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Team #8

Team #8. Matthew Bernat Kara Owens Heather O’Keefe Instructor: Bruyaka Section time & day: 2:30 MW File Name: Gap_Case_Team8_MW230_Owens Submitter: Kara Owens. Leveraging a Common Capability for Gap Inc. Strategic Issue:

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Team #8

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  1. Team #8 Matthew Bernat Kara Owens Heather O’Keefe Instructor: Bruyaka Section time & day: 2:30 MW File Name: Gap_Case_Team8_MW230_Owens Submitter: Kara Owens

  2. Leveraging a Common Capability for Gap Inc. • Strategic Issue: • How can Gap build a successful corporate portfolio through a unified core competency? • Underlying Cause(s): • Leveraging a common ability through creating a competitive advantage specific to their five brands. • Synergies deviating away from their main core business, family clothing, do not currently exist. • Recommendation: • Creating a strategy geared towards improved fashion responsiveness.

  3. Snapshot • 2008 Recession has shrunk the family clothing industry by ~$4 billion • In 2010 consumer confidence was still unstable • Family fashion industry have a high probability of slow growth in the near future • 4 out of 5 GAP brands compete in the high priced lines, which compete in only 35% of the overall market • Increasing competition with the strengthening of the economy • GAP, INC revenues have been decreasing since 2005, however profitability is increasing slightly • 3 Key Factors to success in the fashion industry: Brand equity, fashion responsiveness, and financial management and inventory management Implication: GAPs downward spiral has been intensified by the 2008 recession.

  4. GAP Inc. Remains A Cash Cow Core competencies - GAP lacks a strong core competency to leverage synergies between their different brands. Portfolio Management - GAPs competitive position is composed of mainly cash cows with the potential to become dogs. Both of which will not enable GAP to grow as a portfolio. GAP needs to establish a core competency in order to establish a portfolio focused on greater growth potential. High Relative Market Share Low Piperlime/ Athleta Low- Industry Growth -High Implication: Slow growth in GAP Inc.’s cash cow brands are becoming dogs due to decreasing sales. Old Navy Gap Banana Republic

  5. Effectiveness of Sharing Activities & Vertical Integration • Cost savings • Replenishment inventory kept at common distribution centers to enable quick-to-ship delivery to its stores, regular inventory checks for quick markdowns if needed  Reduced inventory carrying costs. • Implication: May be difficult to do in the future if GAP decides to expand its e-commerce efforts especially into international markets. • Successful implementation of IT software platform common to GAPs operations increased monitoring of workflow and accuracy of financial forecasting. • Revenue & Differentiation Efforts • Different product and market segments by acquiring Banana Republic, Old Navy, and Gap’s Piperlime shoe division as well as expanding internationally on some level has kept GAP Inc somewhat stable in the marketplace. • High Levels of Vertical Integration • Focusing on the majority of their brand and product design initiatives in-house impedes the opportunity to seek out potential bottlenecks in other areas that might need current or future attention. • Implication: Potentially giving right to design/develop “new” brands to outside third parties might have a potential drawback as the ability for GAP to control such actions becomes even more difficult to manage outside let alone meet the quality standards of the entire corporation. Overall Conclusion: The shared activities seen through increased revenue and cost savings by Gap Inc. has not been enough to offset the decrease in sales performance across its entire value chain. Other actions and/or changes are needed to increase sales performance and therefore profitability standings.

  6. Strategic Issue: How can Gap build a successful corporate portfolio through a unified core competency? Turnaround Strategy III

  7. Implementation • Recommendation: Create a strategy geared towards improved fashion responsiveness • Plan specifics • Need: Application service provider • Fund: Take away some of the funding for advertising and use those cut funds for saving up for the ASP. • Critical success factor: GAP Inc. would have learn the ASP program and comprehend and respond to the trend data collect by the real time and up-to-date daily purchases • Overall time frame: 1 to 2 years

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