GIORDANO

We are committed to provide our customers with value-for-money merchandise, professional

customer service, and a comfortable shopping experience at convenient locations. Giordano s
Corporate Mission

Giordano is a retailer of casual clothes in East Asia, South-East Asia, and the Middle East. In
1999, it operated outlets in China, Dubai, Hong Kong, Macao, Philippines, Saudi Arabia,
Singapore, South Korea, and Taiwan. Giordano's sales grew from HK$712 million in 1989 to
HK$3,092 million in 1999 (see Exhibit 1). This case study describes the success factors that
allowed Giordano to grow rapidly in some Asian countries. It 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. The first concerns Giordano's positioning. In what ways, if at all, should
Giordano change its current positioning? The second concerns the critical factors that have
contributed to Giordano's success. Would these factors remain critical over the coming years?
Finally, as Giordano seeks to enter new markets, the third issue, whether its competitive strengths
can be transferred to other markets, needs to be examined.
Giordano was founded by Jimmy Lai in 1980. To give his venture a more sophisticated image, Lai
picked an Italian name for his retail chain. In 1981, Giordano started in Hong Kong selling casual
clothes manufactured predominantly for the United States market by a Hong Kong-based
manufacturer, the Comitex Group. Initially, it focused on wholesale trade of high-margin
merchandise under the Giordano brand in Hong Kong. In 1983, it scaled back on its wholesale
operation and started to set u p its own retail shops in Hong Kong. It 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.
However, in 1987, sales were low and the business became unprofitable. Lai realized that the
priey retail chain concept was unprofitable. Under a new management team, Giordano changed its
strategy. Until 1987, it sold exclusively men's casual apparel. When it realized that an increasing
number of women customers were attracted to its stores, Giordano changed its positioning and
started selling unisex casual apparel. It repositioned itself as a retailer of 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. Its sales almost quadrupled, from HK$712
million in 1989 to HK$3,092 million in 1999

Management Values and Style

Being Entrepreneurial and Accepting Mistakes as Learning Opportunities

The willingness to try new ways of doing things and learning from past errors was an integral part
of Lai's management philosophy. The occasional failure represented a current limitation and
indirectly pointed management to the right decision in the future. To demonstrate his commitment
to this philosophy, Lai took the lead by being a role model for his employees" . .. Like in a
meeting, I say, look, I have made this mistake. I'm sorry for that. I hope everybody learns from
this. If I can make mistakes, who the hell do you think you are that you can't make mistakes?" He
also believed strongly in empowerment-if everyone is allowed to contribute and participate,
mistakes can be minimized.

Treating Employees as an Asset

Besides the willingness to accept employees' mistakes, another factor that contributed to the
success of Giordano was that it had a dedicated, trained, ever-smiling sales force. It considered
front-line workers to be its customer service heroes. Charles Fung, Giordano's Chief Operations
Officer and Executive Director (South-East Asia), said, "Even the most sophisticated training
program won't guarantee the best customer service. People are the key. They make exceptional
service possible. Training is merely a skeleton of a customer service program. It's the people who
deliver that give it form and mean ing."
Giordano had stringent selection procedures to make sure that only those candidates who
 matched the profile of what it looked for in its employees were selected. Selection continued into
its trai'ling workshops. Fung called the workshops "attitude training." The service orientation and
character of a new employee were tested in these workshops. These situations, he added, were an
appropriate screening tool for "weeding out those made of grit and mettle."
Giordano's philosophy of quality service could be observed in its overseas outlets as well. Its
Singapore operations, for example, achieved IS09002 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."
According to Fung, everyone who joined Giordano, even office employees, worked in a store
for at east one week as part of his or her training. "They must understand and appreciate every
detail of the operations. How can they offer proper customer assistance-internal and external-if
they don't know 'what goes on in operations?"
In Singapore, for instance, Giordano invested heavily in training its employees. In 1998, it
spent 3.9 percent of its overall payroll on training, with each employee receiving an average of
224 hours of training per year. It had a training room complete with one-way mirrors, video
cameras, and other electronic paraphernalia. A training consultant and seven full-time trainers
conducted training sessions Jr every new sales staff member, and existing staff were required to
take refresher courses. Its commitment to training and developing its staff was recognized when
it was awarded the People Developer Award in 1998.
1.
However, providing training programs was not as important as ensuring the transfer of
learning from the workshops and seminars to the store. As Fung explained, "Training is
important. Every organization is providing its employees training. However, what is more
important is the transfer of learning to the store. When there is a transfer of learning, each
dollar invested in training yields a high return. We try to encourage this [transfer of learning] by
cultivating a culture and by providing positive reinforcement - rewarding those who practice what
they learned."
For Giordano, investment in service meant investment in people. It paid high wages to attract
and keep its staff. Giordanooffered what Fung claimed was "one of the most attractive packages
in an industry where employee turnover is high. We generally pay more than what the market
pays." With higher wages, there was a lower staff turnover rate. The higher wages and Giordano's
emphasis on training resulted in a corps of eager-to-pleasesales force.
Managing its vital human resources (HR) became a challenge to Giordano when it decided to
expand into global markets. To replicate its high service-quality positioning, Giordano needed to
consider the HR issues involved in setting up retail outlets on unfamiliar ground. For
example, the recruitment, selection, and training of local employees could require modifications
to its formula for success in its current markets owing to differences in the culture, education, and
technology of the new countries. Labor regulations could also affect HR policies such as
compensation and providing welfare. Finally, expatriate policies for staff seconded to help run
Giordano outside their home country and management practices needed to be considered.
Giordano maintained a flat organizational structure. Fung believed that "this gives us the
intensity to react to market changes on a day-to-day basis." It followed a relaxed management
style, where management worked closely with line staff. There were no separate offices for higher
and top management; rather their desks were located next to their staff's, separated only by
shoulder-high panels. This closeness allowed easy communication, efficient project management,
and speedy decision making, which are all critical ingredients to success amidst fast-changing
consumer tastes and fashion trends. Speed allowed Giordano to keep its product development
cycle short. Similar demands in quickness were also expected of its suppliers.

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, Lai felt that Giordano must
have a distinctive competitive advantage. Although many retail outlets in Hong Kong competed
almost exclusively on price, Lai felt differently about Giordano. Noting successful Western
retailers, Lai astutely observed that there were other key factors for success. He started to
benchmark Giordano against best practice organizations in 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) (Ang 1996).
The emphasis on service and the value-for-money concept had proven to be successful. Lai was
convinced that the product was only half of what Giordano sells. Service was the other half,
and Lai believed that service was the best way to make customers return to Giordano again
and again. Lai said, "We are not just a shirt retailer, we are not just an apparel retailer. We are
also a service retailer because we sell feeling. Let's make the guy feel good about coming into
here [our stores]"(Ang 1996).

Service:
Giordano's commitment to excellent service was reflected in the list of service-related awards
it had received. It was ranked number one by the Far Eastern Economic Review, for being
innovative in responding to customers' needs, for three consecutive years-1994, 1995, and 1996.
And when it came to winning service awards, Giordano's name kept cropping up. In Singapore, it
won numerous service awards over the years. It was given the Excellent Service Award for three
consecutive years: 1996, 1997, and 1998. It also received three tourism awards: "Store of the
Year" in 1991, "Retailer of the Month" in 1993, and "Best Shopping Experience-Retailer Outlet"
in 1996. These were just some of the awards won by Giordano (see Exhibit 3).
How did Giordano achieve such recognition for its commitment to customer service? It began
with the Customer Service Campaign in 1989. In that campaign, yellow badges bearing the words
"Giordano Means Service" were worn by every Giordano employee. This philosophy had three
tenets: We welcome unlimited try-ons; we exchange-no questions asked; and we serve with a
smile. The yellow badges reminded employees that they were there to deliver excellent
customer service.
Since its inception, several creative, customer-focused campaigns and promotions had
been launched to extend its service orientation. For instance, in Singapore, Giordano asked its
customers what they thought would be the fairest price to charge for a pair of jeans and charged
each customer the price that they were willing to pay. This one-month campaign was immensely
successful, with some 3,000 pairs of jeans sold every day during the promotion. In another
service-related campaign, customers were given a free T-shirt for criticizing Giordano's
service. Over 10,000 T-shirts were given away. Far from only being another brand-building
campaign, Giordano responded seriously to the feedback collected. For example, the Giordano
logo was removed from some of its merchandise, as some customers liked the quality but not the
"value-for-money" image of the Giordano brand.
Against advice that it would be abused, Lai also introduced a no-questions-asked and no-
time-limit exchange policy, which made it one of the few retailers in Asia outside Japan with
such a generous exchange policy. Giordano claimed that returns were less then 0.1 percent of
sales.
To ensure that every store and individual employee provided excellent customer service,
performance evaluations were conducted frequently at the store level, as well as for individual
employees. The service standard of each store was evaluated twice every month, while individual
employees were evaluated once every two months. Internal competitions were designed to
motivate employees and store teams to do their best in serving customers. Every month, Giordano
awarded the "Service Star" to individual employees, based on nominations provided by shoppers.
In addition, every Giordano store was evaluated every month by mystery shoppers. Based on the
combined results of these evaluations, the "Best Service Shop" award was given to the top store.

Value for Money :

Lai explained the rationale for Giordano's "value for money" policy: 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.
Giordano was able to consistently 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.
Inventory Control:
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
storeroom in each store. Instead, a central distribution center replaced the function of a back
storeroom. With information technology, 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-ofsale 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 saies 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.
Another advantage of its IT system was that information was disseminated to production
facilities in real time. Such information allowed customers' purchase patterns to be understood,
and this provided valuable input to its manufacturIng operations, resulting in fewer problems and
costs related to slowmoving inventory. "If there is a slow-selling item, we will decide
immediately how to sell it as quickly as possible. When the sales of an item hit a minimum
momentum, we pull it out, instead of thinking of how to revitalize its [slow-selling] sales."
Giordano stores were therefore well stocked with fast-moving items, and customers were happy
as they were seldom out of stock of anything.
The use of technology also afforded more efficient inventory holding. Giordano's inventory
turnover on sales was reduced from 58 days in 1996 to 28 days in ] 999, allowing it to thrive on
lower gross margins. Savings were passed to customers, thus reinforcing its value-for-money
philosophy. All in all, despite the lower margins, Giordano was still able to post 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.
Besides the use ofIT and real-time information generated from the information system,
Giordano's successful inventory control was achieved through close integration of the purchasing
and selling functions. As Fung elaborated, "There are two very common scenarios that many
retailers encounter: slow-selling items stuck in the warehouse and fast-selling popular items that
are out of stock. Giordano tries to minimize the probability of the occurrence of these two
scenarios, which requires close integration between the purchasing and selling departments."
But more than technology and inventory control, Giordano had another competitive edge over
its competitors. As Fung explained, "In the 1980s and early 1990s, when few retailers would use
IT to manage their inventory, the use of IT gave Giordano a leading edge. However, today, when
many retailers are Llsing such technology, it is no longer our real distinctive competitive strength.
In a time when there is information overload, it is the organizational culture in Giordano to
intelligently use the information that sets us apart from the rest." And this was further explained
by Lai: "None of this is novel. Marks & Spencer in Britain, The Gap and Wal-Mart in America,
and Seven-Eleven in Japan have used similar systems for years. Nowadays, information flows so
fast that anybody can acquire or imitate ideas. What matters is how well the ideas are executed."
Indeed, with rapid development in Internet and intranet te<;hnologies, packaged solutions (e.g.,
MS Office, point of sale [PaS] and enterprise resource planning [ERP] software), and supporting
telecommunications services (e.g., broadband Internet access), acquiring integrated IT and
logistics technology has become easier and more cost-effective than ever before. Hence, a
competitive advantage based on technology and its implementation is likely to become smaller
and more difficult to maintain in the medium- to long-term future.
Product Positioning:
When a business becomes successful, there would always be a temptation to expand into more
products and services to meet customer needs. However, Giordano recognized the importance of
limiting its expansion and focusing on one specific area. 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] 00 items in a
Giordano store. We have 17 core items; other retailers have 200 to 300 items. Merchandising a
wide range of products causes retailers to take a longer time to react to market changes."
Giordano's willingness to experiment with new ideas and its perseverance despite past failures
could also be seen in its introduction of new product lines. Its venture into mid-priced women's
fashion, Giordano Ladies', clearly illustrated this. With its line of smart blouses, dress pants, and
short skirts, the company was hoping to attract young, stylish women and benefit from the fatter
profit margins enjoyed in more upscale niches of women's clothing-about 50 to 60 percent
compared with 40 percent for casual wear. Giordano, however, wandered into a market crowded
with seasoned players. While there were no complaints about the look or quality of the line, it had
to compete with more than a dozen established brands already on the racks, including Theme and
Esprit. It also failed initially to differentiate its new clothing line from its mainstream product line,
and even tried to sell both through the same outlets. Nevertheless, it persisted in its efforts and
Giordano Ladies' made a successful comeback. In 1999, it took advantage of the financial troubles
facing rivals such as Theme, as well as the post-Asian currency crisis boom in many parts of Asia,
to aggressively relaunch its Giordano Ladies' line, which met with great success. As of June 30,
2000, the reinforced Giordano Ladies' focused on a select segment, with 14 stores worldwide
offering personalized service (e.g., staff are trained to memorize names of regular customers and
recall past purchases). It also had plans to expand its five more Giordano Ladies' outlets in Hong
Kong, Taiwan, and the Middle East.
Giordano recently began to reposition its brand by emphasizing sensible but more stylish
clothes and broadening its appeal by overhauling the stores and apparel. For instance, a large
portion of its capital expenditure (totaling HK$56.9 million in the first six months of year 2000)
went to renovating of its stores to enhance shop ambience. This indicated its intention to reinforce
its image and to position it in line with its globalization strategy and changing consumer needs. A
typical store layout is shown in Exhibits 4 and 5. Giordano's relatively mid-priced positioning
worked well-inexpensive, yet contemporary looking outfits appealed to Asia's frugal customers,
especially during the Asian economic crisis. However, over time, this positioning became
inconsistent with the brand image that Giordano tried hard to build over the years. Says one of
Giordano's top executives, "The feeling went from 'this is nice and good value' to 'this is cheap.'
When you try to live off selling 100-Hong Kong-dollar shirts, it catches up with you."(Asia Week,
15 October 1999)
Nevertheless, while it gradually remarketed its core brand as a trendier label, Giordano
continued to cater to the needs of customers who favored its value-for-money positioning. In 1999
it launched a new product line, Bluestar Exchange, to cater to the needs of its budget-conscious
customers, after successful proto typing in Hong Kong and Taiwan. The good market responses to
this new line, which targeted mainly families (similar to Gap's Blue Navy), triggered plans to
expand from the 14 Bluestar stores in Hong Kong and 3 in Taiwan, to 20 in Hong Kong, 15 in
Taiwan, 2 in Singapore, and up to 100 in mainland China (including franchised stores).

Aggressive Advertising and Promotion

Fung 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$I.5 million to S$2 million annually on its advertising and promotional activities.
It won the Top Advertiser Award from 1991 to 1994 (see Exhibit 3). Up to June 30, 2000, total
advertising and promotional expenditure for the group amounted to HK$41.5 million, or 3 percent
of the group's retail turnover. In addition to its big budget, Giordano's advertising and promotional
campaigns were creative and apJ:,ealing. 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 from 10 to 60 percent at various times beginning at midnight. For example, jeans were
offered at a 20 percent discount from 12 A.M. to 1 A.M., whereas polo shirts and T-shirts were
given a 30 percent discount from I A.M. to 2 A.M. and then shorts at a 40 percent discount from 2
A.M. to 3 A.M. To keep listeners awake and excited, the product categories that were on sale at
each time slot were released only 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 relaunched 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. Its 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 reIl}arketing of its core brand and relaunch or introduction of sister
brands, Giordano Ladies', Giordano Junior, and Bluestar Exchange.

The Asian Apparel Retail Industry

Hit severely by the Asian crisis from 1997 to 1999, the Asian retail industry went through
dramatic restructuring and consolidation. Many retailers reduced the number of shops in their
chains, or closed down completely. Almost everyone in the industry implemented cost-cutting
measures while at the same time cajoling reluctant customers with promotional strategies. Yet,
there was a silver lining, as the more competitive firms were able to take advantage of lower
rentals and the departure of weaker companies. Some firms, including Giordano, worked toward
strengthening their positioning and brand image to compete better in the long run. Some retailers
also explored opportunities, or accelerated their presence in markets that were less affected by the
Asian crisis-mostly in markets outside Asia.
During the crisis and for the immediate future until a full recovery set in, industry analysts
predicted that opportunities would continue to be driven by value. Thus, Giordano's value
proposition appeared appropriate during these times. It was not surprising, then, that in spite of its
problems, Giordano was ranked the 14th most competitive company overall in Asia by a regional
business magazine (Asia Inc., 6 June 1997). rt even won a place on Forbes Global's 1999 list of
the World's 300 Best Small Companies, indicative of world-class performance, together with
eight other Hong Kong companies. Giordano's performance was accredited to its management's
swift cost-control strategies in the areas of rents, outsourcing, inventory control, cash
management, and overseas travel. The economic downturn had indeed revealed the management's
flexibility and responsiveness in making decisive moves.
The retailing environment was becoming more dynamic, a change that was perhaps led by
growing sophistication of tastes and rapid advancements in the media, communications, and
logistics environment. Giordano's response to these trends would be the key to its ability to
compete in the future, especially as these trends seem to "commoditize" its current competitive
edge in IT, stock control, and logistics.

Giordano’s Competition

Until recently, Giordano's main competitors for low-priced apparel were Hang Ten, Bossini, and
Baleno. However, its shift in positioning, and the squeeze of the retailing sector caused by the
crisis, pushed formerly more upmarket firms such as Esprit and Theme to compete for Giordano's
value-for-money segment. Exhibit 6 provides a list oftheir websites for more information
regarding their product lines and operations. Exhibit 7 shows -the relative positioning of Giordano
and its competitors: The Gap, Bossini, hang Ten, Baleno, Espirit and Theme.

United States-based Hang Ten and Italy-based Bossini were generally positioned as low-price
retailers offering reasonable quality and service. The clothes emphasized versatility and
simplicity. But while Hang Ten and Baleno were more popular among teenagers and young
adults, Bossini had a more general appeal. Their distribution strategies were somewhat similar,
but they focused on different markets. For instance, according to Fung, while Hang Ten was
only strong in Taiwan, Baleno was increasingly strong in China and Taiwan. On the other hand,
Bossini was very strong in Hong Kong and relatively strong in Singapore but had little presence
in Taiwan and China.
Esprit is an international fashion lifestyle brand, engaged principally in the image and product
 design, sourcing, manufacturing, and retail and wholesale distribution ofa 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-a position that Giordano was
occupying. As of 1999, Esprit had a distribution network of over 8,000 stores and outlets in 40
countries in Europe, Asia, Canada, and Australia. The main markets were in Europe, which
accounted for approximately 65 percent of sales; and in Asia, which accounted for
approximately 34 percent of 2000 sales. The Esprit brand products were principally sold via
directly managed retail outlets, by wholesale customers (Including department stores, specialty
stores, and franchisees), and by licensees for products manufactured under license, principally
through the licensees' own distribution networks.
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 were 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$1 06.1 million net loss for the six months
up 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 upmarket, 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 located primarily in good ground-floor areas,
drawing high-volume traffic and facilitating shopping, browsing, and impulse buying. However,
Giordano clearly distinguished itself from its competitors with its high-quality service and cost
leadership that together provided great customer value that none of its competitors had been able
to match.
In a study by Interbrand on top Asian marquees, Giordano was Asia's highest-ranking general
apparel retailer. It was ranked number 20. The clothing names next in line were Australia's
Quicksilver at number 45 and Country Road at number 47. However, Giordano as a world label
was still far off. As a spokesman on consumer insights for advertising agency McCann-Erickson
said, "It is a good brand, but not a great one. Compared to other international brands, it doesn't
shape opinion."
A threat from US-based The Gap was also looming. Giordano was aware that the American
retailer was invading Asia. The Gap was already in Japan. After 2005, when garment quotas are
likely to be abolished, imports into the region should become more cost-effective. Hence,
Giorc41no had to examine whether its intention to shift toward a higher position from its current
value-for-money position was viable.

Giordano’s Growth Strategy

As early as the 1980s, Giordano realized that it was difficult to achieve substantial growth and
economies of scale if it operated only in Hong Kong. The key was in regional expansion. By
1999, Giordano had opened 740 stores in 23 markets, out of which Giordano directly managed
317 stores (see Exhibit 10). Until 2000, four markets dominated its retail and distribution
operations-Hong Kong, Taiwan, China, and Singapore (see Exhibit 11). By 2000, Giordano had
895 Giordano stores in 25 markets.
Giordano cast its sights on markets beyond Asia, driven partially by its desire for growth and
partially to reduce its dependence on Asia in the wake of the 1998 economic meltdown. In
Giordano's first full year of operation in Australia, sales turnover reached HK$29 million
(US$3.72 million) in December 2000. The number of retail outlets increased from 4 in 1999 to 14
in 2000. With the opening up of its first retail outlet in Sydney in September 2000, Giordano
outlets could now be found in both Melbourne and Sydney. As part of Giordano's globalization
process, it planned to open up its first shops in Germany and Japan during the first half of 200 1.
 Currently, Giordano planned to focus its globalization efforts on new markets like Germany,
Japan, Australia, Indonesia, and Kuwait.
When the crisis made Giordano rethink its regional strategy, it was still determined to enter and
further penetrate new Asian markets. This determination led to the successful expansion of
Giordano in Mainland China, which saw the retail outlets grow from 253 stores in 1999 to 357
stores in 2000. Due to the expanded retail network in Mainland China and improvements made to
the product line, sales turnover increased by 30.9 percent to HK$712 million (US$91.3 million) in
2000. Faced with the imminent accession of Mainland China to the World Trade Organization,
Giordano's management foresees both challenges and opportunities ahead. In Indonesia, Giordano
opened up 7 more stores in 2000, bringing the total number of retail stores to 10. These stores
covered areas in Jakarta, Surabaya, and Bali. However, with the political and social instability in
Indonesia, coupled with the downward pressure on the Rupiah, Giordano was cautiously
optimistic about further expansion and planned to proceed with caution. In Malaysia, Giordano
planned to refurnish its Malaysian outlets and intensify its local promotional campaigns to
consolidate its leadership position in the Malaysia market.
Giordano's success in these markets would depend on its understanding of them, and consumer
tastes and preferences for fabrics, colors, and advertising. In the past, Giordano relied on a
consistent &trategy across different countries, and elements of this successful strategy included its
positioning and service strategies, information systems and logistics, and human resource policies.
However, tactical implementation (e.g., promotional campaigns) was left mostly to local managers
in their respective countries. A country's performance (e.g., sales, contribution, service levels, ane
customer feedback) was monitored by regional headquarters (e.g., Singapore for South-East Asia)
and the head office in Hong Kong. Weekly performance reports were made accessible to all
managers. In recent years, it appeared that as the organization expanded beyond Asia, different
strategies had to be developed for different regions or countries.

The Future:
Giordano was confronted with some important issues as it prepared itself for the new
millennium. Although it had been extremely successful, as its revenue, profits, and the many
awards that it received clearly show, the question was how it could maintain this success in the new
millennium. First, how, if at all, should Giordano reposition itself against its competitors in its
existing and new markets? Would it be necessary to follow different positioning strategies for
different markets (e.g., Hong Kong versus South-East Asia)?
The second issue was the sustainability of Giordano's key success factors. It clearly understood
its core competencies and the pillars of its success, but it had to carefully explore how they were
likely to develop over the coming years. Which of its competitive advantages would be sustainable
and which ones were likely to be eroded?
A third issue was Giordano's growth strategy in Asia as well as across continents. Would
Giordano's competitive strengths be transferable to other markets? Would strategic adaptations to
IT strategy and marketing mix be required, or would tactical moves suffice?

STUDY QUESTIONS

1. Describe and evaluate Giordano's product, business, and corporate strategies.

2. Describe and evaluate Giordano's current positioning strategy. Should Giordano reposition
itself against its competitors in its current and new markets, and should it have different
positioning strategies for different geographic markets?
3. What are Giordano's key success factors (KSF) and sources of competitive advantage? Are its
competitive advantages sustainable, and how would they develop in the future?
4. Could Giordano transfer its key success factors to new markets as it expanded both in Asia and
the other parts of the world?
5. What general lessons can be learned from Giordano for other major clothing retailers in your
country?
Note: Exhibits are in attached JPEG file