1. Analysis of the company's history, development and growth Founded in 1969 by Donald Fisher and Doris Fisher, Gap Inc is largest clothing and accessories retailer in America. The clothing store began in San Francisco California, where the Fishers opened their first shop because they had been frustrated with the poor service and clothing styles offered at other retailers. The store was named the gap because it supplied clothing to teenagers and college students, the "generation gap" between children and adults.
Originally, Gap did not sell its own brand of clothing, carrying only the Levi Strauss & Co label on its shelves until 1978. At this time Gap had opened more than 300 stores and was selling its own, increasingly popular brand with the Gap label. While manufacturing products under its own label Gap saw its dominance begin, and ultimately stopped selling Levi's altogether in 1992; this move allowed Gap to lower transaction costs and reduce supply threats created by Levi's.
For years, Gap was popular for its basic T-shirts, khakis and sweaters, bringing in the kind of cash-generating revenue that helped fuel its explosive growth in the 1990s. But as competitors began offering similar styles and prices and apparel sales began to lose momentum, Gap slipped away from basics and tried to pull ahead with unique fashions. The strategy backfired, and the Gap subsequently alienated its core 20- to 30-year-old customer base with far-out fashions that appeal to younger consumers, or that missed completely. Gap chose to chase trends, instead of reinforcing its strengths.
2. Identify the company's internal strengths and weaknesses
The Gap's multiple brands have become some of the most recognizable labels within the apparel industry. Its product line offers a selection of clothing for all ages. Products include: Gap, Gap Body, Gap Kids, baby Gap and Gap Maternity.
Increased sales have resulted primarily from the Gap's ability to expand into specialty markets. Banana Republic is known for casual luxury, with high-quality apparel for men and women and sophisticated seasonal collections of accessories, shoes, personal care products, intimate apparel and gifts for the home. Old Navy, is known for its low cost, and is famous for its denim, graphic tees, cargos, and tops. In addition, the Old Navy Item of the Week which, offers a special item every week at a discounted price.
Gap's financial control and expense discipline have been excellent. A decrease in liabilities generated tremendous free cash flow that provides the company with flexibility regarding its strategic long-term options. Celebrities in Gap Ads
Gap is well known for featuring celebrities in its print and television advertisements. They have featured over 300 celebrities of various statures in their campaigns. Number of retail locations
There are 1,250 Gap stores within the domestic U.S; as well as nearly 500 Banana Republic stores and almost 1,000 Old Navy's. The Gap also has an additional 282 stores overseas. Weaknesses
Out of touch with fashions
At the Gap store shelves have displayed merchandise from classic casual to trendy to professional too many times in the past years, causing consumers to wonder what the brand even stands for. Some of Gap's recent merchandise and branding problems stem from the fact that it seems out of touch with the new generation of consumers. Ten years ago a teenager might have worn one brand head to toe. The younger generation of consumers expresses itself through how they put things together. They don't want a fashion authoritythey want options. Misjudgment of fashion trends in 2000 and 2001 increased inventory, the markdowns needed to move the product caused revenues to slow down earning only a 2% growth, while Cogs during the same period grew by more that 10%.
Image tarnished from accusations of sweatshop labor
Given the opportunity to lower its costs by manufacturing...
References: Textbook, Strategic Management: An Integrated Approach
Case 13, Gap international: A specialty Apparel Retailer C200-229
Wikipedia Online-The Gap
"Gap hires Egon Zehnder to find new CEO" (reprint), Associated Press, 5 Mar 2007.
"Gap Explores Alternatives, Including Possible Sale: CNBC 's Faber", CNBC.com, 8 Jan 2007.
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