are then weighted by their relative importance and the final score is calculated as the weighted average.

INDUSTRY GROWTH/PERFORMANCE
Chart 6 Key Industry Indicators 2004-2010

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Source: Note:

Euromonitor International PPI (Producer Price Index) is a measure of the average change in selling prices over time received by domestic producers of goods and services.

Chart 7

Key Industry Indicators Annual Growth 2005-2010

Source: Note:

Euromonitor International EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is a measure of a company's earnings that ignores the interest expense, profit taxes, depreciation and amortization.

Chart 8

Turnover of Local Producers and Nominal GDP 1997-2016

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Source: Note:

Euromonitor International Shaded areas mark historic slowdown years and current economic downturn.

Chart 9

Total Market Dynamics and the Role of Local Producers

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Euromonitor International

ROLE OF IMPORTS AND EXPORTS


Chart 10 Imports and Exports 2004-2010

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Source: Note:

Euromonitor International Imports CIF (Costs, Insurance and Freight) is imports value with freight, insurance and other costs incurred during transportation of goods from the port of origin. Exports FOB (Free on Board) is exports value including freight cost up to the port of origin but excluding all other costs.

Chart 11

Import vs Export Growth

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INDUSTRY SECTORS
Chart 12 Turnover of Local Producers by Sector 2004-2010

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Chart 13

Industry Sectors Growth Indices 1997-2016

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COMPETITIVE ENVIRONMENT
Chart 14 Number of Local Producers by Size of Enterprises 2004-2010

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Chart 15

Local Producers Turnover by Size of Enterprises 2004-2010

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BUYERS
Chart 16 Buyers Expenditure on Sports Goods Industry 2004-2010

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Source: Note:

Euromonitor International Other sources of revenue include: remaining buyers expenditure on industrys products/services, and changes in buyers inventories. Here Investment refers to gross fixed capital formation, excluding change in stock.

Chart 17

Annual Growth of Buyers Expenditure 2004-2010

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Euromonitor International

Chart 18

Buyers Share of Sports Goods Market 2004-2010

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Chart 19

Buyers' Investment in Sports Goods Industry 2004-2010

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Chart 20

Bargaining Power: Buyers 2010

Source: Note:

Euromonitor International The bargaining power table enables the consideration of all main bargaining power evaluation factors, supplementary to those shown in the bargaining power chart below. By looking at all major factors affecting the industrys relationship with buying industries, the table helps to determine the industrys ability to bargain with and pressure its major buyers.

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Buyers share in industrys market: expressed as a percentage share of total market size, this reveals which are the most important buyers for the industry under review. The share is proportional to the potential bargaining power that the buyers might have. Industrys share in buyers costs: expressed as a percentage share of total intermediate buyers costs, this shows how important the industry under review is to each buyer, relative to their other suppliers. The higher the share, the stronger potential bargaining power the industry under review might have against its buyers. Number of potential buyers: the figure reveals how many companies the industry under review could be potentially selling to. The number of potential buyers is proportional to the bargaining power of the industry under review. Level of concentration: expressed as the percentage of total industry output produced by large companies, this figure shows the degree of concentration of the buyers market. The higher the figure, the more production is created by large companies, meaning that the industry has a lower ability to switch and find new buyers. Import penetration: expressed as a percentage of imported products in the buyers market, this shows how the buying industry is pressured by imported goods. The higher the percentage, the smaller the market share that local buyers account for, thus giving them lower bargaining power. Chart 21 Buyers: Households & GDP 1997-2016

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Euromonitor International

Chart 22

Buyers: Education & GDP 1997-2016

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Chart 23

Buyers: Education Spending on Sports Goods

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Euromonitor International

Chart 24

Buyers: Agriculture & GDP 1997-2016

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Chart 25

Buyers: Agriculture Spending on Sports Goods

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SUPPLIERS
Chart 26 Main Industry Costs and Suppliers 2004-2010

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Chart 27

Annual Growth of Main Industry Costs and Suppliers 2005-2010

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Euromonitor International

Chart 28

Spending on Suppliers as Share of Total Industrys Costs 2004-2010

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Source: Note:

Euromonitor International Intra-industry trade (the industry itself is among its major suppliers) refers to the exchange of products within the same industry definition range. The industry classification can include a wide variety of supply chain components from raw materials to finished or semi-finished goods. Consequently, it is not uncommon that one part of a product is produced by one company and then sold to another enterprise in the same industry to be included in the production of a final product. This trade enables the industry players to specialise in a limited range of production and reap the advantage of increasing returns.

Chart 29

Bargaining Power: Suppliers 2010

Source: Note:

Euromonitor International The bargaining power table enables the consideration of all main bargaining power evaluation factors, supplementary to those shown in the bargaining power chart below. By looking at all major factors affecting the industrys relationship with supplying industries, this table helps to determine the industrys ability to bargain and pressure its major suppliers.

Spending on suppliers: expressed as a percentage share of the industrys intermediate costs, this reveals which are the most important suppliers for the industry under review. The higher the share, the stronger the potential bargaining power that suppliers have. Industrys share in suppliers market: expressed as a percentage of suppliers total market size, this shows how important the industry under review is to each supplier. The higher the share, the stronger the potential bargaining power that the industry under review might have with its suppliers.

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Number of potential suppliers: this figure reveals how many companies the industry under review could be potentially dealing with, for a specific input. The higher the number of suppliers per company of the industry under review, the higher the bargaining power of the industry under review. Level of concentration: expressed as a percentage of total industry output produced by large companies, this figure shows how concentrated local suppliers are. The higher the figure, the more production is created by large companies. Consequently, the higher the figure, the lower is the industrys ability to switch and find new suppliers. Import penetration: expressed as a percentage of imported products in suppliers market, this shows how the supplying industry is dependent on imported goods. A higher percentage implies a lower bargaining power for local suppliers. Chart 30 Suppliers: Plastics Products & GDP 1997-2016

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Euromonitor International

Chart 31

Suppliers: Plastics Products Cost and Price Dynamics

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Chart 32

Suppliers: Corrugated Paper, Paperboard and Containers & GDP 1997-2016

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Euromonitor International

Chart 33

Suppliers: Corrugated Paper, Paperboard and Containers Cost and Price Dynamics

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Chart 34

Suppliers: Basic Precious and Non-ferrous Metals & GDP 1997-2016

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Euromonitor International

Chart 35

Suppliers: Basic Precious and Non-ferrous Metals Cost and Price Dynamics

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Chart 36

Supply Structure ( million, year 2010)

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BARGAINING POWER
Chart 37 Bargaining Power of Buyers and Suppliers

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Bargaining Power: Explanation


Bargaining power is a concept referring to the relative abilities of parties to influence each other in setting trading terms, especially prices. The graph of bargaining power enables a quick evaluation of which of the main buyers and suppliers have the strongest effect on the industry under review with regards to the ability to pressure for better business terms. The roles are presented using two major bargaining power evaluation factors: share of intermediate costs and role in the market. Other factors, such as number of buyers and suppliers, concentration ratios and industry rivalry, are presented in the bargaining power tables above. The graph is separated into buyers area and suppliers area, depicting the industrys top three B2B buyers and suppliers. Note that on the graph: The sizes of boxes in the graph visually represent the importance of and help to evaluate buyers and suppliers ability to bargain with and pressure the industry under review ; The arrows indicate the direction of the pressure, with this being either towards the industry or towards its buyers and suppliers. Pressure towards the industry (represented on horizontal axis)

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Buyers Shows how the revenue received from each of the top three buyers is important to the market of the industry under review. Expressed as a percentage of the industrys market size; The higher the percentage, the larger the market share of the buyer, thus possibly giving it higher bargaining power with regards to the industry under review. Suppliers Shows how the expenditure on each of the three suppliers is important to the intermediate costs of the industry under review. Expressed as a percentage of total intermediate costs; The higher the percentage, the larger the share of costs related to the supplier, thus indicating a potentially higher bargaining power against the industry under review. Pressure towards buyers and suppliers (represented on vertical axis) Buyers Shows how important the industry under review is to each of the top three buyers costs. Expressed as a percentage of buyers total intermediate costs; A higher percentage indicates higher possible bargaining power for the industry under review towards its buyers. Suppliers Shows how important the industry under review is to each of the top three suppliers. Expressed as a percentage of total suppliers market; A higher percentage indicates higher potential bargaining power for the industry under review towards its suppliers.

FUTURE OUTLOOK
Chart 38 Forecasts 2011-2016

Source:

Euromonitor International

Euromonitor International

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