Supply Chain: Operations Strategy, Customer Satisfaction, and Business Model

This report analyzes Giordano HK's supply chain operations strategy, customer satisfaction practices, and business model. It explores performance objectives, customer expectations, and the company's competitive strategies.

Supply Chain
Business Operations
Giordano HK
Name:
Institutional Affiliation:
Author Note:
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Supply Chain
Contents
Introduction...........................................................................................................................................2
Part 1.....................................................................................................................................................3
Performance objectives......................................................................................................................4
Customer satisfaction........................................................................................................................6
Business model..................................................................................................................................9
Supply chain management...............................................................................................................10
Part 2...................................................................................................................................................13
Part 3...................................................................................................................................................16
Balanced Scorecard.........................................................................................................................17
Conclusion...........................................................................................................................................18
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Supply Chain
Introduction
Operations management (OM) refers to business practices that maximize on company
resources for optimization of returns. Best practice strategies include efficiency, reduction of
wastage and value returns. Managing resources such as time, raw materials and processes is a
challenge. This case analysis considers Giordano HK as a large operation in the fashion retail
industry with multiple stores internationally. With more than 2420 stores across the company
has a manufacturing unit for its supplies. This Hong Kong oriented brand has served
customers for more than 37 years. Further insight into its business mechanisms identifies an
established global retail and distribution network1. Listed as a fashion retailer the company
goes through planned purchases, organized distributions, controlled prices and coordinated
marketing. Principles of OM guide these processes for higher returns and improved
efficiency. This report focuses on the operations strategy, company objectives, business
model, and supply chain for recommendations on best practices. Of critical importance are
principles such as cause and effect, risk management and best practice. Synchronizing
business elements for maximum output depends on the capacity of the company2.
Part 1
Giordano Operations strategy defines its business model featuring retail, wholesale and
distribution point. This is a complex system that calls for a resource based management with
multiple benefits3. Aligning these with company objectives and business activities is tricky
because of the existing market competition. As a result efficient operations drive down costs
by designing an appropriate framework, managing its operations and improving on it
1Bloomberg, ‘Giordano International Ltd; 709: stock Exchange of Hong Kong Limited’, 2019,
https://www.bloomberg.com/research/stocks/snapshot/snapshot.asp?capId=410706
2 Inside Retail Asia, ‘Giordano cites ‘sluggish’ Hong Kong-Macau market’, August 10, 2018,
https://insideretail.asia/2018/08/10/giordano-cites-sluggish-hong-kong-macau-market/
3 Michael H, Kai X, Christina, M, ‘Resource based theory in operations management research’, Journal of
Operations Management, Vol. 41, 2016, p. 77-94
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continuously4. This creates a competitive advantage which becomes a practice. Specialised in
fashion apparel, its target customers include men, women and children. Additional products
on its list include global accessories. Business franchises from across the globe can also buy
products from Giordano on wholesale5. Its wide clientele explains its use of different brand
labels such as Giordano Junior, BSX and Giordano Ladies. This heterogeneity shows a
growing complexity in the company’s business model. Revisiting its strategies is one way to
identify existing gaps and reinforcing its strengths against weaknesses. Resource exploitation
through extension is one of the patterns that Giordano adopts6.
Performance objectives
Operations strategy performance model in Giordano’s case includes an efficient team work7.
In order to achieve its performance objectives the company scrutinizes its decision making
process. An efficient human resource management system supports its process design. An
online retail business with a global layout requires an integration of objectives. Critical
elements used to guide its decision making feature the business costs, flexible operation,
dependability, quality products, and speed in service delivery. This framework guides
Giordano’s complex supply chain which requires operational measures for effective planning
and controls8. Figure 1 below shows a summary of this with reference to the fashion
manufacturing and wholesale chain. Adopted from Porters five competitive forces these
elements give Giordano an advantage9. Dependability in this case means that customers in the
wholesale franchise can count on Giordano’s manufacturing plant to produce orders on time.
Reduction of the order size should not affect the company’s performance records in terms of
4 Miriam M W, Constantin B, Vikram B, Antony P, ‘Sustainability in multi-tier supply chains: Understanding
the double agency role of the first tier’, Journal of Operations Management, Vol. 41, January 2016, p. 42-60
5 Lanlan C, Jyoti N, Zhongqi J, ‘Business model innovation: How the international retailers rebuild their core
business logic in a new host country’, International Business Review, Vol 27, No. June 2018, p. 543-562
6 Ibid 256
7 ibid
8 Brettel M, Klein M, Friederichsen N, ‘The relevance of manufacturing flexibility in the context of industrie
4.0, Procedia Cirp, Vol 41, 2016. p. 105-110
9 Christopher M, ‘Logistics & supply chain management’, 2016, Pearson, UK
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cost of production, and quality of customer services. One of Giordano’s challenges in this is
maintaining flexibility amidst external changes. For example workers may complain of poor
human resource management caused by an imbalance between work and leisure times10. With
more than 8000 employees Giordano thrives through mutual support. In addition, the
company has an environment that encourages staff retention. Among these are monetary
benefits, and promotions which encourage employee loyalty.
Branding strategies feature long term plans to enhance performance through customer and
employee loyalty11. Giordano’s workers feel proud of their brand because of its performance
records in the market. The good working environment provides training opportunities for
professional development. Most of its employees are within the 20-40 year bracket whose
preference is organizations with better opportunities for growth. Internal branding through
company values coupled with an effective external branding or marketing plan influence
loyalty. Brand identity motivates customers to invest in the success of the business. Buying
more items from Giordano means an increase in sales and a positive relationship with the
brand. However, Giordano’s reported sales show a drop of HKD 161 Million in the last year.
The company has an executive team headed by its CEO Dr. Kwok Kuen Lau, a director and
Group HR. These are over 40 year olds but the management supports a cordial working
environment with most of its employees featuring young people below 40years. Its
executives and Board of Directors support staff participation in company decisions for a
caring environment. Through a hands-off management strategy the company boosts the
employee motivation and competencies.
10 Indeed, ‘Giordano’ Management Reviews, 2019, https://www.indeed.com/cmp/Giordano/reviews?
fcountry=ALL&ftopic=mgmt
11 Pearson S, ‘Building brands directly: creating business value from customer relationships,’ 2016, Springer
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Figure 1: Giordano performance elements
Customer satisfaction
OM considers the quality of goods and customer service as a best practice. The service gap
model or 5 gaps model gives five ways to offer customer satisfaction. The figure2 below
shows these areas for Giordano to identify and fill. The knowledge gap influences how the
company meets customer expectation, understating customer needs and fulfilling them.
Principles of customer satisfaction include continuous improvement on service delivery12.
Giordano invests in speedy and friendly online services in order to create strong and lasting
relationships. For example, when a customer complains about the product quality, the sales
department responds on time in order to assure the customers.
12 Beckford J, ‘Quality: a critical introduction’, 2016, Routledge, p 77
6
Costs Control costsSpeed
Perfomance
Objectives
Giordano
Fashion Retail
and
Wholesale
flexibility
Dependability
Manage
external and
internal
branding
Quality

Supply Chain
Figure 2: Illustration of the service Gap model
Loyalty brings the buyer back and spreads the news to new customers. Knowing the customer
means taking time to meet the required expectations. It also implies giving accurate
information about the company. Training the employees in the best sales skills, Giordano
manages to address its rigorous sales process. Having adequate knowledge about a product
enhances the customer and employee confidence13. Quality improvement strategies such as
digital marketing strategies encourage innovative campaigns for market competition. This is a
useful technique for acquiring new customers but it also breeds content familiarity for new
products. Figure 3 highlights an example of Giordano’s mixed marketing with pricing,
pomp and colour as critical strategies14.
13 Ibid 212-232
14 David B, Operations Management: An International Perspective, Chapter 2, ‘Operations, Strategy and
Operations Strategy’, 2018, Cengage, http://cws.cengage.co.uk/barnes/students/sample_ch/ch2.pdf
7
Customer expectation
Customer perception
Customer
Service delivery
Service policies
Understaning customer needs
External communication
Company
Knowledge gap Customer
satisfaction

Supply Chain
Figure 3 Giordano pricing mechanism combined with holiday festivity15
Celebrity endorsement in the Figure 4 below is a strategy to maintain customer loyalty in its
Chinese markets. Giordano expresses its corporate strategy in product launches highlighting
its business type, diversification and strategic objectives. The business level strategy focuses
on each franchise or store while the functional level plans enhance marketing, operational and
financial mechanisms16.
Mixed marketing strategies enhance the brands product strategy. Positioning itself as a global
brand has benefits and risks. Its repositioning strategies include focusing on the regional
markets too. Focusing on place, price and product, its promotions incorporate all target
customers17. However, when Giordano experiences slow growth as seen in its Macau market
an analysis of probable cause is necessary. Poor performance and tough competition are some
of its major challenges18. In this case the solution would be to reduce costs while improving
15Offeraty, ‘Giordano Online Sale 50% off, May 2019’, https://www.offeraty.com/stores/giordano/giordano-
online-sale-50-may-2019-25106
16 ibid, p, 25
17 Chen X, Wang X, Jiang X, ‘The impact of power structure on the retail service supply chain with an 020 mixed
channel’, Journal of the Operational Research Society, Vol, 67 No. 2, 2016, p. 294-301
18 Inside Asia, par 3
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on innovativeness or creativity. A drop in group sales implies reduced net margins hence it
affects financial performance. OM supports the optimization of sales for profitability.
Figure 4: Celebrity endorsement showing Jeon Ji Hyun in Giordano commercial
Business model
Giordano’s process of producing and supplying goods thrives on customer value19. Its
corporate values include innovation, simplicity, quality, knowledge and service20. Giordano’s
vision is to have the “best” and “biggest” apparel retail business21. This supports its mission
of making the customer to feel and look great. Specializing in men’s, ladies, and kids wear
is a challenge but market competition is also high. The company is up against global retailers
from UK and US markets. Brands such as Gap, Esprit, Fast Retailing and Bossini
International Holdings push Giordano to invest more in offering value for customer’s money.
Some of its competitors offer alternatives, for example Japans Fast Retailing uses the
LifeWear concept which has a catchy tagline for high quality, affordable and comfort
19 Stark J, ‘Product lifecycle management’, Springer, Vol 1,2015, p. 1-29
20 Giordano, Corporate, 2019, http://corp.giordano.com.hk/en/vision.aspx
21 Ibid, par 1
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material. Giordano is a high end brand with standard and custom made designs sold through
aggressive promotional strategies. Therefore creating a competitive strategy in the midst of
the high competition focuses on four strategies. Giordano has an opportunity to excel in its
industry through innovative focus on attractive costs, differentiation, and leadership22. Table
1 below highlights this under Porters Generic Competitiveness concept.
Uncertainty in the markets a major risk in the retail business and it calls for a strategy to
spread risks while looking for new opportunities23. The company has to continuously monitor
its microeconomics for effective business operations. In 2018 Giordano experienced an
increase in sales with a 9.2% increase. However, this was not the case in 2019 because its
sales dropped by 20%24. Capitalizing on e-commerce the company looks to better
performance. Its IT strategies enhance financial performance through marketing strategies
while minimizing costs for profitability25. Analytic techniques support pricing strategies for
high accuracy in the retail wholesale model. Giordano has a dual framework business
approach therefore it needs to prepare for multiple results. The retailer business may thrive
through social networks but the wholesale section greater focus on more inputs and outputs.
Cost Leadership
-low cost production
-use economies of scale
-technology and innovation
Easy access to raw materials
Differentiation
-Uniqueness in design/operations
-gain customer value
-position brand as ideal in meeting customer
needs
-best price offers
22 Cambridge University, ‘Porter’s Generic Competitive Strategies ( Ways of competing), Management
Technology Policy’, 2016, https://www.ifm.eng.cam.ac.uk/research/dstools/porters-generic-competitive-
strategies/
23 David B, p. 55
24 Bloomberg, par 5
25 Martis L, Rindova V, Greenbaum B E, Unlocking the hidden value of concepts: a cognitive approach to
business model innovation, Strategic Entrepreneurship Journal, , Vol 9 No.1, 2015 p. 99-117
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Cost Focus
-Narrowing the target through cost advantage
-reduce competitive scope
-exclusive pricing
Differentiation Focus
-Narrowing the differentiation target
-Focus on special needs segments
-exploit differences
Table 1: Porters Generic competitiveness for best cost strategy
Supply chain management
Creating value for the Giordano customer is a major strategy that goes through the complete
supply chain26. First suitable operations must be in place for this cross channel system.
Efficiency in this system ensures that the brand maintains value for money while improving
efficiency. Competitive priorities in the ladies wear calls for changes in. Maximization of
value brings out competitive advantage. Figure 5 shows the intertwined supply chain in the
Giordano e-commerce for proper scheduling, timely distribution and effective demand
management.
26 Kohtamaki M, Partanen J, ‘Co-creating value from knowledge-intensive business services in manufacturing
firms: The moderating role of relationship learning in supplier-customer interactions;, Journal of Business
Research, Vol 69, 7, 2016, p. 2498-2506
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Figure 5: Illustration of Giordano’s complex supply chain
Sustainability continues to feature as Giordano’s challenge because of the comparative costs
from competitors. A comparative analysis of its approaches recommends repositioning
strategies that maximises on the brands abilities. To develop competitive priorities Giordano
HK must explore its buyer and supplier chains27. Its Hong Kong Markets may not be as
favourable as its Saudi Arabian markets or South East Asia. Having in-depth knowledge
about the market environment gives the company strength against its regional and global
competitors. Sustainable management ensures that efficiency maximizes on production,
resource management and technology. This goes beyond the profit agenda because it weighs
the internal and external customer value. IT solutions support the design, execution and
control of operations. These form the back bone for OM supply chain which converts
resources into expected outcomes. Giordano obtains the desired goods and services through
an effective implementation of company strategies. Technology selection proved effective for
its global competitor Zara, but the company has to redefine its fashion trends to match the
27 Jitpaiboon, T, ‘The study of competitive priorities and Information Technology Selection: Exploring Buyer and
Supplier Performance’, Journal of International Technology and Information Management, Vol 23, No. 3, 2014
12
Distribution Retail
Wholesale
Sales
Operations
Demand
management
Inventory
manufacturing Design
Suppliers

Supply Chain
new markets28. This motivates further research and development for customised supply chain
operating systems29. Giordano HK has to make constant changes in sourcing strategies,
delivery speed, product quality and customer influence is critical. Driven by the demand
factor, the fashion industry is highly dynamic. Competitive priority measures for this
company would features the performance principles of quality, cost, flexibility and delivery30.
31Figure 6: Summary of Supply chain activities in the Giordano OM
Part 2
Evidently, Giordano HK needs an effective operating system to provide solutions to
sustainability32. By defining its business model the company breaks down activities within the
28 Sonya D. ‘Zara looks to technology to keep up with faster fashion’, Reuters, June 15, 2018,
https://www.reuters.com/article/us-inditex-technology-focus/zara-looks-to-technology-to-keep-up-with-faster-
fashion-idUSKBN1JB0HG
29 Meyr H, Wagner M, Rohde J, ‘Structure of advanced planning systems’, In Supply Chain Management and
Advanced Planning , Springer, Berlin, 2015 p. 99-106
30 Christopher, p. 75
31 Business Dictionary, Difference between Logistics and OM, 2019
http://www.differencebetween.info/difference-between-logistics-and-operations-management
32 Kaleigh M, ‘New report shows sustainable fashion efforts are decreasing’, Forbes, May 19 2019,
https://www.forbes.com/sites/kaleighmoore/2019/05/19/new-report-shows-sustainable-fashion-efforts-are-
decreasing/
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supplier system, manufacturing and consumer distribution. High quality supply chains has
consideration for the Customer ( C), Actors ( A), Transformation ( T), Weltanshauung
( World View), Owner ( O), Environmental constraints ( E)33. The abbreviations form
CATWOE for analysis of the future and existing customers, company profile and products.
Its processes and the appropriate means of actualizing these highlight the transformation
process.
Problem: Giordano needs a sustainability system to address regional and global
innovativeness
The figure 7 below shows the Root Definition for Giordano’s need of a new supply chain
management system. Figure 8 describes the CATWOE elements which impact the product
process, information system and financials in an organization. Changes in the Giordano
supply chain should indicate a dynamic process that has controls. Transformation is
progressive therefore the company prevents risks by providing the bigger picture for inputs
and outputs. Aligning the distribution of products in different sizes with the Giordano team
capacity ensures a balance between the supply chain lifecycle and the potential technology
inputs.
33 Zlatanovic, D. A ‘holistic approach to corporate social responsibility as a prerequisite for sustainable
development: Empirical Evidence’, , Economic Annals, 60, 2015, p. 207
14
Root Definition for Giordano’s Supply
Chain System
A sustainability system addressing regional and
global challenges through innovativeness

Supply Chain
Figure 7: Root Definition of Giordano’s gaps in supply chain
Advanced quality elements Giordano Properties Inputs/Outputs
1. Customer Retail Products/Services
2. Actors Employees Global, regional, permanent,
contract
3. Transformation Improved products &
services Technology systems
Sustainability through people
and technological innovation
4. World View Brand image Consumer perception,
positioning
5. Owner Strategic management Financial, people, raw
material
6. Environmental Appropriate means eco-friendly, people friendly
Figure 8: Illustration of CATWOE properties for transformation process
Figure 9: Picture showing the solution (use of the popular Giordano Hong Kong T-shirt as a solution)34
Solution: Use of eco-friendly fabric made from sustainable material for Giordano T-shirt
34 Carousell, ‘Giordano HK exclusive T-shirt’, https://sg.carousell.com/p/giordano-hk-exclusive-t-shirt-
191199724/
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Forbes reports that there is a diminishing image of companies in the fashion industry due to
lack of eco-friendly initiatives35. In this report, industry leaders have to refocus their energy
back to sustainable fashion that targets the younger generation. Celebrity influence in this
campaign is high. Manufacturing supply chains face accusation of wasting raw materials and
using high energy that adds up to the greenhouse gasses. Giordano has to invest in an eco-
friendly fabric that shows commitment to the future challenges. The popular Hong Kong T-
shirt in figure 9 is a potential product for sustainable innovation. An ideal framework in its
supply chain also shows the brands commitment to a sustainable plan.
The Figure 10 (adopted from Wall Street) below shows price dynamics based on past
earnings, value of assets and expected growth36. Quality in supply chain is critical and
prevents risks arising from poor quality processes. This new strategy covers the material
(financial and production tools) and non-material costs (processes, value etc.). The retail
fashion industry has different stages featuring the garment design, manufacturing process,
retail distribution and operations37.
Expected Outcome: Increased sales, positive brand name and sustainability business
Giordano’s past performance record is positive but is based on asset value and past earnings.
However improvements in the supply chain operations presents growth opportunities. The
brand has a chance to improve its performance through the use of sustainability strategy-in its
HK retail speciality. This is a chance to invest in designer fabric made from eco-friendly
material for improving the brand value beyond asset value.
35 ibid
36 Simply Wall Street, ‘Giordano International’, 2019 may,
https://simplywall.st/stocks/hk/retail/hkg-709/giordano-international-shares
37 Malhotra N, ‘Thinking creatively about environmental sustainability’, Forbes, Dec 20, 2018,
https://www.forbes.com/sites/neilmalhotra/2018/12/20/thinking-creatively-about-environmental-sustainability/
#7a70d64d1f4d
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Figure 10 Giordano price projections based on past and expected changes from growth factors
Part 3
The process of turning performance objectives into operations priorities begins with
responsible management. Branding strategies encourage companies to have a positive impact
in their activities38. Effective implementation of a sustainability process involves a careful
design of the solutions for suitability in its market system. The global market environment
demands an environment conscious approach to business. Multinational brands like Giordano
generate income by reducing on wastage. Key areas for Giordano include material costs,
packaging, transportation and manufacturing. An alternative to its energy resources is the use
of solar energy. This is an eco-strategy targeting a positive impact on the business operation
as well as the environment. Manufacturing is at the core of Giordano’s product production.
Using technology lowers costs because innovation reinforces the coordination of networks
reducing the time spent on labour intensive activities39. As a result this solution eliminates
38 Meyr H, Wagner M, Rohde J, p. 100
39 Eva M, HindleK, Paul D, Rollaston C; Tudor D, ‘Business Analysis’, D. Paul, D. Yeates, J. Cadle ( Eds), The
Chartered Institute for IT, 2014
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delay as a risk. It is also a solution to mistakes made in the purchasing process. Integrating
the expensive operations also cuts down the supplier duration hence it enhances efficiency at
the inventory level. Technology in data management through the Enterprise Resource
Planning (ERP) is also effective for online strategies. Managing online activities effectively
the brand synchronizes activities by integrating and controlling some. The ERP supports the
billing process for speedy services, faster communication with customers and suppliers.
Using a corrective action approach is one way in which Giordano can implement the new
strategy. Quality systems have a cost effective and efficient plan that encourages the best
possible outcome.
Balanced Scorecard
The business performance metrics in post implementation indicate the successful
implementation of the strategy. Giordano’s latest financial metrics indicate a 20% drop in its
profits in the last year40. Encouraging stakeholders to embrace an environmental approach is a
big challenge. However strategies such as the use of incentives and collaborative stewardship
are important41. A balanced score card looks at the company mission, its vision and strategic
agenda in order to develop the key performance indicators (KPI). This describes the action
plan which aligns Giordano HK to its new project. Its planned new product enhancement plan
for the Hong Kong T-shirt would involve a measure of the daily activities required to
accomplish plan. The illustration below summarises this statement.
40 Bloomberg
41 Garcia-Torres S, Rey-Garcia M, Albareda-Vivo L, ‘Effective disclosure in Fast-Fashion Industry: From
sustainability Reporting to Action, Mission’, Sustainability, Vol 9, 12, 2017, p. 2256
18
Giordano Mission
“To make people look good and
feel good”
Strategic
objectives
(Innovation)
Actions
(New fabric)

Supply Chain
Figure 12: Giordano HK integration of strategic objectives by aligning company plans
Mapping the strategies means using the strength elements to envision a value strategy for the
company. The Hong Kong T-shirt is strategic because it supports the company vision of
“being the best and the biggest” brand in the retail42. Therefore the sustainability agenda
targets the improvement of the T-shirt as the most effective action in order to implement the
strategy. A balance score card uses the internal functions for an external result. Its feedback
mechanism improves the business through results. In this case it affects the KPI which are
customers, internal processes growth perspective and financial outcomes.
Conclusion
Giordano HK is a popular fashion retailer with headquarters in Hong Kong and global
branches. Leadership strategies continue to give the company a competitive edge against its
competitors like Esprit and Zara. However, the high competition in the market environment
calls for continuous improvement strategies to manage its performance. Successful operations
have financial benefits, improved customer value and better internal processes. The global
market environment is moving towards a sustainability approach to operations management.
Critical elements in Giordano HK success include an efficient supply chain system that
matches its business model. A balanced score card provides guiding metrics to guide
Giordano towards a better performing brand. An integrated system combines the internal and
42 Giordano, ‘About’
19
Strategy
(Sustainability)

Supply Chain
external attributes in order to place the brand at the best level in its industry. Technology and
innovation reinforces this effort for strategic and quality effects. The HK retail segment
provides an opportunity for the innovation of an eco-friendly fabric for the popular Hong
Kong T-shirt.
20