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Gap, Inc MB107 Group 17
[GAP STRATEGIC REVIEW]
An overvi ofG ap’ current probl s and suggesti to sol them . ew s em ons ve
December 8, 2006
[GAP STRATEGIC REVIEW]
Section Conclusions Recommendations Background Apparel Industry Gap, Inc Performance Why Fast Fashion? Spry Brand Positioning Locations Supply Chain Marketing Expansion Results Risk Assessment Topic Page 3 4 5 6 7 8 9 10 11 12 13 14 15
Title SWOT Analysis Strategy Diamond PESTEL Analysis Mi chaelPorter’ 5 Forces s Page 16 20 21 22
Gap, Inc | Anthony Ferri, Arturo Villalobos, Michael Griffiths, Pearl King, Qi Qin Tan
2006 [GAP STRATEGIC REVIEW] Conclusions Apparel Market 1. Gap. Michael Griffiths. Inc is unable to grow its core brands in the US market. Market saturation and increasing competition make It impossible to grow Gap rapidly enough to please shareholders. Inc 1. Global brands that appeal to a wide demographic are becoming difficult to grow. Gap. Gap. 3 Gap. Pearl King. 2. Specialty apparel market is segmenting. Arturo Villalobos. Apparel and Accessories accounted for 22% of Target’ s revenue in 2005.December 8. with brands to serve each market niche. Inc cannot change consumer perception of the clothing its brand sells without extensive change and substantial risk. Discount retailers and ‘ superstores’compete on selling clothing basics to all ages. Qi Qin Tan . Inc | Anthony Ferri.
Michael Griffiths. Inc | Anthony Ferri. New Initiatives 1. Pearl King. 4 Gap. Expand brand portfolio. Establish a new brand (Spry) to operate in the growing Fast Fashion market. Arturo Villalobos. Create niche or local brands to address market segmentation. 2. Disassociate new brand (Spry) from Gap and Old Navy brands. with new styles weekly or bi-weekly.December 8. Qi Qin Tan . 2006 [GAP STRATEGIC REVIEW] Recommendations Strategic Direction 1.
Pearl King. Qi Qin Tan . Arturo Villalobos. and specialty apparel retail occupies 34%. Inc | Anthony Ferri. Spending by Channel Specialty Retailers 34% National Chains 13% Departmen t 22% Mass Merchants 14% Factory Online Outlets 7% 1% Billion Off-Price Retailers 9% Revenue by Gender Infants 7% Brand Share of Specialty Retailing Men 35% Women 58% Old Navy 8% Banana Republic 3% GAP 7% 5 Gap. 2006 [GAP STRATEGIC REVIEW] Background Apparel Industry Growth Projection $330 $320 $310 $300 $290 $280 $270 $260 $250 $240 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Apparel Industry The apparel industry is growing at roughly 2% per year. Michael Griffiths.December 8.
05 -0.2 Comparable Store Sales Return on Assets Sales per sq. Arturo Villalobos.1 0 -0. Store Sales and Return on Assets 20000 0. Pearl King. Qi Qin Tan .1 -0.4 0.2 0. revenue and income are fluctuating.15 2001 2002 2003 2004 2005 400 200 0 -200 Gross Revenue -0. Inc is having trouble expanding its bottom line. 2006 [GAP STRATEGIC REVIEW] Background Revenue and Income Performance 1400 1200 1000 800 600 10000 5000 2001 2002 Net Income 2003 2004 2005 0 15000 Gap. ft.1 2001 2002 2003 2004 2005 2001 2002 Expansion 38000 36000 34000 32000 30000 2003 2004 Sq. Inc | Anthony Ferri. while sales per sq.3 0.1 0. Inc Performance Gap.December 8. $100 0. ft.05 0 -0. 2005 28000 $90 $80 $70 $60 $50 Sq ft Growth 6 Gap.15 0. ft fail to grow. Michael Griffiths.
Arturo Villalobos. compared with between 5% and 17% in Europe. The fast fashion has been a rapidly growing market segment in Europe. Volume is expected to grow over the next five years to 6% in the USA. 2. fast fashion retailers have been growing stores and profit in double digits. Qi Qin Tan . Inc | Anthony Ferri. resources. H&M 2000 1500 1000 500 Millions ($) 0 1999 2000 2001 2002 2003 2004 2005 0 Stores Profit USA Fast Fashion 1% UK Fast Fashion 12% Spain Fast Fashion 17% 7 Gap. Additionally.December 8. with global fast fashion retailers having only a handful of stores divided across the major cities. This growth has barely begun in the USA. Michael Griffiths. t the economies of scale. 1400 1200 1000 800 600 400 200 Stores Why Fast Fashion? Fast fashion is only 1% of sales in the USA. growing at 3 times the overall apparel industry. Inc has the opportunity as a US-centric company to establish a fast fashion division and dominate the US fast fashion market. 2006 [GAP STRATEGIC REVIEW] Background Overview 1. or infrastructure Gap. Pearl King. Inc does. D om esti com peti on exi but doesn’ have c ti sts. Gap.
Inc | Anthony Ferri. and Addidas. Spry is a youthful. A vibrant. Purchasing Director Kicki Oliversjo Kicki Oliversjo is currently the Director of Purchasing at Lindex. has worked as a fashion and textile consultant. Designer Stella Nina McCarthy Stella McCarthy is a high-end fashion designer with experience designing for H&M. Arturo Villalobos. edgy brand in the fast-fashion segment of the apparel industry. Brand Image 1. colorful clothing and store layout. and has 12 years experience at H&M as a section manager. well-illuminated store. the customer should feel that urgency is imperative. 2006 [GAP STRATEGIC REVIEW] Spry Spry is a new. Pearl King. Urgency and snap-decision making are imperative. young. 2.December 8. Michael Griffiths. Corporate Structure President LeAnn Nealz Marketing Director Christian Bagnoud Designer Stella Nina McCarthy Purchasing Director Kicki Oliversjo Logo President LeAnn Nealz LeAnn Nealz is the Executive Vice-President and Chief Design Officer of American Eagle Outfitters. with a touch of urgency. Marketing Director Christian Bagnoud Christian Bagnoud has been the H&M Director of Marketing in Canada for the last 13 years. a specialty apparel retailer selling clothing to 15-25 year olds. where teenagers compete to wear the latest fashions. 8 Gap. Qi Qin Tan . Focus on selling the goods Spry should be a destination. edgy brand full of energy. Modern. the same demographic Spry is serving. Gucci. As fast fashion clothing is created in limited-run batches.
00 . 6% 4% Formal vs.$15.00 $12.00 .99. 20% $5 to $9. Under $5.00 .$12.December 8. with core goods going between $10 and $40.00 $40.99. 27% $10 to $14. Age $20 to $24.00 $3. Arturo Villalobos.00 $8. 5% $39. 10% $15 to $19. 7% $30 to $40 and up.99.00 $15.99.$20. Fashion Volume by Price Point $25 to $29.99.$60. Inc | Anthony Ferri.$25.00 $15. Qi Qin Tan . 22% 9 Gap.00 .00 .00 Positioning Price vs.00 $15.$25. Michael Griffiths.00 .$20.00 .99.$20. Clothing Category Accessories Fleeces Jackets Jeans Shirts Skirts Sweaters Underwear Price Range $1.00 . Pearl King. 2006 [GAP STRATEGIC REVIEW] Spry Price Point Spry clothing will be priced at an affordable level.
000 $40. 4.19 Ages 20 .000 $20.000 1.I s th nc’ other stores and the apparel industry.000 sq. $100.000 0 Population of Basic Demographic San Francisco Ages 10 .200. emphasizing minimalistic store design focused on revealing the clothing. Qi Qin Tan . with popular music varying by store region. 3. Household Income for Preferred Cities $60.000 600. after comparing the demographic information for potential cities from the US Census.000 1. stent w i G ap. initially leveraging the radio.600.000 200.14 New York Los Angeles Ages 15 . Store will be brightly lit. W i ng path di des m en’ cl ng f ndi vi s othi rom w om en’ cl ng. Michael Griffiths.24 Chicago 10 Gap. 2. Pearl King.000 1.000 Locations We intend to launch in San Francisco.000 400.000 $0 San Francisco New York Mean Income Los Angeles Chicago Median Income Competition 10 8 Store Count Population 6 4 2 0 San Francisco New York Zara Los Angeles H&M Chicago 1.000.400. 2006 [GAP STRATEGIC REVIEW] Spry Store Details 1.000 $80.December 8. Spry will launch in 10. Inc | Anthony Ferri. Stores will have an edgy atmosphere.000 800. consi . s othi leading to the cash register at the back of the store. ft. Arturo Villalobos. Customer should feel welcomed at a part of the brand identity.
Inc | Anthony Ferri.Spry can on es ckl l everage Gap. Pearl King.December 8.I s exi i suppl chai w i houtchange.as f f nc’ st ng y n t ast ashi cycl m uch m ore qui y. Ship frequently in small quantities and deliver to stores with minimal storage. Rapid adaptation of designs from existing trends and popular designs into clothing. 2006 [GAP STRATEGIC REVIEW] Spry Overview High use of technology in the supply chain leading to high supply visibility and responsiveness to demand and changing trends. Michael Griffiths. Qi Qin Tan .H ow ever.I s rel i nc’ at onshi w i h suppl ers and di ri i network. Supply Chain Spry cannotuse Gap. Arturo Villalobos. p t i st but on Fast Fashion Process Design Manufacture Distribute Use CAD sofware to design garments Modular manufacturing Ship weekly from China Numerous designers creating volume of designs Automatic cutting Leverage nearby distribution centers 11 Gap.
Local Spending National 12% 60 40 20 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Marketing Costs Local 88% 12 Gap. Michael Griffiths. and ability to order clothing before anyone else. Inc | Anthony Ferri. 3. Advertising will primarily be local. Marketing will involve identifying best customers through the IT system and rewarding them with in-store parties. Marketing will attempt to establsh a “pul” expansi strategy for Spry. 2006 [GAP STRATEGIC REVIEW] Spry Marketing Campaign 1. fashion exclusives. 2. Marketing Spend by Channel Magazines 22% Billboards 16% Local TV 22% Local Newspaper s 34% Radio 6% Marketing Cost Projection by Year 100 80 Millions National vs. Pearl King. generating local i l on support and excitement for the clothing instead of pushing the store everywhere. Spry advertising will inspire people to consider clothing as a disposable consumable. Customer satisfaction should be the primary growth avenue.December 8. Marketing Spry will emphasize local. with marketing creating brand awareness and identity. not an investment. Arturo Villalobos. focusing on generating grass-roots support for the brand. Qi Qin Tan . easy-to-connect to advertising.
3.000 $250 $200 Millions Expansion Costs Millions $3. Pearl King. we expect revenue per store to be a conservative $5 million. Revenue will grow per store. Qi Qin Tan . Michael Griffiths. 2006 [GAP STRATEGIC REVIEW] Spry Overview 1. 200 150 100 Expansion Store Growth 1000 800 600 400 50 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 200 0 Total Stores Stores Opening Income from Spry $5.000 $2. 2. Spry will push the concept of disposable fashion. Inc | Anthony Ferri. which requires Spry stores to be in fairly high-traffic areas. before beginning a national expansion policy to place a store in every town.000 $4.December 8.000 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Gross Sales Net Income 13 Gap. Inc stores that are underperforming can be replaced by Spry stores. Existing Gap. Spry will establish itself in major cities nationwide to test interest in various locations. Arturo Villalobos.000 $150 $100 $50 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $1.
000 $21.000 Impact on Gap.600 Million 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $1.8 $157.6 $5.0 $88.4 $32.0 $613.8 $9.580.500 $1. Michael Griffiths.240 $4.0 $104. Arturo Villalobos.December 8.8 $8.000 2.000 $15.5 $13.6 $24.700 $1.0 $56.000 1.8 $221.000 $16.0 $193.680. Inc Income $1.5 $276.000 980.8 $20.0 $40.000 $17.000 4.4 $15.8 Expansion Cost $9.8 $53.8 $40.000 480.000 $1.0 Marketing Cost $4.290 $1.8 $29.680.5 $486.480.000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 14 Gap. Qi Qin Tan .100 $1.8 Rent $6 $18 $48 $98 $168 $258 $368 $498 $648 $818 Total Sq Ft 60.8 $128.200 $18.8 $68.0 $73.000 Results Gross Sales $30 $90 $240 $490 $840 $1.000 8. Pearl King.980.8 $85. Inc Sales $22.090 Net Income $4.8 $101.000 180.000 3.840 $2.000 $20.8 $13.8 $188.0 $72.0 $120.5 $36.300 $1.800 $1.8 $53.180.000 Million $19.400 $1. 2006 [GAP STRATEGIC REVIEW] Spry Results Forecast Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Stores Opening 6 12 30 50 70 90 110 130 150 170 Total Stores 6 18 48 98 168 258 368 498 648 818 Store Expansion $4.000 6.0 $136.490 $3.5 Impact on Gap. Inc | Anthony Ferri.0 $373.5 $126.8 $76.
iPod. 3. laptop. forcing Spry to find and train new suppliers in different countries. Existing supply chain cannot easily be modified to support fast fashion. 2. WTO or US government introduce trade quotas.I s m i i ng nc’ stakes i 2000. or fails to use required technology. technology implemented does not integrate with Oracle/Retek IT system. but early missteps could be critical to destroying the brand. Fashion director misjudges styles required in fast fashion. etc.duplcati G ap. O verexpansi stretches G ap. US economy experiences a recession.I s resources and grows on nc’ beyond dem and. n 15 Gap. 2006 [GAP STRATEGIC REVIEW] Spry Market Risks 1. Technology required is off the shelf. cell-phone. failing to grow far beyond 1%. under pressure from Gap. Arturo Villalobos. Risk Assessment Initiative Risks 1. Inc to show fast results. Qi Qin Tan .” such as ng um gadgets. Pearl King. and there should be no problem with existing supply chain. 2. 3. Inc supply system with differentiating well from Old Navy. clone existing Gap. 4. Inc | Anthony Ferri. Suppliers can be trained. Staff hired fail to grasp key fast fashion elements and. Further reduction in consumer spending in the 15-25 age bracket due to i ncreasi vol e of“m ust haves. 4. Michael Griffiths. Fast fashion does not appeal to the US market.December 8. accessories.
foot Geographically fragmented manufacturing Threats Industry consolidation Reduction in US consumer spending Threat from counterfeit products Increasing segmentation of apparel market by brand Opportunities Launch of Forth and Towne Elimination of textile quotas Customer database and smart cards Fast fashion Strengths Brand recognition The com pany’ G ap.com. and one it is having difficulty solving.com that offer the respective brands.December 8. This provides the brand with a distinct competitive advantage. bananarepublic. Arturo Villalobos. structural problems left over from its overexpansion in the late 1990s have made it difficult for Gap to overcome its supply and design problems.com. Gap operates three websites for tapping on this opportunity gap. Qi Qin Tan . Inc | Anthony Ferri. Increasing competition on all sides is the major problem facing Gap. Pearl King. 2006 [GAP STRATEGIC REVIEW] SWOT Analysis 1 Conclusions Gap. and oldnavy. These brands are one of the most widely s i d ts m recognized brand names within the retail apparel industry. Websites provide a virtual showcase for companies. Michael Griffiths.Banana Republc and O l N avy brands are am ong i m ost i portant assets. giving 1 SWOT Analysis adapted from 2005 Datamonitor SWOT 16 Gap. However. Inc has a strong brand portfolio and stable revenues. They have a significant degree of credibility and presence in the marketplace. it is beset by problems both direct and indirect. Strengths Brand recognition Strong online presence Weaknesses Relatively less differentiated fashion collection Geographically concentrated operations Seasonal pattern of business Fluctuating sales per sq. Strong online presence The role of the Internet has been a major growth driver for the company.
Fluctuating sales per sq. Gap. Qi Qin Tan . have fluctuated between $100 and $60 per sq.The rem ai ng segm ents Europe and Asi contri or 7% s ni a buted m erel 5. ofthe com pany’ totalrevenues. ft.December 8. and the shopping decision is made on price. This increases costs across the company. Arturo Villalobos. in 2004 and 2005. and thus differentiation comes mainly through price. Geographically concentrated operations The company relies heavily on the North American markets for its revenue generation. and 3.The com pany’ com peti y n eadi f usi ashi s tors have become much quicker in getting in new fashions. While Gap. 17 Gap. Weaknesses Relatively less differentiated fashion collection Basic apparel items tend to be commodity-like. ft. Michael Griffiths. Seasonal pattern of business The com pany’ busi s ness f l s a seasonalpattern.Target and Zara. Inc recovered to reach $95 per sq. The current price-driven sales environment places the company at a disadvantage. whilst allowing them to see and experience the brand. Inc uses a multitude of geographically fragmented manufacturers for its clothing. Gap. Pearl King. 2006 sales have again dropped. these periods accounted for approxi atel 32% ofthe com pany’ net sal Thi m y s es. respectively y 4% 6% in fiscal 2005. s generates weakness in the business activities at other time periods and adversely affects the results of operations. In fiscal year 2005. During fiscal year 2004. In an environment where basic wardrobe product offerings are indistinguishable from one specialty retailer to the next. the North American market alone accounted f 90. Inc sales per sq. Inc | Anthony Ferri.w i sal peaki over a totalofabout 13 w eeks duri the Back-to-School (August) and olow th es ng ng Holiday (November-December) periods. ft. Gap is likely to lose its customers to lower priced discount retailers. a remnant of the Multi-Fiber Agreement Treaties. Geographically fragmented manufacturing Gap. Moreover. Inc needs to show consistent growth in sales per sq. with lower priced competitors usually winning market share. Such a heavy reliance on this market exposes the company to market concentration risks. increasing competition and putting Gap at a comparative disadvantage. the more fashion-conscious customers would be willing to buy from other suppl chai l ng stores that of er excl ve f on garm ents such as H & M . a strong web presence has given the company a competitive edge within the market. In light of rising online sales. 2006 [GAP STRATEGIC REVIEW] customers the ability to shop for merchandise. ft. ft.
Forth and Tow ne w ill l aunch i f test n our stores in the Chicago market and one in New York in fall of 2005. Elimination of textile quotas The elimination of textile quotas offers immense growth opportunities to retail apparel companies such as Gap. Inc | Anthony Ferri. and assortments that serve a variety of occasions. and growth is set to accelerate in the USA. 2006 [GAP STRATEGIC REVIEW] Opportunities Launch of Forth and Towne G ap l aunched Forth and Tow ne brand. Fast Fashion The fast fashion industry has become a significant part of the European apparel market. Rising usage of smart cards can also benefit discounters and department store operators in improving their customer service and managing their inventory effectively.U S quotas on i ports oftexties and apparel from most WTO members were zati s W l othi m l lifted in January 2005. Arturo Villalobos. This represents an important long-term growth opportunity for the company. has enabled retailers to alter their product display and maintain inventory accordingly. This will enable US retailers to procure high quality merchandise at a low cost.December 8. The market segment is young enough for Gap to become a primary player in the segment by leveraging its economies of scale and experience in the retailing industry. Michael Griffiths.Com piati ofcustom er i orm ati ti em n l l on nf on. whilst providing the opportunity to broaden their product portfolios.thi group’ spendi pow er accounts f about39% ofw om en’ totalapparelexpendi ati s s ng or s tures. Under the terms of the World Trade O rgani on’ ( TO )Agreem ent on Texties and Cl ng. tastes and spending patterns. with a focus on fit.the com pany’ new w om en’ apparel retail in April 2005. as well as discount stores who are unable to duplicate the supply chain responsiveness. This event would improve flexibility in obtaining imported merchandise manufactured in WTO countries. 18 Gap. Since Gap sources its merchandise from more than 700 vendors in 50 countries. A rapidly growing segment of the popul on. such an agreement may provide ample savings opportunities to the company. covering preferences. The new brand focuses on women over age 35 s s and would offer a broad range of sizes. Pearl King. Qi Qin Tan . Fast fashion growth will primarily come from specialty apparel retailers targeting the teenage crowd. Customer database and smart cards Understandi custom er’ needs and pref ng s erences has becom e a cri calel ent i the retai sector.
Michael Griffiths.December 8. Pearl King. companies have been working in tandem with government officials to target this threat. and the availability of consumer credit. adversely affecting sales of major apparel retailers. Inc | Anthony Ferri. as large companies create diverse brand portfolios to both minimize risk and increase appeal to target demographics. 2006 [GAP STRATEGIC REVIEW] Threats Industry consolidation Merger and acquisition activity has been rife amongst US discounters and department stores. investments and commitment required in successfully countering the threat from counterfeit products is huge. apparel retailers such as Gap would continue to witness erosion of market share and dilution of brand equity. Therefore until the industry sees significant progress on this front. interest rates. Apparel retail forecasts for 2005 show a slow growth of 3. creating larger entities with huge scale economies. Consumer purchases tend to reduce during recessionary periods and retail stores like Gap may face a decline in demand of their offerings and thereby a fall in its revenues. taxation and consumer confidence in future economic conditions. However. Threat from counterfeit products Estimated counterfeit sales of around $500 billion per year are a major problem for companies within the apparel and accessories markets. w hose superi bargai ng pow er w i supplers are f i hi or ni th i uelng gher m argi w i n the U S retai envi ns thi l ronm ent. Arturo Villalobos. Qi Qin Tan . Greater consolidation in the industry would lead to higher competition levels and thereby lower the profit margins for the company in future.8%.Thi “cherry pi ng” of ngl th che ng fc s cki profitable consumers is likely to increase.a pri red ne vatel hel w om en’ retaier ofupscal and contem porary y d s l e apparel. 19 Gap.2% in 2004.Carter’ acqui O shkosh B’ osh s red G in 2005 while New York & Company acqui Boston based Jasm i Com pany. even lower than 5.w i ni brands cateri the specii tastes. Increasing segmentation of apparel market by brand The apparel market i becom i i s ng ncreasi y segm ented by brand. Reduction in US consumer spending The downturn of the US economy since 2001 has adversely affected the purchases of discretionary luxury items. The increasing penetration of counterfeit products can lead to a negative impact on company sales and as a result of this. footwear and accessories under the JasmineSola and Luisa Luisa brand names. Many factors that affect the level of consumer spending in the apparel and accessories industry include general business conditions.
segmented by brand identity Strong online presence selling directly to consumer Target demographic varies by brand Domestic dependence. Qi Qin Tan .I i pri ariy conti ng to turn a proftthrough i strong brand i age. Inc | Anthony Ferri. Pearl King. Michael Griffiths. 2006 [GAP STRATEGIC REVIEW] Strategy Diamond Conclusions The Strategy D i ond reveal that G ap. international growth in Japan.December 8. Arturo Villalobos.i doesn’t have any substantial am s nc s m l nui i ts m t differentiators that allow it to challenge discount retailers or increasingly niche-targeted brands. UK Vehicles Construction of new stores Establishment of new brands Reducing supply chain fragmentation Differentiators Brand identity Custom IT solution by Oracle and Retek Staging Create new brands to expand into new demographics Increase presence online Establishing stronger supplier relationships Customer tracking system 20 Gap. Economic Logic Consistent sales with reliable inventory and strong brand identity Arenas Discrete stores locations selling apparel.
Increase in communication and celebrity gazing decreases fashion shelf life. Decreased overall leisure spending shrinks market for high-margin fashion products. Factories with better environmenta l standards. Internet access allows greater price comparison by consumers.and G ap’ stapl cl ng i parti ar. Legal Legal concerns over copyrighted designs in fashion world. Inc | Anthony Ferri. Arturo Villalobos. 21 Gap. Ongoing aging of Baby Boomer population implies new. increases demand for cutting edge fashion. Decreased spending on clothes as proportion of income reduces potential market. Socio-Cultural Increase in individual fashion raises required product diversity. Qi Qin Tan . changes in the overall economy are increasing prices while consumers are becoming l enchanted w i cl ng. However. Pearl King. Stable domestic political situation. Economic Increase in real estate prices in prime locations will slow store expansion and may require reduction in floor space. 2006 [GAP STRATEGIC REVIEW] PESTEL Analysis Conclusions Gap. Technological Increasing use of technology lowers supply chain costs. Inc has a stable political and legal situation. Michael Griffiths. Oil prices raise costs through the supply chain. Potential problems with business methods patents in supply chains. Environmental Global warming may lead to increased demand for summerwear. older and affluent market.December 8. Trend towards professional appearing garb. Ubiquitous internet access implies new avenue for direct sales. ess th othi s e othi n cul Political Elimination of MFA quotas allows reduction in prices.
December 8. reducing margins of specialty apparel retailers Move to mimic high fashion in short time over staple clothing Buyer Power Rapidly changing fashion desires for core demographics leads buyers to trendy brands Entrenched brand identity Difficulty of training Eastern suppliers leads to exclusive relationships and a reduced volume of good suppliers Switching costs away from brand identity Access to good suppliers Competition over brand image instead of prices 22 Gap. Qi Qin Tan . Pearl King. Supplier Power Large number of suppliers leads to low prices Rivalry Discount retailers also sell clothing. Barriers to Entry High capital expense to establish strong retail presence Threat of Substitutes None. Michael Griffiths. Arturo Villalobos. 2006 [GAP STRATEGIC REVIEW] Mi chaelPort s 5 Forces er’ Conclusions The specialty apparel industry is facing increasing competition and market segmentation. Inc | Anthony Ferri. while costs to expand remain high.
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