Environmental scan: the gap and Urban Outfitters

Environmental Scan: The Gap and Urban Outfitters

An environmental scan refers to the process of carefully monitoring both the internal and external environments of a particular company to determine if there are an nascent signs of threats or opportunities which might impact its present or future plans or intentions.

For example, if one were to examine the retailer Gap, Inc., this is a company which has undergone a great deal of stress and challenges in the last fifteen years. The 1990s was the company's heyday, when it was at the height of its popularity. This was when the company was able to garner strong success in all their stores, capitalizing on the 90s culture of simple designs and grunge appeal. The next 15 years showed a tremendous amount of challenge to the company, largely through external and internal threats. Consider the external threats: massively successful companies like H&M and Forever 21 were able to offer more current and more daring fashions for a fraction of the price. For instance, H&M has used the last decade to expand aggressively in the United States, and while this aggressive expansion has slowed earnings to a certain extent, the firm continues to outpace Gap, Inc. (Bogenrief, 2013). Thus, this external threat is compounded by the internal issues which impact the company. "Instead of retrenching, innovating, and economizing operations and designs in order to cut COGS, boost net income, and solidify product offerings in the now internationally-dominated world of fast-fashion retail, GAP has instead decided to take the afore-listed retailers on "head-on," by embracing the difficult-to-master art of quick operations and 'modern' designs, all intended to boost inventory turns and keep consumers returning again and again. And, despite the recent few years' positive proof the strategy's working, it's driving the company into a sartorial corner" (Bogenrief, 2013). Thus, this means that in terms of stability, Gap relies most heavily on Old Navy, it's most low-priced brand, and the one that is able to provide it with the highest level of stability and international growth (Bogenrief, 2013). This is largely because this brand is better able to compete with the "fast fashion" of the biggest rivals to Gap, such as Forever 21 and H&M. This also explains how the higher priced internal environment of Banana Republic has been suffering just so much in profits. This largely suggests that the external environment of consumer trends have been gravitating towards lower priced items of apparel. This means that Gap has been wise to push Old Navy forward, but this is generally a short-term strategy. There's essentially no clarity as to how Gap and Banana Republic will survive in the long-term, and what their fate is.

Another retailer which experienced a tremendous amount of growth and popularity in the 1990s, but which continues to struggle now, is Urban Outfitters. Urban Outfitters, like Gap, was one of the "it" stores of the 1990s, a decade which also marked its heyday. Now the brand is also, struggling, though not as acutely as Gap Inc. Consider the following: the namesake brand of the company has struggled for profitability, though it's sister brands of Anthropologie and Free People continue to thrive. "While the retailer recorded strong sales growth for its Anthropologie and Free People brand, its namesake business stumbled due to missed fashion calls and severe winters in the U.S. However, Urban Outfitters' Q4 earnings per share of $0.59 was better than the consensus estimate of $0.56" (Trefis, 2014). Experts predict that Urban Outfitters is going to bounce back from these harder times more succinctly than Gap, Inc. because consumer response is so loyal to Anthropologie and Free People. Those are two brands which are not competitively priced: the core consumer bases are loyal to the products and have demonstrated a willingness to continue to follow the brand. Experts predict that these external environmental factors are exactly what will help Urban Outfitters push forward into recovery.