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Giordano: Positioning for International Expansion

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As it looks to the future, a successful Asian retailer of casual apparel must decide whether to maintain its existing positioning strategy. Management wonders what factors will be critical to success and whether the firm’s competitive strengths in merchandise selection and service are readily transferable to new international markets.
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Case Studies 775
PART 6
CASE Giordano: Positioning for
International Expansion
Jochen Wirtz
As it looks to the future, a successful Asian retailer of casual apparel must decide whether to
maintain its existing positioning strategy. Management wonders what factors will be critical to
success and whether the firm’s competitive strengths in merchandise selection and service are
readily transferable to new international markets.
To make people “feel good” and “look great.”
Giordano’s Corporate Mission
© 2011 by Jochen Wirtz.
This case is based on published information and quotes from a
wide array of sources. The generous help and feedback provided by
Alison Law, former Assistant to Chairman, Giordano International
Ltd, to earlier versions of this case are gratefully acknowledged. The
author thanks Zhaohui Chen for his excellent research assistance.
In mid-2009, Giordano, a Hong Kong-based retailer of
casual clothes targeted at men, women, and children
through its ve company brands — Giordano, Giordano
Concepts, Giordano Ladies, Giordano Junior, and Blue
Star Exchange — was operating more than 1,800 retail
stores and counters in some 30 markets worldwide. Its
main markets were Mainland China, Hong Kong, Japan,
Korea, Singapore, and Taiwan. Other regions in which
it had a presence were Australia, Indonesia, Malaysia,
Middle East, and North America. In September 2008,
there were 1,757 Giordano and Giordano Junior stores,
46 Giordano Ladies stores, 29 Giordano Concept stores,
and 111 Blue Star Exchange stores. Sales had grown to
HK$4,950 million (US$561 million) by 2007 (Exhibit 1).
Giordano stores were located in retail shopping districts
with good foot trac. Views of a typical storefront and
store interior are shown in Exhibit 2. In most geographic
markets serviced by Giordano, the retail clothing business
was deemed to be extremely competitive.
The board and top management team were eager to
maintain Giordanos success in existing markets and to
enter new markets, especially in mainland China. Several
issues were under discussion. First, in what ways, if at
all, should Giordano change its current positioning in
the marketplace? Second, would the factors that had
contributed to Giordanos success in the past remain
equally critical over the coming years or were new key
success factors emerging? Finally, as Giordano sought to
enter new markets around the world, were its competitive
strengths readily transferable to other markets?
COMPANY BACKGROUND
Giordano was founded in Hong Kong by Jimmy Lai
in 1980. In 1981, it opened its rst 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 rst retail outlet in Singapore.
Responding to slow sales, Giordano changed its
positioning strategy in 1987. Until 1987, it had sold
exclusively mens casual apparel. When Lai and his
colleagues realized that an increasing number of female
customers were attracted to their stores, he 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 margins. is shi in
strategy was successful, leading to a substantial increase
in turnover. In 1994, Peter Lau Kwok Kuen succeeded
Lai, and became chairman of the company.
Management Values and Human Resource
Policies
A willingness to try new and unconventional ways of
doing business and to learn from past errors was part
of Lai’s management philosophy, and soon became an
776 Case 22 Giordano: Positioning for International Expansion
Exhibit 1 Giordano’s financial highlights (1998–2008)
2008
(6 Months
ended
30 June)
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998
Turnover (million HK$) 2,342 4,950 4,372 4,413 4,003 3,389 3,588 3,479 3,431 3,092 2,609
Turnover increase (percent) 11.6 13.2 (0.01) 0.10 18.1 (5.5) 3.1 1.4 11.0 18.5 (13.4)
Profit after tax and minority
interests (million HK$) 206 304 218 431 393 266 328 377 416 360 76
Profit after tax and minority
interests increase over
previous year (percent)
32.9 39.4 (49.4) 9.6 47.7 (18.9) (13.0) (9.4) 15.3 373.7 11.8
Shareholders’ fund (million
HK$) 1928 1927 1,987 2,122 1,954 1,799 1,794 1,695 1,558 1,449 1,135
Working capital (million
HK$) 716 736 862 1,029 1,004 961 861 798 1,014 960 725
Total debt to equity ratio 0.45 0.47 0.45 0.36 0.35 0.4 0.3 0.4 0.3 0.3 0.3
Inventory turnover on sales
(days) 28 33 35 31 30 24 26 30 32 28 44
Return on total assets
(percent) 7 10.3 7.3 15.2 14.9 10.7 13.7 16.8 20.7 21.5 5.3
Return on average equity
(percent) 10.8 15.1 10.0 19.9 20.9 14.8 18.8 23.2 27.7 27.9 6.9
Return on sales (percent) 8 6 4.7 9.2 9.8 7.8 9.1 10.8 12.1 11.6 2.9
Earning per share (cents) 13.9 19.8 13.8 27.5 27.2 18.5 22.8 26.3 29.3 25.65 5.40
Cash dividend per share
(cents) 6.5 21.5 26.5 26.5 23.0 21.0 19.0 14.0 15.25 17.25 2.25
Annual Reports 1998 through 2008, Giordano International.
Source
integral part of Giordano’s culture. Lai saw the occasional
failure as a current limitation that 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, adding:
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
do you think you are that you can’t make
mistakes?
He also believed strongly that empowerment would
minimize mistakes — that if everyone was allowed to
contribute and participate, mistakes could be minimized.
Another factor that contributed to the firms success
was its dedicated, ever-smiling sales sta of over 11,000.
Giordano considered frontline workers to be its customer
service heroes. Charles Fung, executive director and
general manager (Taiwan), remarked:
Exhibit 2 The typical Giordano storefront.
Case Studies 777
PART 6
Even the most sophisticated training program
won’t guarantee the best customer service.
People are the key. ey 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 meaning.
Giordano had stringent selection procedures to make
sure that the candidates selected matched the desired
employee prole. Selection continued into its training
workshops, which tested the service orientation and
character of a new employee.
Giordano’s philosophy of quality service could be
observed not only in Hong Kong, but also in its overseas
outlets. e company had been honored by numerous
service awards over the years (Exhibit 3). Fung described
its obsession with providing excellent customer service
in the following terms:
e only way to keep abreast with sti competition
in the retail market is to know the customers’
needs and serve them well. Customers pay our
pay checks; 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 sta.
Giordano believed and invested heavily in employee
training, and has been recognized for its commitment
to training and developing its sta by awards such as the
Hong Kong Management Association Certicate of Merit
for Excellence in Training and the People Developer
Award from Singapore, among others. Fung explained:
Training is important. 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.
Giordano oered what Fung claimed was “an attractive
package in an industry where employee turnover is high.
Giordano motivated its people through a base salary that
probably was below market average, but added attractive
Exhibit 3 Selected awards Giordano received
Award Awarding Organization Category Year(s)
Mystery Shoppers Award Singapore Retailers Association (SRA) 2006
Top Service Award Next Magazine Taiwan Chain Stores of Fashion &
Accessories
2006
Service and Courtesy—Supervisory
Level
Hong Kong Retail Management Fashion & Accessories 2006
Best Service Performance Brand;
Best Service Performance
Department of Economic Development of
Dubai
Large Business; Service
Performance
2006
The Wall Street Journal Asia 2007
Survey
The Wall Street Journal Asia Most admired publicly
traded companies in Asia
2007
Dubai Service Excellence
Performance Award
Dubai Department of Economic
Development
Customer Service 2007
4th Premier Asian Licensing Award Hong Kong Trade Development Council
and the International Licensing Industry
Merchandiser’s Association
Best Licensee 2007
Top Service Award 2008 Next Magazine Chain Store of Fashion &
Accessories
2008
Hong Kong Brands Awards 2008 American Chamber of Commerce Hong
Kong
Fashion and Apparel 2008
2008 Service and Courtesy Award Hong Kong Retail Management
Association (HKRMA)
Junior Frontline Level and
the Supervisor Level
2008
Caring Company 2008/2009 Hong Kong Council of Society Service
(HKCSS)
Corporate Social
Responsibility
2009
778 Case 22 Giordano: Positioning for International Expansion
performance-related bonuses. These initiatives and
Giordano’s emphasis on training had resulted in a lower
sta turnover rate.
Giordano was only too aware that managing its human
resources (HR) became a major challenge when it decided
to expand into global markets. To replicate its high-
service quality positioning, Giordano knew it needed to
consider the HR issues involved in setting up retail outlets
in unfamiliar territory. For example, the recruitment,
selection, and training of local employees required
modications to its formula for success in its current
markets, owing to dierences in the culture, education,
and technology of the new countries. Labor regulations
also affected HR policies such as compensation and
welfare benets.
Focusing Giordano’s Organizational
Structure on Simplicity and Speed
Giordano maintained a at organizational structure. e
company’s decentralized management style empowered
line managers and, at the same time, encouraged fast and
close communication and coordination. For example,
top management and staff had desks located next to
each other, separated only by shoulder panels. This
closeness allowed easy communication, ecient project
management, and speedy decision-making, which were
all seen as critical ingredients to success amid fast-
changing consumer tastes and fashion trends. is kept
Giordanos product development cycle short. e rm
made similar demands on its suppliers.
In addition, the company kept its operations lean to
focus on what it considered is its competitive advantage:
service. One of their main strategic objectives was to
disengage from manufacturing to focus on retailing.
is was implemented by reducing its interest in their
joint ventures with key manufacturers. is allowed the
group to channel its resources from the Garment Trading
& Manufacturing Division to the more protable Retail
& Distribution Division.1
Service
Giordano’s commitment to service began with its major
Customer Service Campaign in 1989. In that campaign,
yellow badges bearing the words “Giordano Means
Service” was worn by every Giordano employee, and
its service philosophy had three tenets: “We welcome
unlimited try-ons; we exchange — no questions asked;
and we serve with a smile.” As a result, the rm started
receiving its numerous service-related awards over the
years. It had also been ranked number one for eight
consecutive years by the Far Eastern Economic Review
for being innovative in responding to customers’ needs.
Furthermore, proving its expansion success in the Middle
East, in 2006, Giordano received double the awards for
exceptional service and customer-centricity from the
Government of Dubai.
Giordano’s management had launched several creative,
customer-focused campaigns and promotions 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. is one-month campaign was immensely successful,
with some 3,000 pairs of jeans sold every day during the
promotion. In another service-related campaign, over
10,000 free T-shirts were given to customers for giving
feedback and critiquing Giordanos services.
To ensure customer service excellence, performance
evaluations were conducted frequently at the store level,
as well as for individual employees. 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, each 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. Customer feedback cards were
available at all stores, and were collected and posted at
the oce for further action. Increasingly, customers were
providing feedback via the rm’s corporate website.
In late 2006, Giordano opened the Giordano University,
located at Dongguan in China. At its initial stage, the
University trained staff located in Hong Kong and
Mainland China. There are plans to offer training to
its other markets, and even franchisees and authorized
dealers. Giordano’s efforts on staff training and
development reaped results as was shown by the many
service awards it clinched.
1 Management Discussion and Analysis, p. 30, Interim Financial
Report 2008, Giordano International.
Giordano to dispose of their interest in garment manufacturing
subsidiary (accessed via http://www.giordano.com.hk/web/
HK/investors/news/2008-06-30_Placita%20Disposal_E.pdf, on
March 9, 2009).
Case Studies 779
PART 6
Value for Money
Lai explained the rationale for Giordanos value-for-
money policy:
Consumers are learning a lot better about what
value is. 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
[we did] yesterday. at is all value, because
convenience is value for the consumer. Time is
value for the customer.
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. For instance, in 2003, to
provide greater shopping convenience to customers,
Giordano started to open kiosks in subway and train
stations aimed at providing their customers with a “grab
and go” service.
Inventory Control
In order to maximize the use of store space for sales
opportunities, a central distribution center replaced the
function of a back storeroom in its outlets. Information
technology (IT) was used to facilitate inventory
management and demand forecasting. When an item was
sold, the barcode information — identifying size, color,
style, and price — was recorded by the point-of-sale cash
register and transmitted to the company’s main computer.
At the end of each day, the information was compiled
at the store level, and sent to the sales department and
distribution center. The compiled sales information
became the stores order for the following day. Orders
were lled during the night and were ready for delivery
by early morning, ensuring that new inventory was
already on the shelves before a Giordano store opened
for business.
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 studied, and this provided valuable input to its
manufacturing operations, resulting in fewer problems
and costs related to slow-moving inventory. The use
of IT also allowed more efficient inventory holding.
Giordano’s inventory turnover on sales was reduced from
58 days in 1996, to merely 28 days in 2008. Its excellent
inventory management reduced costs and allowed
reasonable margins, while still allowing Giordano to
reinforce its value-for-money philosophy. All in all,
despite the relatively lower margins than those of its
peers, Giordano was still able to post healthy prots.
Such eciency became a crucial factor when periodic
price wars occurred.
PRODUCT POSITIONING
Fung recognized the importance of limiting the
firm’s expansion and focusing on one specific area.
Simplicity and focus were reected in the way Giordano
merchandised its goods. Its stores featured no more
than 100 variants of 17 core items, whereas competing
retailers might feature 200 to 300 items. He believed that
merchandising a wide range of products made it dicult
to react quickly to market changes.
Giordano was also willing to experiment with new ideas,
and its perseverance despite past failures. It ventured into
mid-priced women’s fashion by introducing new product
lines, such as the “Giordano Ladies” label. is featured
a line of smart blouses, dress pants, and skirts targeted at
executive women. Reecting retailer practices for such
clothing, Giordano enjoyed higher margins on upscale
women’s clothing — typically 50% to 60% of selling price
compared to 40% for casual wear.
Here, however, Giordano ran into some diculties, as it
found itself competing with more than a dozen seasoned
players in the retail clothing business, including Esprit.
Initially, the rm failed to dierentiate its new Giordano
Ladies line from its mainstream product line and even
sold both through the same outlets. In 1999, however,
Giordano took advantage of the boom that followed
the Asian currency crisis in many parts of Asia, to
aggressively relaunch its “Giordano Ladies” line, which
subsequently met with great success.
As of September 2008, the reinforced “Giordano Ladies”
focused on a select segment — the “oce ladies, but
dressier” market, with 46 “Giordano Ladies” shops in
Hong Kong, Taiwan, Singapore, Malaysia, Indonesia,
and China, oering personalized and exceptional service
as one of its core offerings. Among other things, the
employees were trained to memorize names of regular
customers and recall their past purchases.
During the late 1990s, Giordano had begun to reposition
its brand by emphasizing differentiated, functionally
value-added products, and broadening its appeal by
improving on visual merchandising and apparel. In 1999,
the rm launched Blue Star Exchange (BSE), a new line
of casual clothing for the price-conscious customer.
780 Case 22 Giordano: Positioning for International Expansion
Giordano’s relatively mid-priced positioning worked
well — inexpensive, yet contemporary-looking outts
appealed to Asia’s frugal customers, especially during a
period of economic slowdown. However, over time, this
positioning became inconsistent with the brand image
that Giordano had tried hard to build over the years. As
one senior executive remarked, “e feeling went from
‘this is nice and good value’ to ‘this is cheap.’” As such,
Giordano started to focus on establishing clear brand
images and creating distinct identities between its brands.
In September 2006, Giordano announced that it would
rebrand Bluestar Exchange. As explained by Peter Lau:
e apparel retail market is getting increasingly
competitive, regardless of whether you are
talking about the high end or the mass market. In
order to succeed, you must achieve meaningful
dierentiation from your competitors or else you
risk becoming lost in the crowd. We believe it is
time to give Bluestar Exchange a makeover to
sharpen its image, and decided to go outside the
company to get a fresh perspective.2
e newly revamped brand, now known as Blue Star
Exchange (BSX) (Exhibit 4), was unveiled at the launch
of its rst agship store in Hong Kong in April 2007. e
shi saw BSX evolve from price to “fun sell”, targeting the
key youth demographic.3 Expansion plans to bring BSX
to other countries were made, following careful review
and tweaking aer its Hong Kong debut.
2 Giordano Re-brand Blue Star Exchange article (accessed via
http://www.giordano.com.hk/web/HK/investors/news/Blue
Star%20Rebranding.html in January 2008).
3 Blue Star shifts from price to “fun” sell, James Murphy, Asia’s
Media & Marketing Newspaper; November 3, 2006, p. 11.
Exhibit 4 Giordano’s first BSX store in Hong Kong
Additionally, having achieved success in its value-
for-money lines, Giordano now wanted to penetrate
the “upper premium” segment. is was done via the
introduction of Giordano Concepts and its existing
Giordano Ladies range. The lines focused on quality
lifestyle, and targeted the fashion-conscious consumer
in the auent market segment. In contrast to its unisex
Giordano stores that carried a majority of items for
women, Giordano Concept stores carry 60% of items
catering to males.
To create alignment between the new up-market
positioning and brand image, Giordano Concepts and
Giordano Ladies stores were distinctly dierent from
its mainstream stores. is included revamping store
interiors and sta image to exude exclusivity, induce
curiosity, and, more importantly, appeal to an auent
target group. For instance, to enhance its white-themed
summer collection of 2006, agship Concept stores in
Hong Kong and Taiwan were dressed in abstract wall
patterns and modern images.
Giordano gradually remarketed its core brand in ways
that sought to create the image of a trendier label. To
continue connecting with customers, Giordano launched
several promotions. Among its successes was the “World
Without Strangers” slogan. First launched in South Asia
as a means to raise funds for the 2004 Indian Ocean
tsunami victims in Phuket, it gained popularity with
its other markets and was launched across the region
in 2005. The slogan extended to a range of T-shirts
and rubber wristbands that promoted international
friendship. e products came in a variety of colors and
brought across the message through words like “Strength,
Explore, Listen, Believe, Imagine, and Accept.4 Ishwar
Chugani, Executive Director for Giordano Middle East,
explained:
e words are designed to be personal
watchwords, such as “have strength in your
convictions,” or “explore the world around you,
almost reminders to live outside the box and
experience the variety of life… e shirts are a
sign of solidarity for fellow humans, spreading
a message of peace, acceptance and open-
4 Al-Bawaba News_Giordano world without strangers spreading
goodwill October 11, 2005 (accessed via Factiva in December
2007).
Case Studies 781
PART 6
mindedness, which is something we can all use
from time to time.5
In light of international crises and fragile cross-border
friendships, “World Without Strangers” served as a
mediator and avenue through which customers could
express themselves. e company has been able to act as
a mouthpiece for society, championing various themes
from environmentalism to community work, and even
the economy. An example would be the “Cheer U Up
collection, produced in collaboration with Mr. Jim Chim
Sui-man. is collection aimed to li the spirits of the
people in the nancial turmoil during the 2009 global
economic crisis. e rm’s skills in executing innovative
and eective promotional strategies helped the retailer
to gain public favor and approval.
Giordano’s Competitors
To beat the intense competition prevalent in Asia
— especially in Hong Kong — founder Jimmy Lai
believed that Giordano had to develop a distinctive
competitive advantage. So he benchmarked Giordano
against best-practice organizations in four key areas:
(1) computerization (from e Limited), (2) a tightly-
controlled menu (from McDonald’s), (3) frugality (from
Wal-Mart), and (4) value pricing (as implemented at the
British retail chain Marks & Spencer). e emphasis on
service and the value-for-money concept had proven to
be successful.
Giordano’s main competitors in the value-for-money
segment had been Hang Ten, Bossini, Baleno, and,
at the higher end, Esprit. Exhibit 5 shows the relative
positioning of Giordano and its competitors: e Gap,
Bossini, Hang Ten, Baleno, and Esprit.
Hang Ten and Bossini were generally positioned as low-
price retailers oering reasonable quality and service.
e clothes emphasized versatility and simplicity. But
while Hang Ten and Baleno were more popular among
teenagers and young adults, Bossini had broader appeal.
Their distribution strategies were somewhat similar,
but they focused on different markets. For instance,
while Hang Ten was mainly strong in Taiwan, Baleno
increasingly penetrated Mainland China and Taiwan.
However, Bossini was very strong in Hong Kong and
relatively strong in China. e company planned to make
its business in China into the group’s largest turnover
5 Al-Bawaba News_Giordano world without strangers spreading
goodwill October 11, 2005 (accessed via Factiva in December
2007).
Exhibit 5 Giordano’s first Concepts store in Hong Kong
and prot contributor. e geographic areas in which
Giordano, e Gap, Espirit, Bossini, Baleno, and Hang
Ten operate are shown in Exhibit 6.
Esprit is an international fashion lifestyle brand. It
promoted a “lifestyle” image, and its products are
strategically positioned as good quality and value for
money — a position that Giordano was occupying.
By 2008, Esprit had a distribution network of over
12,000 stores and outlets in more than 40 countries
in Europe, Asia, America, Middle East, and Australia.
Its main markets were in Europe, which accounted for
approximately 86.7% of sales. e Esprit brand products
were principally sold via directly managed retail outlets,
wholesale customers (including department stores,
specialty stores and franchisees), and by licensees for
products manufactured under license, principally
through the licensees’ own distribution networks.
Although each of these firms had slightly different
positioning strategies, they competed in a number of
areas. For example, all firms emphasized advertising
and sales promotion heavily, selling fashionable clothes
at attractive prices. Almost all stores were also located
primarily in good ground-oor areas, drawing high-
782 Case 22 Giordano: Positioning for International Expansion
Exhibit 7 Market positioning of Giordano and principal
competitors
Firms Positioning Target market
Giordano
(www.giordano.com.
hk)
Value for money
Mid-priced but
trendy fashion
Unisex casual
wear for all
ages (under
different brands)
The Gap
(www.gap.com)
Value for money
Mid-priced but
trendy fashion
Unisex casual
wear for all
ages (under
different brands)
Esprit
(www.esprit-intl.com)
More up-market
than Giordano
Stylish, trendy
Ladies’ casual,
but also other
specialized lines
for children and
men
Bossini
(www.bossini.com)
Value for money
(comparable to
Giordano)
Unisex, casual
wear, both
young and old
Baleno
(www.baleno.com.hk)
Value for money
Trendy, youngage
casual wear
Unisex appeal,
young adults
Hang Ten
(www.hangten.com)
Value for money
Sporty lifestyle
Casual wear
and sports
wear, teens and
young adults
Exhibit 6 Giordano Ladies
volume trac, and facilitating shopping, browsing, and
impulse buying. However, none had been able to match
the great customer value oered by Giordano.
A threat from US-based The Gap was also looming,
having already entered the Japanese market. After
2005, when garment quotas had been largely abolished,
imports into the region became more cost-eective for
this US competitor. rough franchise partners such
as FJ Benjamin Holdings Ltd., e Gap expanded its
international presence with franchises in Bahrain, Greece,
Indonesia, Korea, Kuwait, Oman, Qatar, Malaysia, Russia,
Saudi Arabia, Philippines, Singapore, Turkey, and the
United Arab Emirates. Financial data for Giordano,
Esprit, e Gap, and Bossini are shown in Exhibit 7.
Giordano’s Growth Strategy
Early in its existence, Giordano’s management had
realized that regional expansion was required to achieve
substantial growth and economies of scale. By 2007,
Giordano had over 1,800 stores in more than 30 markets.
Exhibit 8 shows the growth achieved across a number of
dimensions from 1998 to 2007. Despite a drop in prots
in 2006 due to the unforeseen warm winter as well as
the astounding rise in rental expenses in Hong Kong,
Giordano showed relatively consistent growth over the
years as prots rebounded in 2007 with a 39.4% increase.
Driven in part by its desire for growth and in part by the
need to reduce its dependence on Asia in the wake of
the 1998 economic meltdown, Giordano set its sights on
markets outside Asia. Australia was an early target, and
the number of retail outlets increased from four outlets in
1999 to 56 outlets in 2008. Although the Asian nancial
crisis had caused Giordano to rethink its regional strategy,
the company was still determined to enter and further
penetrate new Asian markets. is determination led
to its successful expansion in Mainland China (Exhibit
9), where the number of retail outlets grew from 253 in
1999 to 881 in 2008. Giordano’s management foresaw
both challenges and opportunities arising from the
People’s Republic of Chinas accession to the World Trade
Organization.
Giordano opened more stores in Indonesia, bringing its
total in that country to 100 stores. In Malaysia, Giordano
planned to refurnish its outlets and intensify its local
promotional campaigns to consolidate its leadership
position in the Malaysian market. To improve store
protability, Giordano had already converted some of its
franchised Malaysian stores into company-owned stores.
Having gained a foothold in the Far East, Giordano began
expansion into India in 2006, and into North American
and the Middle East in 2007. In June 2007, Giordano
unveiled its rst franchised store in Cairo, Egypt. Since
the launch of its rst store in Chennai, Giordano has
increased its presence in India to nine stores in ve cities.9
9 Giordano opens three new stores in India, November 20, 2008
(http://www.giordano.com.hk/web/HK/investors/IR2008/2008-
11-20%20Pune%20+%20Mumbai.pdf); accessed March 9, 2009.
Case Studies 783
PART 6
Exhibit 8 Geographic presence of Giordano and its principal competitors.
Country Giordano The Gap Esprit Bossini Baleno Hang Ten
Asia
Hong Kong/Macau X X X X X
Singapore X X X X X X
South Korea X X X X X
Taiwan X X X X X
China X X X X X X
Malaysia X X X X X X
Indonesia X X X X X
Philippines X X X X
Thailand X X X X
Japan X X X
Middle East X X X X X X
World
USA and Canada X X X X X
Europe X X X
Australia X X
TOTAL 1,585 3,117 9,751 827 1,160 NA
Note: “X” indicates presence in the country/ region; “-” indicates no presence.
Giordano International Limited, retrieved March 9, 2009 from http://www.giordano.com.hk/web/HK/ourCompany.html; Annual Report 2007, Gap Inc.,
retrieved March 9, 2009 from http://media.corporate-ir.net/media_les/IROL/11/111302/AR07.pdf; Esprit, Retrieved March 9, 2009 from http://www.
esprit.com/index.php?command=Display&navi_id=104; Bossini International Holdings Limited, retrieved March 9, 2009 from http://www.bossini.com/
bossini/html/eng/common/global.jsp ; Baleno, retrieved March 9, 2009 from http://www.baleno.com.hk/EN/stores_list_map.asp; Hang Ten, retrieved
March 9, 2009, 2005 from http://www.hangten.com.hk/countryLink.do.
Source
Exhibit 9 Competitive financial data for Giordano, The Gap, Esprit, and Bossini
Giordano The Gap Esprit Bossini
Turnover (US$ million) 639 15,736 4,403 298
Profit after tax and minority interests (US$ million) 39.2 833 832 8.2
Return on total assets (percentage) 7.0 10.6 33.1 6.97
Return on average equity (percentage) 10.8 19.5 46.0 9.71
Return on sales (percentage) 8.0 5.3 20.7
Number of employees 11,000 12,100 154,000 10,541 4,300
Sales per employee (US$ ‘000) 52.81 102.18 457.43 69.02
Note: The Gap reports its earnings in US$. All reported figures have been converted into US$ at the following exchange rate (as of March
2009): US$1 = HK$7.75.
Annual Report 2007, Giordano International; Annual Report 2007; e Gap; 2007 Annual Report, Esprit International; Financial Report 2007/8, Bossini
International Holdings Limited; Annual Report 2007/08.
Source
784 Case 22 Giordano: Positioning for International Expansion
The senior management team knew that Giordano’s
future success in such markets would depend on
a detailed understanding of consumer tastes and
preferences for fabrics, colors, and advertising. In the
past, the rm had relied on maintaining a consistent
strategy across dierent countries, including elements
such as positioning, service levels, information systems,
logistics, and HR policies. However, implementation of
such tactical elements as promotional campaigns was
usually le mostly to local managers. A country’s overall
performance in terms of sales, contribution, service
levels, and customer feedback was monitored by regional
headquarters (for instance, Singapore for Southeast Asia)
and the head oce in Hong Kong. Weekly performance
reports were distributed to all managers.
As the organization expanded beyond Asia, it was
becoming clear that different strategies had to be
developed for different regions or countries. For
instance, to enhance protability in Mainland China,
the company recognized that better sourcing was needed
to enhance price competitiveness. Turning around the
Taiwan operation required refocusing on basic designs,
streamlining product portfolio, and implementing their
micromarketing strategy more aggressively. In Europe,
Giordano was investigating a variety of market entry
opportunities.
Decisions Facing the Senior Management
Team
Although Giordano had been extremely successful,
it faced a number of challenges. A key issue was how
the Giordano brand should be positioned against the
competition in both new and existing markets. Was
repositioning required in existing markets, and would
it be necessary to follow dierent positioning strategies
for dierent markets (e.g., Hong Kong versus Southeast
Asia)?
A second issue was the sustainability of Giordano’s key
success factors. Giordano had to carefully explore how
its core competencies and the pillars of its success were
likely to develop over the coming years. Which of its
competitive advantages were likely to be sustainable and
which ones were likely to be eroded?
A third issue was Giordanos growth strategy in Asia as
well as across continents. Would Giordano’s competitive
strengths be readily transferable to other markets? Would
strategic adaptations to its strategy and marketing mix
be required, or would tactical moves suce?
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? Should it have different positioning strategies
for different geographic markets?
3. What are Giordano’s key success factors 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. How do you think Giordano adapted/would have adapted its marketing and operations strategies and
tactics when entering and penetrating your country?
6. What general lessons can be learned from Giordano for other major clothing retailers in your country?
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... The center positioning strategy, which is one of the major initiatives offered by the franchisor, is an important strategic decision that should be made when expanding the network of a franchising business model (Rondan-Cataluna et al., 2012;Wirtz, 2011). According to Karamychev and van Reeven (2009), firm's location strategies contribute significantly to the expansion of the stores in the retail chain. ...
Article
Purpose – The purpose of this paper is to propose a franchising decision support system (FDSS) for future development planning by center positioning strategy formulation under a franchising business model. Design/methodology/approach – The system makes use of data collected from the franchising business and external environment analysis for decision making in center positioning problems. The fuzzy logic approach is integrated into the system for analyzing the geographical market dynamics including profitability and competitiveness in the district concerned. To demonstrate the application of the proposed FDSS, a case study is conducted in a Hong Kong-based franchising private education center, i.e. Dr I-Kids Education Center. Findings – The tailor made FDSS helps to facilitate the business operations of the franchising education center and develops a district positioning model for the centers located in the 18 districts of Hong Kong. The findings provide a solid foundation for marketing strategy and expansion direction formulation. Originality/value – Due to the globalization of business, managing a growing franchising business model becomes challenging to the franchisor. In order to fully leverage the merits of the franchising system, an intelligent decision support model, focusing on making strategic development plans, is needed so as to expand the scale of business efficiently.
Suitable for: • Polytechnic Students • Undergraduate Students Services Marketing is available for various audiences: Services Marketing Series • The content in terms of core theory, models and frameworks is largely the same across these publications. However
  • Jochen Wirtz
  • Christopher Lovelock
Jochen Wirtz and Christopher Lovelock (2016), Services Marketing: People, Technology, Strategy, 8th edition, World Scientific. Suitable for: • Polytechnic Students • Undergraduate Students Services Marketing is available for various audiences: Services Marketing Series • The content in terms of core theory, models and frameworks is largely the same across these publications. However, they are presented and designed to fit their particular target audiences.