PEST Analysis for GAP
Politics
Globalization has been a current trend to every industry which also includes the apparel and fashion industry in which is due to the construction of import international facilities and establishment.
It has been noted that when products are traded regulations and policies are present. With these regulations and policies, company’s operations may be impaired. Some countries also control the entrance of foreign companies which would also affect the process of operation of these companies. Large tax implementation is one of the controls that government usually pursues. With such government control many companies are impaired and usually can not operate on those countries.
In the case of the regulations in the retail industry it has negative impacts because the regulations in the retail industry could easily be changed beyond the established limit and will affect the business adversely, in addition companies such as target will obtain higher costs in expenses due to the changes.
Furthermore, changes and transformation in overtime regulations and the share of the retail stores in the healthcare bill. It has a huge effect on GAP negatively or positively. In the case of the regulations in the retail industry it has negative impacts because the regulations in the retail industry could easily be changed beyond the established limit and will affect the business adversely, in addition companies such as target will obtain higher costs in expenses due to the changes. The healthcare bill, on the other hand, will have positive effects on GAP because the bill will aid in controlling the prices of the medicines in the market which in return will help the consumers, as well as the company.
Economic
During the period of 2004 to 2006, a change in consumer preferences in apparel is more apparent. Many underground sales of unbranded apparel are very common. It even extends to the export of these apparel to many Asian countries.
Another factor that would affect the external environment of Target is the US economic growth; the rapid or slow growth may have a positive or negative impact on the business. If the growth is fast then consumers will have higher purchasing power, on the other hand, if the economy is very slow then it will also have an effect on the attitude towards purchasing products. Another is the low-cost destinations sourcing; it will either affect the economy positively or negatively. Positive, in the sense wherein the company will have more consumers because of the cheaper products offered. On the other hand, the local suppliers would be affected because the company prefers outsourced products.
Socioeconomic
With the increasing globalization of business, society has also been more concern with the degradation of the environment and a continuous concern for the benefit of the employees. The society has call for attention to industries for social responsibility. This includes human right protection of corporate employees, consideration for the health and safety of consumers, and contribution to local communities.
And with the increasing global environmental issues that arise with the globalization, people are now increasingly aware of the effects of the continuous industrialization.
Another factor is the rise of the population of the retiree, companies such as GAP wherein it has numerous employees will have a hard time obtaining more employees, the retirement of employees is rapidly getting higher while the replacement does not increase.
Technological development
It has been noted that apparel and fashion industry has experience a rapid technological changes over the years. This fast changes has lead to a more sophisticated, with a significant apparel and fashion items present in the present time. To provide comfort and aesthetic value, while still being friendly to the environment, these new fashions use the latest developments of many different technologies.
The utilization of new software and technology for faster production and marketing, which is more helpful and useful because it makes the job of the employees and management easier and error free.
There are a number of opportunities for GAP to grow and these are the apparel industry in Asia industry, GAP must give more emphasis on this sector because consumers buy apparel products that have low prices and is closer to home wherein GAP has the characteristics.
The weaknesses of the target company include the fact that the organization has not yet expanded to rural areas in the Asian continent. In addition, the size of the stores of GAP is lower compare to other retail companies in the Asia. Lastly, the image of the company which is a retail store that caters to apparel hinders the ability to obtain market share in other aspects of the retail business.
Emergence of new knowledge resulted from a publicly financed, scientific problem solving. Eventually, the generation of this new knowledge is not primarily for application purposes or for any guided interest. However, such there are new knowledge which usually carries some commercial business potential. Evidently, national capabilities in exploiting these opportunities of new knowledge differ from each other.
Moreover, as what is really the fact, Chinese nationals tend to rely heavily on personal relationships as what they call as guanxi in business dealings (1994). In China’s new, fast-paced business environment, guanxi has become extremely important. It has in large part filled the vacuum and is more entrenched than ever, heavily influencing Chinese social behavior and business practices (1990). Guanxi provides the lubricant for the Chinese to get through life. It is a form of social investment. No company in the Chinese business world can succeed unless it benefits from an extensive guanxi.
In addition, guanxi binds literally millions of Chinese firms into a social and business web. Sales force marketing, an activity heavily dependent on guanxi, has become an increasingly popular and effective marketing means. In addition to marketing personnel dispatched by head office, companies in China often set up regional sales offices in major target areas.
Furthermore, China is a planned economy that adds to the difficulty of marketing in the country. All China’s purchasing activities are guided by a planned economy, the annual economic plan. If a need is found for a product not envisaged by the planners, the product will be subjected to a long examination process.
Finally, there are Chinese cultural biases which involve negative associations between product promotions and the perceived value of that product. The Chinese think that aggressive promotions cheapen a product and that cheap products are never good. Chinese consumers do want to buy American made products that are associated tastefully with events and people, particularly celebrities, in the United States.
In order for a business to survive in China (Hong Kong), it is significant to know the cultural practices of the country. In a transition to a market focus business, marketing is very important. These would include knowing the target market, knowing the customer needs, defining value proposition, then winning over the customer and lastly having a continued communication to the customers to be able to be updated with the ever changing customers’ needs and preferences.
Assignment Question: Gap Inc currently appoints you as a Marketing Consultant to explore the opportunities to expand its busniesses in Hong Kong. Based on the enviromental assessment (basically the PEST analysis), write an organized report to the company. Required to write a report to GAP whether or not they should expand business in HK, writing is base on PEST but no need to explain what PEST is.
Credit:ivythesis.typepad.com
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