GROUP CASE STUDY
STRATEGIC MANAGEMENT
KPA 1213
TITLE:
GAP INC. – 2011 (CASE 6)
NAME
MATRIC NO
Nor Hazlina Binti Abdullah
KBA 14032
Nur Nadiah Salihah Binti Mat Razali
KBA15040
Ateera bt Ahmad Dahalan
KBB16011
Rami Abdullah Ba Hamid
KBA14035
Khaled Bark Muhimdana Shantof
KBA14034
1.0 INTRODUCTION
Gap (often referred to as “The Gap”) is a popular retailer providing clothing, accessories,
and personal care products for men, women, children, and babies under the Gap, Old Navy,
Banana Republic, Piperlime, and Athleta Brands. Stores are located in the United States, Canada,
China, the United Kingdom, France, ireland, and Japan. On 2011, the company employed about
134,000 people with 3,231 store locations. Customers also can shop online at gap.com,
oldnavy.com, bananarepublic.com, piperlime.com, and athleta.com. Other gap-owned retail
outlets include GapBody, GapKids, and babyGap. The company provides a wide range of family
clothing products. All gap clothing is private-label merchandise made specifically for the
company. From the design board to store displays, gap controls all aspects of its trademark
casual look.
The 1980s was a period of major growth and expansion of GAP. From 1990 to 1999, Gap
continued its progressive expansion efforts. Two years later, Gap became the second-largestselling apparel brand in the world. In 1993, Gap continued its global expansion by entering the
French marketplace. In 2005, Gap revamped its online stores, offering more convenience and
interactive shopping. In the same year, Gap introduced Forth & Towne in Chicago and New
York. The store caters to baby-boomer women, offering stylish, age-appropriate clothing that is
especially appealing to their femininity and individuality. In 2007, Glenn Murphy became Gap’s
CEO and, within months, closed all 19 Forth & towne stores. In 2008, the company acquired all
the capital stock of Athleta Inc., a women’s sports and active apparel company based in
Petaluma, California, for $148 million. For the last few years, Gap has added stores in four new
countries annually.
But, Gap’s July 2011 revenue at stores open at least a year fell 5 percent, worse than
analysts expected. Total revenue for the four weeks that ended July 30 was almost flat at $949
million, compared with $948 million a year earlier. Gap Inc. includes the Banana Republic and
Old Navy chains, outlets and smaller retail concerns, and is the country’s biggest clothing seller.
Gap’s July 2011 revenue at stores open at least a year dropped 10 percent for its overseas
business. In North America, revenue fell by 6 percent at gap stores open at least a year, fell 4
percent at Banana Republic and fell 3 percent at Old Navy. Second-quarter 2011 revenue from
stores open at least a year dropped 2 percent but total quarterly revenue rose 2 percent to $3.39
billion. The company needs a clear strategic plan.
2.0 VISION, MISSION, OBJECTIVE, STRATEGY
2.1 GAP’S ORIGINAL VISSION AND MISSION
Gap Inc. does not have an official company mission or vision statement. But, they are noted for
claiming: “Gap Inc. is a brand-builder. We create emotional connections with customers around
the world through inspiring product design, unique store experiences, and compelling
marketing.”
But Gap Inc. has a Corporate Philosophy and Code of Business Ethics:
2.1.1 Corporate Philosophy
Gap strives to be a leader in the specialty family clothing industry and has strongly espoused the
importance of its customers and employees. The statement of corporate philosophy exemplifies
the concern as shown in the 2010 Annual Report: “at Gap Inc., we seek to make lasting, positive
impressions on the people and communities where we operate—because we believe that doing
what’s right is good for business. That means delivering value to our shareholders while working
to lessen our impact on the planet, advance the rights of garment workers and ensure that our
company culture is one our employees can be proud of.”
2.1.2 Code of Business Ethics
Gap has well-established code of ethics that was translated in 65 different languages that
addresses the different aspects and guidelines about its purpose, responsibilities, laws, reporting
code violations, retaliation, policy changes, and waivers. The code proposes a responsible and
ethical work environment for all Gap Inc. employees and directors and addresses the following
most common ethical problems: conflict of interest, discrimination or harassment, workplace
violence, complaints to government agencies, international trade regulations, bribes and
improper payments, antitrust laws and selling practices, product integrity, commercial
transactions, brand protection, and political contributions and activities.
2.2 GAP’S OBJECTIVES
The current objectives of Gap, Inc. are to (1) target primarily the upscale casual clothing
consumer family (other than infants), and (2) target secondarily the adult consumer seeking
sports clothing which is both more expensive and more stylish than that offered in the firm's
principal retail outlets (Rudnitsky, 1987). In the implementation of the first objective, Gap, Inc.
operates Gap stores which cater to teenagers and adults, Gap Kids stores which cater to children
(other than infants), and Banana Republic stores which continuous to offer safari clothing, but
which now also emphasizes vacation and resort clothing. The firm operates Hemisphere stores in
the implementation of the second objective, where European style, expensive sports clothing is
offered. The Hemisphere stores have not proved to be a great success, and current plans call for
them to be closed in 1990 (Schiffman, 1990).
Within this framework of objectives, the firm has several specific goals. These goals include the
following:
1. The opening of 50 to 60 new The Gap stores per year (Schiffman, 1990).
2. The opening of 50 new Gap Kids stores per year (Schiffman, 1990).
3. The opening of 15 to 20 new Banana Republic stores per year (Schiffman, 1990).
4. The closing of nine Hemisphere stores in 1990 (Schiffman, 1990).
5. Earning a return on investment of 25.0 percent (minimum) on net worth annually.
Although Gap, Inc. operates through separate store groups, each with its own Senior Vice
President, and although the firm has organizational units covering merchandising, buying,
facilities management, and so forth (Standard, & Poor's, 1989), the actual management of the
firm is largely a one man operation (Rudnitsky, 1987). Millard Drexler is a hand on President,
who makes decisions related to retail store environments, product quality, product style, product
lines, target markets, and so forth, and who visits company retail outlets daily, and who often
makes on the spot decisions at one retail store which become effective throughout the
organization (Rudnitsky, 1987).
The effective one man show of Millard Drexler is definitely a part of the corporate culture at
Gap, Inc. Donald Fisher, the founder and Chairman of the firm, is also a very much hands on
person; however, since he brought Drexler into the company, he has allowed Drexler free rein in
merchandising and general operations, while retaining a relatively tight con trol for himself with
respect to dealings with shareholders and capital sources (Rudnitsky, 1987).
2.3 GAP’S STRATEGIES
GAP decided to use multichannel strategy. Company saw its bricks-and-mortar stores not as an
impediment, as many Internet pure-plays liked to assert, but as a key asset that it could leverage
to give consumers a complete shopping experience:
Consumers benefited in several ways:
i. Customers could return products to stores even if they bought them online.
ii. Banana Republic offered free alterations.
iii.Customers could do product research first on the Web and then buy at brick-and-mortar store.
iv.Customers were more comfortable buying online because of GAP’s well-established brand
and reputation
2.4 REVISE VISION AND MISSION
2.4.1 Revise Vision
Gap’s vision is to be the consumer’s first choice in family retail clothing while capitalizing on
customer satisfaction and shareholder value.
2.4.2 Revise Mission
Gap’s desire nothing less than to satisfy the fashion desires of their customers by providing
quality yet affordable clothing through their five competitive brands. With passionate and
fashion minded employees, the shopping experiences for Gap clientele is incomparable, these
attributes allow Gap to be set apart from their competitors. Gap desires to sustain a strong brand
image by improving their presences through the use of technology to build and maintain brand
awareness.
3.0 EXTERNAL OPPORTUNITIES AND TREAT
3.1 EXTERNAL OPPORTUNITIES
i.
Gap’s opportunity to penetrate the market overseas like Europe and Asia
ii.
E- commerce expansion is up by 10% growth rate through 2010-2015
iii.
Growth in market for plus size women (currently a 42 billion dollar market)
iv.
Growing of the green and organic material for clothes
3.2 EXTERNAL THREATS
i.
Rising of cost production
ii.
Unemployment rate is causing consumers to spend les
iii.
Consumers searching for lower price(counterfeit products)
iv.
Currency changes between country
v.
Competitive retail market
4.0 COMPETITIVE COMPILE MATRIX (CPM)
It is a tool used to compare the relative strength and weaknesses of the rivals in the same
industry, in order to have better understanding of external environment that makes the firm be
aware of what to improve and what to protect. Critical success factors for the apparel industry
are so many and we choose the most critical in the table below and compared them with the key
competitors in the industry.
CRITICAL
TJX Companies
Abercrombie
Nordstrom
& Fitch Co.
Inc.
SUCCESS
Gap Inc.
American
Eagle Inc.
FACTORS
Weig
Ratin
ht
g
Score
Ratin
Score
g
Ratin
Score
g
Ratin
Score
g
Ratin
Score
g
Product diversity
0.15
3
0.45
3
0.45
3
0.45
3
0.45
2
0.30
Financial Position
0.10
4
0.40
3
0.30
3
0.30
3
0.30
3
0.30
Market Share
0.05
3
0.15
3
0.15
3
0.15
3
0.15
3
0.15
Brand name
0.15
3
0.45
3
0.45
3
0.45
3
0.45
3
0.45
Global Expansion
0.10
3
0.30
3
0.30
3
0.30
3
0.30
2
0.20
Price policy
0.10
4
0.40
3
0.30
3
0.30
3
0.30
3
0.30
Retailing channel
0.15
3
0.45
4
0.60
3
0.45
4
0.60
2
0.30
Marketing strategy
0.10
3
0.30
3
0.30
3
0.30
3
0.30
3
0.30
Technology
0.10
3
0.30
2
0.20
2
0.20
4
0.40
2
0.20
TOTAL
1.00
4 – major strength
3.20
3 – minor strength
3.05
2 – minor weakness
2.90
3.25
1 – major weakness
From CPM matrix above, Gap Inc. scored 3.65, while TJX Companies weighted score of
3.35, Abercrombie and Fitch scored 3.05, Nordstrom Inc. 2.90 and American eagle Inc. was the
last one with 2.5. Although Gap Inc. has the highest weighted score, some of its factors have a
varied score in rating and weight.
2.50
Gap Inc. have to focus on competitive advantages and make additional improvements with
factors that have low on rating allocating improvements with marketing strategy, additional
advertisements and also in pricing policy. The company should also focus on its Global
Expansion in Asia since they had a goods trade as well as investments in order to catch up in the
future. This advantage can improve its management, customer service, financial position,
number of branches, customer loyalty and security and safety and international relation.
5.0 External Factor Evaluation (EFE) Matrix
It is a tool used to assess the current business situation for the firm through the opportunities and
the threats (enteral factors) that facing the firm. These factors are subjected to social, economic,
political, and legal and other external forces.
Gap Inc. like any firm has opportunities in the external environment also has threats that will
affect the firm in the future if don’t consider it and has proactive approach to face them. In the
table below is the (EFE) matrix for Gap Inc.
KEY EXTERNAL FACTORS
Weight
Rating
Score
Opportunities
Green/Organic materials for clothes
0.05
2
0.10
Growth in plus size apparel
0.10
2
0.20
Growth of global market (Europe and Asia)
0.15
3
0.45
e-commerce trends
0.15
4
0.60
Rising of the production cost
0.15
2
0.30
Exchange rate
0.05
2
0.10
Growth of counterfeit products
0.10
3
0.30
Aggressive competitors
0.20
3
0.60
Unemployment rate
0.05
2
0.10
TOTAL
1.00
Threats
2.75
Based on the EFE Matrix of Gap Inc. above, it scored 2.95. EFE Matrix based on the evaluation
of general environment analysis of these external factors that affect the business to get the
potential opportunities and threats for Gap, Inc. The weighted score indicates that the company’s
response had a huge effect in its existing Opportunities and Threats in the Apparel Retail
industry.
In the table, we can see that the densest factor is Global new market in Europe and Asia; and the
e-commerce trends are evaluated as the most opportunities for gap to make use of it the most to
improve their provability. The most threats for Gap Inc. are competitors that they consider as the
biggest threat.
EFE Matrix above has its current competitive position or business strength in the industry is
above average. This factors had been coping up well, which can be positively or adversely affect
its financial positioning today.
6.0 INTERNAL ASSESSMENT
Strength
GAP recognized as American style, its main strength is through franchising. It operates through
franchise agreements in more than 20 countries including Australia, Chile, Egypt, Greece, Israel,
Mexico, Russia and Thailand. These franchise agreements are with unaffiliated franchisees to
operate Gap or Banana Republic store worldwide. The company has stores present in the US,
Canada, the UK, France, Ireland, Japan, China and Italy making it more globally recognized.
Gap’s net profit margin is double in comparison to its competitors in 2011; Gap’s net profit
margin was 8.2%. Gap is able to achieve this through inventory and cost control, an efficient
supply chain, repositioning of its Old Navy brand and introducing new product categories. It also
has strong margins in comparison to many of Gap’s competitors.
Gap’s presence online offers user-friendly websites, easy online check-out for consumers,
convenience, gives consumers variety as well as making the latest international trends accessible
to consumers who are on the go while they enjoy international shipping. The company’s online
presence is not only beneficial to the consumers but also to Gap because they are also able to
enjoy low operational costs
WEAKNESS
Most of sales depend on third-party vendors, which are not in the United States. Almost 1000
vendors in 60 countries are produced in China. With the fact that Gap does not manufacture its
items, this practice has led to quality issues due to the company’s reliance on third-party agents.
Only 1% of merchandise sold in 2011 was manufactured in the United States while the
remaining was outsourced in the other countries. Having a marginal increase in 2011, the
company still reported a decline in sales in 2011 fiscal year. Gap experienced low sales per
average square foot, with sales per average square foot decreased to $329 in 2010 compared with
$412 in 2006. This in general represented a compound annual rate of change of 5% during 2006–
10.
7.0 Internal Factor Evaluation Matrix
KEY INTERNAL FACTORS
Weight
Rating
Score
Brand recognition
0.16
3
0.48
Strong distribution channels
0.11
2
0.22
Financial position
0.10
2
0.20
Divarication
0.11
3
0.33
STRENGTHS
Technology
0.14
4
0.56
Depending on Outsider vendors
0.10
3
0.30
Low productivity(decline sales)
0.15
2
0.30
Less attractive in trendy clothing
0.05
1
0.05
Uncontrollable production processes
0.05
1
0.05
Low numbers of stores in global market
0.15
3
0.45
TOTAL
1.00
WEAKNESSES
2.89
Based on the table above, Gap Inc. scores 2.89. It weighted based on the company’s higher than
average rate and has a strong internal position. This reiterates the fact that the company is strong
in terms of branches inside and outside America. From the illustration table, it concludes that
Gap, Inc. has a good internal structure.
Based on the analysis of the opportunities, threats, strength and weakness it seems that Gap Inc.
has more threats than opportunities and more good internal structure than the weakness, so they
have to focus on the external issues to improve the firm.
8.0 SWOT Matrix
From the SOWT analysis we can identify the most strength for Gap Inc. which is brand name
and latest technology, the opportunity is the growth of the global market. For the weakness is the
low expanding in the global market and decreasing sales, the most threat that affect gap is the
aggressive competitors
•
SO strategy
Gap Inc. having well-known brand and strong online advantage so they can extend to new
markets like Asia Europe and Africa (market Development strategy) also using the latest
technologies (online sales) to increase their market shares and expand their market target.
•
ST strategy
Gap Inc. can use the good reputation in market and their brand recognition, to reveal with their
competitors like TJX and Fitch to make them able to maintain their market share and use the
latest technology to make them more effective and efficient. By this they can easily take a
competitive advantage and can overcome on the competitors in the market.
•
WO strategy
If Gap Inc. able to maintain their distinctive competence they can take advantage from market
potential. (Market penetration)By increasing or by properly utilizing the technical personnel Gap
may able to capture more shares in the growing market.
•
WT strategy:
If Gap Inc. able to overcome and increase or maintain their distinctive competence they can
easily compete with their competitors. If they introduce new product in the market they may able
to avoid the threat of competitors. (Product development) By increasing or properly utilizing
their technical labors and start advertisements, Gap can again improve sale position. They also
can avoid the weakness of low productivity by entering and expanding in the global markets
(market penetration) increase the productivity.
8.1 PORTER’S FRAMEWORK ANALYSIS
Gap Inc., is one of the leading family brand apparel in the world. Its competitors are
Abercrombie & Fitch, American eagle Outfitters, TJX Companies, Nordstrom, Inc, and others.
For the threats of New Entrance, I can see a potential with the emerging Asian brands like UniQlo, Bench, Hang Ten, etc. This could be a threat to them since they are starting to become
global. About the substitutes, I can’t find any substitutes for these casual wears as far as clothing
style is concerned. It varies in brand but less in style. What’s common about these brands is that
they are focused in being a household casual wear brand that may cater to the entire age bracket
in a family.
8.2 Strategic Position and Action Evaluation (SPACE) Matrix
For SPACE matrix there are four-quadrant framework indicates whether aggressive,
conservative, defensive, or competitive strategies are most appropriate for a given organization.
Also there are two dimensions that can identify the strategies of the company and which one of
these strategies we recommended for the company based on some steps. The two internal
dimensions financial position [FP] and competitive position [CP], and two external dimensions
stability position [SP] and industry position [IP], then we can select the most important
determinants of a company’s overall strategic position
Internal analysis
External analysis
Financial position FP
Stability position SP
Return on investment
4
Rate of inflation
-4
Leverage
3
Technological changes
-3
Liquidity
5
Price range of competing products
-4
Working capital
5
Competitive pressure
-4
Cash flow
6
Barriers to entry into market
-3
4.6
Stability position SP average
-3.6
Financial position FP average
Internal analysis
External analysis
Competitive position CP
Industry position IP
Market share
-3
Growth potential
5
Product quality
-2
Financial stability
4
Customer loyalty
-3
Ease of entry into market
6
Technological know-how
-2
Resources utilization
5
Control over suppliers and
-3
Profit potential
4
distributions
Competitive position CP average
-2.6
Industry position IP average
4.8
Based on the analysis above and from we have seen in SPACE matrix, Gap Inc. on the first
quarter which is aggressive strategy also based on the ranging above Gap has selected to be close
on industry position IP and financial position FP as well.
8.3 Boston Consulting Group (BCG) Matrix
For BCG matrix graphically portrays differences among divisions in terms of relative market
share position and industry growth rate, allows a multidivisional organization to manage its
portfolio of businesses by examining the relative market share position and the industry growth
rate of each division relative to all other divisions in the organization. The Boston Consulting
group’s product portfolio matrix (BCG) is designed to help with long-term strategic planning, to
help a business consider growth opportunities by reviewing its portfolio of products to decide
where to invest, to discontinue or develop products. The major benefit of the BCG Matrix is that
it draws attention to the cash flow, investment characteristics, and needs of an organization’s
various divisions
Based on the analysis above the company (Gap) was in the first quarter, they have decided to be
more strength by pursuing their intensive strategy (market penetration, market development, or
product development) or to sell them. From their total profit they always trying to generate their
cash flow and manage it as possible as they can to get more because they are in third guardant so
they must maintain cash and make it stable as long as possible.
8.4 Internal-External (IE) Matrix
The Internal-External (IE) matrix is tool used to analyze working conditions and strategic
position of a business. It is based on an analysis of internal and external business factors which
are combined into one suggestive model, so it is considered as a continuation of the EFE matrix
and IFE matrix models.
Gap Inc. strategic position based on (IE) matrix with 2.89 for EFE and 2.78 for IFE that put Gap
in the average phase hold and maintain strategy that Gap has to their tactical strategies should
focus on market penetration and product development as it shown in the graph below.
8.5 Grand strategy matrix
Grand Strategy Matrix is tool in devising alternative strategies. It is basically based on four
important elements Rapid Market Growth, Slow Market Growth, Strong Competitive Position
and Weak Competitive Position.
Gap Inc., based on the analyses located in QUADRANT I which means that gap is in a strong
competitive position and flourishing with rapid market growth. Gap Inc. is in excellent strategic
position and it need to concentrate on current markets and products. Concentration on current
markets reveals the adoption of strategies such as market penetration and market development
and likewise concentration on current products calls for adoption of product development
strategy and must avoid from losing the focus from the competitive advantage gained over the
time.
8.6 Quantitative Strategic Planning Matrix (QSPM)
The Quantitative Strategic Planning Matrix (QSPM) is the decision stage. In this objectively
indicates which alternative strategies are best. Uses input from Stage 1 analyses and matching
results from Stage 2 analyses to decide objectively among alternative strategies.
Strategic Alternatives
Market Development
Key External Factors
Product Development
Weight
AS
TAS
AS
TAS
Economy
0.20
3
0.60
3
0.60
Political/ legal / Governmental
0.20
1
0.20
3
0.60
demo graphic/Environmental
0.10
3
0.30
3
0.30
Technological
0.25
3
0.75
2
0.50
Competitive
0.25
2
0.50
2
0.50
Key Internal Factors
Management
0.30
3
0.90
2
0.60
Marketing
0.10
2
0.20
2
0.20
Finance/ accounting
0.15
2
0.30
4
0.60
Production/ operations
0.15
3
0.50
3
0.40
Research and development
0.20
2
0.80
4
0.40
Management information
0.10
3
0.40
3
0.30
system
Total
5.45
5.00
Based on The Quantitative Strategic Planning Matrix (QSPM) and its steps to compare all
strategy and as showing above market development is high and more suitable with Gap
Company more than product development. Market Development is the recommended strategy
for Gap.
9.0 Recommendation
The Gap Inc. Company did not come out with mission and Vision Company. Basically, people
will ignore and assume that the mission and vision not the crucial part in organization. They just
find the market trend, marketing gap and customer preferences. It is same like the perception of
the spouse whose pioneer of Gap Inc. Company. They open the first Gap just to find a pair jeans
that fit. So, we try to come out the vision and mission for this company. It is very important to
see clearly the objective want to achieve and long term strategy to plan. We will propose the
vision and mission for this company to pursue their target objective. The vision of Gap Inc.
Company is to be the consumer’s first choice in family retail clothing while capitalizing on
customer satisfaction and shareholder value. The mission of Gap Inc. company is Gap’s
desire nothing less than to satisfy the fashion desires of their customers by providing
quality yet affordable clothing through their five competitive brands. With passionate and
fashion minded employees, the shopping experiences for Gap clientele is incomparable, these
attributes allow Gap to be set apart from their competitors. Gap desires to sustain a strong brand
image by improving their presences through the use of technology to build and maintain brand
awareness.
Second, we recommend to Gap Inc. to make clear and precise market segmentation. Fashion
is fickle and change very fast. The Gap should know their best target market. Basically, the
casual wear will seek by the teen generation and suitable to west rather than east. The Gap also
can come out the product which old generation interest to wear up. The focus group also can be
put at the country which has four seasons; the cloth can be made up the cotton to absorb the heat
during winter season. It must suit with the season.
Nowadays, the Gap faces loose with the outstanding debt. There are many outlets or branch in
some countries. So, during this situation, the planning we recommend is to close the branch
which only gives loose to them. The workers need to pay wages, the utility bills also need to pay
and rent of the shop will continue to pay. Unfortunately, the sales are dropping and the
expenditure is more than the revenue. The Gap should focus the branch which gives profitable to
them. The product development stage also stated the fourth stage of product, which at the
maturity stage need to have some innovation or development. Perhaps the next stage is decline or
will sustain if the Gap able to penetrate again the market using the market penetration with
giving the low price or discount to the buyer. The Gap Company should choose to sacrifice their
goods at the lower price rather to clear stock and get high sale volume.
The long term planning is trying to recover the inventory management and integrate the local
preferences. The Gap Inc. have problem in inventory management. There are three channel of
distribution of their product which are full price retail stores, online and outlet Gap. People some
time need to buy immediate for some function. So, we realize that stock in inventory is suitable
to make sure all people satisfy and feel the title of goods was given when purchase. The better
inventory management here also means the lower cost used and most appropriate location. Profit
Logic is the system that control price system to be more suitable with different demand schedule
and different locations. The Gap also must keep make the Research and Development to follow
the trends and may faster to capture people preferences. The first mover advantage is also can
help the Gap’s to produce new style which can acceptable by the people local.
The Gap’s company faces losing market share in recent years. Even though in past this company
very successful. So, the firms need to change strategies to maintain a good market. First of all,
the company should maintain the customer loyalty in the brand. The brand recognition is
important. So, the company should follow the trends that customer preferences. The target
market should be suitable based on demographics factors. The cloth must fit with the teen, adult
and also old fashion. Next, the customer also can be sustain if they feel valued when they make
purchasing. The company should give reward like discounts card. The economical zed customer
want to have valued when make purchasing. So, the customer may attractive to make repeat
buying. For instance, in the Banana Republic offer the higher prices in their product. So, the
credit card payment will provides reward program to frequent customer come. It can increase
emotional attachment to repeat purchase there.
In order to maintain growth, the Gap Inc. should focus in penetrated market in the domestic.
When the domestic market strengthens and able to control, then can move to international
market. Now, it likely the number of Gap stores open in US was losses. Old Navy and Banana
Republic become growth but still limited. So, the Gap Inc. must arrange the good strategy to
wide range customer base to all brands line. It must come out the promotion, introducing and
expand the market to make people aware and give attention to Gap. The older generation will be
intruding with new brand.
Next, is using the opportunist to enhance the sales. The Gap was popular in the world. The
company also was acquiring many competitors with buy the share in the stock. So, the company
might be used this opportunist to giving the license to make franchising business. The franchisee
may adopt the business to be stronger and get attention. It might give chance to the company
raise their revenue from making franchising. All the fees and regulations will give money back to
main company.
Furthermore, the company may come out with the vertical integration which is minimizing
the outsourcing of manufacturing. The company should make their garments and apparel by
their own. It can make the company able to generate income more. The company already
provides more capital on brand image and recognition. So, it must be protected. Whenever
producing outsource, it will create the copyright. The fashion is one of the products which not
long lasting and may fade. So, every trend will come and goes fast. The company should think
ten times forward with creative idea to compete with other competitor. Every product need to
restructure to increase line up of plus sized apparel.
The Gap company also must avoid the threat when want to continuously market their
product to other country. It may happen the counterfeit which the other country may copyright
their pattern. The Intellectual Property laws in the country that want to enter must be research
first. Then, when the company wants to expend their market, they must research carefully
whether the country tariffs, exportation and laws can be obey by the company. If the restriction
will cause problems, better the company go to another country.
The marketing strategy must be aggressively implemented to attract people. The launching
must be do it separately between teenagers, old and baby clothing to focus on trendy and
acceptable of people. The celebrities in the Television, Film and Sports also can use to promote
the products. The advertising, promotion and sales should be doing it frequently to attract
customers to come to the company. The company also may do the corporate social marketing to
make people know them well. The marketing network also is a unique company asset. The Gap
Company may have strong relationship with supplier. This operating principle is simple: when
the company builds an effective network relationship with stakeholder, the profit will follow
them.
10.0 SPECIFIC ANNUAL OBJECTIVES AND POLICIES
We would like to recommend for Gap Inc. to propose annual objectives of stopping negative
growth in sales. This going to be the most important objectives since Gap Inc. is currently faces
problem of negatives sales growth. Gap Inc. faces strong competitive forces especially from Zara
and H&M. They have no loyal customer base and facing an overlapping of clientele with Old
Navy. Therefore, Gap Inc. needs to restructure the management and production team to ensure
the objectives are clear.
Besides, Gap Inc. has to strengthen brand loyalty among older generation and at the same time
build brand preference among younger generation. By using this strategy, Gap Inc. will have
bigger market segmentation and not only focusing on certain target market. This will definitely
help to increase the sales growth of the company.
Other than that, they need to reposition Gap brand. They have to be clear about the target market
for each of their brand to ensure there is no overlapping of clientele. Overlapping of clientele
will definitely bring the negative sales to the brand.
Moreover, with the aimed of stopping negative growth in sales, Gap Inc. also need to aimed for
positive growth sales to ensure the company can still be compete with their competitive.
11.0 PROCEDURES FOR STRATEGY REVIEW AND EVALUATION
First of all, Gap Inc. needs to focus on how they can change their relationship with suppliers and
distributors. This is very important so that they can keep updated the new trend and style of
fashion. They have to build a chain of suppliers that focusing on maximizing value to the
ultimate customer. As they maximize value along the chain, they will be able to ensure the
improving of quality, delivery and innovation.
Besides, the operational strategy must be link with broad corporate strategy. These two strategies
can help to increase competitiveness through product customization, high quality, cost reductions
and speed to market with the added emphasis being on the supply chain. Gap Inc. focusing on to
cut down on scatter and huge number of suppliers and thus focus on building dependable close
yet very few suppliers with long-term strategic relationship. Then the selection of suppliers has
to change.
Other than that, it is important that Gap Inc. build on process focused facilities in the medium to
long term period as they have to centralize their operations. Scheduling systems is necessary to
ensure that accurate and relevant production database is maintained throughout the entire
organization. In conclusion, feasible and efficient schedules of production must be developed;
the demands of human resources and facilities must be determined and controlled.
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