Table of Contents
- Business Mission
- Internal and External Factors
- New Mission
- Strategic Options
- Operational Objectives
Gap Inc which was founded by Doris and Dan Fisher in 1969 mainly focuses on the mission that states, "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".They also have a purpose statement which states that it is designed to make it easier to express an individual's style throughout the life. Gap Inc's vision statement expresses that they ‘seek to make a positive lasting impact on the people and the places where they operate' (StudyMoose,2019). Gap Inc values state that it ‘respects' everyone and also believes in ‘dignity' and ‘fairness' (Comparably, 2019).
Internal and External Factors
In the second quarter of 2019, sales of all the Gap Inc stores worldwide and websites faced a decline by 4% which were expected to be 3.1% approximately. At the same time, the shares worth $6.7 billion have declined by more than 30% (Thomas, 2019).
In the year 2016, Gap revenue was valued at $15.51b, whereas in the year 2017 it was valued at $15.56b and in the 2018 it reached $16.58 b. It has increased by 4.6% from the previous year (See Appendix). When Gap's revenue is broken down by business segments it is noticed that majority of the revenue is earned by Old Navy. Whereas, if broken down according to geographic segments, majority of the revenue is earned from The United States (See Appendix) (Gap inc sustainability, 2019) Internal factors also known as the micro-environment is generally the immediate environment in the daily life of a person. Internal factors are analysed with the help of SWOT analysis. The SWOT analysis is a process through which individuals create awareness of business surroundings to create better present and future performances (Naryanan and Nath, 1993). SWOT analysis generally abbreviated to Strength, Weakness, Opportunities and Threats to any company or an organisation.
The SWOT analysis for Gap Inc are as follows:
There were promising sales trends in some of the Gap Inc brands due to the development in the look, quality and fit of the products and also because of the increased flexibility in the supply chain which made adapting to new trend easier and quick (Wahba, 2017).
Gap Inc. is found in 90 countries with around 3,300 company operated stores and approximately 400 franchise stores. They also have an online store which makes shopping even more convenient (Gap, 2017).
Over a period of 3 years, number of Gap outlets have closed down in the UK which shows the decrease of popularity of the brand in the region (Lowery, 2019). The customers in the UK market have being gradually shifting to fast fashion retailers like Zara and Forever 21, since Gap has been unable to catch and hold customer attention (Reuters, 2016).
The prices of Gap Inc products are much higher as compared to the other products in the similar margin. Gap has stores in many developing countries (e.g. India), where people cannot afford high priced products due to low income level.
According to research, associating celebrities with the brand can help increase the popularity of the brand and seems to attract the younger generation (Reimann, Wagner and Reisinger, 2017). Similarly, when Gap collaborated with fashion influencer and supermodel Olivia Palermo it increased the brand image and visibility of the brand substantially (Gap, 2017).
With rapid development in e-commerce, Gap has big advantage to increase their revenues in online sector. In the first quarter of 2018, Gap earner over $3 billion in online revenue. Having the ability to ship products to over 90 countries, the functionality where customers can pick up their online order from a physical store and investing in an online app has helped the brand to a great extent (Bhasin, 2019).
Since Gap has its UK-based merchandising team set up in the United States and the closing down of a number of stores in the UK, the brand image and the quality is threatened because of a strong presence of their competitors (Zara) who have a merchandising team set up in the UK itself (McGregor and Hounslea, 2017).
Gap faces intense competition from fast fashion retailers like Zara, H&M, American eagle, etc who have a wide range of products with good quality, whereas Gap products are more sober and plain. The other brands also have the ability to stay up to the changing trends in the fashion industry, whereas, although Gap tries to stay up with the dynamic fashion environment, it fails (Bhasin, 2019).
With the internal factors, the company also has many external factors that influence the working environment of any company or organisation. A macro-environment can be defined as "the condition that exists in the economy as a whole, rather than in a particular sector or region" (Chappelow, 2019). In order to analyse and comprehend the external factors, ‘Pestel analysis' is used. Pestel is usually abbreviated to Political, Economic, Social, Technological, Environmental and Legal. The Pestel analysis is as follows:
Political: Since the headquarters of Gap Inc is in the United States and the country gives them the right to carry out business in other foreign countries and also outsource labour from other developing countries for cheap (Nyakang'i, 2018).
Economic: Although in the first quarter of 2017 apparel sector was very cold in the United States, Gap Inc's performance showed that they withstood the downward trend (Olson, 2017). The elimination of the trade barriers between the WTO and the European Union (EU) was very beneficial for Gap Inc's working environment (Nyakang'i, 2018).
Socio-cultural: Gap Inc stands with the LGBT community by producing ‘Pride T-shirts by GAP' and donating approximately 30% of their total profit from those tot the UN Foundation to benefit Free and Equal (Gap Inc., 2017a).
Technological: Gap have invested in the use augmented reality in their online clothing app. This function is by far not used by many of its competitors. It allows customers to see how the clothes looks like on their body (Ion, 2017).
Environmental: Gap Inc has started a new campaign called ‘Gap For Good' where they are committed to create sustainable clothing. They also started producing denim that requires 20% less water for washing under the program called ‘Washwell' and also take care that the water used doesn't spoil local waterways and environment under the ‘Water Quality Program' (Gap, 2019a).
Legal: For transparency in women's equality and gender reporting, Bloomberg has listed Gap Inc. as one of 230 global companies. Before this, Gap was the first Fortune 500 company to give men and women equal pay (Gap Inc., 2019b).
Gap Inc mainly targets men, women and kids from the age group of 3-40 of middle class psychographic. However, this is a very wide range and satisfying all of them is extremely difficult. Thus, after analysing all the internal and external factors that Gap Inc undergoes it can be suggested to re-evaluate the target audience in order to make it easier to focus on satisfying those audiences. The clothes they produce are simple, plain and sober. However the Generation Z (ranging from mid 1990s to early 2000s) want their clothes to colourful, attractive and trendy. However as noticed in the SWOT analysis, they lack the ability to be fashionable and keep up with the ever-changing and evolving fashion environment.
The company should target kids between the age of 3-10 and adults (men and women) ranging from 30-45 years of age. They should also focus more on keeping up with he dynamic fashion environment like their competitors (Zara). The biggest competition for Gap Inc is Zara. Thus, the new vision for Gap Inc. should be to move up towards Zara in the quality and design perspective.
Ansoff Matrix is used by marketers who want to grow in market and have competitive advantage as it gives strategic options to achieve these objectives (Hussain et al, 2013). The ansoff matrix consists of Market Penetration, Market Development, Product Development and Diversification. Market Penetration basically means improvising the existing products in the existing market by the means of various promotional and attractive marketing techniques. Market Development is selling an existing product in a new market. Product Development refers to producing new product in the existing market. Whereas, Diversification refers to producing a completely new product in a completely new market segment.
As established in the above section, it is suggested to change the target audience from a wide range of 3-40 years to a range of kids (3-10 years) and adults (30-45 years). Since the clothes that Gap Inc produces are sober and plain it will go well with the above age groups. Thus, to do so, the company should adopt the technique of ‘Market Development'. In this the company can keep their existing type of clothes with a new market segment. They should also focus on selling their products in Asian countries at cheaper rates since the income level is low in those countries in order to increase revenue. Market Development is one of the most riskiest alternatives, but also one of the most successful alternatives in order to gain success revenue.
Value chain analysis is a comprehensive framework that analyses the various sources that can reinforce value creation for various businesses. The below given value chain analysis of Gap Inc. examines the primary and support activities of the company (Dudovskiy, 2016). The Primary activities are involved directly in the production and selling of goods and products to the target customers. The primary activities includes Inbound Logistics, Operations, Outbound logistics, Marketing and Sales and Services.
Inbound Logistics: Maintaining relationship with suppliers is extremely essential since their support is important to receive, store and distribute the product. It requires the company to emphasise on transformation from raw materials to final products. Without doing so, Gap Inc can encounter many difficulties with the development product (Byrne, 2018).
Operations : This stage starts when the company (Gap Inc.) has received the raw materials and is ready to produce the final product and sell it in the market. It is essential for increasing the productivity and makes sure to achieve competitive success of the company. This will thus help Gap Inc to attain economic growth and maximise profitability (Byrne, 2018).
Outbound: This comprises of various activities that deliver the product to the customers by passing through different channels. In order to achieve the business growth advantage, Gap Inc can examine the use the outbound logistics. When the products require a quick delivery, the company is required to give extreme significance to outbound logistics (Byrne, 2018).
Marketing and sales: Marketing the products is very crucial for gap Inc in order to persuade the customers that their products are better than what the competitors are offering. In order to frame the marketing activities, Gap Inc can use the marketing funnel approach. Giving careful attention to marketing activities can help Gain Inc to to create brand equity and stand different from its competitors (Byrne, 2018).
Services: The post-sale services offered by the company is an important part of the complete selling process as it creates customer loyalty. It is considered tome as important as marketing. Gap Inc should focus special attention to this activity as it helps spread a positive word of mouth because of timely and quick post-sale response, instead of damaging the reputation of the brand (Byrne, 2018).
Support activities helps the primary activities and they create the base for any organisation (Vliet, 2019).
Firm Infrastructure: This refers to the activities that help an organisation to continue it's day-to-day workings (Vliet, 2019). It is very beneficial to Gap Inc if the firm infrastructure is managed well to gain full advantage of the entire value chain. They can use this to strengthen their competitive stance in the market (Byrne, 2018).
Human Resource: This refers to the activities wherein developing the workforce in the organisation is the key (Vliet, 2019). In order for Gap Inc to decrease competitive strain because of lack of motivation, skills, etc, having a strong HR management is important. By examining training and hiring of employees with relative return, the company can achieve their objective of cost minimisation (Byrne, 2018).
Technology Development: This refers to the activities that concerns with the internal and external development of the products and services (Vliet, 2019). Due to the technological advancements in the current era, all the activities within the value chain depend heavily on technology. Gap Inc needs to realise the importance of technology since all the processes from production, distribution, marketing and HR are together heavily based on technology (Byrne, 2018).