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

1968 Words 8 Pages
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,
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These include stores such as Reitmans who target women or H&M and Zara that target young adults. * Product differentiation and brand loyalty will make it more difficult to enter.
Threat from Substitutes
The threat from substitutes is high due to: * Several good substitutes are available 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 Power
Supplier bargaining power is slightly higher than normal due to: * Limited supplies, potential for shortages * Products are differentiated in quality and style, however, could easily be duplicated by another supplier. * No cost to buyers to switch suppliers; however, may not be possible if there are shortages.
Buyers Bargaining Power
Buyers 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

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