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Gap Inc waccGroup members:Jahangir hayat khan 11108007Muzammil rana 11108009 Submitted to: SIR SALMAN ANWAR

Vision and Mission

Gap has no formal vision or mission, but the company does have philosophy and ethics statement.

Vision (Developed)

Gap Inc.s vision is to be the first choice in family retail clothing while maximizing customer satisfaction and shareholder value.Our vision for how we work is built on four pillars:Think: customers first we consider the needs and value the diversity of thought, experience and perspectives among our customers.Inspire: creativity we open ourselves to new ideas, tapping into our diversity of perspectives.Do: whats right we treat every customer, supplier and employee with respect.Deliver: results we strive to create an inclusive environment where employees thrive and generate top performance.

Mission (Developed)We create emotional connections with customers around the world through inspiring product design, unique store experiences, and compelling marketing to make it easier for you to express your personal style throughout your life.Mission is build on following pallors:

Gap, Inc. is a brand-builder. We create emotional connections with customers (1) around the world (3) through inspiring product design, unique store and renowned ecommerce experiences (4), and compelling marketing. Our purpose simply to be a leader in the specialty family clothing (2) industry to make it easy for you to express your personal style throughout your life (7). We have more than 150,000 passionate, talented people around the world who help bring this purpose to life for our customers (9), leading us to achieve a major competitive advantage. Across our company and embedded in our culture are key values that guide our success and continued growth (5): integrity, respect, open-mindedness, quality and balance (6). Every day, we honor these values and exemplify our belief in doing business in a socially responsible way .

Goals & Objectives:Moving beyond 2011, the company remains focused on growing revenue, operating margin and earnings while returning excess cash to shareholders. The company has an overall goal of low single digit revenue growth on its approximately $15 billion revenue base. In North America, sales are expected to grow modestly on its smaller, healthier specialty store fleet supplemented by sales growth in its online and outlet channels. Internationally, the company plans to complement specialty store growth with the higher returning online, outlet and franchise channels. Regarding margins, the company intends, over time, to return to the operating margin levels achieved in 2010. These are expected to be enabled by merchandise margin re-expansion resulting from anticipated normalized cotton prices, especially beginning in the back half of 2012.Current Strategies:A. Corporate Strategy

1. Diversified brands give Gap an edge: Old Navys value-priced products enable The Gap, Inc to strive during economic downturn. Banana Republics fashionable products offer customers more variety during economic growth.2. Booming International Expansion: Its unprecedented growth is a direct result of meeting a niche in the clothing market, at a time when The Gap was well positioned to meet the new demands of this "business-casual" trend, introducing other chains to expand its customer base, and aggressive expansion in the global marketplace.Today, Gap, inc. is recognized as one of the world's largest specialty retailers. It. operates four of the most well known clothing brands on the planet: Gap, banana republic, Old Navy, and Forth & Towne. 3. Outsourcing: to utilize modern infrastructure and focus on their core strengths while other professional firms handle their other business processes. The textile industry has been a fundamental driving force in Chinas economy for many years. Outsourcing production to the Chinese manufacturers has become popular among other foreign firms in the recent past. This is especially because the textile industry is a labor intensive industry and firms prefer to outsource in China since it has large pool of cheap labor. 4. The GAP Inc. launched its e-commerce platform, Universality, in 2008, which enables consumers to navigate with ease through each of the companys five brands. This service focuses on improving the speed and user-friendliness of The Gap, Inc.s websites, and has recently expanded the service to 18 additional European countries. The Gap, Inc. now offers products to customers in 90 countries, an increase from 25 countries since the beginning of 2010. One consumer trend that continues to gain momentum is 5. Conveniencecustomers want it now. They continued to make investments to expand our online and outlet presence so more people can participate with their brands.6. Focusing on Customer, the Gap, Inc. recognizes the importance of its customers opinion. The company indicated trends pointing toward value maximization, and now offers Gap Outlet and Banana Republic Factory Stores to satisfy demand for value. The company created a store model that boasts bright colors, interactive options, and bold marketing ideas to create an enjoyable and exciting shopping experience for the whole family. The company has also identified the importance of the womans role in shopping for the whole family, and focuses their marketing tactics on them with hopes of increasing market share. Furthermore, in March 2010, Gap was recognized by the Ethisphere Institute as one of the Worlds Most Ethical Companies, for the fourth consecutive year

Swot:Opportunities 1. Research and development of new and appealing products.2. Global new market in Europe and Asia3. Penetration of e-commerce4. Developing and training of personnelWEAKNESSES1. Nearly all merchandise depends on third-party vendors, which is outside of the US.2. Huge store base including unaffiliated franchisees3. Less attractive in trendy clothing4. Uncontrollable production processes5. Low numbers of stores in AsiaSTRENGTHS1. Global brand recognition2. Stores located in worldwide3. Franchising system easily to expand Gap store internationally4. Multiple brands and brand extensions for a wide range of segments5. Huge customer and vendor base

Threats1. Economic downturn directly affects apparel retail business. 2. Global specialty apparel retail industry is highly competitive3. Emerging fast fashion retailers4. The market for prime real estate is competitive5. Newly emerging Asian brands

Competitive Profile Matrix (CPM)CRITICAL SUCCESS FACTORSTJX CompaniesAbercrombie & Fitch Co.GAP Inc.

WeightRating Weighted ScoreWeightRating Weighted ScoreWeightRating Weighted Score

Customer Loyalty0.1530.450.1530.45.1530.45

Financial Position0.140.40.0520.10.130.3

Market Share0.130.30.0530.150.0530.15

Management0.140.40.1530.450.130.3

Global Expansion0.140.40.130.30.140.4

International Branches0.1530.450.1520.30.1030.3

Employees0.0530.150.0540.20.1040.4

Family-Oriented Image0.120.2.2040.80.2040.8

Advertising0.0530.150.0540.20.0530.15

Technology0.1530.3.0520.1.0520.1

TOTAL1.003.21.003.051.003.35

Based on the CPM matrix, Gap Inc., obtained a weighted score of 3.35, while TJX Companies obtained a weighted score of 3.2 and Abercrombie and FItch obtained a weighted score of 3.05. Even if Gap Inc. has the highest weighted score, some of its factors have a varied score in rating and weight.Gap Inc. should prioritize competitive advantage and make additional improvements with factors that have low on rating allocating improvements with its technology and additional advertisements. The company should also focus on its Global Expansion in Asia since they had a goods trade deficit of approximately $62.1 billion as of March 2011 as well as investments in order to catch up in the future. This advantage can improve its management, customer service, financial position, number of branches, customer loyalty and security and safety and international relation. Lastly, the company should maintain its Family-oriented apparel image since they share a very big market share with that sector.

External Factor Evaluation (EFE) MatrixKEY EXTERNAL FACTORSWeightRatingWeighted Score

Opportunities

Green/Organic materials for clothes0.0640.24

Research and development of new and appealing products.0.1730.51

Global new market in Europe and Asia0.1830.54

Penetration of e-commerce0.0820.28

Developing and training of personnel0.0620.12

Threats

Economic downturn directly affects apparel retail business. 0.1130.33

Global specialty apparel retail industry is highly competitive0.0720.14

Emerging fast fashion retailers0.0620.12

The market for prime real estate is competitive0.0720.14

Newly emerging Asian brands 0.1440.32

TOTAL1.003.12

According to the EFE Matrix of Gap, Inc., it scored 3.12. EFE Matrix based on the evaluation of general environment analysis of these external factors that affect the business to get the potential opportunities and threats for Gap, Inc. The weighted score indicates that the companys response had a huge effect in its existing Opportunities and Threats in the Apparel Retail industry.In the table, we can see that the densest factor is Global new market in Europe and Asia; it evaluated in a weight the average of 0.54. Europeans had been a good market for clothing since then. Asian countries on the other hand are becoming a good possible market for clothes nowadays since they are becoming aware of the global brands with affordable prices. As a Filipino, I think that it will be a hit if they will increase the numbers of branches here in the Philippines.EFE Matrix above has its current competitive position or business strength in the industry is above average. This factors had been coping up well, which can be positively or adversely affect its financial positioning today.

Internal Factor Evaluation Matrix KEY INTERNAL FACTORSWeightRatingWeighted Score

STRENGTHS

Global brand recognition0.1140.44

Stores located in worldwide0.1740.68

Franchising system easily to expand Gap store internationally0.1320.26

Multiple brands and brand extensions for a wide range of segments0.0820.16

Huge customer and vendor base0.0620.12

0

WEAKNESSES0

Nearly all merchandise depends on third-party vendors, which is outside of the US.0.1120.22

Huge store base including unaffiliated franchisees0.0610.06

Less attractive in trendy clothing.0720.14

Uncontrollable production processes0.0720.14

Low numbers of stores in Asia0.1440.56

TOTAL1.002.70

Based on the table shown above IFE Matrix, Gap Inc., scores about 2.70. It weighted based on the companys higher than average rate and has a strong internal position. This reiterates the fact that the company is strong in terms of branches inside and outside America. It had increased in the number of foreign branches; positive value system of the employees, as well as the broad distribution of local branches and Global Brand Recognition rated as 4 which had been evaluated by the companys strengths. From the illustration table, it concludes that Gap, Inc. has a good internal structure.

Swot matrix: Opportunities 5. Research and development of new and appealing products.6. Global new market in Europe and Asia7. Penetration of e-commerce8. Developing and training of personnel

WEAKNESSES6. Nearly all merchandise depends on third-party vendors, which is outside of the US.7. Huge store base including unaffiliated franchisees8. Less attractive in trendy clothing9. Uncontrollable production processes10. Low numbers of stores in Asia

STRENGTHS6. Global brand recognition7. Stores located in worldwide8. Franchising system easily to expand Gap store internationally9. Multiple brands and brand extensions for a wide range of segments10. Huge customer and vendor base

Threats6. Economic downturn directly affects apparel retail business. 7. Global specialty apparel retail industry is highly competitive8. Emerging fast fashion retailers9. The market for prime real estate is competitive10. Newly emerging Asian brands

So strategies:(S4, o3) company has a positive global reorganization so they should heavily invest in china to burst their sales.(s2, o2) stores are located worldwide they have a great opportunity to do research and explore what people are looking forward.Wo strategies:(W1, o3) gap vendors are outside of United States so their cost of material supply is high they should transfer the plant to that place where they can produce cheap.W2, o2) They have opportunity to do research on different segments in big stores to avoid unaffiliatedness.St Strategies:(S5, t5) they have big vendor hub so they can easily target and serve to Asia.S4, t2Company has multiple brands and segments they can tackle up the competitiveness of global trends.Wt strategies:W5, t5 Gap should increase the stores in Asia to tackle the newly emerging brands.W4, t3If Production process is controlled economic downturn can be controlled.

Space matrix: Internal strategies External strategies

Here company fall in the aggressive strategies: Backward, forward, horizontal integration Market penetration Market development Product development Diversification

Bcg matrix: High Medium low1.0.5 0.0High+20

Medium (growth)0.0

low -20

Relative share Industry sales growth rate id 18% while the market share of the company is 70% so according to the results of Boston Consulting Group (BCG) Matrix, gap inc Company lies in the second quadrant (star) of the matrix and it is the segment with high relative market share and a high industry growth rate that represent organization have best long rum opportunities for growth and profitability. Appropriate strategies of the star quadrant are as:

Forward, backward and horizontal integration.

Market Penetration.

Market Development.

Product Development. In the essence, the company goes to the product, market development and market penetration

Internal external matrix (IE):

According to IE matrix gap inc Company is placed in the first three cells which suggest that the organization should follow the Grow & Build strategy. In this case the tactical strategies should focus on the Market Penetration and Product development.

Backward, Forward or Horizontal Integration.

Market Penetration.

Market Development.

Product Development.

Grand strategy matrix:

The plastic furniture industry growing rapidly and the demand of the plastic furniture is increasing with the passage of time. According to the GRAND Matrix the gap inc Company lies in the first quadrant which shows that the company has the strong competitive position in the growing market. And the strategies of the first quadrant are as:

Market Development.

Product Development.

Market Penetration.

Backward Integration.

QSPM:

Strategic alternative Product development Market penetration

KEY INTERNAL FACTORSWeightASTASASTAS

STRENGTHS

Global brand recognition0.1140.443.33

Stores located in worldwide0.1740.684.68

Franchising system easily to expand Gap store internationally0.1320.262.26

Multiple brands and brand extensions for a wide range of segments0.0820.163.24

Huge customer and vendor base0.0620.121.06

0

WEAKNESSES0

Nearly all merchandise depends on third-party vendors, which is outside of the US.0.1120.221.11

Huge store base including unaffiliated franchisees0.0610.061.06

Less attractive in trendy clothing.0720.143.21

Uncontrollable production processes0.0720.144.28

Low numbers of stores in Asia0.1440.564.56

TOTAL1.002.702.79

Opportunities

Green/Organic materials for clothes0.0640.244.24

Research and development of new and appealing products.0.1730.513.51

Global new market in Europe and Asia0.1830.543.54

Penetration of e-commerce0.0820.282.28

Developing and training of personnel0.0620.122.12

Threats

Economic downturn directly affects apparel retail business. 0.1130.333.22

Global specialty apparel retail industry is highly competitive0.0720.142.14

Emerging fast fashion retailers0.0620.122.12

The market for prime real estate is competitive0.0720.142.14

Newly emerging Asian brands 0.1440.324.32

TOTAL1.003.122.63

Grand total5.825.42

Anticipated ratios for futures: Currency inMillions of US DollarsAs of:Jan 312009ReclassifiedJan 302010ReclassifiedJan 292011Jan 282012PressRelease4 YearTrend

Revenues14,526.014,197.014,664.014,549.0

total revenues14,526.014,197.014,664.014,549.0

cost of goods sold9,079.08,473.08,775.09,275.0

gross profit5,447.05,724.05,889.05,274.0

selling general & admin expenses, total3,892.03,922.03,912.03,836.0

depreciation & amortization, total2.06.04.0--

other operating expenses, total3,894.03,928.03,916.03,836.0

operating income1,553.01,796.01,973.01,438.0

interest expense-1.0-6.0---69.0

interest and investment income37.07.06.0--

net interest expense36.01.06.0-69.0

currency exchange gains (loss)--32.03.0--

other non-operating income (expenses)--1.08.0--

ebt, excluding unusual items1,589.01,830.01,990.01,369.0

other unusual items, total-5.0-14.0-8.0--

ebt, including unusual items1,584.01,816.01,982.01,369.0

income tax expense617.0714.0778.0536.0

earnings from continuing operations967.01,102.01,204.0833.0

net income967.01,102.01,204.0833.0

net income to common including extra items967.01,102.01,204.0833.0

net income to common excluding extra items967.01,102.01,204.0833.0

DECISION AND RECOMMENDATION

A. Corporate:

Objectives: Increase number of stores by 5 % in next five years.Increase sales per square foot by 6% over the next 3 years.Increase same store sales by 10% over the next 3 years.Mitigate increases in cost of materials.Expand International sales in new and existing marketsIncrease technology features to allow for a consumer friendly platform.

Strategies: Aggressively pursue franchiseesThe organization should actively seek the attention of potential individuals or groups who are interested to own a franchise with any of the Gap product subsidiaries. Attractive franchisee packages shall be drawn and presented with emphasis on the companys steady growth in market share and product offerings. Purchase cotton hedges to mitigate costs increases.Gap, Inc. is a business that require significant quantities of cotton, thus in order to offset future rising cost, it is wise for the company to engage in hedging into the cotton futures market. The result of hedging guarantees a set and predictable amount despite aggressive fluctuations in cotton prices. Develop aggressive customer rewards programs to encourage higher spending.Customer reward programs appear to be very attractive amongst buyers these days. Numerous companies in the retail industries are heavily engaged in such practices e.g. Kohls cash. Gap, Inc.s sales growth can definitely use the added value of a customer rewards program; price sensitive buyers will surely avail of such buying incentives in light of todays economic landscape. Research high population countries to determine International feasibilityCountries with expanding population, growing national income, increasing industrialization are most likely to be more receptive in spending money into brand name clothing products. Research show that there is a thriving market for Gap, Inc. in Europe and Asia, thus the organization should focus on increasing its market share in these areas. Review IT platform for better design qualitiesTechnology is constantly evolving; it is prudent for the organization to remain cutting-edge in this aspect, especially with the growth of e-commerce. The IT platform should be designed to support widely diverse market geography, and one that can easily adapt with varying regulations from foreign markets.

B. Business:

Objectives:Generate higher product visibility to target market. Develop a mobile promotional plan.Develop online shopping avatar that allows the customer to try on outfits from the comforts of their home.Capitalize on peak shopping seasons by increasing sales with minimum overhead investment.Strategies: Utilize social media by encouraging customers to like their products for a chance to win promotional items. Social media plays a large role in todays connected society; Gap, Inc. should utilize this strategy to ensure higher product visibility to their target market. Build and maintain customer cell phone numbers to send instant promotions for store events.Cell phone users have grown exponentially worldwide; individuals carry cell phones as part of their lifestyle. The strategy of sending instant messaging to cell phone users regarding ongoing promotions can be very effective in increasing sales through mobile notifications. Create state of the art IT platform that enhances the customers online shopping experience.Todays technological innovations offer unlimited boundaries, creating a virtual shopping experience where buyers can design a personal avatar while clicking on a garment offers an instant image of how the product would look on them. Establish seasonal booths to sell seasonal items in shopping malls where there is no storefront available.Gap, Inc. does not have a brick and mortar store on all shopping malls, thus, having seasonal booths generate product visibility and increasing sales at a lower cost.

C. Functional:

Objectives & Strategies:

Research and Development

Analyze trends in the global market to best capitalize on the changing environment.Obesity is a growing condition in our society. The number of women wearing plus size clothing are increasing gradually; Gap, Inc. should take advantage of this emerging market and open a product line designed for these women.

Sales and Marketing Utilize social media marketing to reach new and existing customers.Focus on flooding social media through Facebook, Twitter, and blogs to disseminate promotions and newly-released products.

Production

Utilize Six Sigma experts to gain understanding of how to become more efficient.Six Sigma Quality Programs utilize advanced statistical methods to improve quality by reducing defects and variability in the performance of business processes. Gap, Inc. can utilize the Six Sigma program to improve its performance using the DMAIC process. This endeavor will prove to be very useful if the company pursues some backward integration strategies e.g. acquiring textile/fabric manufacturers.

Outsource non-core activitiesOutsourcing activities that have less impact on the companys core competency such as store maintenance/upkeep (cleaning services), maintenance services for store equipment (registers/display racks/scanners, etc.) can be cost-effective.

Finance Develop cost benefit analysis for investment in IT applications Perform gap analysis between high performing stores and low performing stores. Go to market to identify hedge funds to mitigate any increases in raw materials. Pursue funding for expansion in new and existing markets.

IMPLEMENTATION

Goal #1: Capitalize peak shopping season by utilizing booths in shopping malls where stores are not present.

Participants: Chief Financial Officer, President, Gap Inc., Global Human Resources and Corporate Affairs, Gap Inc. Marketing Department, Legal Department

Steps: President and CFO to review business case and assumptions before sign off. Legal Department to review contractual agreements for leases related to booths. Marketing to determine key locations to maximize profitability. Human Resources to source positions at various locations.

Goal #2: Expand product line to include plus size clothing line

Participants: Chief Financial Officer, President, Marketing Department

Steps: Conduct research to determine demand for new products Create clothing design Determine stores to carry clothing line Introduce marketing campaign to drive sales

Goal #3: Expand operations in Asia

Participants: Chief Financial Officer, President, International Strategist, Gap Inc., Global Human Resources and Corporate Affairs, Gap Inc. Marketing Department, Legal Department

Steps: Assess product needs within the overseas market. Develop entry plan Develop understanding of culture, laws and regulations in Asia. Replicate strategies used in previous global expansions Implement marketing programs to gain market share.

ConclusionEstablished in 1969 as a small retailer of jeans, Gap has been able to surpass various hurdles to reach todays designation of top US apparel retailer. It is an expert in the clothing retailer industry with different brands maintaining their effects in different niche market. For example, Old Navy covers price conscious shoppers and banana republic is an attraction for people who would pay a higher price for more sophisticated dress. Having faced so many different hurdles, Gap has proved its worthiness. But current problems in cash flow shows need for the companys change in marketing, management, or financial strategies. Since it is an established name, if strong plans are traced out, the company should be able to maintain its superiority in retail industry.