A company need to frame varied set of strategy for the purpose of fulfilling the objective sand also to attain its specific aim. It initiates with strategic planning and developing strategies for the same. This aids in reducing the impact of any unforeseen event and also helps in getting rid of risk and uncertainty. With a motive to gain deep knowledge regarding business strategy, present report has been prepared. For this purpose, Giordano International has been taken into account which is a Hong Kong based clothing retailer. In this, discussion is incorporated for strategic planning, formulation of new strategy, evaluation and implementation of strategy.
Task 1: The Process Of Strategic Planning
1.1 Assessment of how business missions, visions, objectives, goals and core competencies in form strategic planning
Mission and Vision
Giordano International is a Hong Kong based clothing retailer that was founded in 1981 (Corp.giordano.com.hk 2015).The brand embodies contemporary lifestyle choice by providing superior apparels for men, women and children. The vision of the brand is to be the best and biggest brand in the world. The company maintains a cosmopolitan touch by thinking global. The mission of the brand is to make people feel good and look great. Giordano has over 2400 store operations in the Middle East region and beyond (Corp.giordano.com.hk 2015). The brand believes in providing corporate values with trendy fashion regardless of nationality, ethnicity or culture and illustrates the message of a world without strangers (Corp.giordano.com.hk 2015).
Goals and Objectives
The core objective of the brand is to provide maximum customer satisfaction. The brand aims at providing excellent customer service by keeping in contact with customers and soliciting feedback on an on-going basis. Giordano focuses on exceeding the expectations of customers in terms of merchandise and service. The brand aims to be a pioneer in customer service by focusing on five corporate values QKISS- Quality, Knowledge, Innovation, Service, and Simplicity (Giordano-me.com 2015).
Giordano believes in modern simplicity and style. The brand maintains a competitive edge by providing world class customer service; timeless quality product; strategic locations for easy accessibility of customers and providing additional services such as alteration and global exchange policy. It is the primary objective of any company to address the customer needs. The brand provides consistent exceptional shopping experience to its customers. The additional services such as customer service toll free hotline, complimentary alterations and global exchange policy programs are core competencies of the business (Corp.giordano.com.hk 2015).
The company’s vision, mission, objectives and core competencies inform the strategic planning of the business in the clear cut manner. The vision of the company states clearly that where the company wants to be in future or after a certain period of time. The mission of the company states the reason of the existence of the company. The objectives define what the company wants to do and the core competency is the strength of the company or the area where the company is best at. All the components together form the strategic planning for the company as they state that what the company needs to do in order to achieve its long term goals.
1.2 Analysis of the factors that have to be considered when formulating strategic plans
There are various factors that have to be considered while forming a strategic plan such as internal factors, stakeholders and macro-factors. The internal factors involve code of ethics, organizational culture and policies of the company. The external factors involve political, economic, socio-cultural and technological factors affecting strategic plan. The stakeholders involve employees, managers, customers, suppliers, creditor, community and government. At this juncture, economic justification of stakeholders of approach can be considered in order to shed light on requirement of different parties who are directly or indireclty associated with company (Freeman and et. al., 2010).
Giordano is a successful company but it has confronted some important strategic planning process issues. The current positioning of the brand is customer satisfaction. The main objective of the brand is to provide maximum customer satisfaction. The current positioning of the brand is to provide trendy clothes at inexpensive prices (Zhang 2014, pp 698). The brand sells at discounted casual unisex appeal. The issue with brand positioning is that the strategy works in Asia but in other economies, people might appreciate a more affluent brand. Esprit is a tough competitor, as a part from being value for money, the brand also specializes in chains for men and women. Giordano must reposition itself to suit as a global image for achieving its mission (Wirtz 2011, pp 1-13).
Giordano follows a vision-based planning approach. The brand focuses on a clear and concrete vision and makes judgments only on the priorities as the quickest and least expensive way. It is also important to follow an issue-oriented planning approach which is a hybrid of data-based and vision-based planning approach. The current situation and future projections can be accomplished in this vision. The vision-based approach only focuses on challenges and opportunities while in issue-oriented approach, the brand can strike a good logic between data and vision (Wittmann and Reuter 2012, pp 12).
Structure of the Organization: The structure of the organization largely affects the strategy of the business. The companies must make the strategy according to the structure of the organization. The strategy of the organization has to be in accordance with internal structure and the policies of the company.
Culture of the Organization: The culture of the organization is also a very important factor that affects the strategy of the company. The culture decides how the people will be able to implement the strategy. The culture of the organization is the collective thinking of the people and how would they contribute to the strategy. (Kiptoo and Mwirigi, 2014).
1.3 Evaluation of the effectiveness of techniques used when developing strategic business plans
A SWOT analysis can be used for analysing strengths, weaknesses, opportunities and threats for strategically planning a framework. A mapping course with a clear view can be obtained and can help Giordano in achieving its objectives. Through SWOT analysis, present situation of Giordano can be assessed effectively and accurately; it demonstrates the impact of internall and external factors to the business. Especially SWOT helps Giordano in evaluating advantages and disadvantages of internal factors. In addition it also states chances and risks from external factors (Kvedaraviciene 2013, pp 3)
With the blue ocean strategic tool, Giordano starts with the identification of the major factors that define competitive differentiation with the given industry today. This includes price, quality, breadth of product, availability of product etc. (Kim and Mauborgne 2005).
PESTLE Analysis: The PESTEL Analysis is also one of the most popular techniques through which the strategy is formulated. The PSTEL technique enables the strategist to analyze the most important Macro factors which can affect the business and which have the direct impact on the strategy. The PESTEL factors are Political, Economic, Sociological, Technological, Legal and Environmental which are defined as follows:
- Political Factors: The political factors are very important to be considered while developing the strategy. The political factors may be defined as those factors which determine the attitude of the government towards the industry and thus the business in particular. These factors are the factors like the policies related to the trade, or tariffs etc.
- Economic Factors: The economic factors like the inflation or deflation also need to be considered. The economic factors have a direct impact on the industry as these factors determine the state of the economy of the country the business is operating in. The economic factors also affect the demand of the consumers.
- Sociological Factors: The societal factors of the customers are also very important. The social factors like the demographics, the trends and analysis of the population are also very important as these are directly related to the purchase pattern of the consumers.
- Technological Factors: This is a well-known fact that this is the technological era and without the latest technology adoption the survival of the company in the international market is not possible. Thus the latest technology must be adopted by the company.
- Legal Factors: The Company like Giordano and Adidas must also take into consideration the legal factors like the laws and regulations that have to be followed by the companies.
- Environmental Factors: The business does not act alone and it is surrounded with the environment. These factors affect directly the strategy of the company. Thus the environmental factors are also very important for Giordano and Adidas (PESTLE Analysis, 2016).
Task 2: Formulation Of a New Strategy
2.1 Analysis of the strategic positioning of a given organisation by carrying out an organisational audit
Need for Organizational Audit
Giordano needs an organizational audit for designing a consulting activity in order to add value and improve the operations if the company.
Value Chain analysis
Value chain analysis plays an important role as it is an era of rapid globalization for increasing competitiveness. The brand has excellence in design and outstanding customer service as main activities of the value chain. The brand has adapted its IT structure from Walmart’s, which integrates its logistics and marketing functions (Woo and Jin 2014, pp 5).
- The strength of the brand is that its product caters to all age groups of both men and women. The professional service provided makes the customers feel comfortable and important. The brand sells value-for-money through careful selection of suppliers. The stores are located at strategic locations for convenience of consumers (Woo and Jin 2014, pp 5).
- The weakness of the brand lies in the fact that their product range is limited. The adapted IT strategies are not feasible for all organizations. The brand also fails to differentiate core brands from the mainstream (Mittal and Arora, 2014).
- The opportunity of the brand lies in the fact that there is scope for expansion in continents other than Asia. Their brand image can be strengthened through greater advertising and customer service. The brand image can be maintained and even improved through these efforts (Woo and Jin 2014).
- The brand has threats of intense competition like GAP, Esprit etc. The competitors have better strategic locations and technology in the design process (Mittal and Arora 2014).
Benchmarking and Scenario Planning
The benchmark set for scenario planning is to grow in other markets for affluent consumers. In Asia, the brand focuses on value for money. It aims to target customer segments which have disposable income and can pay more. People believe that high priced products are luxurious. So prices have to be raised in order to target the luxurious market segment (Urde, Baumgarth and Merrilees, 2013).
The strategic synergy for Giordano by achieving benchmark would be that there would be a greater market segment created. The new market segment of luxurious consumers who prefer other brands might switch to Giordano as it would be in a premium segment (Urde, Baumgarth and Merrilees 2013).
Strategic Positioning of Giordano
The strategic positioning of Giordano is that it sells value for money products but its prices are not that high. The Company Giordano has positioned itself as a brand which is famous for its trendy apparels and yet the prices are moderate. (Le, 2015)
2.2 Environmental audit of Giordano
Political Forces- Hong Kong has a democratic government that makes the political situation of the country positive. The government does not provide any subsidy to apparel industries. Due to free trade, Hong Kong is the sixth-largest exporter of apparel and textiles that makes the market attractive (Wirtz 2011).
Economic Forces- Hong Kong was ruled by the UK government, prior to its takeover by China. People spend large amounts on apparel in Hong Kong than in UK. Hong Kong has a fashion conscious culture with highest clothing expenditures (Wirtz 2011).
Social Forces- Giordano provides both business and casual clothing for men and women of all ages in addition to kids wear. A combination of both US and Chinese cultures are followed in Hong Kong.
Technological Forces- With rapid transition in technology, Giordano has adapted the IT structure of Walmart. The speed of technological transfer makes the company feasible for customers.
Legal Forces- The import and export regulations of Hong Kong state that operations of apparel industry are free to trade. There are reduced barriers to US export (Trade.gov 2015).
Environmental Forces- Giordano supports a number of CSR events such as “Project Hope” and “World Without Strangers” for handling crisis in the environment (Wirtz 2011).
Porter’s Five Forces Analysis
Bargaining power of suppliers(Moderate)
It is appropriate to build a win-win relationship with suppliers for protecting interests at both ends. There is supplier concentration and diversity in designs offered by suppliers. The suppliers have bargaining power but the degree of their bargaining power is moderate as there are lots of suppliers who are willing to supply for a brand like Giordano.
Bargaining Power of customers (High)
There are a lot of competitive brands available in the market such as Gap and Esprit that make increase the bargaining power of customers (Mun 2011). The bargaining power of the customers is also very high and the reason behind this is that in this competitive era the customer is the king of the market and without valuing the customer it is not possible for the business to survive. The customers have various options and their bargaining power is also high.
Threat of new entrants (Low- Moderate)
With the advancement of technology, there is a dilemma within the apparel industry regarding sustainability of long-term advantage over competitors(Zhu and He 2013). The threat of the new entrants remain moderate to low as giving the competition to a brand like Giordano for the new entrants in not an easy game.
Threat of substitutes (High)
Apparels are available in value for money that restricts the capability of improving margins and raising prices for Giordano (Zhu and He 2013). With the ever changing apparel industry the threat of the substitute products is quite as the customer switches easily with one brand to another.
Rivalry among Competitors (High)
There are a number of intense rivalries such as H&M and Sara in the global market while Bossini has a strong local market share (Zhu and He 2013). The rivalry among the customers is also very high. All the competitors are mapping the activities of one another and the competition us cut throat.
The strategic positioning of Giordano is planned at providing best quality products at competitive prices while entering into the international market. The brand also needs to grow its sales internationally through aggressive advertising so as to match competition in the market (Chaudhry and Hodge 2012).
2.3 Significance of stakeholder analysis when formulating new strategy
The key stakeholders of Giordano are internal and external stakeholders. There are internal stakeholders for fund investors, shareholders, management team and employees. External stakeholders include customers, suppliers, government, communities. The main purpose of business is to satisfy its customers. The satisfaction of customers is influenced by the fund investors as they contribute to the business.
The roles of the shareholders will be provided the source of finance for the Giordano if they expect to increase their value with the growth of Business (Gudonaviciene & Rutelione, 2009 pp. 397-406). The roles of management manage efficient and lower cost of operations. Employees would be to provide efficient operation for organization and help Giordano to attain competitive advantage with their well training. The roles of suppliers have an important role to supply raw materials at good quality and low price which will be produced a quality products and cost benefit to organization and consumers.
The customers cannot be satisfied without a win-win situation with suppliers and employees. The government lays important regulations for smooth operation of the business. The brand also has a social responsibility towards the community through environmental measures (Pitt and Koufopoulos, 2012).
Stakeholder Mapping Analysis
Strategy Formulation: The stakeholders’ analysis is very important for the companies from the point of view that through the stakeholders’ analysis the company gets to formulate the strategy which is in accordance with the people who are affected by it.
Value Addition: The stakeholders’ analysis also helps the company to add the value to its business.
Formation of Partnership: The stakeholders’ analysis is also very beneficial for the formulation of the partnership.
2.4 Presentation of a new strategy
With the results achieved through PESTLE and Porter’s analysis, Giordano can consider becoming a luxurious brand and provide premium products rather than competitive prices.
The new strategy for the company Giordano would be to repositioning itself and become the new and improved brand. The company can position itself as a brand which is the luxurious brand and it can also offer the prices which are premium in nature. There is great advantage of adopting such a strategy as such companies are considered to be of best quality company and this is why the consumer is willing to pay more for the products of such companies.
Till now the company is famous for its low/moderate price apparels and this strategy seemed quite successful for the company also. However, there is a whole large segment which consists of the prime consumer, i.e. consumers who are willing to pay more for the best quality products and the products which they find value for money. Thus the new strategy for Giordano could be to enter into this segment of the market and try to increase the share of the market through aggressive marketing (Ingram, 2016).
Task 3 Approaches To Strategy Evaluation
3.1 Analysis of possible alternative strategies relating to substantive growth, limited growth or retrenchment
Market Penetration- The strategy can be used to increase sales in the existing markets of Giordano. The brand must extend its strengths in the market for improving sales to existing or new customers through increased advertising, price competition and intensive distribution.
Product Development- The strategy to increase sales in current or developing products can be done through variants such as accessories, range extensions and innovations for current models (Stonehouse and Houston, 2013).
Market Development- The strategy to increase sales in new markets can be done by competitive pricing and entering luxurious market segment (Stonehouse and Houston, 2013).
Diversification- Giordano can consider diversifying business to bed accessories by integrating concepts from Esprit. Market research must be done before putting anything into action (Stonehouse and Houston, 2013).
Market Entry Strategies
Franchising is a foreign market entry mode for managing stores at various locations. The franchisees for Giordano must be set up in international markets for selling products and making Giordano available at convenient locations. The store must carry luxurious furnishing and high end services meant to target the luxurious market segment. Affluent customers can purchase through such chain stores.
Substantive growth, Limited growth, and retrenchment strategies
For substantive growth of the brand, Giordano may consider franchising, horizontal or vertical integration. Through horizontal integration, the brand can capture greater market share by merging with local famous brands. Just-in-Time inventory can be ensured through vertical integration (Ackermann and Audretsch, 2013).
For limited growth strategies, Giordano may simply aim to retail the existing market share and perform no alternative. Giordano can modify its products according to global needs for the market it enters. The products can be innovated according to foreign markets and increase in market presence. A combining strategy may be adopted by combining the above strategies.
For retrenchment strategies, remedial actions must be taken promptly by Giordano. The brand is known for its value for money that ignores the luxury segment. Competitive pricing strategies can be followed for competing with other luxurious brands in the global market. This would help in attaining mission of the organization by satisfying its customers. Giordano must focus on generating revenue by increasing margins (Chakrabarti, Vidal and Mitchell 2011).
Blue Ocean Strategy
Blue ocean strategic tool can be used for determining competitive landscape. The products can be designed for minimizing competition through new start-ups and developments in the existing organization(Teece, 2010). Demand is rather created than fought over. Blue Ocean provides ample opportunities that can be profitable for Giordano. Blue ocean strategy is an opportunity-maximising risk-minimising strategy. There are two ways to create blue oceans in the business. Firstly, Giordano can consider launching new industries. Either way, and the most commonly followed method, Giordano can expand the boundary from the existing industry. The strategy mainly focuses on creating value for the customers.
3.2 Justification of an appropriate future strategy for Giordano
The process of strategy selection
The selection of strategy is based on direction through which strategy which will move and methods for purusation of the same. It can also be done on the basis of willineness or level of corporation to seek for competitive edge (Johnson, Scholes and Whitthington, 2008).
Upon analysis of mission and objectives, the purpose of the firm to pursuit future opportunities is guided. An internal and external environmental analysis is conducted by identifying its strengths, weaknesses, opportunities and threats. The market entry strategies are formulated alternatively for growth of the organization. Based on this data and analysis, Blue Ocean strategy can be adopted for future strategic planning. The mission of Giordano is to make people feel good and look great. Blue Ocean Strategy can be used as a tool for meeting the mission of the organization. The Blue ocean strategy can help in creating an uncontested market space through process innovation(Wirtz, 2011) .
Blue Ocean strategic tool can be used for meeting mission of Giordano as it not only creates an uncontested market space but also appears to be a combination of cost leadership and differentiation. These factors help in defining a niche market using approaches of information gathering through internal and external environment analyses. As seen in the case of Japanese company Canon, it creates a niche market by shifting the target customer of the copier industry from corporate purchasers to users (Blue Ocean Strategy, 2016). The Blue Ocean tool helps the organisation in going outside the comfort zone and exploring new territories in the market. Blue Ocean tool also helps n developing a strategic canvas and allows the management to see the results by benchmarking. Blue Ocean strategy helps in moving the organisation towards its competitors by lessening the gap and increasing chances of achieving goals. As seen in the case of Polo, Ralph Lauren updated price and look for capturing greater market share . Thus, new markets can be made by not competing but making the competition irrelevant (Omar and Sawy, 2013).
Justification of the Strategy
Increased Profit: Through the new strategy the profit of the Company is likely to be increased. The company must be able to adapt according to the changes of the market and this is the reason that without the adaptation of the changes the company cannot earn profits.
Long Run Survival: The long run survival is also possible only when the company gets to adopt the new improved strategy with the changing tine.
One of the main reason due to which blue ocean as a strategy can be undertaken by business is that through this long term performance of the enterprise can be enhanced easily. Further, profitability level of the enterprise can be easily enhanced through introduction of this strategy within the business operations . Blue ocean strategy can enhance market share long with profitability level of organization and it is one of the main reason behind selection of this strategy. This can surely bring favourable results for organization in every possible manner and can act as development tool for the business (Blue Ocean Strategy, 2016).
4.1 Explain the different roles and responsibilities needed for strategy implementation
It is significant for Giordano to place better and effective strategy which is able to lead the business to great success and overall achievements (Wirtz, 2011). In that respect, the cited organisation should follow the stated processes which are helpful in creating a perfect strategy:
Strategy implementation process
In the prior step, Giordano has to determine the vision of the blue ocean strategy. For instance, they are likely to increase their overall stores from 2,400 to 2600 in the international sector. Further, the Giordano needs to evaluate the information gained from the market research. In addition to this, they are able to identify the number and level of resources available in the market (Bhardwaj, Eickman and Runyan, 2011). For introducing new stores they require proper information about the available resources in the concerned sector.
Blue oceans strategy is very powerful as it is a tool for building brand. A blue ocean strategic move also creates brand equity that has an impact over people for decades. Giordano can make proactive changes in the industry for purposeful application of the tool. The strategy is an integrated approach for aligning three propositions- profit, value and people. Speed, quality and consistency of providing products to consumers can be attained at a low cost with efficient planning and engagement (Ackermann and Audretsch, 2013).
In the next step, Giordano should try to address the present form of demands made by their targeted clients and supply provided by them. This would be profitable for the firm to address the overall abilities and quality given by the organisation in their performance (Stonehouse and Houston, 2013).
Considering the entire data collected, the team of Giordano should take effective and strategical actions by considering the market information and approaches for blue ocean