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Strategic Management: Submitted By: Percival C. Bordeos Jr. - 4ABE
Strategic Management: Submitted By: Percival C. Bordeos Jr. - 4ABE
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Company Profile
We are: A leading global specialty retailer offering clothing, accessories and personal
care products for men, women, children and babies. With about 132,000 employees
and about 3,000 company-operated stores and over 250 franchise stores, our presence
is felt around the world.
Brands
Headquarters
Product Design: New York City, San Francisco, Los Angeles, London
Stores
Company-operated stores: About 3,000 stores across the United States, United
Kingdom, Canada, China, France, Ireland, Japan and Italy
Franchise stores: Over 250 stores in locations across Asia, Australia, Eastern Europe,
Latin America, the Middle East and Africa
Employees
About 132,000 employees around the world support Gap Inc. and its five brands.
Social Responsibility
To us, it means everything from ensuring that workers are treated fairly to addressing
our environmental impact.
Gap has no formal vision or mission, but the company does have philosophy and ethics
statement.
Vision (Developed)
Gap Inc.’s vision is to be the first choice in family retail clothing while maximizing
customer satisfaction and shareholder value.
Our vision for how we work is built on four pillars:
Think: customers first – we consider the needs and value the diversity of thought,
experience and perspectives among our customers.
Inspire: creativity – we open ourselves to new ideas, tapping into our diversity of
perspectives.
Do: what’s right – we treat every customer, supplier and employee with respect.
Deliver: results – we strive to create an inclusive environment where employees
thrive and generate top performance.
These cultural cornerstones are the filter for our decisions and behaviors. And we sum it
all up in three words: “Wear your passion.”
Wear Your Passion is the cultural foundation that links all of our brands, divisions and
functions. It encompasses our goal of fostering a culture that retains the essence of
what makes us special and focuses on how we need to evolve to succeed.
Mission (Developed)
Corporate Philosophy
Gap strives to be a leader in the specialty family clothing industry and has strongly
espoused the importance of customers and employees. Its statement of corporate
philosophy exemplifies this concern as shown in the 2010 Annual Report; “At GAP Inc.,
we seek to make lasting, positive impressions on the people and communities where we
operate- because we believe that doing what’s right is good for business. That means
delivering value to our shareholders while working to lessen our impact on the planet,
advance the rights of garment workers and ensure that our company culture is one our
employees can be proud of.”
Based on the graph, Gap, Inc. has revenue of 14.6 B and a net income of 1.20B
as of 2011 in terms of assets and second to its greater competitor, which is TJX
Company that has a revenue of %21.9B and Nordstrom that has a 9.7B revenue. These
are the most competing brands worldwide in terms of Family Clothing retail competition.
Competitors
An American retailer that focuses on casual wear for consumers aged 18 to 22. It has
over 300 locations in the United States, and is expanding internationally. The company
also operates three offshoot brands:Abercrombie kids, Hollister Co., and Gilly Hicks, in
addition to a post-collegiate brand, Ruehl No.925, that closed in early 2010.
The brand targets 15- to 25-year-old males and females, with 911 American Eagle
Outfitters stores, 158 aerie stand-alone stores and 21 77kids stores. In 1977, the first
American Eagle store opens in Twelve Oaks Mall in Novi, MI as the destination for the
great outdoors.
Nordstrom, Inc.
Rivalry:
Abercroombie &Fitch
Suppliers Target Market
Subcompanies American Eagle
Outfitters All family member's
age bracket
TJX Companies
Nordstrom, Inc.
Substitutes
NONE
Gap Inc., is one of the leading family brand apparel in the world. Its competitors are
Abercrombie & Fitch, American Eagle Outfitters, TJX Companies, Nordstrom, Inc, and
others.
For the threats of New Entrance, I can see a potential with the emerging Asian brands
like Uni-Qlo, Bench, Hang Ten, etc. This could be a threat to them since they are
starting to become global. About the substitutes, I can’t find any substitutes for these
casual wears as far as clothing style is concerned. It varies in brand but less in style.
What’s common about these brands is that they are focused in being a household
casual wear brand that may cater to all the age bracket in a family.
Competitive Profile Matrix (CPM)
International
0.15 3 0.45 0.15 2 0.3 0.10 3 0.3
Branches
Family-Oriented
0.1 2 0.2 .20 4 0.8 0.20 4 0.8
Image
Legend:
Rating:
4 – major strength 3 – minor strength 2 – minor weakness 1 – major weakness
*The company who has the highest TOTAL is the strongest strategic position among the competitors in
the industry.
Based on the CPM matrix, Gap Inc., obtained a weighted score of 3.35, while
TJX Companies obtained a weighted score of 3.2 and Abercrombie and FItch obtained
a weighted score of 3.05. Even if Gap Inc. has the highest weighted score, some of its
factors have a varied score in rating and weight.
Gap Inc. should prioritize competitive advantage and make additional improvements
with factors that have low on rating allocating improvements with its technology and
additional advertisements. The company should also focus on its Global Expansion in
Asia since they had a goods trade deficit of approximately $62.1 billion as of March
2011 as well as investments in order to catch up in the future. This advantage can
improve its management, customer service, financial position, number of branches,
customer loyalty and security and safety and international relation. Lastly, the company
should maintain its Family-oriented apparel image since they share a very big market
share with that sector.
External Factor Evaluation (EFE) Matrix
Threats
Economic downturn directly affects apparel retail 0.11 3
business.
0.33
Global specialty apparel retail industry is highly 0.07 2
competitive
0.14
Emerging fast fashion retailers 0.06 2 0.12
The market for prime real estate is competitive 0.07 2 0.14
Newly emerging Asian brands 0.14 4 0.32
TOTAL 1.00 2.74
According to the EFE Matrix of Gap, Inc., it scored 2.74. EFE Matrix based on
the evaluation of general environment analysis of these external factors that affect the
business to get the potential opportunities and threats for Gap, Inc. The weighted score
indicates that the company’s response had a huge effect in its existing Opportunities
and Threats in the Apparel Retail industry.
In the table, we can see that the densest factor is Global new market in Europe and
Asia; it evaluated in a weight the average of 0.54. Europeans had been a good market
for clothing since then. Asian countries on the other hand are becoming a good possible
market for clothes nowadays since they are becoming aware of the global brands with
affordable prices. As a Filipino, I think that it will be a hit if they will increase the
numbers of branches here in the Philippines.
EFE Matrix above has its current competitive position or business strength in the
industry is above average. This factors had been coping up well, which can be positively
or adversely affect its financial positioning today.
INTERNAL ASSESSMENT
Strength
Gap, Inc. has had a long history of almost 40 years now. It is an established name and
is distinct in its sector of market. An in-depth of Gap’s brand strength is later discussed
in this section. The other distinct strength that Gap has is its global approach. Since, it is
a multinational company; it is recognized all over the world. Meanwhile, being a
multinational company has helped Gap, Inc. to diversity its intra-country market risks.
Gap also invests large sum of money in research and development. This has given the
company regular boost to move forward. Gap’s unique way of ready-made goods from
different countries including Honduras, India, Bangladesh, and others has helped the
company to reduce the labor costs. Meanwhile, it is interesting to look at a historical
trend that the company has been able to sustain such a large supply chain and still
been able to maintain enough inventories in the stock.
Weakness
Although Gap has excelled in its sector of apparels, it has some weaknesses that it
needs to address. The company’s narrow niche is one of the major weaknesses. It is
limited in sales and growth. This has also increased the risks associated with the
market. Even a minor competition from another clothing retailer can hamper the
company’s over-all growth. In addition, Gap does not have a distinct name in certain
sectors like Nike or Reebok have in sporting goods. Furthermore, as illustrated by
BusinessWeek, Gap has not been able to maintain a fashion identity.
Based on the table shown above IFE Matrix, Gap Inc., scores about 2.78. It weighted
based on the company’s higher than average rate and has a strong internal position.
This reiterates the fact that the company is strong in terms of branches inside and
outside America. It had increased in the number of foreign branches; positive value
system of the employees, as well as the broad distribution of local branches and Global
Brand Recognition rated as 4 which had been evaluated by the company’s strengths.
From the illustration table, it concludes that Gap, Inc. has a good internal structure.
Strength
Global brand recognition
GAP is globally recognized as American style, pop culture and the emotional
affinity.
Stores located in worldwide
GAP has 3,095 stores in worldwide as of January 30, 2010.
Company-owned stores are located in United States, United Kingdom, Japan,
Canada, France and Ireland.
Franchisees-owned stores are located in other countries such as Turkey, United
Arab Emirates and so on.
Franchising system easily to expand Gap store internationally
GAP has franchise agreements with unaffiliated franchisees to operate Gap or
Banana Republic brand stores worldwide.
Multiple brands and brand extensions for a wide range of segments
GAP has 5 distinct brands such as Gap, Old Navy, Banana Republic, Piperlime
and Athleta and
brand extensions such as GapKids, babyGap, gapbody and GapMaternity.
Huge customer and vendor base
Weaknesses:
Nearly all merchandise depend on third-party vendors, which is outside of the
US.
Approximately 1000 vendors in 60 countries. 27 percent is produced in China.
Third-party vendors can cause products shortage, shipment delay and increased
costs.
Huge store base including unaffiliated franchisees
Gap is limited to keep up with fashion trends, to train some methods and to control
quality.
Less attractive in trendy clothing
Gap’s product lines are less attractive clothing to consumers who are interested in
trendy clothing than competitors
Uncontrollable production processes
Control of production processes is a key factor among fast fashion retailers