The Turbulent Global Economic Conditions: The Gap Inc - Case Study Example

The gap is in the fashion industry and must continually compete on the basis of brand desirability. Brand name equity is Gap's greatest asset. However, the recent economic downturn has had and will continue to have, a negative impact on Gap's ability to generate revenue. The gap is a luxury apparel item and would be one of the first to be reduced in a consumer's budget. In 2007, Gap closed several Forth and Towne stores after test marketing did not meet with customer acceptance (We Are Gap Inc. ). In addition, protectionist attitudes in the US, and the coming election, may alter the trade agreements that have benefited Gap's manufacturing and distribution strategies.

The industry environment is best analyzed by using Michael Porter's five forces. New entrants into the fashion apparel industry are faced with the ease of entry, and the difficulty of marketing. Globalization has made it easier for international brands to compete via the Internet or established distribution networks. According to Formisano, "As more countries develop around the world, more competitors are created, which fuels more competition for market share" (58). The cost of entry is significantly lower with offshore manufacturing and Internet outlets than the traditional brick and mortar storefront operations.

However, brand loyalty can be a significant obstacle to overcome and demands a large investment in advertising. In addition, product differentiation is difficult in the fashion industry where companies rely on promotions to sell their products.Porter's forces of supplier and buyer power are both weak in the apparel industry. The materials are common and can be obtained from any one of a large number of international suppliers. In addition, other competitors use the same raw materials and there are few technical innovations in this area.

Buyers are weak, as there are a large number of buyers who do not purchase as a strategic group. The gap is a mature company in a fragmented industry with several competitors all fighting for market share. The apparel and accessory industry also has no substitutes, and future industry sales should remain constant when adjusted for economic conditions. However, poor economic times may see consumers switch to lower-cost brands, such as Levi, or shop at the big box discount outlets.The greatest threats to Gap Inc.

are the turbulent global economic conditions and the ability of consumers to shop globally via the Internet. Consumers, faced with bad economic times, may seek to save money by shopping on the Internet for convenience or to save the high cost of fuel. However, these threats can also be an opportunity for Gap. They have recently opened the online store Piperlime to sell high-quality footwear. In addition, they have expanded into the global market with several stores in Asia and Europe. The global opportunities have been able to offset some of Gap's declining sales in North America (We Are Gap Inc.).