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The Gap, Inc. PESTEL & Environment Analysis
Strategic Management Essays, Term Papers & Presentations
The Gap, Inc. PESTEL analysis is a strategic tool to analyze the macro environment of the organization. PESTEL stands for - Political, Economic, Social, Technological, Environmental & Legal factors that impact the macro environment of The Gap, Inc..
Changes in the macro-environment factors can have a direct impact on not only the The Gap, Inc. but also can impact other players in the Apparel Stores. The macro-environment factors can impact the Porter Five Forces that shape strategy and competitive landscape. They can impact individual firm’s competitive advantage or overall profitability levels of the Services industry.
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PESTEL analysis provides great detail about operating challenges The Gap, Inc. will face in prevalent macro environment other than competitive forces. For example an Industry may be highly profitable with a strong growth trajectory but it won't be any good for The Gap, Inc. if it is situated in unstable political environment.
Spanish oil giant Repsol had to face a similar instance. It started an above average profitability operations in Argentina and made strong returns in 5-7 years. But the business was later expropriated by the Left Wing government. So the decade long profits didn’t materialize in the end.
Order Now - The Gap, Inc. Porter 5 Forces Analysis & Industry Analysis
Political Factors that Impact The Gap, Inc.
Political factors play a significant role in determining the factors that can impact The Gap, Inc.'s long term profitability in a certain country or market. The Gap, Inc. is operating in Apparel Stores in more than dozen countries and expose itself to different types of political environment and political system risks. The achieve success in such a dynamic Apparel Stores industry across various countries is to diversify the systematic risks of political environment. The Gap, Inc. can closely analyze the following factors before entering or investing in a certain market-
- Political stability and importance of Apparel Stores sector in the country's economy.
- Risk of military invasion
- Level of corruption - especially levels of regulation in Services sector.
- Bureaucracy and interference in Apparel Stores industry by government.
- Legal framework for contract enforcement
- Intellectual property protection
- Trade regulations & tariffs related to Services
- Favored trading partners
- Anti-trust laws related to Apparel Stores
- Pricing regulations – Are there any pricing regulatory mechanism for Services
- Taxation - tax rates and incentives
- Wage legislation - minimum wage and overtime
- Work week regulations in Apparel Stores
- Mandatory employee benefits
- Industrial safety regulations in the Services sector.
- Product labeling and other requirements in Apparel Stores
Economic Factors that Impact The Gap, Inc.
The Macro environment factors such as – inflation rate, savings rate, interest rate, foreign exchange rate and economic cycle determine the aggregate demand and aggregate investment in an economy. While micro environment factors such as competition norms impact the competitive advantage of the firm. The Gap, Inc. can use country’s economic factor such as growth rate, inflation & industry’s economic indicators such as Apparel Stores industry growth rate, consumer spending etc to forecast the growth trajectory of not only --sectoryname-- sector but also that of the organization. Economic factors that The Gap, Inc. should consider while conducting PESTEL analysis are -
- Government intervention in the free market and related Services
- Exchange rates & stability of host country currency.
- Efficiency of financial markets – Does The Gap, Inc. needs to raise capital in local market?
- Infrastructure quality in Apparel Stores industry
- Comparative advantages of host country and Services sector in the particular country.
- Skill level of workforce in Apparel Stores industry.
- Education level in the economy
- Labor costs and productivity in the economy
- Business cycle stage (e.g. prosperity, recession, recovery)
- Economic growth rate
- Discretionary income
- Unemployment rate
- Inflation rate
- Interest rates
Social Factors that Impact The Gap, Inc.
Society’s culture and way of doing things impact the culture of an organization in an environment. Shared beliefs and attitudes of the population play a great role in how marketers at The Gap, Inc. will understand the customers of a given market and how they design the marketing message for Apparel Stores industry consumers. Social factors that leadership of The Gap, Inc. should analyze for PESTEL analysis are -
- Demographics and skill level of the population
- Class structure, hierarchy and power structure in the society.
- Education level as well as education standard in the The Gap, Inc. ’s industry
- Culture (gender roles, social conventions etc.)
- Attitudes (health, environmental consciousness, etc.)
- Leisure interests
Technological Factors that Impact The Gap, Inc.
A firm should not only do technological analysis of the industry but also the speed at which technology disrupts that industry. Slow speed will give more time while fast speed of technological disruption may give a firm little time to cope and be profitable. Technology analysis involves understanding the following impacts -
- Recent technological developments by The Gap, Inc. competitors
- Technology's impact on product offering
- Impact on cost structure in Apparel Stores industry
- Impact on value chain structure in Services sector
- Rate of technological diffusion
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Environmental Factors that Impact The Gap, Inc.
Before entering new markets or starting a new business in existing market the firm should carefully evaluate the environmental standards that are required to operate in those markets. Some of the environmental factors that a firm should consider beforehand are -
- Climate change
- Laws regulating environment pollution
- Air and water pollution regulations in Apparel Stores industry
- Waste management in Services sector
- Attitudes toward “green” or ecological products
- Endangered species
- Attitudes toward and support for renewable energy
Legal Factors that Impact The Gap, Inc.
In number of countries, the legal framework and institutions are not robust enough to protect the intellectual property rights of an organization. A firm should carefully evaluate before entering such markets as it can lead to theft of organization’s secret sauce thus the overall competitive edge. Some of the legal factors that The Gap, Inc. leadership should consider while entering a new market are -
- Anti-trust law in Apparel Stores industry and overall in the country.
- Discrimination law
- Copyright, patents / Intellectual property law
- Consumer protection and e-commerce
- Employment law
- Health and safety law
- Data Protection
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