"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 - – increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, wage bills are increasing, increasing transportation and logistics costs, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies,
talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, 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 -
Cross disciplinary teams
– Horizontal connected teams at the Gap's Gap are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Gap's Gap is one of the most innovative firm in sector. Manager in Gap, Inc., 2012 Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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.
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.
Sustainable margins compare to other players in Strategy & Execution industry
– Gap, Inc., 2012 firm has clearly differentiated products in the market place. This has enabled Gap's Gap to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Gap's Gap to invest into research and development (R&D) and innovation.
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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Gap's Gap digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Gap's Gap has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
High switching costs
– The high switching costs that Gap's Gap has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Gap's Gap is one of the leading recruiters in the industry. Managers in the Gap, Inc., 2012 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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 -
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.
No frontier risks strategy
– After analyzing the HBR case study Gap, Inc., 2012, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
Capital Spending Reduction
– Even during the low interest decade, Gap's Gap has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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 cash cycle compare to competitors
Gap's Gap has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Gap, Inc., 2012 HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Gap's Gap has relatively successful track record of launching new products.
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.
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.
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.
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.
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 -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Gap's Gap can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Gap's Gap can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Gap's Gap can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Gap, Inc., 2012, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Gap's Gap in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at Gap's Gap can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
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.
Learning at scale
– Online learning technologies has now opened space for Gap's Gap to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Using analytics as competitive advantage
– Gap's Gap has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Gap, Inc., 2012 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Gap's Gap to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Gap's Gap has opened avenues for new revenue streams for the organization in the industry. This can help Gap's Gap to build a more holistic ecosystem as suggested in the Gap, Inc., 2012 case study. Gap's Gap can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
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 -
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.
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 .
Technology acceleration in Forth Industrial Revolution
– Gap's Gap has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Gap's Gap needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
Shortening product life cycle
– it is one of the major threat that Gap's Gap is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Gap's Gap high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Gap's Gap in the Strategy & Execution sector and impact the bottomline of the organization.
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.
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.
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.
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 wage structure of Gap's Gap
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Gap's Gap.
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.