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Strategic Team IV

Christian Snuggs,

Disheka Butler, Rachel Kenlon,

Clemente Moreno, & Matthew Ulichney

May 11, 2014

BMGT 495 Strategic Management

Professor: Vernon Swinton

Vision & Mission

Currently, Gap does not possess an official vision or mission statement (David, 2013, p. C-55). Both a vision and mission statement are required in order for the corporation to clearly display the strategic direction it is moving in. A vision statement clearly exhibits what Gap wants to become, and a mission statement clearly exhibits what Gap’s reason for existing is. Vision and mission statements go hand-in-hand with the corporation’s strategic plans and are a guide as those goals are achieved. Without a vision and mission, the corporation is in limbo and everything following it is unclear.

After closely analyzing Gap Inc., ST4 has devised a vision and mission statement from the corporation’s philosophy and ethics statements. The proposed vision statement would not only speak of Gap striving to become the world’s leader in specialty clothing, but would also speak to Gap pursuing and providing excellent financial values for its customers. Gap would also provide simple, specialty clothing for every member of the family. Gap Inc.’s official Vision Statement would be: “World’s leader in Casual, Classical, and Stylish apparel… at accessible prices.”

The proposed mission statement should be one that would incorporate Gap’s continuous implementation of righteous and good ethical decision-making. Gap in committed to pursuing and practicing its existing codes of ethics, which have provided employees with a comfortable working atmosphere. The code of ethics has also provided customers with a relaxing shopping environment. The mission statement ST4 has proposed would ensure that the proper core values are exhibited throughout Gap’s entire corporation. Gap Inc.’s official Mission Statement would be: “Provide exceptional services and clothing apparel to customers as well as providing a responsible ethical work environment for employees.”

The proposed visions and mission statements will provide Gap with not just philosophy and ethical statements, but a clear foundation and declaration. The vision and mission statements will be aligned with the corporations’ strategic plans. Not only will Gap clearly state where the corporation is going and why it exists, but it will also provide the corporation with purpose. The suggested vision and mission statements will greatly contribute to Gap becoming the “World’s leader in Casual, Classical, and Stylish apparel… at accessible prices.”

GAP History

In 1969, married couple Doris and Dan Fisher, opened its first Gap store or “The Gap” in San Francisco (David, 2013, p. C-54). The original concept was to provide a fresh, casual, American style focused on creating a unique shopping experience with a wide selection of styles (David, 2013, p. C-54). Throughout the 1970s and 1980s Gap found major success and began changing to adapt to the market. In 1976, the company initiated its first public offering of 1.2 million shares of stock on the New York and Pacific Stock Exchange (David, 2013, p. C-54). By 1980, Gap dropped other brand names to focus on their own private label (David, 2013, p. C-55). During this time of change Gap began procuring other franchises and expanding their store locations and product line. Gap acquired Banana Republic and introduced a kids line called GapKids (David, 2013, p. C-55). At the same time, Gap opened its first stores on the international market in England and Canada, with sales ultimately reaching $1 billion (David, 2013, p. C-55).

Gap continued this expansion throughout the 1990s. Gap introduced a new product line, babyGap and continued to open GapKids stores nationwide (David, 2013, p. C-55). They also entered the French and Asian market opening Gaps in France and Tokyo while introducing and opening Old Navy stores nationally (David, 2013, p. C-55). By 1998, Gap’s success seemed unstoppable. They had become the second largest apparel brand in the world and continued to open stores both nationally and internationally. By 2005, Gap unsuccessfully introduced a new store, Forth & Towne, in Chicago and New York, which ultimately closed all 19 stores by 2007 (David, 2013, p. C-55). Gap also acquired PiperLime and Athleta Inc. in the early 2000s (David, 2013, p. C-55). Gap is one of the largest retailers in the United States and operates throughout the world. They currently have Gap stores in 24 countries, including newly opened stores in China and Italy, more than 3,500 stores, 136,000 employees and six brand names (Gap Inc.)

Technique Analysis

A technique analysis will measure and discuss how effective the Gap’s current strategies are at meeting their objectives. It will also discuss what changes may need to be made to accommodate the inaccuracies or inefficiencies within the firm. There are three stages to successfully analyze a firm’s technique. Stage 1 is the input stage. The input stage is derived from the External Factor Evaluation Matrix (EFE Matrix) and Internal Factor Evaluation Matrix (IFE Matrix) (David, 2013, p. 175). These matrices develop a firm’s threats and opportunities, and strengths and weaknesses, respectively. Gap must make decisions regarding the importance of external and internal factors and rank and weight each one (David, 2013, p. 175). After each matrix is complete, it is time to move on to stage 2, the matching stage.

Stage 2 is where the majority of technique analysis is done. There are several ways to measure how successful Gap is at meeting their current objectives with their current strategies such as a SWOT Matrix, the SPACE Matrix, the BCG Matrix, the IE Matrix, and the Grand Strategy Matrix (David, 2013, p. 175). A popular, effective tool to measure Gap’s technique is the Grand Strategy Matrix. In a Grand Strategy Matrix a firm is positioned in one of the four strategy quadrants (David, 2013, p. 175). The Grand Strategy Matrix is based on two dimensions: competitive position and market (industry) growth (David, 2013, p. 189). On The Grand Strategy Matrix, competitive position represents the x-axis or horizontal line of the matrix, while the y-axis or vertical line is represented by market growth. Before placing Gap into one of the four quadrants; these two dimensions must be defined.

Based on the IFE Matrix or strengths and weaknesses analysis, Gap does have a strong competitive position. Their strengths contribute to their strong competitive position; including a strong global presence and expansion, and their ability to run multiple business entities both in store and online. Gap is able to reach over 90 countries online (David, 2013, p. C-64). Gap is also able to reach several different market segments. Gap is able to appeal to baby boomers, teens and young adults through each of their six brands (David, 2013, p. C-57). This gives them the edge over the competition. They are able to price each line differently and market them based on which age group they are trying to appeal to. Alternatively, Gap has not been able to maintain steady growth and sales within the last three years. The annual sales growth for the last three years has only been .3%. This is not a strong growth rate. This is due to fluctuations in sales. Sales dropped from $14,526,000 to $14,197,000 from 2009 to 2010 and then increased to $14,664,000 in 2011 (David, 2013, p. C-64). This puts Gap closer to the weak competitive position axis.

A factor contributing to a weak industry growth is based on the EFE Matrix or the opportunities and threats analysis. There has been a shift in consumer priorities from retail to educational costs, health care, housing and leisure activities (David, 2013, p. C-57). This shift has decreased demand for retail, weakening Gap’s industry growth. Contributing to a rapid industry growth, Gap has the opportunity to pursue all of these age groups because of their multiple brands. Gap must also consider that in 2011, the expected retail industry growth was 4% (Grannis, 2011). An industry that exceeds 5% is considered to have rapid growth (David, 2013, p. 189). This puts Gap closer to the rapid market growth axis.

The conflicting competitive position and market growth places Gap in Quadrant II. This means that Gap needs to evaluate their present approach in the marketplace (David, 2013, p. 190). Although, their industry is growing, Gap is unable to maintain steady sales, which compromises their competitive position. Gap needs to determine why their current approach is ineffective and how they can improve their sales and ultimately their competitiveness (David, 2013, p. 190). Gap should consider market development, market penetration and product development. Gap should create objectives to appeal to more of the market through products. Baby boomers represent 77 million in retail sales (David, 2013, p. C-55). Baby boomers are a large group that has recently shifted their priorities, Gap should form strategies to appeal their products back to the baby boomers. This would increase sales and Gap’s competitive because they would be able to reach more consumers. Another strategy that falls in Quadrant II is horizontal integration. Horizontal integration is the acquisition of additional business activities that are similar to the purchasing business (Horizontal, 2014). Gap has been successful at acquiring other businesses such as PiperLime and Athleta. Gap could form strategies to purchase other businesses that would help them reach more of the market. This would increase industry growth and competitive position.

The final stage is the decision stage. This stage is the basis for making strategy-formulation decisions (David, 2013, p. 190). The matching techniques, including The Grand Strategy Matrix, is an important tool to help formulate future strategies.

Strengths, Weaknesses, Opportunities, and Threats (S.W.O.T.)

I. Strengths: There are multiple strengths of which Gap possesses. For example, Gap is a global business enterprise, which currently operates 375 store locations in 41 different countries (Gap, 2013). Along with its large global presence, Gap is pursuing global business expansion with the development of additional stores in China, Philippines, and Taiwan; end result is 400 stores globally by 2015 (Gap, 2013). Gap also has incorporated the digital age and technology advancements in the form of online shopping avenues and social media electronic sites (Gap, 2013). The results of such electronic era pursue has resulted in Gap possessing an edge on speed, flexibility, and scalability via on-lie shopping capability (Gap, 2013). Furthermore, Gap possesses an advantage over competitors in the form of multiple business establishments (e.g., Banana Republic, Old Navy, Piperlime, Athleta, and Intermix (Gap, 2013). Finally—and possibly the strongest strength—Gap has the established name and character which has for years been known for casual, American style, classical apparel at accessible prices (Gap 2013).

II. Weaknesses: No corporation is complete without some type of weaknesses; Gap is of no exemption. For instance, currently Gap lacks the development of a clear vision, clear mission statement. Another weakness for Gap is that the corporation focuses upon private-label merchandise made exclusively for the company (David, 2013, p. 60). Although Piperlime, Athleata, and Intermix (Gap’s additional retail stores) offer customers with an array of other leading brands of merchandise, Gap inclusive retail stores only carry private-label merchandise (David, 2013, p. 60). One last weakness which Gap displays is the lack of contingency plans and programs in the event of unexpected dilemma. Overall, Gap’s weaknesses are minimal and easily correctable.

III. Opportunities: When it comes to opportunities, Gap has a few areas of opportunity which the organization may choose to pursue. First, the area of demographics consisting of the 15-19 age group; this age group averages 7.1 percent of the retail market for clothing apparel (David, 2013, p. 57). Second, continuously focusing and addressing the needs and wants of the baby boomer age group. Although the purchasing priorities have shifted for the baby boomers--focusing now upon retirement expense and health care--nonetheless, the age group still holds the largest group of consumers (David, 2013, p. 57). Third, on-line retail is evolving daily; the opportunity to manage intangible issues has never been greater. Although consumers are unable to feel, touch, or dress within the clothing article before purchasing on-line, consumers will still continue to conduct purchase operations via on-line as long as customer service and item return simplicity exists (Gap, 2013). Lastly, the opportunity to pursue environmental friendly products and services is a cost-saving option for all. With Gap pursuing the latest technology in energy conservation and manufacturing of "Green Products", the corporation could save billions on costly energy bills and pass such savings onto the customers, shareholders, and the corporation. IV. Threats: When analyzing threats upon Gap, there are an abundance of threats. For example, world economy has been unstable for many years; many businesses have felt the financial strain due to economic actions and situations. Competition and competitor threats are always going to exist in any arena of business marketing and retail. Rising prices on natural resources, raw materials, and transportation means is a growing concern and threating avenue. Failure to retain key Gap employees and personnel is another threating issue. Security of data and breach of strategic--secret--operations must be considered. Contingency response to natural disasters and unexpected events cannot be overlooked or forgotten. Global trade and retail presents the potential of increased trade restrictions, stricter custom regulations, and global governmental concerns (Gap, 2013). Lastly, what if merchandise, products, and clothing goods are unsuccessful at gaining customer appeal? Overall, Gap is of no exception to the threats that encircle global commerce.

Strategy and Prioritization Selection

There are alternative strategies of which Gap could, and is, implementing to enhance corporation efficiency and effectiveness. Alternative strategies are listed below and prioritized based on potential benefits.

· Employment of Technology

· Product Differentiation (Brand Building)

· Expansion

· Strategic Distribution

· People Differentiation

Technology of course is forever changing and enhancing the way business is conduct. In the environment of Gap, technology has already been implemented in the area of communicating better with consumers, mainly via network groups like Facebook and on-line Gap homepages, shopping platforms (Gap, 2013). The means of advanced technological communication has resulted in speed, flexibility, and scalability so that Gap could better meet the needs and wants of consumers. Just last year alone—2013—Gap’s on-line communication avenues produced a 21% increase in sales (Gap, 2013). All-in-all, the employment of technology is a must strategic priority for Gap to stay competitive.

Product Differentiation is a second strategy that Gap should incorporate. Through product differentiation, Gap can differ on features, style, and design of clothing apparel than other competitor’s products (Gap, 2013) (Kotler, 2012, p. 211). Additionally, with advancements in product differentiation Gap could provide even more benefits and selections to demographic-geographic groups, potentially resulting in fulfilling consumer preferences and offering amazing products at the same time (Gap, 2013).

Business expansion and growth has already been evaluated and decided upon within Gap. Through expansion, Gap will reach out and physically touch those consumers that may never before stepped foot into a Gap business establishment. With the concept and strategy of expansion of course comes the consideration of additional supplies and personnel, financial figures and revenue returns. All-in-all, business expansion is a strategic strategy direction; Gap will need to monitor this strategy closely for complete success.

Strategic distribution is a strategy, which could make, or break, a business corporation. Bottom line, if consumers cannot receive purchased goods in a desirable amount of time, then consumers will take business elsewhere. In the event of business expansion for Gap, the strategy of strategically placing merchandise throughout the world will be mission essential. In this strategy, GAP Inc. will have to analyze potential locations that best present distribution avenues, alternatives, and possibilities of which the corporation could utilize in the event of increased sales, increased shipments, and increased demands.

People Differentiation may be the most important strategy that any business could incorporate. Bottom line, what is an organization without its employees, its management, its people? Gap’s strategic strategy to address people differentiation—differentiation in the contrasts of better, more enthusiastic, and more dedicated then rivals—comes in the form of education and increased wages (Gap, 2013). Gap’s strategy is to better train its employees to handle and address more effectively customer-contact interactions (Gap, 2013). Along with better training comes better pay and incentives, resulting in efficient, productive, and dedicated personnel wanting to join the Gap team and remain with the corporation rather than pursue competitor employment positions (Kotler, 2012, p. 211). Overall, the strategy of people differentiation is a must strategy for Gap.

Evaluation Plan

An evaluation plan should initiate managerial questioning of expectations and assumptions, trigger a review of objectives and values, and stimulate creativity in generating alternatives (David, 2013, p. 290). The first step in the evaluation plan is to review the underlying bases of an organization’s strategy (David, 2013, p. 291). After establishing and implementing new strategies, Gap needs to evaluate how effective they are. Gap should revise their internal strengths and weaknesses by revising their IFE Matrix. They should also revise their external opportunities and threats by revising their EFE Matrix. Gap should then compare the planned (original) matrix to the actual (new) matrix. This comparison should show improvement. On the new matrix Gap should have been able to turn their weaknesses into strengths and their threats into opportunities. If there is no improvement then Gap needs to form and implement new strategies. Internally, ineffective strategies may have been chosen or implementation may have been poor (David, 2013, p. 292). Externally, actions by competitor, changes in demand, changes in technology, demographic shifts, economic changes and governmental actions may have caused strategies to fail (David, 2013, p. 292).

The second step in the evaluation plan is measuring organizational performance. This included investigating deviations from plans, evaluating individual performance, and examining progress being made (David, 2013, p. 292). Gap needs to forecast and predict future trends. If forecasted trends are poor Gap needs to evaluate and implement new strategies to avoid these negative trends. To forecast trends Gap should compare their performance over different time periods, to their competitors, and to industry averages (David, 2013, p. 294). Corrective actions need to be taken to avoid these negative trends.

Corrective actions is the last the step in evaluating strategies. When strategies are proving unsuccessful then actions must be taken to reposition Gap. Many corrective actions can take place including altering an organization’s structure, replacing one or more key individuals, selling a division, revising a business mission, revising objectives, and devising new policies (David, 2013, p. 295). Currently, Gap has no formal mission or vision statement. This is a corrective action Gap could implement to help make their objectives clearer. Gap could also review and evaluate their current structure. If problems relate to one department or person, Gap may want to consider replacing that team or individual.