Gap (GPS) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Apparel)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Gap (United States)
Based on various researches at Oak Spring University , Gap is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, technology disruption, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies,
there is backlash against globalization, cloud computing is disrupting traditional business models, 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 United States
4. Making a Retail (Apparel) 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 -
Innovation driven organization
– Gap is one of the most innovative firm in Retail (Apparel) sector.
Strong track record of project management in the Retail (Apparel) 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.
High switching costs
– The high switching costs that Gap has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Gap is one of the leading players in the Retail (Apparel) industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Operational resilience
– The operational resilience strategy of Gap comprises – understanding the underlying the factors in the Retail (Apparel) 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.
Low bargaining power of suppliers
– Suppliers of Gap in the Services 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.
Digital Transformation in Retail (Apparel) 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.
Effective Research and Development (R&D)
– Gap has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Gap staying ahead in the Retail (Apparel) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Diverse revenue streams
– Gap is present in almost all the verticals within the Retail (Apparel) industry. This has provided Gap a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Retail (Apparel) industry
– Gap has clearly differentiated products in the market place. This has enabled Gap to fetch slight price premium compare to the competitors in the Retail (Apparel) industry. The sustainable margins have also helped Gap to invest into research and development (R&D) and innovation.
Weaknesses of Gap | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Gap are -
High bargaining power of channel partners in Retail (Apparel) industry
– because of the regulatory requirements in United States, 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 Retail (Apparel) industry.
Aligning sales with marketing
– From the outside it seems that Gap needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Apparel) industry have deep experience in developing customer relationships. Marketing department at Gap can leverage the sales team experience to cultivate customer relationships as Gap is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Gap, in the dynamic environment of Retail (Apparel) 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.
Slow decision making process
– As mentioned earlier in the report, Gap has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Apparel) industry over the last five years. Gap even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Skills based hiring in Retail (Apparel) 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.
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 Retail (Apparel) products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Gap has a high cash cycle compare to other players in the Retail (Apparel) industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Workers concerns about automation
– As automation is fast increasing in the Retail (Apparel) 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.
Interest costs
– Compare to the competition, Gap has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
High dependence on Gap ‘s star products
– The top 2 products and services of Gap still accounts for major business revenue. This dependence on star products in Retail (Apparel) industry has resulted into insufficient focus on developing new products, even though Gap has relatively successful track record of launching new products.
Gap Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Gap are -
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 Retail (Apparel) industry.
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.
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 Retail (Apparel) 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.
Use of Bitcoin and other crypto currencies for transactions in Retail (Apparel) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Gap in the Retail (Apparel) industry. Now Gap can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Retail (Apparel) industry, but it has also influenced the consumer preferences. Gap can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Gap has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Apparel) 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.
Creating value in data economy
– The success of analytics program of Gap has opened avenues for new revenue streams for the organization in Retail (Apparel) industry. This can help Gap to build a more holistic ecosystem for Gap products in the Retail (Apparel) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 Retail (Apparel) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Gap to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Gap can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Gap to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Gap External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Gap are -
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 Retail (Apparel) sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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 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 Retail (Apparel) industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Gap has witnessed rapid integration of technology during Covid-19 in the Retail (Apparel) industry. As one of the leading players in the industry, Gap needs to keep up with the evolution of technology in the Retail (Apparel) 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.
Consumer confidence and its impact on Gap demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Retail (Apparel) industry and other sectors.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Gap will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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 Retail (Apparel) sector.
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.
Easy access to finance
– Easy access to finance in Retail (Apparel) 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gap in Retail (Apparel) industry. The Retail (Apparel) 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.
Increasing wage structure of Gap
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Gap.
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.