Gap in Strategic Management Analysis of Gap Inc Essay

833 Words Mar 13th, 2011 4 Pages
Strengths
Large network of physical stores
Gap, the company, has a large network of physical locations. At the beginning of February 2008, the company had 3,167 stores, including 1,249 in the US and 1,918 in international locations such as Canada, the UK, France and Japan. Gap has also entered franchise agreements to operate Gap stores or Gap and Banana Republic stores in Singapore, Malaysia, United Arab Emirates, Kuwait,
Qatar, Bahrain, Oman, Indonesia, and Korea. Comparatively, Gap’s competitor, Abercrombie &
Fitch Co, operated 1,035 stores in the US, Canada and the UK. Another competitor, Aeropostale merchandise operates 828 stores. Gap’s large physical network of stores enhances the company's sales penetration and gives it a
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Low debt and high interest coverage ratio provide the company with the flexibility to ramp up its operations. Further, Gap has strong financial leverage compared to competitors. Macy’s, one of the Gap competitors, recorded an increase in long term debt at a CAGR of 23.3% from $3,151 million in 2004 to $9,087 million in 2008. Reduced long term debt eases the debt burden and gives the company greater scope for growth.

Weaknesses
Weak performance of comparable stores
The company witnessed a declined in revenues from comparable stores of Gap and Old Navy brands.
Comparable store sales compare sales of stores that have been open for a year or more. Gap North
America witnessed a fall in comparable stores sales by 5% in FY2008 over FY2007 and Old Navy
North America recorded a decline by 7% in the same period. The primary reason for the decline was the company weak product assortment at the stores. Due to the decline of comparable store sales from Gap and Old Navy brands, the company’s total revenues declined by 1% in FY2008.
Comparatively, American Eagle Outfitters witnessed an increase in comparable store sales by 1% in FY2008. Another competitor, Aeropostale, recorded an increase in comparable store sales by
3.3% in the same period. A weakness in comparable store sales indicates inability to retain customers and could lead to a loss of market share.
Geographic concentration
Gap remains heavily dependent on the US. The

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