External Analysis on Gap Incorporated

Gap Incorporated is one of the largest pioneers in clothing industry.  It was founded at New York In the summer of 1969 and today it has 3100 stores located across the countries.  Amazingly, its fiscal revenues reached $15.9 billion in 2006.  It established four of the most known brands in the world namely- Gap, iconic American styles for all ages, Banana Republic, an accessible luxury brand, Old Navy, stylish and accessible prices for everyone and Piperlime, an online store of shoes great for your picks.

Based on the recent report on the Gap Inc. sales dated in October 11, 2oo7, there has been a decline of 3 percent on its total net sales incurring $1.43 billion for the five-week period ended October 6, 2007 .  This is relatively lower than the $1.46 billion for the five-week period net sales in September 30, 2006.  Efficient employees equipped with the advanced technology and competitive skills help not just by increasing the profitability and production output of a store but also in securing the company’s status in the market.  It also secures a healthy working atmosphere in the work place.   These are internal characteristics of the company that should be look out and certainly there may be also factors that could possibly explain the situation of GAP Inc.- why there is a decrease in net sales.  In analyzing the case situation I may wish to incorporate the SWOT analysis and also I will be including the Five Competitive Forces by Porter.

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To start with, in the macro- environment analysis, Gap Inc. has been outgrown by its major competitor- The TJX Companies Inc. with a 9.1 % percent growth within the previous year compared to the -.5 % of Gap Inc (Reuters 2007).  In addition, emerging new lines of clothing apparel and small clothing companies are finding its way to be purchased and wore by the people.  Also, their old competitors like Nordstrorm, Inc., Abercrombie and Fitch Co. and Rose, Store Inc.  have their fair share on the net sales.  Being established since 1969, the Gap Inc.’s popularity and known product quality despite the problems regarding the foreign currency rates fluctuation across the different countries wherein the stores are located is the foundation that strengthens the company despite the crises.  In determining the position of the buyers, the discrepancy of the net sales between Gap Inc. and the leading competitor of the company may be address to the diversity of the products that the latter offers to customers.  Likewise, the TJX companies render off-price apparel and it also retails fashion for the home which the first company does not offer.

On the other hand, analyzing the industry environment, the company markets clothing apparel for all ages with variation of prices depending on the chosen brand among their four acclaimed brands.  Regarding the company analysis, from a single store in New York installed in 1969, it has been able to cross the border lines and be a known brand in the world.  As for the case situation of the company, the Chief Executive Officer should find measures in eliminating the negative sales growth and gradually improving the company growth to a positive level.  The tools to be use in order to gain this goal are the acknowledged strengths of the company- well established and popular across the countries, 2nd in the sales volume (meaning too close too the top and leading will not be impossible), growing number of stores all over the world, being able to address the complaints, likewise, the issues on child labor and practicing social responsibility inside the companies among their employees and to the community.  In contrast, the company’s weaknesses are identified as concentration to one need of a consumer and that is clothing.

Basically, this is the absence of home apparels that is available in their major competitor.  Unorganized stores are also included because of the assortment of items in their stores that are inconvenient for the customers to choose their picks.  Lastly, is the frequent discount offerings which decrease the sales and product value.  The primary weakness of the company is their business transaction in different countries.  This is included in the identified strengths but the indefinite currency rates fluctuation is putting the business in distress.  The opportunities seen to win over these distress are the diverse location of the stores, large number of customers patronizing the products, expansion- Gap penetrating the Middle East market (this is a new agreement with Al Tayer Group, Dubai-based that will bring Banana Republic in Middle Eastern countries this year.

The threats are the complaints and protests of the people regarding the alleged child labor, new clothing lines that offer relatively lower price, old competitors who share try to win the sales with different market strategies and the earlier discussed currency adjustments.