Gap Inc. in 2010: Is the Turnaround Strategy Working? Essay

Executive Summary go against Inc. is facing the task of change magnitude gross revenue in the family fit out store manufacture. Included in this paper is a detailed analysis of the family costume store industry. This out-of-door analysis has showed that the industry is extremely competitive and difficult to make a benefit due to low boodle margins.The internal analysis of the troupe shows that although sales have drop-offd, Gaps financial performance strengthens all(a)(prenominal) year. Their profitability, leverage, and liquidity ratios have improved steadily every year which helps the party maintain a somewhat strong business situation.There be several possible alternatives for Gap Inc. to help increase sales and commercializeplace sh ar including maintain status quo, create peeled product lines and section their guide markets, and expand company operated stores in impertinent markets which is the suggested course of action. riddle StatementThe problem facing Gap Inc. is their decreasing sales and market share in the family clothing store industry due to the decreasing touristedity of their clothing.Background and HistoryGap Inc. has several brands including The Gap, Old Navy, Banana Republic, Athleta, and Piperlime. Gap Inc. was founded in 1969 by Doris and Don Fisher. They started out shell outing clothing that targeted teenagers in San Francisco and expanded their clothing line to include active wear in 1970. The company went public in 1976.Gap Inc.s clothing was popular in the 1990s and as their clothes were becoming popular and sales were change magnitude rapidly, so was their debt due to expansion. As their long-term debt increased, the quality of their clothing decreased. By 2000, their clothing room was non popular.The company had a few CEOs including Millar Drexler who was fired due to decreasing sales, Paul Pressler who resigned due to the companys weak performance and he was replaced by Glen Murphy. Presslers contrary outli ne for Gap included reducing long-term debt. Murphys turnaround strategy was to expand business internationally and improve on the style and design of the clothing. PESTE AnalysisPolitical Forces* Foreign governments can cause delays or stall shipments by imposing new rules. * Better labour standards in foreign countries could cause an increase in textile prices. * The World grapple Organization. Another Multi-Fiber Arrangement could be imposed in the future.Economical Forces* inlet consumers more cautious of prices * Interest range pull up stakes affect a stores ability to afford loans for expansions * Exchange rates impart affect tolls to those companies that are importing textiles from foreign countries.Social Forces* Consumers tastes change frequently in the fashion industry. * Aging population as the baby boomers age, their fashion needs allow be different. * Obesity rates rising, demand for plus size clothing rising * Sweat shops/ suffering working conditions for empl oyees of suppliers in foreign countries can cause bad furtheranceTechnological Factors* The internet is becoming a popular way to sell merchandise. * New software and advancements in IT make it easier and more efficient for companies to pass across inventory and make the ordering process easier.Environmental Factors* People are more environmentally conscious and inadequacy to ensure companies are commit to green practices and are being socially responsible. * Clothing manufacturers can be creating a large amount of pollution due to their operations, particularly if test a large plant.Porters Five Forces holy terror of contentionGap Inc.s competition includes Abercrombie & Fitch, American Eagle Outfitters, Ross Stores, and several weakened local companies. The threat of rivalry is high due to * Several competitors thousands of petite local and regional retailers. * No cost to buyers to switch brands.* Low profit margins estimated to be only 3.4% in 2008.Threat of New Entrant sThe threat of new entrants is moderate to high due to* Several possible new entrants, especially those operating specialty clothing stores. These include stores such as Reitmans who target women or H&M and Zara that target young adults. * Product distinction and brand homage will make it more difficult to enter. Threat from SubstitutesThe threat from substitutes is high due to* Several good substitutes are gettable such as* Make your own clothes* Shop at specialty clothing stores* Buy second hand from flea markets, yard sales, or second hand stores* Department stores/big box retailers such as Sears or Wal-Mart.* No cost to buyers to switching to a substitute.* Prices are comparable or cheaper for substitutes and maintain quality supplier Bargaining PowerSupplier negociate power is slightly higher than normal due to* trammel supplies, potential for shortages * Products are differentiated in quality and style, however, could easily be duplicated by another supplier. * No cost t o buyers to switch suppliers however, may not be possible if there are shortages.Buyers Bargaining PowerBuyers bargaining power are fairly high due to* Low cost to switch suppliers * Products are differentiated in quality in style, however, could be easily duplicated. This increases buyers bargaining power. * Buyers are price sensitive low profit margins and most of their purchases rely on third party suppliers from foreign countries. Overall, the family clothing store industry is not a very attractive industry. With all competitive forces being moderate to high, it would be very difficult for a new entrant to make a decent profit.Factors Driving mixed bag* Entry of foreign companies * Regulatory influences and government policy changes. Regulations for importing textiles from foreign markets could cause an increase in prices for family clothing stores. * Changing social issues increasing obesity rates* Changes in lifestyle people becoming health conscious which affects their c lothing needs. These factors driving change have the potential to decrease the demand for the family clothing store industry. As demand decreases, competition will become more intense. The combined impact of these factors could lead to lower industry profitability, especially if the companies cannot turnover inventory.Key Success Factors* Location* Brand loyalty* Keeping current with fashion trendsThese key success factors will govern how successful the companies in the family clothing industry are. Location is important because customers want to shop close to home. Companies must build brand loyalty to watch their customers coming back. Most importantly, if the company is not staying current with fashion trends, their customers will shop at a store that is offering the latest fashions.