· Further expansion into overseas markets.
· Coming out with new line of product (e.g. babies clothes)
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.
Key Competitive Strengths
Giordano’s home base Hong Kong was flooded with retailers, both big and small. To beat the dog – eat – dog competition prevalent in Asia, especially Hong Kong, the founder, Jimmy Lay felt that Giordano must have a distinctive competitive advantage. Although many retail outlets in Hong Kong competed almost exclusively on price, Lay felt differently about Giordano. Nothing successful Western retailers, Lay astutely observed that there were other key factors for success. He started to benchmark Giordano against best practices practice organizations along four key areas: (1) computerization (from The Limited), (2) a tightly controlled menu (from McDonald’s), (3) Frugality (from Wal-Mart) and (4) value pricing (from Marks & Spencer)
The emphasis on service and the value – for – money concept had proven to be successful. Lai was convinced that the product is only half of Giordano sells. Service was the other half and Lai believed that service that was the best way to make customers to return to Giordano again and again. Lay said, “We are not just a shirt retailer, we are not just an apparel retailer. We are also a service retailer because we sell felling. Let’s make a guy feels good about coming into our stores”.
Computerization
In markets with expensive retail space, retailers would try to minimize every square foot of the store for sales opportunities. Giordano was no different. Its strategy involved not having a back storeroom in each store. Instead, a central distribution center replaced the function of a back storeroom. With information technology (IT), Giordano was able to skillfully manage its inventory and forecast demand. When an item was sold, the barcode information, indentifying size, color, style and price was recorded by the point – of – sale cash register and transmitted to the company’s main computer. At the end of each day, the information was compiled sales information became the store’s order for the following day. Orders were filled during the night and were ready for delivery by early morning, ensuring that before a Giordano store opened for business, new inventory was already on the shelves.
The use of technology also afforded more efficient inventory holding. Giordano’s inventory turnover on sales was reduced from 58 days in 1999, allowing it to thrive on lower gross margins. Savings were passed to customers, thus reinforcing its value-for-money philosophy. All in, despite the lower margins, Giordano was still able to post the healthy profits. Such efficiency became a crucial factor when periodic price wars were encountered. Giordano was able to carve out ever-greater slices of the market, because it was easy money competing against companies that were used to relying on high gross margins to make up for slow inventory turnover.
Value Pricing
Regarding to Jimmy Lai, the rationale for Giordano’s value for money explained as ‘Consumers are learning a lot better about what value is. Out of ignorance, people chose the brand. But the label does not matter, so the business has become value driven, because when people recognize value that is the only game in town. So we always ask ourselves how can we sell it cheaper, make it more convenient for the consumer to buy and deliver faster today than yesterday. That is all value, because convenience is value for the consumer. Time is value for the customer.
A tightly Controlled Menu
When business becomes successful, there would always be a temptation to expand into more products and services to meet customer’s needs. However, Giordano recognized the importance of limiting its expansion and focusing on one specific area. Charles Fung said, “Focus makes the business more manageable: positioning in the market, keeping the store simple, better inventory management. And we can get the best out of limited resources”. Simplicity and focus were reflected in the way Giordano merchandised its goods. “You’ll see no more than 100 items in a Giordano store. We have 17 core items while other retailers have 200 – 300 items. Merchandising a wide range of products causes retailers to take a longer time to react to market changes.”
Frugality
Frugality for Giordano means curbed spending on advertising and tight inventory control. The basic criteria of success for product should be identified, i.e. it must be difficult for competitors to copy and/or it must take time to copy, to allow Giordano to maintain its advantage at least for some time. With continuous investment in human resources and organizational commitment to service orientation; constant improvement in design and in the efficiency of operations; and efforts in increasing marketing muscle by promoting its brand; most of the key success factors, except site selection, are somewhat sustainable in the medium to long term.
(Please see the summary of Giordano’s key success factors as an attachment).
INTEGRATED MARKETING (MARKETING TOOLS)
Strategy is differentiated from tactics, with greater emphasis on planning, focusing on long term issues and being future oriented with organization – wide impact. Marketing mix which is introduced by Philip Kotler is tactical and must be preceded by strategic decision on STP, namely segmentation, targeting and positioning. (…Philip Kotler, According to Kotler, 2005)
The Marketing mix that Kotler introduced was Product, Price, Place and Promotion. And the three additional Ps have been proposed for guiding service marketing. Personnel is one, in that each service provider will make a certain impression. Process is a second one, in that service can be provided in many different ways: for example, food from a restaurant can be available through table service, buffet and home delivery. Physical evidence suggests that service marketers seek to give their offerings a tangible character by using certificates, tickets, logos and so forth.
Product
A product offer has three characteristics. These are Physical which is the tangible part of the offer. It can be seen, felt, transported. The second one is Function in what a product offer does for us. And the last one is symbolic or psychological or emotional values of a product offer are usually the deciding factor such as brand name.
a. Physical
Giordano offer the casual wear for unisex, male, female and kids. All ranges are consists of 100 items in all Giordano’s store with the 17 cores item. Such as t-shirt, polo shirt, blouses, dress, trouser, pants, short skirts and even tank top and panties for ladies. They also offer other merchandise such bag on Giordano junior, shock, belt, towel until umbrella.
b. Function
Like other retailer who offer the same typical of apparel, Giordano offer the product which has cut, style and size tailored to the Asian Physique. The size offer is from small to extra large for ladies, man and unisex clothing and from 100 size (3 – 4 years old) for Giordano junior.
As an apparel, Giordano can wear anytime and everyday and anywhere to avoid the user from cold and humid climate.
c. Symbolic
A brand is a promise of value. It becomes the organizing concept for all the company’s activities that surround the brand. People are willing to pay a price premium for the stronger brands.
The name of Giordano is associated with “a good quality of apparel with affordable price.” An value-for-money apparel with has consolidated its strong position through its understanding of its Asian customers built up over many years. Tomas Dvoracek, leasing manager at MAF shopping, Dubai said that Giordano as a ‘must have’ retailer. “It is a great brand in its category, with active marketing and growing brand recognition in this region.”
Price
Price is the money or other consideration for which a thing is bought or sold. Thus price determines what actually changes hands between the buyer and seller.
The range of price of Giordano product offer (Indonesia market) is from IDR 99,000 for a ladies tank top until IDR 309,000 for man’s trouser. With IDR 10,000 different for each item. As a Chinese believes that number 4 does not good number specially for business, therefore Giordano avoid to use number 4 as in their price system. The price pricing tactics took by Giordano Psychological price that is taking advantage of the customer’s psychological desire to pay as little as possible. IDR 99,000 is seen far less than IDR 100.000. IDR 119.000 as far less than IDR 120,000 and so on.
In the same way, their price reduction appears significant. They using the real numbers rather than percentages. Such offering a product IDR 149.000 for two from the original price IDR 119.000 for one instead of saying 5% discount. Giordano believes many people cannot understand even simple percentages.
Value according to Worsam is defined as the intangible package of benefits that the decision making unit believes attached to the product offer.
Value is within the perception of the individual. It is what the customer believes. Not necessarily what is true. Not even what is proven in logic.
As a mention before that Giordano is value for money product. The apparel which offers a good quality product in affordable price.
Place
Professor Jerry McCarthy introduced the scheme in his first edition of marketing (Circa 1960). He took his Ph.D at Northwestern University and studied under Professor Richard Clewett, who used the framework product, price, distribution and promotion. Jerry changed “distribution” to “place.
By all means, place refers to the channels of distribution that the supplier chooses. Depending on the type of product offer it must be placed close to the target customer or the target customer must be persuaded to come to the offer.
Giordano was able to consistently to sell value for money merchandise through careful selection of suppliers, strict cost control and resisting the temptation to increase retail prices unnecessarily. For instance, to provide greater shopping convenience to customers, Giordano in Singapore located its operations in densely populated housing estates in addition to its outlets in the traditional downtown retail areas. E.g. additional Giordano outlet in the Hougang avenue cause this area has many HDB (flat and apartment build by government). Bugis street cause many people (target market) pass by this street on foot.
However according to Chairman and CEO, Peter Lau, “depending on the brand and the market, Giordano generally prefers stores that measure about 1,100 square feet (100 meter square meter), though the company is looking at bigger sites in high – traffic areas of malls.” But in most markets Giordano preference is to open inside shopping malls because of the climate. “High street locations are good for their flagship stores, such as Hong Kong, Singapore, Korea, etc.”
(See the summary of Giordano’s key success factors as attachment)
Promotion
Promotion’s role is communication. There are 4 tools in the promotions mix, Public relation which defines as the planned and sustained effort to establish and maintain goodwill and mutual understanding between a company and its public. Advertising is paid and non – personal form of communication which works through the media to its target audiences. Sales promotion is the third non personal tool which works close to the individual customers but these is no personal contact between people. The last one is personal selling which is the only personal tools of promotional.
Charles Fung, Giordano’s chief operations officer and executive director said, ‘Giordano spends a large proportion of its turnover on advertising and promotions. No retailer of our size spends as much as us’. For the past five years, Giordano in Singapore had been spending about S$1.5 million (HK$6.675 million) to S$2.0 million (HK$8.9 million) annually on its advertising and promotional activities. It won the Top Advertiser Award from 1991 to 1994. Up to June 30, 2000, total advertising and promotion expenditure for the Group amounted to HK$41.5 million, or 3% of the Group’s retail turnover. In addition to its big budget, Giordano’s advertising and promotion campaigns were creative and appealing. One such campaign was the ‘Round the Clock Madness Shopping’ with the Singapore radio station FM93.3 on 1 May 1994. Different clothing items were discounted between 10-60% at various times beginning at midnight. For example, jeans were offered at a 20% discount from 12 a.m. to 1 a.m.,while polo shirts and T-shirts were given a 30% discount from 1 a.m. to 2 a.m., and then shorts at a 40% discount from 2 a.m. to 3 a.m. To keep listeners awake and excited, the product categories were on sale at each time slot were only released at the specified hour, so that nobody knew the next items that would be on this special sale. Listeners to the radio station were cajoled into coming to Giordano stores throughout the night (Ang 1996). In 1996, Giordano won the Singapore Ear Award. Its English radio commercial was voted by listeners to be one of the best, with the most creative English jingle.
Another success was its ‘Simply Khakis’ promotion, launched in April 1999, which emphasized basic, street-culture style that ‘mixed and matched’ and thus fitted all occasions. In Singapore, within days of its launch, the new line sold out and had to be re-launched two weeks later. By October 1999, over a million pairs of khaki trousers and shorts had been sold. This success could be attributed partly to its clearly defined communications objectives, as Garrett Bennett, Giordano’s Executive Director in charge of merchandising and operations, said, ‘We want to be the key provider of the basics: khakis, jeans and the white shirt’. Elsewhere in the region, sales were booming for Giordano, despite only moderate recovery experienced in the retail industry. Giordano’s strength in executing innovative and effective promotional strategies helped the retailer to reduce the impact of the Asian crisis on its sales and take advantage of the slight recovery seen in early 1999. Aggressive advertising and promotions also played a significant role in the successful re-marketing of its core brand and re-launch or introduction of sister brands, Giordano Ladies, Giordano Junior and Bluestar Exchange.
Physical Evidence
Physical evidence available to the customer must match the expectation created by the promotion. If it doesn’t, the customer will probably withdraw.
Physical evidence is part of the service offer to the customer. Giordano generally stores measure about 1,100 square feet (100 meter square meter) to put the product offer to customer. However it’s depend on the product line. I.e. Giordano outlet in Bugis streets (Singapore) is more compact compare than Giordano Concept outlets in the orchard road.
The Giordano’s logo also part of the physical evidence that included in their marketing mix. To meet the customer satisfaction, Giordano willing to removed the logo from some of it’s the merchandise as some customers liked the quality but not the value for money image of the Giordano brand.
(please see view of Giordano logo as attachment)
People (Personnel)
For Giordano investment in service meant investment in people.
Excellence in service: continual commitment to providing excellent customer service and response. This is the result of integration of the corporate philosophy and leadership, service orientation of supporting functions like human resource policies (e.g., selection, training and remuneration of frontline staff) and information systems, and performance monitoring (e.g., regular evaluations of service standards at store level and mystery shopping)
Giordano’s philosophy of quality service could be observed in its overseas outlets as well. Its Singapore operations, for example, achieved ISO 9002 certification. Its obsession with providing excellent customer service was best described by Fung. ‘The only way to keep abreast with stiff competition in the retail market is to know the customers’ needs and serve them well. Customers pay our paychecks; they are our bosses … Giordano considers service to be a very important element [in trying to draw customers] … service is in the blood of every member of our staff’.
(See the summary of Giordano’s key success factor)
Process
In markets with expensive retail space, retailers would try to maximize every square foot of the store for sales opportunities. Giordano was no different. Its strategy involved not having a back store room in each store. Instead, a central distribution center replaced the function of a back store room. With information technology (IT), Giordano was able to skillfully manage its inventory and forecast demand. When an item was sold, the barcode information, identifying size, color, style and price was recorded by the point-of-sale cash register and transmitted to the company’s main computer. At the end of each day, the information was compiled at the store level and sent to the sales department and the distribution center. The compiled sales information became the store’s order for the following day. Orders were filled during the night and were ready for delivery by early morning, ensuring that before a Giordano store opened for business, new inventory was already on the shelves.
GIORDANO’S COMPETITORS
In The business, every company has few or even many of competitors. Some companies feel the competition is a threat for their business, while the others take it as an asset to set a better planning strategy and innovation over the product of goods and services. In the mass production business such value for money apparel, too many companies will put out copycat products. Price of products in a crowded market will inevitably fall.
Giordano has been called the Gap of Asia. Roughly five years ago, that might have been correct. However since 2000, Giordano international has been blazing its own trail, repositioning itself and expanding its range of brands. Further, the Hong Kong based apparel chain’s modest ambitions are only to become “the best and biggest world brand in apparel retailing.
Until recently the main competitors for low-priced apparel were Hang Ten, Bossini and Benetton which were generally positioned as low-price retailers offering reasonable quality and service also emphasized versatility and simplicity. However the crisis was pushed formerly more up-market firms such as Esprit and Theme to compete for Giordano’s value-for-money segment.
Esprit
Esprit is an international fashion lifestyle brand, principally engaged in the image and product design, sourcing, manufacturing and retail and wholesale distribution of a wide range of women’s, men’s and children’s apparel, footwear, accessories and other products under the Esprit brand name. The esprit name was promoted as a lifestyle image and products were strategically positioned as good quality and value for money which is a position that Giordano was occupying. The Esprit main market is Europe. However the esprit brand products were principally sold via directly managed retail, outlets, wholesale customer (it is including department stores, specialty stores and franchisees) and by licensees in relation to products manufactured under license, principally through the licensees’ own distribution networks.
Theme
Theme International Holdings Limited was founded in Hong Kong in 1986 by Chairman and Chief Executive Officer Kenneth Lai. He identified a niche in the local market, for high-quality, fashionable ladies’ business wear, although it subsequently expanded into casual wear. The Theme label and chain was in direct competition with Giordano Ladies’. From the first store in 1986 to a chain comprising over 200 outlets in Hong Kong, China, Korea, Macao, Taiwan, Singapore, Malaysia, Indonesia, The Philippines, Japan, Thailand, Canada and Holland, the phenomenal growth of Theme was built on a vertically integrated corporate structure and advanced management system. However, its ambitious expansion proved to be costly in view of the crisis, with interest soaring on high levels of debt. In 1999, the company announced a HK$ 106.1 million net loss for the six months to 30 September 1998 and it closed 23 retail outlets in Hong Kong, which traded under its subsidiary The Clothing Shop. Theme International had since been acquired by High Fashion International, a Hong Kong – based fashion retailer specializing in up – market, trendy apparel.
In general, although these firms had slightly different positioning strategies and targeted dissimilar but overlapping segments, they all competed in a number of similar areas. For example, all firms heavily emphasized advertising and sales promotion – selling fashionable clothes at attractive prices. Almost all stores were also primarily situated in good ground – floor locations, drawing high – volume traffic and facilitating shopping, browsing and impulse buying. However, Giordano clearly distinguished itself from its competitors had been able to match.
The Gap
A threat from United States – based The Gap was looming. The Gap with the positioning “value-for-money” and mid-priced but trendy fashion as Giordano occupied, also the same target market as shown in the attachment that Giordano was also aware that the American retailer was invading Asia. The Gap was already in Japan. After 2005, when it was planned that garment quotas would be eliminated, imports into the region should become more cost-effective. Therefore, Giordano had to examine whether its intention to shift towards a higher position from its current value-for-money position was feasible.
STRATEGY OF GIORDANO TO ENTER GLOBAL MARKET
Strategy is with greater of emphasis on planning, focusing on long – term issues and being future oriented, with organization – wide impact. More importantly, an assessment of core competencies and sustainable competitive advantages, which are primary considerations for strategy formulation, is required. Core element of Giordano’s strategy should be maintained when entering any country. This is the way to ensure a consistency in service and merchandise quality, which strengthens brand equity and positioning and facilitates the achievement marketing communications objectives. In this respect, strategy should be seen as something to remain intact in any country. What could be changed are the tactics of implementation.
Giordano Company’s main competitive strengths which can be adapted to other market are: the experience of the employees, inventory controlled system and HR practices. However, the policies should be different for each country and can use the established distribution, marketing and inbound channels members in order to market their product outside the home country.
IT strategy which is currently used by Giordano, it should not adopt the same strategy for other countries where they are planning to expand their business. Because the IT infrastructure for each country in Asia and other continents may not be the same and the current IT strategy of Giordano may not be supported by that particular country’s technological structure.
Giordano needs more efficient, cost effective, and secure internal communication platform which will be link its many sites in Hong Kong and other host countries. As the cross border business of Giordano is increasing, the company needed a comprehensive communications tool that would help Giordano employees conduct multisite management meetings, share documents and collaborate for fast business decisions and quality customer service. In such scenario Giordano can go for partnership with the IT Company (Like Microsoft), through which they can install such a server and software through which they can equip their staff with real time teamwork and presence capabilities that dramatically increased productivity. At the same time they can decrease its multi-national direct dial and travel cost, as well as IT management costs.
The marketing mix strategies that are followed by the Giordano for the existing market should not be the same for new markets where the company is willing to enter. The marketing mix strategies mainly deal with arrangements of the 4 Ps’. So the strategies regarding product price, price, place and promotion should not be the same for all target countries as the market differs in terms of their economic, cultural, social and political environment. But the successful strategies which are currently used for other market can be used by Giordano as guidelines and can develop tactical strategies for different market according to the market situation and customers’ requirement.
RECOMMENDATIONS
“Giordano has a strong following name recognition in Asia”, said Sebastian Skiff, Cushman and Wakefield’s head of retail in the Asia – Pacific. “The brand has traditionally offered a product, cut, style and size tailored to the Asian Physique. It has continued to keep the store design, marketing and product in fashion and adapt quickly to the changing whims of its customers.”
Giordano has perfectly focused in the value-for-money concept and everything they do is managed at a world-class standard. The management conducted their business in such an excellent and professional manner which helped this brand to reach from Asia to the Middle East and India, Australia, Eastern Europe, and now in North America.
While the positioning of Giordano’s brand should remain consistent across markets, the marketing mix could be varied to tailor to the specific market conditions. This is not difficult considering Giordano’s policy to empower local managers who have more experience and knowledge of the local market, to make implementation decisions like advertising and promotion. Hence, this KSF may be transferable to new markets in Asia.
The key to good customer service lies in its philosophy, which is manifested in various HR policies e.g., recruitment and training. Thus, it is likely for Giordano to transfer this to new markets to the extent that it could maintain service levels by providing training to local staff, monitoring performance, etc. More importantly, as the Service Gap Model of customer satisfaction suggests, it should evaluate service expectations from the customer’s perspective rather than its own, and formulate standards accordingly. For instance, Giordano should develop a greater understanding of the different service needs of its international customers by gathering feedback from customers and utilizing it to fine-tune its service standard for those markets.
Despite Giordano’s efforts in ensuring high quality service in new markets, it may face some difficulty in positioning itself on service in some countries outside of Asia. For instance, in Japan and the US, expectations on service are higher and it may be almost impossible for Giordano to differentiate itself from those competitors with high quality service. This is in contrast to much of Asia, where good service is the exception rather than the norm.
STRATEGY TOOK BY GIORDANO INDONESIA
Giordano Indonesia which has branch office in Kelapa Gading, North Jakarta uses the same strategy as their core business strategy. However it might be different in the tactical due to the cultural, political reason and the market condition. We called STEEPLE.
The place or outlet which is chosen by Giordano Indonesia, is more to upper market level it is due to the price that Giordano Indonesia offered to the customer and buying power in Indonesia.
The price is about the same with other region. However foreign exchanged involve to create the price is higher than other region e.g., Singapore and Malaysia. In the other hand, buying power of Indonesian people is lower than other Giordano’s expansion region, makes the target slightly different. To meet the target market in Indonesia, Giordano chose mostly middle up mall to open their outlet.
It is not only due to the price and market condition. Culture in Indonesia where the people likes to hanging around in the mall is another consideration. One more consideration is the climate in Indonesia which is hot and dusty makes people do not feel convenience to wall in the street for shop, like in Singapore, Hong Kong or Korea.
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