High Quality Ceramics Worldwide Economics Essay

The ceramic industry may be considered a labour extensive industry, going out of developed countries at a disadvantage when it comes to labour costs that are increasing. Furthermore, it seems that the global financial crisis has worsened this situation. Therefore countries with considerable raw materials and lower labour costs are strategically positioned in the ceramic industry as their economy provides for the rising demand and supply of ceramic goods.

Over the years, RAK ceramics has quickly cultivated in the ceramic industry and has been recognized worldwide due to the quality with their ceramics. The grade of RAK ceramics allowed the company to position itself as a niche in the global industry by diversifying their products into international specifications.


The features that define an industry's financial dominance include factors including the number of competitors that exist and the opportunity with their competition, market size and its own growth, number of buyers, demand and supply, economies of level, technological change, the degree of product differentiation and innovation.

The composition of the ceramic industry encounters growth in conditions of economical, productive and technical characteristics which establishes the strength of each of Porter's five competitive forces. In this section, the ceramic industry will be analysed in conditions of Porter's five pushes in order to comprehend the opportunity of progress and competition that exists within the industry and its own appeal. The five causes are

Rivalry Among Existing Firms

Menace of New Entrants

Danger of Replacement Products

Bargaining Electricity of Buyers

Bargaining Vitality of Suppliers

Rivalry Among Existing Firms

Rivalry within the industry is relatively low due to the industry being Oligopolistic in mother nature. With that said, there are just a small number of competition within the ceramics industry. RAK ceramics nearly faces no completion in the local market and some competition from countries such as China, Bangladesh, Thailand, and Sri Lanka credited cheaper resources of labour, recycleables and imports, reducing high quality.

Furthermore, RAK ceramics is well known for having strong ways of stay competitive such as arranging international competitive criteria and joint projects with other companies to be able to utilise technological advances to produce better type of ceramic goods.

Threat of New Entrants

RAK ceramics gets the advantage of not having local competitors, but the ceramic industry has huge amounts of fixed costs involved; which means industry is capital intense, which makes it an entry hurdle that restricts potential hazards of new entrants. Furthermore, the need of automation and large investment in technical advances cause as further access barriers.

There has been significant progress in the demand for ceramic products over the years and countries such as Bangladesh that enjoy cheap labour, ease of access to raw materials needed in conjunction with duty free exports to countries in Europe due to lack of quota restriction from a generalised system of inclination, increasing the distance between demand and offer, it poses a threat of entry to the international ceramic market.

Imports of ceramic products via countries such as China also pose a threat of new entry anticipated to low transfer costs as they have got manufacturing plant life of their own that produce large quantities of ceramic goods, reducing quality.

Threat of Swap Products

There ceramic industry encounters extreme competition with reasonably priced goods such as tiles, sanitary and table ware that are majorly produced and brought in from China scheduled to lessen costs. In addition, the industry encounters completion from replacement products offered by companies in other market sectors.

Like RAK ceramics, others within the ceramic industry are facing competition from manufacturers of substitute products, thereby lowering annual profits. Consumers often purchase substitutes of ceramic products because of the convenience in terms of supply and the appeal of lower prices. These substitutes include several modifications of tiles, crockery and wares such as melamine, metallic, glass, aluminium, stones such as marble, lumber, and most commonly, plastic wares.

Furthermore, imports of such substitutes have rapidly increased in the past 10 years to a soaring fourfold. Manufacturers of the goods have widened their procedures and capacities for this reason to maintain with brutal competition and exportation, in that way introducing more products to appeal to a broader range of consumers.

Bargaining Electric power of Buyers

The clients of ceramic products, both local and international buyers in this industry, have significant bargaining ability in terms of price negotiation with the seller. It is because buyer's switching cost is low, therefore, it is silent easy for a buyer to change to other lower priced ceramic goods or substitutes imported from other countries talked about earlier. Keep in mind that although RAK ceramics, with practically no local competition credited to lack of ceramic companies in the U. A. E still faces powerful competition with Chinese substitute products, therefore entailing potential buyers within the U. A. E with appreciable bargaining ability.

Bargaining Power of Suppliers

As with other high quality ceramic challengers, RAK ceramics imports high quality raw materials such as potash feldspar, soda feldspar and clay from countries such as Thailand, Malaysia, Indonesia and India, glazes and fritz from European countries such as Spain. Furthermore, other imported high quality materials include vitrified high alumina porcelain from mines of Germany and UK that happen to be of the best quality. Therefore the raw materials by itself account for nearly all of the total creation, apart from manufacture and technology. Having said that, it is noticeable that the base of suppliers within the ceramic industry is big enough to weaken the bargaining electric power of suppliers.

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