2006

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]

Contents
Contents
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

Appendices
Title SWOT Analysis Strategy Diamond PESTEL Analysis Mi chaelPorter’ 5 Forces s Page 16 20 21 22

2

Gap, Inc | Anthony Ferri, Arturo Villalobos, Michael Griffiths, Pearl King, Qi Qin Tan

Gap. with brands to serve each market niche. 2.  Specialty apparel market is segmenting. Inc 1.  Market saturation and increasing competition make It impossible to grow Gap rapidly enough to please shareholders. Gap.December 8. Inc is unable to grow its core brands in the US market. Gap.  Discount retailers and ‘ superstores’compete on selling clothing basics to all ages.  Apparel and Accessories accounted for 22% of Target’ s revenue in 2005. 3 Gap. Inc | Anthony Ferri. Arturo Villalobos. Michael Griffiths. Qi Qin Tan . Global brands that appeal to a wide demographic are becoming difficult to grow. 2006 [GAP STRATEGIC REVIEW] Conclusions Apparel Market 1. Inc cannot change consumer perception of the clothing its brand sells without extensive change and substantial risk. Pearl King.

Disassociate new brand (Spry) from Gap and Old Navy brands. Michael Griffiths. Inc | Anthony Ferri. Expand brand portfolio. New Initiatives 1. 4 Gap. 2. Pearl King. with new styles weekly or bi-weekly. Establish a new brand (Spry) to operate in the growing Fast Fashion market.December 8. Qi Qin Tan . Arturo Villalobos.  Create niche or local brands to address market segmentation. 2006 [GAP STRATEGIC REVIEW] Recommendations Strategic Direction 1.

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. Pearl King. Qi Qin Tan . 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. and specialty apparel retail occupies 34%. Michael Griffiths. Inc | Anthony Ferri.December 8. Arturo Villalobos.

3 0.1 2001 2002 2003 2004 2005 2001 2002 Expansion 38000 36000 34000 32000 30000 2003 2004 Sq.05 -0. Michael Griffiths. ft.1 0.2 Comparable Store Sales Return on Assets Sales per sq. Inc is having trouble expanding its bottom line. Pearl King.15 2001 2002 2003 2004 2005 400 200 0 -200 Gross Revenue -0. Arturo Villalobos. Qi Qin Tan . Inc Performance Gap. Inc | Anthony Ferri. Store Sales and Return on Assets 20000 0.1 0 -0.2 0.05 0 -0. while sales per sq. revenue and income are fluctuating.15 0. ft.December 8. 2005 28000 $90 $80 $70 $60 $50 Sq ft Growth 6 Gap.4 0. 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 fail to grow. $100 0.1 -0.

fast fashion retailers have been growing stores and profit in double digits. Qi Qin Tan . Inc | Anthony Ferri. Additionally. resources.December 8. Inc has the opportunity as a US-centric company to establish a fast fashion division and dominate the US fast fashion market. Gap. compared with between 5% and 17% in Europe. 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. 2006 [GAP STRATEGIC REVIEW] Background Overview 1. 1400 1200 1000 800 600 400 200 Stores Why Fast Fashion? Fast fashion is only 1% of sales in the USA. Inc does. 2. t the economies of scale. The fast fashion has been a rapidly growing market segment in Europe. or infrastructure Gap. Michael Griffiths. D om esti com peti on exi but doesn’ have c ti sts. Arturo Villalobos. This growth has barely begun in the USA. Pearl King. Volume is expected to grow over the next five years to 6% in the USA. with global fast fashion retailers having only a handful of stores divided across the major cities. growing at 3 times the overall apparel industry.

Purchasing Director Kicki Oliversjo Kicki Oliversjo is currently the Director of Purchasing at Lindex. Focus on selling the goods  Spry should be a destination. the same demographic Spry is serving. the customer should feel that urgency is imperative. Brand Image 1. Designer Stella Nina McCarthy Stella McCarthy is a high-end fashion designer with experience designing for H&M. Gucci. Pearl King. Inc | Anthony Ferri. well-illuminated store. Michael Griffiths. 2.  Urgency and snap-decision making are imperative.December 8. has worked as a fashion and textile consultant. with a touch of urgency. edgy brand full of energy.  A vibrant. young. 2006 [GAP STRATEGIC REVIEW] Spry Spry is a new. edgy brand in the fast-fashion segment of the apparel industry. Marketing Director Christian Bagnoud Christian Bagnoud has been the H&M Director of Marketing in Canada for the last 13 years. where teenagers compete to wear the latest fashions. Qi Qin Tan . Spry is a youthful. 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. Arturo Villalobos. 8 Gap.  Modern. and Addidas. As fast fashion clothing is created in limited-run batches. a specialty apparel retailer selling clothing to 15-25 year olds. and has 12 years experience at H&M as a section manager. colorful clothing and store layout.

$60.00 $8. 6% 4% Formal vs.00 . 2006 [GAP STRATEGIC REVIEW] Spry Price Point  Spry clothing will be priced at an affordable level.99.00 $15.$15.$12. Clothing Category Accessories Fleeces Jackets Jeans Shirts Skirts Sweaters Underwear Price Range $1. 10% $15 to $19.99. Under $5.99. 22% 9 Gap. Age $20 to $24.00 . 27% $10 to $14. Fashion Volume by Price Point $25 to $29. 5% $39.00 $40.00 .00 .00 $15. 7% $30 to $40 and up. Inc | Anthony Ferri.00 . with core goods going between $10 and $40.99. Michael Griffiths. Pearl King. Qi Qin Tan .$25.December 8.00 .$20.00 $12.99.99.00 Positioning Price vs. 20% $5 to $9.$20.$25.$20. Arturo Villalobos.00 .00 .00 $3.00 $15.

000 200. s othi leading to the cash register at the back of the store.200.000 $40.000.I s th nc’ other stores and the apparel industry.400.000 Locations We intend to launch in San Francisco.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. initially leveraging the radio. ft. Qi Qin Tan . W i ng path di des m en’ cl ng f ndi vi s othi rom w om en’ cl ng.000 1. 4. Customer should feel welcomed at a part of the brand identity.December 8.000 1.000 600. with popular music varying by store region.000 sq. 2.000 800. $100. Household Income for Preferred Cities $60.000 400.000 0 Population of Basic Demographic San Francisco Ages 10 . 2006 [GAP STRATEGIC REVIEW] Spry Store Details 1. Arturo Villalobos. Spry will launch in 10. Pearl King. Stores will have an edgy atmosphere. Inc | Anthony Ferri.000 $80. Michael Griffiths.19 Ages 20 . after comparing the demographic information for potential cities from the US Census.600.14 New York Los Angeles Ages 15 . consi . Store will be brightly lit.000 $20.000 1.24 Chicago 10 Gap. emphasizing minimalistic store design focused on revealing the clothing. stent w i G ap. 3.

 Rapid adaptation of designs from existing trends and popular designs into clothing. Pearl King.December 8. Supply Chain Spry cannotuse Gap.as f f nc’ st ng y n t ast ashi cycl m uch m ore qui y.I s rel i nc’ at onshi w i h suppl ers and di ri i network.  Ship frequently in small quantities and deliver to stores with minimal storage. 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. Inc | Anthony Ferri. Michael Griffiths.I s exi i suppl chai w i houtchange.Spry can on es ckl l everage Gap. 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. Arturo Villalobos. Qi Qin Tan .H ow ever.

Marketing Spry will emphasize local. fashion exclusives. 2. not an investment. 2006 [GAP STRATEGIC REVIEW] Spry Marketing Campaign 1. with marketing creating brand awareness and identity. 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. Advertising will primarily be local. Inc | Anthony Ferri. Spry advertising will inspire people to consider clothing as a disposable consumable. Arturo Villalobos. and ability to order clothing before anyone else. Customer satisfaction should be the primary growth avenue. 3.December 8. Qi Qin Tan . Local Spending National 12% 60 40 20 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Marketing Costs Local 88% 12 Gap. Pearl King. easy-to-connect to advertising. Michael Griffiths. generating local i l on support and excitement for the clothing instead of pushing the store everywhere. focusing on generating grass-roots support for the brand. 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.

000 $4. 3. Pearl King. before beginning a national expansion policy to place a store in every town.000 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Gross Sales Net Income 13 Gap.000 $2. Michael Griffiths. Arturo Villalobos. 2006 [GAP STRATEGIC REVIEW] Spry Overview 1. Existing Gap. we expect revenue per store to be a conservative $5 million. Qi Qin Tan . 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. Spry will push the concept of disposable fashion. Inc stores that are underperforming can be replaced by Spry stores.000 $250 $200 Millions Expansion Costs Millions $3. Inc | Anthony Ferri. 2.December 8. which requires Spry stores to be in fairly high-traffic areas. Revenue will grow per store.000 $150 $100 $50 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $1. Spry will establish itself in major cities nationwide to test interest in various locations.

000 Million $19.300 $1.8 $221.December 8.0 $104.0 $73. Pearl King.490 $3.0 Marketing Cost $4.000 8.000 $21.0 $373.600 Million 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $1.8 $29.8 Expansion Cost $9.0 $88.180.000 Impact on Gap.580.480.8 Rent $6 $18 $48 $98 $168 $258 $368 $498 $648 $818 Total Sq Ft 60.5 $13.4 $32.5 $126.000 2.8 $68.8 $8.5 $486.500 $1.090 Net Income $4.000 Results Gross Sales $30 $90 $240 $490 $840 $1.6 $24.100 $1.8 $40.680.8 $13.8 $157.000 $15.000 $1.8 $9.0 $120.000 3.700 $1.0 $56.6 $5.000 6.8 $53. Qi Qin Tan . 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 $4.0 $613. Inc Income $1.8 $76.000 $17.000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 14 Gap.000 $20.240 $4. Inc | Anthony Ferri.000 180.0 $136.400 $1.8 $53.840 $2. Michael Griffiths.8 $101.000 1.8 $85.5 $276.0 $193. Arturo Villalobos.4 $15.8 $188.680. Inc Sales $22.290 $1.000 480.5 Impact on Gap.8 $20.000 980.0 $72.000 4.200 $18.8 $128.800 $1.000 $16.5 $36.980.0 $40.

failing to grow far beyond 1%. Michael Griffiths. Fashion director misjudges styles required in fast fashion. 4. accessories. 2. Inc | Anthony Ferri. Qi Qin Tan . under pressure from Gap. Fast fashion does not appeal to the US market. iPod.  Suppliers can be trained. Existing supply chain cannot easily be modified to support fast fashion. US economy experiences a recession.duplcati G ap. but early missteps could be critical to destroying the brand. Inc to show fast results. WTO or US government introduce trade quotas. O verexpansi stretches G ap. Staff hired fail to grasp key fast fashion elements and. n 15 Gap. technology implemented does not integrate with Oracle/Retek IT system. Pearl King. clone existing Gap.  Technology required is off the shelf. Risk Assessment Initiative Risks 1. 2006 [GAP STRATEGIC REVIEW] Spry Market Risks 1. laptop. Inc supply system with differentiating well from Old Navy. etc. and there should be no problem with existing supply chain. Further reduction in consumer spending in the 15-25 age bracket due to i ncreasi vol e of“m ust haves.December 8.” such as ng um gadgets. 2. 3. Arturo Villalobos. or fails to use required technology. 4. cell-phone. forcing Spry to find and train new suppliers in different countries.I s resources and grows on nc’ beyond dem and.I s m i i ng nc’ stakes i 2000. 3.

Websites provide a virtual showcase for companies. it is beset by problems both direct and indirect. Qi Qin Tan . 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. Inc has a strong brand portfolio and stable revenues. Michael Griffiths. Strong online presence The role of the Internet has been a major growth driver for the company. This provides the brand with a distinct competitive advantage. structural problems left over from its overexpansion in the late 1990s have made it difficult for Gap to overcome its supply and design problems. 2006 [GAP STRATEGIC REVIEW] SWOT Analysis 1 Conclusions Gap. Arturo Villalobos. Strengths  Brand recognition  Strong online presence Weaknesses  Relatively less differentiated fashion collection  Geographically concentrated operations  Seasonal pattern of business  Fluctuating sales per sq.December 8. Pearl King. Inc | Anthony Ferri. These brands are one of the most widely s i d ts m recognized brand names within the retail apparel industry. bananarepublic. giving 1 SWOT Analysis adapted from 2005 Datamonitor SWOT 16 Gap. They have a significant degree of credibility and presence in the marketplace. and one it is having difficulty solving. Increasing competition on all sides is the major problem facing Gap. Gap operates three websites for tapping on this opportunity gap. However.com that offer the respective brands. and oldnavy.Banana Republc and O l N avy brands are am ong i m ost i portant assets.com.com.

During fiscal year 2004. Such a heavy reliance on this market exposes the company to market concentration risks. and thus differentiation comes mainly through price. ft. respectively y 4% 6% in fiscal 2005. Gap.The com pany’ com peti y n eadi f usi ashi s tors have become much quicker in getting in new fashions. Geographically fragmented manufacturing Gap. ft. with lower priced competitors usually winning market share. Pearl King. the North American market alone accounted f 90. Gap. Inc needs to show consistent growth in sales per sq. whilst allowing them to see and experience the brand. Gap is likely to lose its customers to lower priced discount retailers. 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 . ft. Inc uses a multitude of geographically fragmented manufacturers for its clothing. 2006 sales have again dropped. Weaknesses Relatively less differentiated fashion collection Basic apparel items tend to be commodity-like. s generates weakness in the business activities at other time periods and adversely affects the results of operations. these periods accounted for approxi atel 32% ofthe com pany’ net sal Thi m y s es. and 3. a remnant of the Multi-Fiber Agreement Treaties. a strong web presence has given the company a competitive edge within the market. Arturo Villalobos. in 2004 and 2005. and the shopping decision is made on price. Qi Qin Tan . Inc sales per sq.The rem ai ng segm ents Europe and Asi contri or 7% s ni a buted m erel 5. have fluctuated between $100 and $60 per sq. Fluctuating sales per sq. ft. Inc recovered to reach $95 per sq.Target and Zara. Moreover. While Gap. This increases costs across the company. The current price-driven sales environment places the company at a disadvantage. Michael Griffiths. 2006 [GAP STRATEGIC REVIEW] customers the ability to shop for merchandise. ft. increasing competition and putting Gap at a comparative disadvantage. 17 Gap. In fiscal year 2005.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. In an environment where basic wardrobe product offerings are indistinguishable from one specialty retailer to the next. ofthe com pany’ totalrevenues. Geographically concentrated operations The company relies heavily on the North American markets for its revenue generation. Seasonal pattern of business The com pany’ busi s ness f l s a seasonalpattern. In light of rising online sales.December 8. Inc | Anthony Ferri.

covering preferences. Arturo Villalobos.December 8. Since Gap sources its merchandise from more than 700 vendors in 50 countries. Fast Fashion The fast fashion industry has become a significant part of the European apparel market. The new brand focuses on women over age 35 s s and would offer a broad range of sizes. 18 Gap. Inc | Anthony Ferri. Under the terms of the World Trade O rgani on’ ( TO )Agreem ent on Texties and Cl ng. 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.thi group’ spendi pow er accounts f about39% ofw om en’ totalapparelexpendi ati s s ng or s tures. whilst providing the opportunity to broaden their product portfolios.Com piati ofcustom er i orm ati ti em n l l on nf on. Qi Qin Tan . A rapidly growing segment of the popul on.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. 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. Fast fashion growth will primarily come from specialty apparel retailers targeting the teenage crowd. and growth is set to accelerate in the USA. tastes and spending patterns. This will enable US retailers to procure high quality merchandise at a low cost. with a focus on fit. 2006 [GAP STRATEGIC REVIEW] Opportunities Launch of Forth and Towne G ap l aunched Forth and Tow ne brand.the com pany’ new w om en’ apparel retail in April 2005. This represents an important long-term growth opportunity for the company. as well as discount stores who are unable to duplicate the supply chain responsiveness. Michael Griffiths. has enabled retailers to alter their product display and maintain inventory accordingly. such an agreement may provide ample savings opportunities to the company.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. Pearl King. This event would improve flexibility in obtaining imported merchandise manufactured in WTO countries. and assortments that serve a variety of occasions. Rising usage of smart cards can also benefit discounters and department store operators in improving their customer service and managing their inventory effectively. Elimination of textile quotas The elimination of textile quotas offers immense growth opportunities to retail apparel companies such as Gap.

interest rates.a pri red ne vatel hel w om en’ retaier ofupscal and contem porary y d s l e apparel.8%. and the availability of consumer credit. 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.2% in 2004. apparel retailers such as Gap would continue to witness erosion of market share and dilution of brand equity. Qi Qin Tan . Reduction in US consumer spending The downturn of the US economy since 2001 has adversely affected the purchases of discretionary luxury items. 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. 2006 [GAP STRATEGIC REVIEW] Threats Industry consolidation Merger and acquisition activity has been rife amongst US discounters and department stores. Pearl King. 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.Carter’ acqui O shkosh B’ osh s red G in 2005 while New York & Company acqui Boston based Jasm i Com pany. Michael Griffiths. Inc | Anthony Ferri. Arturo Villalobos. The increasing penetration of counterfeit products can lead to a negative impact on company sales and as a result of this. even lower than 5. companies have been working in tandem with government officials to target this threat. 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. Greater consolidation in the industry would lead to higher competition levels and thereby lower the profit margins for the company in future. adversely affecting sales of major apparel retailers. Increasing segmentation of apparel market by brand The apparel market i becom i i s ng ncreasi y segm ented by brand. 19 Gap.Thi “cherry pi ng” of ngl th che ng fc s cki profitable consumers is likely to increase. taxation and consumer confidence in future economic conditions. Apparel retail forecasts for 2005 show a slow growth of 3.w i ni brands cateri the specii tastes. However.December 8. Therefore until the industry sees significant progress on this front. creating larger entities with huge scale economies. as large companies create diverse brand portfolios to both minimize risk and increase appeal to target demographics. investments and commitment required in successfully countering the threat from counterfeit products is huge.

Pearl King.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. Arturo Villalobos. Inc | Anthony Ferri. Economic Logic  Consistent sales with reliable inventory and strong brand identity Arenas  Discrete stores locations selling apparel. 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.December 8. 2006 [GAP STRATEGIC REVIEW] Strategy Diamond Conclusions The Strategy D i ond reveal that G ap. international growth in Japan. Michael Griffiths.I i pri ariy conti ng to turn a proftthrough i strong brand i age. Qi Qin Tan . segmented by brand identity  Strong online presence selling directly to consumer  Target demographic varies by brand  Domestic dependence.

21 Gap. changes in the overall economy are increasing prices while consumers are becoming l enchanted w i cl ng. Michael Griffiths. Factories with better environmenta l standards. Inc has a stable political and legal situation. Legal Legal concerns over copyrighted designs in fashion world. Trend towards professional appearing garb.and G ap’ stapl cl ng i parti ar. Arturo Villalobos. Economic Increase in real estate prices in prime locations will slow store expansion and may require reduction in floor space. Potential problems with business methods patents in supply chains. Qi Qin Tan . ess th othi s e othi n cul Political Elimination of MFA quotas allows reduction in prices. Pearl King. Stable domestic political situation. Decreased overall leisure spending shrinks market for high-margin fashion products.December 8. Internet access allows greater price comparison by consumers. Increase in communication and celebrity gazing decreases fashion shelf life. Socio-Cultural Increase in individual fashion raises required product diversity. Ubiquitous internet access implies new avenue for direct sales. Technological Increasing use of technology lowers supply chain costs. Decreased spending on clothes as proportion of income reduces potential market. However. increases demand for cutting edge fashion. older and affluent market. Oil prices raise costs through the supply chain. Environmental Global warming may lead to increased demand for summerwear. 2006 [GAP STRATEGIC REVIEW] PESTEL Analysis Conclusions Gap. Ongoing aging of Baby Boomer population implies new. Inc | Anthony Ferri.

Pearl King. 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. while costs to expand remain high. Supplier Power Large number of suppliers leads to low prices Rivalry Discount retailers also sell clothing. Qi Qin Tan . Inc | Anthony Ferri. Arturo Villalobos. 2006 [GAP STRATEGIC REVIEW] Mi chaelPort s 5 Forces er’ Conclusions The specialty apparel industry is facing increasing competition and market segmentation. Michael Griffiths. Barriers to Entry High capital expense to establish strong retail presence Threat of Substitutes None.December 8.

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