Strategies Of Firms Successfully Competing In International Markets

Published Date: 02 Nov 2017

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Student ID: 77134681

Level of Study: MA

Module Title: International Dimensions of Marketing

Course Title: MA INTERNATIONAL TRADE AND FINANCE

Module Tutor: JON JAMES

Full text word count: 3898 words (excluding references)

Student Name: LAM QUOCKHA HEN

Student Signature: Kha Hen

Date of Submission: JANUARY. 21st, 2013

Name of first marker: Mark:

Name of second marker: Mark:

Table of contents

Introduction 3

1. Key components in the strategies of firms successfully competing in international markets 4

1.1. Giordano - Being a well-managed organisation with a culture of learning 4

1.2. Giordano - Having an effective relationship strategy 4

2. Internationalization strategies 6

2.1. Uppsala model 8

2.2. Giordano’s internationalisation strategy 9

3. International market entry modes 12

3.1. Joint venture 12

3.2. Franchising 14

4. Giordano has established itself as a global Brand 15

Summary 18

References 19

INTRODUCTION

Giordano is one of the world’s leading international retailers of apparel and accessories with over 2,500 shops operating in 40 territories worldwide. This report will assess some aspects of the Giordano organization’s international development based on the Giordano case study and some information from its website. This report is divided into four sections.

Section 1, the report will evaluate to see if Giordano is being a well-managed organization with a culture of learning and having an effective relationship strategy.

Section 2, the report identify the Uppsala Model firstly and then through analysing some examples from the case study and information from Giordano website in order to assess to what extent the Uppsala model might be used to explain the company’s internationalisation strategy.

Section 3, the report will identify the strengths and weaknesses of Giordano’s joint venture and franchising approaches to international market entry.

Section 4, the report will assess to what make Giordano has established itself as a global Brand.

The summary will provide conclusions and recommendations for Giordano’s continuing international development and strategy.

Key components in the strategies of firms successfully competing in international markets

According to Doole (2000), a well-managed organisation with a culture of learning and an effective relationship strategy are two key factors for a firm expands their business into international markets. This section is going to analyse the case study of Giordano to assess this theory.

Giordano - Being a well-managed organisation with a culture of learning

A well-managed organisation with a culture of learning included a willingness to learn, high levels of energy and commitment to, and control and effective monitoring of, all their international markets.

The willingness to learn:

An integral part of Giordano’s learning culture is the willingness to try new ways to do their works. It was represented through some cases in their business time line in the case study. For instance, when the firm ventured into mid-priced women's fashion, Giordano Ladies', it had to compete with more than a dozen established brands such as Theme and Esprit. It also failed initially to differentiate its new product line from its mainstream, and even tried to sell both through the same outlets. However, it persevered with its efforts and Giordano Ladies' made a successful comeback. Further example, when the company faced up to the Asian crisis from 1997 to 1999, "it worked toward strengthening the positioning and brand image by innovative and effective promotional strategies helped the retailer to reduce the impact of the Asian crisis on its sales and take advantage of the slight recovery seen in early 1999". In addition, Giordano planned to focus its globalization efforts on new markets like Germany, Japan, Australia, Indonesia, and Kuwait. Moreover, the aggressive advertising and promotions also made the success in retail marketing of its core brand and re-launch of sister brands, Giordano Ladies', Giordano Junior, and Bluestar Exchange.

Beside the willingness to try new ways to do the business, it also learns experiences from the past failures. In case of Japanese market, after the joint venture was dissolved in 2009. With experiences learned from the failure, it used another mode as franchising to re-enter Japan. Moreover, it observed the key factors for successful from others company. For example from Western retailers, it against best practice organizations in four key areas: "computerization" from The Limited, "a tightly controlled menu" from McDonald's, "frugality" from Wal-Mart, and "value pricing" from Marks & Spencer (Giordano case study, p3). From these experiences, the firm focused on their inventory system, service, value for money concept and simplicity, which are competitive advantages for Giordano.

High levels of energy and commitment:

Staff with high levels of energy and commitment is another factor that contributed the success of Giordano. It had a consecrate, skilled, ever-smiling sales force. The employees were selected by stringent procedures. The selection continued into its’ training workshops called "attitude training". For instance, when they ran the campaign "Round the Clock Madness Shopping" in Singapore in 1994, the stores was operated throughout the night.

Effective strategies of controlling and monitoring:

Giordano uses effective strategies of controlling and monitoring. With a very good system for recording the inventory, which records their inventory and sends a report to sales and distribution department at the end of the day, Giordano was able to skilful manage its inventory and forecast demand. The control on stock is normally on the demanded products more than other products depending on the seasonal offers provided by Giordano in other countries. Another advantage of its inventory system was that the company understood customers' purchase patterns, and this provided valuable input to its manufacturing operations.

According its terms of management, it has controlled the budget on advertising and promotion effectively. As a result, when the firm was influenced by Asian crisis, its promotion helped the retailer increase sales and take advantage of the slight revivification seen in early 1999.

Giordano - Having an effective relationship strategy

The effective relationship strategies achieved: strong relationship between a firm with stakeholders; a commitment to quality products and services and a dedication to customer service:

Strong relationship with stakeholders such as customers, employees, agents or partners:

Giordano followed a relaxed management style, the management worked closely with the staff. "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" (the case study, p2). It also offered high wages to attract and keep its staff, gave them the good training workshops call "attitude training".

The company also got affection from customer because of their good service. Customers favored its value-for-money positioning. They also advocated their promotions: "Giordano won the Singapore Ear Award. Its English radio commercial was voted by listeners to be one of the best, with the most creative English jingle" (the case study, p4).

In addition, they have strong relationships with retailers and suppliers. Hence, Giordano expanded its business into international markets quickly. By 1999, Giordano had 740 stores in 23 markets, out of which 317 stores were managed directly by Giordano in four main markets, where dominate its retail and distribution operations, were Hong Kong, Taiwan, China, and Singapore. Although, the joint venture in Germany was failed, Management still established good relationships with some European retailers and suppliers, which will be beneficial for the Group’s future expansion in Europe. In Japan, after the company failed in a joint venture with Noda Corporation, they were re-entering Japan by partnering with local retailer WEGO Limited ("WEGO") in a franchising arrangement. In 1993, Giordano entered into The Middle East via joint venture with the ETA Star group of Dubai. By 2011 they had 240 outlets.

Commitment to quality products and services and a dedication to customer service:

Their mission: To make people "feel good" & "look great" (case study). The focussing on service and the value-for-money concept had proven to be successful. It was convinced that the product was only half and service was the other half of what Giordano sells. Regarding the products, Giordano introduce new product lines Giordano Ladies' as the mid-priced women's fashion with smart blouses, dress pants, and short skirts, the company was hoping to attract young, stylish women. From this, the company achieved about 50 to 60 percents compared with 40 percents for casual wear. Even though it also failed initially to differentiate its new clothing line from its mainstream product line, but there were no complaints about the look or quality of the line. Another success was its "Simply Khakis" promotion in 1999 with street-culture style that "mixed and matched". The style fitted all occasions. In Singapore, the new line sold out within days of its launch and had to be re-launched two weeks later.

Giordano's philosophy of quality service could be observed in its overseas outlets as well. Its obsession with providing excellent customer service was best described by Fung. It renovated the stores in order to enhance shop ambience.

In conclusion, as a well-managed organisation, Giordano has a culture of learning and an effective relationship strategy, which fully support Doole’s assessment. These are the keys help Giordano successfully competing in international markets.

Internationalization strategies

Uppsala model

The Uppsala internationalization model was developed by a group of Swedish researchers at the University of Uppsala (including the work of Johanson and Wiedersheim-Paul in 1975 then Johanson and Vahlne in 1977). This is one of the best-known models of how firms set about the internationalization process. One of the assumptions of the model is that "the lack of knowledge is an important obstacle to the development of international operations" (Johanson & Vahlne, 1977, p23). Hence, it suggests that a firm should firstly establish itself in domestic market in order to gain knowledge and experiences from the home market before moving to foreign markets. Then, the firm starts their internationalization process in geographically or culturally countries nearby the home country and then gradually enter further countries.

According to the Stage Model, there are four stages of entering foreign markets:

Stage 1: No regular export activities

Stage 2: Export via independent representatives

Stage 3: Establishment of a foreign sales subsidiary

Stage 4: Foreign production/manufacturing units (Hollensen, 2007).

The model has two dimensions of commitment including the geographical dimension and market commitment dimension. The below figure illustrates this model.

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Giordano’s internationalisation strategy

Based on the information from the case study and Giordano website, this report analyses and assesses to the company’s internationalisation process with two aspects related to the geographical and market commitment.

Firstly, through reviewing the time line on Giordano internationalization process on the case study as follows:

Giordano opened its first retail store in Hong Kong in 1981 and also began to expand its business into Taiwan by distributing Giordano merchandise through a joint venture.

In 1985, it opened its first retail outlet in Singapore.

By 1999, Giordano had opened 740 stores in 23 markets (four key markets dominating its retail and distribution operations are Hong Kong, Taiwan, China, and Singapore).

In 1993, Giordano made its Middle East debut in Dubai through a joint venture with over 70 stores in Saudi Arabia and a significant number of outlets in Kuwait, the UAE.

In March 2001, Giordano entered to Germany and Japan via a joint venture. However, the company failed to penetrate into these markets.

Giordano also opened its first store in Chennai India in 2006 and by the end of 2007 it had grown to 6 outlets.

In 2011, it was re-entering Japan in a franchising arrangement.

Further more information from Giordano website showed:

In April 2005, Giordano International established a manufacturing joint venture in Dongguan, China.

In October 2006, Capitalizing on its success in the region, Giordano Middle East has expanded into neighbor countries in Russia, Bulgaria, Armenia and Algeria.

February 2007, Giordano made its first foray into the North American market in Vancouver, Canada. The company expects to follow up with additional franchised stores in other markets along the West Coast later in 2007.

In May 2007, following the launch of Giordano’s first North American store in Vancouver in February, Giordano opened its first store in the United States. Located in the Westfield Santa Anita Mall in Arcadia, an upscale suburb outside Los Angeles.

In May 2007 also, Giordano expanded its store network in the Middle East with the recent opening of its first franchised store in Cairo, Egypt.

Through the information above, initially Giordano started its business in the domestic market in 1981. And then, the company had started its internationalization process by expanding to neighbour markets such as Taiwan, Mainland China, Singapore where are nearby the home market with a lot of similarities in culture, language and customer behaviours. After its success in some markets in Southeast Asia, It was successful to expand its business into another market, The Middle East. Furthermore, in 2001, the company also realized its ambition to penetrate into far-away markets like Germany and Japan. These operations were interrupted due to financial losses. Roof cause of the failures may mainly come from the lack of market knowledge and experience. Learning experiences from the past failures, in 2006, Giordano Middle East has expanded into neighbouring countries like Russia, Bulgaria, Armenia and Algeria. Following the successes, in 2007, the firm continually entered into Canada, the United States and Egypt. In short, Giordano internationalization process was following Uppsala Model in geographical dimension.

On the order hand, the case study shows that Giordano used different entry modes to expand their business into global markets. For instance, they entered into Taiwan, Mainland China, Germany, the Middle East and Japan in the first time through a joint venture. This is matched with stage 2 of Uppsala Model - export via independent representatives or agents. And in some markets such as Singapore, Mainland China and India, they opened its retail outlets. This is stage 3 - establishment of a foreign sales subsidiary. Then, in 2007, they used franchising mode to enter Egypt and re-entered to Japan in 2011. In 2005 its manufacturing joint venture was established in Dongguan, China. It means Giordano was jumped from stage 2 to stage 4 of the international entry mode.

In conclusion, the above evaluation of Giordano shows that the company has applied Uppsala model for its internationalization process on the two aspects of the geographical and focused on all of 4 approaches of Uppsala Model to enter new international markets. However, it did not follow the model "step by step". Depending on the real situations and circumstance of each market such as the political/ legal, economic and socio cultural environments, Giordano will chose a fit approaches to enter.

International market entry modes

There are several types of strategies to expand a business into international market. Two of such strategies are known as franchising and joint ventures. From the case study, this section of the report will identify the strengths and weaknesses of Giordano’s joint venture and franchising approaches to international market entry.

Joint venture

Joint Venture is one of common and widely used strategies, which helps firm successful in their international expansion. According to Wallace (2004), a joint venture is the coming together of two (or more) independent businesses for the sole purpose of achieving a specific outcome that would not have been achievable by one of the firms alone.

The companies are forming joint ventures to expand markets and products. There are some common reasons such as suitable government policies, pooling resources, risk sharing, making the relationship and reducing competition.

3.1.1. Advantages of joint ventures:

The technology and research of the two companies is combined that help them to reduce the cost of research and improve the quality.

The pooling in of human talent also increased the efficiency of the business.

Risks are shared to the companies.

There is greater financial support among the companies, which helps them to improve the performance of the company and maximize the profit of the company.

3.1.2. Disadvantages of joint ventures:

Even though, the companies have some benefits in joint venture, but most joint venture businesses were failed because the partners do not have much in common. In order to make a joint venture successful, the companies have to understand each other. The culture is important in a joint venture business. In order to avoid the national and cultural shock the partners need to understand each other values, strengths weaknesses and most importantly they need to coordinate with each other.

3.1.3. Giordano’s joint ventures:

In case of Giordano, joint venture is an entry mode, which was successful to penetrate into some markets such as Taiwan, Mainland China and in the Middle East like Saudi Arabia, Dubai, Kuwait and the UAE. However, the firm was failed when they used this mode in Germany and Japan.

Taiwan, China and some countries in South East Asia are nearby Hongkong, Giordano’s home country. Thus, beside these advantages, which were mentioned above, there are others advantages for the companies in joint venture. Due to these countries have some similar in culture and languages, which helped the companies built up strong relationship together easier. Maybe the customer tastes are similar also. In contrast, all of these countries are in Asia, so the companies were faced up with Asia crisis from 1997 to 1999. The companies met with serious difficulties at that time. That was the reason for their expansion into others markets beyond Asia.

In the Middle East: Through joint venture, it was successful with double-digit same-store sales growth across the board as well as overall growth. That has been achieved through a combination of streamlining regional operations and rolling out high-demand product lines, which has led to lower inventories and stronger cash flows (the case study, p7).

In Germany: due to recognition of the inappropriate distribution channel, Giordano was dissolved. Nevertheless, it had good relationships with some European retailers and suppliers, which will be beneficial for its future expansion in Europe.

In Japan: the joint venture was dissolved due to lack of knowledge about this market.

Franchising

Franchising is also one of the popular ways to enter in a foreign market. Franchising develop from franchisor in various level start from name to product, service, management, training, etc. And Franchisees return a percentage of total revenue to franchisor as reward of provides this all service. The main condition is low development costs and risks.

3.2.1 - Advantages:

Due to the brand name, products, services, and business operations have already been established, so it is easier success since a proven business formula is in place.

Maybe it’s easy to loan money from the bank because bankers usually look at successful franchise chains. It means risk of repayment is lower.

The corporate image and brand is well known. Consumers had known the items or service, so they are generally more comfortable purchasing items they are familiar with companies they know and trust.

Franchise companies usually provide IT system, training course and support to their franchisees to help them succeed.

Franchisees don’t spend cost for advertisement because the products and services are advertised at a local and national level by the franchisor. This helps boost sales for all franchisees.

3.2.2 - Disadvantages:

Franchisees can be costly to implement. Also, the franchising charges will be cutting into the margin of franchisees.

Franchisees is required to follows the franchisors’ operations manual. This limits creativity of the franchisees.

Franchisees have to abide by the franchisor’s operating systems, standards, policies and procedures. It is hard work that demands the highest level of commitment. If the franchisees are not capable of running the business, maybe it will fail.

Sometimes franchisors lax on their commitment to support the franchisee.

3.2.3 – Giordano’s franchising:

Regarding Giordano’s franchising, based on the case study, Giordano used franchising entry mode when it re-entered into Japan on 2011, after the failure of the joint venture there in 2009.Co-operating with WEGO Limited, an excellent local retailer as strategic partner, the company believed that franchising is an ideal model to market its product in Japan and its business will continue successful within five years.

To sum up, though analysis of the Giordano’s market entry mode above, joint venture and franchising, there are advantages and disadvantages of both. Giordano was successful in using the joint venture mode to expand into some markets in Asia, where have some similar points as culture, languages or customer tastes. In contrast, the joint venture mode maybe is not successful in further countries. Thus, they tried to use franchising mode in some markets with satisfactory situation. However, there is still a need for proper investigation and research before a firm makes the decision, the SWOT analysis is required.

Giordano has established itself as a global Brand

In the three sections above, the report analyzed and evaluated some aspects of Giordano such as its strategies, its entry modes with the strengths and weakness. Those indicated that Giordano has established itself as a global Brand. We can review in the following information:

Giordano is one of the well-known apparel retailers, especially in the Asia Pacific region, with over 2,500 shops operating in 40 countries. Now, the company is still expanding its global markets because they said that they want to use the Middle East as a hub to enter into West and South Africa.

Giordano had established more brand names, these are: "Giordano", "Giordano Concepts", "Giordano Junior" and "Giordano Ladies".

The firm focuses on its corporate business values of quality of product and service which help their brand name grew up.

Giordano Company’s main competitive strengths which can be transferred to other market are: the high level of employees, good inventory system, human resources managing practices, but the policies should be different for each country.

Giordano International established a manufacturing joint venture in Dongguan, China in 2005 (Giordano website)

The information from Giordano Middle East website showed that the company is looking for partners to cooperate through franchising in order to expand its global markets.

Even though, Giordano has established itself as a global Brand and had successful in some markets, but it also faced to with many troubles and failures. Thus, the recommend for their business development in future is it should understand the markets where they want to enter so that the firm can chose the suitable entry mode in that market. The recommendation markets are European markets where it does not have any branch over there. Giordano should be more services oriented and should make proper investments in organizational goals and recruitment and training and development for employees.

SUMMARY

The report has analysed and assessed of certain aspects of the Giordano organisation’s international development. With their strength in product, service, controlling system, good relationship with stakeholder, Giordano has been a successful in international market expansion into 40 countries with 2,500 stores. The number of its stores is still increasing. However, the company is facing with many competitors such as Theme and Esprit in the field. Thus, Giordano should improves its current products, introduces new product lines. It also should focuses on the marketing strategy, advertising, promotion and distribution channels, which enable the company to take the best advantage and opportunities of a sustainable competition. On another hand, the modes of international market entry and its decision of strategies are important factors, which will decide the success of company in international market expansion. In the near future, Giordano will entry into West Africa and South Africa.