Gap Inc. Case Study

Internal Analysis:

Gap Inc. is a global specialty retailer selling casual apparel, accessories and personal care products for men, women and children. They sell their products in United States, Canada, Europe and Japan. Gap's revenue comes from selling classically styled jeans, khakis, t-shirts, personal care products, sleepwear, and other basic wardrobe items. Gap offers products for babies, children, pre-teens, teens, and adults.

Gap Inc. was incorporated in July 1969. It began as a single store in San Francisco, California. It was founded by Donald and Doris Fisher. It went public in 1976. In 1983 it bought Banana Republic. In 1986, it opened a new segment for kids called GapKids which was followed by Baby Gap in 1990.

The mission statement of Gap Inc. is as follows: Gap Inc. is a brand-builder. We create emotional connections with customers around the world through inspiring product design, unique store experiences and compelling marketing.

The purpose of Gap Inc. is stated as: Simply, to make it easy for you to express your personal style throughout your life. The values that Gap Inc believes has guided its success are: integrity, respect, open-mindedness, quality and balance.

The strategy that Gap Inc has followed in order to achieve its mission are:

1. Sell various goods under the brand name. Segmentation of Products: Gap Adult, GapBody, GapKids, babyGap and GapMaternity

2. Different Gap Brands targeted different age groups. Target men and women of all ages through it's store concepts.

3. Hybrid strategy of cost leadership and differentiation

4. Sell a wide range of products and provide the best customer experience

5. Achieve Market share by opening many stores

The company's business objectives are to create shareholder value and to provide the best customer experience. They want customers to know that when they walk into a store they are walking into a brand. The company keeps a high degree of control on its store as all of them are company owned. The company also believes in building brands and this is reflected by the strong presence of the Gap brand in the marketplace. The Gap brand is very well recognized and has high brand equity in the marketplace.

Over the past couple of years the company's sales are declining and for since past 28 months same stores sales have been falling. The company's traditional customer base has been eroding and it has been unable to attract new customers to its stores.

Functional Analysis:

Inspiration:

From color to concept, it all begins with inspiration -- whether it's people-watching on the streets of Tokyo, a flash from a dream or a visit to a local art gallery. At Gap Inc.'s product development offices in New York City, designers, product managers and graphic artists create the look and feel for each season's merchandise. Gap has tried to be a trend setter in the fashion industry, however, it has completely misjudged customer preferences in the past few years. By introducing new styles in it stores it has not only alleviated its traditional customer base but it has also been unable to attract new customer to its stores. The apparel industry is placed in a very dynamic environment and customer preferences change over night, an organization needs to cater to this changing environment. The company needs to correctly read fashion trends and place orders with vendors accordingly. Its inability to correctly read customer preference has resulted in declining sales.

Sourcing

Located around the globe, employees in Gap Inc.'s Sourcing and Logistics group, along with its buying agents, draw up production schedules and place orders with approved third-party factories in the more than 50 countries where its products are made. It purchases its merchandise from over 500 vendors who manufacture Gap's designed clothing. This large pool vendor ensures that no individual supplier has an unfair advantage. As Gap does not manufacture any of its products it is imperative that it is able to display the latest design in its stores.

It is imperative that Gap deliver the latest styles to its customers in a timely manner. The time lag between designing, sourcing and manufacturing should minimal as the company would like the merchandise to be sold in stores before fashion trends and customer preferences change. Not having a manufacturing plant for its products can be an advantage for Gap if it can effectively procure its goods for third parties and transport them to its stores in a timely manner. As the environment in which Gap operates is very dynamic, production is likely to involve highly specialized labor and equipment which normally tends to be very inflexible.

Marketing

Gap has its own marketing team headquartered in the San Francisco Bay Area. Its in-house marketing teams create everything from hang-tags and in-store posters to billboards and TV commercials. Gap took advantage of various channels of promotions including television, print, outdoor and online. However, its advertising is sometimes unclear and confusing. Also advertising is a non core business activity for Gap. Evaluating the effectiveness of its advertising is a difficult job. It may be a good idea for Gap to outsource it advertising operations.

Gap's products and services differ from the rest of their competition because they have more to offer and they can also compete on the international market. Their clothing is tailored to fit many different age ranges. The gap brand has a strong presence in the marketplace. Gap has introduced various product lines for its customers. It s product offerings includes jeans, pants, denim products, active wear, accessories, loungewear, sleepwear, underwear, fragrances and cosmetics. It tries to meet customer preferences by providing a wide range of products to its customers. It has been able to successfully segment the market on the basis of the customer's age. It provides concept stores for the different ages of its customers (example: Gap Adult, GapBody, GapKids, babyGap and GapMaternity). The company sells products internationally and as of August 2002 it had 2,323 concept stores domestically. Overexpansion has added to Gap's woes as one store is cannibalizing sales of another. Individual stores are experiencing declining sales and increasing operating costs.

The company also has drifted from its tradition designs and may need to reassess it customer preferences.