Executive Summary on Strategic Direction at Gap: SWOT Analysis

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Executive Summary on Strategic Direction at Gap: SWOT Analysis

Introduction

As a team leader in the marketing department at Gap Incorporated, I have been tasked with assisting the company’s strategic direction over the following year.

Gap Incorporated is a clothing retail company that has been in operation since 1969 celebrating its fiftieth anniversary recently. Brands operating under the Gap Brand include Banana Republic, Old Navy, Athletes, and Intermix which offer a variety of products that are family-oriented. It is located at 2 Folsom Street, San Francisco, CA 94105,1905 United States. These apparel products are accompanied by accessories and personal care items that cater to women, men, and children. Customers can access company products through their online website and third parties possess commercial goods and services that satisfy customer needs and wants. Apart from our other operating channels that allow customers to obtain products our company also utilizes its Omni channel services to bridge the gap between the digital world and the physical store. These include ordering in 7Gap, finding in-store, and shipping from store to store along the channels of its numerous brands. The Intermix brand is largely associated with selling products that are manufactured and designed by third parties. We have a large network of stores locally and internationally which gives access to customers in Asia and Europe.

In 2014 we became the first Fortune 500 Company to publish the fact that we offer equal pay for both men and women. Two years later we were presented with the Catalyst Award for our actions as we continue to implement strategies to change this issue which is a global issue. We are honored to say that we have received awards on three separate occasions. These highlight the work we do to raise awareness for gender and equality, and human rights, making our company comfortable for workers not just as a place of productivity but as a place where they can freely express themselves. We are continuously working on taking actions to ease common societal issues where sexual status or race is concerned. Within our company, there are a number of support groups for employees who fall within any of those categories. As our mission statement states ‘To be a general Brand Builder’, our initiatives have led us to not limit our reach as a retail apparel company but as an active member in communities and our customer’s life. The title Gap which means there was ‘a generation gap between young consumers in 1969 desired to what was actually being offered,’ allowed us to carry out filling the gap through promotional campaigns and proper market research over the years. It has indeed allowed us to gain a substantial amount of customers. This has been made possible as a result of our employees that we have posted in the many various stores and franchises globally, the establishment of our many stores internationally, and the segmentation of brands.

When the company was founded Don and Doris Fisher decided on a partnership management system for their business. The key members of the board are Executive Leadership Bobby L. Martin, Executive Chairman of the Board Sonia Fungal, President, Chief Executive Vice President, Director Katrina O’Conell, Chief Financial Officer, Executive Vice President Mark Brief Bard, and President, Chief Executive Officer-banana Republic Mary Beth Laughton. Stakeholders account for 83.83% while Mutual fund holders are 39.76% and Other institutions are 23.38%. We are partners with large firms that have aided in advancements of conditions that affect those employed in the factory section of the production process, transformations in the industry, and various views. The following are some partners: Business Leaders Initiative on Human Rights (BLIHR), Ethical Trading Initiative (ETI), Global Reporting Initiative (GRI), MFA Forum, and Public Reporting Working Group. These alliances are all important to Gap’s success.

Current Situation

In light of the recent Covid 19 Pandemic which has negatively affected businesses worldwide, Gap has been forced to close all its North American stores. As of April 24th, 2020, we have been struggling to continue performing daily functions as a company and is facing cash constraints at the moment. Further decreases in the capital have caused maintenance and simple business activities to be suspended. The present dilemma seems yet to reach its climax coming off the heels of the previous year’s woes in sales. Our company actively hoped to split from its Old Navy brand which was supposed to be completed in 2020. During that time we faced many challenges and a fall in prices. It seemed as if we were forced to give discounts recklessly and many of our displays were not successfully put together to attract customers. Products needed a new look in terms of color, style, silhouette, and patterns. Our goal was to reintroduce denim staple wear in a versatile way along with expected changes and growth within the long term. This venture was subsequently canceled because it had been proven costly and profitless with decreasing sales as an influencer. This impacted the number of discounts given which resulted in a rise in sales by 4%.

Presently speaking we have halted payments of rent for our 2,785 retail stores. Later talks of renegotiation of leases were heard but it could be futile as stores may be shut down eventually. Home-based stores have been temporarily closed and it has threatened 80,000 retail employees’ future with the company. We took action by cutting executive pay also. At the beginning of February majority of the company’s savings were spent. A net amount of 1.7 billion but on May 1, 2020, we expected to remain with $750 to $850 million dollars while expense is valued at $155 million dollars.

Market Review

Sales are below levels compared to that of the 2008 Great Recession figure. In March of this year, the figure was 8.7% significantly lower. The same sentiments are being shared throughout the apparel retail family as many are on the verge of financial ruin. There has been a decline in the 87% of rents being paid at this time last year compared to the 53% of tenants who have paid their rents this year. Moreover, even more, evidence shows that companies such as Footlocker, H and M, Nordstrom, and LOFT are on the list. At this same time, the rest have not settled their bond payments, alongside J.C. Penny and Neiman Marcus. A month ago Macy’s and Kohl’s had to give over thousands of their employee’s permission to leave their jobs. The pandemic has crippled retail activity globally.

Competitive Review

Most companies in the same industry are trying their best to combat the problem and so many stores are closed and events are postponed. With scores of employees home over the board of companies there are no sales being generated in large amounts. Gap withdrew its annual dividends and is focusing on its e-commerce to reach customers. We had to cancel Summer/Spring sales mirroring rivals’ actions.

SWOT

Strengths

Gap has managed to have stores globally covering a large number of customers and potential customers we can not reach locally. This has been profitable to the company since we reap revenue internationally and locally. This extended reach allows us to provide jobs to the wider community and interact with people in many regions where we successfully carry out activities intertwined with our mission statement and values. Another strength is that we are the preferred choice when it comes to apparel that displays American style. Over time people have popularized the Gap Brand to the extent that when it is mentioned people choose our products over rivals. Finally, we have franchisees in Turkey, United Arab Emirates, and others. Hence the brand is well-known and attracts civilians easily.

Weaknesses

In 2017 the number of third-party vendors equaled 1000 in 60 countries. The bulk of this number is foreign to the United States of America. This means that we do not have control over many factors to do with shipping, supplies, and delays, or even increases in prices. China would be considered one such supplier even now it may be more evident with the unstable relationship between the United States and the former. We are not able to spearhead operations at franchisees who are at times behind with the current fashion trends. Clothing lacks the appeal to keep customers interested and so they turn to rival brands. Thirdly the inability to handle the production process of their many suppliers, stores and franchisees eliminate close contact manipulation of raw materials. Even though we give guidelines to these entities we are not directly assessing the cost of each part of the production process and what percentages of this are incurred to us.

Opportunity

Most companies have seized the opportunity and taken advantage of the present situation by seeking after industries they have not been a part of. This is a new experience for many but they have seen a way to still gain revenue and generate sales by providing products that are particularly in high demand at this time. These developments highlight the fact that all businesses have to adapt and find an alternative means of survival. Gap’s online services are seemingly the only or best choice of connection to the wider community. Our company is focused on providing medical wear. This venture can prove profitable but one has to take into account the sentiments of consumers whether the same products are being offered at lower prices or are in fact worried about brand or quality. The task now is to find even more outlets where we can become efficient in providing quality products to the public.

Threats

Politics and governmental policies influence company behavior and the type of activities that occurs in the industry. In the United States, Gap’s home base, government legislation has been able to manipulate monopolistic markets. Companies have more flexibility to operate because of these laws and acts. They have favorably enacted trade agreements that foster relations with foreign countries. If these acts are violated or used as political weapons against nations that have a history of grievances, this can become inefficient for businesses like Gap which conduct business with international parties. On the bright side, Gap is able to acquire its labor and raw materials because of such acts.

Economic activity is a large factor that could determine the very success or failure of businesses. It is where inflation and interest rates are assessed, trade deficits and surpluses are measured, and budget deficit and surpluses and gross domestic product are calculated. International organizations’ amount of earnings is determined by several factors. Production costs are one of these that experience irregularities in their rise and fall amounts. Other factors are natural disasters and inflation. Economic segmentation also a reason affects the levels of consumer spending and purchasing abilities. Foreign currency is volatile hence if depreciation occurs pressure is placed on business revenues that utilize it. When foreign investors exit the economy to join more sturdy ones they negatively contribute to the situation. In case trade barriers are removed the World Trade Organisation and the European Union would encourage a profitable business setting.

Technological advancements are the competitive driver between organizations. It has enhanced the grounds for the automation of production processes. It has further motivated health choices and somewhat environmental policies. Conversion of knowledge that results in modern products and processes.

As the impact of business activities is reflected on the environment many have heeded the call to ‘go green’ but Gap has taken it a step beyond with the sale of environmentally friendly merchandise. They have taken actions in regards to proper waste disposal, energy sustainability, and ensuring that suppliers do the same. Our participation in this year’s earth day by partnering with Arvind has led to saving large amounts of water.

In the fashion industry competition is steep but companies are challenged to conform to present trends. As this is true brand loyalty is an influencing factor as designer wear is not such a product that is readily available for customers. Second-hand products are not preferably creating a lack of variety so retailers fill this gap. Gap has to continue to present trends that are fashion-forward if we want to retain the customer loyalty we already possess. There is no threat posed by the newly formed establishments since customers’ behavior reflects them being loyal to companies they are more familiar with.

Objective

Four ways we can try to execute these plans are by keeping a number of our global stores closed for a couple of months post-Covid, decreasing the workforce until we are successfully up and running again, seeking investments, and reducing costs of products. Firstly shutting the doors of some stores globally will remove the cost of maintaining the facilities though employees may lose their means of income. This could lead to shorter working shifts. Secondly, with the decreased workforce, only important workers and those who have not already been furloughed will require a salary payment limiting expense. Thirdly seeking investments through various means such as selling shares to the public and private entities can help bring in capital to keep the business afloat. Lastly, as we seek to rid of old stock we may have to reduce prices and price bargains so we can quickly put out a fresh set of merchandise.

Strategy

We are challenged to find an alternative means of gaining revenue with the limited funds while still maintaining integrity. Moving forward we are taking a differentiated focus strategy approach. On April 30th we were fortunate to form an alliance with IMG. Due to this our Banana Republic, Janie, and Jack brands, Baby Gap, and Gap Kids will henceforth be partly handled by the said company. We would offer essential care products associated with the daily function of growing up the kids. This will appeal not just to sensuality but to quality and customer loyalty. Parents can look forward to baby equipment, care packages, home decor, and even furniture. Our brand has always been a leader in the industry and has not fallen short of that status even under the present circumstances. This is the reason our global appeal and popularity will continue to aid us as we seek to introduce a nontraditional product to existing and new customers who are aware of the unique and distinctive merchandise we usually present. We would début in a new sector with the means of becoming an active competitor.

Conclusion

In conclusion, our company has showcased the aptitude of being a success with years of experience and our positive contribution to society. Though we are presently battling a global issue that came at a time when we have struggled financially as a company we must try to swim through the choppy waters. Moving forward for the next fiscal year our actions will target our cash flow issue. The newly formed partnership with IMG is sure to stem any further debt along with the cuts to employees and closed stores.

Bibliography

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