Gap: Is The Turnaround Strategy Working?

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GAP in 2010: is the Turnaround Strategy Working? One of 4 largest retailers in US family clothing industry, GAP has always come across as exceptionally successful, strategically sound business, which cannot be exposed to any major downturns or risks solely because of extreme popularity of brand and its fresh designs. However, for the last decade the company has been facing a significant drop in sales across all of its brands accompanied by a decline in quality of clothing and popularity of styling. Although the company’s management tried to resolve the issue by making major changes in the areas of operations, brand development, R&D and international expansion, it is not clear whether the strategy applied fully eliminated all problems and created a shield against any future risks. GAP, as many of its close competitors, was quite successful in pursuing integrated strategy by providing customers with premium clothing at reasonable prices. In the view of a recent decline in profits, the company’s management developed a turnaround strategy. In 2002 the major goal was the reduction of long-term debt while in 2007 the company was expanding internationally and worked on improvement of quality of its apparel and brand image. Although its major brands experienced an increase in sales of about 3% in 2010, the strategy was not targeting all the business areas as planned. Therefore, the results achieved were far from perfect. Family clothing industry has a number of factors, which determine the company’s performance. One of the keys to success are new product lines with late fashion trends and the ability to bring them quickly into the market. Another important aspect is operating within a broad network of retail stores to achieve large geographic coverage. The company also needs to carry a significant amount of inventory before the beginning of a peak season. More

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