The purpose of this report is to analyze and describe about the case study of Giordano – a Hong Kong fashion company that specializes in manufacturing and selling the trendy clothes for men and women. Giordano was established by Jimmy Lai in Hong Kong in 1981 and expanded more and more several stores all over the world up to now. In this report also clearly maintains the successes as well as the limitations of Giordano in particularly international environment in each country. Branding philosophy is based on excellent customer service, quality merchandise, product innovation and the “value for money”. In addition, Giordano wishes to be the best and the largest world brand in apparel as well as to make people “feel good” and “look good”. This is the way to help Giordano create a buzz in the market that the company involved.
Giordano traditionally is a big ad, the use of external media and many other things to the media on its value proposition. This report focuses on four parts: key components to successfully compete in international markets, Giordano’s international strategy, market entry strategies and impacts of foreign manufacturing plan on perception of the Giordano brands. To support the formulation of the report, I have used information and data mainly from the case study “Giordano” provided by the Leeds Metropolitan University and some other academic sources for literature review. The end of the report summarizes all the key points have been through.
Countries in which Giordano operates
1. Doole (2000) – key components to successfully compete in international markets 1.1 Giordano – a well-managed organization with culture of learning. 1.2 Giordano – Clear international competitive focus.
2. Giordano’s international strategy
2.1 Uppsala international model
2.2 Market commitment
3. Market entry strategies
3.1 Alternative approaches relevant to Giordano’s positioning 3.2 Evaluation
of reasonable approaches in key markets in some countries 4. Impacts of foreign manufacturing plan on perception of the Giordano brands 4.1 Positive impacts
4.2 Negative impacts
1. Doole (2000) – key components to successfully compete in international markets: 1.1 A well-managed organization with culture of learning: Obviously, almost of companies apply marketing in their business like a successful key. But how can they do to become successful? It is an extreme hard math because “market likes a battle”; companies are mutual-completive to exist. There are winners, there are losers. Therefore, each company has different marketing strategies to find the best way for their companies. When a company wants to run business, survive and develop in new markets or in the international environment, the important factor is well-managed organization with a culture of learning. According to Doole (2000) “Organisational learning was the means through which firms developed effective international strategies, maintained an efficient network of partnerships across their international markets, and enabled them to build a sustainable competitive advantage on international markets over a period of time”.
Through the knowledge and experience have gained and learnt from market activities, Giordano has used values available to develop the potential markets in the future. The case mentioned that “the willingness to try new ways of doing things and learning from past errors was an integral part of Lai’management philosophy”. This indicates that Giordano could not succeed and grow in international markets without the innovation culture in their organization. Always listening and readily learning from mistakes are the firm’ motto. In the case, Jimmy Lai also believed strongly in Empowerment: “if everyone is allowed to contribute and participate, mistakes can be minimized”. This indicates Giordano runs their company in professional management style that creates comfortable working environment and enhances the role of each individual. Everybody is likely important. The mission of Giordano is “to make people feel good and look good” to get the vision is to be the best and the biggest world brand in apparel Retailing (as mentioned by Giordano case-study).
To achieve the goals and vision set out, Giordano had been non-stopped improving and creating effective relationship strategy with ever-smiling sales forces. It made a private mark and how Giordano wanted to express deeply appreciation to customers as well as provided the most perfect service. One of the most important operations is that the firm has organized training programs to a large team of employees and given them professional skill in the field of communication with customers. According to Charles Fung – Giordano’s Chief Operation Officer and Executive Director, people are the key and they make exceptional service possible. Training is merely a skeleton of a customer service program.
1.2 Giordano – Clear international competitive focus:
Giordano’s products create a good quality with an affordable price which is suitable for both sexes and all ages. Giordano has set up a good customer service policy in order to bring to customers the highest level of quality service. Besides that, they actually understand the vital role of staffs in serving their customers in pass on pre-Eminent service. The firm gives well trainers for staffs and tries to train them become an “entrepreneur”. In the early establishment of Giordano, the firm realized that it faced some difficulties to expand substantial business growth and scale of economics if the company just operated in Hong Kong. The key growth‘s strategy based on regional expansion. However, Giordano realized the importance of focusing on each specific area.
According to Charles Fung – Giordano Chief Operation Officer and Executive Director (South-East Asia) in the case study mentions that “you will see no more than 100 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”. This is found that Giordano has clear market segmentation strategy, focusing on the essential core items to be able to easily catch up with the fashion trends of customers at each stage. This also implies the purpose to reinforce Giordano’s image. Jimmy Lai believed that service was the best way to make customers return to Giordano again and again.
2. Giordano’s international strategy:
Giordano has expanded its international business by some different approaches since 1985. In this section, this activity will be concentrated on analyzing theory: Uppsala model and market commitment. 2.1 Uppsala international model:
Uppsala international model was developed by a group of Swedish researchers including Johanson, Wiedersheim-Paul and Vahlne in the 1970s. It released additional market commitments made by small incremental steps: choosing additional geographic markets with small psychic distances, combining with choosing entry modes with few additional risks (Uppsala international mode, p.72). Johanson and Wiedersheim-Paul (1975, p.74) proposed four different methods for a company entering the business market in the international market through irregular export activities (stage 1), export via independent representatives (stage 2), foreign sales subsidiary (stage 3) and foreign production/manufacturing units (stage 4). Regarding geographic distance, these researchers showed that the process of growth of the company will be fine in the market close to his country so as to understand how it works and the customers’ needs to be able to develop further markets. It is illustrated by the below figures:
In the case of Giordano basing on the Uppsala model, it appears that Giordano has extensive experience in international process by diversified ways during the first decade of the formation of the Giordano brand. Before having Giordano brand name, Jimmy Lai had exported his products to the U.S market. Based on Uppsala model, sporadic export is considered as the simplest approach in the first step for the company development. The purpose of market engagement is to understand the needs and culture of the host country in which has appropriate and reasonable strategy. In the early of 1980s, Giordano admitted that it should not run business only in Hong Kong market but also need to develop in different markets all over the world. In case study, the firm followed the Uppsala model, but not in full compliance with the order four main steps that mainly focus on the two steps: independent representatives (export modes) and foreign sales subsidiary. The first market development is the Mainland China, a place near Hong Kong to easily understand how consumer tastes and needs about Giordano’s products – choosing additional geographic markets with small psychic distances. After that the growth of expansion is in other markets namely Singapore, Indonesia, Malaysia and Vietnam, etc…as the firm expanded beyond Asia, it became clear that different strategies must be formed to develop and apply in different countries.
The market has a close relationship with the company basing on the geographical distance, culture and human resources so that Giordano can select some countries as the first nation to extent internationalization tactic. For instance, China is a large market in a number of retail outlets grew from 253 in 1999 to 881 by 2008. Moreover, Giordano developed in Indonesia with a total of about 100 stores. Development strategy in the new market of Giordano is usually joint-venture approach. Joint venture is a strategic alliance in which two or more individuals accept to engage in business partnership and legal contribution. It can be said that Giordano created eligible quality products with reasonable price. Furthermore, they understood the psychology of new customers, the human factor, such as human resources integration and knowledge sharing to decide to use the form of joint-venture as expanding new markets in foreign countries. With this strategy, Giordano is quickly easy to access to the potential markets that are Germany, Japan, Middle East, etc… the apparel market in these countries have some similar characteristic as those in China. Especially, the Middle East was widely appraised greatly potential market. In the recent years, it has enhanced more markets in Middle East and Saudi Arabia and considered them as the largest market for Giordano Middle East with over 70 stores. In 2006, the company opened the first store in Chennai India and increased six outlets by the end of 2007.
It entered the new markets through the development of small steps by setting form joint-venture in nations with further geographic and psychic distance. One more equal important thing is that Giordano has ambitions to create joint-venture in other countries where they are able to exploit such grant beauty of product market but far distance and a large of different cultures. According to Giordano case-study, the author‘s personal assumption might be that: Only concentrating on certain places in order to segment as well as leapfrog to sufficient market of better opportunities; Effectively combining both geographical / regional diversifications and concentration strategies in focusing on each specific area. For the purpose of clarifying why a firm runs business for both of them or using a hybrid of both strategies, the table 1 below is included with the explanation of diversification versus concentration following on a firm’s product and the external influences of market factors. 2.2 Market Commitment:
Uppsala model‘s “commitment” is defined by Hollensen (2011) as a consistence of the scale of resources and the depth of commitment. Uppsala model determines that the level of commitment can reduce or cease if performance and prospect are inadequate. Giordano has shown that its willingness to experiment with new ideas and its perseverance although past failures should seem to be an introduction of new product lines. Giordano does not begin to reach the new market through its own retail stores, but forming alliances with local partners first and foremost. In that sense, Giordano international step reflects the incremental development postulated in Uppsala that invested very meticulous and small investment at the beginning. The expansion takes place thereafter, which is mainly evident in the number of growing stores worldwide. Related to the similarity between the time frames and different markets, in the first years of the process, Giordano worked toward strengthening their positioning and brand image to compete better in Europe and Asia in the long run (through operations of foreign sales subsidiary), as comparing to the dominance of joint venture utilization for other markets during the later years. This is actually not opposed to Uppsala. In fact, when the market is better and safer than it has been done occupied with the highest level of entry. Those which are less attractive and riskier must be approached with lower commitments in the later period, leaving the impression that the Giordano impacts less and less commitment levels the more and wider its internationalization becomes. 3. Market entry strategies:
3.1 Alternative approaches relevant to Giordano’s positioning: Business is called successful only when it expands more products and services to adapt customer needs as well as high quality products. Having a distinctive difference way, Giordano recognized that they should develop limitedly in each specific nation. In fact, the company introduced many product lines to suit different age and income of each segment customers. After a period of operation, the firm understood to establish reposition its core products with more stylish clothes. Its venture focused on mid-priced women’s fashion and it was called Giordano Ladies. The aim of expansion is to attract more customers in the fiercely competitive global market. Its venture focused on mid-priced women’s fashion and namely called Giordano Ladies.
3.2 Evaluation of reasonable approaches in key markets in some countries: “The role of international market research in primarily to act as an aid to the decision-maker. It is a tool that can help to reduce the risk in decision-making caused by the environmental uncertainties and lack of knowledge in international markets” (Hollensen, 2011, p.174). International market entry and opportunity were carried out by Giordano have not, so far, been gotten to great result in Middle East while Germany and Japanese market might be attractive yet challenging for the company. Relevant interpretation of the mode factors would be included in the individual section of each market. In spite of some missing categories of information for a particular market, a big picture and scenario withdrawn hold its validity to the best possible extent. Market development and investment strategy of Giordano are joint venture and franchising approaches. There are three main markets for running business in the international market entry as below: Germany market:
Germany is one of the major political and economic powers of the European continent in which free market economics are blended with solidarity and social compromise. Germany is an important gateway for the Group to enter into the European Union (EU) consumer market. Through this venture, the Group also wished to tap into the increasingly important East European apparel-manufacturing base in which consumer behaviour is unfamiliar with the Germany. Giordano began operations in Germany through joint-venture in March 2001. There were 23 outlets across the Germany supermarket chain in the system. However, Germany is a large environment and fierce competition in the business, especially in parallel; this market is a place where competition is more and more violent. It is very hard to keep company’s existence, not tell about developing, expanding, or controlling market. Most of famous parallel brands in the world are of European origin. On the contrast, from culture view, Germany still had a difficult market and Giordano continue reassessing and making necessary adjustment. Therefore, after a short time the joint-venture in Germany was discontinued and outlets chain was closed on September 30, 2002.
However, the discontinuation of operation suffered heavy losses, about HK $10 million non-recruiting costs due to recognition of the inappropriate distribution channel at the very early stage. This shows that doing business is a tough question for almost companies when entering the world market, especially hard to face with the national cultural differences or customer behavior. Moreover, the firm lacked local legal knowledge, communication problem, and divergence on agree-upon objective. Another reason for the failure of Giordano in Germany is that Germany and Hong Kong have a far distance in geography; therefore, the headquarters in Hong Kong could not directly well-control and manage the operation in Germany. This can also be seen as a lesson for the failure of Giordano episode the business to learn from better experience in the development of new products. On the other hand, the strong Giordano‘s joint-venture during the brief 18 months of Germany operation has been positive. It established good relationship with some retailers and suppliers in Europe. This set the stage for the development of the product line for the Groups future European expansion. Japan market:
Starting a business in Japan can prove to be an excellent entry point into Asian market. Japan has become as one of the world’s most dynamic and competitive markets, prompting many companies to establish branches in this country. Situated in the heart of Asia, Japan plays a key role in the continent’s economic development since the latter part of the 20th century. It is really similarity to Germany market. In the beginning, Giordano opened its first shop in Japan at the universal Studio Japan (Osaka) in March 2001 through joint-venture approach with the Japanese retailer Noda Corporation. Joint-venture provided Giordano with the opportunity to gain new capacity and expertise as well as to share the risk with a venture partner. It quickly expanded business to two shops operating in Osaka and two in Tokyo at the end of the year 2001. After entering Japanese operation environment, Giordano adapted to customers’ desire with design idea of shop space range from 2.000 to 6.000 square feet. Unfortunately, Joint-venture approach also met some difficulties as the same in doing business in Germany. A firm announced that its Japanese activities had turned a small operation profit at the end of June 2006. “We continued to restructure our operations and among other things we closed one outlet so that our network now stands at 20 outlets compared to 21 as at end-2005” (Giordano case study) was mentioned Mr.Peter Lau – Chairman and Chief Executive of Giordano international Limited.
In addition, this shows that the business faces in trouble, not effective, so the firm closed one outlet. The difficulties of the world economy in general and Japan in particular led to the year 2009 the joint-venture in Japan was dissolved and Giordano quitted the Japanese market. We easily recognize that joint venture approach is used only when the company might understand, capture the local market as well as population density to co-operate with local firm in international expansion business. Although both of Hong Kong and Japan are in Asia, there are absolutely different cultures and management styles result in poor integration and co-operation. Failure in the Japanese business environment is expressed clearly Giordano’s weaknesses of Joint venture. However, Japan is a potential environment, customers are Asian so that it is easy to capture or adapt to their culture for the business. From the failure of the joint- venture in the beginning, the Group changed strategy that it was re-entering Japan by partnering with local retailers WEGO Limited through franchising arrangement. CEO Peter Lau said that “we believe franchising is an ideal model for us to market our market in Japan that our venture will prove successful and within five years, sales in Japan will constitute a meaningful amount of Giordano’s worldwide sales.”
Entering Japanese market much later after the first failure, Giordano should observe that the new Japanese generations are much more cost-conscious and they are in process of taking the value concept. In contrast to joint-venture, franchising is a positive way for Giordano. The franchisee is the local distributor who is usually self-motivate since he has invested much money and time in operation. This makes Giordano’s franchisees have to work hard to maximize in better organizational and monetary results. It also improves sales effectiveness and reflects more satisfied customers. As mentions above, franchising might be a successful approach in international expansion business, particularly in Japan. Middle East market:
Middle East is one of the earliest Giordano‘s market development with a store in Dubai in 1993. In similarity to Germany and Japan, Giordano made its debut in Dubai through a joint-venture with ETA Star Group of Dubai. Initial expansion in the Middle East market should be considered as favorable Giordano’s growth as well as increasing the number outlets to 40 in 2000 and by 2011 to 240. Non-stop in the development, store sales growth is double and was seemed to be “the best-ever year of all of us” (Chugani- Director of Giordano Middle East, Giordano, Case study). In addition, cash flow is also a great efficiency through the active connections in different areas to roll out high-demand products lines that has led to lower inventories. Giordano’s development strategy is mainly focused on the global information data that they get feedback from cash operating place to find out what is significant for them. Chugani also said that “with those products subjects to review by Giordano to ensure they fit with the main collection”.
In its business development strategy, Giordano wants to use the Middle East as a potential and fundamental market to expand further in the other regions in the future. Comparison to Germany and Japan market, the joint venture in Middle East is the most successful approach for Giordano. Giordano International Limited is the largest Shareholder in Giordano Middle-East, holding 20% of the company and increasing day by day. Since the expansion of business in the Middle East, Giordano did not only meet no problems but also increase in many regions around.
One of noticeable points mentions in case study that Giordano’s mission is to be the best and the biggest world in apparel retailing. It cannot be denied that establishment in global market causes significant effects to the overview of Giordano both two ways: positive and negative sides.
In term of positive way, expanding business in foreign countries can pursue and practice the vision that Giordano set up in international development strategy.
Staying on apparel more than 30 years, Giordano builds up a nominated and large name over the world. Not only become a big brand-name in garment but also fight many other Companies all over the world about apparel. A global brand in market development can make customers easily recognize differences, objectives as well as fashionable style of Giordano that focus targets on each type of customer from different regions to different cultures. The company has developed many different markets namely Germany, Japan the Middle East and many other places all over the world with more than 2500 stores in 40 different countries. The market segmentation obviously created variety by setting up reasonable price for both men and women with young and stylish customers. With consistence of selling products is also investment in service that create a comfortable sense to customers as they come Giordano’s stores not only satisfied accommodations fashion but also meet fully in products and services. Each product and each action has a specific concept which contains the values of Giordano characteristics. The emphasis on service and the value-for-money concept had proven to be successful.
In addition, all the company always gets the private strategy for the company selling. Giordano is no exception. For example, the firm has a different look in performance. A Giordano store has no more than 100 items because merchandising a wide range of products causes retailers to take a longer time to react to market changes.
Doing business in international expansion is not an easy entry mode and Giordano met some obstacles as well as failure from joint venture. Germany and Japan are an example. Japan is a completely different environment against with the other markets that Giordano applied successful joint venture approach in the international strategy to integrate its brand. Giordano had mistakes to use its successful business style in HK to apply into Germany. The firm was subjective when not having understood the German market without using export modes. If their products had been sold through exporting, Giordano would have understood more Germany market and customer tastes. This is a regrettable mistake. Although the company established inventory control system – computerization, it could not be called a good policy management as away from Headquarters. Recommend:
If Giordano wants to expand in the international market and avoid unexpected failures from the past, the firm should develop step by step according to the Uppsala model. The company had successfully applied in geographical distances but Giordano missed some important stage on mode of operation. This may be true for large companies, but the past proved that this action should not do to avoid some regrettable failure. We easily recognize that the firm should export to the new market to penetrate. Gradually expanding export from occasional (sporadic export) to sales representatives and foreign sales subsidiary. Company should have multiple marketing strategies and more customer appreciation program which determines the style of Giordano. The firm needs to start with some promotion policies to increase international market share. Giordano also needs to find out possibility of outsourcing to main suitable costs to adapt customer service strategy for each market segment with its own external factors such as social, cultural factors, country risks, etc…
Based on information provided in case study “Giordano”, this report has used available theories, models and resources on the internet such as Uppsala model, franchising and joint venture approach, etc…to indentify, evaluate and discuss about cultural management, customer nationality of Giordano Almost companies run a business with the target is profit and market share, but how can they retain customers? It is not easy. Giordano has taken good care on their customers by constantly improving services better than rivals and learning from their mistakes to perfect themselves. Taking ideas from their staffs and creating good creative environment for all of employees. One more important thing is that they applied smart strategies on each market segmentation. Using joint-venture and franchising methods help the company can avoid risks better than invest their capital to establish their own company in the new market. It is surely that they cannot stay away from troubles of local policies, regulations and rules, take time and waste money for unnecessary problems. Moreover, franchising is the way to advertise their brand name, invest for extension but not require huge capital, just small amount of money, training for franchisee and supporting them in the initial stages. Their products will be sold in the new market. Reference:
Doole, I. (2000) How Small And Medium Sized Enterprises Learn To Compete Effectively On International Markets. Ph.D. thesis, Sheffield Hallam University. 2009,Giordano FAQ, Giordano Fashions (viewed on 27 December 2012), available at http://www.giordano.in/faq.html Giordano store (viewed on 29 December 2012), available at: http://en.wikipedia.org/wiki/Giordano_(store) Giordano.2012 (view on 30 December 2012) , available at: http://www.giordano.com.hk/web/HK/ourCompany.html Hohanson and Weidersheim-Paul (1975) global marketing: A decision-oriented approach. Fifth edition. Svend Hollensen Prentice Hall Hollensen, S. (2011) Global Marketing: A Decision-Oriented Approach. The fifth edition. England, Pearson Education.