82262068 Giordano Case Study Final
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Transcript of 82262068 Giordano Case Study Final
Submitted by:
Diju Daniel
Donny Thomas
Mugdha Joshi
Sugandha Mehrotra
Udita Sood
Giordano-Positioning in international markets
Executive Summary
Giordano was founded in Hong Kong in 1980 by Jimmy Lai. It is Asia’s one of the most
successful retailer currently operating in East Asia, South- East Asia and Middle East. The
success of Giordano can be attributed to several factors such as providing excellent
customer service, offering customer value for money, understanding customer needs and
wants. These attributes actually comprise the company’s competitive advantage. In
addition to the competitive advantage other key success factors like stringent selection
procedures and training of staff, operating efficiencies, extremely good inventory control
and turnover, close integration of purchasing and selling functions and short product
development cycle are the reasons behind the growth of the company and enabling the
company to gain its hold in the global market also supporting its growth strategy, global
expansion. These success mechanisms also helped Giordano survive the Asian economic
downturn and SARS crisis.
The question is how Giordano can maintain its competitive advantage in the future and
how can Giordano sustain its past success was perhaps the most critical question
confronting its management. Giordano has to critically evaluate its success strategies and
sources of competitive advantage. Perhaps, it also needs to consider repositioning itself in
current and newer markets to continue giving its competitors a tough time and remain in
the game. Furthermore, Giordano also needs to understand which key success factors could
be maintained or even strengthened in the long run and which of them would erode in the
coming years. Furthermore, another issue confronting Giordano was which success factors
could be transferrable to other markets during its expansion to other Asian Countries. Thus,
there were several issues that needs consideration by the higher Management at Giordano,
who till now have been quite successful with all their business endeavors and growth
strategies
Introduction
Giordano was established in 1981 by Jimmy Lia. It is a Hong Kong based retailer of casual
clothes targeted at men, women and children. The company has four different brands aimed
at targeting different customers. Giordano, Giordano Ladies, Giordano Junior and Blue Star
Exchange. In early 2006, the company was operating over 1600 retail stores and counters
in some 31 markets in the Asia- Pacific and Middle- East regions. Its main markets were
Mainland China, Hong Kong, Japan, Korea, Singapore and Taiwan. It also had its presence
is Australia, Indonesia and Malaysia. Giordano's sales grew from HK$712 million in 1989
to HK$3,092 million in 1999. In most geographic markets serviced by Giordano, the retail
clothing business was considered to be extremely competitive. It was essential for
Giordano to keep coming up with innovative line of products and ideas to maintain its
presence and brand image in the global market.
Company Background
Giordano opened its first retail store in Hong Kong and also began to expand its market by
distributing Giordano merchandise in Taiwan through a joint venture. In 1985, it opened its
first retail outlet in Singapore. Giordano’s success can be attributed to company’s
continuous focus on 5 main corporate values, quality, knowledge, innovation, simplicity
and service. The company has its own manufacturing units where all the apparels as per the
designs and clothing styles are produced. Giordano is known for its inexpensive and
contemporary garments and is very similar to the American based retailer ‘Gap’
In 1987 responding to slow sales, Giordano changed its positioning strategy. Earlier it had
sold exclusively men’s casual apparel. However, when the management realized that an
increasing number of female customers were attracted to its stores, they repositioned the
chain as a retailer of value-for-money merchandise, selling discounted casual unisex
apparel with the goal of maximizing unit sales instead of margin. This change in
repositioning increased the sales drastically.
To make people ‘’feel good’’ and ‘’look great’’ was Giordano’s corporate mission. In 1994
Peter Lau Kwok Kuen succeeded Lai and became Chairman. Peter Lau believed that a
willingness to try new and unconventional ways of doing business and to learn from the
past is the right attitude and this philosophy also became an integral part of Giordano’s
organizational culture. Moreover, it was ok to make mistakes and that empowerment would
minimize mistakes. On the whole Giordano had 8000 dedicated sales staff in all its stores
across different countries. The company’s philosophy of quality service could be observed
not only in Hong Kong but also in its overseas outlets. The company had been honored by
numerous service awards over the years.
Products
Giordano has four company brands. Giordano, Giordano Ladies, Giordano Junior and Blue
Star Exchange, these four brands were operating over 1600 retail stores and counters in
some 31 markets in the Asia- Pacific and Middle- East region.
Business and Corporate Strategy
Giordano’s overall strategy laid emphasis on critical aspects such as high quality service,
focus on developing employee talent, reaching out to customers, exploring newer markets
to expand in the global arena. It positioned itself as a retailer of value-for-money
merchandise. It had a willingness to try new and unconventional ways of doing business.
The firm was open to experiment and introduce new product ranges and design customized
products for various segments.
Philosophy and Value System
Giordano’s philosophy was to learn from past mistakes and prepare for future challenges as
it believed that this approach will take the organization in the right direction. It gave a
comfort sense to its employees about making mistakes as it encouraged the practice of
taking away the key learning’s from past errors. It also strongly believed empowering its
employees to contribute and participate as much as possible to minimize mistakes. It
focused on understanding the customer needs and serves them well.
Employees Focus Strategy
Giordano had stringent selection procedures to ensure that selected candidates match the
desired employee profile. Service orientation and capability check was an integral part of
these selection procedures. It had invested heavily in employee training and had been
recognized for training and developing its staff from various prestigious institutions. It
considered its front-line workers to be its customer service heroes. The emphasis on
training was with a view to hone the skills of the employees and enables them to provide
best customer services and satisfaction.
Performance Evaluation Strategy
Regular performance evaluations were conducted at individual employee level as well as at
store level. The company had highly rewarding performance linked incentive plans for its
employees to drive higher productivity and encourage internal competition. Trainings
organized for the employees also assisted the staff to acquire necessary skills which need
improvement. Giordano awarded the “Service Star” to individual employees, based on
nominations provided by shoppers.
Focusing Giordano’s Organizational structure on simplicity and Speed
The company maintained a flat organizational structure. The company’s decentralized
management style empowered line managers and at the same time encouraged fast and
close communication and coordination. Effective communication leads to efficient project
management and speedy decision making. This kept Giordano’s product development
cycle short.
Quality Services
Giordano’s vision since inception has been to drive top quality customer service and
promote value for money merchandise. It’s commitment to customer service was backed
by several Customer Service Campaigns and the firm also received numerous service-
related awards. Its management had launched several creative, customer-focused
campaigns and promotions to extend its service orientation. Besides its brand name, logo,
style and quality the firm’s commitment to excellent service became an attractive
proposition for customers to return to this brand. The firm came up with innovative
strategies to attract a larger customer base and initiated customer focus promotions, its
service philosophy had three tenets: “We welcome unlimited try-ons; we exchange—no
questions asked; and we serve with a smile.”
Value for Money (Mid- price)
Customers are learning a lot better about what is value. It is important to sell the products
at cheaper rates. Convenience is value for the customer. Time is value for the customers.
Giordano was able to sell value-for-money merchandise consistently through careful
selection of suppliers, strict cost control and by resisting the temptation to increase retail
prices unnecessarily.
Central Distribution Center
In order to maximize use of store space for sales opportunities, Giordano replaced the
function of a back storeroom with a central distribution center.
Product Strategy
Giordano offered various attractive options to customers where they are given an option to
return or exchange the product if the product they purchased did not meet their
expectations. Customers were also provided with exciting options to choose the fairest
price they want to pay for a product.
The firms another strategy was to sell a small number of core products; Its stores featured
no more than 100 variants of 17 core items, whereas competing retailers might feature 200
to 300 items. It believed that merchandising a wide range of products made it difficult to
react quickly to market changes, this approach of restricted range of products has allowed
Giordano to respond to market changes faster than its competitors, and to keep costs down.
Giordano had begun to reposition its brand by emphasizing differentiated, functionally
value-added products clothes and broadening its appeal by improving on visual
merchandising and apparel. Giordano’s relatively mid-priced positioning worked well—
inexpensive, yet contemporary-looking outfits appealed to
Asia’s frugal customers, especially during a period of economic slowdown. The company
focused on an important concept of value for money which continuously improves the
value of the product.
Case Analysis
Giordano's Problems
As we have learnt that when a Company undergoes expansion plans it undergoes various
challenges. Even in Giordano case as the company has presence mainly in Asia and Middle
east, due to stiff competition, the company decided to seek growth in 2006.As the company
changed it strategies it faced a lot of challenges. The primary three issues that the company
faced were: Firstly, the main issue that Giordano faced was with the "Positioning". As
there would be different strategies for different markets, the company wanted to know how
to position its brand in both in the new and the existing market.
The Second issue that Giordano faced was the issue of "Sustainability". As mentioned
above that the company faced stiff competition the company majorly faced the issue of
sustainability as the customer taste and preference defined the trends in Giordano's fashion.
Thus, sustaining tough market competitors on different soils posed as another challenge.
The third issue was relating to the "Growth strategy" of Giordano. As different markets had
different preferences, adaptability posed as a serious concern in Giordano.
Considering the SERVQUAL Attributes, we can analyze it on the following grounds:
Reliability – Received numerous service related awards. Eg: In 2009 Best service
Performance.
Responsiveness- Serving customer is priority for store teams.
Assurance- Staff trained to recall names and last purchases.
Training enhances job knowledge & confidence.
Empathy – “We serve with a Smile.
Tangibles - Servicescape
We shall now analyze each issue in detail and shall look into the possible solution for the
same:
Repositioning against Competitors:
Osama Tala, a well known author of sell your brains for profits states that,"A Positioning
Strategy results in the image you want to draw in the mind of your customers, the picture
you want him/her to visualize of you what you offer, in relation to the market situation, and
any competition you may have".
As per Giordano, the product strategy that the company created was that of mid priced,
inexpensive yet contemporary looking outfit with value for money. This helped Giordano
in gaining strong market foothold as a trendy unisex apparel outfit company. The Company
was successful in filling in the gap by being a decent brand and at the same time it was cost
effective. The Company always focused on quality of Service. The staff was pro active in
not only helping the customers but also in knowing the customers tastes and preferences.
If we see Giordano positioning, the company holds a brand value in the eyes of the
customers. Thus, if the company decides to reposition itself. It might end up losing what it
has attained as it might create doubt or ambiguity amongst the existing clients. As we have
learnt that the company not only focuses in creating new clients, but the company main
focus lies in retaining the existing clients. Thus, the company must not try to change its
positioning as it might end up losing its current market share in the existing markets.
However, we believe that Giordano can alter its brand image into high value, high-quality,
high end market. This could mean repositioning Giordano as a high priced & high value
brand in some markets in the world. This could mean that Giordano could bring in a price
hike of 5-10% in the market. Statistics prove that a 5-10% price hike doesn't affect the
consumer market to a large extent. Thus the risk of losing the customers decreases.
We recommend Giordano to continue its creativity in promotions. As we have learnt
through the case that Giordano's promotions like "Simply Khaki", "Yoga Collection"
helped Giordano create a niche in front of its competitors. They should spend more on their
traditional advertising as Giordano spends less on advertisement unlike its competitors. It's
very close Espirit creates a "lifestyle" image even though their strategies are very similar to
each other. Giordano could repositions its brand image as more stylish and lifestyle in its
promotions and not just brand.
Another noticeable factor in Giordano is that fact that the company focused on limiting the
product line. So to say that the company stores featured no more than 100 variants of 17
core items. This made it easier for the company to bring in changes with the changing
trends with the changing consumers tastes and preferences.
Regarding the concern of Giordano changing its strategies or keeping the same strategies
for different markets. It depends on the market conditions of the individuals as there must
be some markets which are customized and some which are standardized. Some of
Giordano's strategies have been very successful and has helped the company gain lot of
success like-Value for money, The company should continue the same strategy and should
standardized. The company could standardize the process in Asia except some parts. On
the other side, strategies like Inventory control and good customer service have helped
Giordano create a strong brand image. the company should thus very tactfully apply these
strategies in different markets. Thus to say that the customized strategies could be
developed for different countries even within Asia because there are some variation in
some countries regarding economy, cultures and values.
Recommendation (Against Competitors)
In order to compete with all its main competitors following are the steps that can be taken
by Giordano to face tough competition and continue to maintain its global presence and
brand image.
Giordano should encourage and focus more on Customer Relationship Programs.
They should involve themselves in providing more customized products to their
customers.
Implement Customer Pyramid concept- customers should be categorized according
to the number of purchases made from Giordano stores. Customers with maximum
purchases over a given period can be given the Platinum card, followed by Gold &
Silver cards. This practice will enable to provide additional services and attention to
those who show loyalty towards the brand and frequently visit Giordano stores.
This will keep the regular customers happy, this way they will continue visiting
stores and also feel like special customers who are eligible for special treatment
( customer delight)
Moreover, Giordano should develop social bonds by building personal relationships
with customers. For example, wishing the core customer on birthdays &
anniversary with discount coupon. Platinum Card – Greeting with 10% discount
coupon. Gold Card – Greeting with 5% discount coupon. Silver Card – Greetings.
Repositioning in Existing market
Giordano as we have learnt has been very successful in Hong Kong and in all its expansion
ventures with its current model of its services. As we have even learnt that Giordano has
been facing intense competition from Bossinni, Hang Ten, GAP . Thus, its service model
of excellent customer service can be imitated.
Another fact that can work in Giordano favor is that there is no customer gap. That is what
Giordano promises its customers. It is been able to deliver the same. Customer is treated
with utmost importance. Giordano has been able to deliver all its promises thus minimizing
the scope of any providers gap.
The staff at Giordano is well trained and focused on customers' needs and satisfaction.
Thus, the listening Gap is well covered by learning the customers tastes and preferences.
Knowledge of customer need is well understood. Giordano invests heavily in employee
training and has been recognized for its commitment to training and developing its staff by
such awards as the Hong Kong Management Association Certificate of Merit for
Excellence in Training etc. Such awards minimizes the Service Performance Gap as they
are excellent in their services.
Giordano core competency lies in their simplicity. This covers the Service design and
standards gap. The company over time and again to beat competition has been changing its
strategy to keep up with the changing consumer trends and to maintain its market share.
The Company has been able to reduce the Communication gap by launching service related
campaigns. Thus, it will be easy for Giordano to retain its market share in the existing
markets.
Recommendation (Repositioning in Existing market)
Considering the current positioning by Giordano is successful, we feel there is no need for
repositioning in the existing target market covered by the company. However, as evident
from the case competition is intense and the customer service tactics can be imitated.
Therefore, one of the recommendations to the company would be to continuously keep
bringing about innovation in their service model which needs to be developed from time to
time. Furthermore, Giordano should focus more on customer retention. It is important to
attract new customers; however, it is even more important to retain them. The cost incurred
due to a loss of regular customers can be huge and companies should try their best to retain
all their customers who benefit the company during their life time (customer life-time
value).
Another recommendation would be to recruit a professional Fashion assistant who
possesses skills to provide trendy fashion tips to platinum and gold card holders. Once in a
while customers may need a fashion tip and such privileges given to selected customers
will also be cost-effective and help in retaining valuable customers. In spare time the
professional assistant could also provide training and guidance to Giordano’s sales force to
cultivate a sense of fashion who can then in turn provide some fashion related assistance to
customers in general.
Different Positioning Strategies for different market:
Giordano has another option when it comes to its growth strategy and that is the different
positioning strategies for different markets. As we know that different markets have
different types of consumers which have different needs. As the target market is different,
the set target customers are also different. Similarly, the customer needs changes from
places to places. Thus, a different positioning for different markets is needed.
Also, when Giordano will consider different market. It will have to understand the
spending power of the consumers in that particular market. Some countries like
Philippines have greater spending power than US where customers are more value
oriented. Thus, price quotation will vary in both the market.
Giordano will also face different competitors in different markets. Like GAP emerged as a
major competitor in USA for Giordano and in the home country Giordano faced
competition from Hang Ten, Bossini, Baleno etc that served the same target audience and
gave good competition to Giordano. Thus, the strategy that Giordano would aim to keep in
home country cannot be similar as that of USA as the target audience and the markets are
different. Thus, the products, price, place, people all will vary in different markets.
Recommendation (Different Positioning Strategies for new markets)
Giordano should not reposition itself in the existing markets; however, they should adopt
different positioning strategies for entering new markets. Following are the
recommendations that will help Giordano to establish itself in new markets.
They should be consistent it their service and the quality of their merchandise.
Giordano should conduct Marketing Research to identify latest fashion trends,
current style of the country and the cultural differences and similarities that exist in
the particular country. Moreover, it is also important to gather information about
the economic conditions in the country to be able to judge the purchasing power of
buyers.
Current successful strategies used in existing market, can be used by Giordano as a
guideline depending on the market situation and customers’ requirement.
Finally, Giordano should continue investigating to find opportunities in new
markets like North America and Europe. They should try to find out about their
competitors in North America and Europe and understand if they can give them
competition or will they succumb to the pressures.
Sustainability and Transferability
Competitive Advantage
The company benchmarked its self in various aspects to the industry's best practices
for instance which gave the company an edge over the others:
Computerization (from The Limited),
A tightly controlled menu (from McDonald’s),
Frugality (from Wal-Mart),and
Value pricing (as implemented at the British retail chain Marks &
Spencer).
Strong frontline defense: Trained and dedicated staff with a focus on quality
service.
Decentralized management style: Empowered line managers and brought close
communication and co-ordination.
Speedy Operations: This kept the product development cycle short. This helped in
disengaging from manufacturing and focus on retailing.
Brand Recognition: The organization was recognized for its valuable focus on
customer service and emphasis it laid on delivering high-end customer value
satisfaction.
Recommendation
We feel that all the Key Success Factors will sustain in the existing market in the
long run. However, market research can be conducted to understand if any changes
need to be brought in any of the core competencies.
In future, KSF’s related to service should be developed since product is almost
similar among the competitors. Implying more emphasis should be given to factors
like dedicated workforce and quality of service by means of improved training and
more refined recruitment and selection procedures.
Since operating cost from China has increased they can outsource to other countries
or increase the price. This help Giordano sustain its competitive advantage of
‘value pricing’
KSF’s can be transferable into new market but with certain changes suiting the
needs and understanding of the particular market.
Conclusion
We can conclude by that that Giordano is having a strong service model and product in
existing market with a strong growth over the years. Sstaying ahead with this model in the
existing market is difficult as it can be easily imitated. Therefore, Giordano needs to
continuously bring innovative ideas as to how sales staff respond to customers need and
delight them. Even if its competitors imitate their service model, Giordano always needs to
stay a step ahead. It is important to realize that new market needs more understanding
before entering them and the company should aim at Developing & building the concept of
“Customer as partners”