Giordano-Positioning in international markets
Submitted by: Diju Daniel Donny Thomas Mugdha Joshi Sugandha Mehrotra Udita Sood
Executive Summary Giordano was founded in Hong Kong in 1980 by Jimmy Lai. It is Asia’s one of the most successful retailer currently operating in East Asia, South- East Asia and Middle East. The success success of Giordan Giordano o can be attrib attributed uted to several several factors factors such such as providi providing ng excellen excellentt customer service, offering customer value for money, understanding customer needs and wants. wants. These These attrib attributes utes actuall actually y compri comprise se the company company’s ’s competi competitive tive advantag advantage. e. In addition to the competitive advantage other key success factors like stringent selection procedures procedures and training training of staff, operating efficiencies, efficiencies, extremely good inventory inventory control and turnove turnover, r, close close integrat integration ion of purchas purchasing ing and selling selling functio functions ns and short short product product development cycle are the reasons behind the growth of the company and enabling the company to gain its hold in the global market also supporting its growth strategy, global expansion. These success mechanisms also helped Giordano survive the Asian economic downturn and SARS crisis.
The question is how Giordano can maintain its competitive advantage in the future and how can can Gior Giordan dano o sust sustain ain its its past past succe success ss was was perha perhaps ps the the mo most st crit critica icall ques questi tion on confronting its management. Giordano has to critically evaluate its success strategies and sources of competitive advantage. Perhaps, it also needs to consider repositioning itself in current and newer markets to continue giving its competitors a tough time and remain in the game. Furthermore, Giordano also needs to understand which key success factors could be maintained or even strengthened strengthened in the long run and which of them would erode in the coming years. Furthermore, another issue confronting Giordano was which success factors could be transferrable to other markets during its expansion to other Asian Countries. Thus, there were several issues that needs consideration consideration by the higher Management at Giordano, Giordano, who till now have been quite successful with all their business endeavors and growth strategies
Introduction
Giordano was established in 1981 by Jimmy Lia. It is a Hong Kong based retailer of casual clothes targeted at men, women and children. The company has four different brands aimed at targeting different customers. Giordano, Giordano Ladies, Giordano Junior and Blue Star Exchange. In early 2006, the company was operating over 1600 retail stores and counters in some 31 markets in the Asia- Pacific and Middle- East regions. Its main markets were Mainland China, Hong Kong, Japan, Korea, Singapore and Taiwan. It also had its presence is Australia, Indonesia and Malaysia. Giordano's sales grew from HK$712 million in 1989 to HK$3,092 million in 1999. In most geographic geographic markets serviced by Giordano, the retail retail clot clothin hing g busine business ss was was consi conside dere red d to be extr extrem emel ely y compe competi titi tive. ve. It was was esse essenti ntial al for for Giordano to keep coming up with innovative line of products and ideas to maintain its presence and brand image in in the global global market. market.
Company Background
Giordano opened its first retail store in Hong Kong and also began to expand its market by distributing Giordano merchandise in Taiwan through a joint venture. In 1985, it opened its first first reta retail il outle outlett in Singa Singapor pore. e. Gior Giordan dano’ o’ss succe success ss can can be attr attribu ibute ted d to compan company’ y’ss continuous focus on 5 main corporate values, quality, knowledge, innovation, simplicity and service. The company has its own manufacturing units where all the apparels as per the designs designs and clothing clothing styles styles are produced produced.. Giordan Giordano o is known known for its inexpens inexpensive ive and contemporary garments and is very similar to the American based retailer ‘Gap’ In 1987 responding to slow sales, Giordano changed its positioning strategy. Earlier it had sold exclusively men’s casual apparel. However, when the management realized that an increasing number of female customers were attracted to its stores, they repositioned the chain chain as a retaile retailerr of value-f value-foror-mone money y merchan merchandise dise,, selling selling discou discounted nted casual casual unisex unisex appar apparel el with with the goal goal of maxi maximiz mizing ing unit unit sale saless inst instea ead d of marg margin. in. Th This is change change in repositioning increased the sales drastically.
To make people ‘’feel good’’ and ‘’look great’’ was Giordano’s corporate mission. In 1994 Peter Lau Kwok Kuen succeeded Lai and became Chairman. Peter Lau believed that a willingness to try new and unconventional ways of doing business and to learn from the past is the right attitude attitude and this philosophy philosophy also became an integral integral part of Giordano’s Giordano’s organizational culture. Moreover, it was ok to make mistakes and that empowerment would minimize mistakes. On the whole Giordano had 8000 dedicated sales staff in all its stores across different countries. The company’s philosophy of quality service could be observed not only in Hong Kong but also in its overseas outlets. outlets. The company had been honored by numerous service awards over the years.
Products Products
Giordano has four company brands. Giordano, Giordano Ladies, Giordano Junior and Blue Star Exchange, these four brands were operating over 1600 retail stores and counters in some 31 markets in the Asia- Pacific and Middle- East region.
Business Business and Corporate Corporate Strategy Strategy
Giordano’s overall strategy laid emphasis on critical aspects such as high quality service, focus on developing employee talent, reaching out to customers, exploring newer markets to expan expand d in the globa globall aren arena. a. It posit positio ioned ned itsel itselff as a reta retaile ilerr of valuevalue-for for-m -mone oney y merchandise. It had a willingness to try new and unconventional ways of doing business. The firm was open to experiment and introduce new product ranges and design customized products for various various segments. segments.
Philosophy Philosophy and Value Value System
Giordano’s philosophy was to learn from past mistakes and prepare for future challenges as it believed that this approach will take the organization in the right direction. It gave a comfort sense to its employees about making mistakes as it encouraged the practice of taking away the key learning’s from past errors. It also strongly believed empowering its
employees to contribute and participate as much as possible to minimize mistakes. It focused on understanding the customer needs and serves them well.
Employees Employees Focus Strategy Strategy
Giordano had stringent selection procedures to ensure that selected candidates match the desired employee profile. Service orientation and capability check was an integral part of these selection procedures. It had invested heavily in employee training and had been recognized recognized for training and developing its staff staff from various prestigiou prestigiouss institutions. institutions. It conside considered red its front-lin front-linee worker workerss to be its customer customer service service heroes. heroes. The emphasi emphasiss on training was with a view to hone the skills of the employees and enables them to provide best customer customer services services and and satisfaction. satisfaction.
Performance Performance Evaluation Evaluation Strategy Strategy
Regular performance evaluations were conducted at individual employee level as well as at store level. The company had highly rewarding performance linked incentive plans for its employe employees es to drive drive higher higher producti productivity vity and encoura encourage ge interna internall compet competiti ition. on. Trainin Trainings gs organized for the employees also assisted the staff to acquire necessary skills which need improvement. Giordano awarded the “Service Star” to individual employees, based on nominations provided by shoppers.
Focusing Giordano’s Organizational structure on simplicity and Speed
The company company maintai maintained ned a flat organiza organizatio tional nal struct structure. ure. The company company’s ’s decentr decentrali alized zed management style empowered line managers and at the same time encouraged fast and close communication communication and coordination. Effective communication communication leads to efficient efficient project management and speedy decision making. This kept Giordano’s product development cycle short.
Quality Services
Giordano’s vision since inception has been to drive top quality customer service and promote value for money merchandise. merchandise. It’s commitment commitment to customer customer service was backed by several Customer Customer Service Campaigns Campaigns and the firm also received received numerous numerous serviceservicerelate related d awar awards. ds. Its Its manag managem ement ent had had launc launched hed seve several ral creat creative ive,, cust custom omer er-fo -focus cused ed campaigns and promotions to extend its service orientation. Besides its brand name, logo, style style and quali quality ty the the firm firm’s ’s comm commit itme ment nt to excel excelle lent nt servi service ce becam becamee an attr attract active ive proposition proposition for customers customers to return to this brand. The firm came up with innovative innovative strategies to attract a larger customer base and initiated customer focus promotions, its service philosophy had three tenets: “We welcome unlimited try-ons; we exchange—no questions asked; and we serve with a smile.”
Value for Money (Mid- price)
Customers are learning a lot better about what is value. It is important to sell the products at cheaper rates. Convenience is value for the customer. Time is value for the customers. Giordano Giordano was able to sell sell value-f value-foror-mone money y merchan merchandise dise consist consistentl ently y throug through h careful careful selection of suppliers, strict cost control and by resisting the temptation to increase retail prices unnecess unnecessarily. arily.
Central Distribution Center
In order to maximize use of store space for sales opportunities, Giordano replaced the function of a back storeroom with a central distribution center.
Product Product Strategy
Giordano offered various attractive options to customers where they are given an option to retu return rn or exch exchan ange ge the the prod produc uctt if the the prod produc uctt they they purc purcha hase sed d did did not not meet meet thei their r expectations. Customers were also provided with exciting options to choose the fairest price they they want to pay for a product product..
The firms another strategy was to sell a small number of core products; Its stores featured no more than 100 variants of 17 core items, whereas competing retailers might feature 200 to 300 items. It believed that merchandising a wide range of products made it difficult to react quickly to market changes, this approach of restricted range of products has allowed Giordano to respond to market changes faster than its competitors, and to keep costs down. Giordano had begun to reposition its brand by emphasizing differentiated, functionally valu valuee-ad adde ded d prod produc ucts ts clot clothe hess and and broa broade deni ning ng its its appe appeal al by impr improv ovin ing g on visu visual al merchandising and apparel. Giordano’s relatively mid-priced positioning worked well— inexpensive,
yet
contemporary-looking
outfits
appealed
to
Asia’s frugal customers, especially during a period of economic slowdown. The company focused on an important concept of value for money which continuously improves the value of the product.
Case Analysis
Giordano's Problems
As we have learnt that when a Company undergoes expansion plans it undergoes various challenges. Even in Giordano case as the company has presence mainly in Asia and Middle east, due to stiff competition, the company decided to seek growth in 2006.As the company changed it strategies it faced a lot of challenges. The primary three issues that the company faced were: Firstly, the main issue that Giordano faced was with the "Positioning". As there would be different strategies for different markets, the company wanted to know how to position its brand in both in the new and the existing market. The Second issue that Giordano faced was the issue of "Sustainability". As mentioned above that the company faced stiff competition the company majorly faced the issue of sustainability as the customer taste and preference defined the trends in Giordano's fashion. Thus, sustaining tough market competitors on different soils posed as another challenge.
The third issue was relating to the "Growth strategy" of Giordano. As different markets had different preferences, adaptability posed as a serious concern in Giordano.
Considering the SERVQUAL SERVQUAL Attributes Attributes, we can analyze it on the following grounds: Received ved num numer erous ous servi service ce rela relate ted d awar awards. ds. Eg Eg:: In 200 2009 9 Best Best servi service ce Reliability Reliability – Recei Performance. Responsiveness Responsiveness- Serving customer is priority for store teams. Assurance Assurance- Staff trained to recall names and last purchases.
Training enhances job knowledge & confidence. Empathy Empathy – “We serve with a Smile. Tangibles - Servicescape
We shall now analyze each issue in detail and shall look into the possible solution for the same:
Repositioning Repositioning against against Competitors: Competitors:
Osama Tala, a well known author of sell your brains for profits states that,"A Positioning Positioning Strategy results in the image you want to draw in the mind of your customers, the picture you want him/her him/her to visualize visualize of you what you offer, in relation relation to the market situation, situation, and any competition you may have".
As per Giordano, the product strategy that the company created was that of mid priced, inexpensive yet contemporary looking outfit with value for money. This helped Giordano in gaining strong market foothold as a trendy unisex apparel outfit company. The Company was successful in filling in the gap by being a decent brand and at the same time it was cost effective. The Company always focused on quality of Service. The staff was pro active in not only helping the customers but also in knowing the customers tastes and preferences. If we see Giordano positioning, the company holds a brand value in the eyes of the customers. customers. Thus, if the company decides to reposition itself. It might end up losing what it has attained as it might create doubt or ambiguity amongst the existing clients. As we have learnt that the company not only focuses in creating new clients, but the company main
focus lies in retaining the existing clients. Thus, the company must not try to change its positioning positioning as it it might end up losing losing its current market market share in in the existing existing markets. markets. However, we believe that Giordano can alter its brand image into high value, high-quality, high end market. This could mean repositioning Giordano as a high priced & high value brand in some markets in the world. world. This could mean that Giordano could bring in a price hike of 5-10% in the market. Statistics prove that a 5-10% price hike doesn't affect the consumer market to a large extent. Thus the risk of losing the customers decreases. We recommend Giordano to continue its creativity in promotions. As we have learnt through through the case case that Giorda Giordano's no's promot promotions ions like "Simpl "Simply y Khaki", Khaki", "Yoga "Yoga Collec Collection tion"" helped Giordano create a niche in front of its competitors. They should spend more on their traditional advertising as Giordano spends less on advertisement unlike its competitors. It's very close Espirit creates a "lifestyle" image even though their strategies are very similar to each other. Giordano could repositions its brand image as more stylish and lifestyle in its promotions promotions and not not just brand. brand. Another noticeable factor in Giordano is that fact that the company focused on limiting the product line. So to say that the company stores stores featured featured no more than 100 variants of 17 core items. This made it easier for the company to bring in changes with the changing trends with the changing consumers tastes and preferences. Regarding the concern of Giordano changing its strategies or keeping the same strategies for different markets. It depends on the market conditions of the individuals as there must be some markets markets which are customized customized and some which are standardized. standardized. Some of Giordano's strategies have been very successful and has helped the company gain lot of success like-Value for money, The company should continue the same strategy and should standardized. The company could standardize the process in Asia except some parts. On the other side, strategies like Inventory control and good customer service have helped Giordano create a strong brand image. the company should thus very tactfully apply these stra strate tegie giess in diffe differe rent nt mark market ets. s. Th Thus us to say say that that the the cust custom omize ized d stra strate tegie giess could could be developed for different countries even within Asia because there are some variation in some countries regarding economy, cultures and values.
Recommendation Recommendation (Agains (Againstt Competitors) Competitors)
In order to compete with all its main competitors following are the steps that can be taken by Giordano Giordano to face tough competition competition and continue to maintain maintain its global presence presence and brand image. image.
Giordano should encourage and focus more on Customer Relationship Programs. They should involve themselves in providing more customized products to their customers.
Implement Customer Pyramid concept- customers should be categorized according to the number of purchases made from Giordano stores. Customers with maximum purchases purchases over a given period can be given the Platinum card, followed followed by Gold & Silver cards. This practice will enable to provide additional services and attention to those who show loyalty towards the brand and frequently visit Giordano stores. This will keep the regular customers happy, this way they will continue visiting stores and also feel like special customers who are eligible for special treatment ( customer delight)
Moreover, Giordano should develop social bonds by building personal relationships with with cust custom omer ers. s. For For exam exampl ple, e, wish wishin ing g the the core core cust custom omer er on birt birthd hday ayss & anniversary with discount coupon. Platinum Card – Greeting with 10% discount coupon. Gold Card – Greeting with 5% discount coupon. Silver Card – Greetings.
Repositioning Repositioning in Existing Existing market market
Giordano as we have learnt has been very successful in Hong Kong and in all its expansion ventures with its current model of its services. As we have even learnt that Giordano has been facing intense competition competition from Bossinni, Bossinni, Hang Ten, GAP . Thus, its service model of excellent customer service can be imitated. Another fact that can work in Giordano favor is that there is no customer gap. That is what Giordano promises its customers. It is been able to deliver the same. Customer is treated with utmost importance. Giordano has been able to deliver all its promises thus minimizing the scope of any providers gap.
The staff at Giordano is well trained and focused on customers' needs and satisfaction. Thus, the listening Gap is well covered by learning the customers tastes and preferences. Knowledge Knowledge of customer need need is well understood. understood. Giordano invests heavily heavily in employee training and has been recognized for its commitment to training and developing its staff by such such awar awards ds as the the Hong Hong Kong Kong Manag Managem ement ent Asso Associ ciat atio ion n Cert Certifi ifica cate te of Meri Meritt for for Excellence in Training etc. Such awards minimizes the Service Performance Gap as they are excellent in their services. Giordano core competency lies in their simplicity. This covers the Service design and standards gap. The company over time and again to beat competition has been changing its strategy to keep up with the changing consumer trends and to maintain its market share. The Company has been able to reduce the Communication gap by launching service related campaigns. Thus, it will be easy for Giordano to retain its market share in the existing markets.
Recommendation Recommendation (Reposit (Repositioning ioning in Existing Existing market) market)
Considering Considering the current positioning by Giordano is successful, successful, we feel there is no need for repositioning in the existing target market covered by the company. However, as evident from the case competition is intense and the customer service tactics can be imitated. Therefore, one of the recommendations to the company would be to continuously keep bringing about about innovation innovation in their service service model which needs needs to be developed from time time to time. Furthermore, Giordano should focus more on customer retention. It is important to attract new customers; however, it is even more important to retain them. The cost incurred due to a loss of regular customers can be huge and companies should try their best to retain all their customers who benefit the company during their life time (customer life-time value).
Another Another recomm recommenda endatio tion n would would be to recrui recruitt a profes professio sional nal Fashion Fashion assist assistant ant who possesses possesses skills to provide provide trendy fashion fashion tips to platinum and gold gold card holders. Once in a while customers may need a fashion tip and such privileges given to selected customers will also be cost-effective and help in retaining valuable customers. In spare time the
professional professional assistant assistant could could also provide training training and guidance guidance to Giordano’s Giordano’s sales force to cultivate a sense of fashion who can then in turn provide some fashion related assistance to customers in general.
Different Different Positioning Positioning Strategies Strategies for different different market: market:
Giordano Giordano has another option when it comes to its growth growth strategy and that is the different positioning positioning strategies strategies for different different markets. markets. As we know that different different markets markets have different types of consumers which have different needs. As the target market is different, the set target customers are also different. Similarly, the customer needs changes from places to to places. Thus, Thus, a different different position positioning ing for different different markets markets is needed. needed. Also, Also, when when Giordan Giordano o will will conside considerr differ different ent market. market. It will will have to underst understand and the spendi spending ng power power of the consu consume mers rs in that that parti particul cular ar mark market et.. Some Some count countri ries es like like Philipp Philippine iness have greater greater spendin spending g power power than US where where custome customers rs are more more value value oriented. Thus, price quotation will vary in both the market. Giordano will also face different competitors in different markets. Like GAP emerged as a majo majorr compe competi tito torr in USA USA for for Gior Giordan dano o and in the the hom homee count country ry Gior Giorda dano no face faced d competition from Hang Ten, Bossini, Baleno etc that served the same target audience and gave good competition to Giordano. Thus, the strategy that Giordano would aim to keep in home country cannot be similar similar as that of USA as the target audience and the markets are different. Thus, the products, price, place, people all will vary in different markets. Recommendation Recommendation (Differen (Differentt Positioning Positioning Strategies for for new markets) markets)
Giordano should not reposition itself in the existing markets; however, they should adopt diff differ ereent pos positio itioni ning ng strat trateg egie iess
for for
ente enteri ring ng new new
mark market ets. s. Foll Follow owin ing g
are are
the
recommendations that will help Giordano to establish itself in new markets.
They should be consistent it their service and the quality of their merchandise.
Giorda Giordano no should should conduct conduct Market Marketing ing Researc Research h to identif identify y latest latest fashio fashion n trends, trends, current style of the country and the cultural differences and similarities that exist in the particular country. Moreover, it is also important to gather information about
the economic conditions conditions in the country to be able to judge the purchasing power of buyers. buyers.
Current successful strategies used in existing market, can be used by Giordano as a guideline depending on the market situation and customers’ requirement.
Finally Finally,, Giordan Giordano o should should continue continue investi investigat gating ing to find opportu opportuniti nities es in new markets like North America and Europe. They should try to find out about their competitors in North America and Europe and understand if they can give them competition or will they succumb to the pressures.
Sustainability Sustainability and Transfera Transferability bility
Competitive Advantage
The company benchmarked its self in various aspects to the industry's best practices for instance which gave the company an edge over the others:
Computerization (from The Limited),
A tightly controlled menu (from McDonald’s),
Frugality (from Wal-Mart),and
Value pricing (as implemented at the British retail chain Marks & Spencer).
Strong Strong frontl frontline ine defense defense:: Trained Trained and dedicat dedicated ed staff staff with with a focus focus on quality quality service.
Decent Decentrali ralized zed managem management ent style: style: Emp Empowe owered red line manager managerss and brought brought close close communication and co-ordination.
Speedy Operations: This kept the product development cycle short. This helped in disengaging from manufacturing and focus on retailing.
Brand Recognition: The organization was recognized for its valuable focus on custom customer er service service and emphas emphasis is it laid on deliver delivering ing high-e high-end nd custom customer er value value satisfaction.
Recommendation Recommendation
We feel that all the Key Success Factors will sustain in the existing market in the long run. However, market research can be conducted to understand if any changes need to be brought in any of the core competencies.
In future, KSF’s related to service should be developed since product is almost similar among the competitors. Implying more emphasis should be given to factors like dedicated workforce workforce and quality quality of service by means of improved improved training and more refined recruitment and selection procedures.
Since operating cost from China has increased they can outsource to other countries or increase the price. This help Giordano sustain its competitive advantage of ‘value pricing’
KSF’s can be transferable into new market but with certain changes suiting the needs and understanding of the particular market.
Conclusion
We can conclude by that that Giordano is having a strong service model and product in existing market with a strong growth over the years . Sstaying Sstaying ahead with this model in the existing existing market market is difficul difficultt as it can be easily easily imitate imitated. d. Therefo Therefore, re, Giordano Giordano needs to continuously bring innovative ideas as to how sales staff respond to customers need and delight them. Even if its competitors imitate their service model, Giordano always needs to stay a step ahead. It is important important to realize that new market needs more understanding understanding before entering entering them and the the company should should aim at Developing Developing & building building the concept concept of “Customer as partners”
