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    20 views19 pages

    Case 3

    Uploaded by

    Meme MBA

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    © All Rights Reserved
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    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 HKS712 million in 1989 to HKS3,092 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. “This case was prepared by Jochen Witz asthe bass for class discussion rather than to ilustrae effective or inefective handling of an administrative situation, jochen Wirtz is Associate Professor of Marketing with the NUS Business School, Faculty of Business Administration, National University of Singapore, 17 Law Link, Singapore 117501, Te: 265-8743656, Fax: +65.7795941, mal: thavirtnus edu.sg. Http: /fvwnnus edu sg. Not to be reproduced or used without written permission. ‘The author acknowledges the generous support in terms of time, information, and feedback on earlier drafts ofthis ‘cate provided by Charles Fung, Chief Operating Officer and Executive Director of Giordano (Southeast Asia), and by jill icin, Associate Professor at INSEAD. Furthermore, the author gratefully acknowledges the input by Ang Swee Hoon, who ‘co-authored earlier versions of this case published inthe Asian Case Research Journal (2000), Volume 4, Issue 2, pp. “345-57, and in Principles of Marketing: An Asan Casebook (2000), Ang etal, Prentice Hall, pp. 80-87. Finally, the author ‘she thanks Jerome S. W. Kho and laisey L . Vip for thet excellent esearch asstance in gathering much ofthe data and “asting with the write-up. “The exchange rates atthe time the case was written (February 2001) were USS1 = HKS7.80 and $31 = HKS4.49, 3 Grordano BACKGROUND q een was founded by Jimmy Lai in 1980, To give his venture a more sophisticated image, L ‘picked an Italian name for his retail chain, In 1981, Giordano started in Hong Kong selling casual ‘lothes 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 up fs 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 is first retail outlet in Singapore However, in 1987, sales were low and the business became unprofitable. Lai realized that the pricy 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 inereasing 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 appare! with the goal ‘of maximizing unit sales instead of margins, and sold value-for-money merchandise. Its shift in strategy ‘was successful, Is sales almost quadrupled, from HK$712 million in 1989 to HKS3,092 million in 1999 (sce Exhibit 1). A typical Giordano store is shown in Exhibit 2 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 i Lai’s management philosophy. The occasional failure represented a current limitation and pointed management to the right decision in the future, To demonstrate his commitment philosophy, Lai took the lead by being @ role model for his employees“... Like in a look, I have made this mistake. I'm sorry for that. I hope everybody learns from this. If | ean: ‘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 set 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 @ 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 only those candidates who matched the profile of what it looked for in its employees were selected. Selection continued into its training 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 1809002 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 clement [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 least 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 Percent of its overall payroll on training, with cach employee receiving an average of 224 hours: training per ycar. It had a training room complete with one-way mirrors, video cameras, and 0 electronic paraphernalia. A training consultant and seven full-time trainers conducted training for every new sales staff member, and existing staff were required to take refresher coun ‘commitment to training and developing its staff was recognized when it was Developer Award in 1998, Giordano = providing training programs was not as important as ensuring the transfer of learning from ‘and seminars to the store. As Fung explained, “Training is important, Every organization ing its employees training. However, what is more important is the transfer of learning to the .. When there isa 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. Giordano offered what Fung claimed was “one of the most attractive packages in an {industry where employee turnover Js high. We generally pay more than what the market pays.” With higher wages, there was a lover Staff turnover rate. The higher wages and Giordano's emphasis on. ‘training resulted in a corps of eager-to-please sales force. Matiaging 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 polices for staf¥ seconded to help run Giordano outside their home country and management practices needed to be considered. Focusing Giordano’s Organizational Structure on Simplicity and Speed 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 staffs, 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 eycle 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 (fom The Limited), (2) a tightly controlled menu (Grom McDonald’), (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 ‘we sell feeling. Lets 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 received. It was ranked number one by the Far Eastern Economic Review, for being innovative 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 ofthe Year" in 1991, “Retailer ofthe Month’ i 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 aa 26 Cae Giordano ‘only being another brand-building campaign, Giordano responded seriously to the feedback collected. For example, the Giordano logo was removed from some ofits 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- ‘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 a 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 ofthese 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 detiver 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 ofthe 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-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 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 slow- ‘moving 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, how to revitalize its [slow-selling] sales.” Giordano stores were therefore well ‘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 on sales was reduced from 58 days in 1996 to 28 days in 1999, allowing it to thrive ‘margins. Savings were passed to customers, thus reinforcing its value-for-money. despite the lower margins, Giordano was still able to post healthy profits. Such efficiency

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