Gap Inc.


Gap Inc. – A Portfolio Analysis

Submitted By: Pradeep Sapkota (Gap Inc. - Comprehensive Report) Albi Alikaj (Gap Stores) Kristina Daily (Banana Republic) Sony Byanjankar (Old Navy) Moureen Atieno (Piperlime)

Submitted to: Dr. Tim Wise

April 23, 2008

Gap Inc. 2

This paper is an analytical overview of Gap, Incorporated and its portfolio members. It describes the birth of the company and goes on to describe its current position. As part of the description process, it includes the four major companies that are part of Gap, Inc. These companies include Gap, Banana Republic, Old Navy and Piperlime. A Managerial Analysis is included herewith that gives an insight into SWOT analysis and Five Forces Analysis of the company, and also included is the Strategic Distinction of the company. As per the Financial Analysis part, financial tools such as ratio analysis, consolidated financial statement comparison, and stock trend are analyzed to assess the company’s progress. The paper also keeps close track of company’s social, ethical, environmental and managerial aspects in day to day operations. Future expectations and possible diversification or anti-diversification process that the corporation can practice are also part of the paper. It includes the 9-cell matrix to show the existence of company and its portfolio. As a conclusion, the paper sums up ideas from a group of five undergraduate students and incorporates them to breakdown the strategic and financial aspect of Gap, Inc.

Gap Inc. 3

Gap, Inc. is a leading American specialty apparel retailer based in San Francisco, California. It sells casual apparels, accessories, and other personal care products for men, women, and children. The products of Gap, Inc. include denim, khakis, T-shirts, boxers, casual wear, and others. It is traded in New York Stock Exchange under the symbol GPS. Currently, the company boasts approximately 150,000 employees and 3,139 stores all around the world. Gap, Inc. sustains a large number of brands, namely Gap, Old Navy, Banana Republic, Forth & Towne, Piperlime, and others. These different companies are bought by the parent company in different times. Started as a general jeans retiling store, Gap, Inc. today has a market value of $13.32 billions. Throughout its history, Gap, Inc. has established itself as a leader in the industry.

Purpose and Values of Gap, Inc.
“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. Our purpose? Simply, to make it easy for you to express your personal style throughout your life. We have more than 150,000 passionate, talented people around the world who help bring this purpose to life for our customers. Across our company and embedded in our culture are key values that guide our success: integrity, respect, open-mindedness, quality and balance. Every day, we honor these values and exemplify our belief in doing business in a socially responsible way.” – which sells private branded shoes. 1988 the corporation was reincorporated in State of Delaware. Inc. Old Navy.5 millions in sales in 1971 increased to $97 million in 1976 with 186 stores in 21 states. is a leader in apparel industry. With this knowledge. and Piperlime.Gap Inc. Gap.5 millions. Gap. Gap. Gap had to react by changing the lines of clothes to a larger variety. which led them to feel that the demand of jeans has out-weighted supply. purchased Banana Republic in 1983. Old Navy quickly proved to be one of the best sellers in retailing history. include Gap.’ The other major addition to Gap. Started as ‘Gap Warehouse’. Donald Fisher and his wife Doris went to buy a pair of Levi’s jeans in a department store. Banana Republic was a catalogue retailer selling safari-themed clothes. The immediate response from young customers led Fisher to open other outlets. Inc.’s portfolio was Old Navy which was established in 1994. In May. The company had huge success in late 1990s with net income surpassing $824. Inc. As the recession of 1970s arrived. . 4 History In July 1969. the appeal for jeans grew thus leading to high growth of the company. This store only carried records and Levi’s jeans. tried to diversify its customers and increased the appeal from e-commerce. The major brands of Gap. With the inclusion of Piperlime. With an inclusion of all these different brands. $2. later took a huge step in 2006 with the inclusion of Piperlime. Gap. They started selling their own labels which was later aided by appointment of Mickey Drexler as a CEO in 1980s. Before this. This transformed Banana Republic from a rookie in clothing business to a well established ‘business women’s store. It has established itself as a specialty in this industry. Inc. Banana Republic. But they could not find a pair that would fit him. the couple started a store in a small shop near San Francisco State University. Inc. A close look into these four specific brands included herewith. As the 1970s arrived.

5 Gap Albi Alikaj .Gap Inc.

jeans. Gap is regarded as a distinct brand in casual apparel retail store. sleepwear. shoes. Gap offers extensive selections of classically styled. Products include tops. 6 Until the acquisition of Banana Republic in 1983. the firm claims that it offers products from appeal to unique markets by developing multiple formats and designs. toddler girls and boys up to the age of five. pants/ jeans. GapKids clothing is known for style. since it was the only segment in the company. ages teen through adult. Inc. accessories. Regarding the price range of the brand in the company. and it was created in 1969 with the opening of the first Gap store. Gap also . dresses/skirts. and personal care products. including Old Navy. aged newborn through pre-teen. and Piperlime. casual apparel at moderate price points. yoga wear. pants. and bedding. infant. Gap Jeans. Gap launched GapBody which offered women's underwear. with more expensive products than Old Navy. The goal was to offer the Gap style and quality in casual apparel and accessories to children. respectively. graphic Ts. In 1998. Gap entered the children's apparel market by introducing GapKids and babyGap.. and less expensive than Banana Republic. and it was the base for the success of the other segments. Products range from wardrobe basics such denim. and value with products such as active-wear. polo shirts. babyGap is an international specialty retailer offering clothing and gift sets for newborn. Gap is considered the parent member of Gap Inc.. shorts/swimwear. for example. Gap is located between Old Navy and Banana Republic. Inc.Gap Inc. durability. hooded sweatshirts. and maternity apparel. khakis and T-shirts to fashion apparel. In 1986 and 1989. sweaters/outerwear. personal care products for men and women. high quality. as well as unisex newborn sets. Gap stores were a synonym to Gap. It is one of the four members of Gap. Banana Republic. offers a huge variety of jeans. Although Gap has been criticized for blandness and uniformity in its selling environments. school uniforms. and more. loungewear.

Gap has earned the reputation of a brand with a variety of high-quality products. personal checks. merchandising and shopping environments are controlled by Gap. The company announced the statement after an internal investigation made by a British newspaper. which carry a similar line of products. and sells them with their brand name. The range of merchandise displayed in each store varies depending on the selling season and the size and location of the store. All sales are tendered for cash. Gap designs virtually all of its products. and they were working for up to sixteen hours a day to embroider clothes. these stores redeem gift cards. to marketing. 7 operates Gap Outlet stores. debit cards. which printed pictures of children making clothes for Gap in a sweatshop. In order to attract more customers. Gap said it would refine its procedures to ensure that items made in textile workshops in India were not being produced by children. However. Now. for example. According to the newspaper report. Gap is trying to rebuild its reputation after a child-labor scandal. where children were hand-embroidering GapKids clothes. Inc. and also have a private label credit card program through which frequent customers receive benefits.Gap Inc. some of them bearing Gap labels and bar codes. Gap stores generally are open seven days per week and most holidays. In India. some children were as young as ten years old. and they comprise the majority of the stores owned by Gap. Gap is known throughout the world with more than 1800 Gap stores located in eighteen countries. Regarding its stores operations. . Gap has used a vertical integration since virtually all aspects of brand development from product design and distribution. or credit cards. Gap has to deal with issues such as child labor in some developing countries. Through the years. Most of Gap stores' suppliers are located outside the United States by offering lower costs. The Observer. which are manufactured by independent sources. This case is one of the issues that Gap has to deal with regarding its store operations. So.

Even though the number of Gap stores is almost twice as the number of Old Navy stores. it has the ability to increase online sales since Gap spends in average more than its competitors in online marketing. market. Even though Gap stores are located in eighteen countries. France. In the past years. by having a direct customer interaction. Ireland. During 2007. One reason that Gap is not performing as well as expected is because it has somewhat lost its brand identity. the United Kingdom. Gap shelves have displayed different kinds of clothing from classic casual to trendy to professional too many times.. The remaining twelve countries include the franchise agreements. net sales from Gap consisted of 39 percent of total sales for Gap. Malaysia. Saudi Arabia. including the United States. since most of the stores are mainly located in the United States. the company can acquire valuable insights into their preferences. The company focuses more on sales from physical locations rather than online stores. Gap is more vulnerable to changes in the U.S. causing consumers to wonder what the brand even stands for.523 in 2007 compared to $6.665 for Old Navy. Canada. Inc. But. However. etc. are also playing a role in destroying the . it is its second most profitable segment after Old Navy. Even though Gap stores can be found in eighteen countries. So. Singapore. with its current position. Also. Currently Gap is not bringing as much profit to the company as expected. it is still less profitable with net sales of $6. Being centralized in the United States. and Japan. it has also made franchise agreements in countries such as Bahrain. Kuwait. The other brands of Gap. Currently. a suggestion to have a more stable performance is to become more globally decentralized. 8 One advantage of having a vertical integration is that the company does not have to pay wholesalers and retailers in order to sell its products. Indonesia. Philippines. with a decline of 4 percent in net sales from last year. Gap operates stores only in six countries. there is not a lot of diversity.Gap Inc. Inc.

net sales provided by Gap stores make up 39 percent of the total portfolio of Gap.. . During the last decade. the wheel turned. Due to several reasons. 9 Gap’s core offering and leaving with little room to maneuver. right now Gap needs to improve certain aspects of its marketing strategy in order to regain the reputation that it had a decade ago. which has led the net sales to decline by 4 percent. Inc. the brand defined hip. and suddenly it just didn't feel quite so hip any more. Currently. Gap is not performing as well as it is expected. Gap was considered to be a great example for other brands to look at. Hipster Hollywood types infused the brand with a sense of down-home cool until.” (Walters. with great TV ads directed by directors du jour such as Spike Jonze. “Cool and understated. Gap stores consist of more than half of the Gap.Gap Inc. with its history back at the beginning of Gap. well. and it is the second major segment in company. Gap didn't evolve.. Inc. 2007) In conclusion. So. stores by offering a large variety of casual apparel. complete with catchy soundtracks from on-the-rise bands such as French duo Daft Punk. Inc. Gap stores today make up one of the four segments of the company. Located in several countries throughout the currently.

10 Banana Republic Kristina Daily .Gap Inc.

Old Navy and Piperlime. In addition to the parent company Gap. And Doris and Don Fisher opened the first Gap store in San Francisco. Banana Republic. Banana Republic also operates Banana Republic Factory stores. Gap is known for turning classic clothing into must-have fashion. also operates four of the most recognized apparel brands in the world — Gap.Gap Inc. they added trendier clothing to try and please the younger generation. they tried too hard and had to eventually face not only failure but also loss of interest from their existing customers. the company buys up historic landmarks and refurbishes them as opposed to breaking new ground and paving a fictional paradise. including intimate apparel to personal care products. To differentiate their products. is one of the world's largest specialty retailers. Inc. Additionally. Man took his first walk on the moon. Today. The Beatles give their last public performance on the roof of Apple Records.. acquired Banana Republic in 1983. Banana Republic now offers sophisticated. with high-quality apparel. Banana Republic is known for its casual luxury. Lyndon Baines Johnson left office as Richard Milhous Nixon was sworn in as the 37th President of the United States of America.100 stores and fiscal 2007 revenues of $15. fashionable collections of dress-casual and tailored apparel. Gap has provided its customers with clothing and accessories that enhance their personal style. and a Web site. Banana Republic has grown from its original two-store wannabe safari outfitter to an empire in its own right. Banana Republic tailors its store to appeal to the unique market of pleasing the most fashion conscious consumers. Inc. through all of which it distributes its wellput-together look. Gap Inc. Gap.8 billion. but far from discount) casual and tailored apparel has a expansive territory of 535 stores in North American and Japan. each with their individual target markets. since 1983. Since its founding in 1969. Inc. not only added additional stores such as Old Navy and Banana Republic. at one point it was dangerously close to cannibalizing its parent's customers. which carry a similar line of products. however. Banana Republic products range from apparel. shoes and accessories for men and women at higher price points than Gap. and initially the brand only carried two stores and a safari motif. In several apparent contrasts to Gap. with more than 3. Gap launched a . A division of ailing retail giant Gap Inc. In trying to salvage the company and its sales. However. 11 1969. Today. Gap. Gap Inc. the well-known retailer of men's and women's mid-scale (not high-dollar.

Gap. Inventory levels are reviewed in order to identify slow-moving merchandise within the company and items that are no longer in stock in a sufficient range of sizes and use markdowns to clear merchandise. We constantly evolve each brand to better meet our customers’ needs — through innovative and inspiring design. quality. and shopping environments are controlled by their parent company. especially prior to the peak selling seasons. with the sales peaking over an estimated 13 weeks out of the year during the back-to-school/ work and holiday periods. independent retail stores and internet businesses that market similar lines of merchandise. Japanese.Gap Inc. merchandising. Banana Republic’s ability to develop and evolve their individual brand is vital to its success. The company also issues and redeems gift cards through the private brand. however. and Canadian markets from established regional and national chains. and good value. The back -to -basics campaign brought back the signature merchandise. All sales are tendered for cash. describes its individual brands as having a simple and common purpose. debit and credit cards. checks. The global specialty apparel industry/ retail industry is highly competitive. and by communicating with people in a way that connects to how . “To make it easy for people to express their personal style. Today Gap has regained some of its previous customers and plans to evolve from there. and the Banana Republic private label credit cards issued by a third party. Banana Republic competes with national and local department stores. Their distinct brand is among one of their most important assets. as well as the original management and marketing ideas. Also competition arises in the European. The cyclical nature of the retail business requires Banana Republic to carry a significant amount of inventory. specialty and discount store chains. Inc. Banana Republic stores are generally open seven days per week and most holidays. Banana Republic’s business follows a seasonal pattern. Gap. through convenient and engaging store experiences. Banana Republic stores offer a shopper-friendly environment with an assortment of apparel and accessories that emphasize style. depends on the selling season and the size and location of the store. All aspects of the brand development from product design and distribution to marketing. 12 new back -to -basics campaign aimed at winning back the previous customers' trust. Much of the inventory is maintained in the company’s distribution centers. The range of merchandise displayed in each store. Inc.

Banana Republic offers covetable. 13 they live. offering high-quality apparel and accessories collections for men and women. as a whole. personal care products and intimate apparel. $136 in direct online sales. and how they operate as a company. Banana Republic acquired $2. Social Responsibility of Gap. uncomplicated style. In 2007. which equals to about 15. Inc. The brand offers elevated essentials and sophisticated seasonal collections of accessories. Gap Inc.351 (in millions) in net sales. Inc. Inc. Inc. collective value to shareholders. work and play. Overall. Banana Republic’s net sales (in millions) were $2. $147 in Canada.” Banana Republic acts as Gap. Inc.’s being $15. customers and society.” Banana Republic contributes significantly to Gap. Delivering elevated design and luxurious fabrications at approachable prices. and $89 in Asia. shoes. From work to casual occasions.’s accessible luxury brand. Inc. as per Gap. Dan Henkle. SVP. believes that they should go beyond the basics of ethical business practices and embrace our responsibility to people and to the planet. totaling $2.943.’s 2007 Annual Report. employees. In addition.723 in total net sales which contributes about 17% of the Gap. they believe this brings sustained.’s larger portfolio. Social responsibility is fundamental to Gap. By doing this. describes Gap’s ethical practices in a nutshell through his statement that. Inc.548 when compared to Gap..Gap Inc. the global sales growth of Banana Republic from the previous year was 11%. .98% of the company as a whole. “acting in an ethical way is not only the right thing to do — it also unlocks new ways for us to do business better. Banana Republic has been credited with helping make fashion more accessible.

Gap Inc. 14 OLD NAVY Sony Byanjankar .

it became the first retail brand to reach $1 billion in sales in less than 4 years. Before the opening of Old Navy. the Mall of America. and by the end of a decade. and CEO of the company were visiting Paris. when the founder of Gap Inc. The first three Old Navy stores were opened in Colma. The largest Old Navy stores are its flagship stores. they came up with the idea of Gap Warehouse. the company had 131 stores opened with $420 million in sales. which initially operated under the banner "Gap Warehouse. the company has 282 stores and $1. was founded by a Bronx native. Old Navy was able to open 57 more stores within the country generating $120 million in sales. Seattle. After a long discussion and research. The idea of opening the cheaper version of Gap was an immediate success for the company. By the end of 1995. Drexler and other executive decided to give it its own identity. 15 Old Navy. and San Francisco[In 2001. The reason behind the opening of Old Navy was to compete with the low-priced retailer stores like Target. Within the first year of its opening.3 billions in sales. Chicago. In 1997. Drexler and his advisory groups surveyed if Gap could produce the markdown version of itself. Millard Drexler in 1994.” But after it was proved to be highly successful. San Leandro.. In 1994. they came across a bar named Old Navy which led them to change Gap Warehouse to Old Navy. JC Penny and others. The company converted some of its Gap outlets into the new format. located in New York City. By the end of the year. The company contacted many overseas garment factories and asked them if they could produce a lower-priced line using less expensive fabrics. It opened . Wal-Mart. Old Navy made its debut in international market. and Pittsburg in Northern California. total revenue. which represented nearly 20% of the Gap Inc. More than 100 stores were opened each year in 1998 and 1999. a low-priced retailer and a subsidiary of Gap Inc.Gap Inc. the company had total of 513 stores opened.

People get 5% cash back on purchases at any Gap. in association with New York based company Kiss My Face. More than 100 stores were opened each year in 1998 and 1999.000 stores in the united stated and Canada. hats. and line of clothing and toys for dogs. store and 1% cash back on all other purchases. and its success played an increasingly important role in the health of the Gap Inc. boys. and maternity section. toys. Old Navy started its online store. which are the largest Old Navy stores. Under Ming's leadership. She was not a newcomer in the plus size. In April 1999. Canada and 7 stores in the province of Quebec in 2004. But it could not do really well and dropped the effort after only a few months. At oldnavy. variety of accessories including shoes. handbags. In September 2007. sunglasses. and women clothing. Old Navy continued to expand. Old Navy has more than 1. Old Navy offers Old Navy Visa cards which can be used anywhere.. Old Navy represented the driving force behind Gap Inc. called ONbody (Obsessively Natural). Old Navy’s stores have a specialized section of infants. Jenny Ming was appointed as a president of the Old Navy. men. Old Navy’s target market largely consists of fashion oriented as well as price conscious teenagers and adults. Inc. girls. Old Navy accounted for 16 percent of the total number of stores . But in 2007. Also. have a collection of business clothes for women. By the end of 2007. Old Navy also attempted to start a bath and body line. there is a $5 shipping charge no matter how much you purchase. giving the company a total of 513 stores by the decade's end. She was the one who made the calls to overseas garment factories to determine whether a less expensive line of clothing could be made. 16 12 stores in the Greater Toronto Area. oldnavy. plus-size clothing has been removed from all stores and made it available exclusively online.Gap Inc. But now a days it is promoting free shipping for any order of $50 or more. which boosted its online sales. during the late in 2000. Flagship stores.

In 2000. Old navy accounted approximately 40 percent of the Gap Inc. the extensive retailer began recording declining sales. Despite the negligible expansion achieved in the years leading up to its tenth anniversary.7 millions. Hence. resulting in Old Navy's first setback. Old Navy signals towards need for discount retail stores. but accounted for nearly 30 percent of its sales volume. it is one of the most successful retailers in the history. Old Navy maintains the quality of Gap. the company had posted five consecutive months of decline sales. By October 2000. which made Old Navy extremely important to its parent company.Gap Inc. Old Navy represented a powerful retailing force. Only after a decade. .. Its stock value also dropped by 57 percent and in 2001 the company bear a loss of $ 7. relying on her ability to predict emerging apparel styles. Ming's leadership began strongly but then it started to weaken. ever since its opening in 1994. Old Navy. which placed a huge pressure on Ming. Old Navy has proved itself as a worthy member of the portfolio. 17 operated by its parent company. This has provided the company with satisfied customers and bright future. Inc. With annual sales increasing with large margin. but serves at a lower price. could not offer much help. To strengthen Old Navy's position as the Gap Inc. Ming intended to expand aggressively.’s nearly $16 billion in revenue.’s growth force. which used to be lifeblood of the Gap Inc. Currently.

18 Piperlime Maureen Atieno .Gap Inc.

The online store has shoes for women which are the majority followed by men and then kids who have less than two dozen brands. Piperlime is an accessible luxury brand like starbucks and that one can fine shoes that are affordable compared to other online stores like Zappos.Piperlime sells only shoes while Zappos sells other apparels including eyewear.It is the only online store and it sells only shoes that are not affiliated with the Gap brand. The brand name was randomly created and they chose the words they liked in order to come up with the name Piperlime. manufactured and branded by other companies. 19 Piperlime Shoe Company which is a part of Gap inc. This enables them to get shoes that they customers actually want and they are able to dress their customers from head to toe. On the website green is the main color and the shoe blurbs are called fresh juice and the brand logo is a slice of citrus fruit.Gap Inc. bags and watches. It offers distinctive shoe selection and offers tips on the latest footwear trends and styles by celebrity stylists. started the online shoe store is because they found out that most of their online shoppers wore shoes from other brands instead of the Gap brands. Compared to other companies it offers a prepaid return and no postage on returning shoes . It differs from other online shoe stores like Zappos and Nordstrom because they provide an edited selection of designer and casual brands rather than any style a given shoe maker offers.Piperlime represents 100 brands of shoes in their online store compared to other online stores like Zappos which offer a wide range of brands. So they decided to open an online shoe store that sold shoes with that are designed. It only sells single merchandise that is shoes. Gap inc. The reason as to why Gap Inc. 2006. found that it was less risky for them to start Piperlime since they would benefit from the success of its ecommerce and the growth of its online shoe sale. The shoes are high end and few shoes are under $300 with others costing up to $1000. was started in October 2006 with the site being officially launched in November.

The company’s culture is based on the idea of making it easy for people to express their personal style and doing business in a socially responsible way. The company’s code of ethics which is intended to promote and ensure an ethical and responsible work environment for the employees and the directors.5 billion in 2010 Piperlime has a capability of growing and earning more revenue. make . The company believes in caring for the environment by reducing energy usage and reducing waste to the environment and exploring the use of sustainable materials and products. community outreach and employee volunteer programs. unique store experiences and compelling marketing. The employees are responsible for abiding by the Gap policies and all national and local laws in all countries that the company does business. They make emotional connections with customers all over the world inspiring product design. and many of the people working in the company are Gap veterans and some are well known buyers from their competitors. The online sales in the second quarter of 2006 were up 27 percent from the previous year due to the new site. It is the responsibility for the employees to raise questions. open-mindedness. quality and balance. needs and unique contributions of every employee are respected. They are also focused in improving the factory conditions through comprehensive monitoring and labor-standards program. Caring for the community by focusing on undeserved youth by providing grants. It has an impressive group of merchandisers. They are also dedicated in supporting their employees by creating an environment where the rights. 20 that do not fit. donations. and has attracted good resources from the supply chain thus making it more efficient . To keep its operations efficient Piperlime has a dedicated distribution center in Grove City. Ohio. With the growing of the online shoe sales annually by 15 percent and will be $5. The key values that guide their success include integrity. It is headed by the senior vice president of Gap inc.Gap Inc.

Employees should never give or accept anything that is of value from anyone and they should not solicit invitations or gifts from any third party. stability and establishment and the other GAP brands. a government agency or law enforcement officers. It is against the company’s policy for anyone to any action against any employee or a director. The company’s strength is their ability of focusing on just one product hence making it easy for them to study their customers and providing them with what they want. vendor or agent of the company for lawfully providing information assisting in an investigation of activities which he or she believes violates applicable law or for providing truthful information to the government. There small concentration of brands enables them to have an effective way of having customer loyalty with the particular brands. Even though some of their shoes are expensive.Gap Inc. customers are also able to get affordable shoes. The employees are also expected to report any code violations. . They also have celebrity stylists who offer tips on the new fashion trends hence making them flexible to the new fashion trends. Piperlime is attracting existing customers and new customers. All business decisions should be made solely for the benefit of the company and not for personal benefit. Their major strength is that they are customer focused compared to other online stores. Based on Gap inc. 21 appropriate disclosures and bring potential problems to the company’s attention. There ought to be accuracy of information and product integrity. There is confidentiality of personal and company information. It is able to attract customers with different lifestyles since it provides casual shoes and also high fashion shoes. Their other strength is that the have an effective supply chain operation.

Strength Gap. Gap also invests large sum of money in research and development. Gap’s unique way of ready made goods from different countries including Honduras. Since. This is an extremely powerful took to understand the current standing of a company and to predict the company’s future perspectives. Opportunities. Meanwhile.Gap Inc. Inc. In addition. Bangladesh. Meanwhile. it is a multinational company. . has had a long history of almost 40 years now. Gap does not have a distinct name in certain sectors like Nike or Reebok have in sporting goods. 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. and others has helped the company to reduce the labor costs. it has some weaknesses that it needs to address. The company’s narrow niche is one of the major weaknesses. Even a minor competition from another clothing retailer can hamper the company’s over all growth. An in-depth of Gap’s brand strength is later discussed in this section. Weakness. being a multinational company has helped Gap. India. It is limited in sales and growth. to diversity its intra-country market risks. Inc. It is an established name and is distinct in its sector of market. This has also increased the risks associated with the market. The other distinct strength that Gap has is its global approach. This has given the company regular boost to move forward. 22 Managerial Analysis SWOT Analysis SWOT analysis stands for examination of Strength. it is recognized all over the world. and Threats of a company.

Gap has not been able to maintain a fashion identity. American Eagle. These are some of the possible threats for Gap’s operation. The other competitors of Gap itself are Abercrombie. . Opportunities After excelling in an industry. Since its establishment in 1969. Five Forces Analysis Competition Clothing retailing industry is highly competitive industry. it acquired Banana Republic in 1983. possible tariffs from government over the imported materials. Inc. which will immensely help the company to establish its name in most of the other sectors. the gradual increment in Limited Brands operations can hamper the company’s growth. Another major step came out when Gap opened Old Navy stores in 1994 to compete with the existing discount retailers including Target and Sears. is not an exception to this. There are many retailers in the industry who fight with each other to improve their customer base. Nevertheless. as illustrated by BusinessWeek. Gap has excelled in the sector. 23 Furthermore.Gap Inc. or minor disturbance in the long supply chain of the company are a risk. and others. it has already started a online shoe store which is increasing in popularity. This helped the company to stay in the business as a major retailer in businesswomen clothing. The increasing cost of labor in other countries and decline in value of US Dollars everyday can compel the company to change its way of operation. Threats Many competitors are arising in retailing industry everyday. For example. For example. As stated earlier. since Gap is a recognized name. Gap can now increase its span of business in different industry sectors. to stay in the competition. In addition. Gap.

Since there are a wide variety of products that people can choose. Hence.416 and in 2005 was $ 8. and others. it is hard to establish a distinct brand name. Substitutes There are many substitutes in casual clothing industry. 24 Hence. There is a low cost of entry in the market and there is no need of high research and development costs. the suppliers have limited power. In 2005 it was ranked in 40th position. Ease of Entry Although it is not hard to enter the clothing retail business. the buyers might move shopping around. power to set the price of its raw materials.195 million.Gap Inc. As per Gap. Inc. it has . Since there are various competitors and substitutes in the company. Strength of Suppliers In retailing industry. Gap holds 52nd position in top 100 brand names all over the world in 2006. Inc. this industry is extremely competitive and the companies should be up to date with fashion and customer satisfaction. they could either be substituted by sporting products. This gives Gap. Distinctive Notion According to a report issued by BusinessWeek. the companies have to work harder to retain the clients. business apparels. The annual report states that no suppliers supply more than 3% of the company’s demand. cheap clothing materials. Its brand value in 2006 was $ 6.. Strength of Buyers The buyers have variety of choices to make in the retail clothing industry. the power of suppliers varies depending on the company itself. Having a long history of almost 40 years.

76 billion (2008) where as the industry revenue is only $1. is progressing. It has revenue of $ 15. This is one of the major reasons for Gap being rated one of the highest retention rates among customers. Solvency Ratio Liquidity Ratio The data analysis of solvency ratios shows that the company has a quick ratio of 1.42 and a current ratio of 2. is financially and economically sound. the last two years have shown that Gap. It is less expensive than Gap clothes and is probably the most popular brand in the portfolio. Inc.12 millions. Gap is worth $13. Please refer to Appendix 1 for more details.41 billions. Although the company faced a decrement in net income between 2006 and 2007. Another important indicator. it is also popular among men. Old Navy is distinct as the discount retailer. Established in 1994. Old Navy is another specialty store under the portfolio of Gap. Leverage Ratio . The other members of Gap portfolio are also getting to get distinct in their respective areas. 25 established a sense of closeness in the customers.Gap Inc. Ratio Analysis The data used here with are from 2007 Annual Report. The current ratio shows that the company can still invest some of its cash. It specially appeals to mid-age busy women. Inc.05 of Gap compared to $0.21. Inc.95 of the industry average. Inc.65 billions where the industry average is only $488. It offers sophisticated and fashionable collections and is more expensive than Gap. Earnings per Share is $1. Banana Republic is yet another distinctive feature of Gap. Currently. Financial and Economic Analysis The consolidated financial statement comparison shows that Gap. Nevertheless.

the company is constantly working towards reduction of energy consumption and minimum use of materials that hamper the boom of 1998 and 1999. More recently. It has been paying out regular dividends and the stock trend shows that the company’s value has been volatile.’ According to the Gap. gives high value to social responsibilities. They work with environmental consultancy called CH2M Hill to examine the environmental . Stock and Market Trend Analysis Gap has been able to meet the investors’ expectation most of the times since its incorporation. Inc. the stock reached as high as $68 but with the problems in stock market.05 and that of assets was 0.Gap Inc. which thoroughly examines the factory and working conditions. ‘At Gap. communities. For the reduction of pollution and increment of labor-standards. they divide the social issues in to different sectors including environmental. they conduct a factory-monitoring program.. In addition.09. social responsibility is fundamental to who we are and how we operate as a company. and others. the company’s ability to buffer the ‘so called’ recession is a sign of company’s stability. Social Issues Gap. The also have designed a separate social responsibility report which is published every year.27. This shows that the company still has a lot of room to grow.44 and that between debt and inventories was 1. 26 The ratio between debt and net worth was 0. it went down. Profitability Ratio Return on sales was 0. Inc. although the company has been able to buffer the real estate and credit crunch. This shows that company is in a good share regarding the capacity payment of debts. official website. It says. it has not been able to grow properly. During the . Inc. employees. This profitability ratio does not seem too strong. But as per the analysts.

Gap Inc. Quite often these companies in the portfolio share the warehouses. Gap. Inc. and supply chain optimization. Inc. considers itself as equal opportunity employer and maintains a 24/7 hotline to complain against fraud as well as discriminative behaviors. They share the common principles of ethics. received 100% score in Human Rights Campaign’s Corporate Equality Index. the Chief Foundation Officer of Gap foundation says.’ The company first determined the target causes and invests (donates) time and money for the betterment of the cause. they do not work as autonomous business. and it’s not just in the people we serve-it’s in ourselves. and client services. sustainable design. The environmental challenges include conservation of energy. Although these brand names are distinctive in themselves. 27 challenges. Gap. Betterment of the employees. Gap. ‘We believe there a promise that exists in all of us. All these brands share the value with the corporation. The supply chain and ways of operation is almost the same for these companies. Portfolio: Strategic Analysis Gap claims that its different brands have common purpose of making it easy for people to express their personal styles. and WorldCom scandals brought about new regulations and Gap. conservation of environment where the company operates. equal employment opportunities. Inc. Enron. Inc. Inc. Gap. fair accounting practices. reduction of waste. is active in investment for the community. Ethical Issues As the corporate world is greatly hampered by ethical issues today. and many others are some of the other social issues that the company analyses with high priority. and other resources. . has always been on top of that. Bobbi Silten. Tyco. has always taken active steps to be of the safe sides. mission statement.

starts a new business. Gap has been able to hold significant power in whole apparel industry. Meanwhile. or financial strategies. Gap has proved its worthiness. but was later renamed Old Navy. It used to be called ‘Gap Warehouse’. Having faced so many different hurdles. which grew with the resources that Gap had. Piperlime is a online store that only sells about 100 different brands of shoes. Banana Republic was an existing company. It also should be able to use the brand name to gain customer loyalty. Old Navy was a new concept that Gap started. Inc. if strong plans are traced out. Gap is losing its share of the market. .Gap Inc. For example. Old Navy covers price conscious shoppers and Banana Republic is an attraction for people who would pay a higher price for more sophisticated dress. It is an expert in the clothing retailer industry with different brands maintaining their effects in different niche market. they buy existing struggling company like Banana Republic or they start a new segment themselves. Since it is an established name. the company should be able to maintain its superiority in retail industry. As there are more and more companies entering this industry. It should not aggressively start different sectors but rather start one industry at a time. But it seems like the company can diversify itself to other industries. For example. For example. management. But current problems in cash flow shows need for the company’s change in marketing. Conclusion Established in 1969 as a small retailer of jeans. Gap has been able to surpass various hurdles to reach today’s designation of top US apparel retailer. With all these different brands. the other brands have their own ways of existence. 28 When Gap.

shtml Gap Inc. Web site: http://en.html Wikimedia Foundation. 2008. Fast Company. 29 References Gap (2008. About Gap Inc. Retrieved April 21. McKeough. Web site: http://finance.sec. (2008). 2008 from Web site: http://www. . (2008.shtml Commodity Systems. DESIGNS ON SUCCESS. 2008 from Web site: http://www. Retrieved April 22.nytimes. April 21). 2008 from Web site: http://topics. Retrieved April 19. Gap Campaigns Against Child Labor . Inc. 2008 from New York Times. March). from Business Source Premier DESIGNS ON SUCCESS. Inc. (2008).com/public/About/about.gapinc. 2008. Retrieved April 24.. 2008 from .gov/Archives/edgar/data/39911/000119312508069025/d10k. The Gap Inc. Retrieved April 21.html?_r=1&oref=slogin New York Times (2008. Retrieved April 19. from Business Source Premier database. November 16). Gap. 2008 from EDGAR Web site: http://www. Web site: http://www. Gap Inc.htm#tx36443_2 Gentleman. T. 2008 from Wikipedia. Retrieved April 19. Securities and Exchange Comission (2008). April 20).gapinc.nytimes. Social Inc. (CSI) & Hemscott Americas (2008). Retrieved April 21. T. March). Fast (2008. A (2007. Retrieved April McKeough.

Gap Inc. with the market share measured in unit volume. 30 9-cell Matrix Appendix Appendix 1. Rating of Company’s Strength 2.A business unit’s relative market share is defined as the ratio of its market share to the market share held by the largest firm in the industry. Cost Relative to Competitor’s Cost.2.4 Business units that have low costs relative to key competitors’ costs tend to be more strongly positioned in their industries than . Inc. not dollars. Gap.’s Assessment of Competitive Strengths Competitive Strength Measure Relative Market Share.

or marketing process are usually strong competitors in their industry. Competitively Valuable Capabilities. Caliber of Strategic Alliances and 7.Gap Inc. Brand Image and Reputation. and other important attributes.N/A Business units recognized for their technological leadership. 31 business units struggling to maintain cost parity with major rivals. Ability to Match or Beat Rivals on Key 8. Bargaining Leverage with Key Suppliers 8 or Customers. product performance. Profitability Relative to Competitors. reliability.5 Business units that consistently earn above-average returns on investment and have bigger profit margins than their rivals usually have strong competitive positions.A strong 9 brand name is a valuable competitive asset. Ability to Benefit from Strategic Fits 7 with Sister Businesses. service. product innovation.5 Collaborative Partnerships with Suppliers/Buyers-Well-functioning alliances and partnerships may signal a potential competitive advantage and thus add to a business’s competitive strength.5 Product Attributes-A company’s competitiveness depends in part on being able to satisfy buyer expectations with regard to features. .Strategic fits with other businesses within the company enhance a business unit’s competitive strength and may provide a competitive edge.3.Having bargaining leverage signals competitive strength and can be a source of competitive advantage.

000 - 996.000 10.000 283.354.000 36.000 168.000 1.000) - - Net Income 265.000 5.000 368.407.000 395.000 260.000 239.000 185.000 20.Gap Inc.000 105.000 33.626.000 156.000 1.000 178.000 1.000 1.000 265.000 2.854.000 - 1.265.000 396.000 110.000 438.000 433.000 - 1.000 305.000 1.000 178.558.000 269.000 3.000 .676.000 2.079.000 3.000 1.000 28.000 - (2.000 293.000 153.000 - Operating Income or Loss Income from Continuing Operations Total Other Income/Expenses Net Earnings Before Interest And Taxes Interest Expense Income Before Tax Income Tax Expense Minority Interest Net Income From Continuing Ops Non-recurring Events Discontinued Operations Extraordinary Items Effect Of Accounting Changes Other Items 418.000) - (32.447.000 3. 32 Appendix 2 :Financial Statements Income Statement View: Annual Data | Quarterly Data PERIOD ENDING Total Revenue Cost of Revenue Gross Profit Operating Expenses Research Development Selling General and Administrative Non Recurring Others Total Operating Expenses All numbers in thousands 2-Feb-08 3-Nov-07 4-Aug-07 5-May-07 4.000 237.675.000 2.000 295.411.

000 Net Income Applicable To Common Shares $265.000 286.102.000 Changes In Accounts Receivables Changes In Liabilities 375.000 (3.000) 114. Cash Flows Provided By or Used In Depreciation 547.000 (104.000) ($210.000) (1. 33 Preferred Stock And Other Adjustments $237.000) 12.000 41.000 (97.000 530.000) (123.000) 33. Cash Flows Provided By or Used In Capital Expenditures (682.000) (2.000 Adjustments To Net Income 56.000 1.000) Other Cash Flows from Financing Activities 7.009.000 Total Cash Flows From Investing Activities (274.000 Total Cash Flow From Operating Activities 2.000 1.000) Net Borrowings (326.000 Cash Flow View: Annual Data | Quarterly Data PERIOD ENDING Net Income All numbers in thousands 2-Feb-08 3-Feb-07 28-Jan-06 833.000) 1.000) (860.000) ($306.000) (572.000) Sale Purchase of Stock (1.000 Operating Activities.000) 381. Cash Flows Provided By or Used In Dividends Paid (252.000 778.575.000) (600.000 Changes In Other Operating Activities 18.000 1.000) (1.000) Investments 393.000 26.250.000 (74.000 Changes In Inventories 252.000 $178.000) 1.000) ($5.000 Other Cashflows from Investing Activities 15.146.000 $153.861.113.551.000 Financing Activities.040.Gap Inc.000) (123.081.000) (2.000) 23.000 Investing Activities.000 (150.000) .000 Total Cash Flows From Financing Activities Effect Of Exchange Rate Changes Change In Cash and Cash Equivalents (265.000) (7.000 (179.000 625.

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer for students: Only $4.99/month.

Master Your Semester with a Special Offer from Scribd & The New York Times

Cancel anytime.