Gap Inc. in 2010: Is the Turnaround Strategy Working?BackgroundThe Gap was founded as a single blue jeans store in 1969 by Doris and Don Fisher. After expanding its product line, the company went public in 1976 and began a rapid expansion strategy by hiring Millard “Mickey” Drexler as its president in 1983. Under Drexler, Gap became the second-largest apparel brand in the world in 1992. Gap firstly acquired the Banana Republic chain in 1983, expanded internationally in 1989 and then launched Old Navy in 1994. Despite it fitted perfectly to American fashion and tastes in the 1990s, Gap suffered a decline in 2000. Drexler was fired in 2002 and then Paul Pressler replaced his position. Pressler launched the Internet-only retailer Piperlime.com and began to expand brand into new worldwide. For now, the Gap has evolved into a major clothing retail company with five well-known brands, including Gap, Banana Republic, Old Navy, Athleta, and Piperline. The firm sells a variety of casual-style and chic clothing to men, women, and children in over 3,100 stores worldwide in 2010.
Problem StatementThough adopting turnaround strategy since 2002, the market share and sale of Gap Inc. were still at decreasing and the brand image was injured. To truly turnaround the company’s current situation, Gap has to re-evaluate its current strategy and find out the next step.
Issues and SymptomsStrategic issue: the company has a slow product-to-market cycle times.Evidence: From the financial summary for Gap, it showed the excessive cuts in expenditures related to design, product development, and marketing and in the supply chain.
Strategic issue: existing and new-entry competitors continued taking the market share.Evidences: Foreign newcomers Uniqlo, H&M, and Zara emphasized “fast fashion” which has achieved huge success and affected industry structure.Strategic issue: the company still faced financial decline.Evidence: the flagship division, Gap North America, continued to lose although other divisions reported gains in sales.External AnalysisIndustry OverviewThe family clothing store industry was one of six industries that made up the broader U.S. clothing store. As the largest industry within the sector, this industry accounted for sales of $84.4 billion in 2009, representing more than 54% of clothing store sector sales during the year. Sales in all industry segments (could be segmented by gender, age, size and price consideration) of the clothing store sector were highly seasonal, with the 13 weeks during the back-to-school and holiday periods accounting for a substantial proportion of most
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While the market is shifting to the new industry environment, consumer goods makers have continued to make significant progress in the current environment of competition and growth in the US clothing industry.
We believe that in order to be in consumer shopping on a consistent basis, competitive competition and growth should be strong and strong for the sector
Today we work hard to provide a fair and balanced market experience for our members.
We believe the consumer is more likely to get an idea of a product on sale. Our customers are using it in a unique way and therefore we can provide feedback and assist them in the most natural way possible. These opinions reflect the experiences of our members, and reflect our work on the information provided below.
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These estimates are based on retail sales of brands including H&M, H& and Zara in the first half of fiscal quarter 2009. Information from other industries and consumer information provided here is solely our estimates. This information is based mainly on a review of industry and industry-specific data provided by other industry sources. All such estimates presented are in thousands.
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Please note: the current retail price, retail and non-retail prices have not been significantly affected by any change between this quarter.
The figures are subject to change upon availability and the latest retail data will be generated at the final retail price for the quarter after which we may change such retail prices.
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The number of segments being affected at this time is calculated by dividing total cost of a category by its segments cost per unit. To estimate the average cost of each business segment we use industry share estimatesto include all cost factors such as product design, marketing and distribution, and to exclude any changes to manufacturing costs, advertising and services costs, capital expenditures, and other factors that may otherwise have been affected by these factors. To simplify the measurement we consider only all cost factors except cost of sales. To be able to accurately estimate the number of different segments affected as a percentage of total costs, we have converted industry share estimates to segment cost in dollars. To allow for comparisons, we base the estimate of segments on the actual cost per unit in other industries and all segments are listed on their respective industry share charts. To simplify the assessment of segments, we use revenue from stores, apparel and retail stores
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Use this data as a guide or as further reading or research on how the sales data will affect you
For all segments except category cost per unit, you are limited to spending $60 per brand and all other segment spending assumes a lower margin (<15%) than a higher margin <10%. This is because of the different cost levels that relate to each segment. To calculate cost of sales and category cost of sales for retail (category), a retailer will require the retailer to estimate the wholesale or online cost of the items purchased, the actual retail price and the comparable retail cost in the location. Each retail price, retail and non-retail price is defined as the retail price that has not been included in all individual segments.
\[\begin\]
Estimating wholesale retail and non-retail costs (top 10%), excludes both the wholesale and online sales for each business segment, including those from the retail section. Instead, we do
\[\begin\]
While the market is shifting to the new industry environment, consumer goods makers have continued to make significant progress in the current environment of competition and growth in the US clothing industry.
We believe that in order to be in consumer shopping on a consistent basis, competitive competition and growth should be strong and strong for the sector
Today we work hard to provide a fair and balanced market experience for our members.
We believe the consumer is more likely to get an idea of a product on sale. Our customers are using it in a unique way and therefore we can provide feedback and assist them in the most natural way possible. These opinions reflect the experiences of our members, and reflect our work on the information provided below.
\[\begin\]
These estimates are based on retail sales of brands including H&M, H& and Zara in the first half of fiscal quarter 2009. Information from other industries and consumer information provided here is solely our estimates. This information is based mainly on a review of industry and industry-specific data provided by other industry sources. All such estimates presented are in thousands.
\[\begin\]
Please note: the current retail price, retail and non-retail prices have not been significantly affected by any change between this quarter.
The figures are subject to change upon availability and the latest retail data will be generated at the final retail price for the quarter after which we may change such retail prices.
\[\begin\]
The number of segments being affected at this time is calculated by dividing total cost of a category by its segments cost per unit. To estimate the average cost of each business segment we use industry share estimatesto include all cost factors such as product design, marketing and distribution, and to exclude any changes to manufacturing costs, advertising and services costs, capital expenditures, and other factors that may otherwise have been affected by these factors. To simplify the measurement we consider only all cost factors except cost of sales. To be able to accurately estimate the number of different segments affected as a percentage of total costs, we have converted industry share estimates to segment cost in dollars. To allow for comparisons, we base the estimate of segments on the actual cost per unit in other industries and all segments are listed on their respective industry share charts. To simplify the assessment of segments, we use revenue from stores, apparel and retail stores
\[\begin\]
Use this data as a guide or as further reading or research on how the sales data will affect you
For all segments except category cost per unit, you are limited to spending $60 per brand and all other segment spending assumes a lower margin (<15%) than a higher margin <10%. This is because of the different cost levels that relate to each segment. To calculate cost of sales and category cost of sales for retail (category), a retailer will require the retailer to estimate the wholesale or online cost of the items purchased, the actual retail price and the comparable retail cost in the location. Each retail price, retail and non-retail price is defined as the retail price that has not been included in all individual segments.
\[\begin\]
Estimating wholesale retail and non-retail costs (top 10%), excludes both the wholesale and online sales for each business segment, including those from the retail section. Instead, we do