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WSJ Article: Queenie, Essay Example

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A recent article in Wall Street Journal reports that mass-market fashion brand Gap’s profit rose by 60 percent during the third quarter due to improved margins and investors have responded by driving up the company’s share price. The improved performance has been the outcome of stronger sales in North America, higher profit margins, overseas expansion, and closures or low-performing stores (Jones).

This article demonstrates that profitability can be improved in numerous ways such as better asset utilization rates which Gap did by closing low-performing stores and economies of scale as a result of higher sales in North America and overseas expansion. The article also shows that the organization’s actions influence different stakeholders in different manner. Store closures may have led to employees’ lay-off but better performance has benefitted investors.

The company is doing the right thing by closing low-performing stores because it will not only improve asset utilization rate but also help the management improve control and monitoring of operations. The higher profit margins may also be the result of improvement in economy which may have increased demand from consumers.

As Gap goes overseas, it will spread out risk and may enjoy lower cyclical variations in profitability. Gap’s profitability may also attract more competitors in local and global markets which could help consumers through lower prices. I chose this article because it demonstrates the importance of efficient allocation of scarce resources and how the organization’s actions do not only affect internal stakeholders but also external stakeholders.

Reference

Jones, Kristin. Gap Profit Rises 60% as Margins Improve. 15 November 2012. 15 November 2012 <http://online.wsj.com/article/SB10001424127887324556304578121391112353494.html?mod=WSJ_business_whatsNews>.

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