The Gap Inc Case Study

I. Background of the Case

A. Rationale

Gap Inc is a successful clothing franchise for men, women and children. They are

taking advantage of the low cost of labor in 3rd world countries which is approximately

one twentieth of the rate in the United States. However they faced negative publicity

when the National Labor Relations Committee blew the whistle on the inhumane

working conditions of Gap’s supplier in El Salvador. They claimed that Gap is perfectly

aware of the unethical labor practices in the El Salvador plant but covered this up. After

investigation and assessment, Gap denied the charges.

B. Company Profile

The company is headquartered in San Francisco. Among their successful brand

carrier are the following: GAP, Banana Republic, Old Navy Clothing Co, GAP Kids and

Baby GAP. The company is founded in 1969 by couple Donald Fisher and Doris near San

Francisco State University. in 1983 Millard Drexler former president of Ann Taylor

became new president of GAP. Drexler influenced the brightly colored of rugged high

quality cotton clothes.By 1995 Gap had 1348 well located stores in US, Puerto Rico,

Canada, United Kingdom and France with 258 million dollar profits on sales of 3.723

billion dollars.

II. Case Narrative

Clothing companies like gap purchased their clothes from manufacturers around

the world. Since the work is labor intensive, most clothing companies sourced their raw

materials from manufacturers in 3rd world countries because labor was much cheaper

and less regulated. In China for example the wage rate is one-twentieth of US rates.

Due to this the manufacturers in the US were under depressed conditions. Working

conditions was at it’s worst both in the US and other foreign countries. Gap purchased

30% of it’s clothes from vendors in the US and 70% from foreign suppliers. In 1993 a

fire in a toy factory in Thailand drew attention to the welfare of employees in 3rd world

countries. In response to this issue, Gap promulgated