Since its foundation in 1969, Gap Inc. grew into a fashion behemoth with brand recognition worldwide. Nevertheless, the company’s journey to the pinnacle of success had mixed fortunes, but Gap Inc. stood neck above its competitors due its strategic management team. Smith, Ansett, and Erez (2011) noted that Gap Inc. is not a company afraid to innovate its strategies. An example was during the overhaul of the manner the company interacted with those that criticized it, and adoption of an effective stakeholder management strategy in its place. Gap effectively used the strategy to build strength after a serious of accusations directed at leading global fashion giants for due to their perceived lack of knowledge of corporate social responsibility. As a result of having operations in different countries globally, Gap attracts criticism whenever the clothing industry receives coverage for the wrong reasons. Gap learnt the art of taking criticism positively and using it to transform business strategies. However, the persistent challenges call for incessant innovation of business strategies. Recently, the team from Business Insider (2019) reported that sales in Gap affiliated stores declined by 10% due to inventory problems and reduction in foot traffic. While it is important to examine such developments from a larger perspective, knowledge of organizational factors is mandatory. One tool that is effective for the purpose is the SWOT analysis. According to Abraham (2012), SWOT analysis is effective for conducting organizational internal assessment. The paper conducts SWOT analysis of Gap Inc. and evaluates important aspects of its organizational processes.
SWOT Analysis
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Strengths |
Opportunities |
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A recognizable brand and a multi-brand portfolio - over 3400 stores in 90 countries Brand has diversity and equality attributes Effective and efficient supply chain and supplier relationships sustainable business strategy Gap holds the position of industry leader in the market Some brand segment report promising trend sales Efficient and effective just-on-time-basis manufacturing process Timeless iconic brands Strong financial standing Large employee base |
Potential new markets with expansion to Asian countries E-commerce presents chance to revolutionize business Marketing through celebrity endorsements, Olivia Palermo in 2017 Popularity of specific brand segments such as Athleta High dividend yields experienced by company are attractive to investors Possible strategic alliances Increase focus on women apparel would boost sales |
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Weaknesses |
Threats |
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Declining brand popularity proliferation of competition Little product variety closure of some stores in the UK Brands struggle to attract customers Ineffective utilization of e-commerce platforms Reliance on external manufacturers Inability to penetrate fast to emerging markets |
Decreasing sales and profits Management crisis in lack of new and fresh ideas and products Competitors are catching up including entrepreneurial digital fashion brands Closure of stores reduces market presence leaving competitors to thrive Increases in labor cost globally Risks from global sourcing and manufacturing practices |
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Evaluation
The current situation of Gap Inc. is that it stands to lose on the benefits of sustainable innovation. The company has failed to exploit its strengths and opportunities to address its weakness and threats. In a study by Kiron, Kruschwitz, Reeves, and Goh (2013), it was established that companies that achieved profitability from sustainable business practices also required to change their business models. Gap currently suffers from a cooperate culture that Fiordelisi and Ricci (2014) attributed to high CEO turnover regardless of performance. The company is experiencing decline in sales and profitability and closing some of its stores with some of its brand segments struggling in the market (Business Insider, 2019). The predicament of the company has a strong links to the management, which appears to be in stasis rather than actively transitioning the company through innovative changes in product design and production processes. The lack of new and fresh ideas from the management is the most significant threat Gap Inc. faces. The argument that can be advanced in relation to the status of the company is the negative corporate culture limits both inside and outside success, an aspect that prevents change from happening. Fiordelisi and Ricci (2014) argued that corporate culture influences the probability of turnover irrespective of the performance. Therefore, it can be contended that despite iconic products that have stood the test of time, Gap’s management, in favor of the status quo, failed to initiate the required steps towards sustainability. The company’s declining performance in comparison to competitors is related to lack of innovation, courtesy of a management team without a long vision. Gap products are unable to meet the demands and preferences of modern consumers, and with the growth in online business where consumers are the drivers, the company stands to lose substantially.
The first objective that needs to be implemented by Gap to have a fair chance of competing with other global brands is to overhaul its management. The need for fresh blood that understands the fashion market and is willing to take weighted risks cannot be understated. Gap has the capital and market base to undertake dramatic and sweeping changes of organizational processes to align the company with sustainability goals. Review of the company’s opportunities shows that Gap has the potential to re-establish itself as the leader of the global fashion industry in terms of sales and profitability. However, such an achievement depends on the willingness to embrace and implement the recent technological developments in the industry and market to gain competitiveness. Gap new management of gap that would come into existence should target online business, which is the fastest growing segment of the market. With its efficient supply chain, Gap Inc. can effectively execute the logistics aspects of the business, the most critical in e-commerce. An alternative to shipping products from the US directly to customers through the last mile delivery would be converting some of its existing traditional stores to online stores, and opening dedicated online stores in new and emerging markets for easier management of inventory. Gap Inc. has the opportunities to revolutionize its market presence. However, success is largely dependent on whether the company will introduce new products into the market that can compete favorably with those of its major competitors.
Gap needs to explore options of working through alliances with small and medium scale operators in the new and emerging markets. It is important to identify partners who would not fill threatened by such collaborative efforts. The objective is to obtained partners with detailed understanding of the market trends in terms of product designs and preferences to facilitate customizations. Gap needs to shift from its traditional practice of mass producing was sells in America for markets outside. The company’s change in mindset would affect the whole organization and its structures and systems, implying that a comprehensive change process would be undertaken to realize these goals. Therefore, it is crucial that the company finds an effective change agent to oversee the process.
In conclusion, it is important to note that Gap Inc. current situation is basically and internal problem caused by the management that is lethargic to change. The company had, and still has a head start to its competitors, and its predicament is simply an outcome of the failure to heed the phrase ‘innovate or perish’. Therefore, the new management should primarily focus on aligning organizational structures with the current market demands, invest in research and developments, and come up with new innovative products that cut across cultures, and those that are specific to some regions. It is important to point out that the threats facing Gap Inc. are mostly-self-inflicted, which means they can be reduced by rectifying the way organizational processes and operations are run.
References
Abraham, S. C. (2012). Strategic management for organizations . San Diego, CA: Bridgepoint Education, Inc.
Business Insider. (2019). We went to a Gap store and saw why its sales have been struggling (GPS). Retrieved from https://www.pulse.com.gh/bi/strategy/we-went-to-a-gap-store-and-saw-why-its-sales-have-been-struggling-gps/mkp80tt
Fiordelisi, F., & Ricci, O. (2014). Corporate culture and CEO turnover. Journal of Corporate Finance , 28 , 66-82.
Kiron, D., Kruschwitz, N., Reeves, M., & Goh, E. (2013). The benefits of sustainability-driven innovation. MIT Sloan Management Review , 54 (2), 69.
Smith, N. C., Ansett, S., & Erez, L. (2011). How Gap Inc. engaged with its stakeholders. MIT Sloan Management Review , 52 (4), 69.
