Case Analysis 1: Creating a Strategy and Linking It to Performance at The Gap, Inc.[1]

Founded in 1969 from a single store in San Francisco, GAP Inc. has become a global specialty retailer of clothing, accessories, and personal care products for men, women, children, and babies. With more than 134,000 employees and more than 3,000 stores, the company is also a global player. The brands owned by the global corporation are Gap (including Gap, GapKids, babyGap and GapBody), Banana Republic, Old Navy, Piperlime, and Athleta.

Most recently, the company has experienced a long slide in sales. Gap’s trouble in winning back customers has a variety of explanations. In particular, Gap’s large size has made it tough for the retailer to adapt to changes in fashion trends. Gap’s casual image hasn’t fared well moving from the casualization of the workplace in the 1990s to the recent period of heightened fashion sensibility.

Gap’s turnaround strategy largely consists of three parts: 1) Getting the product and environment right at Gap and Old Navy; 2) cutting costs by simplifying and streamlining operations; and 3) managing the performance of existing employees, especially those who must use a lot of creativity and innovation in their jobs.

With respect to the first part of the strategy (i.e., getting the product and environment right at Gap and Old Navy), several analysts seem to like Gap’s new fall sales offerings, which it is calling the “Classics Redefined” campaign. Gap merchandise is more “age appropriate” and “shows significant improvements in quality,” Needham analyst Christine Chen wrote. “It takes time to win back customers who have been disappointed for three years,” Chen wrote. She added: “It will likely take at least a few more quarters of consistent execution and improved merchandise before customers are convinced that Gap is back.”

As an example of the second part of Gap’s turnaround strategy, cutting costs by simplifying and streamlining operations, Gap eliminated about 2,200 positions in one year. That includes 550 jobs lost at its now-closed Forth & Towne chain.

To implement the third part of the strategy, managing the performance of existing employees, the Board of Directors of Gap has hired you as a performance management consultant. As part of your consulting duties, you will also assist top management in developing the overall strategic plan for the next 5 years.

1) In this context, explain the factors that the Board of Directors of Gap will need to consider in developing a strategic plan.

2) Provide a detailed discussion of what the organization will need to do to create a strategic plan for the next 5 years.

3) Critically evaluate how the strategic plan will relate to individual performance.