Teaching Notes: Gap, Inc. (Case #17, Notes)
Since it was founded in 1969, the company has experienced a phenomenal growth and has already become the second largest selling brand in the world. Such a rapid growth usually comes with a growth pain of haying to shift management attention from how to grow to how to manage the existing stores in various parts of the world with differing cultures, laws and competition. The instructor relates Gap, Inc.’s experience to McDonald’s global expansion.
A rapid expansion of stores is highly correlated with the sales growth. While the case does not show Gap, Inc.’s profitability, students should be reminded that sales and profitability do not necessarily improve in tandem. However, the case amply shows the complexity of managing Gap stores in different countries with different sets of market demands and requirements. Students are encouraged to explore how to implement some sort of operational consolidation while accepting the different needs and conditions of the markets around the world (integration VS. customization issues). Some of the illustrative discussion questions are presented below.
1. Gap, Inc., conducts sourcing from 700 different sources both domestically and abroad. What would be some of the advantages for this type of sourcing strategy? What would be the disadvantages?
2. How can Gap Inc. benefit from the freeports in the UK?
3. The North American Free Trade Agreement has benefited many US companies by reducing tariffs on NAFTA country goods traded between each other. How has this actually benefited Gap Inc.? In the future?
4. Now that more and more US companies are moving into Canadian apparel markets, Gap Inc. is facing more and more competition from apparel manufacturing companies from its own country. How can it maintain its Canadian market share?
5. In Canada there is a recent trend of consumers abandoning their name brands and buying cheaper garments to save money. What can Gap Inc. do to take advantage of this new development?
6. What steps should Gap Inc. take to combat “knock off’ items?
7. Gap used to operate around 20 stores in Germany until it sold them to Swedish H&M in early 2004. Was the move necessary or could the company have considered some other strategy?