Final Report: Addressing the Declining Performance of Gap Inc.

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Final report
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Table of Contents
Final Report......................................................................................................................2
Executive Summary......................................................................................................2
Background of the company.........................................................................................2
A major issue and their detailed analysis......................................................................3
Recommendations to solve the issues and problems...................................................5
Plan of career............................................................................................................... 7
References................................................................................................................... 8
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Final Report
Executive Summary
In this report, a study has been carried out for the for GAP Inc. regarding the industry
and competitive analysis. The resources of the company and its capabilities, financial
and non-financial strengths to carry out the project has been taken into consideration. In
addition, global strategies and e-business strategies issues are also studied. A financial
analysis has been carried out to understand the strength of the company. Other factors
which affect the company's capability to carry out certain project plan such as core
competency, human resources, organizational structures, other strategies have all been
studied in this report. The corporate culture issues, ethical values, and corporate
communication and public relation have also been studied in this report for GAP Inc.
Background of the company
GAP Inc. is a worldwide famous clothing and accessories retailer company. It was first
founded in 1969 by two founders named Donald Fisher and Doris F. Fisher. The
company is headquartered in San Francisco, California. This company has six
departmental divisions including the Banana Republic and Old Navy. The issue with the
company in the current scenario is the tough competition faced by the online retailers
which are decreasing the concerned firm's sales and profits(Team, 2016).
. Also, the issue includes an increasing number of dissatisfied customers, inefficient
customer relationship management activities, an increasing number of competitors in
the market, etc (Team, 2016).
A major issue and their detailed analysis
The main or the major problem with GAP Inc is its continuously decreasing revenue and
net profit. In the current year, the operating profit declined to 43% while the net income
declined to 6% (Fortune, 2015). The incessant fall in the operating income, gross profit,
and net revenue is undoubtedly a major problem for this company. The reason behind
this fall can be attributed to its high priced products. In a business scenario, where
online retailers are selling their products at a very low price, the customers are bound to
shift away from expensive products sold by GAP Inc.
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The second problem is that the firm’s initial products are so heavy priced that later on
they are forced to offer discounts. Their brand Banana Republic runs on continuous
discounts because it cannot compete otherwise, with competitors like H & M which offer
good quality products at a cheaper price. This trend leads to heavy expenses on
promotional activities which are adapted to promote discounted products among
customers via various mediums.
The other competitors like Zara, H & M are fast to bring runway fashion into their stores
whereas GAP Inc. has a very slow supply Chain. The slow supply chain leads to delay
in bringing the latest trends from the runway to their stores.
There has been a heavy shift in the consumer's preference. Initially, the consumers
loved spending upon clothing and apparels but of late they are more into spending upon
experiences rather than physical goods. There has been a major shift in consumer
spending from physical goods to spending on experiences like travel and tourism.
A major problem was also identified in the GAP Inc.'s report that there existed problems
in various factories regarding the compliance of labor laws, and compliance of human
resources law( Ehstoday, 2019). Some of the factories were even found using child
labor, inadequate safety measures, and even unhygienic working conditions.
Sometimes, even verbal and physical abuse of labor was even identified. All this led to
a major fall in the image of the company in the eyes of the public.
Adding to these pre-existing problems, one of the major problems and crucial problems
is the increased presence of cheaper online products in the market. These products are
not only cheaper but also offer great variety and more or less satisfactory quality to the
consumers. GAP Inc. cannot find a way to compete with this online retailer which are
eating a major share of sales from GAP Inc.
Also, not just cheap online retailers but various offline retailers, small designers are
opening up their individual clothing line at a very fast pace. They offer good quality
products at cheaper prices. This also poses a major threat to the existence of GAP Inc.
the profits of this firm is also low because it spends a lot on maintaining its workforce
and good quality of its products. This leads to a lot of expenditure. The sales are also
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less as the customers do not find the latest fashion in the GAP Inc. stores as they find in
competitor's stores such as H&M and Zara. The popularity of the firm is also constantly
declining.
On top of it, the firm decided to close some of its factories (Rosenblum, 2013). This
further led to an increased burden of loss on the company as a whole. Shutting down of
a few factories did not turn out to be a good idea for the firm. The shutting down even
led to increased losses and lesser production and lesser sales (Fortune, 2015). Also,
customer satisfaction never reached satisfactory for this firm after the entry of Zara and
H&M and other competitors. One of the major issues is customer dissatisfaction. The
major reason for customer dissatisfaction is increased prices and outdated and not so
recent fashion, products in their stores.
Recommendations to solve the issues and problems
One of the major problems with GAP Inc. is increased customer dissatisfaction. This
customer dissatisfaction stems from the fact that the products offered are heavily priced.
In today' day and age, the customers are not attracted towards the products which are
heavily priced because there are a number of competitor's offering similar clothes and
accessories at a much cheaper price. So, the first recommendation is to decrease the
initial prices of their products offered. This would attract more customers to the firm.
The second recommendation is to offer the latest runway fashion just like Zara and
H&M and other online competitors. The major problem with GAP Inc. is the fact that due
to its slow supply chain, it offers the runway fashion at least a year later than it's other
competitors (Gao, 2013). This leads to a major loss of sales as fashionable customers
are no more interested in buying the clothes that were trending one year before. So, the
recommendation is to speed up the supply chain and make the latest runway fashion
and trends available to the customers as soon as possible(Barnes, 2017). Instead, a
sincere effort must be made so that the runway and latest fashion reaches the
customers as soon as possible, even quicker than a Zara or H&M delivery.
The third recommendation is to stop heavy discounting later on. The strategy that GAP
Inc follows is that it initially prices its clothing and accessories at a very high rate and
later on when the products don't sell it resorts to heavy discounting. The promotion of
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discounts and its marketing strategy costs a lot of expenditure to the firm (Barnes,
2017). This leads to unnecessary expenditure twice. First on, to market and promote the
heavily priced products and a second time to market the very same products at the
discounted rate. This leads to a huge marketing and promotional expenditure which
does not even bring fruitful results or increased sales for the firm. Instead, the firm must
resort to initially setting up low prices for their clothes and accessories.
Another recommendation for the firm is to improve its image in the eyes of the
consumers. Due to default in factories, child worker hiring, physical and verbal abuse of,
etc. led to a major fall in the goodwill of the company. The company must take sincere
steps to ensure that there is no child labor in its factories. The worker's safety and
hygienic conditions must also be maintained. It must ensure that labor laws are properly
followed by the firm.
Also, one of the best ways to achieve greater revenue in today's day and age is the
online platform. A number of younger generation resort to online shopping nowadays.
The firm must also resort to using online platforms rather than opening up new
platforms. This would save the cost of opening up a new platform and also save the
cost of hiring more staff to manage the new stores. Also, if the products are priced
lesser than before on online market then it can definitely boost up the sales of the
products.
There was also an issue in the company regarding customer relationship management.
In a business scenario, where the customers are the focal point and competitors are too
many, it is very important for the firm to pay attention to their customer relationship
management.
Plan of career
The first step is to improve the pricing strategy of the firm to attract more and more
customer as soon as possible. the second step is to open online stores rather than
offline stores in the firm so that the expenditure is less and profit and sales are more.
The third step is to improve customer relationship management. A customer grievance
cell must be set up and prompt solutions to customer complaints must be made.
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References
 Barnes. T., 2017. Analysts Recommendations The Gap, Inc. (GPS) [Online] New
oracle. Available at: https://www.newsoracle.com/2017/08/29/analysts-
recommendations-the-gap-inc-gps/ [Accessed On: 28th April 2019] Ehstoday. 2019. Gap Inc. Admits Problems, Vows to Improve Working Conditions at
Garment Factories. Ehstoday Available at:
https://www.ehstoday.com/news/ehs_imp_36988 [Accessed on: 28th April 2019] Fortune. 2015. Why Gap investors are worried, in one chart. Fortune Available at:
http://fortune.com/2015/09/30/gap-investors/ [Accessed on: 28th April 2019] Gao. E., 2013. Strategic Marketing Recommendation for GAP Inc. [Online] Prezi.
Available at: https://prezi.com/bvkja639syml/strategic-marketing-recommendation-
for-gap-inc/ [Accessed on: 28th April 2019] Rosenblum. P., 2015. Closing More Stores Doesn't Fix Gap's Biggest Problems.
Forbes. Available at: https://www.forbes.com/sites/paularosenblum/2015/06/15/gap-
continues-downsizing-closing-an-additional-175-stores/#39aa5bff6d12 [Accessed
on: 28th April 2019]
 Team. T., 2016. What Are The Problems Plaguing Gap Inc. [Online] Nasdaq.
Available at: https://www.nasdaq.com/article/what-are-the-problems-plaguing-gap-
inc-cm669698 [Accessed on: 28th April 2019]
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