The American Eagle Outfitters is another important competitor of the Gap. This company focuses on online selling, but has also decided to increase the number of traditional stores it owns. Competition from potential new entrants to the industry

The threat of new entrants is quite reduced in the U.S. clothing industry. This is because success in this industry depends on several important factors. In this case, it is important to be able to provide a large number of similar stores in the proximity of the buyer because this is an important factor that affects customers' purchasing decision. The location of the retail stores is also very important. Some people consider that online clothing retailers are in the position of threatening the big players in this industry. However, this is not exactly the case. This is because most customers prefers to study the clothes they want to purchase. Another important market entry barrier is represented by the financial resources that these companies require in order to build brand loyalty.

Competition from producers of substitute products

In this case, competition is represented by department stores, big-box stores, men's clothing stores, women's clothing stores, children's clothing stores, and others. Important department stores that the Gap must take into consideration are represented by the Federated Group, Sears, and JC Penney. Target and Walmart are important big-box stores that produce competition in this industry. In addition...

This is because they are rather fragmented. There are numerous large and small suppliers that can satisfy the company's needs. Therefore, the Gap can afford to select its suppliers based on cost effectiveness of the products and services they provide.
Customer bargaining power

There is a moderate power of customers on companies in this industry. This is because there are numerous customers and numerous providers also. This means that buyers are fragmented. Therefore, customers can afford to easily switch the brands they usually purchase in case they do not agree with the quality or prices of these products.

5. The company's internal capabilities are represented by:

Current assets: cash and cash equivalents - $2,348 million, property and equipment - $2,628 million.

Total liabilities - $2,131 million

6. Recommendations

It is recommended that the company focus on the opportunities determined by external environmental factors. The most important opportunities are represented by international expansion and online retailing. In other words, the company should focus on the Asian market that presents great potential that can be addressed as a producer, but also as a seller. The online retailing strategy is intended to help the company reduce the costs of its production.