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Corporate financial strategy: Case study Gap, Inc.

A financial and strategic analysis of the Gap, Inc. case study
by

Maarten Buys

on 10 September 2015

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Transcript of Corporate financial strategy: Case study Gap, Inc.

Case Study
History and background
Internal analysis
VRIO-model
Financial analysis
External analysis
Pestel-analysis
Porter's 5 forces
Porter's competitive generic strategies
SWOT-analysis
Strategic advice
Table of contents
SWOT-Matrix
Pestel-analysis
Effect of restrictions by U.S. and other foreign governments (T)
Political
Socio-
cultural
Customer focus on natural and environment-friendly products (Focus on CSR) (O)
National Organic Program (T)
Young customers in growing developing economies (O)
Number of babybooming customers is decreasing (T)
Growing desire for promotional pricing and immediate availability (O)
Teenagers are less attracted to retail (T)
Decrease in use of traditional purchasing channels (T)
Environmental
Increased popularity for internet purchasing (O)
Fast evolving new technologies (Point of sales technology) (T)
Technological
Dollar is more volatile (O+T)
High level of unemployment in U.S. (T)
Increasing oil and energy prices (T)
Growing competition (both foreign and domestic) (T)
Cotton prices are increasing (T)
Economical
Strict regulations by NOP: Products need to be at least 95% organic and natural (T)
Trade and custom restrictions (T)
Legal
VRIO-model
VRIO-model
VRIO-model
VRIO-model
VRIO-model
VRIO-model
Focus on booming young customers
Wide range of products
Large number of channels to access shop
Selfowned factories
Best e-commerce website in retail
An extensive code of business ethics
By Maarten Buys, Joris De Prins, Sanne De Wael,
Pieter Maes & Eline Van Dingenen
Corporate financial strategy
Rivalry amongst
existing competitors
Bargaining power of buyers
Bargaining power of suppliers
Threat of new entry
Threat of substitutes
Customer has too much choice
Economical situation
Sensitivity to promotional pricing
Increased environmental awareness
Gap Inc. has selfowned factories
Price increase of resources (such as oil, cotton, etc.)
Demand for environmental friendly products, leads to increased pricing of environmental friendly resources
Clothing in general has no real substitute products
However, two approaches:
High quality of brands
Low cost clothing
Internet clothing companies (E.g. Asos)
Three perspectives:
Entering Gap Inc.'s market segment: A&F
Saturated market
Internet shopping as a threat
Abercrombie & Fitch
American Eagle Outfitters
TJX Companies
Nordstrom, Inc.
Porter's 5 forces model
Economical factors
Crisis
War for oil
Unemployment
Technological factors
Internet
Online banking
Communication techniques
Social factors
Increase in environmental awareness
Change in shopping behaviour
Political factors
Law
Political instability: Oil pricing
Strengths:
S1: Focus on booming young customers
S2: Wide range of products
S3: An extensive code of business ethics
S4: Large number of channels to access shops
S5: Self-owned factories
S6: Best E-commerce website in retail
Opportunities:
O1: Young customers in growing economies
O2: Increasing in online purchasing
O3: Changing customer mindset to awareness in CSR (P.P.P.)
O4: Growing Asian business
O5: People are obsessed with promotional pricing
O6: Developing new point of sales technologies
Threats:
T1: Strictly regulated policies by NOP (organic materials)
T2: Changing focus away from retail by young customers
T3: Traditional selling channels are decreasing
T4: Growing competition (new competitors in fast changing markets)
T5: Consumers choose either a cheap or an exclusive brand
T6: Decreasing sale numbers
Weaknesses:
W1: No explicit mission or vision
W2: High rate of product segmentation
W3: Not all products (in different branches) are accessible in the same way
S1/O1: Change scope and investment to Asian countries and markets
S2/O2: Expand online cataloging
S3/O3: Working on corporate social responsibility (CSR)
S4/O2: Trend more to online shopping (expand more, such as 'Visa Project')
S1/O4: Change scope and investment to Asian countries and markets
S5/T1: Easy adaptable factories to change product line
S6/T2: Focus on young customers through E-commerce
S6/T3: Focus more on online retail and broathen scope
S3/T1: Working on corporate social responsibility
Strengths:
S1: Focus on booming young customers
S2: Wide range of products
S3: An extensive code of business ethics
S4: Large number of channels to access shops
S5: Self-owned factories
S6: Best E-commerce website in retail
Weaknesses:
W1: No mission or vision
W2: High rate of product segmentation
W3: Not all products (in different branches) are accessible in the same way
Opportunities:
O1: Young customers in growing economies
O2: Increasing in online purchasing
O3: Changing customer mindset to awareness in CSR (P.P.P.)
O4: Growing Asian business
O5: People are obsessed with promotional pricing
O6: Developing new point of sales technologies
Threats:
T1: Strictly regulated policies by NOP (organic materials)
T2: Changing focus away from retail by young customers
T3: Traditional selling channels are decreasing
T4: Growing competition (new competitors in fast changing markets)
T5: Consumers choose either a cheap or an exclusive brand
T6: Decreasing sale numbers
W1/O1: Add a clear focusgroup in the company mission and vision
W1/O3: Add CSR-value in the company mission and vision
W1/O5: Adding a clear way of pricing in company mission and vision
W1/O2: Adding "accessibility" in company mission and vision (USP: Unique selling point
W2/O6: Using new technologies to maintain a clear view in product and geographic segmentation
W3/O2: Every product should be easily accessible through E-commerce in every brand (technological innovations)
W1/T4: It is important to (re-)position and differentiate in a fast changing market through brandmarketing
W2/T5: Through this productsegmentation and due to brandmarketing it is possible to provide both opinions
W1/T6: To remain sustainable in a constant changing market, a company needs a clear vision and mission
Porter's Generic Competitive Strategies
Low cost
Differentiation
Broad
target
Narrow
target
(niche)
Cost
Leadership
Differentiation
Cost Focus
Focussed
Differentiation
Gap, Inc.
Competitive Advantage
Competitive Scope
Financial analysis
History and background
American multinational retailer in clothing and accessories
Founded in 1969
Five primary divisions: 'GAP', 'Banana Republic', 'Old Navy', 'Piperlime' and 'Athleta'
Customers in about 90 countries
Principles: 'Creativity', 'Delivering results', 'Doing what's right' and 'Customers first'
VRIO-model on internal strengths
Strategic advice
Bibliography
Source: Website financial data Gap, Inc.
Create and define a fixed mission and vision statement:
integrate focus on a broad scope
integrate focus on CSR
Maintain an ongoing search for technological advantage
Expand the focus on online sales
Heene, A., Van Haverbeke, J. & Vermeylen, S., 2008. Effectief plannen en uitvoeren praktijkboek strategie. 4 ed. Leuven: Lannoo campus

Maes, G., 2010. De kracht van Human Resources. 3 ed. Leuven: Acco

The Gap inc., 2012. About us: financial information. [Online] Available at: http:/www.gapinc.com [Accessed 5 March 2012]
Thank you
for your attention!
Full transcript