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Global Business Environment

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Summary This report analyses the entire Asian environment and attractiveness of Asia, and the reason why Giordano choose Asia as its main market. From the analysis of Asian environment, sizeable population, increasing consumption on cloth, pursuing for fashion and globalization of world are all factors that make Asia attractive. Giordano’s FDI-related projects and the FDI modes are exhibited in this report, which can describe a whole picture of this company’s development. In addition, based on the analysis of FDI activities, Giordano’s FDI activities have many impacts on host economies, like job creation in Indonesia.
 This report draws on sales data of main Asian markets and subordinate brands to analyse the trend of investment of Giordano. Korea is the most important and second market except Mainland China;The Middle East grows quickly during last decades; Singapore is a stable and profitable market. Malaysia and Indonesia are potential markets, and from a long term perspective Giordano will focus on the development of these countries.
 Asia is the basic market of Giordano, which conducts over 95% foreign investment there.
 This report applies SWOT analysis to illustrate the strengths, weaknesses, opportunities and threats, and also uses PEST analysis to explain the external factors-political, economic, social and technological, which influence the investment direction in the future.
 Country screening process identifies company-specific criteria, which enable them to rank countries. Giordano mainly selects countries in Asia and compares their political and economic environment, etc, Finally, Singapore, South Korea, the Middle East, Malaysia, and Indonesia are selected to be the primary markets.
 BCG box analyses the subordinate brand of Giordano.
 Finally, this report analyses the post financial crisis era of Giordano.

Part A
Strategy/activities of the MNE in Asia during the last decade
1. Main reasons of attraction into Asia and motivations for FDI 1.1 Attractiveness of Asia
Sizeable population
Asia accounts for over half of population of the whole world, and the main markets that Giordano aims at are all countries with high density of population, like Japan, and some region in Indonesia.
Consumption on cloth
The research conducted by the Giordano has indicated that the countries like Singapore, Japan and Taiwan “spend a high proportion of their income on clothing”(Dibb, 1996).
Pursuing for fashion
With the increase of income, most people in Asia are trying to change their lifestyle, in this way, there is increasing demand for more fashionable clothes in these countries.
Globalization is decreasing the differences of culture, and enables companies in different countries easier to do business in the foreign countries. This trend makes Giordano entering the Middle East market recently.

1.2 Motivation for FDI Year | 2005 | 2006 | 2006 | 2007 | Brand | Giordano Ladies | Giordano Middle East | Giordano | Giordano Ladies & Giordano Concepts | Country | Singapore | Saudi ArabiaUAE | Singapore | MalaysiaIndonesia | Motivation | Market seeking | Network seeking | Market seeking | Resource seekingMarket seeking |

Year | 2007 | 2007 | 2008 | 2008 | 2011 | Brand | Giordano | Giordano Korea | Giordano | BSX | Giordano | Foreign market | Indonesia | South Korea | Indonesia | Saudi Arabia | SingaporeMalaysia | Motivation | Resource seeking | Market seeking | Resource tracker | Market seekingResource seeking | Market seekingResource seeking |
Table 1. FDI activities of Giordano in five primary markets
Source: Giordano annual report
Network seeking
Network is critical to the international success of a firm (Dunning 2003). In order to strengthen the core market in the Middle East, Giordano collaborated with Emirates Trading Agency (ETA) of Dubai, and build the Giordano Middle East.
Market seeking
In order to achieve “guilty-free shopping” concept, like all market hunters which seek to service customers and market niches (Dunning 2003), Giordano must to search for suitable niche markets. Like what they do in Indonesia and Malaysia, which is great potential market.
Resource seeking
Low-cost inputs or high-quality resources in foreign countries is important for mMNEs (Dunning 2003), the low labor-cost and rent make Giordano easier to expand its business in Kuala Lumpur (capital of Malaysia) and Indonesia.

2. Main FDI-related projects, FDI modes and impacts on host economies
2.1 Main FDI-related projects and FDI modes Foreign country | FDI mode | Impacts on host economies | Singapore | Wholly-owned subsidiary | (1)Competition degree increased (2)Increased employment (3)Increased fashion consciousness | Indonesia | Wholly-owned subsidiary | | Malaysia | Wholly-owned subsidiary | | South Korea | Joint venture | | The Middle East | Joint venture | |
Table 2. FDI modes and impacts on host economies
Source: Giordano annual report
2.1.1 Giordano’s wholly-owned subsidiaries
Investment environment
The advantages of Malaysia, Indonesia are mainly based on low labor cost, low rent and large-scale production compared with North America and Europe, which lowered the cost and strengthen the capability of company in international trade price competition.
Great demand from Asia countries
Before the entry of Singapore in 2005, Giordano had performed well in Hong Kong and had been getting a lot of enquiries about when open in Singapore, which also encourages Giordano entering other Asia countries in the future.
Scale effect from increasing wholly-owned subsidiaries
In order to further expand its business the best way for Giordano is to invest in foreign countries directly, which can lower cost and increase efficiency. Because Giordano maintains a flat organizational structure, wholly-owned subsidiary can significantly decrease cost.

2.1.2 Giordano’s Joint Venture in the Middle East and South Korea
In order to strengthen their core market in the Middle East, Giordano opened its largest Middle East store at Dubai Mall and four large format stores in Makkah and Madinah. Giordano Middle East is a joint venture between Emirates Trading Agency(ETA) of Dubai and Giordano International Limited. Joint Venture can lower the cost in foreign country and is the best way to decrease trade barrios. Up to now, Giordano Middle East have set up over 100 stores and counters in the Middle East and Central Asia. Due to the high human resource and rent, Giordano developed joint venture in South Korea.

2.2 Potential impacts on host economies Competition degree increased Giordano is the first company that enter Malaysia, and Indonesia, the success of Giordano has attracted many “me too” brand and high-end brand,like Zara from Inditex and Uniqlo from Fast Retailing, their coming will expand casual cloth market of Asia. Also, this investment trend has increase competition in Asia. Increased employment and quality of human resource Giordano’s five pillars of brand values include providing good service which expects to exceed consumer’s expectations. Therefore, Giordano train each employees in order to make sure that they can provide best service to consumers. At the same time, this action improve the quality of human resource, and stimulus employment in these Asian countries. Increased fashion consciousness Giordano are sensitive to fashion and keep in line with fashion trends, which closes distance between fashion and people in backward countries, and help them develop consciousness of fashion.

3. Statistical information about investment trend of Giordano

Figure 1. Trend of sales in five primary Asia markets source: Giordano annual report
This chart describes the trend of Giordano’s investment in Asian countries. Singapore, the Middle East, Korea, Malaysia and Indonesia are five main foreign markets of Giordano. Korea provides quite high profit comparing to other countries, which suffered sharp decrease during financial crisis. After entirely exiting Japan, Giordano’s investment in Korea significantly increased. The other four countries are also important for Giordano, especially the Middle East. With rising of oil price and confidence of consumer, Giordano invested in the Middle East more than Malaysia, Indonesia, and Singapore. Although Singapore has great investment environment, there is more fierce competition.

4. Position of Asia for Giordano

Figure 2. Retail and distribution turnover by market source: Giordano(2009) Interim Results
Giordano’s main foreign activities are focused on Asian countries, there is no FDI value-added activities in Europe or North America. And it can been seen from figure that Mainland China, Hong Kong, Macau and Taiwan are still the main market, which contributes over 75 percent of turnover.

5. SWOT analysis of Giordano in Asia Strengths | Weaknesses | Evolve along with fashion trend but also meeting the demand of consumersGreat servicesValue for money concept | “this is nice and good value” to “this is cheap”(Seno,1990) | Opportunities | Threats | Rising populationIncreasing urbanizationChanging lifestyles | Politics-related problemCompetition from “me too” brandsCompetition from international brands |
Today’s fashion industry is characterized by “very short product life, fickle consumer preferences”(Richardson, 1996). The reason why Giordano can win in this fierce battle and get a good grade is that it always evolves along with fashion trend but also meeting the demand of consumers. Giordano provides good quality and great services for consumers, in addition, Giordano’s “guilt-free shopping” concept makes consumer enjoy shopping in Giordano.
Although the concept of “guilt-free shopping” works well in a lot of Asia countries, with the development of economy, more and more people would like to pay money for more fashionable and expensive cloth, which makes Giordano look like cheap. If Giordano wants to develop wealthy countries in Asia, like Singapore, Giordano must segment its market according to situation in different countries. This is why Giordano set up Giordano Ladies, a brand for more affluent consumer.
Asia market is attractive for all MNEs, which has sizeable population, increasing urbanization, and changing lifestyle. Like in UAE, more and more women choose to wear fashionable cloth instead of traditional cloth.
Although the factors mentioned above make Asia market look optimistic, there are lots of problems in Asia too. Politics-related problems are serious in some regions, like territorial disputes, ethnic problems, and ruler changeovers.
Besides, competition is fierce in Asia, lots of “me too” brands (having the same target market with Giordano) are competing for the frugal Asian market. As consumers in Asia become more affluent and conscious about fashion, they would like to choose more expensive and fashionable brands instead of Giordano.

6. Strategies of Giordano in Asia
Giordano is a group which invests most of its capital in Asia, therefore, this report analyses the international business strategies of Giordano at specific foreign country level.
Level of resources committed
Giordano had its own apparel manufacturing division before 2008, after that time, 95 percent of its product was out sourced, and it only keeps 5 percent manufacturing operation now. This action helps Giordano focus its investment on foreign countries, and open more stores in order to expand market share. In Giordano’s five main markets, it chose advanced modes, like joint ventures and subsidiaries, which lower their cost and make them easier to manage organization and train its employees.
Closeness of collaboration
In order to maintain Giordano’s own business value, it chose sale subsidiaries to conduct its business, which can maintain profit and increase brand loyalty to the maximum degree. On the other hand, for countries having strict or protective trade policy, like what Giordano did in South Korea and the Middle East, it chose joint venture as entry mode to reduce environmental uncertainty.
Pursuit of competitive advantage
Giordano “strives for uniform regional marketing”, at the same time, emphasizing the local sensitivities (Blennerhassett, 1996). In response to cost increasing, Giordano continued to pursue a strategy of improving brand and product differentiation. Therefore, the improved product mix enables the increase of price which recover the increase of cost. This competitive advantage makes sure that Giordano keeps in line with the fashion, and further improve the expansion of market share.
Timing of entry
Giordano is the first causal cloth company entering into comparatively less developed countries in Asia. This has resulted higher market shares than late entrants (Mascarenhas, 1997). However, this first action has its opposite effects. After the establishment of Giordano, many other causal cloth companies can avoid some mistakes based on the experience of Giordano, and some of them did better than Giordano, like Zara.

Part B
Asia & fit with the strategy of the firm
1. Country screen process of Giordano
Primary screening among all Asian countries
Giordano mainly aims at frugal foreign markets like China, because these countries can afford inexpensive casual cloth, and most Asia countries confirm with this condition. In addition, external factors make the Asia the suitable markets. Asia has over half of population of the whole world; Asia is the biggest economic entity, and the most active economic activities happen in countries. More and more Asian countries have entered WTO, which means the trade barriers is lower.
In-depth screening among Korea, India, Indonesia, the Middle East and Singapore
Most of these countries are experiencing quick development of economies and globalization of culture, like the Middle East and India, and the awareness of women are rising sharply, they hope to follow fashion of the world instead of wearing traditional cloth. Although political instability of India and Indonesia is still a serious problem, comparably politically stable country like New Delhi and Bombay are still attractive for MNEs. In addition, the human resources and rent are low in these Asia countries. Besides, Singapore has issued new trade policy to attract foreign investment.
Rank and prioritize attractive markets
As mentioned above, Giordano selected Singapore, India, Indonesia, the Middle East, and Korea as the main foreign countries to proceed its FDI activities. The countries are ranked as follow:
1. Singapore 2. South Korea 3. the Middle East 4. Malaysia 5. Indonesia
Singapore and South Korea have the best investment environment, stable political condition, high-income group and better trade policy; The rise of oil price in the Middle East has lifted consumer confidence, and the rise of awareness of women also stimulates the development of fashion in this region; Although growth in all three markets were negatively impacted by interest rate increases and fuel price hikes, the markets in the two countries are active.

2. PEST analysis of Giordano Political | Economic | Political instability (Dibb, 1996)Labor-related problemsGovernment bureaucracy | Increasing urbanizationTrend towards globalizationFree trade internationally | Social | Technological | Changing lifestyleEthnic problems | ComputerizationStreamlined operations |
Political issues are serious in some region of Asia, political instability increases the risk and cost of foreign expansion in Asia. And Giordano has to face with government bureaucracy and labor-related problems, therefore they have to change some of its FDI activities to wholesaling and franchising.
Increasing urbanization makes people in Asia more conscious about fashion. Trend of globalization and free trade policy facilitate Giordano’s foreign activities.
With development of economies, people in Asia are more likely to follow fashion in Europe. On the other hand, there are still countries that continues their traditional cloth.
Computerization makes Giordano easier to control its production and sale channel, this kind of streamlined operation allows Giordano increase efficiency and create more value.

3. BCG grid analysis of Giordano Brand | Turnover(HK$millions) | Giordano & Junior | 1569 | Giordano Ladies | 114 | BSX | 76 | Giordano Concepts | 64 |
Table 3. Retail and distribution turnover by brand
Source: Stars | Question marks | Giordano Ladies | BSX | Cash cows | Dogs | Giordano & Junior | Giordano Concepts |
Based on the turnover of each brand of Giordano in 2009, four main brands are pointed to four different boxes of BCG. Giordano & Junior is the cow cash, which contribute 86% profit for Giordano. However, it hasn’t had obvious increases since 2009.
Giordano Ladies and Giordano Concepts are both brand designed for higher-level consumer. Both of them have high rate of increase and low market share comparing to Giordano & Junior. However the market share of Giordano Ladies is much higher than Giordano Concepts, it is identified as the stars product.
Giordano Concepts are another brand for higher-level market, and it includes men’s and women’s cloth. Compared to Giordano Ladies, it has lower market share, therefore, it is a question mark product.
BXS is a new brand, which combines all design concepts of Giordano and target at frugal markets, the low rate of growth and low market share make it to be a thin dog product.

4. Giordano’s post financial crisis era
Financial global crisis dramatically influenced various industries, it’s obvious in fashion industry. After global financial crisis, Giordano suffered double digit turnover decline in Asian market, the retail and distribution turnover decreased by 13.0 percent.
Heavy discounting is the first strategy of Giordano to reverse the situation. In addition, many Asian countries have applied stimulus package, therefore, Giordano started its second expansion in some Asian countries. At the same time, Giordano continue a strict budget on expenses, this cost control can help Giordano close low profit stores in Asian market, and focus on more beneficial markets.
At the same time, a new design team is developed and focuses on the design for high-level market.

Blennerhassett, J. (1996), "Asian brand sounds Italian, looks American", Advertising Age International, pp.120.

Dimitratos P, Johnson J, Slow J, et al. Micromultinationals:: New Types of Firms for the Global Competitive Landscape[J]. European Management Journal, 2003, 21(2): 164-174.

Dimitratos P, McDonald F, Mayer M, et al. A typology of international business strategies[J]. The Process of Internationalisation, 2004: 85-103.

Dibb S. The impact of the changing marketing environment in the Pacific Rim: four case studies[J]. International Journal of Retail & Distribution Management, 1996, 24(11): 16-29.

Mascarenhas B. The order and size of entry into international markets[J]. Journal of Business Venturing, 1997, 12(4): 287-299.

Richardson J. Vertical integration and rapid response in fashion apparel[J]. Organization Science, 1996, 7(4): 400-412.

Saxena R P, Khandelwal P K. Is the magic of “feel good” and “look great” at Giordano still working?[J]. Management Decision, 2010, 48(3): 440-455.

Seno A A. An all-new dress for success[J]. Asiaweek, 1999, 15: 64-69

Web sites
Giordano Hong Kong:
Giordano announcement of results for the year ended December 31, 2012: www.
 China)

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...Global Economic Environment In: Business and Management Global Economic Environment Global Economic Environment Generally, global economic environment is influenced by various factors such as technological, environment, political, socio-cultural, and demographic that directly affects businesses. Economic environment refers to the nature of economic systems and policies, distribution of income and wealth, and level of income. Indeed, economic environment has a complex and very dynamic nature; it is continually changing along with the changes in political situations and government policies. Global Economic Environment Mainly, global economic environment is comprised of several components including the economic systems, conditions, policies, legislations, and environment. Indeed, the economic policies being imposed in every business unit are significantly influences by the overall condition of economy. This includes the improvements that occurred in economic conditions such as the purchasing power of the public, standard of living, distribution of income, and supply and demand. Mainly, these factors reflect the size of the market. Another factor reflecting the economic condition is the business cycle, which is critical to every business unit. It refers to the different stages such as prosperity, boom, decline, depression, and recovery. The economic condition of a country can be understood through its national income, per capita income, and distribution of income, demand......

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Global Business Environment Analysis of Apple

...1 The volatility and evolution of computer industry Starting from 1976, Apple computer created the personal computer (PC). After IBM transformed the PC from proprietary systems into open structure, PC has been dominated by Wintel (Windows + Intel) structure. Apple insists in adopting proprietary and niche market strategies made them keep losing market share till less than 3% in 2001. However, its strategy with ignoring the market trends makes it lose the market after years. 1.1 Industrial changes: Apple lost PC market because of ignoring industrial changes The PC industry has evolved in the past decades. There are 3 phases. Let’s take a look at these phases and Apple’s position in each phase. Before 1981: Proprietary Systems. Every PC producer had to develop self own hardware and software. It was proprietary. Most buyers were technical people. There were 2 main streams in the market: Apple style machine and IBM style machine. During this period, Apple was the leader. Its strong developing ability made the Apple II became a family commodity. However, Apple didn’t use patent or trade secret to protect its products. Many computer companies re-engineered Apple II and made cheaper similar products to compete in the market. For example, Acer copied Apple II and developed the Little Professor Series. 1981- 1997: Open structure. IBM turned the PC into open structure. Compaq, HP and many other producers started to show in the market to produce IBM compatible......

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