The following sample essay on Giordano Retail discusses it in detail, offering basic facts and pros and cons associated with it. To read the essay’s introduction, body and conclusion, scroll down.
Successful global players have to create a “virtuous cycle” of self-reinforcing benefits that will give them the ability to redefine the economics of the retailing industry and, ultimately, to establish strategic control around the world. Many specialty retailers have established solid cross-border positions by building and transferring global brands.
Clothing chains like Gap and Zara are following in the footsteps of veteran cross-border operators like IKEA, Hennes & Mauritz, and C&A. Retailers have attempted to expand across borders in the traditional way – replicating domestic business systems and retaining full ownership, an approach that tends to be costly and slow to yield value, will be fail because they have not invested sufficiently in intangibles.
Ways to expand across borders for Giordano
Giordano can leave manufacturing to other companies; a few outsource logistics; and some franchise store operations.
As the advancement of technologies has proved, a globalizing economy drives more and more companies to specialize in ever smaller business “slivers.” In globalizing environment, Giordano will have to make more careful choices about slivers to own, which to control without owning, and which to off-load entirely. The choice depends on cash flow and capital requirements, risk, competitive advantage, and the importance of a sliver to a company’s retail proposition. Gap, for instance, owns most of its slivers – including product development, assortment planning, and branding – which create enormous value for the company and probably couldn’t be executed more satisfactorily by any partner today.
Another example, Carrefour owns its assortment-planning sliver, but it relies on its vendors to develop and brand most of the products it sells. Both Gap and Carrefour tend to own the store operations sliver. On the other hand, McDonald sells it to franchisees because the company can do so without relinquishing control.
Giordano might able to make different choices in different market environments. For example, the company can have multiple ownership and operating structures such as franchises, joint ventures, and wholly and partly owned subsidiaries to reducing risk, in emerging one. Giordano will have to decide whether owning or off-loading their sliver is more likely to enhance their access, scale, and expertise and hence to raise returns for expand geographically.
Get comfortable partnering
Leading globalizers in industries have shown how to enter partnerships without losing control of the business. The concept of forming joint ventures or other kinds of partnerships have established. For example, Amazon.com – are exerting themselves to build alliances with companies like LiveBid, Drugstore.com, and HomeGrocer.com to get leads, enhance their distribution systems, and build brand equity in new markets. But as the industry fragments into smaller slivers, these companies will have little choice but to entertain the idea if they want to endure and thrive. Giordano able to create a relationship with the global departmental stores like Sieyu, Isetan, and others for selling its products. As retailers get better at managing relationships and as stronger local partners emerge, the trend to form cross-boarder partnerships will accelerate. Such partnerships will become ticket to the global game.
Invest in intangible assets
Brands and reputation
A global platform is built on powerful brands. Global brand need to create from a distinctive value proposition: benefits that appeal to consumers at a price they like. As the company move from a country to another, they must tailor their value propositions to address different consumer preferences, but without stretching their brands too far or destroying attractive profit formulas. Strong brands should have clear personalities that are relevant to consumers and reinforced at every possible point of contact with them. Strong brand requires presence; the brand must be made totally visible in the marketplace. Traditionally, retailers have used their store networks to do this, but the emergence of the Internet and global film, television, and magazine vehicle now makes it possible to do so more rapidly and efficiently.
Proprietary technology, know how, and tools
Retailers have to exploit know-how and technology for competitive advantage. Retailers invest only 1 to 3 percent of sales in IT and are therefore missing opportunities to improve customer access, to raise their service levels, and to develop critical global business efficiencies. For example, Carrefour now successfully exports tailored versions of its business model, including operations and accounting systems, across geographies. Giordano should make it possible for customers to “try on” clothing over the World Wide Web like Lands’ End.
People, talent, and skills
To support globalization efforts, Giordano will have to develop their skills: managing partnership, building global brands, renewing concepts, and managing people. Upon entering a market, the Giordano companies should have a team of local retail experts and corporate “entrepreneurs”. When the local operation has matured sufficiently, the company moves its entrepreneurial managers onward to newer markets, and the local team takes over the management of the store. Over time, such practices make people a true intangible asset and source of competitive advantage.
Keep expenses and capital requirements low
The physical complexity of retailing and local market conditions can drive up costs. Giordano have managed by their need for capital relatively low by franchising or renting rather than owing stores. They might able to consider creating turn key store operations that can be off-loaded to local partner, which would bear the capital costs of owning sites while reaping the benefits of world wide branding and economies of scale. But retailer capable of generating very high sales per square foot might find that it still makes sense for them to own stores, at least if they can sustain a lower capital-to-sales ratio. In the fashion industry, a high degree of complexity is a necessary cost of doing business. Indeed, manufacturing to a lot size of one is already a reality in fashion in a location. However, Giordano should keep complexity under control, allowing for it only when it makes a perceptible difference to the ultimate consumer – and the consumer is willing to pay for it. The company should avoid changing the basic fabrics every season every new model, and limit the proliferation of variants to the product segments where the market is willing to pay for the extra choice.
Rethink product development to cut time to market
For fashion companies, getting this process under control has always been a must. Leading companies are rethinking their underlying product development technology to cut development time by up to 70 percent. At present, development can be a lengthy process in some of the short product life industries. In fashion, it ranges between 3 to 4 months. If your new fashion collection is not out in time for the trade shows, you go out of business.