A Strategic Analysis of GAP Inc

Executive summary

The study is effective for strategic management and conducting industrial analysis in order to have effective understanding about the business environment and identifying the organisational strategic planning. The report provides a scope to apply the models such as SWOT, PESTLE as well as Porters five forces model for analysing the business environment of the company as well as identifying the strengths and weakness of the business to run their operations efficiently in near future. The company, chosen in the study is GAP, and the reason of choosing the company is that it is famous and reputed brand where the company focuses on delivering high quality clothing to the customers and the company mainly focuses on the luxury clothing products. Hereby, the strategic analysis is helpful in this report, to evaluate the organisational position in the market and identify the strategic planning through which the company can utilise their strengths for expanding the business internationally.

Introduction

Business environmental analysis is necessary for the organisations to identify the market trend and understand the positive and negative factors affecting the business environment. The growth of the organisation depends on the factors where the factors are playing crucial role in restructuring the business environment and providing the scope to the organisations for successful expansion. The aim of the study is to evaluate the market functions and trend in the recent clothing market where the external and internal business environment for the organisation GAP will be analysed through analysing the strategic models such as SWOT, PESTLE and Porters five forces model. The report is also effective to analyse and evaluate the organisational structure; size and scope of the organisation as well identify the organisational objectives and organisational functions. The positive and negative effects of the macro environmental factors would also be evaluated further in the context of the organisation GAP as well as analysis of the strengths and weaknesses of the organisation will also be analysed through utilising the PESTEL and SWOT analysis.

PESTLE analysis of the clothing market

PESTLE strategic analysis is useful analytical tool to evaluate the political, economic, social, technological, legal and environmental factors. Through the PESTLE analysis, it is possible to evaluate the external factors which are effective to restructure the business environment. The organisation GAP is focuses on managing the stakeholders, who are major art of the business for running the operational activities strategically. The stakeholders of the company include customers, raw material providers and suppliers as well as employees and managers and it is the liability of the organisational leader to meet the demand of the stakeholders by providing high return on investment. The organisation is efficient to manage all the stakeholders of the business and develop interrelationship to run the operational activities and achieve the aim of delivering high quality products and efficient services to the customers. The major disadvantage is cultural diversity which raises issue in developing interrelationship among the stakeholders at the workplace (Oyewobi.et.al.2013).

Section 1: positive and negative impacts of macro environment on the business operations

The external factors are important to be evaluated in order to restructure the organisational policies and for example, the company GAP is efficient to identify the pricing policies of the competitive firms in the clothing market and this further helps the company GAP to generate effective pricing policy and set effective Price for controlling the sales volume (Loorbach and Wijsman, 2013). On the other hand, competitive analysis is mandatory to identify the market competitors in the clothing market and restructure their operations for better performance and gaining high competitive advantage over other competitions in the clothing industry. There are negative impacts which are wring market research and lack of understanding about the strategic planning of the competitive brands in the market as these may raise issue for GAP to analyse the market and develop effective strategic planning leading to market loss (Holden, 2016).

Section 2: Internal and external analysis for identifying organisational strength and weaknesses

Internal analysis in this regard is helpful to identify the strengths of the company as well as weaknesses and it further gives the scope to the management team of the company to develop effective tactic to eradicate the weaknesses for utilising the market opportunities in near future. The internal analysis is helpful to restructure the organisational policies and practice and it further influence the firm to develop effective planning to achieve future sustainable goal. Through this analysis, GAP can identify the internal issues and problems in managing the employees which in turn influence the leader of the company to develop proper planning for utilising the organisational strength so that it is possible for the firm to compete in the clothing industry by utilising the organisational resources and capabilities. On the other hand, the external analysis is also effective for identifying the external weaknesses of the organisation (Nijssen and Frambach, 2013).

Section 3: GAP Analysis by the model of Porter’s Five Forces

Through the model, it is easy to evaluate the threat of new entrants, threat of substitute products, competitive rivalry as well as bargaining owner of the customers and the bargaining owner of the suppliers and in this regard, it helps to improve market understanding so that the firm can identify the market partners and threats in near future. The analysis in retail industry is effective where the company can maximise their profitability after analysing the market situation and utilising the organisational resources (Ewanm, 2018).

Section 4: Strength and weakness to the macro factors

The strengths and weakness of the company are related to external macro factors which influence the decision making practice of the organisational leader. Additionally, macro factors may affect the business positively or negatively such as corporate social responsibility is the duty of the business and sometime it becomes difficult for the firm to manage the responsibility in doing the business ethically in the market. The macro factors also influence the performance and strategic decision of the brands and thus the macro factors are important to be evaluated for better analysis and identifying the business environment to conduct and run the operational activities internationally (Tong.et.al.2015).

Section 5: SWOT and PESTEL Analysis for understanding the effects of the macro environment at GAP

SWOT analysis is effective to identify the organisational strengths and weakness as well as assess the market opportunities and threats in the business environment. On the other hand, PESTEL analysis is also effective in this regard to analyse the environmental factors that have crucial impacts on the business operational activities.

Space INC SWOT analysis

Strengths

As per the Global Winter Clothing market 2017 reports for USA, GAP is one of the top brand in the apparel market.

There are high quality fashion products in space Inc. Brand Gap, banana republic and Old Navy which increased supply chain flexibility and allows the brands to deliver quality clothing like Zara (wahba, 2017).

Spacing INC. will be available in 90 countries worldwide, and there is 3300 company-operated stores, and 400 franchise stores (Gap, 2017b).

Weaknesses

GAP outlets have been closed and latest closure is reported at Preston’s capital centre.

Shutting down its banana republic shops 10 in the UK to revive its sales

Banana republic and Old Navy stores have been closed overseas by the end of 2016 and the website of the company is functional (Blog preston, 2017).

In this regard GAP struggled to retain the customers over the past few years as the customers references has been changed towards fast fashion Forever 21, Inditex’s Zara and H&M.

Olivia Palermo as the first-ever women’s global style ambassador of the brand, which is strength for the company to improve brand image and conduct celebrity endorsement for successful expansion of the company and it further helps to access celebrity after Palermo wore a Gap piece to the 2017 CFDA Awards in New York (Reimann, Wagner and Reisinger, 2017).

High investment is effective which strengthen the supply chain and improve dividend for market expansion.

The brand is also efficient to capture market opportunities, retaining younger generation and improve visibility to expand their business across the international borders (wahba, 2016).

Opportunities

The company focuses on utilising international style icon as the first-ever women’s global style 12 ambassador of the brand. There is increasing brand visibility which further provides the opportunity to manage higher celebrity after Palermo wore a Gap piece to the Awards in New York (Reuters, 2016).

The opportunities for the company are capturing younger, attracting customer worldwide, digitalisation of the business, utilising ecommerce and image oriented customers as well as positive brand image in the market.

Additional investment will provide a scope to expand the market and strengthen the supply chain for managing international operations (Olson, 2017).

Threats

GAP mainly focuses on the UK based merchandise and it is risky for the company to gain high competitive advantage. It is effective closing down the UK merchandise operations where the quality and presentation of the store of the company is opposed to its competitors like Zara, who have strong merchandise as compared to GAP (Lieber, 2017).

One of the largest threats for the organisation is entrepreneurs in the retail fashion industry who are digitalised brands such as Modern Citizen and in the recent era of digitalisation, the company focuses on store expansion, which raises the threats in near future to gain competitive advantages the digital brand share grabbing the opportunity in the fashion retail industry (Gap, 2017b).

Conclusion

The study is effective to utilise the strategic models, which are useful for analysing the micro and macro environmental factors affecting the business both positively and negatively. As per the analysis and evaluation of GAPs SWOT and PESTEL Analysis to gain insight into the impact of the macro environment at GAP is efficient to expand their business internationally through expansion in emerging economies and online presence so that it can run their business globally. The company focuses on delivering quality clothing and apparel to gain high competitive advantage in the international retail clothing industry and in this regard the brand is efficient to maintain the ever-changing fashionable trend to maximise the customer’s satisfaction and strengthen their customer’s base for running the business sustainably.

Continue your journey with our comprehensive guide to A case study on Tesco.