Gap Case Study Analysis

Topics: Brand, Market share, Revenue Pages: 7 (1669 words) Published: March 18, 2013
Porters 5 Forces
1. Rivalry among competing sellers
* No single competitor dominates the share of the market
* All accounted for 39.4% of total market share in 2009 * TJX – 13.4% Gap – 15% Ross Stores – 6.9% Abercrombie & F – 4.1% AE- 1% * Top 4 sellers are competing to drive out market share, must deal with thousands of other smaller companies as well. * Set apart by their advertising, prices, and brand recognition (all varying among these 5) Conclusion: Very strong rivalry

2. Power from substitutes
* There are many companies selling multiple variations of the same types of clothes * Any style can be very easily copied
* Brand recognition is only important to brand-focus shoppers and with state of economy, more people are value-based (discount stores, etc.) * Top 4 companies only demand 40% of the market
* Fashion is considered a very quickly changing and evolving industry because of trends. Conclusion: Strong power of substitutes

3. Bargaining power of suppliers
* Most labor for manufacturing has been outsourced to multiple geographical areas * Many different materials and textiles used and can be interchangeably switched to with relatively low cost. Materials are easily accessible and not considered “rare”. * Low switching cost for distributing companies

* Ending the MFA in 2005 opened companies up to less outsourcing restrictions Conclusion: Weak to moderate power of suppliers

4. Bargaining power of buyers
* Industry draws many buyers and clothing is a necessity in everyday life, losing a customer or two won’t hurt anyone. * Industry has access all over the world for new entry for existing companies. Not dependent on one single region of the world. * Appeals to many different demographics and income levels Conclusion: Very weak bargaining power of suppliers

5. Threat of new entrants
* With so many sellers, entrance into the industry will make anyone just another clothing company. * Very tough to build brand recognition
* Brand loyalty is tough to come by with such dominate names in the market * Many forums/segments/niches available to break into to make a name for yourself (brick and mortar, online, etc.) * Because of slim profit margins, tough to make attractive profit starting out. Conclusion: Weak to moderate threat of new entrants

Forces of Industry change
Industry segmentation (frequently changing trends):
* The industry is easily broken in hundreds of different segments and projecting the most profitable ones can be tricky because of changing lifestyles and trends.

Economic stability:
* The economy determines the average income depending on how stable it is, lower income means more value-focused customers, better income can lead to better chance of reaching more customers with higher priced clothing Labor Laws:

* Since regulations have been placed on wage s in different countries, this can change where a company will go in order to have its clothing manufactured or the supplies delivered from. * Also determines internal labor cost if some operations are outsourced as well. Current Social Issues:

* If environmental issues are a current trend, companies are expected to protect the environment when conducting their business, if labor issues are more current then they are expected to make moral decisions regarding working environment, etc. Based on the Porter’s 5 forces evaluation and the Industry change forces, it is determined that there is a very strong competition in this industry with many buyers, sellers, and suppliers readily available. Also, there are many different niche markets and forums for selling clothing which makes for a wide variety of selling strategies. All sellers are selling the same product, the material is not hard to obtain, and it is essential part of living. The competition in this industry is extremely high. Key Success factors of the...
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