Strategic Management at UNIQLO
Introduction
Dubbed as Japan’s retail success story in the new millennium, UNIQLO is a 100% consolidated subsidiary of Fast Retailing Co. Ltd, a Japanese retail holding company. UNIQLO formed the portmanteau for ‘unique’ and ‘clothing’ as am emblem of creativity and individuality of Japanese apparel industry. UNIQLO offers fashionable and high quality clothing at reasonable prices, and was seized as an opportunity to establish a brand position domestically and internationally, combining all the facets of the business from product design to final sales and the operation of the 790 stores around the globe. Primarily offing for a highly brand conscious consumer group, UNIQLO envisions itself as a leading global casual wear company targeting high sales and profitability growth. For UNIQLO, such aim could materialize based on the established strategies such as low cost management, cheapest manufacture and marketing schedules and prioritizing customer requirements.
Today, UNIQLO is described as the apparel giant Gap, Inc.’s counterpart based on the 4, 000% share price increase, making UNIQLO as Japan’s third largest clothing retailer. However, it is not always victory for UNIQLO; the subsidiary also has its own share of downturns especially on its international expansion. For instance, expansion programmes in the United Kingdom (UK) saw a tumultuous stumble in profits, forcing Fast Retailing to shut down 16 of the 21 UNIQLO stores opened, because of competition. Most recently, three UNIQLO stores in New Jersey were also closed because of economic slumps. Despite these facts, UNIQLO maintains the spirit and still believed that the brand has only but way forward. How UNIQLO will going to do such is central to this paper, focusing on the company’s strategic management. External, industry and competitor analysis as well as the internal environment will be addressed.
External Analysis
Political Analysis
Political factors have direct impact on business conducts and operations. Decisions made by the affects the decision-making of retailers and could come in the form of policy or legislation. In Hong Kong, the ‘one country, two systems’ is the prevalent governance philosophy which endows the special administrative region with a high degree of autonomy and its capitalist economic system. Within a capitalistic and free market-oriented economy, retail companies make the majority of microeconomic decisions but they have to conform to specific agreements. Mainland and HK Closer Partnership Economic Arrangement (CEPA) and the US-China Textile Memorandum of Understanding are two examples of this. Labor and customary regulations as well as code of conducts are also complied into including China Social Compliance 9000 and US and EU quotas (2006).
Economic Analysis
Domestically and globally, businesses are also being affected by economic factors whereby a strong economy indicates positive results and weak economy signifies the opposite, affecting both businesses and consumers. Hong Kong’s gross domestic product is estimated at US6.7bn with the service sector that contributes 90% of the total GDP. The region is also named as the world’s eleventh largest trading entity. Almost 50% of the total population is employed full-time and the unemployment rate has a continuous average decline by 4.1%, making disposition of income a possibility, a lower cost of living that is ( 2008). Spending is generally devoted for food, housing, healthcare, transportation, amusement, services and apparel. People nowadays are very particular with ‘investing in quality’ clothing thereby resume spending with premium apparel finds ( 2006).
Social Analysis
Demography or the population characteristics may determine buying patterns and that understanding demographic changes within a particular region or place facilitates determining whether products and services would appeal to customers as well as the number of potential customers ( 2006, ). Hong Kong has a total of 6, 985, 300 population based on 2008 estimate and is continuously growing due to immigrant influx from Mainland. According to , people in HK and elsewhere have a growing interest in private labels. Consumers aspired for having private levels on everyday garments. Casual wear from HK which is known for good design and quality has a positive image on global consumers. Nevertheless, international brands are concentrated in high-end consumers while domestic brands are for low-end consumers (, 2006).
Technological Analysis
Technological innovations are a priority for the apparel retailing industry but it will remain as labor intensive as it is today. Boosting the industry’s productivity, increased in automation has been the recent trend but it is limited on specific functions, to which mostly require human intervention such as sewing and making patterns. Although there are computerized sewing machines that increase the productivity and reduce training time. Further, the uses of computer system software intended for the industry will be on making rough sketches, printing detailed designs and storing of information for easy retrieval. Hong Productivity Council made a report disclosing that the apparel industry could make sense of information technology (IT) if utilize for order processing, costing analysis, order tracking, material management, reporting and connectivity (2004).
Industry Analysis
Porter’s Five Forces Analysis
A) Threat of Entry
(2006, p. 43) point out that new entrants are the firms which have either recently begun operations or those that threaten to begin operations within an industry soon. Notably, the apparel industry is a buyer-driven industry where producers are considering buyer’s decision-making especially when brand names enter the picture. These buyer-centric industries have low barriers to entry mainly because of intense competition. Utilising brands as a market power source; however, this is a challenge for every clothing company. Building brand awareness and consumer loyalty is a costly endeavor since it involves advertising needed not only to promote the brand but also on sustaining awareness and loyalty. Strengthening brand names also requires that there are ‘quick response’ programs to increase revenues and manage risks. In the clothing business, mass customization has seen to be the most effective strategy. Therefore, the focus must be on minimizing the costs without sacrificing quality and to do this, managerial know how is a must in order to understand interactions with suppliers and consumers, to facilitate creativity and innovation and to maintain mobility in adapting to new market demands.
B) Threat of Rivalry
Either in home or host countries, apparels, accessories and merchandise will always have a competitor which usually fluctuates in size. The modern market trends for the apparel industry are globalization and intensified competition, increasing price and lower profit margin pressures, small quantity with high complexity orders, shorter lead times, multiple location operation, changing customer requirements and liberalization on textile and clothing quota that creates new market dynamics. Being responsive to these market trends shifts the focus of the apparel industry for more extensive product development and improvements at the least possible cost. Such condition forces companies to divert on product differentiation because of high switching cost. In an industry where products are deemed to be ‘equal’, the key sources of differentiation are brand image, reputation and prior existence.
C) Threat of Substitutes
Casual wear is very particular with loose-fit, comfortable and relaxed fit. Athletic or active wear was perceived to be the closest substitute to casual wear as manifested by the booming athletic wear industry. Typically worn as casual fashion clothing, active attires could provide deterrence in the industry. Moreover, the blurring demarcation on the casual clothing family could be also seen as an opportunity for substitutes. Specialized stores offer semi-casual, smart casual and business casual lines. Semi-casual clothes are less presentational than informal but are not as loose as casual dresses. Smart casual purports conservative looks but with harmony on colors, fabrics, shoes and accessories. Business casual, on the other hand, varies in definition but the common element is the collar. Realizing this, the bottom-line now is the price.
D) Threat of Suppliers
The prices and availability of commonly used fabrics such as cotton, blends, synthetics and wools might fluctuate significantly due to its dependence on demand, crop yields, weather, supply conditions, transportation costs, government regulations and economic condition among others. Quota is the major factor that affects the demand and supply of textile and fabrics. Even though the sale of raw materials is standardized, independent contractors, raw material suppliers, importers and apparel manufacturing firms could not isolate themselves from such scenario because of the prospective unsteadiness in the supply chain. As well, because of forward vertical integration, coupled with the low barrier to entry, suppliers could easily become rivals. In becoming threat of entry, suppliers could be also become a competitor to already established apparel manufacturers. In addition, contractors is also one of the threats when the demand of the labor increases, it will cause labor costs price inflation.
E) Threat of Buyers
Reaching more and diverse consuming group, the apparel industry is both a stable and unstable industry. Stable because quality price and quality products are the main element and unstable because there are many factors that affect both price and quality. In the point of consumption, for instance, there are ‘middle men’ such as the retail stores that offer an array of brands. In purchasing manufactured apparel, retail stores could have influence on making significant requirements and demands on their purchase, affecting prices. Though quality is inherent, prices would not be reasonable at all, and alternative clothing is readily available. This explains why apparel manufacturing companies are setting up their own stand along stores which will cater to their own produce. Important is that apparel stores must not fall dependent on s specific class of customer. Buyers are increasingly appearing to prefer above standard apparel with a much lower cost, making apparel less differentiated. When selling directly to consumers, buyers would incur a significant portion of their dispensable cash. Same goes with retail store, they purchase apparel at the least possible final cost, but adds up to prices of apparel.
Competitor Analysis
Local Competitors
There are three competitors for UNIQLO: Bossini, Giordano and Muji. Bossini International Holdings Limited is an apparel brand owner, retailer and franchiser nestled in Hong Kong. From its onset in 1987, Bossini continued to grow both domestically and internationally. Today, the global distribution network is comprised of 551 directly managed and franchised outlets in Mainland, 322 export franchised outlets, 178 directly managed outlets in Hong Kong, Taiwan, Singapore and Malaysia and 1, 051 outlets in 20 countries. Taking pride on its Bossini brand that is comfortable, easy to mix-and-match, colorful and energetic like the ‘Family-Fit’ brand, Bossini was able to cater to various consumer requirements in a value for money fashion ( 2006/2007).
The strength of the brand and the people was drawn from the seven practices: face reality, keep it simple, act with the speed of light, set stretch goals, drive quality, create and sustain a learning organisation and keep the A, nurture the B and discard the C. Through this set of practices, Bossini puts emphasis on quality, efficiency and profitability as a source of competitive edge. The company is also continuously building brand awareness by means of innovative cross-regional marketing activities. In enhancing its supply chain, Bossini shorten the product cycle from design to store and will continue to build string ties with them in a proactive manner. Building up an IT system is a strategy meant to drive future growth and profitability. Though the company deals with closure of unsuccessful outlets whenever necessary to divert their attention to areas which needs a closer concentration and with participating in broad campaigns and dual-branding to promote the products and to expand market reach, Bossini is more focused on its four core markets.
Established in 1981, Giordano is one among the popular and established casual apparel retailer in Asia Pacific Region which employs about 11, 000 staff with over 1, 895 shops operating in 30 territories worldwide. From its restructuring from 1986, the company prepared for international expansion, which was made possible by the initial success in Hong Kong, Mainland and neighboring countries such as Taiwan and Singapore. Known as the most successful homegrown retail stores, Giordano is a pioneering company that participated in drafting of code of practice in the retailing scene and introduced innovations such as the total shopping experience where customers are greeted individually in the doorstops and bade goodbye unto when leaving the store.
Envisioning itself in making people feel good while looking great, the company’s main strategy is its ‘For the People’ philosophy wherein quality, knowledge, innovation, service and simplicity are at the core. As an apparel of choice, Giordano is also committed in providing simplicity of design, quality workmanship, attentive customer service and value-for-money, allowing the company to strongly build its own loyal following ( 2008). Though the four brands – Giordano Ladies, Giordano Concepts, Giordano and Giordano Junior – are constantly profitable, the weakness is that Giordano has a limited range of products and that consumers may grew tired of the existing concepts.
better known as, is an outgrowth from The Seiyu, Ltd. In becoming a separate brand, develops range of apparel, household goods and food that takes pride on being functional, simple and of high quality.
Literally means ‘no brand’, the over 700 products observes the philosophy of simplicity. Primarily purporting an individualistic and diversified lifestyle, follows three processes that is said to be the reason for proving good quality products at lower prices. These are selection of materials, streamlining processes and simplification of packaging.
The company’s emphasis on preventing materials wastage and improvement of essential product quality as well as time and labor optimization are the key in achieving operational effectiveness and efficiency. The selection of materials is a very important stage for where suitable raw materials are the main concern. Bulk buying is a strategy wherein quality is the indispensable criterion, underpinning the possibility of producing high quality, low prices products. Standards at manufacturing stages are also under close scrutiny in order to eliminate waste and reduce cost. When it comes to packaging, sticks to the simplicity philosophy, bearing only product related information and the price tag (Ryohin Keikaku Co., Ltd.).
International Competitors
Gap, Inc. and United Colors of Benetton are the two international competitors for UNIQLO. Gap, Inc. has been officially incorporated in 1988 as a global specialty and outlet store which offers casual apparel, accessories and personal care products. Gap, Banana Republic, Old Navy and Piperlime are the four primary brands.
Credit:ivythesis.typepad.com
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