Question

GAP Inc.

DESCRIPTION

The Gap, Inc. (Gap Inc.), incorporated on April 15, 1988, is an apparel retail company. The Company offers apparel, accessories and personal care products for men, women and children under the Gap, Banana Republic, Old Navy, Athleta and Intermix brands. The Company's products are available to customers online through Company-owned Websites and through the use of third-parties that provide logistics and fulfilment services. In addition to operating in the speciality, outlet, online and franchise channels, it also uses the Company's omni-channel capabilities to bridge the digital world and physical stores. The Company's omni-channel services, including order-in-store, reserve-in-store, find-in-store and ship-from-store that are tailored across its portfolio of brands. The Company also sells products that are designed and manufactured by branded third-parties, especially at its Intermix brands. Gap Inc. has Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, Italy, China, Hong Kong, Taiwan, and Mexico. It operates Gap, Banana Republic and Old Navy stores throughout Asia, Australia, Europe, Latin America, the Middle East and Africa.

Gap

Gap is the apparel and accessories brands anchored in optimistic, casual, American style. Its collections of wardrobes include denim, tees, button-downs, and khakis. Gap includes apparel and accessories for men and women, under the name Gap name, in addition to GapKids, babyGap, GapMaternity, GapBody and GapFit collections. Gap serves through speciality stores, online and franchise stores. Gap also offers a suite of omni-channel services to its customers in the United States. In addition, it brings the brand to customers, with designer collections for Gap Outlet and Gap Factory stores and Web sites.

Question

1. Study the external environment of GAP Inc. Are any changes taking place in the macro environment that might have a positive or negative impact on the industry in which GAP Inc is based on? Apply the PESTEL framework to identify which factors may be the most important in GAP Inc industry. What will be the effect on GAP Inc industry?

2. How dynamic is the industry in which GAP Inc is based? Is there evidence that industry structure is reshaping competition, or has done so in the recent past?

Answer 1

Gap Inc PESTEL Analysis

Political

Gap are included in the list of multinational corporations to speak out against Trump's pro-business climate plan, with a Gap representative stating that "we believe that investing in a low-carbon economy will not only help foster a healthier environment, it is also a key to unlocking new business growth potential for the US and around the world" (The Guardian, 2017). This may result in political pressure from the Trump administration on Gap Inc., given that reports indicate the president is taking an increasingly authoritarian approach towards critics (Robin, 2017).

With the U.S. president placing more pressure on American firms to produce in America, as opposed to outsourcing from cheaper developing companies, the majority of Gap's production is done in South-East Asia, meaning that the firm may face increasing pressure to move some of its production facilities to the U.S.

Economic

In the first fiscal quarter of 2017, the retail environment of the U.S. remained tepid, with this occurring particularly in the apparel sector (Olson, 2017). Nonetheless, Gap's performance in the first-fiscal quarter indicated that the firm's execution resisted the downward trend (Olson, 2017).

Socio-Cultural

Gap have come under fire in the past year for an advertising campaign branded sexist by critics. Accordingly, the campaign featured an image of a boy labelled 'the little scholar', while a girl was feature next to the boy labelled 'the social butterfly', indicating that while the ad says for the boy that 'your future starts here', for the girl the ad says, 'the talk of the playground' (Hemmingham, 2017). In a society increasingly striving for equal rights between males and females, the ad spared controversy amongst consumers (Hemmingham, 2017).

Gap Inc. strongly supports the Pride movement, and maintains a strong support for the LGBT community, donating 30 per cent of profits from the Gap brands Pride T-shirts to the UN Foundation to benefit Free & Equal (Gap Inc., 2017a).

Technological

With augmented reality being frequently cited as the future of online fashion applications, Gap have invested in the use of such technology in their clothing application. The Gap app allows consumers to preview clothing in real time, which is a function that is so far not utilised by competitors. However, at present, this level of augmented reality is limited in its application, with the virtual dressing room app being limited in the items it allows consumers to preview on their body (Ion, 2017).

Gap are further advancing their technological innovation by developing and implementing mobile checkouts in their stores, which allow customers to purchase items using their mobile phone instore (Gap, 2017b).

Environmental

Questions have been increasingly raised about the safety and ethicality of Gap factories in Bangladesh, where protests occurred earlier in 2017. One of the top clothing suppliers for Gap was affected by protests over low wages, with Gap releasing a statement to say that they were troubled by the recent events and urging officials to ensure that no member of the protest was targeted "solely because of any association with a trade union or other group" (Abrams and Sattar, 2017). The question remains as to why a large organisation as Gap, which is listed on the stock exchange, is faced by protests over low wages in its factories, when the size of the company indicates its ability to pay fair wages.

Legal

Gap comply with a number of international standards regarding the legal and ethical obligations of a firm to its stakeholders. These include providing equal pay, where the organisation was the first Fortune 500 company to pay women and men equally, compliance to the California Transparency in Supply Chains Act and the UK Modern Slavery Act (Gap, 2017b).