IT Portfolio Theory for Gap Inc.

This report analyzes IT resources and business value returns for Gap Inc. using IT Portfolio Theory and investigates resources and capabilities from a Resource-Based View (RBV) perspective.

Running head: IT PORTFOLIO THEORY
IT Portfolio Theory
(Gap Inc.)
Name of the student:
Name of the university:
Author Note

1IT PORTFOLIO THEORY
Executive summary
In this report, IT resources and business value returns are demonstrated keeping Gap Inc. in mind. It
is a retail company and facing drastic changes in terms of decrease in obtaining information.
Different capabilities and resources of Gap are investigated here from a resources-based viewpoint.

2IT PORTFOLIO THEORY
Table of Contents
Introduction:..........................................................................................................................................3
1. Task 1:...............................................................................................................................................3
1.a. Identification of IT assets and business value returns using IT Portfolio Theory:.....................3
1. b. Risk, return and balanced view of value from IT portfolio of Gap:..........................................5
2. Task 2:...............................................................................................................................................6
2.a. List of resources and capabilities on the basis of Resource-Based View (RBV) of the
organization:......................................................................................................................................6
2. b. Methods to add value and rarity to resources and capabilities for Gap:....................................8
Conclusion:............................................................................................................................................9
References:..........................................................................................................................................10

3IT PORTFOLIO THEORY
Introduction:
Today’s business has been facing a dramatic change in reduction in the cost of transmitting,
processing and obtaining information. To understand the scenario Gap Inc. is chosen which is
engaged in specialty retailing.
The following study demonstrates features of IT Portfolio Theory in the first task. In the
second task, resources and capabilities are investigated to analyze consumer tastes with big data at
Gap Inc.
1. Task 1:
1.a. Identification of IT assets and business value returns using IT Portfolio Theory:
The various IT assets using IT Portfolio theory:
Inventory Discussion
Product inventory This product is available for sales at Gap.
Property management
and maintenance
Preserving and ideally developing the value of owned properties at Gap.
Development services This includes feasibility studies, marketing advice, design and concept
and project management (Weill and Aral 2006)
Retail leasing It is the contract through which Gap Inc. can convey land, services,
property and so on to others for the particular time and return in a
periodic payment.

4IT PORTFOLIO THEORY
Client reporting It is the method of communication and educating the client, assuring
transparency and showing hard work of Gap in concrete numbers.
Operations and risk
management
This is the continuous cyclic process including risk assessment, risk
decision making and implementing risk controls resulting in acceptance,
mitigation and risk avoidance (Brown 2015).
Marketing retail It is a sale of services and goods for any end user known as the
customer. Gap’s marketing helps them promote awareness and various
interests of their services and goods for generating sales from their
customers.
Research trends Customer insights and retail trends.
Information
technology
This is the study or use of systems regarding telecommunications and
communications to store, retrieve and send data.
Retail designing and
project management
Gap Inc. has been offering a broad variety of conceptual and initializing
services. This is helpful to bring them together onsite with project
managers. Gap’s project managers are intended to deliver every project
onsite (Aguirregabiria, Clark and Wang 2016). This must be done
through experience, skills, knowledge and methods for achieving project
objectives to set out.
Business value returns of Gap:

5IT PORTFOLIO THEORY
 First of all Gap Inc. must use that in maximizing their revenues. This is because of every
business concept there has been the best spot that works best.
 For Gap, rent has been an important operating expense. Various rents exceeding ten percent
of gross revenue are always in a red flag.
 Gap needs to contend with high expenses of rents and additional costs of products for filing
that space.
 Further, it has been taking more labor towards service for a larger than requires space. It can
erode business profit margins of Gap (Hawley and Lukomnik 2017).
1. b. Risk, return and balanced view of value from IT portfolio of Gap:
View of value:
Provided with the importance to maximize their sales, one can expect that valuation of Gap
has been depending on their revenues (Gapinc.com, 2018). It is the most commonly used industry
valuation multiple for the organization. It denotes the sales price of Gap to various annual revenues.
Since discounts and returns are important for their business, business sale price to their net sales
valuation multiple must be considered. Moreover, discounts and returns are vital for Gap,
considering the usage of a business sale price to their multiple net sales valuations. A benefit of
using this last multiple is to bring various values for Gap and measuring business worth on amount
of cash flow thrown off by the business directly.
View of risk:
Risks Discussion
Theft It comprises o retailers 1.3% sales and can then whittle away at profit margin as
Gap do not steps to prevent that.

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Data Breach irrespective of attack on the online store of Gap or their “credit card processing
system”, data breaches can leave them with huge tech bills and various customers
getting frustrated (Laseter and Rabinovich 2016).
Damage to
inventory
Any kind of power outrage and others can leave Gap’s store with expensive surplus
of damaged or spoiled inventory.
View of return:
Returns of products are expensive to do business especially with online shopping and
managing costly reverse supply chain rising constantly. It has been a priority for Gap irrespective of
its size. Moreover, the emergence of online commerce has provided shoppers advantages of
anywhere-anytime shopping and delivery to a doorstep (Pearson.com, 2018). Thus, in a race to
outperform competition and rise in the lifetime value of customers, Gap has been raining discounts
along with offering incentives such as hassle-free- returns.
2. Task 2:
2.a. List of resources and capabilities on the basis of Resource-Based View (RBV) of the
organization:
According to various proponents of RBV, Gap is more feasible to get exploited to external
opportunities utilizing present resources instead of acquiring new skills for every distinct opportunity
(Lund et al. 2017). Resources are provided with RBV model playing a major role to help Gap
achieving higher organizational performance.
List of resources:

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Resources Discussion
Tangible resources This includes capital, equipment, machinery, buildings and lands where all
those resources are tangible. Further, physical resources are easily bought
from the market such that they confer small benefits to Gap in long run.
This is because they have rivals who can acquire those identical resources.
Intangible resources These are a physical presence and can be owned by Gap. This includes
intellectual properties, trademarks and brand reputations developed over a
long time and something that Gap is unable to buy from the market (Lin
and Wu 2014). These types of resources usually stay under Gap and have
been the primary sources of competitive advantage.
List of capabilities:
There have been some capabilities for resources that can be strategically vital for Gap. They
are listed beneath.
Capabilities Discussion
Valuable capability As the resources are capable to bring value to Gap, they can turn into a
source of competitive advantage.
Rare capability Resources need to deliver distinct strategy providing a competitive
advantage for Gap Inc. compared to other competing firms (Kellermanns et
al. 2016). However, these kinds of resources have not been rare for providing
a competitive advantage.

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Inimitable These resources are the sources of sustained competitive advantage for Gap
as competing firms are not obtained by them.
Non-substitutable These kinds of resources are unable to get replaced by other strategically
equivalent valuable resources. As two resources can be used distinctly in
implementing the similar strategy, then these capabilities of these resources
are equivalent from a strategic viewpoint (Hbs.edu, 2018). Further, they are
substitutable and have not been sources of sustained competitive advantage.
2. b. Methods to add value and rarity to resources and capabilities for Gap:
Methods to add value:
Adding value Discussion
Creating anticipation Gap should start promoting benefits before presenting their products.
Handing product to
customers
Communicating with customers is helpful in understanding how
valuable Gap’s products have been.
Having customers
experiencing the
product
It looks like it must be given and never always take place. However,
this never occurs as salespeople never instigate that.
Not talking about
benefits and features of
that product
The customers must experience them. This indicates not going to
specifics of that value till it is in hand of the customers.
Turing those tips to action It includes picking one of those value-added activities offering most

9IT PORTFOLIO THEORY
opportunities (Israeli and Avery 2018).
The various rarities are discussed below:
Rarity Discussion
Influencer collaboration It must be described as the extension of any word-of-mouth marketing.
A rise of social media is indicated that it has been easier for brands in
making collaboration with different influential users. This is to reach
hyper-specific audience group such that it's far quicker and also more
directed towards conventional targeting methods (Laseter and
Rabinovich 2016).
Consumer collaboration Under the current scenario of the world, which is dominated by social
media, Gap must be aware of the value of users in liking and sharing
their contents. However, though any consumer follows and users follow
a brand, there has been no guarantee that they must be engaged actively
with a brand. This is no matter how smart their content is.
An effort for reward In this digital era, there has been much talk about instant gratification,
however, it often pays to make customers do little for their various
rewards. It is particularly when effort and hard work gets forged to the
core of Gap’s brand.

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Conclusion:
The report has critically analyzed how IT and information can create business value and
develop Gap Inc.’s competitiveness in the current market scenario. The two tasks and the questions
answered in each of them helps in understanding discipline-specific knowledge and capabilities
regarding business resources and value returns. The study also analyzes various specifications of
resources and capabilities for retail companies like Gap Inc. from a Resource-based view of this
company.
References:
Aguirregabiria, V., Clark, R. and Wang, H., 2016. Diversification of geographic risk in retail bank
networks: evidence from bank expansion after the Riegle‐Neal Act. The RAND Journal of
Economics, 47(3), pp.529-572.
Brown, J.R., 2015. Managing the Retail Format Portfolio: An Application of Modern Portfolio
Theory. In Marketing in Transition: Scarcity, Globalism, & Sustainability (pp. 329-329). Springer,
Cham.
Gapinc.com. (2018). Home. [online] Available at: http://www.gapinc.com/content/gapinc/html.html
[Accessed 4 Apr. 2018].
Hawley, J. and Lukomnik, J., 2017. The Long and Short of It: Are We Asking the Right Questions:
Modern Portfolio Theory and Time Horizons. Seattle UL Rev., 41, p.449.
Hbs.edu. (2018). Predicting Consumer Tastes with Big Data at Gap. [online] Available at:
https://www.hbs.edu/faculty/Pages/item.aspx?num=52590 [Accessed 4 Apr. 2018].
Israeli, A. and Avery, J. (2018). Predicting Consumer Tastes with Big Data at Gap. Harvard
Business School. [Accessed on 7 March 2018].

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Kellermanns, F., Walter, J., Crook, T.R., Kemmerer, B. and Narayanan, V., 2016. The resource‐
based view in entrepreneurship: A content‐analytical comparison of researchers' and entrepreneurs'
views. Journal of Small Business Management, 54(1), pp.26-48.
Laseter, T.M. and Rabinovich, E., 2016. Internet retail operations: integrating theory and practice
for managers. CRC Press.
Lin, Y. and Wu, L.Y., 2014. Exploring the role of dynamic capabilities in firm performance under
the resource-based view framework. Journal of business research, 67(3), pp.407-413.
Lund, D.J., Robicheaux, R., Hansen, J. and Cid, C., 2017. Brick Versus Click: A Resource-Based
View of Retail Relationship Marketing Through Community Engagement, an Extended Abstract. In
Creating Marketing Magic and Innovative Future Marketing Trends (pp. 363-367). Springer, Cham.
Pearson.com. (2018). Barney & Hesterly, Strategic Management and Competitive Advantage |
Pearson. [online] Available at: https://www.pearson.com/us/higher-education/product/Barney-
Strategic-Management-and-Competitive-Advantage-4th-Edition/9780132555500.html [Accessed 4
Apr. 2018].
Weill, P. and Aral, S., 2006. Generating premium returns on your IT investments. MIT Sloan
Management Review, 47(2), p.39.

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