Gap purchases merchandise from some

Gap purchases merchandise from some 700 sources located
both in the United States and overseas. This procurement
strategy is designed to reduce each supplier’s
importance, so that no single supplier can affect Gap’s
overall operations significantly. All suppliers account for
no greater than 5 percent of the purchase. The suppliers
manufacture the Gap’s private-label merchandise according
to the company’s specifications. Gap purchases
are comprised of 40 percent domestic-made merchandise
and 60 percent foreign-made merchandise. Of the foreign
sources, approximately 23 percent are from Hong
Kong, and the remaining purchases are spread across 42
other countries.Hong Kong,Taiwan, South Korea, Singapore,
and China constitute over 50 percent of Gap’s foreign
merchandise sources. Sudden political instability in
any of these countries could quickly have an adverse effect
on Gap’s sourcing operations, as would any imposition
of import restrictions such as tariffs and quotas by
the U.S. government on products made in these countries.
Both the recent threat by the U.S. government to
deny China most favored nation (MFN) status and
China’s impending takeover of Hong Kong in 1997 are
causes for great concern for Gap’s management.