EXTERNAL FACTORS THAT AFFECT GAP INC

EXTERNAL FACTORS THAT AFFECT GAP INC

1. POLITICAL

   • GAP Inc is known for globalisation. Penetrating a new market in a new geographical area will cause GAP to adhere to the regulations that guide the economy of the new market.
     • The political scene of the United States of America where the company originates from and has it headquarters also, operates in a democratic way in the sense that various bodies are allowed freedom of speech.
       • According to Dennis Koech deregulations of some companies by the government and the enactment of trade agreements with foreign countries has allowed for GAP to source for raw materials and labour from far and wide
     • Political decisions creates a direct impact on business and everyday lives

2. ECONOMIC FACTORS

   • This can be described by the type of economy an organisation has found itself in. Economic factors that will affect a company are inflation, tax rates, interest rates, budget deficits and surpluses, GDP, per capita disposable income, unemployment, prices of raw materials.
     • COP is also a strong determinant of how the economy will affect a business. Cost of production fluctuates based on the injections made by the consumers or withdrawals
       • Unforeseen situations like natural disasters is another major economic factor as they will also determine COP
         • Dennis Koech explained that in 2004 when the United States dollars depreciated, pressure was exerted on companies that that have the dollars income with foreign cost and this was compounded by the financial institutions such as the central bank that tried to support financial systems. The move of foreign investors to move to a more stable economies also weakens local currencies therefore worsening the effects of foreign currency instability, So for an organisation like GAP that operates on a global level, the economic situations in both their domestic and international markets will affect their overall revenue therefore elimination of trade barriers in international markets through mechanisms such as WTU (World Trade Organisation) and the EU foster favourable business conditions.

3. LEGAL FACTORS

   • These are the laws that affect the operation and operational costs of a an organisation
     • Operating on a global level will cause GAP Inc. to comply with various laws from different regions. The most common laws that affects GAP are discrimination laws, antitrust laws, occupation law and health and safety regulations
       • The child labour scandal that GAP experienced in 2007 is a breach of health and safety regulations. This not only led to the company losing profits, it also led to creating a bad image for the company and in a bid to redeem themselves new policies to guide against child labour was set by the management and they also put in place a comprehensive compliance program that is meant to ensure that all employees and management meet the set legal requirements of their environment and to operate responsibly and with integrity. The Guardian, 2007

4. SOCIAL/ETHICAL/ENVIRONMENTAL FACTORS

   • Production will be subjected to the climate or weather conditions of a particular place.
     • GAP will not sell heavy clothing that are meant for cold regions in tropical areas. For example a different apparel will be made for a region like Japan while a totally different apparel will be made for that of France all based one the weather, trend and culture.
       • GAP is involved with charity organisations like RED org that is set up tp involve people and businesses to fight against AIDS, this is a form of giving back to the society
       • "Because a significant portion of CO2 emissions related to our business comes from operations throughout our suppy chain, we are committed to developing a reduction strategy that addresses this risk as climate change has the potential to negatively impact on our business and we believ that companies have an ethical responsibilty to address this societal challenge" this is the summary of the Green Mnufacturing Workshops that was held for the key vendors of GAP Inc in 2012. As we are aware that cotton is the raw material required for making clothing materials, processing it will definitely release waste products which are harmul to the environment and the ozone layer. In late 2012, a new enterprise management system was provided and it was used to systematically track all relevant data usage and emissions and also allow them to better understandhow they can reduce the impact of GHG-related data (greenhouse gas). GAP Inc. Social and Environmental Responsibility Report, 2011|2012.
         • Following a tsunami that hit Japan in 2011 that affected GAP inc employees, GAP foundation made a $200,000 grant to provide emergency and disaster support services icluding food, water, medical supplies and other immediate needs. GAP Inc Social and Environmental Responsibilty Report 2011|2012
     • Demographic trends such as age distribution, ethnicity, gender will be taken into consideration while producing clothes

5. SOCIAL MEDIA NETWORKING

   • Through social media, this brand has been able to make the society at large aware of any changes that has been made in respect to the operations of the company. For example if there is a change in management or mode distribution and so on
     • The internet is globally acknowledged and spreads information faster and efficiently. GAP Inc in an attempt to connect with the younger generation has social media accounts like Facebook, Twitter and Instagram
       • However, GAP Inc's social media platforms are guided by a social media policy which according to Luke Brynley-Jones is "written in a frank, honest and open style. It is not overbearing, legalistic or vague. It is also realistic"

6. TECHNOLOGY

   • GAP Inc plans to right size its specialty store fleet and streamline headquarter workforce primarily in Nort America "Customers are rapidly changing how they shop and these moves will help GAP get back to where we know it deserves in the eyes of consumers." said the chief executive officer of GAP Inc, Art Peck. This decision will lead to more optimisation of online shopping and reduction of human labour. More technology will be involved in this and COP will reduce overtime. GAP inc news, June 2015.
     • internet allows more price comparison by customers

7. FINANCIAL INSTITUTIONS

   • Being a large organisation, GAP Inc has an insurance for both employees and managements. Banks such as the central bank will be willing to lend money to GAP with the hope of getting it back at high interests.

8. ANSOFF MATRIX (see appendix 2)

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