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 – increasing government debt because of Covid-19 spendings, increasing commodity prices, there is backlash against globalization, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models,
there is increasing trade war between United States & China, central banks are concerned over increasing inflation, 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 -
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.
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.
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.
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.
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.
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.
Training and development
– Gap has one of the best training and development program in Services 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.
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.
Superior customer experience
– The customer experience strategy of Gap in Retail (Apparel) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
Weaknesses of Gap | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Gap are -
Products dominated business model
– Even though Gap has some of the most successful models in the Retail (Apparel) 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 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.
Capital Spending Reduction
– Even during the low interest decade, Gap has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Retail (Apparel) industry using digital technology.
Employees’ less understanding of Gap strategy
– From the outside it seems that the employees of Gap don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Gap is dominated by functional specialists. It is not different from other players in the Retail (Apparel) industry, but Gap needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Gap to focus more on services in the Retail (Apparel) industry rather than just following the product oriented approach.
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.
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.
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.
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.
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.
No frontier risks strategy
– From the 10K / annual statement of Gap, it seems that company is thinking out the frontier risks that can impact Retail (Apparel) 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.
Gap Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Gap are -
Manufacturing automation
– Gap can use the latest technology developments to improve its manufacturing and designing process in Retail (Apparel) sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
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.
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.
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.
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.
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.
Buying journey improvements
– Gap can improve the customer journey of consumers in the Retail (Apparel) 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.
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 Retail (Apparel) industry, and it will provide faster access to the consumers.
Developing new processes and practices
– Gap can develop new processes and procedures in Retail (Apparel) industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing 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.
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.
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 Retail (Apparel) sector.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Apparel) industry are lowering. It can presents Gap with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Apparel) sector.
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.
Regulatory challenges
– Gap needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Retail (Apparel) industry regulations.
Shortening product life cycle
– it is one of the major threat that Gap is facing in Retail (Apparel) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Gap business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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 Retail (Apparel) industry.
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.
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 Retail (Apparel) industry.
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.