Gap Inc Swot Analysis, Pesti, Five Forces

P.E.S.T.I Analysis

A P.E.S.T.I analysis was conducted for the company Gap Inc, P.E.S.T.I stands for Political, Economic, Socio-Cultural, Technological and International. Each of these are used to determine how strong or weak the company performs when these forces are analyzed.

Political forces entail local and foreign governments, regulator and deregulators etc. Therefore regardless of the size of an organisation they can be affected by this force. Economic forces usually entail the income levels in the society, interest rate, GDP etc the better the economy the more persons are willing to purchase. Socio-Cultural forces include social, cultural, demographic changes. An example is with a younger demographic, persons are willing to spend more money on products or services which are catered to leisure. Technological advancements are very important in enhancing the business those not up to date can be left behind. International forces include Globalisation and its impact on businesses.

Political

Political factors which affect Gap Inc and other businesses within the clothing industry include the implementation of the Multi-Fibre Agreement (MFA) by the WTO. This agreement is one of the main pieces of legislation that led to the number of suppliers which exist increasing the cost to the manufacturer. This created a closed market with respect to the importation of textiles and clothing from the developing countries to the developed ones and this in turn created new and numerous markets which were not effective and efficient in delivering products at low cost.

When the MFA ended in January 2005 China and the USA still continued with restrictions until 2008 which continued to be prohibitive in reducing cost in the supply of textiles.

Increases in minimum wage in China caused increases in the cost of manufacturing and thus forcing manufacturers to seek cheaper sources.

Domestically there was political stability. New entrants were easily allowed to enter and exit the market thus creating greater competition in the clothing industry and this in turn affected profit, with this sector already having a thin profit margin.

Economic

The global recession of 2008 was a major factor when we speak of the economic influences upon the industry. Consumers were price conscious and therefore not spending as much contrasting better economic times. This reduced the number of sales revenue which Gap Inc could acquire thus affecting profits. Also Gap seemed to cater towards the high end of fashion and as was stated persons were more price-conscious. This reduced the amount of sales that Gap obtained. Exchange rate fluctuations also affect the cost of the products as constant changes can cause a rises in the import or export cost of the products.

Social-Cultural

As the age of the population increases Gap Inc should consider targeting this market. Fashion conscious consumers expect that trends should be obtained on a timely basis. Reduced per capita income decreases capacity of the sales.

Technological

The internet has provided a way for Gap to reach a wider market and increase sales. Price comparisons can be done by consumers with much greater ease. Gaps implementation of a computer system to monitor the financial impact of real estate decisions is important to determining cost which will be incurred if they partake in remodelling efforts, consolidation or expansion. Faster processing of orders was key to reducing a customer's delayed gratification and providing greater product accuracy. Inventory management was critical in keeping available stocks prior to the start of peak selling periods. These efforts create customer satisfaction and will ensure that Gap's has the potential for repeat customers.

International

Penetration into the US family clothing store was relatively low however the impact of those who have entered should not be dismissed as these new foreign entrants have caused frustration for Gap Inc when trying to reach the younger age demographic. Accessible to the new entrants are low cost manufacturers and speed of which to accommodate mini trends.

Suppliers can cause harm to Gap's image if they operate with less than desirable public images that includes using child labour or operating in sweat shop type conditions. However Gap has significantly been at the fore front of good supplier practices with their Code of Vendor Conduct (COVC).

Expansion into the international market has benefited the Gap Inc as revenues from this sector have accounted for 18% of their total revenues. Franchise agreements have improved their portfolio along with movement into the Canadian, European and Japanese market. Further expansion will see them entering the Chinese market which is one of the biggest in the world with effective marketing and cultural understanding Gap can greatly benefit from this market.

S.W.O.T Analysis

SWOT analysis stands for Strengths, Weaknesses, Opportunities and Threats. This tool will be used to analyze the family clothing company Gap Inc. This analysis will give an idea of the environment which the company operates in and its position from a strategic standpoint.

Strengths

Gap catered to the various sectors of the clothing store industry from the younger to the older generation and casual wear to sports, wear. Gap's comparable-store sales for 2009 to 2010 had increased slightly in the first quarter. Persons were once again finding interest in Gap and its various offerings Banana Republic and Old Navy.

Acquisitions, new ventures and franchising have increased the number of accessible stores of the Gap brand. This allows persons easy access to products which Gap offers. The number of stores had grown significantly over the course of Gap's lifetime an example being 450 stores had increased to more than 3,100 stores during the period 1983 to 2010.

The Gap had a strong online presence and due to all its brands being accessible through a single shopping cart made it very easy to use.

Gap's consumers were emotionally driven as the higher price point did not affect their purchases therefore Gap had some measure of brand loyalty generating repeat customers.

Brand loyalty to Gap could act as a deterrent to new entrants to the clothing store industry.

Gap Inc has a high market share therefore it is already well established within