Then they shifted to high-margin private levels. By 1980, 200 Gap outlets in the U. S. offered 14 different private labels, such as Foxtails, Monterey Bay, and Durango. As other retailers started taking the same private label route to bolster their margins. Gap seemed to be getting lost in the crowd. Gap was ranked 52nd (2005 ranking—40th) by the Business Week Inter-brand survey conducted in August 2006. In 2005, it was valued at $6416 million. B. Corporate Governance: Board of Directors: Adrian D. P. Bellamy Chairman of Reckitt Benckiser plc. Chairman of Williams-Sonoma, Inc. Domenico De Sole
Chairman of Tom Ford International Director of Newell Rubbermaid, Inc. Robert J. Fisher Managing Director Pisces, Inc. Former Chairman, Interim CEO William S. Fisher Founder of Manzanita Capital. Bella Goren Chief financial officer of AMR Corporation and American Airlines, Inc. Bob L. Martin President and Chief Executive Officer of Wal-Mart International. Jorge P. Montoya Former executive of The Procter & Gamble Company. Glenn K. Murphy Chairman and Chief Executive Officer. Top Management- Mickey Drexler CEO Jeff Pfeifle EVP, product and design, Old Navy Henry Stafford Merchandiser, Old Navy men’s
Jerome Jessup EVP, product development and design, Gap brands Maureen Chiquet President, Banana Republic Neil Goldberg President, Gap Inc. outlets Michael Tucci EVP, Gap Inc. online division John Goodman SVP, Gap Inc. outlets Jennifer Foyle Divisional merchandising manager, Gap brand, women’s Lynda Markoe Senior director, Gap Inc. HR Todd Snyder Senior director, Old Navy, men’s product design John Valdivia VP, creative services, Old Navy Libby Wadle Div. merchandising manager, Banana Republic, women’s Roxane Al-Fayez VP, operations, Gap Inc. online division Thomas Cawley CFO, Gap brand Patti Barkin-Camilli
SVP, Old Navy, women’s accessories LeAnn NealzSVP, design, GapKids, babyGap SVP, design, GapKids, babyGap Barbara Wambach EVP, Gap Body Tara Poseley SVP, merchandising, GapKids, babyGap Tracy Gardner SVP, merchandising, Gap brand Mark Breitbard SVP, merchandising, Gap Kids, babyGap Alan Marks VP, corporate communications, Gap Inc. Pina Ferlisi EVP, design, Gap brand Jeff Jones EVP, marketing, Gap brand Felix Carbullido VP and general manager, Gap. com Alan Barocas SVP, real estate, Gap Inc. Nick Cullen EVP, chief supply chain officer, Gap Inc. Jyothi Rao VP, merchandising, Forth & Towne
Julie Rosen VP, merchandising, Gap brand External Environment A. General Environment: Consumer-insight research showed that the three brands were losing market share. With the distinction between the products of the three brands becoming hazy, each seemed to be eating into the other’s market share. Pressler decided to reposition all the three brands, giving each a distinctive identity. While Gap stayed in the middle, Old Navy focused on lower prices and basic items, and banana republic raised prices and experimented with runway-influenced designs. The strategy yielded results in the early days.
Old Navy, known for its specialty style at discounted prices, disappointed its faithful by stocking commodity T-shirts and jeans similar to those sold at discount chains such as Target, in the place of the trendy-but-cheap clothes it had stocked earlier. Banana Republic went over the top, devoting too much of its space to embellished pieces unsuitable for the office. As for the Gap brand, it started marketing outfits instead of individual staples like khakis and denim. Shoppers who had once considered Banana, Gap, and Old Navy as default choices gravitated to fresher competitors like Abercrombie & Fitch, Urban Outfitters, and J.
Crew. Gap continued to face a perception problem—a struggle to recapture customers who had abandoned it. Fiscally and operationally, Gap was a tighter, stronger business than it was in 2002. While creating the Forth & Towne chain appeared a gamble, Pressler felt that the numbers pointed to an untapped market. Industry observers, however, opined that no matter how carefully calibrated Gap’s fashion choices were, the nature of the business required a certain degree of risk taking. No one knew what consumers would actually buy until the goods were on the shelves. . B. Industry Environment:
Threat of new entrants: Many new firms like Abercrombie & Fitch, Urban Outfitters, and J. Crew are entering in this high profitable business. Threat of substitutes: A threat from substitutes exists as there are many fashion houses which offer lot of collections with better options. Rivalry among existing firms: High competitive pressure profitability for every single company in the industry are seen. Competitors like Urban Outfitters, Abercrombie & Fitch are highly competition with Gap Inc. Bargaining power of suppliers: The market is highly dominated by suppliers. And as a result it is suffering a lot.
Bargaining power of buyers: Due to the lack of proper decision-making process consumers shifted their preferences to other brands. Internal Environment Marketing: Gap Inc. was a specialty retailer operating retail and outlet stores selling casual apparel, accessories, And personal care products for men, women, and children under the Gap, Banana Republic, Old Navy, and Forth & Towne brands. Gap division’s brands also included Gap Kids, Baby Gap, and Gap Body. In June 2006, the company operated 3,070 stores, including Gap, banana republic, and Old Navy stores throughout the U. S. as well as in Canada, the UK, France, and Japan. In addition, the company also marketed its products to its U. S. customers Used three Web sites: gap. com, bananarepublic. com, and oldnavy. com. The company primarily conducted its business through four shoppers. Old Navy stores offered selections of apparel, shoes, and accessories for adults, children, and infants as well as other items, including personal care products, Offered accessories and personal care products. The bulk of Gap Inc. ’s sales came from Gap and Old Navy, with banana republic and a new chain, Forth & Towne, representing less than 25% of its business.
When laid-off dot-comers stopped loading up on casual clothes, Gap took desperate measures to lift sales, stocking trendy miniskirts and low-rise jeans to chase teenage shoppers. Its purple shirts in extra large sizes did not find any buyers. The promotion featured a pop-up store, which was actually a converted school bus from the Sixties that would drive to summer resort spots on a mission to sell T-shirts, goodies, flip-flops, and beach hats. The campaign also involved in-store promotions, windows, print ads, direct-mail, and outdoor ads and an online micro site offering customers the chance to win concert tickets.
Color was a key component of the campaign. Gap also introduced a contest for customers in New York, Los Angeles, San Francisco, and Chicago to win tickets to concerts. business divisions: Old Navy, Gap, banana republic, and others. Old Navy targeted cost-conscious Finance: The company recorded revenues of $16. 023 billion during the fiscal year ended January 2006, a decrease of 1. 5% over 2005. The operating profit of the company was $1. 79 billion during fiscal year 2006, a decrease of 4. 2% over 2005. The net profit was $1. 113 billion, a decrease of 3. % over 2005. Gap was ranked 52nd by the Business Week Interbrand survey conducted in August 2006. It was valued at $6416 million. The Mouret collection was also a part of the Gap line and featured 10 dresses, ranging in price from 45 pounds to 78 pounds, or about $85 to $148. 11 Styles included belted shirtdresses; Courage’s-inspired numbers and tunics with bib fronts or ruffled V-necks in charcoal, silver-gray, navy, black, and red. The collection was seen by analysts as the next step in bringing back old customers and getting new shoppers interested in the store.
They wanted a new project that would take Gap dresses to a new level. They have always been a fan of Gap—They like their laid-back attitude, and it was the right mix of people to work with. ”12 In April 2006, Pressler decided to concentrate on Southeast Asia to generate growth. He entered into a franchise agreement with the leading retailers in Singapore, Kuala Lumpur, Malaysia, and the Middle East to open Gap and Banana Republic stores there. This was the first franchisee agreement entered into by the U. S. -based retailer that had always operated company-owned stores.
The main benefit of franchise partners was that they provided the local knowledge and experience to allow the company to quickly tap new markets. Core competency: GAP is globally recognized as American style, pop culture and the emotional affinity. GAP has 5 distinct brands such as Gap, Old Navy, Banana Republic, Piperlime and Athleta and brand extensions such as GapKids, babyGap, gapbody and GapMaternity. Analysis of Strategic Factors STRENGTH: * Strong margins compared to competitors. * Huge customer and vendor base. * Multiple brands and brand extensions for a wide range of segments. Global brand recognition. * Well balanced portfolio of value as well as upscale brands. WEAKNESS: * Low productivity of company’s store * The risk of increased mark downs rises as * Less attractive in trendy clothing * Uncontrollable production processes OPPORTUNITIES: * Expanding presence in key growth markets. * Growing market for plus size apparel for women in the US and the UK. * Positive trends in the online channel. * Global new market in Europe and China THREATS: * Growing market for counterfeit products. * Low growth developed economies. * High input cost can pressurize Gap’s margins. Labor costs in Asian countries are likely to increase rising the cost of apparel. Internal Factor | Weight| Rating| Weighted Score| Comments| Strengths| | | | | Strong margins compared to competitors| 0. 20| 4| 0. 80| Strapping margins can be seen in Gaps Inc. | Multiple brands and brand extensions for a wide range of segments| 0. 10| 2| 0. 20| For a wide range of products| Global brand recognition| 0. 10| 5| 0. 50| Presence of brand in world wide. | Well balanced portfolio of value as well as upscale brands. | 0. 10| 3| 0. 30| With expensive brand recognition well balanced portfolio is seen. | Weaknesses| | | | |
Low productivity of company’s store. | 0. 20| 2| 0. 40| Company’s low production is one of its weakness.. | Less attractive in trendy clothing| 0. 15| 5| 0. 75| Provide less attractive collections rather than their competitors. | Uncontrollable production processes| 0. 15| 3| 0. 45| Production is being uncontrollable day by day. | Total| 1. 00| | 3. 40| | External Factor| Weight| Rating| Weighted Score| Comments| Opportunities| | | | | Expanding presence in key growth markets. | 0. 20| 5| 1. 00| In key growth market it is expanding it’s presence. | Positive trends in the online channel. | 0. 10| 4| 0. 0| Positive trends in online sectors . | Global new market in Europe and China| 0. 10| 3| 0. 30| Expanding its market in Europe and China. | Threats| | | | | Low growth developed economies. | 0. 40| 5| 2. 00| | Growing market for counterfeit products. | 0. 10| 1| 0. 10| Leadership is losing on advertising market. | High input cost can pressurize Gap’s margins. | 0. 10| 4| 0. 40| New entrants can enter in the market which will increase competition. | Total| 1. 00| | 3. 20| | Identification of Strategic Issues: Pressler focused on cost cutting, consumer research, and more targeted marketing of the three brands.
Pressler ordered managers to rely increasingly on software that would tell them when and by how much to mark down merchandise. Micro-management was replaced by hands-off leadership. He left specific colorant design decisions to Gap, Old Navy, and banana republic division heads. Pressler devoted more attention to areas visible to the customer, including marketing and store atmosphere. It turned out that Gap had been sending the same size assortments to stores with different selling patterns He initiated customized deliveries—for instance, sending extra-large to places that needed them.
Each chain also instituted “guardrails” that defined what portion of a Store’s inventory should go toward basic colors and styles regardless of how varied the floor displays were. Lastly He decided to reposition all the three brands, giving each a distinctive identity. Strategic Alternatives and Recommendation: ALT-1: The Gap Inc. can merge with one of the major players in the market like Target, Wal-Mart etc. Pros: Merging with other company will help reduce the competition level of the Gap Inc. and expand further to gain new customers. Cons: Merging with other company will give the company the proprietary information about how the Gap Inc. perates its production line. ALT-2: The Gap Inc. focusing on customer’s affordability can sell low quality products showing resemblance to the existing high quality one but at a little low price. Pros: The customers who have less affordability can also shop from the Gap. Cons: If the lowered quality products are launched it may deceive the other customers who want to buy high quality product. Recommendation: We recommend the ALT-2 because it will get new customers and on the other hand the ALT-1 may reveal many strategies that the Gap Inc. follows.