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TEACHING NOTE
CASE 11
GAP Inc.: Can It Develop a Strategy
to Connect with Consumers in 2016?
Overview
Gap became a household name in the 1990s through its clever advertising and merchandising strategy
that made it largely responsible for making the jeans-and-t-shirt style ubiquitous during that decade. The
company’s strategy led to large and regular increases in net sales, which increased from $1.9 billion in
1990 to $11.6 billion in 1999.1 Its net sales by the end of the decade were almost double the $6.6 billion in 1997.
sales decline. Peck had joined GAP in 2005 and had held various executive positions with the company where
he spearheaded the company’s franchising initiative, executed its outlet store strategy, and led its digital and
e-commerce division. Exhibit 1 presents a financial and operating summary for Gap, Inc. for 2011 through 2016.
The sales decline between 2014 and 2015 was reflected in every geographic region except Asia and every brand
Faced with increased competition and a changing demographic amidst a shifting shopping landscape, Gap CEO
Art Peck needed to reverse Gap Inc.’s current trajectory and consider alternatives to improve sales. Complicating
the turnaround, however, would be the increase in shopping mall vacancies, as well as the increased competition
*
*This teaching note reflects the thinking and analysis of Professor John D. Varlaro, Johnson & Wales University. We are most
grateful for his insight, analysis and contributions to how the case can be taught successfully.
1Gap Inc. 1999 10-K
Case 11 Teaching Note GAP Inc.: Can It Develop a Strategy to Connect with Consumers in 2016?
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Suggestions for Using the Case
Students are likely to have great interest in the Gap case and are also likely to have strong personal opinions
about the company’s value proposition and competitive positioning. The case introduces GAP Inc as the epitome
of the mall-based retailer; best seen in the explosive growth in the 90s. But, asks students to consider the issues
GAP Inc currently faces; declining sales, declining popularity of malls, yet increased competition by Indetix
Group, which has successfully competed through what is referred to as fast fashion and online sales. After
Videos for Use with the Gap, Inc. Case. There are two videos that you can show in class (or have students
view on their own):
In our experience, it is quite difficult to have an insightful and constructive class discussion of an assigned case
unless students have conscientiously have made use of pertinent core concepts and analytical tools in prepar–
ing substantive answers to a set of well-conceived study questions before they come to class. In our classes, we
expect students to bring their notes to the study questions to use/refer to in responding to the questions that we
pose. Moreover, students often find that a set of study questions is useful in helping them prepare oral team pre–
sentations and written case assignments—in addition to whatever directive question(s) you supply for these as-
signments. Hence, we urge that you provide students with assignment questions—either those we have provided
or a set of your own questions—for all those aspects of a case that you believe are worthy of student analysis or
that you plan to cover during your class discussion.
Utilizing the Guide to Case Analysis. If this is your first assigned case, you may find it beneficial to have
class members read the Guide to Case Analysis that follows Case 31. The content of this Guide is particularly
helpful to students if your course is their first experience with cases and they are unsure about the mechanics of
how to prepare a case for class discussion, oral presentation, or written analysis.
Suggested Assignment Questions for an Oral Team Presentation or Written Case Analysis. The
case can be used effectively for a written assignment early in the term, but we advise against using the case for
group presentations scheduled just prior to finals since the issues are relatively easy to sort out and address. Our
recommended questions for written assignments are as follows:
1. GAP Inc. is considering you for an entry-level brand management position. You have been asked to prepare
Case 11 Teaching Note GAP Inc.: Can It Develop a Strategy to Connect with Consumers in 2016?
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2. As a new member of the Indetix Group brand management department, you have been asked to prepare an
Assignment Questions
1. What are the strategically relevant components of the U.S. Retail, Family Clothing Stores industry macro-
environment?
2. What is competition like in the craft beer industry? Which of the five competitive forces is strongest? Which
is weakest? What competitive forces seem to have the greatest effect on industry attractiveness and the
potential profitability of new entrants?
3. Compare and contrast the general strengths and weaknesses of Indetix Group and GAP Inc.
4. What key factors may determine the success of GAP Inc.?
5. What recommendations would you make to a smaller, craft brewery to improve its competitiveness in the
market while mitigating any current and future risks?
Teaching Outline and Analysis
1. What are the strategically relevant components of the U.S. Retail, Family Clothing Stores
industry macro-environment?
Students should be able to identify the following from within the case:
Market size and growth. Students may discuss any number of the characteristics of the market presented
in the case, specifically in exhibits 5-8. For example, as presented in the case, estimated revenues were
segments, which may be linked to the trends supporting competitors utilizing a fast fashion-style of
competition, while potentially limiting those retailers whom are more family oriented, and not focused
on fashion and trends.
Scope of rivalry. Rivalry in the industry could be considered global. Further, students should recognize how
trends and brand names drive rivalry as competitors compete in both brick-and-mortar and e-commerce.
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2. What is competition like in U.S. Retail Family Clothing Industry? Which of the five competitive
forces is strongest? Which is weakest? What competitive forces seem to have the greatest
eect on industry attractiveness and the potential profitability of new entrants?
Competing Sellers
of Family Clothing
better market position
and competitive
advantage
Competitive pressures coming from the
market attempts of outsiders to win
buyers over to their products
Competitive pressures coming
from the threat of entry of new rivals
Substitutes for
Retail Family Clothing
Industry
Buyers of
Competitive
pressures
stemming
Competitive
pressures
stemming
Suppliers of
Materials and
Inventory
The bargaining power and leverage of buyers—a moderate competitive force
Students should recognize that although not acting as one buyer, consumers have relative bargaining power
as they are not forced to shop at one or another clothing store. Thus, with complete freedom to shop and
Any and all brands of clothing could be interpreted as substitute products, as the only potential differentiator
would be the brand name, or even the style and material.
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Threat of entry—relatively low
Given the costs of starting a globally recognized brand, threat of entry may be analyzed as low.
decide to buy a different brand if the price is lower, or shop through online channels. Thus discounts offered
through online shopping and/or brick-and-mortar stores increased competition. The rise in non-traditional
competitors, such as Amazon, further increased competition.
3. Compare and contrast the general strengths and weaknesses of Indetix Group and GAP Inc.
GAP Inc. Indetix Group
Strengths Familiar, family of US brands
Price relative to competition
Online presence and distribution
Fast Fashion; ability to meet consumer
Weaknesses Primarily located in malls, heavily relied upon
foot trac for sales
European brands may not have brand
recognition in US
4. What key factors may determine the success of GAP Inc.?
Factors that are necessary for competitive success for GAP Inc may be identified as the following:
Improvement of Online Presence and Growth of e-commerce. Students may identify how GAP Inc’s
strategy may have been over-reliant on mall traffic, and was caught in a situation where their consumer’s
consumers desired in 2015. Students may discuss how GAP will need to invest in improving its style
and meeting consumer desires.
faster supply chain and quicker apparel turnaround. GAP Inc may need to consider making the same
changes to not only meet consumer demands, but be competitive with other fast fashion retailers.
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5. What recommendations would you make to GAP Inc to improve its competitiveness in the
market while mitigating any current and future risks?
Students should note that investments in e-commerce and an increase/improvement in online presence
is necessary for GAP Inc. They should expand beyond, however, social media and discuss an integrated
presence, which includes awareness of brands. Multimedia online marketing as well as online brand
ambassadors may be discussed by students.
Students may recommend an adoption of fashion fashion, but should also recognize the need to invest
heavily in the changes. For example, in-store employees would need to be involved in trend-spotting
Epilogue
There was nothing new to report at the time this teaching note went to press.