INTRODUCTION
Giordano is a renowned retailer of men’s, women’s and children’s quality apparel founded in Hong Kong in 1981 by Jimmy Lai. Giordano has become a pioneer of customer service in the Asia–Pacific region and as of end year 2008, it employs over 11,000 people and operates 1,800 stores worldwide in 40 countries.
Giordano’s success is measured by the company’s relentless focus on its five corporate business values of quality, knowledge, innovation, simplicity and service. The company has its own apparel manufacturing division where many of its own clothing styles are produced. Giordano is also renowned for its basic and practical men’s, women’s and children’s T-shirts and trousers, especially denims. In comparison, Giordano is very similar to the American based retailer The Gap.
The product is sold under the brands of “Giordano”, “Giordano Concepts”, “Giordano Junior” and “Giordano Ladies”. Giordano has been publicly listed since 1991 and since then trades on the Hong Kong stock exchange under the ticker symbol 709.HK
Started in 1980, Giordano’s sales grew fantastic, the net income in 2007 is about US$ 2.36 billion. The case describes the success factors that allowed Giordano to grow rapidly in some Asian countries. In addition, the case looks at three imminent issues that Giordano faced in maintaining its success in existing markets and in its plan to enter new markets in Asia and beyond.
However, in 1987 Giordano sold exclusively men’s casual apparel and sales were low and the business became unprofitable. Lai Chee Ying (Jimmy Lai) realized that the pricey retail chain concept was unprofitable because the number of female customers were attracted to its stores were increased. Under new management team, Giordano changed its strategy and its positioning. They started selling unisex casual apparel. It repositioned itself as a retailer discounted casual unisex apparel with the goal of maximizing unit sales instead of margins and sold value-for-money merchandise. Its shift in strategy was successful.
Company Profile
With that money Lai bought out the owners of the bankrupt garment company of Comitex in 1975 and began manufacturing sweaters. The company was an overnight success and had exports to major American retail brands of J.C Penney, Montgomery Ward and several others. It was during his time there that he was exposed to many western retailer formats which inspired him to get into the retail market himself. In 1981 Lai founded Giordano and opened several stores across Hong Kong.
Giordano’s first beginnings were ominous. Jimmy Lai originally intended for the company to target the upscale Hong Kong market, it proved unsuccessful and soon afterwards the company was faced with closing down all over Hong Kong. However, instead of shutting down Lai turned to other successful retailers of the day for inspiration and proceeded to transform the company. Soon Lai developed a new company formula. By drawing upon ideas from many already successful international retailing brands such as Mc Donald’s, United Colors of Benetton and Marks and Spencer, Lai created a new Giordano which focused on simple and basic high quality styles, in many colors and sold at reasonable prices. The massive make – over included the company’s approach to customer service and consequently Lai had all employees taught to emphasize the importance of the customer. The formula was successful and by the early 1990s Giordano had 200 stores across mainland China and Hong Kong. Other stores soon followed in the Middle East, Singapore, South Korea, Taiwan, Thailand, Malaysia and Indonesia
MARKETING ANALYSIS
A major purpose of environmental scanning is to discern new opportunities. In many ways, good marketing are the art of finding, developing and profiting from opportunities. A marketing opportunity is an area of buyer need and interest in which these is a high probability that a company can profitably satisfy that need.
An environmental threat is a challenge posed by an unfavorable trend or development that would lead, in the absence of defensive marketing action, to lower sales or profit. Threats should be classified according to seriousness and probability of occurrence.
STRENGTHS
· Recognized brand
· Excellent Customer Service and possible to customizing it regarding to
· Excellent Customer Service and possible to customizing it regarding to
the local culture, policy, so on.
· Excellent in Management
· Excellent in Design
· Excellent in marketing and branding
· Key success factors.
· Good discount Promo
· Strong Positioning
WEAKNESSES
· Threat of substitutes for casual apparel is low.
· The promotion in terms of advertising is not enough.
· The concept in customer’s mind is cheap.
· Product variety is not much.
· Has no special design as icon.
· Has no standard for manufacturing employee’s wage. (See attachment
· Excellent in Management
· Excellent in Design
· Excellent in marketing and branding
· Key success factors.
· Good discount Promo
· Strong Positioning
WEAKNESSES
· Threat of substitutes for casual apparel is low.
· The promotion in terms of advertising is not enough.
· The concept in customer’s mind is cheap.
· Product variety is not much.
· Has no special design as icon.
· Has no standard for manufacturing employee’s wage. (See attachment
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OPPORTUNITIES
· Further expansion into overseas markets.
· Coming out with new line of product (e.g. babies clothes)
· Further reduction in manufacturing cost by farming out to countries
The tactical of customer service of Giordano is customizing based on the cultural of the expansion country. Giordano has 39 outlets in Hong Kong alone and employs 10,000 people. "We just can't force everyone to deliver the kind of service that meets the standard we have set," Peter Lau, Chairman of Giordano says. "We have to let them, our employees, find out for themselves what good service is all about, and to encourage them to manage themselves," he says. That way, "good service becomes the staff's own culture and they are going to defend it".
Excellence in design: fast and market-driven new product development, due to flat organizational structure, excellent organizational communication and dedication to the needs of customers (e.g., style, fabrics, etc.)
Excellence in management of operations, logistics and information technology systems: this includes effective supply chain management, inventory control, distribution, and integration of purchasing and selling functions. Cost savings from efficient operations are transferred to customers, thus delivering “value-for-money”.
Excellence in marketing and branding: strong positioning, brand equity for excellent service and ability to deliver “value-for-money”, consistent execution of advertising and promotion to strengthen brand image.
Excellence in service: continual commitment to providing excellent customer service and response. This is the result of integration of the corporate philosophy and leadership, service orientation of supporting functions like human resource policies (e.g., selection, training and remuneration of frontline staff) and information systems, and performance monitoring (e.g., regular evaluations of service standards at store level and mystery shopping)
Weaknesses
Giordano is hardly makes advertisement of their product. Even thought they have a new range in the market. As we know that advertising is made purposely to create the awareness in the market to our target market. For the time being, some people get confuse of their product range. Some people don’t even know that Giordano has several product ranges. To achieve people desire or make them even loyal to our brand, creating awareness is a must.
Giordano has not many products variety due to one of Giordano’s product strategy is to sell a number of core products in its stores. While other retailers have 200 – 300 items, Giordano features no more than 100 variants of 17 core items.
Opportunities
At this moment Giordano has a range for the kids, named Giordano’s junior with the segmentation is for kid on 3-10 years old. Giordano should consider have another range for babies. As we understand that babies product is more expensive, cause its use less material than adult, but has almost same price. And usually parent to be, willing to buy clothes for their baby.
Many of the apparel company such Mango, The Gap or Esprit, are manufactured their product in the other country in order to cut down the production cost. Except China, Giordano may consider to manufacture their product to the growth country such as Myanmar and Cambodia, which has lower cost manpower.
Threats
Despite its reputation for service, the company, nevertheless, is facing tremendous competitive pressure. Over the years, there have been many imitators who have been trying to take a cut from the pie. Their common strategy is to undercut Giordano, the market leader, with lower prices. "If we have to compete with them on price alone, it would be suicidal," Lau says.
Giordano is facing stiff competition from many copycats. And it is become a very difficult time for them. As it tries to pull itself away from cut-throat competition by moving up market, it must tackle the twin problems of ingrained consumer perception and entrenched internal culture arising from its roots as a vendor of mass-market clothing.
MARKETING STRATEGY
All marketing strategy is built on STP – Segmentation, Targeting and Positioning. A company discovers different needs and groups in the marketplace, targets those needs and groups that it can satisfy in a superior way and then positions its offering so that the target market recognizes the company’s distinctive offering and image.
Segmentation
The original idea of mass production, mass distribution and mass advertising was adopted by companies making mass products used by considerable number of people such as soap, refrigerator, car, even apparel and so on. Thus P&G made Ivory soap and tried to get everyone to buy it or Coca Cola made its cola and tried to get everyone to drink it. But people differ in their tastes and this affords an opportunity for challengers and nice marketers to go after narrower market segments.
In response the large company started to differentiate their product offerings for different large segmentation of the market. Thus a company has three possible strategies, go after everyone with one product (undifferentiated marketing); go after different segments with different products (differentiated marketing) or go after one segment as a specialist (concentrated marketing).
Giordano is doing the differentiated marketing. It is mean that Giordano go after different segment for different product. With the 5 ranges of product Giordano is segmented for male and female (unisex) and even kids from 3 years old. The social level from middle – lower social status up to middle – high social status.
Targeting
Giordano recognized the importance of limiting its expansion and focusing on one specific area. According to Charles Fung, the Chief Operations Officer and Executive Director of Giordano for South – East Asia,” Focus makes the business more manageable”. Simplicity and focus were reflected in the way Giordano merchandised its goods.
A. Giordano
Mainstream Giordano Focusing on quality apparel for men and women. Present in all markets in which Giordano International Limited operates. The brand’s goal is to be appealing to the everyday shopper, anywhere at anytime.
B. Giordano Ladies
It is an upscale market women’s clothing much on the line with CUE. Mainly operates in the Asia Pacific region. Prominent in mainland China, Hong Kong, Malaysia and Singapore.
C. Giordano Concept
A more up-market brand of Giordano casual attire with a high emphasis on its own “less is more” retail approach. The brand focuses on the idea that less is more than just more, but that is cool as well. The brand’s said “less is cool” approach involves innovative and modern black, white and grey monochromes in a large variety of styles. The approach gives the brand a very up-market casual clothes attitude, very much on par with other international brands Polo Ralph Lauren and Lacoste. The concepts range is significantly more exclusive than mainstream Giordano, as such Giordano Concepts only extends itself to the Asia Pacific market, in particular Hong Kong, China, Taiwan and only one store in both Singapore and Malaysia.
D. Giordano Junior
Children clothing stores that sell a variety of stylistic and basic apparels for kids aged 3 to 10 years old. Operated mainly in the Asia Pasific region. Prominent in most Asia Pacific nations and Australia.
E. Giordano Bluestar Exchange
A more affordable brand of Giordano casual clothes for the budget conscious shopper. Prominent in most countries which Giordano operates. Giordano Bluestar Exchange which targeted mainly families was rebranded by the company in early April 2006. The original aim of the brand was to make Giordano more appealing to the budget conscious shopper. The target of the change was to make Bluestar Exchange, now BSX which the first store is opened in Lung Cheung Mall in Hong Kong, into a brand more appealing to the young and to those young at heart. The brand’s new direction involves simplifying everything and offering new designs and styles to give BSX an edgy and urban attitude.
Positioning
According to Keller, Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market. The goal is to locate the brand in the minds of consumers to maximize the potential benefit to the firm.
Positioning is not the only step in effective marketing. Effective marketing begins with research into the local market place to discover segments that might be dissatisfied with the current offerings. The company then chooses target segments to which it can provide a superior offering. Positioning is the next step whereby the company communicates what it offers to the target market segments. Note that the company cannot position without first doing segmentation and targeting.
Positioning starts with a product, such as a piece of merchandise, a service, a company, an institution or even a person. But positioning is not what a company does to a product. Positioning is what a company does to the mind of the prospect. That is a company positions the product in the mind of prospect (customer).
If a company does a poor job of positioning, the market will be confused. But if the company does an excellent job of positioning, then it can work out the rest of its marketing planning and differentiations from its positioning strategy.
Giordano’s current positioning to be that of “value – for – money” or “quality merchandise at affordable prices” (product differentiation). Giordano is identified the positioning to be “the high level of service provided to customers” (service differentiation).
CRITICAL SUCCESS FACTOR
Key Competitive Strengths
Giordano’s home base Hong Kong was flooded with retailers, both big and small. To beat the dog – eat – dog competition prevalent in Asia, especially Hong Kong, the founder, Jimmy Lay felt that Giordano must have a distinctive competitive advantage. Although many retail outlets in Hong Kong competed almost exclusively on price, Lay felt differently about Giordano. Nothing successful Western retailers, Lay astutely observed that there were other key factors for success. He started to benchmark Giordano against best practices practice organizations along four key areas: (1) computerization (from The Limited), (2) a tightly controlled menu (from McDonald’s), (3) Frugality (from Wal-Mart) and (4) value pricing (from Marks & Spencer)
The emphasis on service and the value – for – money concept had proven to be successful. Lai was convinced that the product is only half of Giordano sells. Service was the other half and Lai believed that service that was the best way to make customers to return to Giordano again and again. Lay said, “We are not just a shirt retailer, we are not just an apparel retailer. We are also a service retailer because we sell felling. Let’s make a guy feels good about coming into our stores”.
Computerization
In markets with expensive retail space, retailers would try to minimize every square foot of the store for sales opportunities. Giordano was no different. Its strategy involved not having a back storeroom in each store. Instead, a central distribution center replaced the function of a back storeroom. With information technology (IT), Giordano was able to skillfully manage its inventory and forecast demand. When an item was sold, the barcode information, indentifying size, color, style and price was recorded by the point – of – sale cash register and transmitted to the company’s main computer. At the end of each day, the information was compiled sales information became the store’s order for the following day. Orders were filled during the night and were ready for delivery by early morning, ensuring that before a Giordano store opened for business, new inventory was already on the shelves.
The use of technology also afforded more efficient inventory holding. Giordano’s inventory turnover on sales was reduced from 58 days in 1999, allowing it to thrive on lower gross margins. Savings were passed to customers, thus reinforcing its value-for-money philosophy. All in, despite the lower margins, Giordano was still able to post the healthy profits. Such efficiency became a crucial factor when periodic price wars were encountered. Giordano was able to carve out ever-greater slices of the market, because it was easy money competing against companies that were used to relying on high gross margins to make up for slow inventory turnover.
Value Pricing
Regarding to Jimmy Lai, the rationale for Giordano’s value for money explained as ‘Consumers are learning a lot better about what value is. Out of ignorance, people chose the brand. But the label does not matter, so the business has become value driven, because when people recognize value that is the only game in town. So we always ask ourselves how can we sell it cheaper, make it more convenient for the consumer to buy and deliver faster today than yesterday. That is all value, because convenience is value for the consumer. Time is value for the customer.
A tightly Controlled Menu
When business becomes successful, there would always be a temptation to expand into more products and services to meet customer’s needs. However, Giordano recognized the importance of limiting its expansion and focusing on one specific area. Charles Fung said, “Focus makes the business more manageable: positioning in the market, keeping the store simple, better inventory management. And we can get the best out of limited resources”. Simplicity and focus were reflected in the way Giordano merchandised its goods. “You’ll see no more than 100 items in a Giordano store. We have 17 core items while other retailers have 200 – 300 items. Merchandising a wide range of products causes retailers to take a longer time to react to market changes.”
Frugality
Frugality for Giordano means curbed spending on advertising and tight inventory control. The basic criteria of success for product should be identified, i.e. it must be difficult for competitors to copy and/or it must take time to copy, to allow Giordano to maintain its advantage at least for some time. With continuous investment in human resources and organizational commitment to service orientation; constant improvement in design and in the efficiency of operations; and efforts in increasing marketing muscle by promoting its brand; most of the key success factors, except site selection, are somewhat sustainable in the medium to long term.
(Please see the summary of Giordano’s key success factors as an attachment).
INTEGRATED MARKETING (MARKETING TOOLS)
Strategy is differentiated from tactics, with greater emphasis on planning, focusing on long term issues and being future oriented with organization – wide impact. Marketing mix which is introduced by Philip Kotler is tactical and must be preceded by strategic decision on STP, namely segmentation, targeting and positioning. (…Philip Kotler, According to Kotler, 2005)
The Marketing mix that Kotler introduced was Product, Price, Place and Promotion. And the three additional Ps have been proposed for guiding service marketing. Personnel is one, in that each service provider will make a certain impression. Process is a second one, in that service can be provided in many different ways: for example, food from a restaurant can be available through table service, buffet and home delivery. Physical evidence suggests that service marketers seek to give their offerings a tangible character by using certificates, tickets, logos and so forth.
Product
A product offer has three characteristics. These are Physical which is the tangible part of the offer. It can be seen, felt, transported. The second one is Function in what a product offer does for us. And the last one is symbolic or psychological or emotional values of a product offer are usually the deciding factor such as brand name.
a. Physical
Giordano offer the casual wear for unisex, male, female and kids. All ranges are consists of 100 items in all Giordano’s store with the 17 cores item. Such as t-shirt, polo shirt, blouses, dress, trouser, pants, short skirts and even tank top and panties for ladies. They also offer other merchandise such bag on Giordano junior, shock, belt, towel until umbrella.
b. Function
Like other retailer who offer the same typical of apparel, Giordano offer the product which has cut, style and size tailored to the Asian Physique. The size offer is from small to extra large for ladies, man and unisex clothing and from 100 size (3 – 4 years old) for Giordano junior.
As an apparel, Giordano can wear anytime and everyday and anywhere to avoid the user from cold and humid climate.
c. Symbolic
A brand is a promise of value. It becomes the organizing concept for all the company’s activities that surround the brand. People are willing to pay a price premium for the stronger brands.
The name of Giordano is associated with “a good quality of apparel with affordable price.” An value-for-money apparel with has consolidated its strong position through its understanding of its Asian customers built up over many years. Tomas Dvoracek, leasing manager at MAF shopping, Dubai said that Giordano as a ‘must have’ retailer. “It is a great brand in its category, with active marketing and growing brand recognition in this region.”
Price
Price is the money or other consideration for which a thing is bought or sold. Thus price determines what actually changes hands between the buyer and seller.
The range of price of Giordano product offer (Indonesia market) is from IDR 99,000 for a ladies tank top until IDR 309,000 for man’s trouser. With IDR 10,000 different for each item. As a Chinese believes that number 4 does not good number specially for business, therefore Giordano avoid to use number 4 as in their price system. The price pricing tactics took by Giordano Psychological price that is taking advantage of the customer’s psychological desire to pay as little as possible. IDR 99,000 is seen far less than IDR 100.000. IDR 119.000 as far less than IDR 120,000 and so on.
In the same way, their price reduction appears significant. They using the real numbers rather than percentages. Such offering a product IDR 149.000 for two from the original price IDR 119.000 for one instead of saying 5% discount. Giordano believes many people cannot understand even simple percentages.
Value according to Worsam is defined as the intangible package of benefits that the decision making unit believes attached to the product offer.
Value is within the perception of the individual. It is what the customer believes. Not necessarily what is true. Not even what is proven in logic.
As a mention before that Giordano is value for money product. The apparel which offers a good quality product in affordable price.
Place
Professor Jerry McCarthy introduced the scheme in his first edition of marketing (Circa 1960). He took his Ph.D at Northwestern University and studied under Professor Richard Clewett, who used the framework product, price, distribution and promotion. Jerry changed “distribution” to “place.
By all means, place refers to the channels of distribution that the supplier chooses. Depending on the type of product offer it must be placed close to the target customer or the target customer must be persuaded to come to the offer.
Giordano was able to consistently to sell value for money merchandise through careful selection of suppliers, strict cost control and resisting the temptation to increase retail prices unnecessarily. For instance, to provide greater shopping convenience to customers, Giordano in Singapore located its operations in densely populated housing estates in addition to its outlets in the traditional downtown retail areas. E.g. additional Giordano outlet in the Hougang avenue cause this area has many HDB (flat and apartment build by government). Bugis street cause many people (target market) pass by this street on foot.
However according to Chairman and CEO, Peter Lau, “depending on the brand and the market, Giordano generally prefers stores that measure about 1,100 square feet (100 meter square meter), though the company is looking at bigger sites in high – traffic areas of malls.” But in most markets Giordano preference is to open inside shopping malls because of the climate. “High street locations are good for their flagship stores, such as Hong Kong, Singapore, Korea, etc.”
(See the summary of Giordano’s key success factors as attachment)
Promotion
Promotion’s role is communication. There are 4 tools in the promotions mix, Public relation which defines as the planned and sustained effort to establish and maintain goodwill and mutual understanding between a company and its public. Advertising is paid and non – personal form of communication which works through the media to its target audiences. Sales promotion is the third non personal tool which works close to the individual customers but these is no personal contact between people. The last one is personal selling which is the only personal tools of promotional.
Charles Fung, Giordano’s chief operations officer and executive director said, ‘Giordano spends a large proportion of its turnover on advertising and promotions. No retailer of our size spends as much as us’. For the past five years, Giordano in Singapore had been spending about S$1.5 million (HK$6.675 million) to S$2.0 million (HK$8.9 million) annually on its advertising and promotional activities. It won the Top Advertiser Award from 1991 to 1994. Up to June 30, 2000, total advertising and promotion expenditure for the Group amounted to HK$41.5 million, or 3% of the Group’s retail turnover. In addition to its big budget, Giordano’s advertising and promotion campaigns were creative and appealing. One such campaign was the ‘Round the Clock Madness Shopping’ with the Singapore radio station FM93.3 on 1 May 1994. Different clothing items were discounted between 10-60% at various times beginning at midnight. For example, jeans were offered at a 20% discount from 12 a.m. to 1 a.m.,while polo shirts and T-shirts were given a 30% discount from 1 a.m. to 2 a.m., and then shorts at a 40% discount from 2 a.m. to 3 a.m. To keep listeners awake and excited, the product categories were on sale at each time slot were only released at the specified hour, so that nobody knew the next items that would be on this special sale. Listeners to the radio station were cajoled into coming to Giordano stores throughout the night (Ang 1996). In 1996, Giordano won the Singapore Ear Award. Its English radio commercial was voted by listeners to be one of the best, with the most creative English jingle.
Another success was its ‘Simply Khakis’ promotion, launched in April 1999, which emphasized basic, street-culture style that ‘mixed and matched’ and thus fitted all occasions. In Singapore, within days of its launch, the new line sold out and had to be re-launched two weeks later. By October 1999, over a million pairs of khaki trousers and shorts had been sold. This success could be attributed partly to its clearly defined communications objectives, as Garrett Bennett, Giordano’s Executive Director in charge of merchandising and operations, said, ‘We want to be the key provider of the basics: khakis, jeans and the white shirt’. Elsewhere in the region, sales were booming for Giordano, despite only moderate recovery experienced in the retail industry. Giordano’s strength in executing innovative and effective promotional strategies helped the retailer to reduce the impact of the Asian crisis on its sales and take advantage of the slight recovery seen in early 1999. Aggressive advertising and promotions also played a significant role in the successful re-marketing of its core brand and re-launch or introduction of sister brands, Giordano Ladies, Giordano Junior and Bluestar Exchange.
Physical Evidence
Physical evidence available to the customer must match the expectation created by the promotion. If it doesn’t, the customer will probably withdraw.
Physical evidence is part of the service offer to the customer. Giordano generally stores measure about 1,100 square feet (100 meter square meter) to put the product offer to customer. However it’s depend on the product line. I.e. Giordano outlet in Bugis streets (Singapore) is more compact compare than Giordano Concept outlets in the orchard road.
The Giordano’s logo also part of the physical evidence that included in their marketing mix. To meet the customer satisfaction, Giordano willing to removed the logo from some of it’s the merchandise as some customers liked the quality but not the value for money image of the Giordano brand.
(please see view of Giordano logo as attachment)
People (Personnel)
For Giordano investment in service meant investment in people.
Excellence in service: continual commitment to providing excellent customer service and response. This is the result of integration of the corporate philosophy and leadership, service orientation of supporting functions like human resource policies (e.g., selection, training and remuneration of frontline staff) and information systems, and performance monitoring (e.g., regular evaluations of service standards at store level and mystery shopping)
Giordano’s philosophy of quality service could be observed in its overseas outlets as well. Its Singapore operations, for example, achieved ISO 9002 certification. Its obsession with providing excellent customer service was best described by Fung. ‘The only way to keep abreast with stiff competition in the retail market is to know the customers’ needs and serve them well. Customers pay our paychecks; they are our bosses … Giordano considers service to be a very important element [in trying to draw customers] … service is in the blood of every member of our staff’.
(See the summary of Giordano’s key success factor)
Process
In markets with expensive retail space, retailers would try to maximize every square foot of the store for sales opportunities. Giordano was no different. Its strategy involved not having a back store room in each store. Instead, a central distribution center replaced the function of a back store room. With information technology (IT), Giordano was able to skillfully manage its inventory and forecast demand. When an item was sold, the barcode information, identifying size, color, style and price was recorded by the point-of-sale cash register and transmitted to the company’s main computer. At the end of each day, the information was compiled at the store level and sent to the sales department and the distribution center. The compiled sales information became the store’s order for the following day. Orders were filled during the night and were ready for delivery by early morning, ensuring that before a Giordano store opened for business, new inventory was already on the shelves.
GIORDANO’S COMPETITORS
In The business, every company has few or even many of competitors. Some companies feel the competition is a threat for their business, while the others take it as an asset to set a better planning strategy and innovation over the product of goods and services. In the mass production business such value for money apparel, too many companies will put out copycat products. Price of products in a crowded market will inevitably fall.
Giordano has been called the Gap of Asia. Roughly five years ago, that might have been correct. However since 2000, Giordano international has been blazing its own trail, repositioning itself and expanding its range of brands. Further, the Hong Kong based apparel chain’s modest ambitions are only to become “the best and biggest world brand in apparel retailing.
Until recently the main competitors for low-priced apparel were Hang Ten, Bossini and Benetton which were generally positioned as low-price retailers offering reasonable quality and service also emphasized versatility and simplicity. However the crisis was pushed formerly more up-market firms such as Esprit and Theme to compete for Giordano’s value-for-money segment.
Esprit
Esprit is an international fashion lifestyle brand, principally engaged in the image and product design, sourcing, manufacturing and retail and wholesale distribution of a wide range of women’s, men’s and children’s apparel, footwear, accessories and other products under the Esprit brand name. The esprit name was promoted as a lifestyle image and products were strategically positioned as good quality and value for money which is a position that Giordano was occupying. The Esprit main market is Europe. However the esprit brand products were principally sold via directly managed retail, outlets, wholesale customer (it is including department stores, specialty stores and franchisees) and by licensees in relation to products manufactured under license, principally through the licensees’ own distribution networks.
Theme
Theme International Holdings Limited was founded in Hong Kong in 1986 by Chairman and Chief Executive Officer Kenneth Lai. He identified a niche in the local market, for high-quality, fashionable ladies’ business wear, although it subsequently expanded into casual wear. The Theme label and chain was in direct competition with Giordano Ladies’. From the first store in 1986 to a chain comprising over 200 outlets in Hong Kong, China, Korea, Macao, Taiwan, Singapore, Malaysia, Indonesia, The Philippines, Japan, Thailand, Canada and Holland, the phenomenal growth of Theme was built on a vertically integrated corporate structure and advanced management system. However, its ambitious expansion proved to be costly in view of the crisis, with interest soaring on high levels of debt. In 1999, the company announced a HK$ 106.1 million net loss for the six months to 30 September 1998 and it closed 23 retail outlets in Hong Kong, which traded under its subsidiary The Clothing Shop. Theme International had since been acquired by High Fashion International, a Hong Kong – based fashion retailer specializing in up – market, trendy apparel.
In general, although these firms had slightly different positioning strategies and targeted dissimilar but overlapping segments, they all competed in a number of similar areas. For example, all firms heavily emphasized advertising and sales promotion – selling fashionable clothes at attractive prices. Almost all stores were also primarily situated in good ground – floor locations, drawing high – volume traffic and facilitating shopping, browsing and impulse buying. However, Giordano clearly distinguished itself from its competitors had been able to match.
The Gap
A threat from United States – based The Gap was looming. The Gap with the positioning “value-for-money” and mid-priced but trendy fashion as Giordano occupied, also the same target market as shown in the attachment that Giordano was also aware that the American retailer was invading Asia. The Gap was already in Japan. After 2005, when it was planned that garment quotas would be eliminated, imports into the region should become more cost-effective. Therefore, Giordano had to examine whether its intention to shift towards a higher position from its current value-for-money position was feasible.
STRATEGY OF GIORDANO TO ENTER GLOBAL MARKET
Strategy is with greater of emphasis on planning, focusing on long – term issues and being future oriented, with organization – wide impact. More importantly, an assessment of core competencies and sustainable competitive advantages, which are primary considerations for strategy formulation, is required. Core element of Giordano’s strategy should be maintained when entering any country. This is the way to ensure a consistency in service and merchandise quality, which strengthens brand equity and positioning and facilitates the achievement marketing communications objectives. In this respect, strategy should be seen as something to remain intact in any country. What could be changed are the tactics of implementation.
Giordano Company’s main competitive strengths which can be adapted to other market are: the experience of the employees, inventory controlled system and HR practices. However, the policies should be different for each country and can use the established distribution, marketing and inbound channels members in order to market their product outside the home country.
IT strategy which is currently used by Giordano, it should not adopt the same strategy for other countries where they are planning to expand their business. Because the IT infrastructure for each country in Asia and other continents may not be the same and the current IT strategy of Giordano may not be supported by that particular country’s technological structure.
Giordano needs more efficient, cost effective, and secure internal communication platform which will be link its many sites in Hong Kong and other host countries. As the cross border business of Giordano is increasing, the company needed a comprehensive communications tool that would help Giordano employees conduct multisite management meetings, share documents and collaborate for fast business decisions and quality customer service. In such scenario Giordano can go for partnership with the IT Company (Like Microsoft), through which they can install such a server and software through which they can equip their staff with real time teamwork and presence capabilities that dramatically increased productivity. At the same time they can decrease its multi-national direct dial and travel cost, as well as IT management costs.
The marketing mix strategies that are followed by the Giordano for the existing market should not be the same for new markets where the company is willing to enter. The marketing mix strategies mainly deal with arrangements of the 4 Ps’. So the strategies regarding product price, price, place and promotion should not be the same for all target countries as the market differs in terms of their economic, cultural, social and political environment. But the successful strategies which are currently used for other market can be used by Giordano as guidelines and can develop tactical strategies for different market according to the market situation and customers’ requirement.
RECOMMENDATIONS
“Giordano has a strong following name recognition in Asia”, said Sebastian Skiff, Cushman and Wakefield’s head of retail in the Asia – Pacific. “The brand has traditionally offered a product, cut, style and size tailored to the Asian Physique. It has continued to keep the store design, marketing and product in fashion and adapt quickly to the changing whims of its customers.”
Giordano has perfectly focused in the value-for-money concept and everything they do is managed at a world-class standard. The management conducted their business in such an excellent and professional manner which helped this brand to reach from Asia to the Middle East and India, Australia, Eastern Europe, and now in North America.
While the positioning of Giordano’s brand should remain consistent across markets, the marketing mix could be varied to tailor to the specific market conditions. This is not difficult considering Giordano’s policy to empower local managers who have more experience and knowledge of the local market, to make implementation decisions like advertising and promotion. Hence, this KSF may be transferable to new markets in Asia.
The key to good customer service lies in its philosophy, which is manifested in various HR policies e.g., recruitment and training. Thus, it is likely for Giordano to transfer this to new markets to the extent that it could maintain service levels by providing training to local staff, monitoring performance, etc. More importantly, as the Service Gap Model of customer satisfaction suggests, it should evaluate service expectations from the customer’s perspective rather than its own, and formulate standards accordingly. For instance, Giordano should develop a greater understanding of the different service needs of its international customers by gathering feedback from customers and utilizing it to fine-tune its service standard for those markets.
Despite Giordano’s efforts in ensuring high quality service in new markets, it may face some difficulty in positioning itself on service in some countries outside of Asia. For instance, in Japan and the US, expectations on service are higher and it may be almost impossible for Giordano to differentiate itself from those competitors with high quality service. This is in contrast to much of Asia, where good service is the exception rather than the norm.
STRATEGY TOOK BY GIORDANO INDONESIA
Giordano Indonesia which has branch office in Kelapa Gading, North Jakarta uses the same strategy as their core business strategy. However it might be different in the tactical due to the cultural, political reason and the market condition. We called STEEPLE.
The place or outlet which is chosen by Giordano Indonesia, is more to upper market level it is due to the price that Giordano Indonesia offered to the customer and buying power in Indonesia.
The price is about the same with other region. However foreign exchanged involve to create the price is higher than other region e.g., Singapore and Malaysia. In the other hand, buying power of Indonesian people is lower than other Giordano’s expansion region, makes the target slightly different. To meet the target market in Indonesia, Giordano chose mostly middle up mall to open their outlet.
It is not only due to the price and market condition. Culture in Indonesia where the people likes to hanging around in the mall is another consideration. One more consideration is the climate in Indonesia which is hot and dusty makes people do not feel convenience to wall in the street for shop, like in Singapore, Hong Kong or Korea.
· Coming out with new line of product (e.g. babies clothes)
· Further reduction in manufacturing cost by farming out to countries
such as Myanmar, Cambodia, etc.
· Mass production
THREATS
· Has many competitors
· Customer will be easily switched to other retailer.
· Giordano has been facing the situation of saturation market.
Strength
Giordano has received awards such as: The American Service Excellence Award, ISO 9002 Award and People Developer Award which helped Giordano to establish their brand as a familiar one in over 30 countries. All these competitive advantages and sources should be maintained by Giordano in order to keep its current competitive position and there are some other competitive advantages that should be developed by Giordano in future. The future competitive advantages can be gained through investment into the development of employees and continued development of a learning organization which may not be gained by the other competitors.
· Mass production
THREATS
· Has many competitors
· Customer will be easily switched to other retailer.
· Giordano has been facing the situation of saturation market.
Strength
Giordano has received awards such as: The American Service Excellence Award, ISO 9002 Award and People Developer Award which helped Giordano to establish their brand as a familiar one in over 30 countries. All these competitive advantages and sources should be maintained by Giordano in order to keep its current competitive position and there are some other competitive advantages that should be developed by Giordano in future. The future competitive advantages can be gained through investment into the development of employees and continued development of a learning organization which may not be gained by the other competitors.
The tactical of customer service of Giordano is customizing based on the cultural of the expansion country. Giordano has 39 outlets in Hong Kong alone and employs 10,000 people. "We just can't force everyone to deliver the kind of service that meets the standard we have set," Peter Lau, Chairman of Giordano says. "We have to let them, our employees, find out for themselves what good service is all about, and to encourage them to manage themselves," he says. That way, "good service becomes the staff's own culture and they are going to defend it".
Excellence in design: fast and market-driven new product development, due to flat organizational structure, excellent organizational communication and dedication to the needs of customers (e.g., style, fabrics, etc.)
Excellence in management of operations, logistics and information technology systems: this includes effective supply chain management, inventory control, distribution, and integration of purchasing and selling functions. Cost savings from efficient operations are transferred to customers, thus delivering “value-for-money”.
Excellence in marketing and branding: strong positioning, brand equity for excellent service and ability to deliver “value-for-money”, consistent execution of advertising and promotion to strengthen brand image.
Excellence in service: continual commitment to providing excellent customer service and response. This is the result of integration of the corporate philosophy and leadership, service orientation of supporting functions like human resource policies (e.g., selection, training and remuneration of frontline staff) and information systems, and performance monitoring (e.g., regular evaluations of service standards at store level and mystery shopping)
Weaknesses
Giordano is hardly makes advertisement of their product. Even thought they have a new range in the market. As we know that advertising is made purposely to create the awareness in the market to our target market. For the time being, some people get confuse of their product range. Some people don’t even know that Giordano has several product ranges. To achieve people desire or make them even loyal to our brand, creating awareness is a must.
Giordano has not many products variety due to one of Giordano’s product strategy is to sell a number of core products in its stores. While other retailers have 200 – 300 items, Giordano features no more than 100 variants of 17 core items.
Opportunities
At this moment Giordano has a range for the kids, named Giordano’s junior with the segmentation is for kid on 3-10 years old. Giordano should consider have another range for babies. As we understand that babies product is more expensive, cause its use less material than adult, but has almost same price. And usually parent to be, willing to buy clothes for their baby.
Many of the apparel company such Mango, The Gap or Esprit, are manufactured their product in the other country in order to cut down the production cost. Except China, Giordano may consider to manufacture their product to the growth country such as Myanmar and Cambodia, which has lower cost manpower.
Threats
Despite its reputation for service, the company, nevertheless, is facing tremendous competitive pressure. Over the years, there have been many imitators who have been trying to take a cut from the pie. Their common strategy is to undercut Giordano, the market leader, with lower prices. "If we have to compete with them on price alone, it would be suicidal," Lau says.
Giordano is facing stiff competition from many copycats. And it is become a very difficult time for them. As it tries to pull itself away from cut-throat competition by moving up market, it must tackle the twin problems of ingrained consumer perception and entrenched internal culture arising from its roots as a vendor of mass-market clothing.
MARKETING STRATEGY
All marketing strategy is built on STP – Segmentation, Targeting and Positioning. A company discovers different needs and groups in the marketplace, targets those needs and groups that it can satisfy in a superior way and then positions its offering so that the target market recognizes the company’s distinctive offering and image.
Segmentation
The original idea of mass production, mass distribution and mass advertising was adopted by companies making mass products used by considerable number of people such as soap, refrigerator, car, even apparel and so on. Thus P&G made Ivory soap and tried to get everyone to buy it or Coca Cola made its cola and tried to get everyone to drink it. But people differ in their tastes and this affords an opportunity for challengers and nice marketers to go after narrower market segments.
In response the large company started to differentiate their product offerings for different large segmentation of the market. Thus a company has three possible strategies, go after everyone with one product (undifferentiated marketing); go after different segments with different products (differentiated marketing) or go after one segment as a specialist (concentrated marketing).
Giordano is doing the differentiated marketing. It is mean that Giordano go after different segment for different product. With the 5 ranges of product Giordano is segmented for male and female (unisex) and even kids from 3 years old. The social level from middle – lower social status up to middle – high social status.
Targeting
Giordano recognized the importance of limiting its expansion and focusing on one specific area. According to Charles Fung, the Chief Operations Officer and Executive Director of Giordano for South – East Asia,” Focus makes the business more manageable”. Simplicity and focus were reflected in the way Giordano merchandised its goods.
A. Giordano
Mainstream Giordano Focusing on quality apparel for men and women. Present in all markets in which Giordano International Limited operates. The brand’s goal is to be appealing to the everyday shopper, anywhere at anytime.
B. Giordano Ladies
It is an upscale market women’s clothing much on the line with CUE. Mainly operates in the Asia Pacific region. Prominent in mainland China, Hong Kong, Malaysia and Singapore.
C. Giordano Concept
A more up-market brand of Giordano casual attire with a high emphasis on its own “less is more” retail approach. The brand focuses on the idea that less is more than just more, but that is cool as well. The brand’s said “less is cool” approach involves innovative and modern black, white and grey monochromes in a large variety of styles. The approach gives the brand a very up-market casual clothes attitude, very much on par with other international brands Polo Ralph Lauren and Lacoste. The concepts range is significantly more exclusive than mainstream Giordano, as such Giordano Concepts only extends itself to the Asia Pacific market, in particular Hong Kong, China, Taiwan and only one store in both Singapore and Malaysia.
D. Giordano Junior
Children clothing stores that sell a variety of stylistic and basic apparels for kids aged 3 to 10 years old. Operated mainly in the Asia Pasific region. Prominent in most Asia Pacific nations and Australia.
E. Giordano Bluestar Exchange
A more affordable brand of Giordano casual clothes for the budget conscious shopper. Prominent in most countries which Giordano operates. Giordano Bluestar Exchange which targeted mainly families was rebranded by the company in early April 2006. The original aim of the brand was to make Giordano more appealing to the budget conscious shopper. The target of the change was to make Bluestar Exchange, now BSX which the first store is opened in Lung Cheung Mall in Hong Kong, into a brand more appealing to the young and to those young at heart. The brand’s new direction involves simplifying everything and offering new designs and styles to give BSX an edgy and urban attitude.
Positioning
According to Keller, Positioning is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market. The goal is to locate the brand in the minds of consumers to maximize the potential benefit to the firm.
Positioning is not the only step in effective marketing. Effective marketing begins with research into the local market place to discover segments that might be dissatisfied with the current offerings. The company then chooses target segments to which it can provide a superior offering. Positioning is the next step whereby the company communicates what it offers to the target market segments. Note that the company cannot position without first doing segmentation and targeting.
Positioning starts with a product, such as a piece of merchandise, a service, a company, an institution or even a person. But positioning is not what a company does to a product. Positioning is what a company does to the mind of the prospect. That is a company positions the product in the mind of prospect (customer).
If a company does a poor job of positioning, the market will be confused. But if the company does an excellent job of positioning, then it can work out the rest of its marketing planning and differentiations from its positioning strategy.
Giordano’s current positioning to be that of “value – for – money” or “quality merchandise at affordable prices” (product differentiation). Giordano is identified the positioning to be “the high level of service provided to customers” (service differentiation).
CRITICAL SUCCESS FACTOR
Key Competitive Strengths
Giordano’s home base Hong Kong was flooded with retailers, both big and small. To beat the dog – eat – dog competition prevalent in Asia, especially Hong Kong, the founder, Jimmy Lay felt that Giordano must have a distinctive competitive advantage. Although many retail outlets in Hong Kong competed almost exclusively on price, Lay felt differently about Giordano. Nothing successful Western retailers, Lay astutely observed that there were other key factors for success. He started to benchmark Giordano against best practices practice organizations along four key areas: (1) computerization (from The Limited), (2) a tightly controlled menu (from McDonald’s), (3) Frugality (from Wal-Mart) and (4) value pricing (from Marks & Spencer)
The emphasis on service and the value – for – money concept had proven to be successful. Lai was convinced that the product is only half of Giordano sells. Service was the other half and Lai believed that service that was the best way to make customers to return to Giordano again and again. Lay said, “We are not just a shirt retailer, we are not just an apparel retailer. We are also a service retailer because we sell felling. Let’s make a guy feels good about coming into our stores”.
Computerization
In markets with expensive retail space, retailers would try to minimize every square foot of the store for sales opportunities. Giordano was no different. Its strategy involved not having a back storeroom in each store. Instead, a central distribution center replaced the function of a back storeroom. With information technology (IT), Giordano was able to skillfully manage its inventory and forecast demand. When an item was sold, the barcode information, indentifying size, color, style and price was recorded by the point – of – sale cash register and transmitted to the company’s main computer. At the end of each day, the information was compiled sales information became the store’s order for the following day. Orders were filled during the night and were ready for delivery by early morning, ensuring that before a Giordano store opened for business, new inventory was already on the shelves.
The use of technology also afforded more efficient inventory holding. Giordano’s inventory turnover on sales was reduced from 58 days in 1999, allowing it to thrive on lower gross margins. Savings were passed to customers, thus reinforcing its value-for-money philosophy. All in, despite the lower margins, Giordano was still able to post the healthy profits. Such efficiency became a crucial factor when periodic price wars were encountered. Giordano was able to carve out ever-greater slices of the market, because it was easy money competing against companies that were used to relying on high gross margins to make up for slow inventory turnover.
Value Pricing
Regarding to Jimmy Lai, the rationale for Giordano’s value for money explained as ‘Consumers are learning a lot better about what value is. Out of ignorance, people chose the brand. But the label does not matter, so the business has become value driven, because when people recognize value that is the only game in town. So we always ask ourselves how can we sell it cheaper, make it more convenient for the consumer to buy and deliver faster today than yesterday. That is all value, because convenience is value for the consumer. Time is value for the customer.
A tightly Controlled Menu
When business becomes successful, there would always be a temptation to expand into more products and services to meet customer’s needs. However, Giordano recognized the importance of limiting its expansion and focusing on one specific area. Charles Fung said, “Focus makes the business more manageable: positioning in the market, keeping the store simple, better inventory management. And we can get the best out of limited resources”. Simplicity and focus were reflected in the way Giordano merchandised its goods. “You’ll see no more than 100 items in a Giordano store. We have 17 core items while other retailers have 200 – 300 items. Merchandising a wide range of products causes retailers to take a longer time to react to market changes.”
Frugality
Frugality for Giordano means curbed spending on advertising and tight inventory control. The basic criteria of success for product should be identified, i.e. it must be difficult for competitors to copy and/or it must take time to copy, to allow Giordano to maintain its advantage at least for some time. With continuous investment in human resources and organizational commitment to service orientation; constant improvement in design and in the efficiency of operations; and efforts in increasing marketing muscle by promoting its brand; most of the key success factors, except site selection, are somewhat sustainable in the medium to long term.
(Please see the summary of Giordano’s key success factors as an attachment).
INTEGRATED MARKETING (MARKETING TOOLS)
Strategy is differentiated from tactics, with greater emphasis on planning, focusing on long term issues and being future oriented with organization – wide impact. Marketing mix which is introduced by Philip Kotler is tactical and must be preceded by strategic decision on STP, namely segmentation, targeting and positioning. (…Philip Kotler, According to Kotler, 2005)
The Marketing mix that Kotler introduced was Product, Price, Place and Promotion. And the three additional Ps have been proposed for guiding service marketing. Personnel is one, in that each service provider will make a certain impression. Process is a second one, in that service can be provided in many different ways: for example, food from a restaurant can be available through table service, buffet and home delivery. Physical evidence suggests that service marketers seek to give their offerings a tangible character by using certificates, tickets, logos and so forth.
Product
A product offer has three characteristics. These are Physical which is the tangible part of the offer. It can be seen, felt, transported. The second one is Function in what a product offer does for us. And the last one is symbolic or psychological or emotional values of a product offer are usually the deciding factor such as brand name.
a. Physical
Giordano offer the casual wear for unisex, male, female and kids. All ranges are consists of 100 items in all Giordano’s store with the 17 cores item. Such as t-shirt, polo shirt, blouses, dress, trouser, pants, short skirts and even tank top and panties for ladies. They also offer other merchandise such bag on Giordano junior, shock, belt, towel until umbrella.
b. Function
Like other retailer who offer the same typical of apparel, Giordano offer the product which has cut, style and size tailored to the Asian Physique. The size offer is from small to extra large for ladies, man and unisex clothing and from 100 size (3 – 4 years old) for Giordano junior.
As an apparel, Giordano can wear anytime and everyday and anywhere to avoid the user from cold and humid climate.
c. Symbolic
A brand is a promise of value. It becomes the organizing concept for all the company’s activities that surround the brand. People are willing to pay a price premium for the stronger brands.
The name of Giordano is associated with “a good quality of apparel with affordable price.” An value-for-money apparel with has consolidated its strong position through its understanding of its Asian customers built up over many years. Tomas Dvoracek, leasing manager at MAF shopping, Dubai said that Giordano as a ‘must have’ retailer. “It is a great brand in its category, with active marketing and growing brand recognition in this region.”
Price
Price is the money or other consideration for which a thing is bought or sold. Thus price determines what actually changes hands between the buyer and seller.
The range of price of Giordano product offer (Indonesia market) is from IDR 99,000 for a ladies tank top until IDR 309,000 for man’s trouser. With IDR 10,000 different for each item. As a Chinese believes that number 4 does not good number specially for business, therefore Giordano avoid to use number 4 as in their price system. The price pricing tactics took by Giordano Psychological price that is taking advantage of the customer’s psychological desire to pay as little as possible. IDR 99,000 is seen far less than IDR 100.000. IDR 119.000 as far less than IDR 120,000 and so on.
In the same way, their price reduction appears significant. They using the real numbers rather than percentages. Such offering a product IDR 149.000 for two from the original price IDR 119.000 for one instead of saying 5% discount. Giordano believes many people cannot understand even simple percentages.
Value according to Worsam is defined as the intangible package of benefits that the decision making unit believes attached to the product offer.
Value is within the perception of the individual. It is what the customer believes. Not necessarily what is true. Not even what is proven in logic.
As a mention before that Giordano is value for money product. The apparel which offers a good quality product in affordable price.
Place
Professor Jerry McCarthy introduced the scheme in his first edition of marketing (Circa 1960). He took his Ph.D at Northwestern University and studied under Professor Richard Clewett, who used the framework product, price, distribution and promotion. Jerry changed “distribution” to “place.
By all means, place refers to the channels of distribution that the supplier chooses. Depending on the type of product offer it must be placed close to the target customer or the target customer must be persuaded to come to the offer.
Giordano was able to consistently to sell value for money merchandise through careful selection of suppliers, strict cost control and resisting the temptation to increase retail prices unnecessarily. For instance, to provide greater shopping convenience to customers, Giordano in Singapore located its operations in densely populated housing estates in addition to its outlets in the traditional downtown retail areas. E.g. additional Giordano outlet in the Hougang avenue cause this area has many HDB (flat and apartment build by government). Bugis street cause many people (target market) pass by this street on foot.
However according to Chairman and CEO, Peter Lau, “depending on the brand and the market, Giordano generally prefers stores that measure about 1,100 square feet (100 meter square meter), though the company is looking at bigger sites in high – traffic areas of malls.” But in most markets Giordano preference is to open inside shopping malls because of the climate. “High street locations are good for their flagship stores, such as Hong Kong, Singapore, Korea, etc.”
(See the summary of Giordano’s key success factors as attachment)
Promotion
Promotion’s role is communication. There are 4 tools in the promotions mix, Public relation which defines as the planned and sustained effort to establish and maintain goodwill and mutual understanding between a company and its public. Advertising is paid and non – personal form of communication which works through the media to its target audiences. Sales promotion is the third non personal tool which works close to the individual customers but these is no personal contact between people. The last one is personal selling which is the only personal tools of promotional.
Charles Fung, Giordano’s chief operations officer and executive director said, ‘Giordano spends a large proportion of its turnover on advertising and promotions. No retailer of our size spends as much as us’. For the past five years, Giordano in Singapore had been spending about S$1.5 million (HK$6.675 million) to S$2.0 million (HK$8.9 million) annually on its advertising and promotional activities. It won the Top Advertiser Award from 1991 to 1994. Up to June 30, 2000, total advertising and promotion expenditure for the Group amounted to HK$41.5 million, or 3% of the Group’s retail turnover. In addition to its big budget, Giordano’s advertising and promotion campaigns were creative and appealing. One such campaign was the ‘Round the Clock Madness Shopping’ with the Singapore radio station FM93.3 on 1 May 1994. Different clothing items were discounted between 10-60% at various times beginning at midnight. For example, jeans were offered at a 20% discount from 12 a.m. to 1 a.m.,while polo shirts and T-shirts were given a 30% discount from 1 a.m. to 2 a.m., and then shorts at a 40% discount from 2 a.m. to 3 a.m. To keep listeners awake and excited, the product categories were on sale at each time slot were only released at the specified hour, so that nobody knew the next items that would be on this special sale. Listeners to the radio station were cajoled into coming to Giordano stores throughout the night (Ang 1996). In 1996, Giordano won the Singapore Ear Award. Its English radio commercial was voted by listeners to be one of the best, with the most creative English jingle.
Another success was its ‘Simply Khakis’ promotion, launched in April 1999, which emphasized basic, street-culture style that ‘mixed and matched’ and thus fitted all occasions. In Singapore, within days of its launch, the new line sold out and had to be re-launched two weeks later. By October 1999, over a million pairs of khaki trousers and shorts had been sold. This success could be attributed partly to its clearly defined communications objectives, as Garrett Bennett, Giordano’s Executive Director in charge of merchandising and operations, said, ‘We want to be the key provider of the basics: khakis, jeans and the white shirt’. Elsewhere in the region, sales were booming for Giordano, despite only moderate recovery experienced in the retail industry. Giordano’s strength in executing innovative and effective promotional strategies helped the retailer to reduce the impact of the Asian crisis on its sales and take advantage of the slight recovery seen in early 1999. Aggressive advertising and promotions also played a significant role in the successful re-marketing of its core brand and re-launch or introduction of sister brands, Giordano Ladies, Giordano Junior and Bluestar Exchange.
Physical Evidence
Physical evidence available to the customer must match the expectation created by the promotion. If it doesn’t, the customer will probably withdraw.
Physical evidence is part of the service offer to the customer. Giordano generally stores measure about 1,100 square feet (100 meter square meter) to put the product offer to customer. However it’s depend on the product line. I.e. Giordano outlet in Bugis streets (Singapore) is more compact compare than Giordano Concept outlets in the orchard road.
The Giordano’s logo also part of the physical evidence that included in their marketing mix. To meet the customer satisfaction, Giordano willing to removed the logo from some of it’s the merchandise as some customers liked the quality but not the value for money image of the Giordano brand.
(please see view of Giordano logo as attachment)
People (Personnel)
For Giordano investment in service meant investment in people.
Excellence in service: continual commitment to providing excellent customer service and response. This is the result of integration of the corporate philosophy and leadership, service orientation of supporting functions like human resource policies (e.g., selection, training and remuneration of frontline staff) and information systems, and performance monitoring (e.g., regular evaluations of service standards at store level and mystery shopping)
Giordano’s philosophy of quality service could be observed in its overseas outlets as well. Its Singapore operations, for example, achieved ISO 9002 certification. Its obsession with providing excellent customer service was best described by Fung. ‘The only way to keep abreast with stiff competition in the retail market is to know the customers’ needs and serve them well. Customers pay our paychecks; they are our bosses … Giordano considers service to be a very important element [in trying to draw customers] … service is in the blood of every member of our staff’.
(See the summary of Giordano’s key success factor)
Process
In markets with expensive retail space, retailers would try to maximize every square foot of the store for sales opportunities. Giordano was no different. Its strategy involved not having a back store room in each store. Instead, a central distribution center replaced the function of a back store room. With information technology (IT), Giordano was able to skillfully manage its inventory and forecast demand. When an item was sold, the barcode information, identifying size, color, style and price was recorded by the point-of-sale cash register and transmitted to the company’s main computer. At the end of each day, the information was compiled at the store level and sent to the sales department and the distribution center. The compiled sales information became the store’s order for the following day. Orders were filled during the night and were ready for delivery by early morning, ensuring that before a Giordano store opened for business, new inventory was already on the shelves.
GIORDANO’S COMPETITORS
In The business, every company has few or even many of competitors. Some companies feel the competition is a threat for their business, while the others take it as an asset to set a better planning strategy and innovation over the product of goods and services. In the mass production business such value for money apparel, too many companies will put out copycat products. Price of products in a crowded market will inevitably fall.
Giordano has been called the Gap of Asia. Roughly five years ago, that might have been correct. However since 2000, Giordano international has been blazing its own trail, repositioning itself and expanding its range of brands. Further, the Hong Kong based apparel chain’s modest ambitions are only to become “the best and biggest world brand in apparel retailing.
Until recently the main competitors for low-priced apparel were Hang Ten, Bossini and Benetton which were generally positioned as low-price retailers offering reasonable quality and service also emphasized versatility and simplicity. However the crisis was pushed formerly more up-market firms such as Esprit and Theme to compete for Giordano’s value-for-money segment.
Esprit
Esprit is an international fashion lifestyle brand, principally engaged in the image and product design, sourcing, manufacturing and retail and wholesale distribution of a wide range of women’s, men’s and children’s apparel, footwear, accessories and other products under the Esprit brand name. The esprit name was promoted as a lifestyle image and products were strategically positioned as good quality and value for money which is a position that Giordano was occupying. The Esprit main market is Europe. However the esprit brand products were principally sold via directly managed retail, outlets, wholesale customer (it is including department stores, specialty stores and franchisees) and by licensees in relation to products manufactured under license, principally through the licensees’ own distribution networks.
Theme
Theme International Holdings Limited was founded in Hong Kong in 1986 by Chairman and Chief Executive Officer Kenneth Lai. He identified a niche in the local market, for high-quality, fashionable ladies’ business wear, although it subsequently expanded into casual wear. The Theme label and chain was in direct competition with Giordano Ladies’. From the first store in 1986 to a chain comprising over 200 outlets in Hong Kong, China, Korea, Macao, Taiwan, Singapore, Malaysia, Indonesia, The Philippines, Japan, Thailand, Canada and Holland, the phenomenal growth of Theme was built on a vertically integrated corporate structure and advanced management system. However, its ambitious expansion proved to be costly in view of the crisis, with interest soaring on high levels of debt. In 1999, the company announced a HK$ 106.1 million net loss for the six months to 30 September 1998 and it closed 23 retail outlets in Hong Kong, which traded under its subsidiary The Clothing Shop. Theme International had since been acquired by High Fashion International, a Hong Kong – based fashion retailer specializing in up – market, trendy apparel.
In general, although these firms had slightly different positioning strategies and targeted dissimilar but overlapping segments, they all competed in a number of similar areas. For example, all firms heavily emphasized advertising and sales promotion – selling fashionable clothes at attractive prices. Almost all stores were also primarily situated in good ground – floor locations, drawing high – volume traffic and facilitating shopping, browsing and impulse buying. However, Giordano clearly distinguished itself from its competitors had been able to match.
The Gap
A threat from United States – based The Gap was looming. The Gap with the positioning “value-for-money” and mid-priced but trendy fashion as Giordano occupied, also the same target market as shown in the attachment that Giordano was also aware that the American retailer was invading Asia. The Gap was already in Japan. After 2005, when it was planned that garment quotas would be eliminated, imports into the region should become more cost-effective. Therefore, Giordano had to examine whether its intention to shift towards a higher position from its current value-for-money position was feasible.
STRATEGY OF GIORDANO TO ENTER GLOBAL MARKET
Strategy is with greater of emphasis on planning, focusing on long – term issues and being future oriented, with organization – wide impact. More importantly, an assessment of core competencies and sustainable competitive advantages, which are primary considerations for strategy formulation, is required. Core element of Giordano’s strategy should be maintained when entering any country. This is the way to ensure a consistency in service and merchandise quality, which strengthens brand equity and positioning and facilitates the achievement marketing communications objectives. In this respect, strategy should be seen as something to remain intact in any country. What could be changed are the tactics of implementation.
Giordano Company’s main competitive strengths which can be adapted to other market are: the experience of the employees, inventory controlled system and HR practices. However, the policies should be different for each country and can use the established distribution, marketing and inbound channels members in order to market their product outside the home country.
IT strategy which is currently used by Giordano, it should not adopt the same strategy for other countries where they are planning to expand their business. Because the IT infrastructure for each country in Asia and other continents may not be the same and the current IT strategy of Giordano may not be supported by that particular country’s technological structure.
Giordano needs more efficient, cost effective, and secure internal communication platform which will be link its many sites in Hong Kong and other host countries. As the cross border business of Giordano is increasing, the company needed a comprehensive communications tool that would help Giordano employees conduct multisite management meetings, share documents and collaborate for fast business decisions and quality customer service. In such scenario Giordano can go for partnership with the IT Company (Like Microsoft), through which they can install such a server and software through which they can equip their staff with real time teamwork and presence capabilities that dramatically increased productivity. At the same time they can decrease its multi-national direct dial and travel cost, as well as IT management costs.
The marketing mix strategies that are followed by the Giordano for the existing market should not be the same for new markets where the company is willing to enter. The marketing mix strategies mainly deal with arrangements of the 4 Ps’. So the strategies regarding product price, price, place and promotion should not be the same for all target countries as the market differs in terms of their economic, cultural, social and political environment. But the successful strategies which are currently used for other market can be used by Giordano as guidelines and can develop tactical strategies for different market according to the market situation and customers’ requirement.
RECOMMENDATIONS
“Giordano has a strong following name recognition in Asia”, said Sebastian Skiff, Cushman and Wakefield’s head of retail in the Asia – Pacific. “The brand has traditionally offered a product, cut, style and size tailored to the Asian Physique. It has continued to keep the store design, marketing and product in fashion and adapt quickly to the changing whims of its customers.”
Giordano has perfectly focused in the value-for-money concept and everything they do is managed at a world-class standard. The management conducted their business in such an excellent and professional manner which helped this brand to reach from Asia to the Middle East and India, Australia, Eastern Europe, and now in North America.
While the positioning of Giordano’s brand should remain consistent across markets, the marketing mix could be varied to tailor to the specific market conditions. This is not difficult considering Giordano’s policy to empower local managers who have more experience and knowledge of the local market, to make implementation decisions like advertising and promotion. Hence, this KSF may be transferable to new markets in Asia.
The key to good customer service lies in its philosophy, which is manifested in various HR policies e.g., recruitment and training. Thus, it is likely for Giordano to transfer this to new markets to the extent that it could maintain service levels by providing training to local staff, monitoring performance, etc. More importantly, as the Service Gap Model of customer satisfaction suggests, it should evaluate service expectations from the customer’s perspective rather than its own, and formulate standards accordingly. For instance, Giordano should develop a greater understanding of the different service needs of its international customers by gathering feedback from customers and utilizing it to fine-tune its service standard for those markets.
Despite Giordano’s efforts in ensuring high quality service in new markets, it may face some difficulty in positioning itself on service in some countries outside of Asia. For instance, in Japan and the US, expectations on service are higher and it may be almost impossible for Giordano to differentiate itself from those competitors with high quality service. This is in contrast to much of Asia, where good service is the exception rather than the norm.
STRATEGY TOOK BY GIORDANO INDONESIA
Giordano Indonesia which has branch office in Kelapa Gading, North Jakarta uses the same strategy as their core business strategy. However it might be different in the tactical due to the cultural, political reason and the market condition. We called STEEPLE.
The place or outlet which is chosen by Giordano Indonesia, is more to upper market level it is due to the price that Giordano Indonesia offered to the customer and buying power in Indonesia.
The price is about the same with other region. However foreign exchanged involve to create the price is higher than other region e.g., Singapore and Malaysia. In the other hand, buying power of Indonesian people is lower than other Giordano’s expansion region, makes the target slightly different. To meet the target market in Indonesia, Giordano chose mostly middle up mall to open their outlet.
It is not only due to the price and market condition. Culture in Indonesia where the people likes to hanging around in the mall is another consideration. One more consideration is the climate in Indonesia which is hot and dusty makes people do not feel convenience to wall in the street for shop, like in Singapore, Hong Kong or Korea.
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