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 Asias one of the most successful retailer currently operating in East Asia, South- East Asia and Middle East. The success of Giordano can be attributed to several factors such as providing excellent customer service, offering customer value for money, understanding customer needs and wants. These attributes actually comprise the companys competitive advantage. In addition to the competitive advantage other key success factors like stringent selection procedures and training of staff, operating efficiencies, extremely good inventory control and turnover, close integration of purchasing and selling functions and short product development cycle are the reasons behind the growth of the company and enabling the company to gain its hold in the global market also supporting its growth strategy, global expansion. These success mechanisms also helped Giordano survive the Asian economic downturn and SARS crisis. The question is how Giordano can maintain its competitive advantage in the future and how can Giordano sustain its past success was perhaps the most critical question confronting its management. Giordano has to critically evaluate its success strategies and sources of competitive advantage. Perhaps, it also needs to consider repositioning itself in current and newer markets to continue giving its competitors a tough time and remain in the game. Furthermore, Giordano also needs to understand which key success factors could be maintained or even strengthened in the long run and which of them would erode in the coming years. Furthermore, another issue confronting Giordano was which success factors could be transferrable to other markets during its expansion to other Asian Countries. Thus, there were several issues that needs consideration by the higher Management at Giordano, who till now have been quite successful with all their business endeavors and growth strategies

Introduction

Giordano was established in 1981 by Jimmy Lia. It is a Hong Kong based retailer of casual clothes targeted at men, women and children. The company has four different brands aimed at targeting different customers. Giordano, Giordano Ladies, Giordano Junior and Blue Star Exchange. In early 2006, the company was operating over 1600 retail stores and counters in some 31 markets in the Asia- Pacific and Middle- East regions. Its main markets were Mainland China, Hong Kong, Japan, Korea, Singapore and Taiwan. It also had its presence is Australia, Indonesia and Malaysia. Giordano's sales grew from HK$712 million in 1989 to HK$3,092 million in 1999. In most geographic markets serviced by Giordano, the retail clothing business was considered to be extremely competitive. It was essential for Giordano to keep coming up with innovative line of products and ideas to maintain its presence and brand image in the global market.

Company Background

Giordano opened its first retail store in Hong Kong and also began to expand its market by distributing Giordano merchandise in Taiwan through a joint venture. In 1985, it opened its first retail outlet in Singapore. Giordanos success can be attributed to companys continuous focus on 5 main corporate values, quality, knowledge, innovation, simplicity and service. The company has its own manufacturing units where all the apparels as per the designs and clothing styles are produced. Giordano is known for its inexpensive and contemporary garments and is very similar to the American based retailer Gap In 1987 responding to slow sales, Giordano changed its positioning strategy. Earlier it had sold exclusively mens casual apparel. However, when the management realized that an increasing number of female customers were attracted to its stores, they repositioned the chain as a retailer of value-for-money merchandise, selling discounted casual unisex apparel with the goal of maximizing unit sales instead of margin. This change in repositioning increased the sales drastically.

To make people feel good and look great was Giordanos corporate mission. In 1994 Peter Lau Kwok Kuen succeeded Lai and became Chairman. Peter Lau believed that a willingness to try new and unconventional ways of doing business and to learn from the past is the right attitude and this philosophy also became an integral part of Giordanos 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 companys philosophy of quality service could be observed not only in Hong Kong but also in its overseas outlets. The company had been honored by numerous service awards over the years.

Products Giordano has four company brands. Giordano, Giordano Ladies, Giordano Junior and Blue Star Exchange, these four brands were operating over 1600 retail stores and counters in some 31 markets in the Asia- Pacific and Middle- East region.

Business and Corporate Strategy

Giordanos overall strategy laid emphasis on critical aspects such as high quality service, focus on developing employee talent, reaching out to customers, exploring newer markets to expand in the global arena. It positioned itself as a retailer of value-for-money merchandise. It had a willingness to try new and unconventional ways of doing business. The firm was open to experiment and introduce new product ranges and design customized products for various segments. Philosophy and Value System Giordanos 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 learnings from past errors. It also strongly believed empowering its

employees to contribute and participate as much as possible to minimize mistakes. It focused on understanding the customer needs and serves them well. Employees Focus Strategy Giordano had stringent selection procedures to ensure that selected candidates match the desired employee profile. Service orientation and capability check was an integral part of these selection procedures. It had invested heavily in employee training and had been recognized for training and developing its staff from various prestigious institutions. It considered its front-line workers to be its customer service heroes. The emphasis on training was with a view to hone the skills of the employees and enables them to provide best customer services and satisfaction. Performance Evaluation Strategy Regular performance evaluations were conducted at individual employee level as well as at store level. The company had highly rewarding performance linked incentive plans for its employees to drive higher productivity and encourage internal competition. Trainings organized for the employees also assisted the staff to acquire necessary skills which need improvement. Giordano awarded the Service Star to individual employees, based on nominations provided by shoppers. Focusing Giordanos Organizational structure on simplicity and Speed The company maintained a flat organizational structure. The companys decentralized management style empowered line managers and at the same time encouraged fast and close communication and coordination. Effective communication leads to efficient project management and speedy decision making. This kept Giordanos product development cycle short. Quality Services

Giordanos vision since inception has been to drive top quality customer service and promote value for money merchandise. Its commitment to customer service was backed by several Customer Service Campaigns and the rm also received numerous servicerelated awards. Its management had launched several creative, customer-focused campaigns and promotions to extend its service orientation. Besides its brand name, logo, style and quality the firms commitment to excellent service became an attractive proposition for customers to return to this brand. The firm came up with innovative strategies to attract a larger customer base and initiated customer focus promotions, its service philosophy had three tenets: We welcome unlimited try-ons; we exchangeno questions asked; and we serve with a smile. Value for Money (Mid- price) Customers are learning a lot better about what is value. It is important to sell the products at cheaper rates. Convenience is value for the customer. Time is value for the customers. Giordano was able to sell value-for-money merchandise consistently through careful selection of suppliers, strict cost control and by resisting the temptation to increase retail prices unnecessarily. Central Distribution Center In order to maximize use of store space for sales opportunities, Giordano replaced the function of a back storeroom with a central distribution center.

Product Strategy Giordano offered various attractive options to customers where they are given an option to return or exchange the product if the product they purchased did not meet their expectations. Customers were also provided with exciting options to choose the fairest price they want to pay for a product.

The firms another strategy was to sell a small number of core products; Its stores featured no more than 100 variants of 17 core items, whereas competing retailers might feature 200 to 300 items. It believed that merchandising a wide range of products made it difficult to react quickly to market changes, this approach of restricted range of products has allowed Giordano to respond to market changes faster than its competitors, and to keep costs down. Giordano had begun to reposition its brand by emphasizing differentiated, functionally value-added products clothes and broadening its appeal by improving on visual merchandising and apparel. Giordanos relatively mid-priced positioning worked well inexpensive, yet contemporary-looking outts appealed to Asias frugal customers, especially during a period of economic slowdown. The company focused on an important concept of value for money which continuously improves the value of the product.

Case Analysis Giordano's Problems As we have learnt that when a Company undergoes expansion plans it undergoes various challenges. Even in Giordano case as the company has presence mainly in Asia and Middle east, due to stiff competition, the company decided to seek growth in 2006.As the company changed it strategies it faced a lot of challenges. The primary three issues that the company faced were: Firstly, the main issue that Giordano faced was with the "Positioning". As there would be different strategies for different markets, the company wanted to know how to position its brand in both in the new and the existing market. The Second issue that Giordano faced was the issue of "Sustainability". As mentioned above that the company faced stiff competition the company majorly faced the issue of sustainability as the customer taste and preference defined the trends in Giordano's fashion. Thus, sustaining tough market competitors on different soils posed as another challenge.

The third issue was relating to the "Growth strategy" of Giordano. As different markets had different preferences, adaptability posed as a serious concern in Giordano. Considering the SERVQUAL Attributes, we can analyze it on the following grounds: Reliability Received numerous service related awards. Eg: In 2009 Best service Performance. Responsiveness- Serving customer is priority for store teams. Assurance- Staff trained to recall names and last purchases. Training enhances job knowledge & confidence. Empathy We serve with a Smile. Tangibles - Servicescape We shall now analyze each issue in detail and shall look into the possible solution for the same: Repositioning against Competitors: Osama Tala, a well known author of sell your brains for profits states that,"A Positioning Strategy results in the image you want to draw in the mind of your customers, the picture you want him/her to visualize of you what you offer, in relation to the market situation, and any competition you may have". As per Giordano, the product strategy that the company created was that of mid priced, inexpensive yet contemporary looking outfit with value for money. This helped Giordano in gaining strong market foothold as a trendy unisex apparel outfit company. The Company was successful in filling in the gap by being a decent brand and at the same time it was cost effective. The Company always focused on quality of Service. The staff was pro active in not only helping the customers but also in knowing the customers tastes and preferences. If we see Giordano positioning, the company holds a brand value in the eyes of the customers. Thus, if the company decides to reposition itself. It might end up losing what it has attained as it might create doubt or ambiguity amongst the existing clients. As we have learnt that the company not only focuses in creating new clients, but the company main

focus lies in retaining the existing clients. Thus, the company must not try to change its positioning as it might end up losing its current market share in the existing markets. However, we believe that Giordano can alter its brand image into high value, high-quality, high end market. This could mean repositioning Giordano as a high priced & high value brand in some markets in the world. This could mean that Giordano could bring in a price hike of 5-10% in the market. Statistics prove that a 5-10% price hike doesn't affect the consumer market to a large extent. Thus the risk of losing the customers decreases. We recommend Giordano to continue its creativity in promotions. As we have learnt through the case that Giordano's promotions like "Simply Khaki", "Yoga Collection" helped Giordano create a niche in front of its competitors. They should spend more on their traditional advertising as Giordano spends less on advertisement unlike its competitors. It's very close Espirit creates a "lifestyle" image even though their strategies are very similar to each other. Giordano could repositions its brand image as more stylish and lifestyle in its promotions and not just brand. Another noticeable factor in Giordano is that fact that the company focused on limiting the product line. So to say that the company stores featured no more than 100 variants of 17 core items. This made it easier for the company to bring in changes with the changing trends with the changing consumers tastes and preferences. Regarding the concern of Giordano changing its strategies or keeping the same strategies for different markets. It depends on the market conditions of the individuals as there must be some markets which are customized and some which are standardized. Some of Giordano's strategies have been very successful and has helped the company gain lot of success like-Value for money, The company should continue the same strategy and should standardized. The company could standardize the process in Asia except some parts. On the other side, strategies like Inventory control and good customer service have helped Giordano create a strong brand image. the company should thus very tactfully apply these strategies in different markets. Thus to say that the customized strategies could be developed for different countries even within Asia because there are some variation in some countries regarding economy, cultures and values. Recommendation (Against Competitors)

In order to compete with all its main competitors following are the steps that can be taken by Giordano to face tough competition and continue to maintain its global presence and brand image. Giordano should encourage and focus more on Customer Relationship Programs. They should involve themselves in providing more customized products to their customers. Implement Customer Pyramid concept- customers should be categorized according to the number of purchases made from Giordano stores. Customers with maximum purchases over a given period can be given the Platinum card, followed by Gold & Silver cards. This practice will enable to provide additional services and attention to those who show loyalty towards the brand and frequently visit Giordano stores. This will keep the regular customers happy, this way they will continue visiting stores and also feel like special customers who are eligible for special treatment ( customer delight) Moreover, Giordano should develop social bonds by building personal relationships with customers. For example, wishing the core customer on birthdays & anniversary with discount coupon. Platinum Card Greeting with 10% discount coupon. Gold Card Greeting with 5% discount coupon. Silver Card Greetings. Repositioning in Existing market Giordano as we have learnt has been very successful in Hong Kong and in all its expansion ventures with its current model of its services. As we have even learnt that Giordano has been facing intense competition from Bossinni, Hang Ten, GAP . Thus, its service model of excellent customer service can be imitated. Another fact that can work in Giordano favor is that there is no customer gap. That is what Giordano promises its customers. It is been able to deliver the same. Customer is treated with utmost importance. Giordano has been able to deliver all its promises thus minimizing the scope of any providers gap.

The staff at Giordano is well trained and focused on customers' needs and satisfaction. Thus, the listening Gap is well covered by learning the customers tastes and preferences. Knowledge of customer need is well understood. Giordano invests heavily in employee training and has been recognized for its commitment to training and developing its staff by such awards as the Hong Kong Management Association Certificate of Merit for Excellence in Training etc. Such awards minimizes the Service Performance Gap as they are excellent in their services. Giordano core competency lies in their simplicity. This covers the Service design and standards gap. The company over time and again to beat competition has been changing its strategy to keep up with the changing consumer trends and to maintain its market share. The Company has been able to reduce the Communication gap by launching service related campaigns. Thus, it will be easy for Giordano to retain its market share in the existing markets. Recommendation (Repositioning in Existing market) Considering the current positioning by Giordano is successful, we feel there is no need for repositioning in the existing target market covered by the company. However, as evident from the case competition is intense and the customer service tactics can be imitated. Therefore, one of the recommendations to the company would be to continuously keep bringing about innovation in their service model which needs to be developed from time to time. Furthermore, Giordano should focus more on customer retention. It is important to attract new customers; however, it is even more important to retain them. The cost incurred due to a loss of regular customers can be huge and companies should try their best to retain all their customers who benefit the company during their life time (customer life-time value). Another recommendation would be to recruit a professional Fashion assistant who possesses skills to provide trendy fashion tips to platinum and gold card holders. Once in a while customers may need a fashion tip and such privileges given to selected customers will also be cost-effective and help in retaining valuable customers. In spare time the

professional assistant could also provide training and guidance to Giordanos sales force to cultivate a sense of fashion who can then in turn provide some fashion related assistance to customers in general. Different Positioning Strategies for different market: Giordano has another option when it comes to its growth strategy and that is the different positioning strategies for different markets. As we know that different markets have different types of consumers which have different needs. As the target market is different, the set target customers are also different. Similarly, the customer needs changes from places to places. Thus, a different positioning for different markets is needed. Also, when Giordano will consider different market. It will have to understand the spending power of the consumers in that particular market. Some countries like Philippines have greater spending power than US where customers are more value oriented. Thus, price quotation will vary in both the market. Giordano will also face different competitors in different markets. Like GAP emerged as a major competitor in USA for Giordano and in the home country Giordano faced competition from Hang Ten, Bossini, Baleno etc that served the same target audience and gave good competition to Giordano. Thus, the strategy that Giordano would aim to keep in home country cannot be similar as that of USA as the target audience and the markets are different. Thus, the products, price, place, people all will vary in different markets. Recommendation (Different Positioning Strategies for new markets) Giordano should not reposition itself in the existing markets; however, they should adopt different positioning strategies for entering new markets. Following are the recommendations that will help Giordano to establish itself in new markets. They should be consistent it their service and the quality of their merchandise. Giordano should conduct Marketing Research to identify latest fashion trends, current style of the country and the cultural differences and similarities that exist in the particular country. Moreover, it is also important to gather information about

the economic conditions in the country to be able to judge the purchasing power of buyers.

Current successful strategies used in existing market, can be used by Giordano as a guideline depending on the market situation and customers requirement.

Finally, Giordano should continue investigating to find opportunities in new markets like North America and Europe. They should try to find out about their competitors in North America and Europe and understand if they can give them competition or will they succumb to the pressures.

Sustainability and Transferability Competitive Advantage The company benchmarked its self in various aspects to the industry's best practices for instance which gave the company an edge over the others: Computerization (from The Limited), A tightly controlled menu (from McDonalds), Frugality (from Wal-Mart),and Value pricing (as implemented at the British retail chain Marks & Spencer). Strong frontline defense: Trained and dedicated staff with a focus on quality service. Decentralized management style: Empowered line managers and brought close communication and co-ordination. Speedy Operations: This kept the product development cycle short. This helped in disengaging from manufacturing and focus on retailing.

Brand Recognition: The organization was recognized for its valuable focus on customer service and emphasis it laid on delivering high-end customer value satisfaction.

Recommendation We feel that all the Key Success Factors will sustain in the existing market in the long run. However, market research can be conducted to understand if any changes need to be brought in any of the core competencies. In future, KSFs related to service should be developed since product is almost similar among the competitors. Implying more emphasis should be given to factors like dedicated workforce and quality of service by means of improved training and more refined recruitment and selection procedures. Since operating cost from China has increased they can outsource to other countries or increase the price. This help Giordano sustain its competitive advantage of value pricing KSFs can be transferable into new market but with certain changes suiting the needs and understanding of the particular market.

Conclusion We can conclude by that that Giordano is having a strong service model and product in existing market with a strong growth over the years. Sstaying ahead with this model in the existing market is difficult as it can be easily imitated. Therefore, Giordano needs to continuously bring innovative ideas as to how sales staff respond to customers need and delight them. Even if its competitors imitate their service model, Giordano always needs to stay a step ahead. It is important to realize that new market needs more understanding before entering them and the company should aim at Developing & building the concept of Customer as partners