Gap Inc In 2010 Case Study

Excerpt from Case Study :


Description of Industry

Gap, Inc. is one of the most leading American forte apparel retailers who foundation is centered in San Francisco, California. It trades things like the casual apparels, decorations, and other products that are personal for men, women and children. The merchandises of Gap, Inc. comprise of khakis, T-shirts, boxers, denim, casual wear, and others. The trade is done in the New York Stock Exchange which goes up under the symbol GPS. The brands that signified reasonable stylishness and just about everyone-from well-known celebrities to usual American families had a pair of Gap clothing somewhere in their closet. Many people had to have the latest pair of khakis or a cardigan from Gap. Gap, Inc. maintains an unusually large number of various brands, specifically Gap, Forth & Towne, Piperlime, Old Navy, banana republic, and others. All of these various businesses are purchased by a business in different times. Making its starting point as a general jeans retiling store, Gap, Inc. currently is bringing in with a market value of $14.32 billion. During the course of its history, Gap, Inc. has proven itself as a leader in the industry.

Dominant Economic Characteristics

Fashion retail with the Gap is where they are hugely dominant. In the fashion, they are essentially a customer goods market. It is considered by an extremely short product life, fickle customer partialities, many competitors, comparatively easy admission and departure, and a countless of industrial, marketing and retail replacements (Richardson, 1996). Over in their company, they mostly make mentions to Europe and United States where the capitals of fashion which are New York, Milan, London and Paris - exist in. One of the explanations for Gaps being the leading sector is that they are remarkably much able to get a lot of data on future drifts in color, them in advance, preparing their own assortments by uniting and understanding such information that is with the market data (Aktuglu, 2001).

Major Driving Force of Gap Inc.

Old Navy became the driving force of Gap. With the immense money resources of The Gap backing up its development, Old Navy decided to make the expansion into at an intense pace. When it came to the very end in business, the chain had 61 stores opened, bringing in some $120 million that was all in sales. By 1995, when the organization opened its flagship store in New York, it brought in double the sales, which ended the year with 135 stores and $450 million in transactions. The achievement of the chain had actually surprised even its most hopeful groups, enticing a broader, more chic clientele than its makers had decided to target. A study had been done by NPD Group that was at the end of the period which had discovered that more than 75% of Old Navy's trades were to households that earn somewhere around $60,000 a year. "I really do not believe any of us in the business ever believed that Old Navy would turn into was it has become today," Drexler mentioned in his February 29, 2005 conference with the San Francisco Chronicle. "That's the reality," he added.

Strength of the Industry

One of the strengths is that Gap's information technology systems are always critical to upholding appropriate inventory and supporting its Internet retailing efforts. The company's website was attractive and easy to navigate for customers wanting to view new styles or purchase all of the products online. Gap strength is that it has contracted with IBM to be able function features of its evidence technology substructure, counting provision for its processor computer, servers, network and store operations systems, help desk, data center, customer service support, and some disaster recovery. Another part of this strength is that in January 2009, the corporation applied a refined software package for handling the real estate during the course of its processes. The software permitted the syndicate to screen its real estate workflow and prediction the financial influence of real estate decisions, counting those of combining or increasing or altering store locations. In the fall of 2009, in time for the holiday season, the business also positively transitioned its order meting out to a new system learned from Kiva Organizations.

Key Success Factors

All through the years, Gap has been able to earn the status of a product that has a variety of products that are high-quality. At the present, Gap is recognized all over the world with more than 2000 Gap stores which are located in about eighteen countries, and they include the mainstream of the stores which are owned by Gap, Inc. So, Gap has utilized a vertical incorporation because virtually every one of the aspects of brand growth that comes from product design and distribution, to marketing, selling and shopping environments is organized by Gap.

One advantage of getting a vertical addition is that the business does not have to pay the entire sale and sellers so that they can sell their products. Furthermore, by having a direct client communication, the business can obtain valuable understandings into their partialities. On the other hand, it has also made franchise arrangements in nations for instance Philippines, Saudi Arabia, Bahrain, Indonesia, Kuwait, Malaysia, Singapore, etc. Despite the fact Gap stores can be originating in eighteen nations, Gap functions stores only in six nations, counting the United States, France, Ireland, Canada, the United Kingdom, and Japan. The continuing twelve nations include the franchise arrangements.

Strategic Group Mapping

Strategic mapping is an analytical tool that is used for showing the different market or competitive positions that rival the firm occupy in the industry.

The Major Players

When it comes to the major players, it needs to be understood that the top four U.S. family attire stores industry players were (1) the TJX Companies Inc., with a 13.4% market share (up from 11.5% in 2006); (2) Gap Inc., with a 15% market share (down from 18.6% in 2006); (3) Ross Stores Inc., with a 6.9% market share (up from 4.0% in 2006); and (4) Abercrombie & Fitch, with a 4.1% market share (steady since 2006 but up from 3.8% in 2005) (Loham). American Eagle Outfitters was also a notable rival in the industry, with an estimated market share in 2009 of about 1%.


In addition, consumers who did not need to try on an article of clothing frequently turned to the Internet to find closeouts or other discounts that might not be available locally. Internet retailing is one strategy that all four of the companies are using as a strategy. Consumers with these companies who did not need to try on an article of clothing in their stores would just frequently turn to the Internet sites to discover closeouts or other discounts that might not be available locally. Their strategies do not differ much from the gap beside the fact that might sell more loyal brands than the others.

Is the Industry Attractive?

The industry is particularly attractive at the moment because the Gap has control over all features of brand development from design to delivery in-house. It is an attractive industry because most of its products that were being manufactured by roughly 79 independent merchants are positioned in 60 nations. Nearly 3% of the company's products were produced nationally, with the remainder that is produced outside the United States.

Financial and Economic Analysis

The combined financial statement contrast displays that Gap, Inc. is financially and frugally sound. While the establishment faced a decrement in net income among the years of 2006 and 2007, the last two years have displayed that Gap, Inc. is continuing. At this time, Gap is worth $15.75 billion where the business regular is merely $489.12 million. It has income of $16.76 billion (2008) where as the manufacturing income is simply $2.41 billion. Another significant pointer, Pays per Share is $1.05 of Gap associated to $0.95 of the manufacturing normal.

Ratio Analysis

The information that is utilized here which are from 2008 Annual Report.

Liquidity Ratio

The data analysis of solvency ratios displays that the company has a quick ratio that is of 1.42 and a current ratio of that includes about 2.21. The current ratio displays that the business can still capitalize some of its money.

Leverage Ratio

Gap Inc. The ratio among obligation and net worth was 0.44, and that among debt and records was 0.49. This displays that the business is in a good share concerning the volume recompense of debts.

Profitability Ratio

Return on sales was 0.07, and that of assets was 0.08. This displays that the corporation still has a plenty of space to grow. This profitability ratio is not showing a strong point.

SWOT Analysis

Gap over the years has managed to be able to encounter the investors' anticipation most of times because its business. It has been disbursing out normal bonuses, and the stock trend are starting to display that the business's value has been unstable. For the duration of the .com boom which happened around 1998 and 1999, the…

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