Gap Strategic Overview

Strategy exercise

1. Three corporate directional strategies for the Gap:

1) Concentration - Horizontal Growth - Joint Venture

- Pros:

- Reduction in cost of international trade by operating in foreign markets

- Increased market power

- Higher survival rate by broadening product lines

- Reduce possible niches competitors may enter by continually adding additional sizes and multiple variations to existing product lines

- Introduces successful products from one part of the world to other regions

- Growing internationally is positively associated with firm profitability

- Cons:

- Legal issues

- Restrictions such as percentage of ownership

- Low survival rate for lower performers

2) Stability - Pause/Proceed-with-caution strategy

- Pros:

- Allows Gap to put its growth on hold and take care of internal issues and figure out who its customers are

- Temporary, very useful in short run

- Cons:

- Dangerous if followed for too long

3) Retrenchment Strategy - Turnaround

- Pros:

- Allows Gap to implement a program to stabilize the corporation

- Emphasizes improvement on operational efficiency

- Cons:

- Overemphasize on cutting costs can hurt performance

- Failure to encourage and involve employees in improvements can create an obstacle

2. Recommendation:

The corporate directional strategy that I recommend for Gap is a Pause/Proceed-with-caution strategy because I think Gap needs to reposition the brand and to do that it needs to first understand who its customers are and how it can satisfy their needs. After Gap has found a market to target and has repositioned the brand to satisfy that market, it can then focus on continuing to satisfy the market and grow the brand. In addition, I do not think Gap can continue forward until it understands who its customers are because it if does not, it will continue to see a decline in sales.

3. Business competitive strategy recommendation:

A business competitive strategy that I recommend for Gap Inc. is a niche cost focused strategy because once Gap obtains geographic, demographic, and psychographic information on its customers it will be able to better position itself