OCD44 UNIVERSITY OF BOLTON WESTERN INTERNATIONAL COLLEGE FZE BUSINESS MANAGEMENT SEMESTER 1 EXAMINATIONS 2016/2017 STRATEGIC MANAGEMENT MODULE NO: BAM6002 Date: Saturday 14th January 2017 Time: 10:00am – 01:00pm INSTRUCTIONS TO CANDIDATES: Answer ALL questions. This is an open book examination and you are able to bring with you 2 x A4 pages (4 sides) of notes. Text books and reference materials are NOT allowed. You must hand in your notes with your exam paper. The examination questions are based on the pre-released case study (attached). Page 2 of 2 University of Bolton Western International College FZE Business Management Semester 1 Examination 2016/2017 Strategic Management Module No. BAM6002 ANSWER ALL QUESTIONS 1. Critically examine the industry competitiveness and attractiveness with the help of appropriate concept and theories. (25 marks) 2. Critically examine the strategies that Gap Company should implement by taking advantages of the opportunities that exist in the industry while utilizing its strengths? And manage its weaknesses while avoiding potential threats imposed by competitors and/or the industry. (25 marks) 3. Identify strategies that CEO of Gap Company should consider in order to continue surpassing its rivals in the industry. (25 marks) 4. Critically analyse various factors which will influence Gap companies expansions strategies. (25 marks) END OF QUESTIONS 23 Gap Inc. — 2011 Sharynn M. Tomlin Angelo State University GPS http://www.gapinc.com Headquartered in San Francisco, Gap Inc. opened its first stores in Serbia and Ukraine in 2011, broadening the clothing chain’s reach into Eastern Europe. Gap stores just opened in Belgrade and Kiev. Stephen Sunnucks, Gap’s international president, said in a statement that the Ukraine is the fastest-growing retail market in Eastern Europe, while Serbia has many young customers who enjoy shopping. Gap now has stores in 24 countries throughout Asia, Europe, Latin America, the Middle East, and Australia. The retailer has about 180 franchise stores and plans to increase that to 400 by fiscal 2015. Gap Inc. has divisional presidents based in London, Tokyo, Shanghai, and San Francisco. The company also operates Banana Republic and Old Navy stores. Gap (often referred to as “The Gap”) is a popular retailer providing clothing, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brands. Stores are located in the United States, Canada, China, the United Kingdom, France, Ireland, and Japan. On January 30, 2011, the company employed about 134,000 people with 3,231 store locations. Additionally, it has agreements with unaffiliated franchisees to operate Gap and Banana Republic stores in other countries around the world. Under these agreements, third parties operate or will operate stores that sell apparel purchased from the company under its brand names. Also, customers can shop online at gap. com, oldnavy.com, bananarepublic.com, piperlime.com, and athleta.com. Other Gap-owned retail outlets include GapBody, GapKids, and babyGap. The company provides a wide range of family clothing products, including denim, khakis, T-shirts, fashion apparel, shoes, accessories, intimate apparel, and personal care products. All Gap clothing is private-label merchandise made specifically for the company. From the design board to store displays, Gap controls all aspects of its trademark casual look. Gap’s July 2011 revenue at stores open at least a year fell 5 percent, worse than analysts expected. Total revenue for the four weeks that ended July 30 was almost flat at $949 million, compared with $948 million a year earlier. Gap Inc. includes the Banana Republic and Old Navy chains, outlets and smaller retail concerns, and is the country’s biggest clothing seller. Gap’s July 2011 revenue at stores open at least a year dropped 10 percent for its overseas business. In North America, revenue fell by 6 percent at Gap stores open at least a year, fell 4 percent at Banana Republic and fell 3 percent at Old Navy. Second-quarter 2011 revenue from stores open at least a year dropped 2 percent but total quarterly revenue rose 2 percent to $3.39 billion. The company needs a clear strategic plan for 2012–2014. History In 1969, Doris and Don Fisher entered the clothing retail business with the vision of creating a unique shopping experience and offered a wide selection of styles. The idea behind the first Gap store, founded in San Francisco, was to provide fresh, casual, American style. By 1970, sales reached $2 million and the company opened its second store in San Jose, California. Six years later, in 1976, the company underwent some major changes and initiated its first public offering of 1.2 million shares of stock on the New York and Pacific Stock Exchange. The 1980s was a period of major growth and expansion. In 1980, Gap Inc. dropped Levis and other brands and began focusing on its own private label. In 1983, Gap expanded 222 SHARYNN M. TOMLIN horizontally by acquiring Banana Republic, as well as expanding its product line and intro- ducing GapKids with the opening of its first store in San Mateo, California. A year later Gap Inc. burst into the international market and established its presence in London, England, and Vancouver, British Colombia. The same year Gap entered the European market and Gap’s annual sales reached $1 billion. From 1990 to 1999, Gap continued its progressive expansion efforts. At the turn of the de- cade in 1990, Gap opened babyGap and debuted the GapKids store in San Francisco. Two years later, Gap became the second-largest-selling apparel brand in the world. In 1993, Gap continued its global expansion by entering the French marketplace. The following year Gap introduced Old Navy, with the first store opening in Colma, California. Gap Inc. opened its 20,000-square-foot Gap stores in Tokyo in 1996. In 1998 Gap launched its first store in Alaska and established a firm foothold in all 50 states. In 2005, Gap revamped its online stores, offering more convenience and interactive shop- ping. That same year, Gap introduced Forth & Towne in Chicago and New York. The store caters to baby-boomer women, offering stylish, age-appropriate clothing that is especially appealing to their femininity and individuality. The following year, Gap added PiperLime to its online brands. In 2007, Glenn Murphy became Gap’s CEO and, within months, closed all 19 Forth & Towne stores. In 2008, the company acquired all the capital stock of Athleta Inc., a women’s sports and active apparel company based in Petaluma, California, for $148 million. For the last few years, Gap has added stores in four new countries annually. Vision/Mission Gap has no formal vision or mission statement, but the company does have philosophy and ethics statements. Corporate Philosophy Gap strives to be a leader in the specialty family clothing industry and has strongly espoused the importance of its customers and employees. Its statement of corporate philosophy exemplifies this concern as shown in the 2010 Annual Report: “At Gap Inc., we seek to make lasting, positive impressions on the people and communities where we operate—because we believe that doing what’s right is good for business. That means delivering value to our shareholders while working to lessen our impact on the planet, advance the rights of garment workers and ensure that our company culture is one our employees can be proud of.”1 Code of Business Ethics Gap has a well established code of ethics, translated in 65 different languages, that addresses the different aspects and guidelines about its purpose, responsibilities, laws, reporting code viola- tions, retaliation, policy changes, and waivers. The code proposes a responsible and ethical work environment for all Gap Inc. employees and directors and addresses the following most common ethical problems: conflict of interest, discrimination or harassment, workplace violence, com- plaints to government agencies, international trade regulations, bribes and improper payments, antitrust laws and selling practices, product integrity, commerical transactions, brand protection, and political contributions and activities. Organizational Structure Gap operates from a hybrid divisional structure by geographic region and by product, as illus- trated in Exhibit 1. Some analysts think an SBU structure by region would be more effective. The total number of stores by region and brand as of January 2011 is shown in Exhibit 2. Note there are 3,231 stores, and counting. External Issues Demographic/Economic Trends Most trends affecting the $14 trillion apparel retail industry are driven by demand from the various demographic groups and their consumer preferences. While much of the boom in retail sales is attributable to the 77 million baby boomers, there has been a shift in their purchasing $"4& t ("1*/$ 223 EXHIBIT 1 The Gap’s Organizational Chart John T. Keiser, EVP and CIO Stan Raggio EVP. GIobal Supply Chain Eva Sage-Gavin EVP, GlobalHuman Resources Sabrina Simmons, EVP and Chief Financial Officer Arthur L. Peck, President, Gap North America Michelle Banks, General Counsel, Corporate Secretary and Chief Compliance Officer Glenn M. Murphy, Chairman and CEO Jack Calhoun President, Banana Republic John Ermatinger, President, Asia Pacific Region Toby Lenk, President, Gap Inc. Direct Stephen Sunnucks, President, Europe and International Strategic Alliances Tom Wyatt, President, OldNavy David Zoba, SVP, Global Real Estate 224 SHARYNN M. TOMLIN EXHIBIT 2 Number of GAP Stores, 2011 Store # of Store Locations Gap North America 1,152 Gap Europe 178 Gap Asia 120 Old Navy North America 1,039 Banana Republic North America 576 Banana Republic Asia 27 Banana Republic Europe 3 Athleta North America 1 Company-operated total stores 3,095 Franchise 136 Total 3,231 Source: Company documents. priorities to children’s educational costs, retirement, elder care, health care, housing, and leisure activities.