Gap (GPSI34) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Gap (Brazil)
Based on various researches at Oak Spring University , Gap is operating in a macro-environment that has been destablized by – increasing commodity prices, geopolitical disruptions, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing energy prices,
supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Gap can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gap, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gap operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Gap can be done for the following purposes –
1. Strategic planning of Gap
2. Improving business portfolio management of Gap
3. Assessing feasibility of the new initiative in Brazil
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Gap
Strengths of Gap | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gap are -
Successful track record of launching new products
– Gap has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gap has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Strong track record of project management in the industry
– Gap is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Gap has one of the best training and development program in industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Operational resilience
– The operational resilience strategy of Gap comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– Gap is one of the most innovative firm in sector.
Superior customer experience
– The customer experience strategy of Gap in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Gap in the sector have low bargaining power. Gap has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gap to manage not only supply disruptions but also source products at highly competitive prices.
Cross disciplinary teams
– Horizontal connected teams at the Gap are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Analytics focus
– Gap is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure of Brazil is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High brand equity
– Gap has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Gap to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Gap
– The covid-19 pandemic has put organizational resilience at the centre of everthing Gap does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in industry
- digital transformation varies from industry to industry. For Gap digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Gap has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Weaknesses of Gap | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Gap are -
No frontier risks strategy
– From the 10K / annual statement of Gap, it seems that company is thinking out the frontier risks that can impact industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative at Gap, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Gap has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Gap has some of the most successful models in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Gap should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in industry
– because of the regulatory requirements in Brazil, Gap is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Need for greater diversity
– Gap has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring in industry
– The stress on hiring functional specialists at Gap has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Lack of clear differentiation of Gap products
– To increase the profitability and margins on the products, Gap needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Gap is one of the leading players in the industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Gap supply chain. Even after few cautionary changes, Gap is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gap vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Gap is slow explore the new channels of communication. These new channels of communication can help Gap to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the industry, Gap needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Gap Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Gap are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gap can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Gap can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the industry.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Gap to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Gap to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Gap can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Using analytics as competitive advantage
– Gap has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Gap to build a competitive advantage using analytics. The analytics driven competitive advantage can help Gap to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Gap in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Gap can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Gap can use these opportunities to build new business models that can help the communities that Gap operates in. Secondly it can use opportunities from government spending in sector.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Gap can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Learning at scale
– Online learning technologies has now opened space for Gap to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Gap can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Gap can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Gap is facing challenges because of the dominance of functional experts in the organization. Gap can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Gap in the industry. Now Gap can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Gap External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Gap are -
Technology acceleration in Forth Industrial Revolution
– Gap has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Gap needs to keep up with the evolution of technology in the sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Shortening product life cycle
– it is one of the major threat that Gap is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Gap in the sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gap can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Gap prominent markets.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Gap needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Gap needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Gap can take advantage of this fund but it will also bring new competitors in the industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gap in industry. The industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Gap can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Gap may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
Stagnating economy with rate increase
– Gap can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the industry.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Gap.
High dependence on third party suppliers
– Gap high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Weighted SWOT Analysis of Gap Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Gap needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Gap is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Gap is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Gap to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Gap needs to make to build a sustainable competitive advantage.