Category: Gap

History

Gap Inc. was established in 1969 by Donald and Doris Fisher as a single store in San Francisco. After becoming irritated with their struggle to locate fit pants, the Fishers imagined a store offering a broad range of sizes. The “generation gap” between Baby Boomers and their parents was referenced in the store’s name.

The original Gap business strategy of selling Levi’s pants and records rapidly changed. The corporation started creating private-label products in the middle of the 1970s, emphasizing quality and fit. This transition paved the way for Gap’s growth since its recognizable logo sweatshirts and unpretentious Americana appealed to customers.

Gap rose to prominence in the 1980s and 1990s as a symbol of American casual clothing. The business added Banana Republic, Old Navy, and Athleta to its portfolio to target various market niches.

The firm had to deal with competition and changing fashion tastes, among other difficulties. However, it has maintained relevance due to its flexibility and emphasis on sustainability, inclusive advertising, and design partnerships.

Gap Inc. is a symbol of American enterprise today. It has evolved from a small store concept to a massive worldwide fashion industry, and it still shapes how generations dress by fusing design with utility.

Corporate Identity

A company’s corporate identity results from all the visual and verbal elements that set it apart from competitors. It’s more than just a company’s logo or snappy tagline, it’s the whole character of the company and the story it chooses to tell. When correctly developed, this brand links a company and its audience, fostering trust, recognition, and loyalty.

Corporate identity primarily consists of three elements:

Graphical Design Components

The logo, color palettes, typography, and general design aesthetic all fall under this category. When used consistently across all platforms, these components guarantee quick brand identification. Consider the recognizable Apple logo or the distinctive red and white color scheme of Coca-Cola.

Style of Communication

A company’s identity is significantly shaped by its internal and international communication. Public relations, ads, government pronouncements, and even interactions on social media can all fall under this category. A brand may speak formally that exudes professionalism or use a lighthearted, approachable tone, like Wendy’s or Old Spice.

Corporate Values and Culture

This is the organization’s guiding principle. It represents the company’s purpose, vision, and values. For instance, Patagonia’s dedication to sustainability and Google’s “Don’t be evil” motto impact their entire corporate identities.

A robust corporate identity may make a firm stand out in an era of overabundance of information. It provides various benefits, including:

Differentiation

A distinctive corporate brand aids organizations in standing out from rivals in crowded markets.

Trust and Loyalty

Consumer trust is strengthened through brand consistency, which increases brand loyalty.

Enhanced Image and Perception

A clearly defined identity may improve a company’s perception, giving it a more credible and professional air.

Employee Spirit and Cohesion

Employees feel pride and connection when their employer has a distinct corporate identity. Corporate identity is defined as how a corporation is represented to the outside world. It serves as the initial and enduring impression and the cornerstone for constructing brand connections.

Management

Fundamentally, management is the art and science of organizing, directing, and regulating resources to accomplish particular objectives. These resources include financial assets, human capital, technology tools, and more in a company setting. Any business, whether a large corporation or a small startup, needs effective management to run smoothly and succeed.

The following are some essential management dimensions:

Planning

Managers decide the direction and strategy in this first period. It entails establishing specific goals, locating available resources, and selecting the most effective ways to reach them. It is a plan of action.

Organizing

Management must allocate resources most effectively when a strategy has been put in place. The organization’s structure must be established, jobs must be clearly defined, and resources must be distributed where required.

Managing teams effectively requires motivating and inspiring them. Leading teams effectively involves directing them through routine tasks, resolving problems, promoting communication, and fostering team cohesiveness. It focuses on bringing out the best in people for the benefit of the group.

Controlling

This phase entails monitoring and assessing ongoing operations to ensure the organization achieves its objectives. Corrective measures are implemented if there are differences between the actual performance and the plan.

Several benefits include:

Efficiency

With proper management, resources are exploited to their fullest potential, minimizing waste and increasing productivity.

Clarity

Every team member knows their job thanks to clearly defined roles, responsibilities, and goals, which decreases confusion and improves alignment.

Boosting Morale

Higher productivity leads from contented, inspired, and engaged workers, which results from good management techniques.

Management of Risk

Effective managers can predict difficulties and take action to lessen them, ensuring that the firm can handle unanticipated challenges. Management paradigms are constantly changing as a result of the changing global environment. Traditional management techniques are changing due to ideas like agile methodology, remote working, and digital transformation. The fundamental management concept remains the same: it’s about successfully using resources to turn a vision into reality. It serves as the foundation for an organization’s growth and performance over the long term.

Influence

Influence is the power to mold or persuade people or organizations’ thoughts, actions, and behaviors. It affects all parts of our lives, whether overt or covert, from the decisions we make on a personal level to the social conventions we follow. There are several domains where the depth of effect may be demonstrated.

Social and Cultural Influence

Society and culture significantly influence our opinions, values, and behaviors. Our conceptions of good and evil are shaped by ingrained traditions, religious convictions, and cultural practices, which direct our actions and relationships. For instance, how we show ourselves is influenced by fashion trends, which emerge from the fusion of culture and media.

Mutual influence

Our friends and acquaintances, with whom we surround ourselves, significantly impact our decisions. Positive and negative peer pressure, particularly during formative years, can influence decisions ranging from lifestyle selections to risk-taking behaviors.

Digital and Media Influence

The emergence of the virtual era has given social media sites, news organizations, and influencers a newfound power to sway public opinion. The spread of knowledge (or false information) can result in widespread movements or misunderstandings in hours.

Authorities and Leadership

Large groups may be influenced by those in positions of authority, whether in corporations, communities, or nations. Influential leaders may promote good change, but authoritarian characters may use their work to manipulate or dominate others.

Psychological and Emotional Influence

Our views and choices can be affected by our feelings and psychological states. For instance, marketing frequently appeals to emotions like joy, anxiety, or nostalgia to sway customer decisions.

Introduction

As a team leader in the marketing department at Gap Incorporated, I have been tasked with assisting the company’s strategic direction over the following year.

Gap Incorporated is a clothing retail company that has been in operation since 1969 celebrating its fiftieth anniversary recently. Brands operating under the Gap Brand include Banana Republic, Old Navy, Athletes, and Intermix which offer a variety of products that are family-oriented. It is located at 2 Folsom Street, San Francisco, CA 94105,1905 United States. These apparel products are accompanied by accessories and personal care items that cater to women, men, and children. Customers can access company products through their online website and third parties possess commercial goods and services that satisfy customer needs and wants. Apart from our other operating channels that allow customers to obtain products our company also utilizes its Omni channel services to bridge the gap between the digital world and the physical store. These include ordering in 7Gap, finding in-store, and shipping from store to store along the channels of its numerous brands. The Intermix brand is largely associated with selling products that are manufactured and designed by third parties. We have a large network of stores locally and internationally which gives access to customers in Asia and Europe.

In 2014 we became the first Fortune 500 Company to publish the fact that we offer equal pay for both men and women. Two years later we were presented with the Catalyst Award for our actions as we continue to implement strategies to change this issue which is a global issue. We are honored to say that we have received awards on three separate occasions. These highlight the work we do to raise awareness for gender and equality, and human rights, making our company comfortable for workers not just as a place of productivity but as a place where they can freely express themselves. We are continuously working on taking actions to ease common societal issues where sexual status or race is concerned. Within our company, there are a number of support groups for employees who fall within any of those categories. As our mission statement states ‘To be a general Brand Builder’, our initiatives have led us to not limit our reach as a retail apparel company but as an active member in communities and our customer’s life. The title Gap which means there was ‘a generation gap between young consumers in 1969 desired to what was actually being offered,’ allowed us to carry out filling the gap through promotional campaigns and proper market research over the years. It has indeed allowed us to gain a substantial amount of customers. This has been made possible as a result of our employees that we have posted in the many various stores and franchises globally, the establishment of our many stores internationally, and the segmentation of brands.

When the company was founded Don and Doris Fisher decided on a partnership management system for their business. The key members of the board are Executive Leadership Bobby L. Martin, Executive Chairman of the Board Sonia Fungal, President, Chief Executive Vice President, Director Katrina O’Conell, Chief Financial Officer, Executive Vice President Mark Brief Bard, and President, Chief Executive Officer-banana Republic Mary Beth Laughton. Stakeholders account for 83.83% while Mutual fund holders are 39.76% and Other institutions are 23.38%. We are partners with large firms that have aided in advancements of conditions that affect those employed in the factory section of the production process, transformations in the industry, and various views. The following are some partners: Business Leaders Initiative on Human Rights (BLIHR), Ethical Trading Initiative (ETI), Global Reporting Initiative (GRI), MFA Forum, and Public Reporting Working Group. These alliances are all important to Gap’s success.

Current Situation

In light of the recent Covid 19 Pandemic which has negatively affected businesses worldwide, Gap has been forced to close all its North American stores. As of April 24th, 2020, we have been struggling to continue performing daily functions as a company and is facing cash constraints at the moment. Further decreases in the capital have caused maintenance and simple business activities to be suspended. The present dilemma seems yet to reach its climax coming off the heels of the previous year’s woes in sales. Our company actively hoped to split from its Old Navy brand which was supposed to be completed in 2020. During that time we faced many challenges and a fall in prices. It seemed as if we were forced to give discounts recklessly and many of our displays were not successfully put together to attract customers. Products needed a new look in terms of color, style, silhouette, and patterns. Our goal was to reintroduce denim staple wear in a versatile way along with expected changes and growth within the long term. This venture was subsequently canceled because it had been proven costly and profitless with decreasing sales as an influencer. This impacted the number of discounts given which resulted in a rise in sales by 4%.

Presently speaking we have halted payments of rent for our 2,785 retail stores. Later talks of renegotiation of leases were heard but it could be futile as stores may be shut down eventually. Home-based stores have been temporarily closed and it has threatened 80,000 retail employees’ future with the company. We took action by cutting executive pay also. At the beginning of February majority of the company’s savings were spent. A net amount of 1.7 billion but on May 1, 2020, we expected to remain with $750 to $850 million dollars while expense is valued at $155 million dollars.

Market Review

Sales are below levels compared to that of the 2008 Great Recession figure. In March of this year, the figure was 8.7% significantly lower. The same sentiments are being shared throughout the apparel retail family as many are on the verge of financial ruin. There has been a decline in the 87% of rents being paid at this time last year compared to the 53% of tenants who have paid their rents this year. Moreover, even more, evidence shows that companies such as Footlocker, H and M, Nordstrom, and LOFT are on the list. At this same time, the rest have not settled their bond payments, alongside J.C. Penny and Neiman Marcus. A month ago Macy’s and Kohl’s had to give over thousands of their employee’s permission to leave their jobs. The pandemic has crippled retail activity globally.

Competitive Review

Most companies in the same industry are trying their best to combat the problem and so many stores are closed and events are postponed. With scores of employees home over the board of companies there are no sales being generated in large amounts. Gap withdrew its annual dividends and is focusing on its e-commerce to reach customers. We had to cancel Summer/Spring sales mirroring rivals’ actions.

SWOT

Strengths

Gap has managed to have stores globally covering a large number of customers and potential customers we can not reach locally. This has been profitable to the company since we reap revenue internationally and locally. This extended reach allows us to provide jobs to the wider community and interact with people in many regions where we successfully carry out activities intertwined with our mission statement and values. Another strength is that we are the preferred choice when it comes to apparel that displays American style. Over time people have popularized the Gap Brand to the extent that when it is mentioned people choose our products over rivals. Finally, we have franchisees in Turkey, United Arab Emirates, and others. Hence the brand is well-known and attracts civilians easily.

Weaknesses

In 2017 the number of third-party vendors equaled 1000 in 60 countries. The bulk of this number is foreign to the United States of America. This means that we do not have control over many factors to do with shipping, supplies, and delays, or even increases in prices. China would be considered one such supplier even now it may be more evident with the unstable relationship between the United States and the former. We are not able to spearhead operations at franchisees who are at times behind with the current fashion trends. Clothing lacks the appeal to keep customers interested and so they turn to rival brands. Thirdly the inability to handle the production process of their many suppliers, stores and franchisees eliminate close contact manipulation of raw materials. Even though we give guidelines to these entities we are not directly assessing the cost of each part of the production process and what percentages of this are incurred to us.

Opportunity

Most companies have seized the opportunity and taken advantage of the present situation by seeking after industries they have not been a part of. This is a new experience for many but they have seen a way to still gain revenue and generate sales by providing products that are particularly in high demand at this time. These developments highlight the fact that all businesses have to adapt and find an alternative means of survival. Gap’s online services are seemingly the only or best choice of connection to the wider community. Our company is focused on providing medical wear. This venture can prove profitable but one has to take into account the sentiments of consumers whether the same products are being offered at lower prices or are in fact worried about brand or quality. The task now is to find even more outlets where we can become efficient in providing quality products to the public.

Threats

Politics and governmental policies influence company behavior and the type of activities that occurs in the industry. In the United States, Gap’s home base, government legislation has been able to manipulate monopolistic markets. Companies have more flexibility to operate because of these laws and acts. They have favorably enacted trade agreements that foster relations with foreign countries. If these acts are violated or used as political weapons against nations that have a history of grievances, this can become inefficient for businesses like Gap which conduct business with international parties. On the bright side, Gap is able to acquire its labor and raw materials because of such acts.

Economic activity is a large factor that could determine the very success or failure of businesses. It is where inflation and interest rates are assessed, trade deficits and surpluses are measured, and budget deficit and surpluses and gross domestic product are calculated. International organizations’ amount of earnings is determined by several factors. Production costs are one of these that experience irregularities in their rise and fall amounts. Other factors are natural disasters and inflation. Economic segmentation also a reason affects the levels of consumer spending and purchasing abilities. Foreign currency is volatile hence if depreciation occurs pressure is placed on business revenues that utilize it. When foreign investors exit the economy to join more sturdy ones they negatively contribute to the situation. In case trade barriers are removed the World Trade Organisation and the European Union would encourage a profitable business setting.

Technological advancements are the competitive driver between organizations. It has enhanced the grounds for the automation of production processes. It has further motivated health choices and somewhat environmental policies. Conversion of knowledge that results in modern products and processes.

As the impact of business activities is reflected on the environment many have heeded the call to ‘go green’ but Gap has taken it a step beyond with the sale of environmentally friendly merchandise. They have taken actions in regards to proper waste disposal, energy sustainability, and ensuring that suppliers do the same. Our participation in this year’s earth day by partnering with Arvind has led to saving large amounts of water.

In the fashion industry competition is steep but companies are challenged to conform to present trends. As this is true brand loyalty is an influencing factor as designer wear is not such a product that is readily available for customers. Second-hand products are not preferably creating a lack of variety so retailers fill this gap. Gap has to continue to present trends that are fashion-forward if we want to retain the customer loyalty we already possess. There is no threat posed by the newly formed establishments since customers’ behavior reflects them being loyal to companies they are more familiar with.

Objective

Four ways we can try to execute these plans are by keeping a number of our global stores closed for a couple of months post-Covid, decreasing the workforce until we are successfully up and running again, seeking investments, and reducing costs of products. Firstly shutting the doors of some stores globally will remove the cost of maintaining the facilities though employees may lose their means of income. This could lead to shorter working shifts. Secondly, with the decreased workforce, only important workers and those who have not already been furloughed will require a salary payment limiting expense. Thirdly seeking investments through various means such as selling shares to the public and private entities can help bring in capital to keep the business afloat. Lastly, as we seek to rid of old stock we may have to reduce prices and price bargains so we can quickly put out a fresh set of merchandise.

Strategy

We are challenged to find an alternative means of gaining revenue with the limited funds while still maintaining integrity. Moving forward we are taking a differentiated focus strategy approach. On April 30th we were fortunate to form an alliance with IMG. Due to this our Banana Republic, Janie, and Jack brands, Baby Gap, and Gap Kids will henceforth be partly handled by the said company. We would offer essential care products associated with the daily function of growing up the kids. This will appeal not just to sensuality but to quality and customer loyalty. Parents can look forward to baby equipment, care packages, home decor, and even furniture. Our brand has always been a leader in the industry and has not fallen short of that status even under the present circumstances. This is the reason our global appeal and popularity will continue to aid us as we seek to introduce a nontraditional product to existing and new customers who are aware of the unique and distinctive merchandise we usually present. We would début in a new sector with the means of becoming an active competitor.

Conclusion

In conclusion, our company has showcased the aptitude of being a success with years of experience and our positive contribution to society. Though we are presently battling a global issue that came at a time when we have struggled financially as a company we must try to swim through the choppy waters. Moving forward for the next fiscal year our actions will target our cash flow issue. The newly formed partnership with IMG is sure to stem any further debt along with the cuts to employees and closed stores.

Bibliography

1. Business Says net(n.d.). Gap Inc. Mission Statement. Retrieved from https:/businessay.com/Mission and vision statement.
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3. Dupree, K. (Jan 7, 2019). What does Gap Stand For? The haunt Gap stands for ‘history of the schoolyard taunt Gap stands for “Gay and Proud’. www.bustle .com/ p what-does-gap-stand-for-the-history-of-the-schoolyard-taunt-gap-standing-for-gay-and-proud.
4. Nyakagi, E. (2017). SWOT Pest and Potter’s Five Forces Analysis of Gap Incorporated. Retrieved from www.googlad.com/amps/kenyayote.com/swot-pest-and-porters -five-forces -analysis -of-gap-inc/amp/
5. Forbes. (April 27, 2020). Gap GPS. Retrieved from www.Forbes.com/companies gap/#4b80487a3569.
6. Gap Inc. (2020). Equal and Belongings Network Groups. Retrieved from https://corporate.gapinc.com/en-us-about/diversity –inclusion/brg
7. Gap Inc. (2020). Gap Careers. Retrieved from https://corporate. gap inc.com/en-us/careers/gap-careers
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11. Sandler, R. (April 24, 2020). ‘Gap Inc Has Stopped Paying Rent And Will Likely Need To Find More Money Within the Next 12 Months To Stay Operational. ‘ Retrieved from www.forbes.com/site/Rachel Sandler/2020/04/24/att-ceo-randall-stephenson-steps- down-coo-john-stankey-to-replace-him.

1.0 Executive Summary

Gap Inc. is an American fast clothing and accessories retailer based in San Francisco, California, founded in 1969 by Donald Fisher and Doris F. Fisher. It is one of the largest global specialty retailers in United States. Gap Inc. has operated six distinct brands which include Gap, Banana Republic, Athleta, Old Navy, Hill City and Piperlime. Each of the brands are target to different customer and offers different styles to match. Gap Inc. Gap Inc. operates 3,727 stores worldwide, 2,406 of which are based in the United States.

Gap Inc. had faced sales decline in 2018, the net sales of the company was drop by 2 percent. The company faced decline in sales for few years. Gap Inc. has reported that it is preparing to shut down 230 stores of the flagship brand over the next two years as it is trying to restructure its business. On March 2018, Gap and Banana Republic brand has shut down their store in Malaysia due to sales decline, and they are focus in online store. There are few competitors for Gap Inc. which include Zara, H&M, Forever 21 and Uniqlo. In Malaysia, the main competitor of Gap Inc. is H&M and Zara.

The target market for the Gap Inc. are mostly for the age from 18 to 45 years old. There are few recommendations for Gap Inc. to increase their sales:

• a) expand their stores more internationally that domestically
• b) try change physical business to online business
• c) customer relationship management
• d) marketing department

2.0 Company Overview

The Gap Inc. is the worldwide clothing and accessories retailer in United States. It also known as a fast fashion retailer. It offers a variety of products that include apparel, accessories and personal care products for women, men, children and babies. Gap Inc. founded by Donald Fisher and Doris F. Fisher in 1969, Gap Inc. is headquartered in San Francisco, California. Under Gap Inc., there are six primary divisions such as Gap, Old Navy, Banana Republic, Athleta, Hill City, and Intermix. Each of the brands are target to different customer and offers different styles to match. More specifically, the company provides jeans, T-shirts, clothes for use in sports and daily life, eyewear for both women and men, footwear, bags, and jewellery.

The company is based in San Francisco, California and except of the United States and Canada, it also operates in Mexico, United Kingdom, France, Italy, Taiwan, Japan, and Ireland. The company employs about 135,000 people and operates 3,727 stores worldwide, 2,406 of which are based in the United States.

History

In 1969, Doris and Don Fisher opened the first Gap store. It’s because Don Fisher could not find a matching pair of jeans, The Gap referred to the gap in generation. Doris and Don are commercializing the retail sector of specialty.

In 1973, Gap debuts iconic “fall into the gap” jingle. Gap Inc. went public in 1976, selling 1.2 million stock shares. In 1977, Gap Inc. establish nonprofitable arm, Gap Foundation.

Banana Republic was acquired by Gap Inc. in 1980. GapKids opened its first store in San Mateo, California in 1986. In 1987, Gap opens store in London, it is first store outside the United States.

Old Navy was born in 1994, the Old Navy’s first store was opened in Colma, California. Gap went digital in 1997, debuting online shopping. Gap wins awards for his campaign “Khakis Swing” in 1998.

In 2004, Gap Inc. has released their first annual Corporate Social Responsibility report. In 2006, Gap launches PRODUCT (RED) campaign. In 2008, Athleta was acquired.

In 2010, Gap opens doors in China. In 2013, Intermix was acquired. In 2014, Gap Inc. raises the minimum hourly wage for the United States employees. In 2014, Old Navy has opened their first store in China.

3.0 Current Market Analysis

Today, through its 3.500 company-operated stores, approximately 400 franchise stores, and e-commerce site, Gap Inc. serves consumer worldwide and is still growing.

According to (Thomas, 2019), Gap Inc.’s fiscal second quarter sales had fell short of analysts from expectations. Gap Inc. have decline in net sales which drop about 2 percent from $4.09 billion to $4.01 billion a year ago, and it is short of estimates for $4.02 billion. Sales at all Gap Inc. stores operating for at least 12 months and their websites were down by 4 percent, which is worse than the expected 3.1 percent decline. Sales from the same store climbed 2 percent a year ago.

At one of the brands from Gap Inc., Old Navy which typically has been the retailer’s largest division, same-store sales dropped for 5%. At the Banana Republic, they were down 3 percent. And the product flagship Gap posted a 7 percent global decline in sales in the sale store.

Gap Inc. has said that it will split into two independent publicly traded companies-one comprised of its Old Navy brand, and second will be the company that includes its other brands such as Banana Republic and Athleta (Thomas, CNBC, 2019). Gap Inc. has reported that it is preparing to shut down 230 stores of the flagship brand over the next two years as it is trying to restructure its business. Over the past 12 months, gap shares have fallen by about 20 percent, taking their market cap to around $9.7 billion.

On March 2018, all Gap Inc. are closing down their brands store including their namesakes Gap and Banana Republic in Malaysia due to bad sales. In 2017, Gap brands had experienced a drop of 1% in sales and the other brand under Gap Inc. called Banana Republic had experienced about 5% drop in their sales. (Elankovan, 2018) Gap Inc. will focus their sales in online store in Malaysia.

There are few competitors for Gap Inc. which include Zara, H&M, Forever 21 and Uniqlo. In Malaysia, the main competitor of Gap Inc. is H&M and Zara.

H&M (Hennes & Mauritz) is a multinational Swedish clothing company. It also known as a fast retail clothing for women, men teenagers and children. H&M and its affiliate operated with over 4,500 stores in 62 countries (Wikipedia, 2017). H&M faced sales growth that potentially slowed from 12 percent in June to 6 percent in those two months. The company said their summer collections were well received and succeeded in increasing market share. The quarterly sales increase of 8 percent in local currencies shows that part of the revenue. During the quarter, the sales increase of 8 percent in local currencies shows that part of the revenue growth comes from foreign currency movements. (Bloomberg, 2019)

Furthermore, Zara is also one of the competitors of Gap Inc. in Malaysia. Zara SA is a retailer of Spanish apparel in Arteixo, Galicia. Zara is a brand under Inditex. The company focus in fast fashion retails and they have variety of products including clothing, accessories, shoes, swimwear, beauty and perfumes (Wikipedia, n.d.). Zara has a rose in sales in the first five weeks of new financial year as shopper has bought item from the spring collection (Dowsett, 2019).

4.0 Competitive Analysis

4.1 Strength

Gap Inc.

H&M

Zara

a) They have global brand recognition and multibrand portfolio.

· It available in 90 countries worldwide.

b) They have effective supply chain.

· They have use just-in-time inventory system.

c) Sustainable business

· Jeans in Gap is made with 20% less water than other manufacturing method.

a) They have a wide range of products.

· H&M has a wide range of product offering including apparels, cosmetics, shoes, accessories for a wide range of customers.

b) Diversified global presence.

· H&M has their stores in over 60 countries.

c) Unique identity for all brands.

· H&M sells variety of product through many different brands such as H&M, COS, and Monkl to specific customer target group.

a) They have unique design on their products.

· The clothes in Zara are elegant, superior quality and have fantastic finishing.

b) They have strong presence of brands.

· Zara has expand their store to almost 96 countries.

c) Zara has a great supply chain

· Zara as of 2017 has manages up to 20 clothing collections in a year.

4.2 Weaknesses

Gap Inc.

H&M

Zara

a) Increasing competition.

· Brands like H&M, Zara, and Forever 21 are becoming more customer-centric collection.

b) Lack of product variety

· Gap has offer products like sweaters, jeans and tees, but their competitor has offer same product but at lower price.

c) Decreasing brand popularity

· The brand identity of Gap is losing its appeal and needs a much clearer sense of purpose.

a) Dependence of third-party suppliers.

· H&M had outsourced their production of their product to about 800 independent suppliers and hence it has lower control over the production.

b) Affordable pricing affects quality

· H&M is well-known for their affordable clothing, but sometimes it will affect the quality of the clothes and other products.

a) Generalized their collection

· Zara does not specialized in anything but they only come out with day to day wear or trendy wear.

b) They have lack of advertising.

· Zara can double his profit if they advertise their profit in advertising.

c) Low safety stock.

· It means that they will keep less inventory as a strategy to attract customers walking into the stores to check out the latest fashion.

4.3 Opportunities

Gap Inc.

H&M

Zara

a) International expansion focusing on Asia.

· Most of their stores operates in Asia, but not in Australia and Africa.

b) Improvement of online business

· Gap has launched a new application for mobile apps which allow customers to buy online.

a) E-commerce as a platform

· H&M needs to expand in the E-commerce platform to serve to a large market.

b) Expand in emerging markets.

· H&M needs to explore the emerging markets like Asia and Africa in order to capitalize in the demand created.

c) Improving lifestyle

· People that are more brand-conscious and it can provide an opportunity for brands like H&M to capitalize on the need generated.

a) E-commerce as a platform

· Zara needs to expand in the E-commerce platform to serve to a large market.

b) Growing market potential

· A rise in earning potential of consumer results increasing in demand for status symbol.

c) Market expansion

· New markets will always give new business and potentially profitable business to Zara.

4.4 Threats

Gap Inc.

H&M

Zara

a) Decline of sales and profit

· Gap Inc. faced decline in sales by 2%.

b) Competitors

· Such as Zara, H&M, and Forever 21

c) Management not able to improve the business

· Gap Inc. has made improvements on the company’s supply chain and come out with loyalty programs but it unable to attract new customers.

a) Evolving fashion trends

· H&M has to deliver their products according to the new trends in the market.

b) Competitors

· Such as Zara, Forever 21, and Gap Inc.

c) Rising labour costs in developed countries

· They will be earning for less profit.

a) Competitors

· Such as H&M, Mango and Gap Inc.

b) Rising cost of raw materials.

· It causes the raises of operational costs of the brands.

c) Regulatory threats

· Every country has their own rules and regulations to follow.

5.0 Consumer Analysis

According to (Dudovskiy, 2016), there are few brands in Gap Inc., there are Gap, Banana Republic, Old Navy, Intermix and Athleta. The table below shows Gap Inc. segmentation and target market.

Source: https://research-methodology.net/gap-inc-segmentation-targeting-positioning-an-effective-application-of-multi-segment-positioning/

The table has illustrated that Gap Inc. has using demographic segmentation to target their consumers. For the brands in Gap Inc., they are mostly targeted for the consumer who is in the age between 18 to 45 years old which their occupation may be employees, students, and professionals.

6.0 Recommendations/ Conclusion

In conclusion, it is clear that Gap Inc. what the profile and history of Gap Inc. is and that the company was able throughout its history to surpass most of the barriers and reach its objectives. The company by providing a large variety of classy, trendy, casual and affordable apparel it attracted a lot of consumers. However, it is still one of the market niches as it has only 4% of the entire market share of the clothing retail companies. That’s why the company should make more efforts in order increase its market share.

Actually, there are few recommendations for Gap Inc. First, they need to increase their sales to expand their stores more internationally than domestically (in United States) as most of its stores are located in the United States. Gap Inc. can expand their business largely through franchising agreement. This can help the company to gain more revenue from different countries. It can also get more customers from different countries with different taste.

Besides, the company can also try change their physical business to online business which means their franchise can be operates with brick and mortar store. In online business, they can find many customers globally. This will allow customer to buy their products online through the company official website safely. Gap Inc. also offer international shipping on their official website to almost 44 countries including Japan, Australia, Mexico and Brazil. This would allow their customer received their products quickly.

After introduce the use of online business, Gap Inc. must have a customer relationship management. Customer relationship management is the process of maintaining and building customer relationship by giving the best customer value and satisfaction. Creating customer relationship is the important part in online business. This will let customer feel satisfied after purchasing from their stores and will be purchase again.

Furthermore, Gap Inc. can improve their marketing department. The role of marketing department is to build strong relationship and capture value from customers. Marketing department should market the products to ‘true’ customer. So, customer will feel that it is worth to buy the products from Gap Inc. Then, the value proposition of the Gap Inc. product quality will be creating in customer’s mind.

7.0 References

1. Brands. (n.d.). Retrieved from https://www.gapinc.com/content/gapinc/html/aboutus/ourbrands.html?_ga=2.250938447.83095501.1574147844-2084901136.1574147747.
2. Gap Inc. (2019, November 14). Retrieved from https://en.wikipedia.org/wiki/Gap_Inc.
3. Gap’s second-quarter sales fall short of estimates, CEO calls out ‘challenging environment’. (2019, August 22). Retrieved from https://www.cnbc.com/2019/08/22/gap-reports-fiscal-q2-2019-earnings.html.
4. Kumar, N. (1997) “The Revolution in Retailing: from Market Driven to Market Driving”, Long Range Planning, vol. 30, No. 6, pp. 830-835.
5. GRIFFIN CONSULTING GROUP. (2012). Gap, Inc. GAP, INC. Retrieved from http://economics-files.pomona.edu/jlikens/SeniorSeminars/Likens2012/reports/Gap.pdf

In this commentary, I will examine The Gap Inc.’s working conditions and will eventually come to a conclusion whether or not they can be considered as socially responsible in terms of the manual labour process

The Gap, Inc, is an American multinational corporation which operates as an apparel and accessories retailer with international associations. Over the past 50 years, the company branched out, and grew to own six retailing companies: Athleta, Banana Republic, Hill City, Intermix, Gap, and Old Navy.

The Gap, Inc, retails to over 90 countries globally, selling clothing, accessories, as well as personal care products for both men and women, as well as children. They supply their products through over 3100 company-operated stores, as well as almost 400 franchise stores, and e-commerce sites. Additionally, they have franchise agreements with other unaffiliated franchises to help run their stores all around the world. As of February 2nd 2019, they had 3194 company-operated stores; and 472 franchise stores, as well as e-commerce sites.

However as the brand continues to grow, so does the demand of their products and human resources. This would mean that The Gap, Inc has to meet these requirements and find cheap human resources while adhering to fair employment practices. So from this, we look at whether or not can The Gap Inc.’s working conditions be considered as socially responsible in terms of the manual labour process?

In order to be considered as socially responsible in terms of the manual labour process, businesses have to provide decent working conditions and a reasonable salary. Furthermore, they must also avoid the implementation of unethical practices such as the exploitation of child labour by hiring minors in developing countries. This way they adhere to an ethical practice and follow the ‘Health and Safety at Work legislation’ to avoid taking advantage of their workers.

If they are considered as socially responsible, they will develop an improved corporate image with more loyal customers. Additionally, being socially responsible can help boost staff morale and help motivate productivity. Ethical practices can also help garner attention from job-seekers and helps the business retain a more motivated workforce .

However, certain businesses do not comply as compliance costs can potentially be quite high which can result in lower profits (Hoang, 37).

Information in regards to SWOT Analysis

Based off of my supporting documents, I conducted a hypothetical SWOT Analysis of The Gap, Inc.

Strengths

Strong belief in equality and diversity: This ensures that everyone feels welcome both as a customer and as a member of the workplace (Catalyst).

Sustainable Business: The Gap Inc. jeans are made with 20% less water than typical manufacturing methods in an effort to be environmentally responsible (Gap Inc.).

Weaknesses

Competition: The Gap Inc. faces increasing competition as currently businesses such as H&M and Zara are the market leaders in the fashion apparel industry.

Previous history of unethical practice: The Gap Inc. were previously involved in situations where female workers in the factories were getting sexually and physically abused (Hodal, 2018).

Opportunities

Improvement in E-commerce: They have released a new initiative which lets customers browse and purchase their items online to then pick-up in store, and are currently working on improving this system.

Threats

Competition: The market leaders of the fashion apparel industry are able to regularly improve their store traffic which The Gap Inc. is struggling to do.

Corporate Social Responsibility

A business which is considered as socially responsible behaves ethically towards stakeholders and the natural environment.

In reference to The Gap Inc.’s 2017 report, we are able to see that they are making an effort to reduce pollution caused by their manufacturing process by using a more environmentally friendly production process and reducing unnecessary water consumption to prevent wastage (Gap Inc., 41). They are also taking responsibility to help prevent global waste in their procedures so not only can they benefit the environment, but additionally benefit themselves to prevent adding unnecessary cost.

In the same report we are also able to see references to their inclusivity within their workforce by creating an accepting diverse environment for all ethnicities and genders (Gap Inc., 21), as well as sharing several of the awards they have won in recognition of such.

As stated in Thomsonn Reuter’s diversity and inclusion index, The Gap Inc. is considered to be one of the top brands in terms of inclusivity. They have publicly stated that they believe that inclusion, diversity and opportunity are the main factors in order to continue as a successful company. Their inclusive nature has helped to create a positive image for the business.

However, in opposition to this, The Gap Inc. have previously been accused of worker abuse and mistreatment of their employees in sweatshops based in underdeveloped countries. Aside from addressing their diversity and inclusion, their public statements show that The Gap Inc. does not suitably discuss their accusations of workplace harassment, violence towards staff and infringement of acceptable work standards.

As a fast-fashion business, The Gap Inc. are required to hit high production targets. These high production targets as well as using a piece rate wage system creates pressure amongst their workers to meet these goals at the cost of resting, using the bathroom, or even eating or drinking water.

In response to this, The Gap Inc. have allegedly administered a materiality analysis in order to make sure that their method and reporting addresses the most crucial present and forthcoming economic, environmental, and social impacts on people, as well as the communities involved with the business. However, in spite of this, in evaluating risk, The Gap Inc.’s global sustainability team only evaluates “the importance of potential social and environmental risks and opportunities” to external stakeholders, for example, suppliers.

According to the information available to the public, in evaluating supply chain risk, they particularly leave out industry-related risks along with supplier-related risks and do not discuss certain risks connected with the industry; neither risks affiliated with certain suppliers. Doing this goes against the principles of due diligence as stated in the UN Guiding Principles on Business and Human Rights, stating the responsibility to respect human rights obligates business enterprises to: ‘Avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur.’ as well as to ‘seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.’ (United Nations of Human Rights, Article 13)

Worker Motivation

The UK Institute of Management explains motivation to be “getting someone to do something you want or, on an individual basis, wanting to do something for yourself for a particular reason.” In regards to this, increased worker motivation leads to improved enthusiasm and job satisfaction which would therefore promote enhanced productivity and quality, as well as better relationships within the workplace and lower absenteeism (Hoang, 172) .

However, due to The Gap Inc.’s involvement in unethical practices of labour, what motivates their staff to amplify job satisfaction, morale and job productivity?

Taylor

Taylor’s principles of scientific management assumed that employees are mainly motivated by money and that productivity can be improved by setting output and efficiency targets related to pay. However, although the scientific management is rather ineffective when referring to jobs that focus on mental rather than physical output, the manufacturing process tends to lean towards the aspect of physical output.

This table demonstrates the retail prices for workers of the Indian factories for The Gap. Inc in 2018. This indicates that the suppliers calculate the labour costs primarily basing it on minimum wage, rather than living wages; and ten-hour days, including two hours of overtime, rather than eight-hour working days (Asia Floor Wage Alliance). India has previously been titled the ‘Labour Capital of the World’ by the UN due to it having the cheapest labour as well as the most flexible labour laws and entry costs. This is as India is still a developing country with thousands suffering in poverty and are desperate for money to live off of, resulting in these factories offering minimum wage job, taking advantage of the underprivileged. So from the table above, we can see that money could be a potential factor in motivating The Gap Inc. staff.

Conclusion

In conclusion, can The Gap Inc.’s working conditions be considered as socially responsible in terms of the manual labour process? No.

Although, yes, The Gap Inc. can be considered to be one of the top brands in terms of inclusivity within their workforce, they still have a lot of issues in terms of their mistreatment of their employees in sweatshops, as well as their lack of addressing the situation publicly and taking action to prevent this from continuously happening.

The Gap Inc.’s corporate social responsibility measures may seem acceptable on paper, however they fail to adequately discuss their accusations of workplace harassment, violence along with violations of sufficient labour standards. On top of that, they are completely self-surveilled. As a whole they fail to talk about risk factors for violence as well as administer access for assistance in situations of workplace harassment and violence.

The Gap Inc. should recognise specific risk factors for violence in global production networks and should try to implement a way to offer labour protection to labourers employed in either developing countries or circumstances that are not protected by labour law as well as another social protection framework. Aside from this, they should also take action to prevent unrealistic manufacturing demands and piece-rate goals that hastens manufacturing rates, lengthens labour hours, develops arduous working environments, and allows abuse.

`A proposal is a formal suggestion or plan that is put forward for the consideration by others in order to stimulate change. Proposals are mainly used by companies or organization to highlight the problems that the organization is facing and eliminate them or look for strengths that the organization could exploit in order for it to grow.

The company that is our main focus is the Gap Inc. Gap Inc. is an American retail company that deals with accessories and garments. It is a large retail company with an approximate of 135,000 employees and a total of 3726 stores in the world. Its branches are located in America, Europe and Asia. These statistics makes Gap Inc. one of the largest retail companies not only in America but also in the world at large. Gap Inc. has five brands namely: Old Navy, Gap, Athleta, Banana Republic, Piper lime and Intermix (Oxford 112). The company has operated since 1969 hence has a lot of experience in the market and has a lot of demand as it has been a trusted brand fir a long period of time but the company has its fair share of weaknesses that if not worked on the company will fall to its knees.

The first problem that needs to be solved is the issue on pricing. Gap Inc. products are generally expensive. In this day and age designer companies are formed each and every day hence if a company such as Gap Inc. have expensive price tags on their merchandise then they are going to lose even their most valuable customers. Gap Inc. products are simply expensive with a simple knit sweater going for $60, a plain grey t-shirt going for $35 and a belt going for $35 in one of their stores. The higher the prices for their merchandise go the fewer number of people that can afford it that causing a reduction in sales that would hurt the company immensely. If the company sells its merchandise at a lower price it will definitely increase its sales volume and will make up or the depreciated price per unit by returning bigger gross profits. The increase of the price tag also seriously harms the level of demand on a product, the higher the price of the item the lower the level of demand on the product, sometimes this might be risky as in some cases companies try to reduce their prices in order to increase sales of a particular item but when the price increased the demand fell and even when the price falls back it may never be the same again (Nasdaq).

They have to increase the quality of their products. The quality of products produced by Gap Inc. are nice but they are not quite there yet. The products that are produced by the company don’t do much to increase the number of people who use their merchandise. The merchandise that Gap Inc. produces is simply basic and lacks the ability to compete with other designer brands. In order to keep and also increase their clientele Gap Inc. has to come up with new cloth lines that more people subscribe to. The company also need a wider selection of its products in order to cater for the needs of most of its clients. If a store doesn’t have a wide range of material to choose from depending on the taste and preference of the people involved such as the young and old and the students and the working class, it is destined to fall as it will not be the people’s store of choice that resulting in a decline in sales and also a decline in its success (Pulse).

Gap Inc. also has to employ better marketing strategies. Gap Inc. needs to use marketing strategies that work in its advantage. Marketing strategies aim to achieve the following: Increase sales, getting existing customers to buy more, Increase Market share, improve customer loyalty, introduce a new product or service and also to bring in new customers. An example is an increase in advertising. Companies that invest their resources in order to advertise often get returns on their money by an increase in the number of sales as it increases awareness of the merchandise produced by the company thus resulting in an increase in sales, examples of such companies are: Nike, Adidas and Coca-Cola. A marketing strategy needs to cost efficient so that it does not end up bringing more loses to the company. Marketing strategies also have to be aimed at reaching the target audience in order for the company to experience significant returns (Smarta 15).

The company should increase the number of stores that it has throughout the world. By increasing the number of stores that the company has it will increase the awareness of the brand and also create a wider market as more people will be seeking to buy the product. Increasing the number of outlets that the company has around the world will also increase the demand for the product hence the sales of the product are bound to increase. The stores should be across all continents in order for the brand to gain popularity cross the world. Companies such as Coca-Cola which work on having their products all around the world have seen the advantages of this as they get higher amounts of profits and also broaden their client base (Pulse 60).

The above is a proposal that highlights the key areas that the company needs to work on in order to thrive as it is supposed to. It also focuses on the various weak points that the company has and seeks to eliminate all its weak points and works towards building on its strengths in order for the company to experience significant growth. If the proposal is followed by the company to the letter it is assured to experience significant growth. This growth will lead to a higher amount of profits and market that will make Gap Inc. one of the leading companies in the world.

Works Cited

1. Gap. Shop Gap for Casual Women’s, Men’s, Maternity, Baby & Kids Clothes, 9 Feb. 2017, www.gap.com/. Accessed 19 Feb. 2019.
2. Nasdaq. ‘What Are The Problems Plaguing Gap Inc.?’ NASDAQ.com, 24 Aug. 2016, www.nasdaq.com/article/what-are-the-problems-plaguing-gap-inc-cm669698. Accessed 19 Feb. 2019.
3. Oxford. ‘Proposal | Definition of Proposal in English by Oxford Dictionaries.’ Oxford Dictionaries | English, 5 May 2016, en.oxforddictionaries.com/definition/proposal. Accessed 19 Feb. 2019.
4. Pulse. ‘Gap is Struggling to Keep Up with Its Sister Brands ? We Visited the Store and Saw Why (GPS).’ Ghana News, Business, Sports & Entertainment | Pulse.com.gh, 17 Dec. 2018, www.pulse.com.gh/bi/strategy/gap-is-struggling-to-keep-up-with-its-sister-brands-we-visited-the-store-and-saw-why/4n7n0ty. Accessed 19 Feb. 2019.
5. Smarta. ‘How to Develop a Marketing Strategy.’ Smarta.com, Feb. 2017, www.smarta.com/advice/sales-and-marketing/advertising-and-marketing/how-to-develop-a-marketing-strategy/.

A. Company Introduction: GAP Inc.

1. History and Brand Portfolio

List of GAP Inc. brands as of 2018

• GAP

Includes GapKids, babyGap and GapMaternity

• Banana Republic

Acquired in early 1980s

Offer style from business formal to casual

• Old Navy

Launched in the 1990s

Positioned at lower price with casual apparel

• PiperLime

Online fashion market launched in 2008

Closed in 2015

• Intermix

Boutique retail chain acquired in 2013

2. GAP Inc.’s global presence

Gap Inc. is a global company with almost 3,700 stores worldwide, including company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, China and Italy, and franchise stores in Asia, Australia, Europe, Latin America, the Middle East and Africa.

The GAP brand currently has 1,700 company-operated and franchise retail locations. GAP Inc has also expanded its online presence to around 70 countries. (2018)

3. GAP Inc.’s problem in 2016

Sales decline between 2014 and 2015 was reflected in every geographic region except Asia, and every brand except Old Navy which experienced a 1% increase in sales in 2015 (Exhibit 2).

The company also saw very little growth in net sales, only increasing from $14.5 billion to $15.8 billion in five year.

Amid the decline in store performance, GAP Inc announced closure of underperforming stores in 2016 to improve operating cost (see also Exhibit 1). The closure affects primarily Gap stores in North America and Europe, while other regions saw net gains in number of stores (Exhibit 3).

This situation, along with macro-environmental and industrial factors identified in the following part of this report, has raised the problem of whether GAP Inc. can develop a strategy that help the company back on its profitability track.

B. Case study Analysis

1. Strategically relevant components of the U.S. Retail, Family Clothing Stores industry macro-environment.

Sociocultural factors

Exhibit 5 from the case study demonstrates the demographic characteristics of the industry in 2016, where segmented sales of women’s clothing made up the majority of industry sales. Age demographics also indicated that the largest purchasers of clothing were within the employed generation with disposable income. These two factors are recognized as the “key drivers of industry growth” , indicating how the segmentation of clothing by demographics and the fluctuation of disposable income may be relative determinants of the market demand for clothing retailers.

Other sociocultural factors to be considered should be consumer’s buying habit and attitude towards product.

With the growth of Internet and smartphones during the last two decades, along with the improvement of logistics, online marketplace had been made easier and and become a more common practice. This shift in buying habits was also reflected in demographics of consumers, ‘to this degree of adoption, demographics whose experiences with such technology had begun at earlier ages have now become a primary consumer.’ Thus, brands and consumers were then becoming hyperconnected, whose relationship was to take place both online and brick and mortar.

The new retail practice of Fast Fashion also indicates consumer’s attitude towards clothings, where the assumption that ‘consumer wishes to purchase and maintain the clothing for a longer period of time’ was replaced. A faster fashion cycle of production-to-retail shows how consumers could be pushed to ‘continually monitor new clothing, while treating clothes as a disposable commodity.’

Lastly, as the industry saw a decline in mall vacancies and foot traffic, social media seemed to be a contributing factors, since the cultivation of an online presence could help substitute the purpose of entertainment and presence in malls as in the 1990s.

Technology factors

Exhibit 6 shows a 200 percent growth of e-commerce sales in clothing and accessories, compared to the traditional retail chain sales growth. Statistics of retail from the first quarter of 2016 also showed:

• $93 billion in e-commerce sales in the U.S.
• An increase of 15% from the first quarter of 2015, compared to industrial growth of only 2%, and accounting for 8% of total U.S. retail sales during the quarter.

‘This shift toward increasing consumer confidence in online shopping’ is believed to result from the rapid growth of the Internet, as well as the development of mobile phone, which gave consumers access a wide range information and enabled easier browsing and shopping on websites.

Technology also contributes in the improvement of logistics and delivery system, thus overall making shopping online an increasingly attractive and suitable choice for consumers over visiting brick-and-mortar establishments and in person shopping.

2. The competitive forces of U.S. Retail Family Clothing Industry

Bargaining power of Buyers

Moderate

• The bargaining power of Buyers in U.S Retail family clothing industry is represented in consumers’ ability to either postpone their consumption or switching to competing brands. The adequate number and distribution of retail stores, especially within malls, variety of brands, substitutes and the growth of online shopping have overall allowed a low switching costs and strengthened Buyer’s bargaining power in this case.
• As e-commerce and the Internet became a common practice, the quantity and quality of information available on products (prices, quality, attributes,…) among different brands also increased, thus giving buyers more power in bargaining.
• Quality of products and brand images have becoming greater concerns to purchasers of clothes. Thus, by enhancing such attributes, company may be able to gain brand loyalty as well as bargaining power against consumers.

Bargaining power of Suppliers

Weak to moderate

• U.S companies in buying contracts with offshore manufacturers seem to have more purchasing power against their suppliers. The business can be critically important to these manufacturers, considering due to the high volume of its orders, while they have little control over the industry.
• In most cases, companies also have the ability to substitute suppliers and minimum supplier substitution costs, thus lowering the bargaining power of their Suppliers.
• However, there are a few factors that may have impacts on the bargaining power of suppliers against companies, considering purchases from offshore suppliers compose of a large percentage of the industry. Exchange rate fluctuations and trade restrictions are some others factors to be considered significant.

New Entrants

Weak to moderate

• There are a number of visible entry barriers in the industry, namely:
• The capital requirements necessary (including infrastructure, distribution chain, human resources, marketing) stands as a great challenge in establishing a new clothing brand.
• The industry has seen a moderate growth in the last few years, average annual growth under 2%, while the density of competitors remain high. Thus it is not a highly attractive industry for newcomers.
• Brand loyalty and great popularity of established brands can also be a barrier for new entrants to try competing.
• However, there is the potential of new entrants with differentiation strategy, especially as fast fashion is increasing in popularity.

Substitutes

Moderate to strong

• Industry retailers are adversely affected by competition from substitutes, such as specialty clothing stores. For instance, statistics given above has shown how women’s clothing take up the majority of purchasers, while the market is also witnessing the grow of several women’s specialty stores, boutiques or teenage girl apparels.
• Substitutes are available at convenient locations, with attractive prices and comparable quality. These stores also give customers a relatively same level of bargaining power, thus making them equally competitive.

Rivalry among Competing Sellers

Strong

• The industry has an overall high density of competitors, with 46,905 businesses recorded in 2018. Statistics on market share also shows how fragmented the industry is, where major companies and brands, despite taking up one third of the industry, could obtain market share ranging from a relatively small number of 5 to 10%.
• As bargaining power of Buyers is moderately high, there is an intense competition of not only product differentiation, but also marketing, customer services and other promotions to maintain a good value proposition.
• Segmentation from large companies also add to the competitive force, where they are able to compete with specialty brands or with exceptional high prices in high-end brand while still offering low-end brand.

3. General strengths and weaknesses of GAP Inc. (in comparison with main competitors)

Strengths

1. GAP Inc. has a strong portfolio of distinct brands across multiple channels, addressing the needs and appealing to preferences of different and wider customer segments within family clothing and fashion industry. This is in fact the characteristic of other big companies in the industry, for instance Inditex Group with its portfolio of 8 brands.
2. GAP Inc. can pose a global presence of its brands across its large number of stores, which matches with the company outlet store and franchising strategy from early 2000s, and plays an important role in market penetrating and building brand image. As of 2016, Inditex Group was also recorded to be operating over 7,013 locations in 88 countries and 29 online markets, including 2,000 Zara stores.
3. GAP has been a household name due to successful marketing strategy and iconic styles of iconic jeans-and-t-shirts style products. Along with the company’s long established and wide scale business, GAP has earned a huge customer and vendor base.

Weakness

1. Declining sales and profits for the past few years could be considered as a major weakness that affected the company’s overall performance and strategy, which was stated as a current problem that requires solutions in this report.
2. Considering the changing factors of industrial environment such as technology, e-commerce and fast fashion, GAP has not succeeded in competing effectively in terms of efficient utilization of online sales channel and new business trends. Its online fashion market was also closed in 2015.

In comparison, Inditex Group proved to have epitomized the fast fashion approach, with “new apparel lines to meet rapidly evolving consumer preferences through its vertically integrated design and manufacturing strategy”. Inditex Group also “started distributing its Zara brand through an official storefront on the largest online Chinese sales platform, T.Mall” and witnesses positive results in its financial performance (Exhibit 7).

4. Key success factors for GAP Inc.

Breadth and depth of product line and selection

• is GAP’s current strength,
• assist in gaining market share and counter the threat of strong rivalry.

Clever advertising and strong brand-building

• made GAP a household and iconic American style clothing brand,
• built a strong brand portfolio.

Utilization of technology and e-commerce

• is an opportunity to enhance online sales capability,
• can help improve production processes and utilizing the trend of Fast fashion approach, which is currently considered a weakness compared to their main competitor.

5. Recommendations for GAP Inc to improve its competitiveness in the market while mitigating any current and future risks.

Enhancing relationships and connecting with consumers

GAP has been one of the top players in the industry, staying as a familiar and iconic clothing brand. Thus, sustaining its current relationship and brand image with customers, enhancing brand loyalty and value proposition are vital to keeping the company on the run and improving their bargaining power against buyers.

While falling behind with their outlet strategy, considering declining the problem of store performance, GAP could improve its competitiveness with a strategy intensely focusing on building a ‘hyperconnected’ relationship with consumers, improving online shopping experience – creating brand online presence instead of mall and retail presence, while flexibly catering to needs and trends. The Fast fashion practice has proved to be a suitable approach – encouraging customers to stores and serving rapidly changing trends, and would stay as an opportunity should GAP can utilize it against competitor.

The risk of offshore manufacturing

While suppliers from offshore should offer lower cost and possess moderately weak impact, a risk of dependency and bargaining power was raised when a large percent of GAP’s manufactured products are solely from China. Thus, recommendations to mitigate this risk, depending on GAP’s internal strategy and financial clout, are either to conduct business with suppliers whose power can be reduced by sole dependence on GAP, or to sourcing from various global reasons using its large vendor base.