Current Strategic Position
Gap Inc. decided to retain the major strategic thrusts that the company did in the last ten years. This includes building a global operation and then developing four distinct types of stores or brands. The first one is the flagship Gap brand which offers casual clothing and accessories such as t-shirts and hoodies to customers of all ages. The second one is Old Navy, a similar concept as Gap but with items selling at lower prices. The third one is the Banana Republic, a brand that offers high-end and high-quality apparel. The products here are significantly more expensive than those found in Old Navy; at the same time, it caters to a more focused group of consumers – the professionals who want to wear something that can be used at work and play without having to change outfits. The last and fourth one is Piperlime which is a unique brand because it does not sell products affiliated with the parent company. Aside from that, it sells only one type of product, shoes. Piperlime is also a purely online store.
Aside from firing and hiring CEOs the past decade can be described as more of the same. In the past, they hired a CEO that is good at designs and now they hired Glenn Murphy whose expertise lies in retail marketing. So far Murphy was relatively successful in arresting the quick financial slide that Gap Inc, has been experiencing in the past years. Nevertheless, the company is well aware that it is getting harder and harder to compete within the apparel industry.
As of 2007 Gap Inc. attempted to strengthen its global reach with the operation of 3, 131 stores worldwide. At the same time, it began to diversify heavily with the introduction of brands like GapKids, BabyGap, GapMaternity, and Love Me Gap. The purpose is clear but the needed boost in revenue was not seen in recent years. The company is also faced with many competitors and it cannot seem to sustain its growth. Based on data gathered the customers do not mind a more expensive product as long as the design fits them.
New Strategic Position
It is difficult to change what was once considered a very successful formula. The creation of four distinct brands Gap, Old Navy, Banana Republic, and Piperlime may have at one point contributed to the growth of the company but the harsh reality is that these brands are no longer performing as expected. They are being drowned out by competition and an economy that is slowing down. It does not require a financial genius to understand that a new strategic position can be had if Gap Inc. is willing to divest one or two of these brands.
One major change is for the company to let go of Old Navy. There is an overlap, in terms of products sold, between the flagship company and Old Navy. The only difference is that the other store is offering lower-priced apparel. It has been pointed out earlier that the target customers are willing to pay more as long as the designs are not only attractive but are in vogue. The gap will therefore absorb Old Navy.
The next step is to clarify the target market of Banana Republic. If it is a high-end store for working professionals – specifically those who work in offices – then the company has to spend more on advertising to create that image for the Banana Republic. Again, the target customers here do not mind paying more as long as the company can deliver on its promise to provide highly functional and yet durable apparel that can be worn both in offices and after office settings. Online marketing for both stores can be improved further.
It is quite interesting to know that Gap Inc. struggled with the need to hire a CEO that can do everything from design to financial controls and managing a global juggernaut. For example, it took seven years to find a replacement CEO. Why is the company wasting valuable resources when it can hire a consultant? The consultant can help them in their designs and yet not be burden with the need to monitor the daily operations of the company. The hired consultant can simply focus on creating new designs that will appeal to both old and new clients.