Analysis of Giordano Holdings Limited

Executive Summary

Giordano Holdings Limited is a leading high-quality discount clothing manufacturer and retailer based in Hong Kong. The company has a striving geographical growth program with recently successful operations in several Asian countries. An emphasis of customer service is the basis of Giordano’s competitive advantages. Combined with intense staff training regimes and a unique managerial approach, Giordano is also a market technological leader with highly efficient distribution channels. The contents of this strategic plan predominantly focus on Giordano’s prior and proposed strategic operations in the Hong Kong apparel market at large. The relatively stable future predictions of the Hong Kong economy provide a certain level of planning confidence to marketing planning.

The Sino-British Joint Declaration in 1997 may, however, carry with it room for uncertainty and a possible economic downturn. The Hong Kong apparel industry is becoming increasingly competitive, driven by the free nature of the Hong Kong trade system. Giordano essentially aims to exploit the recent rise in disposable incomes to promote a higher-quality brand image primarily through improved product quality, increased pricing, store development and a ‘trendy’ advertising campaign. Through these means, the company aims for a 30% increase in sales turnover by 2007, aligned with a substantial 10% gain in market share.

Company Description

The Giordano label was introduced to the Hong Kong clothing retail market in 1981 as a relatively high-priced clothing retailer by the now well renowned marketing entrepreneur Jimmy Lai. Since 1987 the company has undergone a corporate makeover to position itself as a high-quality retailer of casual discount clothes. The company has also undergone substantial geographic expansion from Hong Kong, into other geographic markets including Taiwan, China and Singapore. The company has built a solid reputation for friendly, helpful service in a region where retailers frequently dissuade the customers from trying on clothes. Since applying computerisation, a tightly controlled menu, frugality and value pricing to its corporate strategy, total sales have surged to over HK$2.8 billion in 1994 (Ang 1996).

Intensity of competition is quite high resulting in a need to determine and exploit competitive advantages through core competencies. Up to date, Giordano has been successful by excelling in customer service, minimizing production costs, and applying the latest software technologies to link its stores with its factories. Such corporate facets are the driving force behind an ambitious vision to become the best and biggest world brand in apparel retailing, and the mission to make people ‘feel good’ and ‘look great’.

Marketing Goals & Objectives

* Horizontal integration – By expanding market share in existing markets Giordano will be able to enjoy the competitive advantages associated with economies of scale. We aim to increase market share 10% by 1997.

* Differentiation – This has been a key success factor for Giordano since the company was first started. Price-cutting strategies have proved ‘disastrous’ in the past, and it is important that long term measures are taken for Giordano to remain competitive. A focus needs to be pressed on innovation, to keep up ahead of the market, and retain excellent service among Giordano employees.

* New markets – As competition increases from the likes of Gap and Hang Ten, it is crucial that Giordano takes advantage of new opportunities and markets. Most importantly, China, where there are a lot of untouched market segments. This can be achieved primarily through franchising, in order to maximise the rate of geographic expansion. Other markets that we aim to continue expanding to include, South Korea, Malaysia, and Thailand.

* Positioning – We aim to make Giordano much more ‘trendy’ in the Asian market. The product needs to be differentiated from competitors, and as brand equity increases, Giordano will be able to raise prices.

* Image – Giordano’s individuality and uniqueness needs to be taken to another level. This can be done through marketing campaigns that show Giordano as a quality, value-for-money product that is individual, trendy, and unique to Asia.

By taking the above measures to improve Girodano’s position in the market place, we anticipate sales in Hong Kong to increase by at least 30% over the next three years, while markets such as China, Malaysia, South Korea, and Thailand begin to contribute more to total turnover. Over the next three years, Giordano aims to develop the product, service, and operational sides of the business. We see the source for the majority of growth coming from the Cantonese and Chinese markets.

Environmental Analyisis: Hong Kong

Technology

The impact of technology on the clothing retail industry and its cost structures is at the forefront of corporate success. E-commerce is forecast to revolutionalise the clothing industry through the application of the internet. The internet provides a low-cost solution to contact with associated parties: customers, businesses, shareholders, suppliers etc. This is especially important in the clothing industry to ensure the rapid update of retailing inventory.

New laser-cutting and sewing technologies are also being adopted in the manufacturing sector, the application of which sees an increase in efficiency and possible output, as well as reduced labour requirements and long term costs.

Government

Remaining under British rule until July 1 1997, the Hong Kong government stimulates economic and entrepreneurial activity by assuming a non-interventionist approach to economic policy which stresses limited government interference and the predominant role of the private sector. Within the three year scope of this plan occurs the effect of the Sino-British Joint Declaration upon which the People’s Republic of China (PRC) will resume the exercise of sovereignty over Hong Kong in 1997 whereupon Hong Kong will become a “Special Administrative Region” (HKSAR). HKSAR is to have a high degree of autonomy, and enjoy executive, legislative and independent judicial power such that the currently enjoyed social and economic systems, lifestyles, right and freedoms will remain unchanged for at least 50 years.

Economy

The free market philosophy of Hong Kong’s open, services-dominated economy has been a driving force in maintaining consistently high growth rates over the past decade. 1994 saw GDP growth reach 5.5%, in line with government projections. Hong Kong’s growth outlook is linked to that of China. Since growth in China is expected to moderate again in 1995, Hong Kong is predicted to remain at about 5.6% growth through to 1997 (World66 1996). Growth is generally associated with a rise in disposable incomes, thus consumers are tending to become decreasingly price sensitive. The Sino-British Joint Declaration is expected to bring a possible downturn in economic growth in 1997, along with potential financial instability in the region due to the growing effect of inconsistent interest-rate policies and dollar hegemony.

Inflation levels for 1994 remained high at 8.5% and complemented by economic growth are predicted to remain between 8.5% and 9.5% until the end of 1997 (U.S. Department of State 1996). The unemployment rate currently at 1.9% is predicted to rise to 3% within a year (U.S. Department of State 1996). This will inevitably generate an increase in customer price sensitivity. However, this will not necessarily negatively affect Giordano’s low-cost, non-luxury, products. Since 1983 the Hong Kong dollar has been linked to the US dollar at HK$7.8 = US$1 providing a certain level of economic stability. The clothing sector has recently held strong as retail sales have generally improved in response to 1993’s increasing interest rates and property prices, and decreasing equity.

Demographics

From a broad perspective the Hong Kong market for quality discount clothing consists of practically the entire population of 6 million, plus input from the tourist market of whom are looking for a ‘quick holiday bargain’. The small geographical scale of Hong Kong, and its efficient transportation system somewhat justifies this broad target market definition, especially considering a population density of over 250, 000 per square mile. A more definite market as such would be a focus on consumers aged between 30 and 49 years of whom comprise 36% of the population and have the highest disposable income (Strategis 2005). The growing elderly market is also available to product growth, as well as that for children’s wear.

Culture

The broadly defined target market is a result of the Hong Kong business-oriented lifestyle. Prompting the success of Giordano and its competitive counterparts is the acknowledgement that Hong Kong has the highest proportion of people wearing casual clothes in Asia & Hong Kong residents own an average of 6 pairs of jeans (Strategis 2005). Moreover, shopping is one of the major leisure time activities in Hong Kong with more than one third of the population shopping for clothes at least once a month. The average Hong Kong shopper is becoming increasingly brand conscious as the increasing number of competitors in the clothing industry battle to establish their own unique brand equity.

SWOT Analysis

Internal

Strengths Weaknesses

Flexible managerial style

Top-down integration

Emphasis on innovative

No-questions-asked and no-time-limit exchange policy

Service orientation

Reputation for quality and service – customer loyalty

Technological leader – just-in-time replenishment scheme

Low cost manufacturing locations

Dynamic corporate culture

Intense staff training program

Italian name evoking sophistication Small range of clothing designs.

Risky managerial approach (errors may become catastrophic)

No budget, financial projections or market research.

External

Opportunities Threats

E-commerce – Interaction with associated parties

– Recent introduction of online shopping

Relatively stable open economy

Push for corporate geographical expansion

Increase in casual-wear among demographic Increasing intensity of competition

Dynamic and rapidly changing market.

Saturation of Hong Kong market

Industry Analysis

Textiles and clothing industries are the predominant backbone of Hong Kong’s overall manufacturing sector, of which has declined over the past few years to 11% of GDP against a backdrop of a continuing shift of manufacturing operations to China. On the other side of the fence, retial sales have grown by 12% throughout 1994 with especially strong growth in the clothing and footwear departments showing a 36% rise in sales. If we include Chinese re-exports, Hong Kong exported approximately HK$20 billion worth of clothing in 1994 (Strategis 2005).

The Hong Kong high quality discount clothing market is relatively stable, but saturated. Recent years has seen a dramatic increase in the number of indirect competitors. For example, many of the largest Thailand garment makers are entering the Hong Kong clothing retail market due to the considerably higher wages, and thus disposable incomes. Companies such as Hua Thai and SK Garment have recently established their own branded goods, as well as supply contracts with pre-established brand names such as Polo, Banana Republic and The Gap.

Bargaining Power of Buyers Moderate

Customers essentially determine what is sold in clothing retail stores, and to some extent, the price.

Bargaining Power of Suppliers Low

Ease of backward integration and a large number of suppliers.

Threat of Substitutes High

Relatively homogenous products, pricing and quality. Several similar direct and indirect substitutes.

Intensity of Competition High

Broad spectrum of competitors competing predominantly on price. Relatively saturated marketplace.

Threat of New Entrants Moderate

Open nature of Hong Kong market enables relative ease of entry. Relatively high initial capital costs. High costs of establishing brand equity.

Hong Kong Property

Location Taiwan Hong Kong Singapore

Year 1993 1992 1993 1992 1993 1992

No. of shops 89 58 42 33 21 13

% ↑ in outlets 54% 27% 62%

Sales (HK$m) 1,003 615 778 653 278 169

% ↑ in sales 63% 19% 65%

Hong Kong’s dubious distinction as the world’s most expensive business location has been an increasingly prohibitive factor on retailer profit margins due to the continual rise of property and rental costs. The tight property market saw a peak in April of 1994 and is forecast to cool in the following years. In response, an increasing number of Hong Kong’s clothing manufacturers are moving production offshore in a bid to reduce costs and access available textile quotas. Stores, however, must absorb the brunt of the property burden, with retail location proving a major success factor in the industry. A correlation can be seen between the number of shops and recent sales volumes in the region in the adjacent table.

Customer, Market and Trend Analysis

Giordano is essentially targeting the bourgeois middle aged market. The past decade, and especially the mid 90’s, has seen a shift from structured clothing to casual attire. This can be seen by the introduction of casual work days and relaxed dress code about the offices. Young people are also decreasingly prone to wearing formal attire. There can be seen an increasing influence from American fashion trends. Domestic demand, especially for younger age brackets, shows that local consumers perceive American-style mid-priced garments as casual, wearable and suitable for everyday use. When it comes to quality, the Hong Kong market perceives French and Italian labels as having the best design and quality. Hong Kong consumers are highly brand conscious and well acquainted with the top apparel designer names and fashion trends. Whilst male executives tend to be more familiar with the G2000 brand, female executives in their late 20’s to 40’s tend to be more familiar with the Giordano label (Strategis 2005).

Key Success Factors of the Industry at Large

The Asian retail market for discount quality casual clothing seems somewhat relatively homogenous in terms of products, prices and quality. Therefore, whilst maintaining such market standards (low price and moderate to high quality levels), determinants of individual corporate success will rely upon differentiating customer service strategies, innovative apparel design and the exploitation of available efficiencies and core competencies.

Key Success Factors

Low price

Product quality

Store location and retail space

Effective customer service

Proactive marketing techniques

Innovative design

Application of new technologies

Competitor Analysis

Giordano’s major competitors in Hong Kong are local apparel companies G2000, Bossini and U2. G2000 Apparel Limited is poised as a relatively new specialty clothing chain distributing both fashionable men’s and ladies’ career wear. G2000 boasts a large male market share, being favoured by local male executives. U2 is a corporate counterpart of G2000. It claims to retail stylish, superior value men’s and ladies’ casual wear. It also holds a relatively large proportion of the children’s-wear market share. Both G2000 and U2 focus more on product quality, than price or service. Bossini employs a social responsibility code in its bid to retail high quality casual fashion wear and merchandise. Entering the Hong Kong market in 1987, Bossini enjoys a relatively high level of managerial experience. There are also dozens of indirect competitors operating in the Hong Kong market of whom have adopted different positioning approaches. Direct competitor comparisons are examined below.

G2000 / U2 Bossini

Size and growth New and ambitiously growing firms Established firm, moderate growth, less focus on profits.

Image and positioning Fashionable/superior quality career/casual wear High quality casual fashion wear and accessories, ‘caring company’

Objectives and commitment Mass appeal, fashionable merchandise, superior value ‘Top-of-mind’ brand leader, commitment to serve each other’s interest in the best way possible

Current and past strategies Regional expansion through franchising Corporate citizenship, quality control, attractive stores

Organisation and culture Relatively less experienced, high innovation Highly experienced management team

Cost structure Low direct costs due to franchising Moderate cost efficiencies

Exit barriers Specialised assets (plant and equipment) Specialised assets, store leases

Strengths Innovative design, strong male customer contingency Corporate image

Weaknesses Intermediary inefficiencies Over-reliance on brand image

Internal Company Analysis

Financial performance: Sales and Profitability

Giordano’s sales turnover within Hong Kong accounted for 33.9% of company sales worldwide in 1993. Due to the broad nature of the market and its numerous domestic and international competitors, it is difficult to determine Giordano’s relative market share.

Company Consolidated Profit and Loss Account (HK$’000)

1994 1993 1992

Turnover 2,863,726 2,334,135 1,661,364

Operating Profit 235,251 180,481 155,969

Profit before taxation 234,236 166,666 145,569

Profit after taxation 205,611 137,632 115,091

Earnings per share (¢) 30.9 22.0 19.0

(Ang 1996)

Hong Kong Sales Figures

1993 1992

Turnover (HK$’000) 1,003,014

Net Sales (HK$) 777.7 652.8

Sales per sq. ft (HK$) 21,200 21,100

Comparable store sales increase (%) 6 16

Retail floor area (sq. ft.) 41,900 33,100

Number of sales associates 479 497

Number of outlets 46 37

Shops 42 33

Counters 4 4

(Ang 1996)

Non-financial Performance

Customer satisfaction/loyalty Growing, yet moderating, market share indicates relatively high levels of customer satisfaction. Awards for excellent customer service signify high customer contentment and loyalty.

Product & service quality Very high service quality.

Low quality relative to direct competitors.

Brand associations Friendly, helpful and efficient staff, low prices

Relative cost Low price strategy

New product activity Moderate levels of product innovation. R&D stimulated by top-down management integration.

Manage/employee capability and performance Very intense training regime, high wages and a trial-and-error emphasis ensure an active and capable sales team.

Marketing Strategy

Year 1995 1996 1997

Product Become more trendy Expand product range Maintain position

Price Slowly ↑ both price and discount Continue ↑ both price and discount Maintain the high price level

Place Improve existing stores Expand into residential area At least one store in every shopping district

Promotion Use Asian models Advertise/promote the trendy image Reduce advertising after establishing trendy image

Product

Giordano should approach 1995 strategically by introducing designs which are stylish. As Hong Kong clothing trends are somewhat coherent with that of Japan, Giordano should employ Japanese designers. Fashionable clothes will attract more buyers and also will allow Giordano to increase the price. The result is the improvement in brand image. In the following year Giordano exploit the opportunity to provide a more extensive range of products. For instance, Giordano may offer socks, underwear, belts, wallets, purses and bags. They may even carry a larger range of formal clothing, kids clothing and additional female clothing. Giordano must maintain its stylish, trendy positioning. For 1997, the research and development group may take an innovative approach by a greater customer influence on design. Some customers will be willing to pay a higher price because the clothes they have are extremely unique.

Price

The 1995 pricing strategy should involve a general price rise, accompanied by increasingly frequent sales and discount activities. The higher price would project a higher quality image. Additionally, discounts attract customers into the stores. The price increase must be gradual and scientifically based on demand prospects such that consumers do not panic and search for alternative retailers. Therefore, Giordano may increase the price in the following year and maintain the desired price level through 1997. Giordano should often promote sales due to a sale’s ability to attract new and frequent customers. Giordano should exploit the annual high demand periods by promoting summer, winter, New Year, Christmas and other holiday sales. Management must be cautious about the frequency of sales periods such that the novelty of such occasions is not diminished by a saturation of discount periods. Nevertheless, buyers will benefit intrinsically due the greater perceived value for money

Place

Giordano’s distribution strategy should be designed to exploit the advantages of the new inventory replenishment software system. Such technology, along with the introduction of online shopping, will continue to improve the efficiency of the distribution channels. On the retail front, Giordano should initiate small and relatively inexpensive developments to the retail outlets. Giordano may, for example, play contemporary music in their stores, making the customers feel comfortable while inside. The music played should also be of consistent genre in every store to establish a similar image.

Another possible addition is to have a specific aroma in the stores. Again, every store should provide a similar aroma. This specific aroma and music will act as a pleasant reminder to consumers in close vicinity to the store location. Additionally, bright lighting, the color of the store, product displays and arrangements are all minor alterations useful in establishing the desired level of brand equity. After improving the existing stores Giordano experiment with expansion into residential areas, as recently seen to be beneficial in Singapore. Due to Hong Kong’s small geography, Giordano should eventually aim have at least one store in every shopping district. Local expansion strategy will incur a goal of 55 operational stores (up from 42 in 1993) by 1997.

Promotion

Previously, Giordano have been utilizing Western marketing models for its advertising and promotion campaigns. To ensure compatibility with the Hong Kong culture and predominant customer base, management ought to combine the Western and Asian models. Giordano should advertise its trendy, fashionable image using television, radio, and magazine mediums especially those of Chinese nature. Hong Kong is one of the largest centers in the world for Chinese language publications. This concept can be applied to events such as top level soccer matches and television programs such as Hong Kong Idol. Television advertisements for high quality products are, however, often relatively ineffective and regarded as ‘tacky’ if inappropriately applied. Thus may contradict the strategic push for improving brand image through price and product improvements.

As noted previously, Giordano should frequently have select discount items to attract customers into the stores and boost sales. Another approach is to exploit mobile phone technological improvements by messaging frequent member customers as they walk past the store or as they enter the shopping centre. The ‘SMS’ informs customers of sales, new product arrivals and other promotional activities. Such technology would, however, carry substantial development costs. An inexpensive method of attracting customers is to have a Giordano staff member greet potential customers at store entrances whilst making available the latest in-house clothing catalogue. The catalogue shall be automatically mailed directly to the card (VIP, credit card) members. Further promotion could involve organizing bi-annual or annual fashion shows with the shopping malls. Shows would be coordinated timely to coincide with the start of the spring/summer or autumn/winter seasons.

Strategic Positioning

Quality

G2000

U2

Giordano

Bossini

In the apparel industry, Giordano is positioning itself with a lower price and higher quality than Bossini. On the other hand, G2000 and U2 are offering better quality clothing than Giordano. On a comparative scale with the entire industry, however, the overall pricing strategies for these companies is relatively high. To appropriately compete, Giordano will undergo a pricing and quality improvement scheme. This will ultimately affect consumer perception of brand image. However, the negative associations made with the higher pricing should be countered by the rise in perceived quality. By planning to compete more directly with G2000 and U2, Giordano aims to take advantage of the continuously growing economy and rising levels of disposable income.

Service

Giordano U2 G2000

Bossini

The relation between service and price among directly competing companies is seen in the figure immediately above. Giordano provides similar customer service to Bossini, G2000 and U2. With the competing firms adopting similar service strategies to Giordano’s pioneered approach, Giordano must determine further differentiating measures to sustain a competitive advantage. Embracing new software and manufacturing technologies, and extensive market research and new product design are some generalized options.

Formal

G2000

U2

Giordano

Bossini

Giordano has positioned itself in a low-price casual clothing market. On the other hand, G2000 and U2 integrate market activities by retailing both formal and casual clothing at higher prices. That’s means they have a wider market than Giordano. As a result, Giordano need to expand their market capabilities. For example, the Giordano management team may find it appropriate to set up subsidiary branches under a Giordano Formal label to access the formal business-apparel market. Alternatively, and far more suitable to a strict budget, will experience a need to expand the product line. A problem eluded by building the design range and expanding in-store
to the formal clothing market.

Age

G2000

Point A U2

Giordano

Bossini

Giordano and its direct competitors differ substantially in their appeal and approach to different age bracket. Giordano offers casual apparel to a relatively wide demographic. This can be considered a prolific competitive advantage. While many firms are approaching niche markets, Giordano can, on the contrary, exploit this observation by continuing to broaden its target market In collaboration with the expansion to formal attire recommendation, Giordano should aim for point ‘A’ in the figure above by appealing to the growing elderly demographic. Similarly, a Giordano Kids label could be implemented to further expand the product range, and approach the age demographic in the opposite direction.

Budget Projections

Year Turnover (HK$mill) Profit after tax (HK$mill)

1992 1,661 115

1993 2,334 137

1994 2,863 205

1995 3,488 242

1996 4,089 287

1997 4,690 332

From above figures, we try to predict the turnover and profit from 1995 to 1997. The sales growth projections continue the somewhat linear growth performance of turnover and profits over the past 3 (see Appendix I). This also aligns the company’s performance with the steady economic growth predicted for Hong Kong through to 1997. As can be observed, Giordano will aim for sales in excess of HK$300 million through 1997 if the appropriate marketing plan is stressed. The linearly increasing profits will be available to build upon the marketing mix strategies.

Budget for Product

As we aim to initiate a Japanese design influence, labour costs may improve marginally by employing additional experienced and skilled fashion designers. The managerial emphasis of expressing new ideas among staff members still remains a vital key to Giordano’s product research to development. Also, since the competitive reduction of fixed costs is a major industry trend, the investment in the newest fabric laser-cutting technologies and sewing machines will be necessary to develop additional competencies and improve efficiency and quality standards.

Budget for Promotion

Promotion extracts a major share of available capital among Giordano and its competitors. Prior to 1994 the inception of television advertising had not been addressed. The introduction of such advertising techniques will result in a substantial increase in promotional costs relative to the questionable effectiveness. As noted previously, television advertisements are assumed relatively cost inefficient and may disrupt brand image. Use of major billboards on freeways and at sporting events appears cost effective and a continuous, rather than one-off, method to establish brand awareness. Popular local models can be used for such billboards and also to frontline the fashion shows. Overall, promotional investments will need to increase along with the intensifying competition.

Budget for Distribution

By 1993, Giordano operated 46 retail outlets in Hong Kong alone. Therefore, the associated costs of proposed redesign will be relatively substantial. Management, however, believe that the dire importance of the company-customer interaction stage (the store) compensates heavy budget expenditure in this category. The tight property market about Hong Kong will also hinder profits and that of the strategic goal to operate at least one shop in every shopping district. Giordano is already an industrial leader its distribution channel efficiencies, and should maintain and utilise such an advantage by allocating suitable expenditure rights to continuous technological improvements.

Implementation

Product

As Hong Kong clothing fashion usually follows the trends in Japan, Giordano should employ Japanese designers. Giordano can maintain and improve its fashion design by listening to customers and applying and encouraging customer feedback systems. The addition of products, such as underwear, socks, and belts is not difficult because Giordano can use existing distribution system and channel. This is also the case with the product expansion to more children’s and more formal attire.

Price

The key to success here is to have the right price, being the major basis of competition. After moderately increasing the price we suggest that the price level remains U2 and G2000 due to the product nature. Giordano’s product is more casual and informal than U2 and G2000, and thus the lower pricing strategy. Sales should coincide with the ending of summer and winter periods, as well as holiday and festive occasions. This will result in a swift removal of old stock such as to replenish for the upcoming season.

Place

For the store improvements, Giordano can subcontract interior design professionals in this field. Giordano must choose the best location when opening new stores such that they are visible, noticeable and convenient. Data about the average income in the area and age of the resident can become helpful in selecting the location. Giordano should, in the end, have stores in every Hong Kong district.

Promotion

Giordano should employ both Asian and European models for its advertisements and fashion shows. If television advertisement is to be initiated, Giordano shall advertise on TV during popular programs such as important Soccer matches, and Hong Kong Idol. Similarly radio, Giordano should use channels that are modern and reach the young-adult/middle-aged target market. For magazines, Giordano should use single-sided page-size advertisements in the Chinese version of Maxim and a fashion magazine called ‘MILK’. To inform customers of sales, new products arrivals and other promotional campaigns, Giordano can exploit mobile phone technological improvements by messaging frequent member customers as they walk past the store or as they enter the shopping centre. Such technology would, however, carry substantial development costs.

Advertising through store-front greetings and catalogue giveaways will simply require adequate staff training. The catalogues will be simple, attractive, and be distributed prior to fashion. The fashion shows within shopping malls will require subsidizing due to labor requirements. They will also necessitate prior negotiation with neighboring stores and mall councils. Shows must be chronologically arranged to coincide with new product arrivals for seasonal fashion wear.

Evaluation and Control

A specific milestone has been established to measure and compare actual progress in the coming years. We are expected to achieve a 20% increase in predicted turnover by 1997 to coincide with the 10% market share gain objective, which is reasonable and achievable. Anticipated figures are illustrated in the table below. If the actual turnover is lower than the expected turnover Giordano must identify the problem and take appropriate actions. According to the Ang (1996), Jimmy Lai believes in trial and error. We disagree on this managerial concept to some extent. Due to the

Year 1995 1996 1997

Predicted Turnover (HK$mill) 3,488 4,089 4,690

Expected Turnover (HK$mill) 4,185 4907 5,628

risky nature of the fashion industry, Giordano should try new strategies on a small scale before implementing them to the rest of Hong Kong. For instance, Giordano’s in-store improvements (aroma, music, etc) should be applied initially to a few stores only, whilst measuring changes in consumer activity. If playing modern music results in negative sales, Giordano must change to other music, maybe to classical genres. It is extremely difficult to predict and thus small scale tests are of vital importance. When introducing a new style or design of clothing, Giordano should test consumer reactions by distributing new products to specific stores and measure and compare the sales with market projections. This method will determine, to a large extent, the predominant components of the Giordano catalogue. If the style or design is already accepted in Japan then it is likely to be accepted in Hong Kong as well. Evaluation and Control should be a continuous process. It comes down to how well the strategy meets the objectives and how well the strategy improves the level of profit.

Conclusion

The realism of Giordano’s financial gain aims depends on the company’s internal ability to determine and act upon differentiation prospects which may provide a short-term, or sustainable, competitive advantage. Due to the dynamic and ever-changing nature of the fashion industry, the majority of the recommendations in this report are tailored to provide financial relief in the range of 2 to 5 years. The key strategies to be employed revolve around more of a safety-oriented management approach because of the increasing risk of failure. Additionally, to sufficiently compete, our recommendations include building brand image through raised quality and pricing, new store interior design, adoption of the latest software technologies, implementation of a dynamic design team, and a ‘trendy’ and original advertising and promotion campaign. If appropriately and ambitiously applied, Giordano may be able to break out of Hong Kong’s somewhat stagnant clothing market conditions by eventually gaining an extra 10% market share over its closest rivals.

References

Ang, S. H. 1996, Marketing Management and Strategy: an Asia-Pacific Perspective, Prentice Hall, Singapore.

U.S. Department of State. (1996), Country Commercial Guide for FY 95-96: Hong Kong, [Online], Country Commercial Guides. Available from: [18 October 2005].

World66. (1996), Economy, [Online], Oberon Medialab, Available from: [20 October 2005].

Strategis. (1 March 2005), Apparel, [Online], Industry Canada, Available from: [18 October 2005].

Appendix

Calculation of projected profit values

Turnover and Profit (in HK$ millions)

Yr 1 (1992) Yr 2 (1993) Yr 3(1994)

Turnover 1,661 2,334 2,863

Profit after tax 115 137 205

The line of best fit for turnover is

T = 601x + 1084

r = .998 r close to 1 indicates that the line fits the data very well

Now we can predict the future

x = 4 (1995) T = 3,488 HK$ million

x = 5 (1996) T = 4,089 HK$ million

x = 6 (1997) T = 4690 HK$ million

The line of best fit for Profit after tax is

P = 45x + 187/3

r = .959 r close to 1 indicates that the line fits the data very well

Now we can say

x = 4 (1995) P = 242.333 ≈ 242 HK$ million

x = 5 (1996) P = 287.333 ≈ 287HK$ million

x = 6 (1997) P = 332.333 ≈ 332 HK$ million