Gap Inc. in 2010 – Is the Turnaround Strategy Working?
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Gap Inc. in 2010: Is the Turnaround Strategy Working?
Business: Offered an extensive selection of “classically styled, high quality casual apparel at moderate price points. Product ranged from wardrobe basics such as khakis and T shirts to fashion apparel, accessories and personal care products for men and women.”
Mission Statement: 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
How to we reach our Mission?
Improve working conditions in factory -> Cost leadership
Improve environmental performance
Globally effective organization
Career advance opportunities
Leverage asset to deepen impact
Differentiation through fashion and brand name besides Gap such as Banana Republic and Old Navy
Business Model
A key part of our strategy moving forward will be to build vendor capacity to develop human resource management systems
Improving our partnerships. Work can be greater reach and impact by continuing to engage a broad range of partners, including labor rights groups, trade unions, factory owners and management, governments, non-governmental organizations and other companies
Business Philosophy: We seek to make a positive, lasting impact on the people and in the places where we operate.
Business Principle: doing business responsibly, honestly and ethically. Not only meet legal requirements around the world, but also operate responsibly and with integrity in everything they do.
Corporate Culture:
Think: customers first – We make decisions with our customers in mind. We connect with our stores and create the quality our customers value and expect
Inspire: creativity – We think big, take risks and solve problems. We challenge the status quo and always look for new ideas and ways of working
Do: whats right – We believe that how we do business is as important as what we do. We act with integrity, and we give back to the communities in which we do business
Deliver: results – We deliver the best result possible – were committed to taking responsibility, setting priorities and meeting our goals.
Corporate Strategy:
identify, evaluate and prioritize strategic opportunities for the Gap Inc portfolio
Business Strategy
Using the differentiation strategy to sell to sophisticated customers who want to purchase moderately priced, high-fashion casual clothing. Gaps strategic success was largely a product of a segmentation strategy wherein the firm attempted to focus stores offerings on the unique needs of different market
Have distributors deliver items to stores instead of letting stores carry their own inventories. Regularly review its inventories to identify slow moving merchandise and determine markdown amounts necessary to clear merchandise. -> reduce inventory carrying cost
E-commerce platform was developed. Websites redesigned to provide greater functionality and a more convenient shopping experience. Using Kiva system, allows its e-commerce division, to process orders faster and with greater accuracy
Develop Code of Vendor to keep long term relationship with its vendors. To ensure its workers were paid fairly, did not work excessively and in healthy and safe environment.
International revenue takes up to 18%. Enter into franchise agreements to operate Gap apparel in 20countries
Implementation of Strategy
Focus on reducing debt to increase dividend payments to shareholders
Cost cutting to allocate resources to restore Gap brand reputation for style and quality.
Strategic Challenges
Require to carry a significant amount of inventory even before the beginning of a peak selling season.
Industry Gap Inc. competes in: Apparel
Five Forces Summary
Force: Level:
Rivalry among Existing Firms: High
Threat of New Entrants: Low
Threat of Substitute Products: Moderate
Bargaining Power of Buyers: Moderate
Bargaining Power of Suppliers: Low
Rivalry among Existing Firms: the TJX Companies Inc. (13.4%), Ross store (6.9%), Abercrombie & Fitch (4.1%), American Eagle Outfitters (1%), Gap Inc. (15%). Identifying and being knowledgeable about competitors, and how to overcome obstacles that their competitors place on firms is essential in highly competitive industries. Since the specialty apparel industry is highly competitive amongst existing firms, firms in this industry must focus on industry growth, concentration in their market, differentiation, switching costs, economies of scale, and fixed/variable costs to maintain and/or gain their market share.
Concentration: The main thing companies have to worry about with concentration is the big name companies in the industry who have stores everywhere and hold a lot of the market share as demonstrated below. This strengthens the need to recognize opportunities to expand into these less saturated market areas and further increases rivalry among existing firms.
Differentiation: The attempt is to bring customers interest back on Gaps unique brand and product image. Product Differentiation is key in this highly competitive market. The firms in operations must maintain their separate images. Ultimately there is a relatively high threat of existing firms when considering the effort firms must exert in brand image differentiation
Threat of New Entrants: Entering a market where there already is tough competition can be a difficult and daunting task. New firms will use such barriers as: economies of scale, first mover advantage, access to the channels of distribution and relationships, and legal barriers. They will use this to help justify their decision on whether or not there is profit to be made in the market. Existing firms have to take the