Globalisation of GAP

Gap was founded in 1969 by Donald Fisher and Doris Fisher. The name came from the growing differences between children and adults, called "the generation gap. The Fishers had been frustrated with the lack of decent customer service and fashionable styles at other retailers. One of the original mottos of the company was "Levi's for Guys and Gals. " Around 1982, Gap began focusing on its own private label clothing and by 1991-1992, the company had stopped carrying Levi's. As of April 2, 2005, Gap Inc. had approximately 150,000 employees and operated 3,005 stores worldwide.

Donald Fisher retired as Chairman of the Board in 2004 and was replaced by his son, Robert Fisher. The Fisher family collectively owns about 25% of the company. Since its founding in 1969, Gap has provided its customers with clothing and accessories that enhance their personal style. What began as one brand has grown to include Gap, examples of Gap brands are GapKids, babyGap, GapBody and GapMaternity. By providing great style, value and service, Gap has become one of the world's most recognized brands with more than 1,450 stores in the United States, Canada, the United Kingdom, Japan and France.

Today, Gap Inc. is one of the world's largest specialty retailers, with more than 3,100 stores and 2006 revenues of $15. 9 billion. Gap operate five of the most recognized clothing brands in the world including Gap, Banana Republic, Old Navy, Forth & Towne and Piperlime. The culture and ethics of Gap can be seen from the missions statement provided by Gap. Guided by a shared Purpose, we're able to work together more effectively and contribute to Gap Inc. 's success in a more meaningful way. Inspired by the same Values, we reflect the character, spirit and beliefs of Gap in everything we do.

Driven to exceed with the right Behaviors, we work purposefully as individuals, as teams, as a company, to be the best we can be and achieve our vision for growth. Our Purpose Every day, Gap Inc. honors the original reason for founding this company: We're passionate that you be you. We make it easy for you to express your personal style throughout your life. Our Values To achieve our purpose, we create an environment that encourages our teams to act with integrity and live by the highest standard of ethics. We listen, we respect each other's time, we value the contributions each of us makes.

In a spirit of open-mindedness and trust, we are open to a diversity of ideas, approaches and points of view-across teams and across divisions. We believe in quality and delivering the best result possible, reflecting the realities of price, time and what customers truly value. We find ways to put into balance things that seem to be at odds-work and life, commerce and social responsibility, rapid response and a planful approach. One of the main aims for a business is to grow, once a business has achieved this in it's own market expanding into foreign markets can be very expensive but profitable.

Businesses which operate in more than one country are multi nationals examples of multi nationals are Coca Cola, Sony, Mcdonalds and Gap inc. these businesses have successfully expanded into foreign markets and are now a global brand which is enviable to any business. There are various reasons why companies want to expand into foreign markets. Firstly the world consists of over 6 billion people this is a huge customer base for companies to try to exploit. More potential customers could result in increased sales and revenue because of the larger target market.

This could therefore increase profit and even further growth for the business. As a business grows economies of scale can be an essential tool for businesses to take advantage of. Economies of scale allow businesses to buy in bulk and so pay less for each unit, lowering costs for the business. On a global scale the economies of scale the business could benefit would be far greater than that if they just operate in their own domestic market. Also if a business operates in more than one domestic market the risk is spread over several markets.

Therefore if one market is not doing well for the business other foreign markets could make up for this. Spreading the risk would be very beneficial as the business would not be reliant on one market. Finally, investing in emerging markets businesses would gain the opportunity to sell to people who's income are growing strongest and fastest, creating a brand and customer loyalty which would benefit the company greatly when the country further develops. There are however drawbacks and disadvantages to entering into foreign markets.

Firstly language can be a major problem in foreign markets. If the business is not familiar with the language of the new market it can cause problems in communicating with employee's directors and employees. This could then lead to problems in making decisions and implementing any changes. Also setting up in a new market can have very high start up costs. This could include a variety of things ranging from buying land to building factories for production. These high capital costs could inhibit the company from expanding as they may be reluctant to borrow finance.

Advertising in the new market can be very expensive, as the company tries to create a brand and gain a competitive advantage TV commercials or adverts in newspapers or the radio could cost the company millions as the advertising campaign may need to be a long term investment. In new markets research and development can also be very expensive as learning about the new market and customers is essential to do well in the market. The company must invest heavily in the research and development as it would be crucial to supply the market with what they need, not just relying on what has been provided in their own domestic market.

The government in the new country can also pose a problem. Different laws tax and interest rates can cause a problem for the company. The business could have to pay higher amounts of tax or change some regulations in the company to comply with laws in the country. Decision making can be very difficult. If the head quarters of the business was in America and they had just expanded into China implementing decisions and making decisions would be made so much harder. Overall operating in another market can cost the company millions in a variety of areas.

When making the decision the company must take into consideration the opportunity costs of the expansion and not neglect the domestic market. Entering into new markets involves a great deal of risk there are many problems associated with selling in an unknown markets. Businesses attempt to overcome some of these problems in a number of ways, Firstly the company could decide to use joint ventures. This involves the business working together with another company in the country they wish to expand into. Both businesses will expect to gain from the venture.

The partnership includes the original company who then teams up with a local company in the foreign market who has the knowledge of the market and already has established distribution links etc. An example of joint ventures could be Coca Cola who have entered joint ventures with bottling companies. They trade brand power for local knowledge of the distribution system. Joint ventures can be very good for companies, they can gain local knowledge without having to spend millions of pounds on research and development.

Also initial capital costs would be reduced because you wouldn't have to build factories or buy land because of your partner company. There is a greater chance of success in the foreign market and the risk is reduced for the company. From the research I have done I have not found any evidence of Gap entering into joint ventures, this could be due to the following negatives of the concept, firstly having to work with another business could be problematic. You may not be familiar with new company and so trust would have to be built between the two businesses in order for the partnership to be effective.

The cultures of the two businesses could also be different causing difficulties in situations such as ethics. Decisions would also have to be made together; coming to a collective decision could be difficult. Finally any profits would have to be shared between the two companies, whereas if the original business had set up alone it would receive 100% of the profits. Obviously Gap would have taken into consideration the positives and the negatives about joint ventures but found that the disadvantages were outweighing the advantages.