Brand Management Case Study of Gap Limited

Content

Executive Summary P.2

Introduction P.3

Environment analysis P.4-5

Internal analysis P.5-7

Market research of the potential market P.8

Nature of competition and level of market P.9

Conclusion P.10

Recommendation P.10

Reference P11-12

Executive Summary

Gap limited has entered into part of the China since 2010, however China market is too big and involve different environmental factors in different cities. Therefore, I am going to analyze the Nanchang market, to find out whether external and internal factors are favorable for Gap to enter.

After the analysis, I found that Nanchang is valuable for Gap to enter base on the political, environmental, social, legal factors and its own pricing strategy and market mix help itself to differentiate with other competitors and gain an advantage in entering a new existing market. Although, there are room for improvement of the enterprise, it is believed that can be improved through the short, medium and long term development.

Introduction

Gap, a company which was founded by Doris and Don Fisher in San Francisco, California in 1969. From the start, it was just a brand which selling abnormal size of jeans in Levi’s. As the company growth, other elements were added into the portfolio, for example clothes, personal care products and accessories. The company went internationally in 1987 and becomes a fast fashion retail store nowadays. The latest international business action for Gap was entering into China in 2010. This is a great and important decision to the company which entering a huge new market as China.

[pic 1]As one of the top fast fashion retail company in the world, its clothing business can be mainly separated into 4 divisions, which are Men’s wear, Women’s wear, Kid’s wear and Baby’s wear. According to Porters Generic Strategies, the Gap could be classified as using differentiation strategy in company development. Although it is a fast fashion company, it does not employing cost leadership as H&M or Uniqlo, Gap differentiates its product with a higher price than them. Of cause, higher price is coming with a higher quality and more others. Like its founders said, “Do more then sell clothes” (Gap, 2014), the company reduced 20% emissions of greenhouse gas, lower energy and water use and using organic cotton while producing process (Gap, 2014). Moreover, simple American style is another element of the differentiation. These three elements make Gap become different.[pic 2]

[pic 3]

Internal & Extetnal Analysis

Environment analysis

New market entry is a very important decision to a company, it invloves a huge investment in different aspects, such as cash, time, staff. An insufficient market research of target market could make a great loss to the company. Therefore, the PESTLE framework is adopted to analyse external factors. In this case, the target market is Nanchang of China. Although Gap has already entered into China, its territory is extremelly large and there is different environment in different cities, some of them involve very different culture or economic factors, therefore there is a need to analyse different cities before entry.

Political environment of Nanchang, the city has been classified as a second-tier city, it was not the first choice for development by the Communist Party of China (CPC). However, according to the 12th Five-Year Plan, domestic demand is going to be enhanced in China. Nanchang faces a chance to develop its local domestic demand through importing more foreign direct investment (KPMG, 2011). Beside, inviting foreign investors is an important aspect of local government officials’ political achievement, they are willing to import more foreign investors with high passion. In addition, the regime of the CPC will be stable in foreseeable future, it gives the confindent to the investors to invest in China.

Nanchang’s econmoic environment is not such as good as the second-tier cities arround it, for example Changsha and Wuhan. However, after the publication of the 12th Five-Year Plan and a year implementation of the plan, according to the Nanchang 2013 National Economic and Social Development Statistics Bulletin , GDP of Nanchang inceresed 10.7%, in addition the greatest rise category in Consumer price index is clothings (Bureau, 2014). These reflect that the consumers are more willing to purchase on clothes under the improved econmic condition with higher disposable income, a 10% rise compare with last year (Bureau, 2014). Morover, Nanchang was ranked the fifteen in the Global Urban Competitiveness Report (2007-2008) (Nanchang, 2008).

 For social aspect, according to the sixth national census , Nanchang’s resident population was almost 5 millions which has increased 13.72% than a decade ago. Citizens with degree educational level were 0.95 million, it shows that there are almost one out of five citizens is highly educated. In addition, around 87% of the residents belonged to 15-64 age group (Nanchang, 2011), it showed that most of the citizens are still in the labor forceand can gererate income.

Nanchang established several technologic development zones, for example Nanchang State-level Economic and Technological Development Zone and Nanchang State-level High-tech Industrial Development Zone. Inside these zones, there are severl high-technologic products are being invented and produced. For instant, LED and mobile phone (Nanchang, 2008). Technology level would not be weaker than other second-tier cities. Furthermore, there were about a half of the family have connected with the internet at home (Nanchang, 2011), it means that universal of internet use is quite high here.

Nanchang legal system is complete and updated. To coordinate with the implementation of the 12th Five-Year Plan and city’s economic development, the government implied several laws and policies to attract foreign investors. The policy support which is being showed on the government website, lists out the subsidies, bonuses and other benefits to the investors. For example, export amount of the enterprise over 1 million can receive a RMB 50 thousand yuan. These supporting policies are attractive to those foreign investors who are interested in entering China market.