The GAP Strategies - Case Study Example

Yvonne Marie Leyson Academia-Research Maximizing Sales and Profit 20 August 2006 Thirty-seven years ago, Gap Inc. started its humble beginnings withbig dreams that spun into a golden international retail enterprise of highly-respected apparel lines. From a handful of employees at its historic California home, Gap Inc. has now hired over 160,000 employees all over the world that support the brand names it carries. With more than 4,250 stores, Gap Inc. boasts of its worldwide lead as a retailer for clothing, accessories and personal care products under the brand names of Gap, Banana Republic and Old Navy. By the year 21st century the complexity of the fashion industry has acknowledged the changing moods of dressing. Dressing down according to Kelly and Silverstein (2005) became an acceptable norm for the society whose rules for dressing became relaxed and interest in fashion waned. With home-based jobs sprouting people saw no need to buy fashionable clothes. Ordinary retail and clothing sales saw a disappointing decline as the millennium ushered in comfort dressing. Gap Inc., whose target clients are teens and the middle market with its basic style should see a logical push compared to Banana Republic’s affluent clientele and Old Navy’s fashionable yet bargain minded customers. Gap Inc. however, suffered tremendous drawbacks against its gracious fashion profit enjoyment of the 90’s that Brady attributed to its electronic retailing in 1997, as prevailing modes of expression sank the sales of summer 2001. Hea revealed how store sales showed a 12% dip compared to the previous year. Given the sales shortfall, shares of stocks remained on the defensive that Hea positively believed could pick up during the fall months. However August and September saw weak store traffic owing to the lack of buyers’ enthusiasm for its apparel lines. The Old Navy division suffered the highest setback with the biggest sales drop that then CEO Millard Drexler acknowledged as its priority, “the need to find the right balance between key items and fashion”. In its numerous attempts to survive the fashion crash, Drexler was later replaced in 2002 according to Brady(2003) that has brought in bolder colors that certainly help cut the inventory, squeezed out costs and helped Gap triple its earnings and stocks rose to more then $18 per share. The GAP strategies By redesigning a “look” to fit in with the season and the environment, Gap’s strategies included highly focused surveys and research on consumer needs and fashion trends that high-lighted classifying its clientele from the “style-conscious, updated and classic” individuals according to Brady(2003). Gap, has also adapted the different mixes provided by Levy and Weitz (2004, Ch.2) that retailing systems should carefully observe with strong emphasis on the merchandise. According to them, much focus on its products centered on the ability to recognize versatility in style, assortment and variety without sacrificing its quality. Fit being an important factor in the clothing apparel line, assumed that its predictability should announce its availability that consumer research brings into its designs for must-have clothes. Although the millennium trend was to dress down and simplify, the smugness brought by the old Gap designs were too obtainable with other cheaper competition. A variety of choices for the shopper in style and a wider array of color definitely zeroed in the buying spree. Gap’s predictability in the 1990’s saw a gradual yet significant progress that has seen improvement on its credit rating and debt reduction in the 3rd quarter of 2003. Webb then announced its CEO Paul Pressler’s move to repurchase its common stocks. Price Adjustment according to the law of supply and demand hammers specific changes to maximize profit and minimize markdowns according to Chorafas (2002). Prices change but are highly capricious in trying to match the demand. Gap, has however attached a stigma to dynamic pricing that the fashion industry equates with consumers flocking stores only during price markdowns while the rest of the periods are utterly almost devoid of sales. Further frequent discounts may be training Gap customers to buy only during sales according to Brady. Along with the rest of the name-brand fashion retailers, Gap likely ruled this one out in favor of affordability on some of its casual lines of apparel. However, when a price–optimization software helped improved profit margins in its Old Navy stores, a uniform system for all its product in more than 1, 300 stores was deployed that delivered significant benefits without causing major disruptions to the organization during implementation according to Tom Cawley, Senior Vice-President for Finance. Getting the right price is still considered as leverage to meet specific terms that minimize markdowns. Constant style updates and versatility called in attractive strategies made by Gap in its retails lines that resulted in operating profits. Recognizing the need for further versatility, Gap further ventured with Inter-Parfums Inc., an exclusive manufacture of personal care products as part of its lines while Gap handles the in-store operations, marketing and selling lines. The trend has revealed an opportunity for growth that other famous fashion retail outlets ventured into and strive to adapt to products that cater and enhance the local tastes. This will definitely see its mass launch will see light by the fall of 2006 and early 2007. Tailoring certain products according to the different buying habits of men and women creates a demand for every client. Its acquisition of the Forth & Towne as a new apparel concept for women, whose high affinity for style, fashion and trends is established. Chic and wearable fashion trends that fit and flatter is the aim according to Gap Inc. Marketing ads, promotional strategy and good advertising has developed brand promotion without sacrificing the need of other clients who favor understated confidence gained from rejecting logos that plaster its emblems on an apparel line. Some people value the private sensual experience of knowing the luxury they are wearing that reconfirms their identity. Gap Inc. has recognized this need for the privileged but has also seen products that could easily show up in the common shelves of JC Penney or Macy’s. Schmitt and Simonson, provided clear guidelines for harnessing a company’s total aesthetic output through its “look and feel” that provides a vital competitive advantage. Hot commercials soon ushered in Raoul Bova, Madonna and Missy Elliot that ultimately helped boost sales along for its fashion conscious clientele to take note its displays that caters to every customer’s whims. Branding and identity helps to sell as the customer walks in and encounters a “memorable experience” that is highly irresistible and such marketing aesthetics will create a sensory experience that Schmitt and Simonson believe could ensure customer satisfaction and loyalty. Further, Schmitt and Simonson has also addressed the emergent topic of how to manage corporate and brand identity online and proceeded to enumerate the actual corporate and brand identity measures that Gap has developed, refined, and maintained that set them apart from other competitors. Levy and Weitz (2004, ch.3)has enumerated the importance of product acceptance and visibility with the actual figures of $4B and $24B owed to TV Home Shopping and Internet Retailing respectively. Gap Inc. has also maintained that it has ethically maintained its labor standards and monitored its factory conditions to make sure the quality is definitely not sacrificed and service to its clientele is exemplary as strongly advised in Levy and Weitz. To eliminate competitive attacks the company has raised the consciousness of it employees and promoted exemplary employee relations as the core of its relationship that works against crushing fake competition that other Asian markets have tried to break in order to dispel the growth of the fashion industry and claim profit turn-out for their lowly replicas. Gap has identified that as a consequence of globalization other aggressive tactics that seek to negotiate the lowest price would force suppliers to cut corners and employ abusive practices in order to deliver a desired product. While retailers do not own or control their suppliers, their significant responsibility in contributing to the abusive practices is apparent when they insist on unrealistically low production costs. Gap has maintained that it has stuck to the formal codes of conduct requiring their suppliers to address labor issues. Conclusion Gap Inc. has clearly recognized that the fight against competition and fashion complexities enable them to recognize and implement certain strategies that create and tailor a versatile atmosphere to its buying clientele through lucrative design, style and promotional ads based on a focused market research and not merely on instinct. A wider range of products definitely attracts more clients along with an acrobatic and flexible leadership would lead the downturns into lucrative changes for the company. The 2005 prediction on the exposition structure of the fashion industry revealed up to 30% revenues on clothes. The fashion comeback will see a better light for Gap Inc. that should anticipate the movement of the Hispanic buying power in 2007 in America. Walmart and Walgreen being leaders in serving the multi-cultural community should be studied as an alternative focus. Further, as Biesada (Hoovers.com) has reported of Gap’s expansion plans to Europe, UK and Japanese markets in 2007 who has accounted for 5% of Gap’s revenues, their plan will see fruition if they adhere flexibly to the different standards of the buying public. Works Cited Simonson, Alex and Schmitt, Bernd. Marketing Aesthetics: The Strategic Management of Brands, Identity and Image. E-book file. Gap, Inc. Forth & Towne announces Los Angeles area locations: Forth & Towne Opening in Century City, Thousand Oaks and Topanga. Gap Inc., 2006. Hea, Johnny. Gap Inc.’s July Sales Sink. Financial Analysis from Idea Advisor.com. August 20, 2006. http://www.cnsnews.com/ViewPrint.asp?Page=\Business\archive \200108\BUS20010813a.htmlJohnny Hea, CFA Biesada, Alex. Gap UK Holdigs Limited. Hoovers.com August 20, 2006 . http://www.hoovers.com/gap-uk/--ID__135343--/free-co- factsheet.xhtml?cm_ven=PAID&cm_cat=INK&cm_pla=CO1&cm_ite=ga p-uk Chorafas, Dimitris. Liabilities, Liquidity, and Cash Management: Balancing Financial Risks. US: John Wiley & Sons, 2002 Brady, Diane. Despite a style and operations revamp, Gap hasn’t yet found its groove. New York. Oct 6, 2003. Kelly, Francis and Silverstein, Barry. The Breakaway Brand: How Great Brands stand out. United States: Mc-Graw Hill, 2005. Levy, Michael and Weitz, Barton. Retailing Management. 5th ed. New York: McGraw-Hill/Irwin, 2004. Read More