MARKETING COMMUNICATION CAMPAIGNE OF ONLINE GAMES

INTRODUCTION ABOUT THE PRODUCT

What is online games

Online gaming is a technology rather than a genre, a mechanism for connecting players together rather than a particular pattern of game play. Online games are played over some form of computer network, now typically on the Internet. One advantage of online games is the ability to connect to multiplayer games, although single-player online games are quite common as well.

Online games are games played over some form of computer network. At the present, this almost always means the Internet or equivalent technology; but games have always used whatever technology was current: modems before the internet, and hard wired terminals before modems. The expansion of online gaming has reflected the overall expansion of computer networks from small local networks to the Internet and the growth of Internet access itself. Online games can range from simple text based games to games incorporating complex graphics and virtual worlds populated by many players simultaneously. Many online games have associated online communities, making online games a form of social activity beyond single player games.

The rising popularity of Flash and Java led to an Internet revolution where websites could utilize streaming video, audio, and a whole new set of user interactivity. When Microsoft began packaging Flash as a pre-installed component of IE, the Internet began to shift from a data/information spectrum to also offer on-demand entertainment. This revolution paved the way for sites to offer games to web surfers. Most online games like World of War craft, Final Fantasy XI and Lineage II charge a monthly fee to subscribe to their services, while games such as Guild Wars offer an alternative no monthly fee scheme. Many other sites relied on advertising revenues from on-site sponsors, while others, like Run Escape, let people play for free while leaving the players the option of paying, unlocking new content for the members.

After the dot-com bubble burst in 2001, many sites solely relying on advertising revenue dollars faced extreme adversity. Despite the decreasing profitability of online gaming websites, some sites have survived the fluctuating ad market by offsetting the advertising revenue loss by using the content as a cross-promotion tool for driving web visitors to other websites that the company owns.

The main objective of this product is to reach the user as large and many numbers of player and keep the interaction to the community through external forums or chat system. Usually these games have a large community of players to plan, coordinate and work as a team (if possible) such as tribes, clans or alliances.

Ragnarok Online Version 2 (RO2)
The year 1000 L.C is approaching. One thousand years prior, a terrible destruction took place, and the world was saved by St. Lif, son of Baldr. Roughly twenty years earlier, a destructive war took place between Normans of the east and west, but there has recently been peace. Strange things have begun happening, however; the dark wanderers Dimago have awoken, and the Ellr have left their land of Alfheim to investigate the Mother Tree's silence.

Ragnarok Online 2 improves on many of the original's features as well as adding quite a few of its own. Below are notable new features or changes that will be seen in RO2. (Larger features are described in detail however not all game features have been announced yet).

Full 3D graphics, while retaining the "original manhwa style" of Ragnarok Online.

Real Emotion Expression, allowing player avatars to show and express realistic emotions. This will replace the "bubble emotes" from the original.
Anti-Theft Mob System, which gives benefits to victim of kill-stealing instead of penalizing the offender.

Safe Trade System, which enables two ways of trade. The first option requires an item from both parties (or Zeny) and the second option allows the trade of an item or amount of Zeny without having to receive something in return.

Killing one strong creature has been redesigned to be far more effective than killing multiple weaker enemies. Grouping has also been made far more beneficial to those in the group.

Loot collection has been changed to a "loot the body" system. Instead of making dropped items fall onto the ground, the player must select the fallen enemy's corpse and retrieve the items.

Jumping and swimming have been implemented.There will be a day and night cycle.

Besides day and night cycle, weather effects such as rain is available. It is possible that in the future there will be snow effects for Christmas festival.
This System allows a character to use skills from other classes. Special abilities can be gained by leveling a character's job class, giving them the ability to create useful and original class combinations, such as battle mages and wares-selling thieves.

For example, when a Swordsman learns Bash Specialty, he can equip this ability when he changes into another class, such as an Enchanter. He can now use the ability without being a Swordsman. Specialty skills learned this way have no real limitations, except for the fact that they cannot be upgraded while the character is not in the class in which the skill belongs. In this example, in order to upgrade the skill, the Enchanter must change back into a Swordsman, level up the Bash ability, before changing back to an Enchanter.

A bonus feature of this system is that a class can now equip class-specific gear that is normally limited to a different class. For example, Swordsmen have the "Long Sword Specialty." When equipped on an Enchanter, he/she can use Long Swords, where usually Enchanters could not.

There is a limit to how many special abilities one can employ at a time, represented by 16 blocks in a 4x4 box. Some skills may take up to 3 blocks, however, thus leaving less room for other abilities. Characters start with fewer than 16 blocks, but will gradually gain additional blocks as he/she levels, eventually gaining access to the full 4x4, 16-slot box.

PRODUCT ANALISYS

SWOT ANALISYS

The overall evaluation of a company’s strengths, weaknesses, opportunities and threats is called SWOT analysis. It involves monitoring the external and internal marketing environment.

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

1. Ragnarok which genre is MPOCG provide the players with unlimited various gameplay to make them feels like they’re in the real world.
2. It has an attractive visualization where every player are able to modify the gender, styles and hair colors of the characters which is create 72 combination plus accessories that can be bought in stores in the game will make each players as a unique person.
3. This game has a quite high level of interactivity because the players can communicate and interact with others and even create a chatting room and build a team against the monsters.
4. Ragnarok Online supporting the features which is rich of love and friendshipness, contrary with other games. The players could show various emotion by using the emote icon which is simple and easy to used. Therefore, the married system and adopting child is aplicated for the purpose of the main objective of this game which is love and friendshipness.
5. Ragnarok Online has a dynamic and attractive visualization , besides it can also creating an ideal world to fulfill the inner side of the player.
6. Ragnarok community has its own social control towards its players. The one who says un-polite words when they interact with other players will be discriminated when he wants join to a group.
7. Technical penalty will be possible if there was a deviation-surpass the fundamental rules in the game, for example: stealing the character owned by other players dishonestly by hacking and etc. The trespasser will get Ban (eviction then continued with isolation) by the administrator or the board of the game.

Weaknesses

1. Space for the installation is quite big (it is about 600 MB), beside, the player cannot play it instantly because they have to install the application first.
2. There is a limited platform which supported by each games cause not everyone can play it.

Opportunities

1. The growth of games lately can be said developed rapidly. It’s caused by the growth of internet Technology in all over the world.
2. The rapidly growth of IT might create a perfect dimension of social interaction to substitute the social interaction.

Threat

1. There are negative perceptions from people of online games (please see attach, Negative Impact of Online Game)
2. Most gamers are interested with the online games which have violence contents and mostly have negative effects for children who imitating the dangerous scene in that game.

POSITIONING, DEFFERENTIATION AND BRANDING

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.

A brand is a name, term, sign, symbol, design or any combination of these features, which is intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of the competitors.

Essentially a brand is the perfect means of identifying the seller or the manufacturer. Once a brand name has been legally registered under trademark law, it is in force forever and no other organization can copy the name, unlike a patent or copyright, both of which have expiry dates.

MARKETING COMMUNICATION CAMPAIGN

Background

Online games are one of the new phenomena based on new form of information media. This phenomena is including many countries, to rush by geographic boundary, ages, gender, nation and religion. Although it was already exist and develop overseas, online games still relatively new in Indonesia. From many types of games, there is a game that can be played in a group of people in one time. This type of game is called Massively Multiplayer Online Games (MMOG), which using communication technology by internet and have different characteristic from the other games before. This type of game involving a large number of players and give them opportunities to play together, to interact and adventured with one another and also to build their own communities in virtual world. Ragnarok Online version 2 is one of this type of games.

As a recreation tool, online games have a negative and positive effect. People is spotlighting the negative effect because the online games players tend to spend their time and money just for play and cause them to losing academic grades. Parents and teachers are even concern with the behaviors of the children and teenager who playing this games. They are assuming that playing games (online games) can affect negatively to the academic performance and social behavior of the children.

However the positive things of online games are the players gain the opportunities to do self exploration, to fulfill their needs of leisure. Online games are fun and sharpen strategic thinking and improve our responses.
Indonesia has a largest number of players, to look at its potential, we are doing campaign to establish and increasing the number of players and also the interaction between them can establish the friendshipness or gamers community although they have never seen one another face to face. And also we are going to launch the new version of Ragnarok Online which is Ragnarok online version 2.

Target Audience

The main (primary) target audience for Ragnarok online version 2 campaign are Female and Male around 15-25 years old, leave in the 5 big cities in Indonesia such as Jakarta, Surabaya, Bandung, Semarang and Medan. Those who familiar with the previous Ragnarok online, innovator and early majority types of audience category as a trend setter at their community, student and employee (both blue and white collar), like challenges, adventure, socialize, risk taker, imaginative, creative, friendly, tend to develop team work and relationship.

While the secondary target will be those who followers of the trend setter person on the community, usually those people categories as early majority, people who like to build up their community and networking in the virtual life.

Objective

To be specific, there are three main objectives necessary to be achieved thru this campaign. They are :

1. To build the awareness of Ragnarok online version 2 as the extended of Ragnarok online in the mind of the target audience by twelve months.
2. Increasing the number of players of the Ragnarok online version 2, into 25% by twelve months.
3. Create the understanding among the gamers how important to build up the networking and relationship in both virtual and the real live by twelve months.

Strategy, Tactics, Tone and Support
To launch the new version which is Ragnarok Online 2, we are going to make an event titled : “Ragnarok Berjuta Cinta Bagi Sahabatku”. The event will be held in the view malls of 5 big cities in Indonesia such as Jakarta, Bandung, Surabaya, Semarang and Medan. The duration for every city will be 2 days. (For the event description details, please see the attachment).

In every event, gravity corps, will be donate fund to the UNICEF as realization of the titled “Berjuta Cinta Bagi Sahabatku”. Every gamer has opportunity trying the unique feature of Ragnarok online Version2 and guessing the name of the icon or creature in the cards. Stamp will be given to the gamer who succeed to mention the name of the icon. One stamp for a single correct answer, which worth IDR 10,000.- each stamp. The gamers can redeem to a merchandise from UNICEF for every 5 stamps.

During the event, a hundred gamers will be get a CD trial of Ragnarok Online Version 2 also they can buy in the discounted price the map and guiding book of Ragnarok Online Version 2. This activity’s objective is to build the awareness among the community, by using experience of the gamers. On the other hand, we believe it will be increase the number of the players.

As we know that majority online games is more challenging game rather than rational. The tone for the campaign will be fun and challenging. We use the additional song as the opening song will be “I Got You (I feel Good)” from James Brown also the theme song of The Ragnakrog online version 2 itself. The Banner or the advertisement of this event will be written “It’s a challenging!!!” and “Dare you try???” or “Ready to take off with RO2” and so on.

Beside the event, the media from all segmented magazine for the games will be invited to try the unique feature of the Ragnarok online version 2, before the product launch. So the media will be create the story to the public about the extended Ragnarok online. It can be used to create public opinion about the game also free advertisement for the game itself.

Benefits
We understand that some of the audience tend to profiling the image of online games as the negative side which can be read as attachment. However online games can be use to build the networking among the gamers community, since Ragnarok online version 2 is game with the team working rules.

The campaign of Ragnarok online version 2 is emphasizing the understanding among the gamers how important to build up the networking and relationship in both virtual and the real live.

MEDIA COMMUNICATION

Online media
Information technology (IT) has evolved a generic term, which relates to the use of a computer as a tool for gathering, storing and using information. In their early days, commercial computers were used predominantly for communicating (written communications), data storage (databases), calculations (spreadsheets) and basic graphic presentations (simple graphics program).

The current situation of economic makes every company create the smartest way to communicate their product or services. One of the solutions is using the online media. Ragnarok Online Version 2 is online games, which operates under online system. Therefore online media of communication will be more effective such as put a banner in the other web, news web, blog, official website own by Ragnarok online itself.

Blog
A blog (a contraction of the term "Web log") is a Web site, usually maintained by an individual with regular entries of commentary, descriptions of events, or other material such as graphics or video. Entries are commonly displayed in reverse-chronological order. "Blog" can also be used as a verb, meaning to maintain or add content to a blog.

Many blogs provide commentary or news on a particular subject; others function as more personal online diaries. A typical blog combines text, images, and links to other blogs, Web pages, and other media related to its topic. The ability for readers to leave comments in an interactive format is an important part of many blogs. Most blogs are primarily textual, although some focus on art (artlog), photographs (photoblog), sketches (sketchblog), videos (vlog), music (MP3 blog), audio (podcasting), which are part of a wider network of social media. Micro-blogging is another type of blogging, one which consists of blogs with very short posts. As of December 2007, blog search engine Technorati was tracking more than 112 million blogs. With the advent of video blogging, the word blog has taken on an even looser meaning — that of any bit of media wherein the subject expresses his opinion or simply talks about something.

Website
A website is a collection of Web pages, images, videos or other digital assets that is hosted on one or more web servers, usually accessible via the Internet.

A Web page is a document, typically written in (X)HTML, that is almost always accessible via HTTP, a protocol that transfers information from the Web server to display in the user's Web browser.

Offline media
Even online media is believed as the smartest choice of media communication. However it is not the wise idea to put aside the offline media. Therefore we are using segmented magazine and word of mouth which is known as WOM to communicate RO2. It is due to the important thing of online games are networking and or community.

Magazine
Magazines, periodicals, glossies or serials are publications, generally published on a regular schedule, containing a variety of articles, generally financed by advertising, by a purchase price, by pre-paid magazine subscriptions, or all three.

Most magazines are available in the whole of the country in which they are published, although some are distributed only in specific regions or cities. Others are available internationally, often in different editions for each country or area of the world, varying to some degree in editorial and advertising content but not entirely dissimilar.

The information placed in Segmented magazine (ex : Game station, Hotgame, Ultima X, etc)

Word of Mouth (WOM)
Word of mouth, is a reference to the passing of information from person to person. This includes any type of human communication, eg face to face, telephone, email.

Word-of-mouth marketing, which encompasses a variety of subcategories, including buzz, blog, viral, grassroots, cause influencers and social media marketing, as well as ambassador programs, work with consumer-generated media and more, can be highly valued by product marketers. Because of the personal nature of the communications between individuals, it is believed that product information communicated in this way has an added layer of credibility. Research points to individuals being more inclined to believe WOMM than more formal forms of promotion methods; the receiver of word-of-mouth referrals tends to believe that the communicator is speaking honestly and is unlikely to have an ulterior motive (i.e. they are not receiving an incentive for their referrals.

In order to promote and manage word-of-mouth communications, marketers use publicity techniques as well as viral marketing methods to achieve desired behavioral response. Influencer marketing is increasingly used to seed WOMM by targeting key individuals that have authority and a high number of personal connections.

PRODUCT, STRATEGIES AND TACTICS ANALYSIS FOR AIR ASIA

INTRODUCTION

About The Product
Air Asia is a low cost airline based in Kuala Lumpur, Malaysia. It operates scheduled domestic and international flights and is Asia’s largest low fare, no frills airlines. Air Asia pioneered low cost travelling in Asia. It is also the first airline in the region to implement fully ticketless travel and unassigned seats. Its main base is the Low Cost Carrier Terminal (LCCT) at Kuala Lumpur International Airport (KLIA). Its affiliate airlines Thai Air Asia and Indonesia Air Asia fly from Suvarnabhumi Airport, Thailand and Soekarno-Hatta International Airport, Indonesia, respectively.

The airlines established in 1993 and started operations on 18 November 1996. It was originally founded by a government-owned conglomerate DRB – Hicom. On December 2, 2001 the heavily – indebted airlines was purchased by the former Time Warner executive Tony Fernandes’s company Tune Air Sdn Bhd for the token sum of one ringgit. Fernandes proceeded to engineer a remarkable turnaround, turning a profit in 2002 and launching new routes from its hub in Kuala Lumpur International Airport at breakneck speed, undercutting former monopoly operator Malaysia Airlines with promotional fares as low as RM1 (US $ 0.29).

Air Asia operates with the world’s lowest unit cost of US$0.023/ASK and a passenger breakeven load factor of 52%. It has hedged 100% of its fuel requirements for the next three years, achieves an aircraft turnaround time of 25 minutes, has a crew productivity level that is triple that of Malaysia Airlines and achieves an average aircraft utilization rate of 13 hours a day.

Air Asia currently is the main customer of the Airbus A 320. The company has placed an order of 175 units of the same plane to service its routes and at least 50 of these A320 will be operational by 2013. The first unit of the plane arrived on 8 December, 2005.

Support
As a pioneered in low cost air transportation in Asia, Air Asia has several subsidiaries and associate company to support its operation.

Subsidiaries
Thai Air Asia was established as Subsidiaries of Air Asia Berhad on 8 December 2003 as joint venture with Shin Corporation. Flight operation was commenced on 13 January 2004 from its base in Don Mueang International Airport. Since 25 September 2006, the airline is based at the new Suvarnabhumi Airport.

The other subsidiary is Indonesia Air Asia. This airline is based in Soekarno-Hatta International Airport. Air Asia acquired the then defunct Awair in 2004 with a 49% stake in the airline. Awair commenced services on behalf of Air Asia in December 2004; full rebranding to Indonesia Air Asia was completed on 1 December 2005. The airline is based in Soekarno-Hatta International Airport.

Associated companies
They also have associate companies such as Air Asia X, Fly AsiaXpress, Tune Hotels and Tune Money. Air Asia X is a service operated by Air Asia X sdn.Bhd. (previously known as Fly AsianXpress Sdn.Bhd.) as a franchise of AirAsia. It has started offering long-haul services from Kuala Lumpur to Australia and China using Airbus A330. The inaugural flight was on 2 November 2007 to Gold Coast, Australia.

The first AirAsia ‘no-frills’ hotel, Tune Hotels, is ready for occupancy in Kuala Lumpur and Kota Kinabalu and later in Penang, Johor Bahru, KLIA, Miri, Kuching and Sandakan.

Tune money is Asia’s first ‘no-frills’ online financial service owned by Tune Air Sdn.Bhd. Modelled aftaer Virgin Money, it comprises life, home and motor vehicle insurance as well as prepaid cards.

Destination
Air Asia operates over 200 flights a day, to over 75 domestic and international routes covering Malaysia, Thailand, Indonesia, Singapore, Brunei, Myanmar, the People’s Republic of China, Vietnam, Laos, Cambodia, Australia and the Philippines.

In 2007, 19 new routes had been introduced over the Air Asia wide network. These include routes from Kuala Lumpur to Gold Coast (Via Air Asia X), Vientiane and Banda Aceh and the connection of Southern China (Macau and Shenzhen) with different Malaysian hubs and Bangkok. In 2008, new routes were introduced which included destinations in India and China.

Air Asia future plan is seeking to set up a hub in Malacca serving Medan, Pekan Baru, Palembang, Padang, Penang and Langkawi. Air Asia has gained approval from India authorities to start flying to destinations in India such as Chennai, Madurai and Kochi.

Value Added Services
On 15 May 2007, a service named ‘Xpress Boarding’ was launched, enabling passengers to get priority boarding for a fee. This product is available in all hubs including Thai Air Asia and Indonesia Air Asia.

On Air Asia X flights, passengers are given a choice of purchasing extra baggage weight, meals, comfort kit and seat selection all with nominal fees.
On 26 November 2008, Air Asia has launched its Air Asia X London flights to London Stanstead Airport.

PRODUCT ANALYSIS

As with living organisms, products have a life cycle. For some, such as the Boeing 747, the life cycle is measured in decades whilst for others, for example the merchandising spin – offs from popular movies, the life cycle may be measured in mere weeks.

The Product Life Cycle (PLC)

A product enters the market in one of three ways. The first may be as an improvement on an existing product, in which case there will already be a customer base. The second is as a competitor to an existing product, in which case a customer base exists, but its loyalties may lie elsewhere. The third way is as a totally new product, in which case a customer base needs to be built up.

Research has shown that many new products never move out of the launch stage. In the 1960s it was stated that 96 per cent of all new product launches failed. By the 1980s this had improved to the extent that only 80 per cent of product launches failed.

Reasons for failure were given as:
· Incorrect segmentation – trying to reach the wrong market.
· Incorrect pricing – either too expensive to provide consumer value or

too cheap to sustain the costs of production and market activities.
· Incorrect communication mix – failure to create the required levels of

awareness, interest and action.
· Incorrect distribution – not in the right channels or if in the right

channels, not in enough of them.
· The product itself – by far the most common reason. The product does

not provide any new benefits or it provides benefits that are not sought

or valued by the customer. It has no beneficial differentiation to

existing products already established in the market.

Air Asia, Airlines Company with 58 flight destination is in the growth phase position of Product Life Cycle (PLC) stage. The growth phase is when loyalty begins to be built up. Some products or services can be taken up by the customer base very quickly and achieve rapid growth. Sales of Air Asia Airlines grew tremendously in every country in which they were available.

It is during the growth phase that the product will begin to recover its development and launch costs and slowly move through the break – even mark to begin to make a profit for the organization. During the growth stage of a new market or a new product, competitor will also enter the market with similar products or services and competition will become increasingly evident.

The characteristics of products or services in the growth phase are Gain market share instead of create awareness and promote trial as the objective, increasing the sales, moving from the non profits into profit, the competition is growing.

As Air Asia gain high market share begins to make a contribution to overall profitability. Revenue pays off the development costs. It will begin to make rival product or service into problem. As the market still growing, revenues can be expected to increase. This period correspond to the star phase of the Boston Consulting Group (BCG).

The market mix elements during in the Growth phase are as follows.

Product
Product extension and minor modification.

Price
Penetration Pricing for Market Share.

Advertising
Heavy media even not as heavy as introduction phase, to build awareness and create brand.

Sales promotion
Reduce as demand increases instead of intensive sales promotions to encourage trial likes introduction phase.

Distribution

Move from selective distribution to intensive distribution.

SWOT Analysis

A SWOT (Strengths, weaknesses, opportunities and Threats) analysis is a common component of organizational planning and marketing. The analysis is in two parts, the first part looks at the strengths and weaknesses of the organization and is thus an internal analysis and the second part considers the threats and opportunities facing the organization from the external environment, which are derived from the external analysis.

The strengths of an organization are those things it does particularly well, especially when viewed against the operations of its competitors, where as its weaknesses are areas in which it is weaker than the competition. However well run and competitive an organization is, it will still have weaknesses.

Opportunities are those external factors on which the organization can use its strengths to outclass the competition, and threats are those factors from external environment from which the organization may suffer because of its weaknesses.

STRENGTHS

• Low cost carrier (Value for money)
• Internet booking systems (Reduce the man power cost and cut down the channel and time of distribution as they as close to the market already)
• Reputation gained over time (the market share is gained as Air Asia is not in the introduction phase)
• Added value on the service. We can book the hotel, rental car, tour package, meals in the same time of ticket booking thru the internet instead.

WEAKNESSES

• Inflexible, when passenger needs to change his flight reservation.
• Operate out of less popular airports (Budget terminal).
• Lack of spare aircraft hinder flexibility and occasionally caused flight delay.
• Less varieties of in flight shopping
• Meal and drink are not provided by the airlines.
• No reward mileage for customer loyalty.
• Tight leg room makes it uncomfortable for bigger size passenger.
• Certain flights departs at odd hours (ie. 4 or 5 am)
• No fixed seat selection resulting in passenger rushing for seats.

OPPPORTUNITIES

• Due to current economic situation, many people moved to budget airlines.
• Increase the uses of Internet. (More people aware and understand how to work with and the using of Internet)
• Alliance with other carriers and hotels.
• Mass segment is wider than premium target.
• People like travelling and they like to pay low cost.

THREATS

• Other low cost operators such as value air, tiger air, jet air, etc
• Cutting price (promotion class) offered by traditional airlines such as Garuda Q Class.
• Increases in airport charges.
• Fluctuation in fuel price.
• Threat of world recession. Travel is often one of the first activities to be hit.

STRATEGIES AND TACTICS

Strategy is used to refer to an overall plan of action. The strategic plan of a company will indicate where the organization is going and how different functions fit into the plan. Tactics are the smaller scale actions that are taken to realize the objectives of the strategy. Gaining 40 percent market share for a product in order to boost profits is a strategy. Lowering the price of that product for a time in order to stimulate sales is a tactic.

The Internet plays a vital part in the Air Asia business and has proved to be critical to the success of the business. As a low – cost operation, controlling the cost of doing business is clearly highly important to the airlines’ ability to be competitive by offering low fares. The Internet provides the most cost – effective distribution channel available.

CASE STUDY OF STRATEGY AND TACTICS TAKEN BY GIORDANO TO ENTER GLOBAL MARKET

INTRODUCTION

“… We are committed to provide our customers with value-for money merchandise, professional customer service and comfortable shopping experience at convenient locations.” (Giordano’s Corporate Mission)

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

Lai Chee Ying, Jimmy Lai in English, was born into poverty in mainland China’s Guandong Province in 1948. At the age of 12 Lai was smuggled by his family into Hong Kong which at the time was still under British colonial control. Through relatives Lai easily managed to ascertain work at the local textile factory and by the age of twenty had succeeded in becoming the company’s General Manager. With his first end of year bonus of $ 1000 dollars. Along with all his live savings, Lai decided to trade on Hong Kong stock exchange. The gamble, although risky proved fortuitous and Lai turned his measly original $ 3000 investment into approximately $40,000 dollars.

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

The overall evaluation of a company’s strengths, weaknesses, opportunities and threats is called SWOT analysis. It involves monitoring the external and internal marketing environment.

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

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

the world without stranger)

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

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.

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.

CASE STUDY OF THE EXPANTION OF M&S TO US MARKET

INTRODUCTION

The International Environment is changing rapidly. Firms, individuals and policymakers are affected by these changes. These changes offer new opportunities but also represent new challenges. Although major economic and successfully through imagination, investment and perseverance can produce a new, better world order and an improved quality of life.

Marks & Spencer (M & S) is a British retailer, with 760 stores in more than 30 countries around the world. It is one of the most iconic and widely recognized chain stores in the United Kingdom (UK) with 520 stores and is the largest clothing retailer in the country as well as being a multi-billion pound food retailer. Most of its shops sell both of these categories. It has recently started home wares such as bed linen.

All international stores of Marks and Spencer are operated under franchise with exception of the stores in the Republic of Ireland and Hong Kong. The first M&S store in central Asia was built in Kabul, Afghanistan in the 1960’s. The store was later shut down.

Expansion into France began with stores opening in Paris at Boulevard Haussmann and Lyon in 1975, followed by a second Paris store at Rosny 2 in 1977. Further expansion into other French and Belgian cities followed into 1980’s. Although the Paris store remained popular and profitable, the whole of the Western European Operation did not fare as well and all the stores were closed in 2001. Branches just remained in some European countries, such as the Czech Republic and Malta.

Retail internationalization has attracted much attention in recent years as the scale and nature of the activity has changed. Most analysis of retail internationalization however is based on market entry and mainly successful businesses. Here, the internationalization strategy of Marks and Spencer over 30 years is examined. Its recent large-scale withdrawal from such activity is considered in the light of theories about internationalization and business failure. The complexity of market exit in retailing is emphasized. It is suggested that market exit and failure are important under researched dimensions of retail internationalization.

On 1987, the President of Marks and Spencer, Ltd, J. Edward Sieff is thinking how to make M&S become much more dominant in the retailer industries. He intend to do market expand to US market like his majority staff input during their meeting.

However, Sieff has his own perspective for it. He still remembers their experience in Canada market. They lost money and the last 38 stores in Canada were closed in 1999 after 10 years disaster for the first fourteen years of their operation even though In 1970’s Marks and Spencer has good experience in Canada market compare with other M&S markets by using D’Allaird’s Peoples and M&S brand names.

COMPANY PROFILE

The company was based upon a single market stall in Leeds created by the sole trader Michael Marks. After Thomas Spencer joined the company in 1894 it was known as “Marks and Spencer”. The site of the first stall is marked with a green and gold commemorative clock in Leeds Kirkgate Market. One of the original Penny Bazaars – in Grainger Market, Newcastle upon Tyne – remains open to this day and is now the smallest Marks and Spencer store in operation.

Marks and Spencer, known colloquially as M&S or “M and S” made its reputation in the 20th century on a policy of only selling British-made goods. It entered into long term relationships with British manufacturers and sold clothes and food under the ‘St Michael” brand (trade mark registered in 1928). IT also accepted the return of unwanted items, giving a fully cash refund if the receipt was shown, no matter how long ago the product was purchased. It has now adopted a 90 – day returns policy.

By 1950, all goods were sold under the St Michael label. Simon Mark died in 1964, after 56 years service to the company. Israel Sieff took over as Chairman. A cautious international expansion began with the introduction of Asian Food in 1974. M&S opened stores in continental Europe in 1975 and in Ireland four years later.

The Company put its main emphasis on quality but for most of its history, it also had a reputation for offering fair value for money. When this reputation began to waver, it encountered serious difficulties. Arguably, M&S has historically been an iconic retailer of “British Quality Goods”. Its business model required suppliers to commit to long term contracts solely with M&S. This approach often led to over – reliance by manufacturers on the portion of trade they did with M&S. Accordingly, when the M&S fashion buyers changed suppliers on some aspects of the company’s retail clothing offering, manufacturers were left dangerously exposed : many became insolvent. This has resulted in a change of climate and no longer is a contract to supply M&S held up the panacea it once was.

In 1988 the company acquired Brooks Brothers, an American clothing company and Kings Super Markets, a US food chain. Both were subsequently sold off in 2001 and 2006 respectively.

M&S profits peaked in financial year 1997/1998. At the time it was seen as a continuing success story but with hindsight it is considered that during Sir Richard Greenbury’s tenure as head of the company, profit margins were pushed to untenable levels and the loyalty of its customers was seriously eroded. The rising cost of using British suppliers was also a burden, as rival retailers increasingly imported their good from low-cost countries, but M&S’s belated switch to overseas suppliers undermined a core part of its appeal to the public. Another factor was the company’s refusal to accept any credit cards except its own store card. In addition, as an ageing and famously bureaucratic company, it was losing touch with potential younger customers, who were reluctant to shop with it.

Since the late 1990s M&S has experienced serious boardroom instability and has made a number of attempts to revive its business, with only partial success. By 1999, online shopping was brought in and the company grew with new sales of fashion clothing. In 2001, with changes in its business focus such as the introduction of the “Per Una” clothing range designed by George Davies, accompanied by a redesign of its underlying business model, profits recovered somewhat and M&S recovered some of its market share, but it soon became apparent that problems remained. Other changes to tradition included accepting credit cards and opening stores on Sunday.

US MARKET CONDITION

A. TRADE POLICY IN US PERSPECTIVE
All countries have international trade and investment policies. The importance and visibility of these policies have grown dramatically as international trade and investment flows have become more relevant to the well being of most nations. Given the growing links among nations, it will be increasingly difficult to consider domestic policy without looking at international repercussions.

International trade and investment policy can take either a multilateral or bilateral approach. Bilateral negotiations are carried out mainly between two nations while multilateral negotiations are carried out among a number of nations. The approach can also be broad, covering a wide variety of products, services or investments.

Too often the public mistakenly expected successful trade negotiations to affect the domestic economy in a major way, even though the issue addressed to resolve was only of minor economic importance. In light of global change, US trade policy does need to change. Rather than treating trade policy as a strictly “foreign” phenomenon, it must be recognized that it is mainly domestic economic performance that determines global competitiveness. Therefore, trade policy must become more domestically oriented at the same time that domestic policy must become more international in vision.

Such a new approach should pursue at least five key goals. First, the nation must improve the quality and amount of information government and business share to facilitate competitiveness. Second, policy must encourage collaboration among companies in such areas as goods and process technologies. Third, US industry collectively must overcome its export reluctance and its short-term financial orientation. Forth the United State must invest in its people, providing education and training suited to the competitive challenges of the twenty first century. Finally the executive branch must be given authority by congress to negotiate international agreements with reasonable certainly that the negotiation outcome will not be subject to minute amendments.

It will also be necessary to achieve a new perspective on government – business relations. However closer government – business collaboration is seen as one key to enhanced competitiveness. More mutual listening to each other and joint consideration of the long-term domestic and international repercussions of policy actions and business strategy can indeed pay off.

B. NAFTA
The concept of regional integration was used more than 100 years ago when Germany developed the Zollverein. Similar market agreements have been formed by other groups of nations. One of them is North American Free Trade Agreement (NAFTA), the Mercosur in Latin America and the Gulf Cooperation Council (GCC). These unions were formed for different reasons and operate with different degrees of cohesiveness as appropriate for the specific environment. They focus on issues as forming a custom union, a common market, an economic union, or a political union.

C. CULTURAL ENVIRONMENT
Culture is defined as integrated system of learned behavior patterns that are distinguishing characteristics of the members of any given society. It includes everything that a group thinks, says, does and makes – its customs, language, material artifacts and shared system of attitudes and feelings.

Culture is also multidimensional, consisting for a number of common elements that are independent. Understanding culture is critical not only in terms of getting strategies right but also for ensuring that implementation by local operation is effective.

United States highly regards individualism, promotional appeals should be relevant to the individual. Also in order to incorporate the lower power distance within the market, copy should be friendly. In opposite situations, marketing communications has to emphasize that the new product is socially accepted. While negotiating in United Kingdom, one can expect a counterpart who is thorough, systematic, very well prepared but also rather dogmatic and therefore lacking in flexibility and compromise. Great emphasis is placed on efficiency.

D. BRANDING
Brand names convey the image of the product or service. The term brand refers to the name, term, symbol, sign or design used by a firm to differentiate its offerings from those of its competitors.

The US market has a number of options in choosing a branding strategy. They may choose to be a contract manufacturer to a distributor or to establish national, regional or worldwide brands. For US Market, We (for example M&S) standardization of product and brand do not necessarily move hand in hand. A regional brand may well have local features or a highly standardized product may have local brand names.

ANALYSIS

Marks and Spencer entered the US in 1988 through acquisition of the up-market clothing chain, “Brooks Brothers” and “Kings Supermarkets”, a 16 store New Jersey chain. As with Canada, these acquisitions did not produce the results expected, despite store expansion of both chains. As part of its March 2001 restructuring exercise, both of these chains were put up for sale. Exit reflects perhaps the entry price paid and thus a failure to meet performance expectations and more recently a perceived lack of ‘business fit’.

Marks and Spencer failed in the Canadian and US markets due to a number of inter-connecting reasons. First, the fundamental differences between the US and the UK consumer requirements. The positioning in the UK market was replicated in Canada and US, but in a very different competitive environment. The position was not seen as distinctive nor unique and the brand lacked meaning. Certainly, its merchandise did not warrant its premium price. The business model did not transfer; it means there was no overall internationalization strategy. There were global ambitions for the business, as evidenced in the ‘quality, value, service, worldwide’ promotional line of mid 1990s but no real commitment to converting these ambitions into something concrete.

Second, the multi-dimension approach to store internationalization does not appear to be that coherent. There was no direction in the US purchase and no synergy. The franchise operations were a mix of the small, colonial, developing markets and random other countries.

Third, Marks and Spencer have always held to belief in their way of doing things above all else. For example the well known ‘Buy British’ policy, the lack of advertising and marketing, a refusal to take credit cards and a long time resistance to out of town developments all marked the company out as different. Also its product sourcing that was heavily based in the UK. All these factors greatly influenced its pricing strategy. The emphasis on a British product alone and lack of clear retail positioning and design, all presented problem in a global situation especially in the highly competitive US market.

A. STRATEGY
“Our experience illustrates that to succeed internationally when entering mature markets, you must adapt your store formats to the competitive realities of these markets.” (M&S annual report 2001)

The British people grew up with Marks and Spencer just like the Americans growing up with Levi’s and Nike. Marks and Spencer is an icon in the British retail business. However Marks and Spencer should realize that the American are not as passionate with the Marks and Spencer brand compared with the British. As such Marks and Spencer should tailor their products towards the American taste instead of trying to convince the American to “buy British products”. Marks and Spencer should therefore “un-British” their products for the US market. The US has a “younger population” compared to the Britain. This resulted in differences in consumer taste as a “younger population” is more dynamic, flexible and simple compared to the “older population” who are more sophisticated and inflexible.

To avoid losing touch with the potential younger customers who forms the biggest market segment in the US, Marks and Spencer should change the tradition of refusing to accept credit cards except its own store card. The younger Americans are very much in favour of using credit cards for their purchases. Also the opening days of the store has to be extended. Marks and Spencer have to consider opening their stores on Sundays to provide more convenience to its customers. Normally working people in dynamic countries like the US, do most of their shopping during weekends.

Before their product sourcing was mainly based in the UK. Now to take advantage of the tax benefits under NAFTA (North American Free Trade Agreement), Marks and Spencer should consider outsourcing their products to neighboring countries like Mexico and Canada. It also makes economic sense in terms of logistic.

B. BUSINESS FORMAT
Marks and Spencer should consider tying up with an established American retailer like JCPenney or Macy’s to break into the US market. It should not go into acquisition as it did previously with Brooks Brothers and Kings Supermarkets. These two acquisitions did not perform up to its expectations and were eventually disposed of.

Marks and Spencer should tap into its local partner’s knowledge and expertise in the US market in order to develop and gain a foothold in the US market. Marks and Spencer should realize that their product and brand name are not well-known in the US market. In order to establish the M&S brand in the US market, they need the other company which has experience, knowledge and survival in the US market. The company must be well-known in the US, has good networking and understands the local habits of US consumers. While we understand so far Marks and Spencer’s products are more segmented for the older people, working people who are more sophisticated and conservative.

C. BRAND AND PRODUCT
Since 2001 Marks and Spencer has a new variant female clothing product which was launched on September 2001. This product is “Per Una” which is a joint- venture between Marks and Spencer and the Next founder George Davies. The brand name means for “one woman” in Italian. This product has been a major success for the company.

For the US market, Marks and Spencer may use the same strategy, that is, to make a new product range which is geared more towards the American taste. Therefore Marks and Spencer may hire a well-known icon designer for younger Americans, with the brand name that’s easier and reflective of the American character, that is, young, dynamic, simple but trendy. They may also use a new name or using the designer name for the new product name or brand, following “… from Your M & S”

The other option takes into account the current trend among male and female celebrities who produce their own brand of clothes, EDP, jewelry, shoes, hand bags, etc. For example, Paris Hilton, Kate Moss, JLo, etc. It will be a good advertisement and image if Marks and Spencer also tie up with a celebrity and using his or her name to produce a limited edition range of products.

However, I suggest that Marks and Spencer’s original products also are made available in every store even in small quantities. It is important for Marks and Spenser to reach out to all Americans.

D. COMPETITION
As we understand that Marks and Spencer hardly place much emphasis on advertisements in the UK. It’s because almost every British people understand about M&S brand. However a strong business model is needed for Marks and Spencer to succeed in the highly competitive US market. More emphasis should be placed on advertising and marketing to create the awareness among the American public about Marks and Spencer products. That Marks and Spencer or M&S is not only about ‘British product’ but also means quality, style but simple and dynamic.

Marks and Spencer may use David Beckham as their icon model. It is because David Beckham’s original nationality is British and he is currently based in Los Angeles. Also he is famous not only among younger generation but also among the mature generation.

E. CULTURE COMPARISON
Culture is also multi-dimensional, consisting of a number of common elements that are independent. Understanding culture is critical not only in terms of getting strategies right but also for ensuring that implementation by local operation is effective.

British culture and US culture is different, it will influence in the way they act, behave and making decisions, also their taste for clothes, etc. Americans are more individualistic, as such promotional appeals should be relevant to the individual. Also in order to incorporate the lower power distance within the market, copy should be friendly. In opposite situations, marketing communications has to emphasize that the new product is socially accepted. While negotiating in UK, one can expect a counterpart who is thorough, systematic, very well prepared but also rather dogmatic and therefore lacking in flexibility and compromise. Great emphasis is placed on efficiency.