Gap is in the fashion industry and must continually compete on the basis of brand desirability. Brand name equity is Gap's greatest asset. However, the recent economic downturn has had, and will continue to have, a negative impact on Gap's ability to generate revenue. Gap is a luxury apparel item and would be one of the first to be reduced in a consumer's budget. In 2007, Gap closed several Forth and Towne stores after test marketing did not meet with customer acceptance (We Are Gap Inc. ). In addition, protectionist attitudes in the US, and the coming election, may alter the trade agreements that have benefited Gap's manufacturing and distribution strategies.
The industry environment is best analyzed by using Michael Porter's five forces. New entrants into the fashion apparel industry are faced with the ease of entry, and the difficulty of marketing. Globalization has made it easier for international brands to compete via the Internet or established distribution networks. According to Formisano, "As more countries develop around the world, more competitors are created, which fuels more competition for market share" (58).