Gap Inc. Organizational Structure and Management

As shown in the above figure, the Gap organizational structure is divided into five departments, each representing an independent brand that led by a president. At the same time, the organizational structure of each department is highly hierarchical and there is a multiple-level management between the department president and the workshop assistant.

Gap Inc. is a divisional organizational structure. The divisional organizational structure conducts the activities of a business around market, product, or specific group of consumers. Thus, a company can operate in some country like the United States or Europe, or sell products focused on a specific customer base.

Each such division contains a complete set of functions. The Gap operates three different retailers such as Banana Republic, Gap and Old Navy. They are all independent entities that can satisfy different consumer segments and belong to the Gap Inc. brand.

Through divisional structure, the Gap can easily respond to market changes. However, it is difficult to communicate within the department and team identification.

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Communications between departments can be awkward because employees in other departments are not used to working together. On the other hand, inefficiencies may occur due to certain efforts that may be repeated. Similarly, there is a greater likelihood of conflict between departments, especially if one department is more successful than another. Competition between divisions can lead to conflict between employees when one person is more successful than another. This kind of environment can cause divisions to divergent interactions, rather than interacting in a synergistic way, combining their efforts.

The structure in Gap Inc. can be more costly because the size of the management team is too large. It became difficult to be maintain. The people at lower management level is having different way to handle problem. Before it leads to bigger loss to the company, the Gap’s top management must judge the cost of task redundancy and the possibility that the merger may be more cost effective.

The problem is that the flagship Gap brand has been “heavy on inventory,” which impacted margins, while the “timing of inventory flow” due to difficulties with new inventory assortment and allocation software has exacerbated the issue. Lack of control on the inventory led to a waste of money to the costs. Gap brand’s chief executive, Jeff Mirwan, left the company in March 2018.

The missteps led to promotions during the quarter and a $28 million inventory charge because of inventory has not been fully right-sized. Outdating styles and basics apparel remain on the shelves. (StockNews, 30 May 2018). To save the poor performance of the Gap brand and clearing the old inventory, the brand had a heavy discounting in the stores. Gross margin was 36.7% in the quarter, a drop of 120 basis points compared with the same period last year, largely due to discounting at the Gap brand.

The Gap goes seamless with inventory management. The inefficient of inventory control that caused the stores keeping tonnes of inventory that unable to be sold. Same-store sales at the Gap brand fell 4% while same-store sales rose 3% at both Old Navy and Banana Republic. Old Navy and Banana Republic are the business that separated from Gap. Gap is targeted at the broadest audience, classically styled, high quality, casual apparel at moderate price points. Banana Republic exhibiting sophisticated and fashionable characteristics, typically with a professional or semi-formal to formal flair at higher price than Gap but Old Navy targeting the value-oriented family shopper with a lot of apparel for the whole family at bargain prices. Gap is expected to capture all the market.

In addition, holding onto too much inventory or wrong inventory does not make it better but will worsen the situation of the company. However, this hurt the sales and the company’s profit margins and the brand image. The company was suffering the retail deadliest mistakes, such as the rampant of having discount which is 70% discount on every single item. Gap Inc. shares fell 14% after the apparel retailers failed to meet earnings expectations. The inventory issues at its flagship store take several months to resolve. (Garcia, 28 March 2018)

The solution to treat the situation was by using certain approaches. The moves were including shrinking of the stores, faster the supply chain, saving production costs, moving towards digital business and the improvement of the product quality. Then only the company can go to be adding more selection to its stores, entering new markets either locally or internationally and growing consistent sales.

By shrinking the stores. The margin pressure of the company led to the decision of shutter the uncompetitive stores. The Gap Inc decided to close about 10% out of approximately 200 stores worldwide. The company then had managed to identify those 230 weaker stores. Mostly the Gap and Banana Republic stores at malls globally and decided to be shutter down, including Malaysia, India, United States and others.

The shutter of bad sales performance stores was not only stopping the losses of the fixed cost to maintain it. It was also a sign that allowed the company to redesign the supply chain strategy to be more focusing on strong performers. The Gap Inc will continuing to have paying attention on some strong performing retailers, including Old Navy.

Now, Gap was shutting hundreds of its namesake stores. Gap Inc. has more than 3,000 stores around the world. In recent years, Gap has been closing stores, going down from 1,100 stores to 775 worldwide today. Peck said more need to be shuttered and told investors that the company is looking to close hundreds of Gap stores, including its flagship locations. (Thomas, 2018)

In our opinion, Gap should focuses on having the right products at the right time for the right channel. The right product is a demand-driven concept that can be loosely defined as a product with features and functions that meet a customer's needs. Gap should offer suitable clothes, shoes, accessories or any relevant products to fill customer’s needs and preferences. For example, Gap can offer winter clothes such as jackets, scarves, mittens, warm underwear like long underwear, union suits and socks on different month for different cold country.

Gap need a research and development (R&D). The ultimate objective is to improve the excellent quality of their current range of products and to innovate new products that meet with changing consumers’ need and preference in order to stay ahead of their competitors. R&D make Gap Inc. offer better products with the best in term of prices and style. In the business world, an innovative idea is important and useful.

Lastly, Gap Inc.'s multi-channel strategy stronger and more advanced than retailers' global competitors. Global sourcing and logistics capabilities enable Gap to build innovative features on its e-commerce site, such as the “Store Reserved” option. This allows customers to hold in store any items they see on Gap’s site so they may go to store and try on the clothes before deciding to make a final purchase.

Customers are increasingly demanding easy access to Gap brands anywhere, any time. Understanding of multiple channels and interaction with customer is a real competitive advantage for Gap Inc. The co-founders Doris and Don Fisher, their belief to 'do more than sell clothes' planted the seeds for a culture of equality, inclusion and opportunity that is embedded in the company's DNA. This culture was established by Gap Inc. when opened the first Gap store in 1969. (Gap Inc. blogs, 2016)

As a conclusion, different company has different management culture. A management culture may include both political climate and expectations related to measurement, quality, innovation, spending, learning from failure and management style. While leadership style is another area where cultural intelligence is necessary to lead across different cultures.

Just as individuals possess varying views and beliefs about preferred styles of leadership, cultures as a whole have varying preferences for certain leadership approaches. Each leader has their own beliefs, practices, patterns, and behaviors. The way of interact, make decisions, and influence others include subordinates and partners. Leaders’ own conscious and unconscious beliefs drive decisions and behaviors, and repeated behaviors become the patterns of leadership culture.