STRATEGIC MANAGEMENT CASE ANALYSIS

ON

GAP INC.

GROUP MEMBERS:

•Wajiha Zafar•Sameen Siddiqui•Reeja Siddiqui•Khan Umer Bin Shahid•Zain Mehboob•Ehtesham Ali

INTRODUCTION:•Gap inc is one of the famous fashion retailer chain

present globally and head quartered in USA San

Francisco.• They are selling wide variety of fashion products to

almost all demographic groups.

Although Gap inc has a successful history of

business; but because of the dynamic market trends

in fashion industry, we recommend that Gap inc

must be able to adopt and implement some new

strategies to stay in the market as a profit earning

firm.

The Gap inc operates through:

Vision &

Mission Statement:

•Gap Inc do not have any formal vision & mission

statements.

•But they have corporate philosophy & code of

business ethics.

PROPOSED VISION FOR GAP INC:

Gap strives to be a leader in the fashion retailing

industry from casuals to formals covering baby

clothes needs to adults garment needs. With our

stores present globally; we are the leading family

fashion brand with affordable prices & great quality

standards operating business on fair and ethical

basis.

PROPOSED MISSION STATEMENT FOR GAP

INC:

“ To continuously develop & offer quality

products at fair prices that meet the customer

& market demands, compatible with fashion

industry. To be a consumer oriented brand

with keen concern

of garment products ensuring quality,

consistency, convenient availability & trendy

designs to operate with high standards of

technology to obtain a leadership position &

retain the position, motivation of human

resource and encourage them to participate in

company’s success by focus on their own

personal goals & achievements.”

INTERNAL ASSESSMEN

T

  Internal Factor Evaluation Matrix (IFE)       

Strengths Weight Rating Weighted Score1. Global brand recognition 0.1 3 0.32. Worldwide stores location 0.1 3 0.33. Offering products through multiple channels 0.05 4 0.24. Online stores presence 0.1 3 0.35. Attracting Elite class (Banana Republic) 0.025 2 0.056. Online available Wide ranges of Sizes 0.02 3 0.067. Maternity Lines Range 0.025 3 0.0758. Piperline-Online store offering multiple brands 0.005 3 0.0159. Atheleta Catering Females Sports need 0.025 2 0.0510.

Extensive Product Range 0.05 4 0.2

 

Weaknesses Weight Rating Weighted Score1. Extensive Size range is present only online 0.05 2 0.12. Piperline offering limited range of products 0.02 1 0.023. Banana republic catering only selected target market 0.02 1 0.024. Atheleta only offering females sports ware 0.05 3 0.155. Not offering brand range specifically for teenagers 0.05 4 0.26. They are outsourcing their Manufacturing 0.1 4 0.17. High cost because of delayed shipments 0.1 3 0.38. So many affiliated brands 0.02 3 0.069. Difficult to control quality standards throughout 0.05 2 0.110.

Dependent on third party 0.04 3 0.12

  TOTALS 1   2.72

EXTERNAL ASSESSMENT

External Factor Evaluation Matrix (EFE)Opportunities Weight Rating Weighted Score

1. changing consumer's trend of purchasing 0.05 3 0.152. growing needs of teen age group 0.04 3 0.123. quick response time 0.09 4 0.364. improvemnet in customer products 0.07 2 0.145. internet based communication between supply chain of the company 0.04 2 0.086. cost efficiency through lean inventories 0.03 1 0.037. demand of sustainable products 0.03 3 0.098. product differentiation 0.07 2 0.149. interactive internet application for sales 0.04 2 0.0810. world wide growth through global branding 0.03 3 0.09

Threats Weight Rating Weighted Score1. U.S. is suffering from high enemployment rate of 9.7 in many 0.04 1 0.042. rising oil prices 0.05 1 0.053. increased natural gas prices 0.04 2 0.084. rising cost of cotton 0.07 1 0.075. restrictions to produce 95% of the product 'natural' and 'organic' 0.06 3 0.186. threat from international competitors 0.09 1 0.097. strong competition from rival companies 0.08 2 0.168. trade restictions 0.04 1 0.049. slow pace of economic recovery 0.02 2 0.0410. U.S. or foreign labor strikes 0.02 2 0.04

TOTALS 1.00 2.07

SWOT Matrix

123

123

123

123 Focus towards in house manufacturing to foster the pace of economic recovery (W6, T9)

focus towards improved customer products to over come limited range of products (W2, O4)delayed shipments can be overcome through effective intranet between the supplier, manufacturer and retailer (W7, O5) Introduce brand range for the growing needs of young adults (W5, O2)

WO Strategies

WT Strategiesblanket purchase from thrid party (supplier) to minimize the effect of risnig cost of raw material (cotton) (W10, T10) Product quality and standards can be maintained by focusing the restrictions of 'organic products' imposed by goveronment. (W9, T3)

SO Strategies

ST Strategies

Expension inAsian countries throuhg global brand recognition (S1, O10)extensive product line is valueable in covering the needs of changing demographics situation (S10, O1)quick response time by online store presence (S4, O3)

Offering products through multiple channels to reduce the effet of competetors (S3, T7)Offering elite class products in competiton with Nordstrom and American Eagle (S5, T4)

Competitive profile matrix

Weight Rating Score Rating Score Rating Score0.04 2 0.08 2 0.08 2 0.080.10 4 0.40 4 0.40 1 0.100.08 3 0.24 2 0.16 4 0.320.06 4 0.24 1 0.06 3 0.180.12 4 0.48 3 0.36 3 0.360.07 2 0.14 2 0.14 4 0.280.07 2 0.14 4 0.28 4 0.280.09 4 0.36 1 0.09 4 0.360.09 4 0.36 3 0.27 2 0.180.15 4 0.60 3 0.45 4 0.600.05 2 0.10 3 0.15 3 0.150.08 4 0.32 4 0.32 2 0.16

1.00 3.46 2.76 3.05

Online Sales Market ShareProduct QualityBrand Management

Critical Success Factors

Gap Inc.

Competitive Profile Matrix (CPM)

TJX CompaniesNordstrom Inc.

Response timeFinancial Profit

AdvertisingMarket PenetrationCustomer ServiceStore LocationsR&D

TotalsPrice Competitiveness

BCG Matrix

Stars Question mark

Cash cows Dogs

40%

Old Navy

Gap

39%

0.18Banana

3%OthersIndu

stry

Sal

es G

row

th R

ate

(%)

Financial Ratios

• Current ratio = 1.87• Quick ratio = 1.1• Debt to total asset ratio = 42 %• Debt to equity ratio = 0.73• Long term debt to equity = 0.22• Inventory turnover =9.05 days• Fixed asset turnover =4.67 times• Total asset turnover = 2.07 times

Continued ratios,• A/c rec turnover = 71.53 %• Avg. collection period = 4.97 days• Gross profit margin = 40 %• Operating profit margin = 13%• ROA = 17 % • ROE = 29 %

RECOMENDATIONS

•Total asset turnover ratio is 2.07 which means

asset are under utilization and firm is not

generating sufficient volume from its assets.•Gross profit margin of the company is 40%

which declares that COGS is 60%. Company

should focus on the ways to minimize its COGS.

•Their inventory turnover is weak, it is about 9

days. Company needs to focus on lean

inventory.• They should be doing vertical integration by

minimizing the outsourcing of manufacturing

and start manufacturing their own garments

and apparels.

•They should be offering sports garments and

accessories to children, teenagers and men

also.•Banana republic should be offering products

attracting all kinds of customers not just the

elite or high class. The prices of the products

should range from high to low and medium.

•The extensive size range should be present

in stores also. Many of the buyers would not

prefer to use the online transactions.•They should be launching a separate brand

catering the needs and trends in teenagers.•Outsource non core activities of the stores

•Opt to get more franchise and make their

products more available•Use aggressive marketing tactics by social

media and offering product promotions to

attract customers.

•Should be using celebrities of TV, Film and

sports to endorse their products.•Can introduce the whole package of complete

attire. This can include tops, bottoms, shoes,

purses and accessories as whole package with

appropriate pricing.

CONCLUSION

Gap inc is facing loosing its market share

within the recent years. Although very

successful in the past; the firm needs to

change its major and minor strategies which

we have recommended to retain a good

market share.