1. Should Gap look to hire a fashion head or split the function with someone who understands how to control the organization?
2. How might this impact creativity and is creativity an important consideration?
3. What other clothing companies might Gap benchmark in order to turn around its operations and return to its former lead position?
4. How much control and what types of controls should be in place? (there are five different control mechanisms discussed in the text that can be used individually or in concert with one another).
GAP CANADA HEADQUARTERS
Bolton, Ontario.Standing outside one of Gap’s mall stores, you realize how daunting the task will be to turn around this venerable chain. The company started with $64,000 of borrowed cash, and today they have 134,000 employees with 3,200 locations worldwide, and more than 60 stores in major cities in Canada. However, same-store sales have been flat or declining in 29 of the past 31 months. During the past two years alone same-store sales have dropped 9 percent each year. You have been hired to change the pattern and bring glory back to the operation.
Donald and Doris Fisher opened the first Gap store in 1969. Over the next few decades they grew the business into one of the world’s largest fashion retailer. In 1983, they took over Banana Republic and in 1994 they launched Old Navy. Old Navy became the first fashion retailer to reach $1 billion in annual sales in less than four years from their founding. Mickey Drexler, the brilliant CEO who grew the business for two decades, was known as a fashion icon that let the financial part of the business slip as he focused on the fashion side. All of this was fine while the business grew at astronomical rates. However, the wheels came off the machine when sales slumped across the board as the company’s efforts to attract teenagers alienated their main group of customers (people in their 20s and 30s). Frustrated with out-of-control costs and a burgeoning inventory, the Fishers fired Drexler and brought in Paul Pressler, who had a long history of strict organizational control at Disney. Pressler rapidly closed under-performing stores, reduced inventory, and cleaned up the finances of the organization. Unfortunately, the fashion side of the business had no real direction and although the organization was carefully tracking the finances, it was failing to attract an increase in foot traffic in its stores. Now Pressler is gone and a replacement is required. What kind of replacement is required? What kind of control systems should that president bring with him or her?
Fashion is a difficult business, and finding a way to consistently attract customers is critical. Attracting customers into a store in a profitable manner is the goal of every fashion organization. How should this be accomplished? Financial controls and efficient operations are crucial, but so are presenting desirable fashions because numerous competitors do the same thing extraordinarily well. Abercrombie & Fitch, which made a significant turnaround after being spun off from Limited Brands, is now one of the hottest stores in the teen market. Even old-line retailer J.C. Penney turned its clothing line into a strength again behind the fashion expertise of merchandiser Vanessa Castagna.
The top companies in any industry benchmark the best practices of their competitors, effectively understand and manage their financial and human resources, and consistently deliver innovative products that attract customers. With these things in mind, should Gap hire a fashion head to focus on the products in its stores, or should it hire someone who will focus on controlling the organization’s costs, schedules, and operations? What companies should Gap benchmark in order to turn around its operations and return to its former lead position? How much control and what types of controls should be in place? How do you achieve a balance between control and creativity? What techniques might help you achieve this balance?