Advising on International Expansion of Gap Inc.

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Assignment for International Business Environment

Group Project: Advising a multinational company on its international business development. Chosen Company: Gap Inc.

Module Name
International Business Environment I

Word count: 4379

Submission Date: 09/11/2009
1. Impacts of Globalisation on Clothing Industry1
2. Environmental Analysis of GAP’s Expansion: China vs. Brazil3 Market Environment3
Market Size & Market Potential3
Clothing Industry Facts5
Economic Environment6
Apparel-shopping Attitudes and Behaviors7
Political Environment7
Political Risks7
Regulatory Environment8
Red Tape8
Protecting Investors9
Factors in Value Chain9
Labour Market9
Raw Material Production and Manufacturing Capacity10
Choice and Reasons11
SWOT analysis for GAP entering China13
Strengths and Weaknesses16
Location and Distribution16
Product and Promotion16
Clothing Production and Company Management 17
Appendix 19

BRIC| Brazil, Russia, India and China|
CISGCNCICCPC | China Industry Security GuideChina National Chemical Information CenterCommunist Party of China| CPI| Corruption Perception Index|
CSRs EUFDI GAP| Corporate Social Responsibilities European UnionForeign Direct Investment GAP Inc.| GCR| Global Competitive Report|
GDPIPCIPL| Gross Domestic ProductIncome per CapitaIntellectual Property Law | IBGE| Brazilian Institute of Geography and Statistics|
IPRs | Intellectual Property Rights|
NLCL| New Labor Contract Law|
SWOTVAT | Strengths, Weaknesses, Opportunities and ThreatsValue Added Tax | WFOEs| Wholly Foreign-Owned Enterprises|
WIPO | World Intellectual Property Organization|
WTO | World Trade Organization|

Gap Inc., with five international brands, is now one of the world’s largest specialty retailers offering clothing, accessories and personal care products for all ages. Having over 3100 stores worldwide from its foundation in 1969, including company-owned-stores and franchise stores, GAP has reached US$14.5 billion revenue in 2008 (Gap Inc., 2009). GAP’s online sale also contributes increasingly important to its revenue, around US$1 billion in 2008 (ibid.). Although globalisation has benefited GAP in both value chain and market, it also pose a threat to GAP, including stiff competition resulting in lost market share in some countries like North America. Hence, searching for new market is extremely urgent for GAP. China and Brazil, two large developing countries, attract more and more attentions recently and have many similarities as well as differences in their business environments. Therefore, they are two optimal choices for GAP’s expansion. China is generally a better option concerning the aspects of apparel market environment, economic, political and legal environment, consumer behaviours and other factors in value chain. This report will firstly examine the impact of globalisation on apparel industry and compare China and Brazil’s business environments. Then, the reasons why China is chosen will be explained. Finally, opportunities and threats the company will face are predicted and some recommendations will also be given, considering GAP’s conditions.

Impacts on Clothing Industry of Globalisation
Globalisation can be defined as growing integration and interdependence of world markets and has impacts on value chain and markets (Hill, 2009). Regarding value chain, apparel industry generally goes through design, planning, production, marketing and selling. To exploit national distinctions in the cost and quality of factors of production, different stages of value chain can be outsourced in diverse countries with specialty. The feature of labour intensity allows apparel industry to be the pioneer of outsourcing and off-shoring to countries with low...
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