The Gap

The Gap Inc. Case

Business Strategy, Financial Analysis, and Valuation

Accountancy 8450

Youzhu Shi, Li Yu

The Gap Inc. business strategy was a combined of cost leader and differentiation. The company provided a highly competitive price with some differentiated fashion features. As a cost leader, The Gap supplied the similar products at a lower price, used the simple design, and applied a tight cost control system to its store space. At the same time, The Gap also equipped with some unique product features. The company had a variety of products designed for different groups of target customers, like GapKids and Banana Republic. The company reinforced the advertising through mass media. In addition, The Gap aimed to expand the business and continue to grow in the future years.

The main success factors of The Gap’s combined strategy were the ability to attract and retain customers and the ability to change the customers’ attitude to “no logo” products. The Gap was able to attract new customers and retain old customers, because of its competitive price and customers’ current shopping attitude towards “no logo” brand. Also, The Gap invested huge capital in advertising its products through massive media. The company was also able to change the customers’ shopping attitude. The current economy environment limited the customers’ purchasing power, but The Gap provided the basic affordable products, yet stylish to satisfy the customers’ needs. Customers had positive attitude towards these “no logo” clothes instead of traditional upscale clothes.

The risk factors for The Gap in its specialty retail business were the competition in the industry and the customers’ shopping attitude in the long run. The specialty retail industry was highly competitive. For The Gap, the risks of likelihood of imitation was increasing gradually, since The Gap did not have too many special operation secrets, and the special features of clothing were too easy to imitate. Another risk was the...