Internationalization of Gap Company

This marketing plan offers a latest and effective analysis of GAP and its entry into the fashion industry in Berlin, Germany. It discusses the company's competitive advantages, key competitors, liability of foreignness, and organizational strategy and structure. The report also evaluates the feasibility of market expansion and staffing philosophy, and suggests ways to protect the company from potential issues.

Running head: Internationalization of Gap Company 1
International Business Capstone

Internationalization of Gap Company 2
Executive Summary
This marketing plan offers a latest and effective analysis of GAP and its entry into the fashion
industry in Berlin, Germany. It has been analyzed that the company has many opportunities to
success and become and industry fashion leader in the market of Berlin. However, the company
can face number of issues or barriers while entering in the market of Berlin but it can be handled
by them by keeping focus on effective international strategy. Company need to take appropriate
action to prevent from the risk of liability of foreignness. It has been evaluated that in Germany,
there is no requirement of import declaration or permit to import which can become easy for the
company to expand its business in this country.

Internationalization of Gap Company 3
Contents
Executive Summary.....................................................................................................................................2
Introduction.................................................................................................................................................4
2 a. The Gap Company............................................................................................................................5
2 b. Reason for the export opportunity....................................................................................................5
Purpose of internationalization (Market seeking)........................................................................................5
Key Competitors..........................................................................................................................................6
Liability of foreignness................................................................................................................................6
Competitive strategy advantage & organisation's strategy and structure.....................................................7
Barrier for GAP Inc. to entry to Germany market.......................................................................................8
Market expansion feasibility and Staffing philosophy.................................................................................8
Protect the company from issues.................................................................................................................9
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10

Internationalization of Gap Company 4
Introduction
The main aim of this paper is to emphasize the international business capstone by taking Gap
Company. Internalization is the process which is taken in use for planning and executing
products and services so that they can effectively be adapted to definite local languages, process,
and cultures called localization. The world has become changed due to the latest technology and
the role of internationalization amplifies the involvement of entities in international markets. The
expansion of company will be done in Berlin, Germany. The organizational structure and the
strategy of the company will be elaborated under this research with company’s competitive
advantages. Valuable components regarding the expansion of business in Germany will be
undertaken by this paper in a significant way.

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2 a. The Gap Company
The Gap Inc. was founded by Donald and Dorish Fisher in 1969 with simple idea. The
Headquarter of the company is situated in San Francisco. The company is considered as the
umbrella brand of sub-division companies entailing Banana Republic, Intermix, GAP and Old
Navy. This company was founded by Donald and Dorish because they were unable to find out
the pair of jeans that fit and initiated their first store in San Francisco. The brand name “The
Gap,” was invented in indication to the generation gap. The Gap brand offers a variety of
products in different styles ranging from casual to classic and modern. The major aim of the
company is to attract a youthful, catching spirit with the freedom to define the individual style.
The clothes of this brand are available in more than 90 countries with 3,727 stores worldwide
and 135,000 total employees.
2 b. Reason for the export opportunity
The company generates profit every year in a huge way that is why it is required for the company
to expand its business to Germany because of Germany’s economic standing and Berlin’s
demographics. Berlin is a cultural hub due to a huge range of international travelers and
residents, along with that; it is considered a foremost city that controls art, music, fashion and
politics. More than 10 million international travellers attract towards it (Milward, 2015). The
company makes clothes and the objectives to set fashions that focus a youthful market.
Furthermore, it would be a great opportunity for the company to make its existence in Berlin
which could be utilized as a foundation to build other export opportunities all through the rest of
Germany.

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Purpose of internationalization (Market seeking)
The internationalization motives different categories of motives but in the context of market
seekers, the main focus of the company is on the demand aspects. The main purpose of the
company is to be a market seeker because the motive of the company is to invest with the
intention of supply goods and services. The government of Berlin is stable that can encourage
investments from Gap Company in other countries. There can be a number of incentives like
subsidized labour and trade barriers might attract companies to invest in these countries (Brush,
2013). The purpose of the company is to reach new markets and limitations of the home market.
There are numerous reasons why the company should expand its business in Germany in which
one of them is that products and services might have to be getting used to needs, trends and
tastes on a specific market. It is necessary for the company to have the direct presence in the
local market, as companies that are not near to markets might have a drawback in adapting
services and goods (Cuervo-Cazurra, Narula and Un, 2015).
Key Competitors
The company has major three international competitors that are recognized in Berlin for Gap Inc.
The gap is an ever-present clothing retailer which majorly selling jeans, jackets, Khakis and T-
shirts. There are some retailers in Berlin such as Zara, H&M and Uniqlo are challenging with
each other at the time when all of them have physical stores in Berlin. It has been found that
Arthur L. Peck, CEO of the company face the issue of reduction of sales and determined to attain
the new strategy called ‘rebuilding of the product processes, which would be facilitated in
cutting the prices and pay more attention to the last fashion products. The main focus of its
competitors to provide latest trendy clothes to the customers which can become the threaten
point for the Gap Company. As per the group concepts of Michael Porter’s strategic, not all

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competitors compete with each other; this indicates that H&M and Zara can have the feature of
direct competitors due to having same customers that is young people. The indirect competitor of
the company is Uniqlo which is providing similar things as a component of broad service
offering (Arrigo, 2013).
Liability of foreignness
The Gap Company has more than 800 fashion stylists and label workers in Berlin in which more
than 5.4 million people live in and there are around 123 million people visit the capital each year.
Germany is the new country and it is essential for the company to evaluate each and every factor
before entering the market of Berlin. Liability of foreignness is a well known concept in
international business domain that refers it is the insight that organization faces social and
economic costs at the time of operating their business in foreign countries (Bell, Filatotchev and
Rasheed, 2012). The rules and regulations of Berlin is quite different from the US that is why it
is required for the company to learn the rules of Germany in a quick manner. Liability of
foreignness is the major risk of international business as the foreign companies have lower
survival rate in comparison to local companies. It is essential for the company to take appropriate
action to prevent the risk of liability of foreignness. It can be done by the company while
entering into the new markets with the thinking of go global and think local. There should be
experienced intermediaries to maintain the operations of the company in an effective manner.
Along with that the company must keep in mind to remain culturally as the culture difference
might bring adverse situation for the company (Korsakiene, 2014). The main aim of German is
to maintain professional when doing business with other countries.

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Competitive strategy advantage & organization's strategy and structure
Company’s competitive advantages
The Gap Company competes with locally, nationally and internationally department retail stores.
The company will focus on online businesses, discount stores chains, and independent retail
stores. The company has no physical stores in Berlin but the customers of company can purchase
their products via online from other countries. It has been found that the customer prefers to do
online shopping instead of going to physical stores due to its convenience services. The company
got positive responses from the customers that are why the company has launched a few online
websites across some countries (Ferreira and Otley, 2009). In a comparison of Zara and H&M
who majorly consider the fast fashion clothing. The company can attain huge competitive
advantages as the Gap offer season fewer clothes which are more classic which defines that the
customer of H&M can fed up after three years with same fashion, but the fashion of Hap will
never be faded. Furthermore, Gap Inc. provides the number of discount to the customers on the
products. Younger generation gets attracted towards lower prices clothes with full of quality
instead of going with high quality and expensive clothes.
Organizational strategy and structure of Gap
The organizational strategy of Gap Inc. is effective as it adopted the cost-plus strategy within the
organization for attracting a number of customers towards the services. this strategy is facilitated
in adding up all costs and is sold at an added percentage, in this case 600% for GAP logo jackets
and 500% for men’s jeans (Gap Inc., 2015). The company is planning to launch its Gap-logo
jackets and jeans with a ‘loss leader’ strategy in the first three months in Berlin for the purpose
of making an establishment of position from global, local and international competitors in the

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fashion industry market. The main aim of loss leader strategy is to make build brand awareness,
attract potential customers and inspire small development in the market. Gap Inc will provide
300 bags of free goods for every purchase made on the day of the starting and sell limited
editions jackets and jeans (Smith, Ansett, and Erez, 2011).
The organizational structure of the company is hybrid integrative specific components of
divisional and hierarchical organizational structures. Gap organizational structure has the
following pattern:
Figure 1: Organizational structure of Gap Inc.
Barrier for GAP Inc. to entry to Germany market
Yes, there are some barriers to entry such as monopoly, legal protection and corruption. It is
necessary for the company to protect its intellectual property such as patents, trademarks and
copyright, it is likely to suffer losses in the market. Cultural barrier is another major barrier
which can enhance the difficulties for the company, along with that, competition, customer
services, currency exchange rates, government policy and product differentiation are major
barrier that can become the hurdle for the company to enter in the market of Germany (Fletcher

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and Crawford, 2014). Government tax policies greatly affect the profitability of a firm. The
companies of Germany have to pay around 15% tax on profits and this percentage is not higher
ain comparison of home country in which the rat e of Australia is at 30% (Deloitte, 2016). It is
required for the company to consider this legal framework on their exports and imports, tariffs,
and standards. It has been evaluated that in Germany, there is no requirement of import
declaration or permit to import. Although there is Common External Tariff (CET) is applicable
for those countries that are outside of the EU trade systems. There is currently no Free Trade
Agreement (FTA) between Australia and Germany.
Market expansion feasibility and Staffing philosophy
Yes, market expansion is feasible and the joint venture strategy would be the most appropriate
strategy for the company. A joint venture market entry provides GAP a chance to enter into an
agreement with two or more parties to attain their aims. This agreement is featured by costs,
risks, shared assets and returns. The joint venture is usually a separate business entity and it has a
number of advantages such as gain new capacity and expertise, improve speed to market,
diversification and synergy (Frederick, 2015).
In the context of staffing philosophy, it has been found that the ongoing clients of Gap Inc expect
from the company to find them the effective possible candidates, whether the company is
endeavouring to replace a departing employee, involving a new headcount and in many cases,
offering them with a permanent employee where the company have had growth with a temporary
employee (Gunnarsdóttir, Clarke, Rafferty and Nutbeam, 2009).

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Protect the company from issues
The company has to face many issues at the time of entering in the international market that is
why it is required for the company to protect itself from inflation rates that are presented in the
German Market that amplify the general price level of goods and services. There can be other
issues related to the commitment and motivation that can impact the products reach and
distribution capabilities (Delios, Gaur and Makino, 2008). Along with the company should
understand the economic standards of another country in a more significant manner and define
the business plan of the company to access the global markets. Tax codes and compliance issues
are the major concern for the company which should be considered by the Gap Inc at the time of
entering the market. Local competition is the major issue for that company that wants to expand
its business international level because it is not easy to win over a foreign customer to faith over
the brand when the same product is made in their home country.
Conclusion
It has been concluded from above report that the expansion of business in other country is not an
easy task but it can be done in a more significant manner with evaluating the business strategies
and international barrier of host country. The report has been made of Gap Inc Company that
deals in the fashion industry and expanded its business in Berlin, Germany. The discussion has
been made on its key competitors Zara, H&M, and Uniqlo. It has been found that Doing business
in Berlin would be a great opportunity for a business to enlarge because they have a strong
economy, and will easily catch the attention of millions of customers.

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References
Arrigo, E., 2013. Corporate responsibility management in fast fashion companies: the Gap Inc.
case. Journal of Fashion Marketing and Management: An International Journal, 17(2), pp.175-
189.
Bell, R.G., Filatotchev, I. and Rasheed, A.A., 2012. The liability of foreignness in capital
markets: Sources and remedies. Journal of International Business Studies, 43(2), pp.107-122.
Brush, C., 2013. International entrepreneurship (RLE International Business): the effect of firm
age on motives for internationalization. Routledge.
Cuervo-Cazurra, A., Narula, R. and Un, C.A., 2015. Internationalization motives: sell more, buy
better, upgrade and escape. The Multinational Business Review, 23(1), pp.25-35.
Delios, A., Gaur, A.S. and Makino, S., 2008. The timing of international expansion: Information,
rivalry and imitation among Japanese firms, 1980–2002. Journal of Management Studies, 45(1),
pp.169-195.
Deloitte, 2016, corporate tax rates, Available [online]
<https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-corporate-tax-
rates.pdf> Accessed on 14th June 2018.
Ferreira, A. and Otley, D., 2009. The design and use of performance management systems: An
extended framework for analysis. Management accounting research, 20(4), pp.263-282.
Fletcher, R. and Crawford, H., 2014. International Marketing - An Asia Pacific Perspective. 6th
Ed, Pearson

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Frederick J., 2015, Germany Ecommerce Market, Available [online]
<http://www.pfsweb.com/blog/2016-german-ecommerce-market/> Accessed on 14th June 2018.
Gap Inc., 2015, 2015 financial report, Available [online]
http://www.gapinc.com/content/dam/gapincsite/documents/GPS%202015%20Annual
%20Report.pdf>. Accessed on 14th June 2018.
Gunnarsdóttir, S., Clarke, S.P., Rafferty, A.M. and Nutbeam, D., 2009. Front-line management,
staffing and nurse–doctor relationships as predictors of nurse and patient outcomes. A survey of
Icelandic hospital nurses. International journal of nursing studies, 46(7), pp.920-927.
Korsakiene, R., 2014. Internationalization of Lithuanian SMEs: Investigation of barriers and
motives. Economics and Business, 26, pp.54-60.
Milward, A.S., 2015. The German economy at war. Bloomsbury Publishing.
Smith, N.C., Ansett, S. and Erez, L., 2011. How Gap Inc. engaged with its stakeholders. MIT
Sloan Management Review, 52(4), p.69.