Gap Inc. in 2010: Is the Turnaround Strategy Working? Essay Example
Executive Summary
Gap Inc. is facing the problem of decreasing sales in the family clothing store industry. Included in this paper is a detailed analysis of the family clothing store industry. This external analysis has showed that the industry is extremely competitive and difficult to make a profit due to low profit margins. The internal analysis of the company shows that although sales have decreased, Gap’s financial performance strengthens every year. Their profitability, leverage, and liquidity ratios have improved steadily every year which helps the company maintain a somewhat strong business situation. There are several possible alternatives for Gap Inc. to help increase sales and market share including maintain status quo, create new product lines and segment their target markets, and expand company operated stores in foreign markets which is the suggested course of action.
Problem Statement
The problem facing Gap Inc. is their decreasing sales and market share in the family clothing store industry due to the decreasing popularity of their clothing.
Background and History
Gap 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 selling 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 increasing rapidly, so was their debt due to expansion. As their long-term debt increased, the quality of their clothing decreased. By 2000, their clothing style was not popular. The company had a few CEOs including Millar Drexler who was fired due to decreasing sales, Paul Pressler who resigned due to the company’s weak performance and he was replaced by Glen Murphy. Pressler’s turnaround strategy for Gap included reducing long-term debt.
Gap Inc. is facing the problem of decreasing sales in the family clothing store industry. Included in this paper is a detailed analysis of the family clothing store industry. This external analysis has showed that the industry is extremely competitive and difficult to make a profit due to low profit margins. The internal analysis of the company shows that although sales have decreased, Gap’s financial performance strengthens every year. Their profitability, leverage, and liquidity ratios have improved steadily every year which helps the company maintain a somewhat strong business situation. There are several possible alternatives for Gap Inc. to help increase sales and market share including maintain status quo, create new product lines and segment their target markets, and expand company operated stores in foreign markets which is the suggested course of action.
Problem Statement
The problem facing Gap Inc. is their decreasing sales and market share in the family clothing store industry due to the decreasing popularity of their clothing.
Background and History
Gap 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 selling 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 increasing rapidly, so was their debt due to expansion. As their long-term debt increased, the quality of their clothing decreased. By 2000, their clothing style was not popular. The company had a few CEOs including Millar Drexler who was fired due to decreasing sales, Paul Pressler who resigned due to the company’s weak performance and he was replaced by Glen Murphy. Pressler’s turnaround strategy for Gap included reducing long-term debt.