Please read below and provide an Executive Summary

Key Problems

GAP like most retailers has been enduring a hard time in the recent years. There have been various factors that played towards the suffering of retailers. Many stores had to be closed. Some companies managed to adapt to the quick transitioning of the industry. That hasnt been the case for GAP. The giant American Apparel company seems to be having issues of their own apart from the industrys struggle. The company is having trouble to even stay focused on their core objective. Facing problems to keep their managers, which in return impacting the companys stability. The international brand is struggling to keep their customers, let alone appeal to new customers. On top of all that, GAP like most retailers is struggling with the transitioning of the market from just a point of sale to a more experienced oriented market, and the digitization have been impacting retail industry significantly. (Gustafson, 2016)

GAPs issues are more drastic than just the general retailers struggle. The company seem to have lost its identity and along with it many of their customers. That identity lost can possibly be the fact that the company is failing to focus on its core objective. Some of that can track back to recent years when the company released two slogans for their campaigns that contradicted each other; In 2014 using (Dress Normal) and in 2015 using (Spring is weird) this confusion shows that company is not focused, does not know or have a targeted market/customer. Which is crucial for any company. All that was happening when competitors, swiftly adapted to the transitioning market. Competitors like H&M and Zara whom know their target and worked precisely on it. (Li, 2016)

Evaluation and Analysis

PESTEL Analysis of GAP Inc.

PESTEL is a framework used to analyze macro-environmental factors that affect the performance of a company in the market. The factors include: political, economic, socio-cultural, technological, environmental and legal aspects.

Political factors. The political, environmental USA, where the GAP Inc. originates and has its headquarters is relatively stable but it currently presents some problems. The substantial expansion of governments size and scope, increased regulatory and tax burdens, and the loss of confidence that has accompanied a growing perception of cronyism, elite privilege, and corruption have severely undermined Americas global competitiveness.

While in the previous years, the government has deregulated some companies and passed laws that control monopoly and has enacted trade agreements that facilitates trade with foreign countries, which has positively impacted Gap to conduct business and source labor and raw material in international markets. The recently elected President in November 2016, Mr. Trump has promised a sharp break with the regulatory, tax, and trade policies of his predecessors, that negatively can impact GAP Inc. However, because of its size and inherent strength, the U.S. economy has shown considerable resilience.

Economic factors. These factors are related to the overall nature of the economy in which the company operates. Large budget deficits and a high level of public debt, both now reflected in the Index methodology, have contributed to the continuing decline in Americas economic freedom (for 2017 its overall score is 75.1). Having registered its lowest economic freedom score ever, the United States is no longer among the worlds 15 freest economies (heritage.org,n.d.). Regarding the interest rates, the Federal Reserve, believing that the economy is doing good (low unemployment level and moderate inflation), increased its benchmark interest rate a quarter point (March 2017) amid rising confidence that the economy is poised for more robust growth. The move, widely anticipated by financial markets, takes the overnight funds rate to a target range of 0.75% to 1% and sets the Fed on a path of a rate hike at least twice more for the year of 2017. (Cox,2017) Policy makers hike rates to tighten financial conditions and by higher rates makes the borrowing more expensive, increases the mortgage rates and it usually increases the price of real estates (which is translated into higher price paid for stories from the retailers). From the other side, the hike in interest rates, boosts savings among consumers as they can generate a higher return on their savings, which means less spending on clothes, which negatively impacts the revenues of retailers and the GAP Inc company. The hike in interest rates has actually decreased the price of commodities such as oil price, which has a positive contribute in reducing the cost in the supply chain for the company.

In addition, the hike in interest rates has strengthened the USD dollar, which has a negative impact on exports. As GAP Inc operates internationally, a stronger dollar means that its products are more expensive now for its consumer in the foreign markets. Current US economic conditions are not working in favor of the retailers and GAP Inc, and a slow in growth and sharing of revenues is expected.

Socio-cultural factors. Socio-Cultural factors assess the mentality and behavior of consumers in a given market. Socio Cultural Environment, considering the trend of fashion, is asking for an increase in the diversity of the products offered from retailers in the market. In addition, there is a trend toward professional appearance which positively contribute to the profits of the company, especially from a targeted professional with high Income. Also, the aging of Baby Boomers demands new apparel requests for an affluent market.

Technological factors. Technological changes have become an important driver of competition among national and international companies. The broad use of e-commerce and online ordering system has significantly reduced the cost in the supply chain activity. On the other hand, the large use of internet has made the buyers more powerful in terms of exposure towards price comparison between retailers. Also, an increasing competition from e-commerce companies negatively impacts the operations and profit of GAP Inc.

Environmental factors. In nowadays, customers are more aware on externalities of the companies and are giving preference to natural and environment-friendly products. GAP Inc need to be strongly embraced the going green concept and make sure that its suppliers have also an environmentally friendly approach. Also, environmental factors such as the climate of a region affect the type of products that customers are more likely to buy. Global warming can be a driver for retailers and especially for Gap Inc. to provide more diversity, style and supply for spring-summer apparel. In addition, as GAP Inc is an international company it need to be aware of changes in climate among different regions and adjust their products to the particular regions/countries.

Legal factors. Operating in a global economy, Gap Inc. is continuously challenged of complying with different domestic, regional, and international laws and regulations (especially in regard to business ethics, discrimination, antitrust and health/safety). These laws and regulations have positive correlation with the operating costs incurred in case of not fully complying with them. Gap Inc. has a strong and comprehensive corporate compliance program that ensures that all employees and the company's Board of Directors not only meet legal requirements around the world, but also operate responsibly and with integrity in everything they do.

Legal aspect of operating in a global scale raises concerns about copyrighted designs in the fashion industry that GAP Inc operates.

SWOT Analysis

A SWOT analysis of GAP Inc. explores the strengths, weaknesses, opportunities and threats of the popular classic American brand. Determining the companys strengths and opportunities will give management the picture of future success. The weaknesses and threats show us where the company needs to improve, eliminate mistakes and avoid failure in the future.

Strengths. Gap one of the largest retail apparel companies in the US that operates in a market since 1990s. Gap influenced the way people dressed by creating high quality jeans and business casual cloth. Since 1999 the company has been stable in sales until 2000 where the company has lost over 60% of its market capitalization. Gap has several main competitors in the US. In order to compete Gap expended the brand, creating several brands, and also collection as GapBody and BabyGap, which are the most profitable lines. Gap has a broad customer base and introduced its stores around the world. The company diversified its market using multi brand, which target different types of customers. These days Gap is trying to follow fashion trends and advertise it through the marketing campaigns on TV nationwide.

Weaknesses. Gap is facing a drop in sales for quite some time. Gaps stock performance has continued on a downward slide. Declining sales can be connected to cannibalization, a big number of stores opening. The Gap is known for selling the most basic clothing and as business casual apparel. Over time, peoples tastes change as well with a lifestyle, many people prefer affordable multitasking cloth that they can wear not only at work, but also at a free time. Some people have two part-time jobs and it means they want to spend less time on shopping. The Gap does not have a good shopping website.

The company is trying to produce clothing at a large scale, but finding factories domestically are very hard. Most clothing is produced in the international market, so the purchase of production rights becomes difficult and investment more expensive.

Opportunities. Gap has penetrated the domestic market; however, the company has to expand internationally. Gap is increasing the product lines into demographic markets. For example, by launching of plus size, maternity, BabyGap, and sport collections. As kids collection brings the most profitable results, the expansion of it will increase the return on a product because this line has presented in a limited number of malls and outlets.

The use of technology would be another opportunity. Improving online campaigns and shopping can attract more customers.

Threats. Gap has a significant decline in price competition with entry of the new firms into the market. Other American brands provide a wider choice of cloth and less price and they also quickly adapt to changing fashion trends. The signature style of Gap has gone and the brand lost its quality. The industry is over-stored, and new companies are open daily. Store promotions do not help the company, their campaign take 40% off every item in the store has failed in making any profit.

VRINE

The GAP Inc. business strategy in the global market of chic accessories and fashion can be categorized as cost leadership. The GAP Inc. offers trendy and fashionable clothing and accessories for reasonable prices. In simple terms, The GAP, Inc. has a business strategy that is linked with providing people with opportunities of being trendy and cool at an affordable price. The GAP Inc. portfolio includes The GAP Inc., Old Navy, banana republic, Athleta, and Intermix brands. The GAP Inc. competitive advantage is conventionally linked with innovative casual design of accessories and clothing items with the selection of choice that enables the opportunities for self-reflection for a wider range of customer segment.

From the VRINE model analysis, it is obvious that even though The GAP Inc. does have variation of capabilities and resources that are VRINE certified, but only to an extent. Consequently, the organization only attains a few justifiable competitive advantages in the industry. Great customer service is one of the primary activities that any organization can adhere to. With technology progressively increasing, The GAP Inc. stays well connected with their consumers by utilizing communication via text messaging, email and of course social media, In addition to service, GAP Inc. has a competitive product return policy. Consumers are able to return within 45 days all items brought at GAP, Inc., Banana republic, and Old Navy and there is no time frame for returns with purchased items from Athleta.

Differentiation will allow The GAP Inc. to gain a competitive edge by developing a marketable characteristic that set them apart from their competitors. The business strategy pertaining to cost leadership regarding all brands within its portfolio offers accessories, apparel and fashionable products for considerably inexpensive prices compared to the prices of other premium fashion brands.

GAP, Inc. business strategy to compact with the issue of decreasing sales contains the subsequent initiatives and plans:

GAP Inc. will continue to focus on its core products that contributed to the global success of the company. Specifically, management has expressed a commitment to return GAP iconic denim, in addition to trendy assortments of washes, fabrications and on-trend silhouettes.

On an international level regarding the market expansion, management is developing a strategic plan to open additional Old Navy stores outside of the United States. These stores will include Japan, Mexico and China, with an additional Gap stores. Also, there will be international outlet stores and The GAP Inc. will continue to grow online sales internationally.

GAP Inc., will make clothing and other items accessible to purchase on Amazon. The organization has avoided association with online retailers for over a decade primarily because online stores are not capable to convey eye-catching store design, in addition to the marketing efforts of the brand regarding point of purchase. Nevertheless, in a most recent meeting with shareholders, CEO Art Peck announced that Gap is open to selling its merchandise on Amazon or other third parties in the U.S.

Competitive defense strategy. Presently, the importance of corporate social responsibility is imperative to the GAP Inc. since the organization desires to be viewed by others as responsible and concerned. By doing so, this gives GAP Inc. the competitive edge of eventually being liked and preferred by both their stockholders and their consumers, particularly those who are socially conscious. GAP Inc. The Gap Inc. management recognizes that Corporate Social Responsibility (CSR) as one of the critically important features of the organization. The organization has won several awards for its CSR initiatives and programs in addition to being recipient for the 2016 Catalyst Award in recognition of its commitment to equality, diversity and inclusion. Furthermore, the 2015 Annual Report of The Gap Inc. was named as The Most Ethical Company by The Ethisphere Institute. If Gap wanted to position itself as heads and shoulders above other retailers on the social responsibility scale, it succeeded.

Maintaining the above competitive edges, The GAP Inc. can develop a defensive strategy. By doing so, this creates a distance between them and their competitors. Eventually, The GAP Inc. will benefit as long as the competitors continue to have difficulty within the industry to compete with any actual resistance to the business.

GAP and Its Competitors

The well-known cloth retailer, Gap has been filling storage rooms with pants and khakis, T-shirts, and poplin since the Woodstock theme. The firm, which works around 3,750 stores around the world, manufactured its notorious easygoing brand on rudiments for men, ladies, and youngsters, yet throughout the years has extended through the urban chic chain Banana Republic, family budgeting Old Navy, online-just retailer Piperlime, and Athleta, a purveyor of active wear. Other brand augmentations incorporate GapBody, GapKids, and BabyGap; each likewise has its own online incarnation. All Gap garments are private-mark stock made only for the organization. From the planning board to store shoes, Gap controls all parts of its trademark easygoing look. The clothing retail scene in the U.S. is profoundly created and focused with various strength brands, retail chains and multi-mark chains going up against each other on the outline, assortment and cost. In the course of the most recent couple of years, specifically, moderate quick design chains, for example, Zara and Forever 21 have taken an impressive piece of the overall industry from forte retailers. Indeed, even Gap Inc., one of the greatest players in the business, has seen its partake in the U.S. attire showcase drop from 5.1% to 4.7% in the course of recent years, in spite of performing superior to other easygoing brands.

Michael porter Five forces model for GAP Inc

Competition from rival sellers. Competition among existing firms garments and extras industry is wild. Hole Inc's. significant rivals incorporate Abercrombie and Fitch Co., American Eagle Outfitters, Inc., Belk, Inc., Guess, Inc., J. C. Penney Company, Inc., J.Crew Group, Inc., Michael Kors Holdings Ltd, Urban Outfitters, Inc., Williams-Sonoma, Inc. what's more, others.

It is imperative to note that "in spite of being one of the greater attire players in the U.S., Gap Inc. holds below 5% piece of the pie, which obviously shows the differing way of the U.S. clothing industry. Higher shares are held by multi-mark retail chain Macy's (9%) and general stock retailer Wal-Mart (more than 7%). J.C. Penney (3.3%) and Target (5.4%) likewise hold a comparative bit of the market, and American Eagle Outfitters, Aeropostale and Abercrombie and Fitch together record for a little more than 2% of aggregate U.S. clothing deals.

Supplier bargaining power. The bartering force of Gap Inc. providers is low. The organization buys from around 1000 providers with manufacturing plants in around 40 nations. Crevice's two biggest merchants each represented just around 5 percent of the dollar measure of its aggregate monetary 2015 purchases. In like manner, Gap Inc's. business is not reliant on a specific provider and this reality builds its haggling power in managing supplies. Moreover, for the dominant part of providers it is basically vital to have business with Gap Inc. because of the high volume of its requests. Extra variables that add to the bartering force of the clothing and adornments retailer in managing its providers incorporate its capacity to substitute providers and least provider substitution costs much of the time.

Competition from potential new entrants. Danger of new participants into design, attire and adornments industry is direct. Access to circulation channels speaks to a standout amongst the most critical boundaries for new market participants, since it is hard to discover empty places in alluring areas to open new stores. Besides, significant market players, for example, Gap, Macy's and Zara get huge advantages from the economies of scale and this open door is not accessible for new market passages, in any event amid the initial couple of years of operations. The requirement for extensive capital necessities to set up the business and expected to strike back from the present market players are extra difficulties to be confronted by potential new market participants.

Customer bargaining power. Gaps Customers have a high bargaining power over the cloth retailer. According to Hofstede purchasers have a tendency to have control over an industry in the event that they are essential to the organization, this might be if the business is with the end goal that purchasers either purchase in mass, or can without much of a stretch change to another provider. A predetermined number of solid purchasers might have the capacity to apply critical control over a vender. Moreover, if an item is like its rival with practically zero separation, then there are chances that the organization may need to give the provider a chance to manage terms keeping in mind the end goal to abstain from losing the client.

Competition from producers of substitute products. Gap Inc. has a high threat of possible substitutes due to firms offering low prices. The danger of substitutes is influenced by components, for example, mark unwaveringness, exchanging costs, relative costs, and in addition patterns and prevailing fashions. Inside the system characterized by Porter, substitute items are those that exist in other industry yet might be utilized to satisfy a similar need. The more substitutes that exist for an item, the bigger the organization's aggressive condition and the lower the potential for benefit. A case of this is for a boxed juice maker, new squeeze, water and soda pops are all substitutes however they exist in independent classes. A high danger of substitutes will affect an organization's capacity to set costs that it needs. On the off chance that a substitute is evaluated lower or satisfies a need superior to anything it might wind up pulling in buyers towards it and lessen deals for existing organizations.

The following are the recommendations for the key problems faced by GAP like decreased revenues, high turnover and difficulty in facing the transition in the industry

The company should set clear and consistent objectives and goals for short , medium and long term

The company should create one or two focus segments for itself like professionals with high income

GAP should focus more on the online channel as it can help it in reducing the costs and the impacts of the negative economic and political climate

GAP should increase diversity in its offering and develop new products lines and even brand lines as per the latest trends

GAP can focus on improving the efficiency of their supply chain operations by the use of latest technologies

GAP should develop sustainability in its product offerings and highlight the same in promotional activities for attracting more customers

A review of the HRM policies is required