I NEED A SYNOPSIS WRITEN OF THE FOLLOWING CONTENT
A1) Industry Analysis– Define and characterize the industry Giordano is operating in for the period leading up to 2008? (please don’t be confused we are taking our selves back to the case study timeframe) Asses the industry’s attractiveness in 2008, be sure to provide evidence.
Pest Analysis of Giordano
As a retail distributer, Giordano has already been expanded internationally in 2008. For the global clothing retail business, it is effective to do the Pest analysis to understand the macro-environment or the industry which is uncontrollable. The following is the Pestle analysis of Giordano.
Impact of Factors
Political and Legal
Labor regulations affected HR policies such as compensation and welfare benefits. The labor law in different countries have different framework, although the hours of work, minimum wages, minimum age and equality are the points that apply to most counties. This could leads to lower labor cost in some counties, but it may also lead to higher labor turnover which increase the training cost. (international Labour Organization 2015)
Attractiveness of the global clothing retailer is Global Financial Crisis was happened in 2008. On one hand, GFC could be a barrier to stop the new competitor to join in, because banks are not willing to loan to new company which has higher risk. On the other hand, the company which do not have enough working capital or too high of the debt to equity ratio could also easy to corrupt as the banks willing to keep the cash; in the other words less competition means more profits. The below chart is the Global Retail Development index, it shows that the retail businesses in Asia passed the peak in 2007( Ben-Shabat et al 2008).
The recruitment, selection, and training of local employees required modifications to its formula for success in its current markets, owing to differences in the culture, education, and technology of the new countries. (Wirtz 2011) Besides, there are also different buying habits in between different counties, in term of the average income are different.
Real time operating system is an IT system that guarantees a certain capability within a specified time constraint. The use of IT also allowed more efficient inventory holding (National Instruments 2013). For example, Giordano’s inventory turnover on sales was reduced from 58 days in 1996 to merely 28 days in 2008. The IT system could reduce costs and allow reasonable margins to these international clothing retail businesses.
Ben-Shabat. H, Moriarty. M, Kuppuswamy. R & Alam. N 2008,’Emerging Opportunities For Global Retailers’, The 2008 A.T. Kearney Global Retail Development index, retrieved 19 April,<http://www.atkearney.com/documents/10192/218eb855-ddfd-4939-b1fd-0d5069838c0a>.
International Labour Organisation 2015, ‘National Labour Law Profile: Australia’, retrieved 23 April,<http://www.ilo.org/ifpdial/information-resources/national-labour-law-profiles/WCMS_158892/lang–en/index.htm>.
National Instruments 2013,’ What is a Real-Time Operating System (RTOS)?’, retrieved 23 April,<http://www.ni.com/white-paper/3938/en/>.
A2. Giordano Competitor analysis
Giordano has many competitors which can threat the company if they unable to handle it and anticipate to maintain their position in the market. According to Wirtz (2011) to beat the intense competition, Lai believed that Giordano have to develop a distinctive competitive advantage. Therefore, he benchmarked 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 (as implemented at the British retail chain Marks & Spencer).
Giordano’s main competitors in the low end value segment had been Hang Ten, Bossini, and Baleno, and at the higher end would be Gap and Esprit (Wirtz 2011). Bossini and Hang Ten are the direct competitors for Giordano brand as these two players with similar positioning and product have been targeting similar customer segments in value for money. But with Giordano friendly service and high quality customer service, it has been able to maintain its edge.
Gap and Esprit can also be a threat for Giordano nowadays, because many stores of Gap and Esprit enter Asian market. Therefore, in Asia Gap, Esprit and Giordano compete tightly. Although Giordano has been the first company in value-for-money retail market in Asia and there are many other companies who have challenged Giordano’s position and competing against the brand (Wirtz 2011). Bossini, Hang Ten, Baleno, Esprit and Gap are some of the more well known competitors. As Giordano operate in multiple segments to compete against many players directly and indirectly.
Giordano competitors were positioned as low-price retailers offering reasonable quality product and great service. Each of these companies had different strategies as they competed in a number of segments. For example, all companies underline advertising and sales promotion heavily, selling fashionable clothing at affordable prices.
Most likely the stores located in very strategic and reachable areas where easily accessible and drawing high volume traffic and attention. However, none of other competitors had been able to match the customer value offered by Giordano.
Here is the competitor analysis figure for both Direct and Indirect competitors according to (Lee & Edwards 2013)
Brand Form Competition
Hang Ten, Baleno, Bossini, Esprit, Gap, Uniqlo.
Other retail manufactures from low value for money market to higher end value market.
Department store, Tailor handmade, boutique, private designer.
Other items that customer buy such footwear, accessories, gadget using their budget for clothing.
A3) Critical Issues– what critical issues did the company face in 2008? 325 words
By 2008, multiple critical issues had arisen for Giordano. Because of the regional expansion, the issue arose of how Giordano should position itself against competition in new and existing markets. The current positioning strategy of “Value for money, mid-priced but trendy fashion” was the same as The Gap who also targeted the same market. Other competitors like Esprit who, whilst were more upmarket than Giordano, had 86.7 percent of their sales in Europe, needed a greater distinction in positioning. In order to continue their growth in different regions Giordano needed to change how it positions itself against competitors
The sustainability of Giordano’s Key Success Factors was another critical issue that arose in 2008. With the global financial crisis crashing stock markets around the world by September of that year, consumer confidence was dropping resulting in less disposable income being used in retail. This meant that Giordano would have to reconsider whether they could maintain KSFs that had led them to significant levels of growth since the 1980s. One of the most significant KSFs to Giordano was “quality of service” developed through motivated staff. This was achieved through “attractive performance related bonuses” despite the base salary being below the market average. However, bonuses would be hard to achieve for staff if consumers were unwilling to spend as much money in the economic climate of 2008. As such, KSFs as this would have to be reconsidered whilst the GFC continued to affect consumer spending.
A final critical issue that came to light in 2008 was how Giordano need to adapt their growth strategy across different markets. They had previously been using a “consistent strategy across different countries” including elements as positioning, logistics and HR policies. But as they expanded beyond they would need to develop strategies which would suit the different climates between areas like Mainland China and Europe.
A4) Industry Key Success Factors
The competitive strength grid outlays the major companies that operate within the retail apparel industry and its key success factors, focusing on satisfying customers, and achieving growth and profitability in times of low disposable income and cautious customer spending.
Price is critical for consumers in determining the overall value of a product. Targeting price sensitive customers who seek value for money, and who can easily switch between retailers is critical, but in the long term view, price needs to follow economic trends to ensure product price remains competitive and affordable while delivering value (Lee & Edwards, 2013, p.135). While all positioned as value for money, the companies are identified differently as either low-price retailers, mid-priced and high-end (Wirtz 2011).
Brand image becomes crucial to retail companies in times of tight spending as consumers rely on strong images when purchasing. Esprit reflects a strong emotional-personality based position of quality fashion through their global lifestyle image, while competitors maintain a simple product image of ‘fashion at an affordable price’ for different target markets (Wirtz 2011). A long term result of increased focus on brand image (high value and high quality) would result in brand equity and customer loyalty towards individual companies (Lee & Edwards, 2013, p.135).
Distribution of stores is another key factor. Exhibit 6 in the case highlights the geographic presence of each company who penetrate the market in different locations. Within this, a multinational strategy in the ability to grow market size and find and target new global markets is identified as a critical issue. Increasing the number of outlets will encourage continued growth of the market and competition, both long and short-term (Lee & Edwards, 2013, p.81).
Store labour helps maintain a strong competitive position, delivering customer service and ultimately driving sales. Companies with well trained personnel create customer perceptions of value and distinguish themselves by creating a shopping experience with meaning (Wirtz, 2011). Giordano has received awards for their quality service, while the number of employees and sales per employee differs for each company in Exhibit 7 of the case. To ensure profitability and sales, companies should provide satisfaction, engagement and fair pay to staff consistently, highlighted as a critical issue.
As fashion is fast changing, product management is important to companies if they wish to compete aggressively. The case points to the fact that majority of the companies have a positioning aspect of ‘trendy fashion’. To ensure consumers are getting what they want, and when they want it, it’s crucial to manage products in reaction to market changes with short product development cycles, high variety and technology to forecast demand amongst times of cautious spending (Wirtz 2011).