However, due to the recession and change in buyers taste Gap was already suffering from a 3% decrease in profit before expanding the business in to BRIC countries. Gap Inc is also not performing well in American so I don’t know if their new strategy will help Gap achieve higher profits. It may rather counter act their losses in America. By Gap becoming more global it might improve other aspects of the business such as, reducing supplier power. This will allow Gap to be more flexible with their credit and help with their cash flow.
Moreover, the fact that they are expanding their business to become global will improve their revenue as Gap will be selling their products in more places thus improving their profits margins. Gap Inc might not have achieved higher profits yet but these emerging markets show promise for the future.
Costa Coffee is also in the same situation as they have been racing to expand in the new emerging markets, recently opening their 100th Costa store but they have not yet to break even in China. However, their overall underlying profit rose by 41.8% to £27.8m showing potential for higher profits in the coming year.
In addition, due to the whole global nature of the business this means that the four Ps (Product, Price, Place and Promotion) will have to change to help create a more appropriate strategy to help achieve higher profits.
Product:
Gap has primarily kept their products the same however a new designer called, Patrick Robinson was brought in to help define a more fashionable image for the all American brand. This strategy did not work in America as Gap could not compete with specialist brands Like Abercrombie and Fitch. Nonetheless, other countries found the tradition preppy American style more exciting and different. This show that a business strategies doesn’t need to significantly change to be successful.
Price:
A business like Dyson that uses a skimming pricing strategy to maximise profits from the early-adopters would have to change their strategy in emerging market as these countries would not be able to afford such a luxury. In order for Dyson to maximise profit they should change to a penetration pricing strategy start at the average market price and establish their prices as the country economy grows.
Place:
As businesses become more global they will be able to manufacture in different countries, reducing their unit costs, as the businesses are more likely to be nearby countries with low minimum wage. This would therefore increase a business profit margin. This also would significantly change the distribution of a business. However, relocating manufacturing to another country will reduce the business control over the worker welfare and pollution in the environment. For Gap Inc this would not be a good strategy to use as they have had very bad publicly in the past for child labour which was their initially starting point for reduction in sale as many consumers boycott the shop. Therefore, changing this strategy may increase profit margins but would not be best for the overall business as it could harm its reputation.
Promotion:
Business need to change their adverts to adapt to each countries culture so their adverts suit their audience. When entering a new country Gap like promote itself as a new concept “Let’s Gap Together,” suggesting a start of a new journey where Gap will develop and integrate in American style with the surrounding culture. This allows consumer to warm toward Gap and get use to the American culture creating interest in the brand, thus increase revenue and profit. Additionally, L’Oreal keeps the same adverts in each country but just change the race of the models to show the viewers what they could look like. They also use celebratory endorsement to advertise in the country they are best known in. For example, in America Beyonce is the face of L’Oreal however in the UK Cheryl Cole is. These little changes to their strategies can have a huge impact on sale and profit.
In conclusion, I believe that the increasingly global nature of business means that some strategies will need to significantly change whereas some could be only slight altered. For example, Gap ansoft matrix strategy only involved marketing their product to a new audience yet they have to significantly change the marketing strategy to make themselves appear as a more fashionable brand.
However, I think a business should constantly be changing and reanalysing their strategies anyway as even if a business does not operate globally or plans on expanding as, external factors will always affect a business (e.g. competition, economy and government laws). Companies therefore, needs adapt their strategies accordingly in order not to miss out on any opportunities (e.g. competitor close down) or ignore potential treats (e.g. sudden change in consumer taste).
