Full version Case Study Analyses: The Gap, Inc.

Case Study Analyses: The Gap, Inc.

This print version free essay Case Study Analyses: The Gap, Inc..

Category: Business

Autor: reviewessays 21 December 2010

Words: 1660 | Pages: 7

The central purpose of writing this Case Study Analyses on The Gap, Inc. is to identify and isolate key issues and their underlying implications and offer practical solutions and plans for implementing those solutions.

This will be done by highlighting the social influences that influence the Gap, Inc. marketing strategy, segmentation strategies with respect to distinct retail markets, and positioning strategies that can be used or changed in a retail setting, as requested in the course assignment (as cited in the course module).

History, Development, and Growth

In 1969, Don Fisher opened the first Gap store in direct response to frustrations he was feeling as an inconvenienced customer. His objective was to provide a classic line of clothing in a wide variety of fits and styles and make the shopping experience easy and convenient for the customer. (www.gapinc.com).

Its unprecedented growth is a direct result of meeting a niche in the clothing market, at a time when The Gap was well positioned to meet the new demands of this “business-casual” trend, introducing other chains to expand its customer base, and aggressive expansion in the global marketplace.

Today, Gap, inc. is recognized as one of the world’s largest specialty retailers. It. operates four of the most well known clothing brands on the planet: Gap, Banana Republic, Old Navy, and Forth & Towne. (www.gapinc.com).

Internal Strengths and Weaknesses

The Gap was bound for success early on because the utility of its product mix (Etzel, Stanton, Walker, 2004) was perfect for a specific market segment. The Gap offered a classic line of khaki pants and cotton button-down shirts (p.200), perfect for the new “business-casual” look, and gained great brand recognition as a result.

Not long after, in 1976, The Gap went public. With the new wealth the company was enjoying, it further strengthened its share in the market by continuing to expand its product mix and add new stores across the world (Etzel et.al., p.200).

Now, with over 3000 stores globally, the Gap name is easily recognized across the world for its simple clothing styles. By interpreting fashion trends and finding ways to present tried and true items, the Gap is able to sell “inexpensive staples that look good”, according to Paul Pressler, CEO ((Stone, B., as cited in Newsweek, 2003).

With product utility, a product mix that met the needs of its target audience, brand name recognition, and global influence as its core strengths, the Gap, Inc. was in good position to grow through expansion.

Unfortunately, the great strength previously mentioned became one of its greatest weaknesses. Former CEO, Mickey Drexler, in response to his accurate prediction of the khaki craze of the ‘90’s, decided to make plans for an aggressive expansion, and by 2001 there were over 4,100 stores across the world (Etzel, et.al., 2004).

When sales began to decline and other retailers caught on to the Gap’s idea of offering simple styles, the Gap responded by attempting to create a trendier line of clothing and as a result lost a large share of its core market. (Etzel, et.al., 2004).

Gap executives figured that if they had the right clothes people would come. They may have been right in that assumption, however, they failed to query their customers about what they wanted to buy with devastating results in their bottom line (Stone, B. as cited in Newsweek, 2003).

Even with the strengths of brand recognition, product utility, and segmented markets, the Gap failed its customers by concentrating more on growth than meeting their specific needs. This failure can best be summed up by Drexler’s statement, “We probably got a little bored at being consistent and simple. Big mistake.” (Etzel, et.al.,2004).

External Environment (Opportunities and Threats)

The Gap, Inc. and its other business ventures still have a relevant place in the world of retail clothing. Brand recognition remains high and Gap’s “Back to Basics” advertising campaign have allowed it to refocus and take a closer look at its purpose, “to make it easier to express your personal style throughout your life.” (www.gapinc.com).

Gap has recently taken advantage of the Internet to help it regain its prominence in the marketplace. The unique opportunities this presents to the buying public (convenience, wider range of products, etc.) have created additional streams of revenue for the company (Etzel, et.al., 2004).

Coupled with a new advertising campaign starring a variety of hot actors, the company attempted to recapture the magic of a previous award-winning campaign called “Individuals of Style” (Etzel, et.al., 2004).

It’s really all about getting back to the basics for this company. Drexler said, “I believe Gap, Old Navy, and Banana Republic are now in a position to offer the product assortments our customers expect and that reflect what our brands have always stood for. The time is right for me to move on, and for the company to bring in new leadership to take the business forward.” (Etzel, et.al, 2004).

With Paul Pressler now at the helm, the company seems to be moving in the right direction. Since Gap already has an established reputation and recognition, Pressler can concentrate on paring down the product line and concentrating on what made Gap successful in the first place.

According to Harry Bernard, retail consultant, the Gap moved away from the fundamentals of researching the customers demands, maintaining quality, and keeping Wall Street expectations in check (Stone, B. as cited in Newsweek, 203).

The resulting loss of focus allowed competitors to move in. Other retailers like Target, Wal-Mart, and Kohl’s were pricing similar items of clothing much cheaper than Old Navy and Gap. This became a threat that Gap responded to with a trendier style of clothing intended to target a teen audience, however, it failed because it still tried to market to the older crowd as well (Etzel, et.al., 2004).

Former CEO, Drexler, summed up this mistake by saying, “We changed too much, too quickly, in ways that weren’t consistent with our brands.” (Etzel, et.al.,2004). The Gap became too big and because of its size, smaller chains were able to meet the changing needs of the market much quicker. The Gap just couldn’t keep up.

The worst threat of all to the Gap was itself. By trying to meet the needs of too many market segments it ultimately didn’t meet the necessary needs of any of them. Sales dropped as a result. Having said that, the Gap has more than adequate opportunity to overcome that threat by going back to the basics that made it successful to begin with.

Key Issues and Recommendations

Understanding the key issues underlying the Case Study is imperative to determining an appropriate plan of action. Two key issues stand above the rest in this case; 1) Rapid growth of business acquisitions and expansion without properly researching the wants and needs of its customers, and 2) Trying to be all things to all people and losing focus by introducing a product mix incongruent to the desires of the target market.

Having more stores may help increase sales in the short term but the long term expenses and loss of revenue due to poor sales ultimately results in a situation where inventory is high (because of lack of sales), and dividends are low (loss of stock value).

It is also unrealistic for a company to think that it can be all things to all people. When the Gap tried to create newer clothing styles and tried to meet the specific needs of several different market segments it ended up alienating all of them to a greater or lesser degree.

In this type of situation it is important to take a step back and consider the company vision and mission. That is to make it easy for you to express your personal style throughout your life. (www.gapinc.com).

We live in a world where people want to know what’s in it for them (WIIFM). They make purchases based on meeting their needs. The Gap can potentially regain a lot of momentum by finding out what those specific needs are and then meeting them.

By questioning customers (via surveys, questionnaires, etc.) and grouping them into different target markets, the Gap can concentrate its efforts on meeting the needs of each of those specific markets. It may want to take the “back to basics” campaign to the extreme and cut back its product line as well.

With the Internet widely available it may offer products that aren’t selling as well online rather than holding onto inventory in its stores. It all goes right back to concentrating on those things that made them successful to begin with. By “gutting” their product line they will lower costs.

The company is capitalizing on its social responsibilities by helping out hurricane Katrina victims, creating goodwill. Goodwill builds trust and loyalty, which the company needs to regain. It can continue to do this by looking outward rather than inward and recognizing needs on the communities and areas where their stores can offer assistance.

The Gap needs to take a close look at its expenses and where they are occurring. It should stop looking at expansion and concentrate on its employees and customers.

Given the facts surrounding this case and their underlying implications, the Gap could do just these few things and see dramatic improvements. It needs to regain its core market and better utilize its current resources. That will solve most of the issues defined in this particular case. Keep it simple, make it fun! It works in education, business, and life! I’m sure it would work for the Gap as well.

Resources:

Etzel, M., Stanton, W., and Walker, B. Marketing. 13th ed. McGraw-Hill, 2004.

Richardson, J. Marketing. Ed. John E. Richardson. 27th ed. Annual Edition. Iowa: McGraw-Hill, 2004.

Stone, Brad. "Back To Basics." Newsweek: Online Posting. 142 4 Aug. 2003. 36-38. 8 Oct. 2005 .