KEY STRATEGIC QUESTION (1): WHAT ARE THE KEY MACRO- ENVIRONMENTAL FORCES IMPACTING ON THE COMPANY?
Political- Each government imposes different country has different policies and regulations that will affect the distribution. The government regulations, shipping, taxing.
Economic Exchange rates, business cycles, differential economic growth rate around the world,
S each country will have different trends and this includes the changing cultures and demographics, also the weather and requirements of customers is key- because they pride themselves on being a customer-focused company.
Technological influences is key because this not only refers to innovation and they are currently lagging compared to their close competitors who
L embraces legislative constraints or changes, such as health and safety legislation or restrictions on company mergers and acquisitions. Labour laws of the different countries and the respective employment laws.
Environmental; stands specifically for ‘green’ issues, such as pollution and waste; and ﬁnally
This is a PESTLE analysis that gap have to be aware of when formulating a strategy, but to be more specific they need to make sure that they conduct one for each specific country.
KEY STRATEGIC QUESTION (2): WHAT FACTORS ARE DRIVING INDUSTRY CHANGE, AND WHAT IMPACTS WILL THEY HAVE?
Rivalry amongst firms
All industries are affected by new developments and on-going trends that alter industry conditions, some more speedily than others. The clothing retail industry is very competitive with a high number of competitors. Even though this means the industry has vast potential, the industry is based on differentiation and not cost leadership. The entry barriers are therefore high because there is a large start-up cost requirement.
The market presents room to grow for companies, but start-up costs may be high. While Gap looks to gain a large share of the market, switching costs for consumers is low. | 2004 | 2005 | 2006 | Total Assets | | | | GAP Inc. | $10,343,000 | $10,048,00 | $8,821,000 | Abercrombie&Fitch | $1,383,000 | $1,347,000 | $1,789,000 | Buckle | $356,222 | $405,543 | $374,266 | Price | | | | Gap Inc. | $21.37 | $17.64 | $18.96 |
Abercrombie&Fitch | $47.15 | $65.25 | $68.00 | Buckle | $29.90 | $32.40 | $45.91 | Sales | | | | Gap Inc. | $15,854,000 | $16,267,000 | $16,023,000 | Abercrombie&Fitch | $1,707,000 | $2,021,000 | $2,784,000 | Buckle | $422,820 | $470,937 | $501,101 | Net Income | | | | Gap Inc. | $1,030,000 | $1,150,000 | $1,113,000 | Abercrombie&Fitch | $204,830 | $216,376 | $333,986 | Buckle | $33,679 | $43,229 | $51,906 |
Threat of new entrants
The internet had bought more sales opportunities for all companies within this industry, the online marketing industry has subsequently increased. Gap must compete with bigger more developed, niche competitors such as RL, Lacoste, TH etc. Because there is a large start-up cost investment, new entrants are deterred from this.
Threat of Substitute Products
“Some key concepts that go along with the threat of substitute products are buyer propensity to substitute, relative price performance of substitutes, buyer switching cost, and perceived level of product differentiation”.
The re-birth of the back to basics and simple ranges will help to develop the style that the consumers love and know.
Bargaining Power of Buyers/Customers
Understanding the bargaining power of your customers will help a firm decide on the price it wants to sell its products for. Since our industry is, on average, not a price competitive industry, this section is not as important as others in the five forces model. Simply due to the low switching costs of the industry, buyers do have some power. Price sensitivity plays a small role but the majority of buyers are willing to pay for Gap’s moderately priced clothing. Sales at retail locations tend to…