Gap Outsourcing in China

Companies want to engage modern infrastructure and focus on their core specialisms hill clean(prenominal) professional firms handle their some other channel processes (Lathering, 2007 2). The fabric Industry has been a fundamental driving force In chinas economy for many years. Outsourcing production to the Chinese manufacturers has arrest popular among other foreign firms in the recent past (Earns, 2006 362). This is e peculiar(prenominal)ly because the cloth industry is a labor intensive industry and firms prefer to outsource In china since It has large pool of cheap labor.The World Bank advertise of 2006 Indicated some of the most suitable locations to Invest In china which re the south east Coastal provinces, the Pearl river delta province of Gudgeon, all special economic zones and the province of Fijian (Yuan, 2008 20). Pestle analysis is a technique used to assist corporations in understanding the external environment In which they operate In the present and fut ure. It helps an organization to assess the macroeconomic conditions border it in order to make a ancestry decision.It works to a greater extent efficiently when used in conjunction with risk analysis, SOOT analysis, and goad grid. Expert knowledge of the organization and its external surrounding Is also Copernican in legal tender analysis. The word PESTLE was coined from political, Economic, Sociological, Technological, legal, and environment factors that affect an organization. The of import aim of conducting PESTLE analysis is to help in the analysis of the external environment and its effect on the organization (Institute of leadership & management 200723).In pestle analysis, we trust each of the external factors and how it is likely to impact on the organization. semipolitical factors The government plays a major role in growth of businesses finished polity formulations. These policies can affect an organization both positively and negatively. Although policies live In chinaware favor exports to mainland China, sourcing remains the best tool to get together entry into the market. It is further renown for its low cost sourcing. Gap Inc. Should consider the existing government policies and assess whether or not they favor the textile industry.Social factors Most of the Chinese working class lack global business experience due to socialism mode of governance where the government provided nearly everything especially in the past. Gap should aim to build good regulations with both the local and international governments. It should also use sourcing as a heart to penetrate the Chinese market. The composition of a country population has major effect on the performance of a business (Center & Edmonds, 2002 40). Outsourcing also requires blue level of trust since It involves sharing financial information and actual take of cash (Chining, 2009127).Economic factors Chinas economy is more favourd in comparison with most other developing I OFF cou ntries. I Nils Is primarily Owe to Its tidally to complete Nell quality products Tanat meet he standards that are required by legislation and consumers in the European countries. It also provides ideal environment to source consumer products. The textile industry is also on the road to recovery due to the policy for revitalization plans for the textile industry which was passed in 2009 Just after China regained economic growth.This has seen the textile industry overcome numerous difficulties and make new development (China textile network company, 2009 4). However, Chinas market is characterized by risks and GAP guild should maintain flexibility and diversity when dealing with sourcing. Teaming up with local companies in China would help Gap in cost cutting. It would also countenance with the knowledge on the domestic market as they would rather assists as partners rather than competitors (The outsourcing institute 2005).Legal factors The Chinese legal system does not adequately protect the IP rights. The outsourcing company should therefore understand the extent to which patents and sight secrets can be protected (Kennedy & Clark, 2006 1). Gap Company should therefore curb that their legal rights are protected. Technology IT professionals graduating each year from China are approximately 200000, providing a strong technically skilled population. China is apace emerging as one of the worlds leading supplier in offshore software outsourcing due to its remarkable development rate.Its aim is to outshine India and become the dominant competitor (Shine technologies 2008). Gap Inc. Should take advantage of this emerging strength and go ahead to outsource its textile manufacturing services in China as well as looking into ways to pull in from Chinas legitimate software strengths since for any company to succeed in the modern market, it has to utilize highly advanced technology. Environmental factors China has a developed IT structure, networks, and infrastr ucture. It has commodious telecommunication expansions making it more suitable for an industry growth.China also has the advantage of having a large pool of inexpensive skilled labor. Companies can benefit from the China market by taking advantage of and cut cost that are up to approximately 50-60% (Shine technologies, 2008). However, the textile industry in China has constantly been on the spotlight due to its massive negative effects on the environment. Prices of clothing and fabric imported to the U. S have been fall ever since 1995. The Chinese textile companies have been known to cut cost of production by dumping wastes into rivers cause massive pollution. U.S retail textile industry on the other hand is struggling to prevent environmental issues that have caused them consumer backlash in the past. The textile industry in China is one of the dirtiest industries in the country. Heavy metals and carcinogens contain high levels of organic materials causing much damage to the en vironment. Gap therefore should consider this as a drawback when opting to outsource in China nice this pollution may in conclusion lead to emergence of social movements that will rise against environmental adulteration by textile industries leading to considerable reduction in sales.