Gap Goes Global

1
Gap Goes Global

• Jason Magee
• Drew Mora

2
The GapThe Beginning

• 19 69
• Man took first walk on the moon
• 450,000 people gathered in upstate New York to
  witness the historical Woodstock concert
  
• Don and Doris Fisher opened the first GAP in San
  Francisco!

3
Gap..Now

• One of the worlds largest specialty retailers
• More than 3,100 stores and 2006 revenues of 15.9
  billion
  
• Also operates Gap, Banana Republic, Old Navy,
  Forth Town, and Piperlime
  

4
The Issue

• The San Francisco clothing chain is expected to
  announce a franchise agreement with Dubai-based
  retailer Al Tayer
  
• Group to open Gap and Banana Republic stores in
  five markets in the Middle East
  
• United Arab Emirates, Kuwait, Quatar, Bahrain,
  and Oman
  
• Gap is hoping to sell masses of young,
  sophisticated Asian and Middle East shoppers on
  its trademark jeans, casual pants, and t-shirts.
  

5
The issue

• The Gap hopes a Middle East franchise deal will
  be a first step toward revving up its
  international business
  
• Company is trying to reverse a trend of declining
  sales
  
• Experiencing high executive turnover and its
  merchandise is failing to click with customers
  
• Total sales revenue has decreased 1.5 from last
  year
  
• France and Britain combined fell 6.1
• The only increase was in Japan, it rose 2

6
Opportunity in the Middle East

• The five locations (United Arab Emirates, Kuwait,
  Quatar, Bahrain, and Oman) are U.S. alliances and
  follow American trends
  
• Taking advantage of franchising instead of owning
  and operating locations itself lowers financial
  risks
  
• Using franchisees, Gap is able to sell its brand
  and its clothing without the headaches of
  navigating local real estate markets and hiring
  store-level employees onto its own payroll.

7
Opportunities in the Middle East

• Gap is hoping to sell masses of young,
  sophisticated Asian and Middle East shoppers on
  its trademark jeans, casual pants, and t-shirts.
  
• Under agreement Al Tayer will open up 35 stores
  in all by 2010
  
• Gap will still control marketing, advertising
  images, and product design
  
• Gap expects to keep its marketing consistent
  worldwide promoting the Gap brand's message of
  "fresh casual American style" and Banana
  Republic's image of "affordable luxury.
• notice no adaptation of marketing plan or
  clothing designs. Staying with American
  marketing and clothing designs

8
Complications

• "Gap may run into more competition than they
  think," says Michael Appel, a managing director
  of retail consultant Quest Turnaround Advisors.
  
• Competition established local brands and also
  other American retailers such as Esprit, Levis,
  Tommy Hilfiger, and Ralph Lauren
  
• American Image in some parts of Middle East could
  be negative
  
• Most Middle East fashion is dictation by European
  retailers instead of Americans

9
Recommendation

• China and other Asian markets should be pursued
  before the Middle East markets
  
• Gap has had continued success in Japan.
• Asian countries typically follow American fashion
  trends and have a more positive outlook on
  American culture
  
• Look into possible expansions into Mexico and
  Central America as well, these markets have been
  ignored thus far.
  
• If Gap must pursue Middle Eastern market first,
  they must use adaptation and change marketing
  plans to be more sensitive to Middle Eastern
  Cultures