Analyzing the Gap Inc, Research Paper Example

Arguably, Gap Inc is among the leading the specialty retailer of clothing in the United States. It has under its armpit the Old Navy, the Banana Republic and Forth & Town. Basically, Gap Inc is specialized in the designing of apparels culminating into clothing products of diverse ranges (Rosenbloom, 2008). As of today, the company boasts of a total of 3,000 stores, with the main headquarters situated in the San Francisco Bay Area of California. The company’s products fundamentally are designed to provide casual and affordable shirts and jeans.
In comparison to other players in the industry, Gap Inc is clearly the dominant force on the market reflected in the enormous chunk of Net Income the company has in relation to its competitors on the market. It also currently boasts of a net worth $14.85 billion coupled with a stock price of $17.92 per share, way above any of its competitors (Rosenbloom, 2008).
By way of target market, the Gap’s products are mainly unisex aimed at the most youthful segment of the market precisely ranging from 17 to 25 years old. Given the scope of the age bracket of the customers of Gap’s products it is easy to discern that they are in their prime youth, perhaps single, could also be young adults and to some degree young couples. On the question of the income segment, the products tend to be tilted more towards upper-class income earners living in metropolitan areas especially in industrialized economies. The brand of customers targeted on the market are also more inclined to exhibit a higher affinity for style and beaming with pride about the quality of the products they purchase.
A major challenge in the clothing industry has to do with the high start up costs this notwithstanding the industry is well endowed with enormous growth potentials. It is worth noting that competition within the industry is carved along two distinct lines defined by price and product differentiation. A shining illustration is TJ Maxx one of the major competitors of Gap Inc, which has adopted to compete against Gap on the price parameter. Gap’s response has been to get a way of instilling a sense of brand loyalty amongst its customers. Another critical part of the industry is that incentive for new entrants is very low given the fact that at any rate economies of scale turn to feature prominently as a hurdle, thus reducing the urge for investment from would-be entrants.
Price sensitivity features as a major determinant of consumer behavior especially when it comes to the products offered by Gap. It is the affordable price tags on the products of Gap that explains why a good number of consumers are motivated to purchase its products. Retail locations most often than not, tend to provide a good base for consumers with low incomes to make their purchases because the average consumer steps into any of the retail outlets with a prior knowledge of what to expect by way of pricing.
The advent of the brand names Old Navy, Forth & Towne and Banana Republic were in direct response by Gap Inc to remain competitive in the industry by leveraging its differentiation advantage to muzzle sales from its competitors. As stated earlier in this essay, price and product differentiation are the two prime movers of the clothing industry, consequently the introduction of these lines is a step in the right direction. Another source of contention for Gap has to do with substitute products on the market. Being as it is, management are under no illusions that consolidating their market superiority cannot be done without taking a serious look at brand loyalty. Therefore one of the core marketing tactic used was premised on the so-called “back to basics” simple designs widely known on the market.
Brand loyalty is in many ways a welcomed move bearing in mind those consumers that are very conscious of brands will always remain attached to the Gap brand name irrespective of the price. The reverse however is true for consumers who are not brand loyalists will seek immediate alternatives if there is a change on the price tag. The strategy in use here is that Old Navy will serve to be a useful alternative for consumers who are so price sensitive, given the fact that Old Navy offers cool styles with a corresponding lower price tag attached to it.
In mid 2006, senior executives of Gap Inc came out to announce changes to its supply chain management structure which clearly pointed to a move towards abandoning the tidal wave of a steady evolution of fully integrated supply chain organizations. By this action the company began the process of dividing its supply chain hierarchy towards a more logistics and sourcing detail and that has always being the practice ever since (Duxbury, 2006). This became necessary after management identified the need for streamlining the global sourcing structure along the brand shreds and in doing this logistics became limited to inventory planning and distribution.
Gap was among the pioneering corporations to break with the convention of integrated supply chain management processes. It was quick in discovering that the benefits are not worth the investment of resources that comes with that traditional practice. After a few years of maintaining this policy the benefits are becoming even clearer because by and large the process of sourcing especial in the retail business is synonymous to buying and merchandizing in any case.
The company has approximately 140,000 employees globally working around the clock to ensure the delivery of the company’s merchandize to its customers across the world. Gap Inc’s products are designed to serve a seasonal purpose, therefore graphic designers and product managers tend to work co-operate along these lines. The supply chain route comprising of sourcing and logistics entities in partnership with sales agents place their respective orders. Third-party manufacturers initiate the distribution process by shipping the products to several distribution centers across the world for retail outlets to take over the selling process.
Knowing that it is operating in a highly dynamic industry that rapidly responds to changes every now and then, Gap has made innovation a defining pivot of meeting this aspect of the industry dynamics. The innovation is reflected in the physical setting of the stores run by the company; technology ranks high on this policy scale. It has facilitated major cost reduction activities associated with mechanization. A good example of the role enhanced information technology is seen in the application of soft wares to better manage inventory taking, most importantly moving from the laborious tasks of collating inventory data to guide action.
Reference
Duxbury, Sarah (2006). “Piperlime — the shoe fits, Gap wears it”. San Francisco Business Times. Retrieved on March 11, 2010.
Rosenbloom, Stephanie (2008). “Gap Acquires Athleta for $150 Million”. New York Times. Retrieved on March 11, 2010.