History of the Strategic Leadership Challenges of the company The Gap and its other business ventures.

Your group will answer the questions at the end of each organizational exercise or embedded in the case study. In addition to the questions from the textbook, include the following:

1. Consider that your group is a consultant to the leaders in the stories. Explain to the leader the competencies he or she will need based on what you read from the chapter and what you have learned from Modules 1-4.
2. Make recommendations to the leader on what she or he will need in terms of professional development based on the problem they faced within the exercise or case study and what they may have lacked in terms of critical thinking, systemic leadership, and managing change for themselves and their stakeholders.

All questions will be answered in a five-page APA-formatted paper. Do not number the questions or write the questions in the paper. Instead, answer the questions as a statement. For example, if the questions is, “how does the leader respond to the problem?, you would write something like, “the problem is…and Leader so-and-so did not respond well in terms of systemic leadership,” as learned in Chapter 1-4.

I have attached as much of the Story from the book below if this helps.

Organizational Exercise: Mind the Gap

It could be argued that parts of the recent history of The Gap retail group reflect a lamentable story of market opportunities thwarted by complacency on the part of its leadership. In the last 10 years, the merchandise group that owns more than 3,100 stores under the Gap, Old Navy and Banana Republic brands, has lost literally billions in shareholder value.

Don Fisher and his wife opened the first Gap store in San Francisco over forty years ago. They began by selling Levi Strauss jeans and a large assortment of gramophone records. By 1998, the Gap had developed a distinctive brand of jean that reflected a classic American style of clothing. The huge success of the Gap clothing brand was credited to Mickey Pressler, formerly from the Ann Taylor store chain.

The Fisher family is deeply steeped, some might say obsessed, with tradition. Don Fisher and his wife of fifty-four years, Doris, and their three sons, Bob, Bill and John, all live within a few blocks of one another. All three sons attended Princeton and Stanford Business School and all three sons have worked for the family business. This tightly knit San Franciscan family still holds a significant percentage of the Gap’s stock and three of the twelve board seats.

In 1976 the Gap faced the first big new reality when the Federal Trade Commission accused Levi’s of price fixing. It soon became clear that discounted jeans would flood the market. The Gap’s fortunes declined and Don Fisher was challenged to formulate a new concept. One attempt was to try to partner with Ralph Lauren. This failed as the organization was unable to manufacture clothes to fit Lauren’s specifications.

In another attempt to shore up sales, Fisher purchased the Pottery Barn. This purchase proved a disaster and he sold it several months later at a $14 million loss. Around the same time he bought a small chain of safari wear stores known as Banana Republic.

In 1983, Fisher appointed Mickey Drexler to take over merchandising. Drexler made huge changes to the Gap formula. He brought in natural fiber clothes that were stylish, comfortable and long lasting. Gap’s fortunes returned; the company grew to 2,428 stores by 1999 and the stock split eight times and returned over 46,000 percent. Mickey created a new and exciting Gap culture. The acquisition of Old Navy proved another feather in Mickey’s cap as its sales soared rapidly to over $1 billion.

In 1995 Drexler was officially appointed CEO. Don Fisher moved over to be chairman of the board that comprised many childhood and college friends. Fisher and Drexler were often at odds and over time things between them deteriorated. Family ties inevitably got in the way of Drexler’s future at Gap. Don’s two sons, Bob and Bill both worked for the company. The elder son, Bob, who headed the Gap brand stores, had no real interest in retail. His work ambivalence, added to a lack of management decisiveness, contributed to his quitting his position in 1999. Don took this hard as his other son, Bill, had quit a year earlier. Relations between Don and Drexler soured. Soon after Bob left, Drexler invested in certain fashions becoming trendy; an investment which was never returned. During this period Don engaged in huge store expansion, signing deals for over a thousand stores in a two-and-a-half year period.

It could be argued that the timing of such confidence precipitated disaster. As Gap merchandise ceased being competitive in a highly competitive retail market, Don was faced with closing a great number of stores, some of them only recently opened under the new expansion. Debt ballooned, store sales slumped for ten straight quarters and the stock price collapsed from over $50 to $8. Fisher fired Drexler and after months of research appointed Paul Pressler of Walt Disney Parks & Resorts as the new merchandiser. Paul and Fisher had similar personalities. They may have been seen as overly rational, penny pinching and lacking in creative and intuitive flair.

On being appointed Pressler soon got to work, reduced debt and increased store sales. Fisher decided he could now relax. He appointed son Bob as chairman of the board while he remained on the board as director intending to take a back seat. Meanwhile Pressler changed the entrepreneurial culture of Gap to one obsessed with rational calculations and financial returns. Creative people in the organization quit and morale plummeted. After the initial improvement, sales continued to fall and in 2006 Fisher fired Pressler. Bob, the eldest son, was appointed interim CEO. He tried to boost morale and entice creative people back to Gap, with minimal success. At the same time Bob and Don began pushing forward on a plan to remodel eighty of Gap’s existing stores.

The search for the new leader was not easy and took more time than anticipated. Finally in July 2007, Gap announced it had appointed veteran food and drug retailer Glenn Murphy as its new CEO to succeed son Bob Fisher. Glenn, a Canadian, claims two decades of retailing experience in grocery stores and book retailing. He is credited with turning around the Canadian store Shoppers Drug Mart.

When the board committee first launched its search it insisted it was going to find an apparel merchant as its new leader. Its plan was to attract someone who understands the creative process and who can execute strategies in complex environments. After an exhaustive search, the board hiring committee appointed Glenn Murphy insisting he is just the right man for the job!

In April 2008, after less than a year at the helm, Glenn Murphy was awarded a $39.1 million compensation package, most of it in stock grants. The award is intended to give him an added incentive to help the company recover some of the $32 billion in shareholder wealth that has disappeared over the past decade.

According to The New York Times, Gap also paid Murphy $2.1 million in bonuses, including $1 million for taking the job, to supplement his salary of $755, 769 for a half a year’s work. He received miscellaneous compensation of $363, 593 including $50,000 to pay the lawyers who negotiated the contract, and $182,301 for personal usage of a company plane. Because his family still lives in Toronto, Gap will spend $400,000 during the current year to cover air travel.

Gaps profits and stock price have improved since Murphy’s arrival, but its sales continue to slip. Murphy has warned that the weak economy will make it difficult to revive sales this year (2008/2009).

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