Textile and Clothing (T&C) are the dominant source of exports and foreign exchange in several Countries. Low income and developing countries such as Cambodia, Bangladesh, Pakistan and Sri Lanka depend on T&C exports for more than 50% of total manufacturing exports (e. g. 80% in Cambodia, 83. 5% in Bangladesh). The employment effects are also significant. Employment in T&C production for least developed and low income countries as a share of total employment in manufacturing ranges from 35% in selected low income countries, 75% in Bangladesh and 90% in other selected LDCs (e.g. Lesotho, Cambodia).
T&C industries are a major contributor to incomes for selected countries. The contribution of T&C production to GDP differs by country but is up to 5% in Sri Lanka, 12% in Cambodia and 15% in Pakistan. Production Chain Division The production chain or should I say supply chain comprise of the steps it takes from the raw material taken from a farm to the production finished product to finally the sale of it in a GAP retail outlet. The supply chain for GAP Inc. can be best depicted by the diagram below:
Just like many other companies that sell apparel, GAP does not own the garment factories that make clothes for their customers. But GAP is involved in sharing the responsibility for the conditions under which the clothes are made. GAP commitment to safe and fair working conditions extends beyond their employees and stores to include the partners in their supply chain. Major Global player/ Competitors Gap is an American clothing and accessories brand based in San Francisco, California. The company has five primary brands: the namesake Gap banner, Banana Republic, Old Navy, Piper lime and Athleta.
The five brands cater to a wide variety of needs. For example Banana Republic caters to more upscale customers. Old Navy is designed to appeal to families and younger customers by emphasizing “fun, fashion and value’. Gap has 3076 stores operating worldwide. Gap operates stores in the United States, Canada, the United Kingdom, France, Ireland, Korea and Japan. Gap also has franchise agreements to operate stores in various other countries in the Middle East as well as Singapore and Malaysia. The major global competitors of GAP are GUCCI, Chanel, Exist, Zara, Levis, Tommy Hilfiger, Prada, Armani, Versace, and Valentino.
All the mentioned brand also target the high income earners as GAP does and so the target market of all these brands is somehwat similar to that of GAP. The major local competitors of GAP in Pakistan could be brands such as Stone age, Outfitters, Crossroads, Riverstone and Breakout. In addition to the above mentioned brands the other local brands that can be potential competitors could be the outlets of Amir Adnan, Gul Ahmed, HSY studio, Hussain Industries or Karma. There are other Foreign brands operating in Pakistan which include Exis and Levi’s. Next also has franchises in Pakistan. Global research and development centers
As GAP started its operation in the 1969 in San Francisco, California so the main centre for research and development is California. Great research and development takes place over there for GAP and this centre is augmented with the help of market research teams that are composed of several of its workers belonging to different nationalities and they work together to better understand the market of the country in consideration as such a global team will help to produce products that have a global appeal. The teams also formed for the purpose of market research to assess the success of GAP product line before being launched in a new country.
With India being an emerging market so there is an R&D centre over there to assess the potential of the Indian market as GAP like other manufacturers wants to capture the potential of Indian market as it will be a very profitable venture. GAP also very recently started its operations in China and the benefit of R&D centre in India or in the USA helps to better analyze the Chinese market. As both India and China being the two most populace country in the world so operating in both countries is paramount to the growth and success of GAP.
Global Demand Centers Gap is an American clothing and accessories brand based in San Francisco, California founded in 1969. But after its success in the American market Gap has continued to expand its customer base and moved out to other countries in the world. Starting in America it has also remained the largest apparel retailer in the U. S. A when it was recently surpassed by one of the Spanish based group. Gap opened the first store on Ocean Avenue in San Francisco and its second store, in San Jose, California.
Gap penetrated rapidly in the market and by 1973 it had more than 25 stores, including areas outside California. After getting a good response and recognition in the U. S. A, Gap decided to move out to other countries. Due to the cultural closeness and awareness it initially started its retail stores in Canada. Then gradually it moved out of its continent to the European market as this market is also very brand conscious and inclined to fashion. Now the brand had gained more recognition in other countries and continents, so it also decided to move to the Asian and Middle East market.
But in Asia, Gap got a very good response in Japan. The demand in this market was high so Gap opened many retail stores in Japan and it has the most stores in Asia. Other demand centers of Gap include countries like Saudi Arabia, South Korea, Puerto Rico, Turkey, Malaysia, India etc. But the major demand centers are U. S. A , U. K, Japan, Canada and France. The store count for the major markets of Gap(all the brands included) are: India and China are the emerging economies in the world but there are only 9 stores in India and 4 in China.
So if we start production in Pakistan then we have the advantage of low costs and we can export the products to these countries and charge premium prices and get more returns. Production cost issues In Pakistan we have a well established textile industry and Gap already has contracts with local producers in Pakistan. But we think that Gap should expand its current production capacity so that it can also supply it to the local stores we want to open here and also increase the exports. GAP can buy from our local textile companies as they are producing high quality yarn and thread.
This would eliminate the need of importing these raw materials and hence will save a lot of costs. The production technology is also readily available but GAP will have to invest in assets in start but these are only initial costs that would be incurred. The costs would include land and machines. Transportation is also an important aspect as we also want to export our merchandise. The costs for exporting would be the export duties. GAP currently has a distribution network that handles the exports. That network could be used, but there is a second option which is to let ABC logistics handle the exports.
Within the country also there is a need for a delivery network. This should also be handed to ABC Logistics as part of the partnership agreement. It would be preferable to locate our production facility in Punjab as it is in the center and it more easily accessible from all parts of the country. Faisalabad will be the preferred location in Punjab because of the availability of raw materials. This central location will ultimately decrease the costs for transportation. Another positive aspect of our production in Pakistan is the labor costs in the country.
Pakistan is not a rich nation overall and we have large poor population so many people are working in production facilities at low wages. So this low labor cost gives an edge over many other production centers in the world. Technology issues and trends Pakistan is an under developed country and technology is at its emerging stage in Pakistan. And access to technology has also been an issue to us. We are mostly importing technologies to our country. Our manufacturing industry also bears witness to it. Production technologies have not grown as it did in the rest of the world.
So in this perspective we are behind other countries in which the production is currently taking place. If we import in new technologies then we will have to bear heavy costs so it is better to use the existing technology and hiring more employees as the labor costs in the country are not very high. This is a labor intensive country so the production should also be a good mix between machines and men. Predominant Corporate strategies of the industry We have international brands like Levi’s, Adidas which already have their production done in Pakistan and even Gap has, so this industry has developed in Pakistan.
These companies have used the conditions in the country to cut down their costs mostly. This is because in Pakistan the labor costs have been low and raw materials are also easily available. Therefore the trend has been that these companies have used this as a strategy to cut down there costs and sell their products outside to make more profits. We are also trying to follow a similar strategy so that GAP can cut down costs and also offer comparatively lower prices in the local and international markets. International Strategy GAP till this day has a total of 3076 out of which 2551 are within the US.
We can see that GAP has not expanded to the international market as much as it has in its domestic market. But recently GAP has shifted towards pushing the company overseas as there has been a decline in sales. Joshua Schulman, GAP’s senior vice president of international alliances, says the company’s U. S. stores already bring foreign customers in the door. “We know from our stores here that we attract many overseas customers when they are traveling here. ” Other than this GAP has a tremendous name recognition in Asia where it is willing to invest heavily.
By pushing into non-Western countries, Gap is hoping to sell masses of young, sophisticated Asian and Middle East shoppers on its trademark jeans, casual pants, and t-shirts. Besides planning on the Middle East outlets, Gap and Singaporean franchisee F. J. Benjamin expect to open stores in coming months in Singapore and Malaysia. Analysts believe that Gap has the potential to attract consumers in these areas. “Gap is recognized as a global brand,” says Andrew Jassin, managing director of retail consultant Jassin-O’Rourke Group.
“The fashion is translatable to many other markets and appeal to the largest segment of the market. ” GAP when expanding internationally opt for franchising out stores and not getting under the headache of owning foreign properties and getting too many employees directly under their payroll. Very recently GAP has announced a franchise agreement with a Dubai based retailer Al Tayer Group to open GAP and Banana Republic stores in five markets in the Middle East which include UAE, Kuwait, Bahrain and Qatar. Besides planning on the Middle East outlets GAP and a Singaporean franchisee F. J.
Benjamin also expect to open stores in coming months in Singapore and Malaysia. GAP is trying to follow the example set by other American brands that have successfully expanded in Asia and the Middle East, such as Starbucks. GAP’s current international expansion strategy of working with local franchisees reduces GAP’s financial risks. Using franchisees, GAP is able to sell its brand and its clothing without the headaches of dealing with local real estate markets and hiring armies of store level employees onto its own payroll. But the distribution network and the advertising is handled by GAP itself in all countries.
All of GAP’s existing overseas stores in Britain, France, and Japan are owned and operated by franchisees. Though GAP is expanding in South East Asia and the Middle East it still doesn’t have any announcements regarding expansion into China which leaves a GAP itself in GAPs international market. If GAP enters into Pakistan it will become easy for them to cater and extend towards the Chinese market as well. It will be having production facilities in Pakistan which will make shipping to markets like China, UAE and South East Asia really cost effective as Pakistan has a very central position in the map.