The Gap Inc Essay

1.Executive Drumhead

The Gap Inc, is an American vesture and accoutrements retailer based in San Francisco, California, and founded in 1969. It is one of the largest planetary forte dress retail merchants, with financial twelvemonth 2009 grosss of $ 14.2 billion. It operates five of the most accepted dress trade names in the universe — Gap, Banana-Republic, Old Navy, Piperlime and Athleta. Gap provides insouciant dress, accoutrements, and personal attention merchandises for work forces, adult females and kids with more than 3,000 shops around the universe.

We will write a custom essay sample on
The Gap Inc Essay
or any similar topic only for you
Order now

Although this industry has been saturated and in the mature phase of the industry lifecycle every bit good as the high competition with industry tendencies of value driven consumers ; the company still leverages its big web of physical shops to better borders, heighten its trade name image and aim new markets. With more than 300 shops outside the U.S., Gap is good known, and still has plentifulness of room to turn globally.

This concern proposal is to measure the feasibleness of developing Gap Inc. ‘s Greater China Market by analysing both internal and external environments of the company. Porter ‘s Five Forces theoretical account is besides applied to analyse the attraction of the industry. Industry and market analysis shows the growing rate in both retail gross revenues and passing power of Chinese people which strongly support the feasibleness for the company spread outing to China. After summing up the findings and analysis, ways are suggested on how Gap Inc. enters China market and urge the most suited retail scheme should the company use in China.

2.Industry and market analysis

The external environment

For the past two old ages, the universe saw a monolithic alteration economically and environmentally. The alteration impacted about everything it can perchance hold an consequence on, from switching economical powers to altering industry tendencies. Although the universe is still traveling through a tough period, analysts are still really much optimistic about the universe ‘s economic system as a whole, and at that place seem to be opportunities everyplace for all industries, including the dress industry.

The ever-changing economic environment and authorities attempts have made China an progressively dominant participant in the planetary fabric and dress trade. Chinese fabric and dress merchandises now became an of import section of dress and fabric markets of the universe. The state has earned a competitory border thanks to its ever-booming economic environment, authorities support, duties and revenue enhancement inducements, SEZ civilization, and low labor and natural stuff cost.

The altering retail industry environment, caused by the betterment of buying power and increasing influence of Western civilization, is besides transforming the domestic dress market of China. The turning of in-between category, raising figure of the young person population and rapid globalisation of civilization are all grounds for the increasing demand for branded dress in the domestic market, particularly the 1s from Western societies. This is pulling both foreign and domestic companies to recognize the importance of the lifting demand of branded section merchandises.

Harmonizing to the National Bureau of Statistics ( NBS ), the entire retail value of vesture, places, chapeaus and fabrics by sweeping and retail endeavors above designated size in 2008 grew nominally by 25.9 % year-on-year to accomplish 377.55 billion kwais. In 2009, the nominal retail value growing slowed to 15.5 % twelvemonth on twelvemonth but it is far in front when comparing with the U.S. retail gross revenues growing of 2.7 %. We can see that there is a larger room for Gap Inc. to spread out in China.

In 2008, per capita disposable income of urban families increased by 8.4 % in existent footings to 15,781 kwai. Urbanites on mean exhausted 10.4 % of their one-year outgo on vesture ( 1,166 kwai ). Harmonizing to the NBS, in the first to 3rd one-fourth of 2009, per capita one-year outgo on vesture per capita was 923.8 kwai.

On the other manus, the Hong Kong Trade Development Council ( HKTDC ) has conducted a Survey on Garment Shoppers in Major Chinese Cities on dress ingestion in 13 major metropoliss viz. Harbin, Shenyang, Tianjin, Hangzhou, Nanjing, Beijing, Chengdu, Dalian, Guangzhou, Shanghai, Wuhan, Chongqing and Ningbo in China. Among the 3,250 respondents, the mean disbursement on dress from the 4th one-fourth 2007 to 4th one-fourth 2008 was 2,758 kwai. The mean disbursement in each metropolis was straight relative to the degree of disposable incomes in that metropolis. We can see that the continuously increasing passing power of Chinese consumers and the affordability of mid- to high-end dress sections in major Chinese metropoliss

Factsheet ( The Datamonitor Group )

  • The Chinese footwear market generated entire grosss of $ 11,683.1 million in 2008, stand foring a compound one-year growing rate ( CAGR ) of 10.7 % for the period crossing 2004-2008.
  • The Chinese men’s-wear market generated entire grosss of $ 37.9 billion in 2008, stand foring a compound one-year growing rate ( CAGR ) of 7.1 % for the period crossing 2004-2008.
  • The Chinese women’s-wear market generated entire grosss of $ 29.4 billion in 2008, stand foring a compound one-year growing rate ( CAGR ) of 8.8 % for the period crossing 2004-2008.
  • The Chinese dress retail industry generated entire grosss of $ 84.9 billion in 2008, stand foring a compound one-year growing rate ( CAGR ) of 7.9 % for the period crossing 2004-2008.
  • The Chinese children’s-wear market generated entire grosss of $ 17.6 billion in 2008, stand foring a compound one-year growing rate ( CAGR ) of 7.9 % for the period crossing 2004-2008.

Today, China ‘s dress market is the universe ‘s 3rd largest, merely behind the US and Japan. Traveling through the undeniable market enlargement, Chinese consumers are going more stylish and brand-conscious, particularly among the urban immature grownups. Many of them praise international trade names, and harmonizing to a McKinsey study on dress in China, half of them agreed that “ foreign trade names have higher quality than local trade names, ” comparing to an norm of 15 per centum across all other age groups.

Turning consciousness of private labels has become more and more obvious. Private labels have become a powerful arm for dress retail merchants. For the intent of distinguishing themselves from the crowd, every bit good as specifying a strong definition on their trade name image, elephantine retail merchants have started to emphasis more on their ain labels. World-known retail merchants such as Marks & A ; Spencer, H & A ; M, Palmers, Orsay, Pimkie, Springfield and Kookai all have their ain private labels. As consumers desire to hold private labels on what they wear every twenty-four hours, the doors are besides unfastened to the supply of these dressing points to private label proprietors.

5 forces analysis

Dickering Power of Suppliers

Suppliers to the retail merchants are, by definition, the fabrication jobbers. They tend to hold instead low dickering power, as compared to retail merchants, for several grounds:

  1. There are many providers in the fabric and dress industry, particularly China is the universe mill. In kernel, there is really small distinction among the providers which makes providers ‘ bargaining power non-existent.
  2. The natural stuffs such as leather, gum elastic and cotton are trade good points and are available plenty in the market topographic point.
  3. Some well-known companies have a definite advantage and power over their providers. These providers become dependent on these houses and tidal bore to provide as their agencies to survival.
  4. Yet another force diminishing the power of the providers is the comparatively low shift costs for retail merchants. Firms are able to exchange between providers rapidly and cheaply, due to the webs of inexpensive labour on assorted continents.

Dickering power of purchaser

The outgrowth of foreign trade names and shops saw a dramatic alteration in purchasing wont and environment for shoppers in China. As we all know, the traditional Chinese purchasing wont was all about one word, deal. Upon the outgrowth of foreign trade names and shops, brought the more westernized concern manner of forte retail shop, which is evidently what shoppers in China have to accommodate to. Although there is an increasing fierce competition, with more trade name names and labels come ining the China market every individual twenty-four hours, purchasers ‘ power is still being weakened. A major ground to this is the increasing capableness of the Chinese people to afford interchanging money for quality, alternatively of blindly looking to low monetary value.

Menace of possible new entrants

In China, the dress industry is in late growing phase harmonizing to the industry life rhythm diagram. In the growing phase, the hazard is moderate and the market is more unfastened than the past. In this instance, Gap can easier to manage and to bear the concern hazard. Harmonizing to the information from HKTDC ( 2009 ), it showed that the dress industry grew so rapidly merely below the jewelry industry. It increased 25.90 % in 2008.

Besides, the consumer behavior of the whole dress industry in China changed a batch. It chiefly separates into two countries. One is those people who chiefly focused on purchasing the high-end manner apparels, while the other 1 is concentrating on purchasing low-cheap apparels. However, as the economic environment becomes better, those people who like purchasing high-end manner apparels increases quickly.

On the other manus, as the market about reach adulthood, each company is contending for market portion and so the market becomes more disconnected. Therefore, the menace of possible new entrant is low.

Menaces of replacement merchandises

The being of close replacement merchandises increases the leaning of clients to exchange to options in response to monetary value additions. Substitutes are a menace because they are in an attractive alternate merchandise or service, which clients can easy switch to if there is low exchanging costs. The handiness of replacements invites clients to do monetary value, quality and public presentation comparings. Competitively priced replacements impose a maximal value on monetary values relevant industry can bear down for its merchandises or services. Gap, which is a house in forte dress or leisure and insouciant wear compete with houses that provide other replacements such as athletic footwear and dress, for illustration Nike and Abdias. The well-known sporting trade names offer non merely manner but besides proficient maps featuring goods at an attractive monetary value. Many younger consumers are turning to featuring good fabrics and footwear as replacements for other types of insouciant frock.

The menaces of replacement merchandises are high in this industry since there is intense competition, manner tendencies, and monetary value witting consumers that have slowed growing of the company. This creates hard state of affairss for company to bring forth a trade name image that entreaties to consumers that want to shop for cheaper dress, but besides dress that has quality.

Extent of competitory competition

First, to speak about the competitory competition, the grade of concentration is needed to be considered. The grade of concentration of dress industry in a China market is to be said as “monopolistic competition”. There are many rivals and the size of rivals is varied. Besides, the nature of merchandise of each retail merchant is different, they target on different section of clients. For the China market, the extent of competitory competition is comparatively high because the rivals of Gap are about the same size and they besides want to derive portion over the others. The competition therefore additions and net incomes autumn. However, Gap is seeking to distinguish merchandises and their services among the industry and so the competition is non basically price-based. They want to guarantee client trueness.

3.3C Analysis


Gap, Inc retails insouciant dress, accoutrements and personal attention merchandises for work forces, adult females and kids through more than 3,000 shops in the US and other states. It has a strong trade name and stable grosss by its big web of physical shops. However, increasing competitions due to easier enter that affect Gap ‘s borders and market portion. The analysis of Gap are as below by utilizing SWOT.

One of the major strength of Gap, Inc is the well-known trade name. It has a long history of 40 old ages. It is an established name and success in its sector of dressing retail merchants market. The other strength of Gap is its planetary attack ; it is recognized all over the universe. In 2009, the company had 3,095 shops, including 2,576 in the US and 519 in other states like Canada, UK, and Japan etc. Gap ‘s big web of physical shops enhances the company ‘s gross revenues and be the competitory advantage.

Then, Gap has been able to prolong such a big supply concatenation and still been able to keep adequate stock lists. It makes goods from different developing states including Honduras, India and others help the company to cut down the labour costs.

Although Gap has excelled in the field of dresss, it still has some failings need to confront. It has non been able to keep a manner individuality, comparatively less differentiated manner merchandise. Gap besides remains to a great extent dependent on the US. Geographic concentration of physical shops increases the company ‘s failing to contrary market conditions in the US and bounds growing chances. Gap North America proved that a autumn in comparable shops gross revenues by 7 % in FY2009 over FY2008.

Furthermore, rivals such as Hennes & A ; Mauritz ( H & A ; M ) have more globally diversified operations. These supply them with a better gross profile and affect Gap ‘s borders and market portion.

After stand outing in an industry, Gap can develop its concern in e-commerce. For illustration, it has already started an online shop which is increasing in popularity. Online shopping is steadily turning in popularity in the US. Retail e-commerce gross revenues in the US recorded totaled $ 127.7 billion in 2007 and are expected grew 14.3 % at $ 146 billion in 2008.

In add-on, Gap run trade name Banana Republic in about 80 franchise shops internationally such as in Japan. Through franchising, it can assist Gap in spread outing its concern and any farther focal point would convey strong spouses to take its trade names to the new markets. Furthermore, the increasing cost of labour in other states like US and diminution in value of US Dollars can diminish its fight.


Gap is the base for the success of the other sections, including Gap, Old Navy, Banana Republic, Piperlime & A ; Athleta. Gap Inc. tries to function different types of client by these five trade names. It offers extended choices of classically styled insouciant dress at moderate monetary value and marks broad scope of clients and supply merchandises such as dress, accoutrements, personal attention merchandises for work forces and adult females, adolescent through grownup, and pregnancy dress.

Old Navy concatenation is designed to appeal to younger coevals of clients by stressing “ merriment, manner, and value ” through a shop experience that delivers “ energy and exhilaration. ”

Banana Republic shops try to convey a more sophisticated image for high-end client, whereas entreaty to a broader midrange of clients.

Piperlime is the online shop which sells merely places that are non affiliated with the Gap trade name. The merchandise of Piperlime is places for all ages of the people.

Athleta is a line of athletic cogwheel and be acquired in 2008 by Gap. Athleta reaches clients via catalogs and an online shop, which will be incorporated into Gap ‘s “ catholicity ” web platform as the 5th online channel in Gap ‘s operations.


The position of planetary forte dress industry is falling into mature phase of its lifecycle. There are many existent and online shops which contribute to the over-saturation of the industry. The environment of planetary forte dress industry is extremely competitory and consumer driven. Globalization and new engineerings have allowed consumers to hold more entree to manner. As a consequence, consumers are altering, competition is ferocious, and companies are germinating to run into these demands. Gap Inc. competes with national and domestic section shops, forte and price reduction shop ironss, independent retail shops every bit good as online concerns that market similar lines of ware.

Direct rivals

The prima rivals of Gap Inc. include cheap-chic European retail merchants Zara of Spain and H & A ; M of Sweden. Both of them offer same scope of merchandises with a more voguish manner.

Zara is celebrated for developing cut monetary value readings of catwalk manners, the trade name offers seasonal outfits for working adult females and work forces, offers monetary values suited for both affluent and non-wealthy consumers. More than half of its shops operate outside Spain and there are already 35 shops opened in China. Over 50 % apparels, particularly high-fashion points, are made in Zara ‘s ain Spanish mills, near to caput office and the goods are centralized distributed from its Spanish distribution centres distributed globally. Zara is known for its speedy response in the manner industry — from organizing design constructs to seting the merchandises on shelves, Zara needs merely ten to 14 yearss on the norm while other apparel companies normally spend six to nine months. In add-on, it pays attending to the diverseness of manners and offers more picks to clients.

Even less expensive than Zara, Hennes and Mauritz ( H & A ; M ) offers everyone from teens to pamper boomers the chance to have on off-the-runway divine pieces. H & A ; M entered China in 2007 ; it offers imaginative design and a comparatively lower monetary value than Gap. H & A ; M carries voguish vesture picks that they have designed based on the melding of international dress gustatory sensations. It does n’t have any mills it beginnings more than 60 % of its merchandises in Asia and builds distribution centres in their international locations in order to cut down lead times and possible logistical costs.

A simple merchandise market positioning map

Indirect rivals

China ‘s dress market is extremely disconnected. Domestic trade names dominate in the mass market. Domestic participants by and large have more extended gross revenues channels particularly in lower-tier metropoliss and the rural market and they have more competitory pricing in general. Harmonizing to the aforementioned HKTDC study, 51.1 % of respondents have purchased domestic trade names in the past twelvemonth, much more than Hong Kong trade name ( 15.8 % ) and foreign trade names ( 27.4 % ).

Although Gap Inc. is confronting high competitions, most of its challengers mark at offering low-cost and fast moving merchandises to consumers ; China ‘s free Spenders may be looking for something else. Young grownups want apparels that aspire to luxury. When its consumers buy foreign trade names, they want what they ca n’t happen at place. Gap is distinctively distinguishing itself from its challengers to supply its consumers the middle-class forte dress with authoritative American manners.


Since China opened the door to the universe, many companies entered the market recognizing the potency of it. Competition became ferocious as the market invariably become more mature. After our survey and scrutiny on the dress industry of China, we found that with increasing competition, the Chinese market still has great potencies. Many trade name names have already started come ining the market and it will merely be the affair of clip that China ‘s market becomes the universe ‘s largest. Early entry will assist Gap to procure its place in the close hereafter as more competitions are bounded to come in the market.


Entry scheme

Harmonizing to, Gap has franchising understandings with unaffiliated franchises to run Gap and Banana Republic trade names in shops in about 80 franchise shops across the universe. For illustration, in 2008, the company signed an understanding with Marinopoulos Group, one of Greece ‘s taking retail, commercial and industrial groups, for sole rights to run Gap and Banana Republic shops in Greece, Romania, Bulgaria, Cyprus and Croatia.

In order to come in China market, franchising is needed to be used because this is the lone manner to develop the concern rapidly and enlargement is the lone manner a company can recognize maximal profits.There are many advanatges of utilizing franchisee in China. Franchisees are given the necessary preparation to get down his concern and finally run it swimmingly. Because the franchisee is purchasing a proved concern construct, the concern hazards involved are mostly minimized. The parent company has already resolved most, if non all, of the job countries in its systems and processs.

China has the most franchises in the universe but the graduated table of their operations is comparatively little. Each system in China has an norm of 43 mercantile establishments, compared to more than 540 in the United States. Today, in China, the Franchise Law is much clearer by virtuousness of the 2007 jurisprudence. The Torahs are applicable if there are minutess affecting a hallmark combined with payments with many duties on the franchiser.

The franchisor must run into a list of demands for enrollment, among which are: ( the following information adopted from )

-the criterion franchise understanding, working Manual and working capital demands,

– track-record of operations, and ample ability to provide stuffs, and

– the ability to develop the Chinese forces and supply them long-run operational counsel.

– the franchise understanding must hold a minimal three-year term

Therefore, Gap Inc can fuifill the above demand and truly profit from the enlargement of China ‘s dress market.

Retail scheme

Merchandise and trade name

The trade name Gap of Gap Inc. is suggested to be introduced foremost to China. The trade name image of Gap as a retail merchant mark on in-between income consumers seeking basic manner manners at sensible monetary values. As a consequence of successful operation in North American market Gap is able to make a strong trade name image in the in-between manner market in order to vie with other national operators, such as Zara, in China. Gap non merely offers a scope of closet necessities which are classically styled, high quality, insouciant dress for work forces, adult females, and kids such as Jerseies, hoodies, great-fitting bloomerss and jean but besides nursery cogwheels for female parents and babes. The big merchandise ranges attracts many different sorts of consumers and heighten the acknowledgment of the trade name.

Life manners are different in America and Asia hence the stigmatization scheme used by Gap is indispensable in distinguishing itself with both from bing challengers and pulling new clients within each of the several markets. Product version is necessary when a in-between category American foreign trade name traveling to Asia states particularly China. It is of import to accommodate the merchandise to the Chinese civilization. Style is more of import in manner industry, which besides includes the colour and symbols. The significance of a colour or a symbol can differ from civilization to civilization. For illustration, bright red is a must colour when the merchandises are selling in the period of Lunar New Year. Besides, size of dresss is besides a chief concern since Asian has a comparably slimmer organic structure figure.

Topographic point

Harmonizing to the NBS informations, Shanghai, Beijing and Guangzhou are taking far in front of other metropoliss in market size and disbursement power. We suggest Gap Inc. to open its flagship shops in these metropoliss. Since Beijing, Shanghai and Guangzhou together account for 12 % of China ‘s consumer market. The consumer market of these three metropoliss is characterized by big urban population and high urbanisation rate. As their occupants ‘ disposable income leads the state, their consumer market is big and their disbursement power is strong.

Department shops are the most suited finish for consumers to shop for apparel points. Harmonizing to the aforementioned study on dress by HKTDC, 67.1 % of respondents shopped in section shops for dress most frequently.


Media advertisement and famous person indorsement are popular in China. It can raise the trade name consciousness of big Numberss of people and motivate consumers who see them in an ad to buy the merchandise advertised. Due to increasing consumerism in China, consumers consider a position symbol to buy an endorsed merchandise and they prefer to have a trade name that has a good repute. A good repute endows the company with competitory advantage which can be used to assist ease a more successful entry into a new market. It is obvious that most of the consumers will acquire attracted to a celebrated movie star, vocalist or a athletics star when it is associated with that peculiar trade name because they wants to keep some position, and feels that utilizing a trade name promoted by a star can fulfill that desires. Besides, opening flagship shops in premier locations is besides an effectual manner to raise the trade name ‘s visibleness.

Monetary value

Monetary value is argued as being an of import index for clients in measuring the quality of merchandises and within the vesture sector this besides holds true. Gap ‘s merchandises are at moderate monetary value points which normally retail less than US $ 100. It is expected that Chinese consumers are able to afford and willing to pass such outgo on the goods with good repute trade name name and good quality.

Customer Service

Retail environment alterations from clip to clip, including elements such as shopper ‘s purchase wonts, shopping penchants ; and client service is non much different. To be better at functioning clients and remain on top in the industry, Gap can concentrate on supplying bringing, client database, and online buying services. For a state every bit large as China, where clients are spread out on the landscape, similar services are decidedly missing. Delivery service will for certain aid in the bringing process and lower clients ‘ vacillation in doing purchase determinations. Constructing a client database can function loyal clients better and improves on client keeping. On top of that, online buying service will shop at anyplace and anytime without affecting physically.

Store Design and Display

Like many brand-named shops, Gap has a unified shop design and expose criterion. Currently Gap is utilizing a shop design that accent strongly on the American manner. This would be an attractive property to maintain for shops in China, which would give the clients a alone shopping experience as they are shopping under a foreign environment without go forthing the state. The shops themselves will so go a attractive force and give them another pick to pass their leisure minutes.


Hi there, would you like to get such a paper? How about receiving a customized one? Check it out