The Gap is a leading international retailer, whose revenues for 2007 surpassed $15.8 billion. As with any company, The Gap seeks to increase these revenues and to accomplish this task, they must analyze the external environment they operate in to determine the threats that exists and the opportunities to overcome. The Gap, as an incumbent firm, must try to maintain their position in the market by trying to increase barriers that prevent potential businesses from making a successful entry into the retail business. The threat from potential competitors is not as significant as the threat posed by the other incumbent companies in the retail industry which can leverage certain aspects of the external environment to negatively affect The Gap’s revenue. Another external factor that The Gap will have to contend with is the bargaining power of customers as this will play a major part in The Gap’s strategic decisions. These three mentioned external factors will be the main issues for The Gap to contend with to progress towards increased revenue.
Barriers to Entry
The retail business is an ever-changing environment due the fact the style usually changes from season to season and sometimes more often than that. The trend setting that is popular in the retail opens up opportunities for new competitors. Although, these competitors may not remain a competitor in the market, they will create issues for The Gap as a seasonal substitute. In the retail business, small companies can compete relatively well by trying to target particular niches. However, I believe The Gap is poised to deal with the possible entry of these substitute competitors do to the diverse target markets that The Gap provides customers about. A niche does not exist that The Gap does not have a store to reach that target base.
The retail business is driven by the growth of personal income. If the economy is doing good and people have extra money to spend on clothing items....