"Between 2000 and 2012, Gap, Inc. (Gap) ceded its world leadership position in specialty fashion retailing to Inditex of Spain and H&M of Sweden. These two companies, each less than a quarter of Gap's size in 2000, were now setting the pace in the global mass fashion market, and Gap appeared to be falling ever further behind. In the intervening twelve years, three CEOs had struggled to turn around the fading brand. While several temporary profit boosts appeared to herald a recovery, a sustained rally remained elusive. Mickey Drexler, Gap's CEO since 1983, who had been responsible for Gap's rise to global prominence, was fired in 2002 after two years of double digit, same-store sales declines and a 75% drop in the stock price. His successor, Paul Pressler, appeared to have engineered a remarkable recovery, but was fired in 2007 after disappointing sales and another slump in profits. His replacement, Glenn Murphy, fresh from a successful turnaround at a Canadian drug-store chain, promised tighter price controls, lower administrative costs, and a leaner, more aggressive Gap, but sales continued to decline over his tenure. After four years of troubles, Murphy brought in former J. Crew President, Tracy Gardner, to consult with the Gap brand and Murphy began a bold program to close one fifth of Gap's North American store base. In 2012, sales had lifted 8%, same-store sales were strongly positive for all of Gap's domestic sub-brands, and the company's share price had lifted nearly 50% from the prior year. After 12 years of poor performance, had Glenn Murphy finally discovered the answers to Gap's problems?"
Authors :: John R. Wells, Galen Danskin
Topics :: Strategy & Execution
Tags :: Branding, Change management, Competition, International business, Leading teams, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis
Swot Analysis of "Gap, Inc., 2012" written by John R. Wells, Galen Danskin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gap's Gap facing as an external strategic factors. Some of the topics covered in Gap, Inc., 2012 case study are - Strategic Management Strategies, Branding, Change management, Competition, International business, Leading teams and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Gap, Inc., 2012 casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, increasing commodity prices, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies,
wage bills are increasing, technology disruption, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Gap, Inc., 2012 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gap's Gap, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gap's Gap operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Gap, Inc., 2012 can be done for the following purposes –
1. Strategic planning using facts provided in Gap, Inc., 2012 case study
2. Improving business portfolio management of Gap's Gap
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Gap's Gap
Strengths Gap, Inc., 2012 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gap's Gap in Gap, Inc., 2012 Harvard Business Review case study are -
Learning organization
- Gap's Gap is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Gap's Gap is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Gap, Inc., 2012 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Gap's Gap
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Gap's Gap does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Gap's Gap is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Gap's Gap has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Gap, Inc., 2012 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Gap's Gap is present in almost all the verticals within the industry. This has provided firm in Gap, Inc., 2012 case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Analytics focus
– Gap's Gap is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by John R. Wells, Galen Danskin can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Gap's Gap in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Gap's Gap has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gap's Gap has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High brand equity
– Gap's Gap has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Gap's Gap to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Gap's Gap in the sector have low bargaining power. Gap, Inc., 2012 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gap's Gap to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Gap's Gap has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Gap, Inc., 2012 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Strategy & Execution field
– Gap's Gap is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Gap's Gap in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Gap, Inc., 2012 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Gap, Inc., 2012 are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Gap, Inc., 2012, it seems that the employees of Gap's Gap don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Workers concerns about automation
– As automation is fast increasing in the segment, Gap's Gap needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Gap, Inc., 2012, in the dynamic environment Gap's Gap has struggled to respond to the nimble upstart competition. Gap's Gap has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, John R. Wells, Galen Danskin suggests that, Gap's Gap is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study Gap, Inc., 2012 has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Gap's Gap 's lucrative customers.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Gap's Gap supply chain. Even after few cautionary changes mentioned in the HBR case study - Gap, Inc., 2012, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gap's Gap vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Gap's Gap has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Aligning sales with marketing
– It come across in the case study Gap, Inc., 2012 that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Gap, Inc., 2012 can leverage the sales team experience to cultivate customer relationships as Gap's Gap is planning to shift buying processes online.
Need for greater diversity
– Gap's Gap has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Increasing silos among functional specialists
– The organizational structure of Gap's Gap is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Gap's Gap needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Gap's Gap to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Gap, Inc., 2012, is just above the industry average. Gap's Gap needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Opportunities Gap, Inc., 2012 | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Gap, Inc., 2012 are -
Better consumer reach
– The expansion of the 5G network will help Gap's Gap to increase its market reach. Gap's Gap will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Developing new processes and practices
– Gap's Gap can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Gap's Gap can use these opportunities to build new business models that can help the communities that Gap's Gap operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Gap's Gap to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gap's Gap can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Gap's Gap can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Gap's Gap can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Gap's Gap can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Gap's Gap has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Gap's Gap is facing challenges because of the dominance of functional experts in the organization. Gap, Inc., 2012 case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Gap's Gap can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Gap, Inc., 2012 suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Gap's Gap to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Gap's Gap to hire the very best people irrespective of their geographical location.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Gap's Gap in the consumer business. Now Gap's Gap can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Gap, Inc., 2012 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Gap, Inc., 2012 are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Gap's Gap needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Gap's Gap.
Consumer confidence and its impact on Gap's Gap demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Gap's Gap can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Gap's Gap can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Gap's Gap with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gap's Gap in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gap's Gap can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Gap, Inc., 2012 .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Gap, Inc., 2012, Gap's Gap may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Regulatory challenges
– Gap's Gap needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Gap's Gap will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Gap's Gap business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Gap, Inc., 2012 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Gap, Inc., 2012 needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Gap, Inc., 2012 is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Gap, Inc., 2012 is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Gap, Inc., 2012 is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Gap's Gap needs to make to build a sustainable competitive advantage.