Case 1 Uniqlo PDF

Preview

Summary

Uniqlo fans...

Description

Case study 1 Adapted from: https://martinroll.com/resources/articles/strategy/uniqlo-the-strategy-behind-the-globaljapanese-fast-fashion-retail-brand/

Uniqlo: The Strategy Behind The Global Japanese Fast Fashion Retail Brand Mention the brand Uniqlo 10 years ago to anyone outside of Japan and you would get a confused look. Mention Uniqlo to any global citizen today and the associations of quality, affordability and fashionable come to mind immediately. That is how successful Uniqlo has become in recent years. It has become yet another contender in the global fast fashion retail market. Despite having to compete against other bigger players like ZARA (Inditex), H&M, Gap and Forever21, Uniqlo has still managed to grow at an astounding pace. Some of Uniqlo’s key brand success factors include its unwavering commitment to innovation and its company culture. Its Japanese founder, Tadashi Yanai is famous for his quote “Without a soul, a company is nothing”. This soul is reflected in the 23 Management Principles that Tadashi Yanai has created and indoctrinated in each and every Uniqlo employee. The essence of these principles includes putting customers first, giving back to society and being self-disruptive. The Uniqlo brand story In 1972, Tadashi Yanai inherited his father’s chain of 22 men’s tailoring stores, Ogori Shoji in Ube, Yamaguchi. Shortly after becoming company president in 1984, he opened a new store in Hiroshima – Unique Clothing Warehouse, which was later shortened to Uniqlo. His promotion is well-documented as the catalyst for the company’s rapid expansion. Inspired by his travels to Europe and the US, where he discovered large casual apparel chains like Benetton and Gap, Tadashi Yanai saw immense potential for Japan’s casual wear market and set goals to evolve the family’s business strategy from suiting to casual clothing, buying fashion goods in bulk at low cost. Tadashi Yanai also discovered that many foreign fashion chains were vertically integrated, taking control of the entire business process from design to production to retail. By 1998, he had successfully opened more than 300 Uniqlo stores across Japan.

However, one of the main challenges faced was consumer perception of the brand – it was perceived to be a discount retailer selling cheap and low-quality apparel to the suburbs. This perception completely changed when the brand launched the Global Quality Declaration in 2004, a pledge to stop making low-priced, low-quality garments. Since then, people started noticing Uniqlo for its high-quality fleece jackets. The brand perception instantly shifted from being cheap and low-quality, to being affordable but high-quality. Today, Uniqlo is a wholly-owned subsidiary of Fast Retailing Company Limited and it is known for providing high-quality private-label casual-wear at low prices. As of September 2019, the brand has grown to more than 2,250 stores in 25 countries across Asia, Europe and US in just a matter of 22 years. It is the biggest apparel chain in Asia with over 800 retail stores in Japan alone. Fast Retailing’s market capitalization is over USD 49.2 billion and it employs more than 56,000 people globally. For the year ending 2020, Fast Retailing had revenues of USD 22 billion and a profit of USD 2.5 billion. The company’s home market Japan contributed 38 percent to its total revenue, with one in four Japanese said to own a Uniqlo down jacket. Fast Retailing has been growing at an incredible rate in the past 5 years and its confidence is reflected in its revenue forecast of 9.5% growth for FY2021. According to global management magazine Forbes, Uniqlo has a brand value of USD 9.2 billion and is 84th on the list of the World’s Most Valuable Brands. Much of it is credited to its founder’s strategy of innovation and its very customer-centric culture. Uniqlo aims to be the world’s largest mass clothing retailer, based largely on expansion in US, China and online. It is slowly catching up with global fashion giant H&M’s market share, whose 2019 revenues stand at USD 24.3 billion. If Uniqlo achieves this ambitious target, it will dethrone Inditex (Zara’s parent company) as the leader in global apparel. The Uniqlo brand strategy Uniqlo’s brand message encapsulates a clear vision: “Uniqlo is a modern Japanese company that inspires the world to dress casual”. The corporate strategy that has worked for Uniqlo so far is to “totally ignore fashion” instead of chasing fast-fashion trends like its other competitors. The brand philosophy “Made for All” positions its clothing to transcend age,

gender, ethnicity and all other ways to define people. Contrary to its name “Uniqlo”, its clothes are simple, essential yet universal, enabling the wearers to blend them with their individualistic style. This design driven clothing brand offers unique functional performance owing to in-house fabric and design innovation. The company distinguishes itself from its price driven competitors by branding its signature innovations with names like HeatTech, LifeWear and AIRism. Uniqlo provides a superlative physical shopping experience by impeccably managing its stores, inculcating a positive employee culture and through in-store technology like video tutorials that describe product attributes. Delivery system supporting a clear brand promise: Two of the biggest challenges for any brand is to define a clear brand promise and to consistently deliver effectively on its brand promise across all touch points of the customer experience journey. Successful brands are those that create supportive organizational and operational structures that facilitate the implementation of strategies to deliver on the brand promise. On one hand, Uniqlo has indeed managed to successfully define a clear brand promise for itself to provide high quality, performance-enhanced, universal, basic casual wear at affordable prices. On the other hand, it has also created a strong delivery system to deliver on this brand promise. The company’s product planning, design, manufacturing and distribution capabilities are all in-house, which means that it is able to stay close to customer needs based on what customers are buying in their stores, allowing them to save costs on overproduction or unnecessary overheads. Stocks can be upgraded within a matter of weeks or replenished within a matter of days. By focusing on core products in a limited range of fabrics, Uniqlo is able to consolidate its fabric buys into huge orders that give it greater negotiation power against suppliers which translates into cheaper prices for its customers – serving its brand promise well. Product development approach and efficient supply chain: Tadashi Yanai is fond of saying that “Uniqlo is not a fashion company, it’s a technology company.” And indeed, the brand’s approach to making apparel has more in common with the iterative approach to product development embraced by the technology industry than the cyclical, trend-driven rhythm of the fast fashion retail industry. While leading competitor Zara has built the world’s largest apparel business based on rapidly responding to fast-changing fashion trends, getting

items from factory to store in approximately two weeks, Uniqlo takes the exact opposite approach, planning production of its wardrobe essentials up to a year in advance. Unlike its competitors who sell a large variety of trendy fashion inspired by the global runway, Uniqlo focuses on producing a few styles of urban practical basics. The company also runs a highly robust supply chain. Through development of a detailed marketing strategy by the marketing department for each season, merchandisers are able to adjust production by style to align with demand well in advance. Concept meetings with all key product creation teams are held about a year before a product is launched. Once a garment is in production, about 400 skilled staff members visit production centers to ensure quality and resolve outstanding issues.The Uniqlo global production centers are located in Shanghai, Ho Chi Minh City, Dhaka, Jakarta and Istanbul. Customer concerns are also addressed by the production department which keeps the product teams plugged into what the end consumer thinks, as product and marketing teams work closely together around strategy and execution. Company culture and visionary leadership: In 2019, Tadashi Yanai was ranked number no. 54 on the list over the best-performing CEOs in the world by Harvard Business Review. Since 2000, he has provided a 700 percent shareholders return, and the market capitalization of Uniqlo has increased USD 39 billion. He is credited widely for the huge success and explosive growth of Uniqlo in the past 36 years due to his creation of a strong company culture which focused on teamwork and customer experience. Uniqlo’s focus on teamwork is demonstrated through its flat organizational structure with employees greatly encouraged to provide suggestions. The values and goals of the company are translated directly into processes and measures exhibited strongly by employees all over the world. Company financials are completely transparent to employees and sales and charted and posted daily. The brand also places a huge emphasis on its retail store experience and micromanages every customer touch point. Staff training is a huge priority for the company as each new employee is trained for a remarkable 3 months – way above global industry average. Every activity undertaken by its employees are recorded and analyzed – from apparel folding technique, to the way retail staff

returns credit cards to customers with both hands and full eye contact. Employees are also taught to interact with shoppers using six standard phrases including “Did you find everything you were looking for?” and all customers are welcomed with “Welcome to Uniqlo!”. In 2000, the company built a Uniqlo University in Tokyo in which 1,500 new store managers are trained every year. One example showcasing Uniqlo’s focus on the customer experience is Tadashi Yanai’s decision to conduct all operations in English in 2012 – a decision considered rare in Japan. This has contributed to its global success and is something other aspiring global companies can learn from. In addition, Uniqlo employees constantly look to improve their internal processes and consequently the customer experience. In 2004, Uniqlo opened its first large-format store (over 2,000 square metres in size) in Osaka after observing its competitors Zara and H&M do the same, leading to an improvement in customer satisfaction and profitability. The Uniqlo Customer Center also uses customer feedback to constantly improve its products. High dedication to innovation: As Peter Drucker said, innovation and marketing are the only two functions of any organization. Uniqlo understands this well – the brand is wellknown for its fabric innovations. The company also hires Japanese textile masters called “Takumi”, who work closely with factories in China and Japan to continually develop new high-tech fabrics for Uniqlo. One of Uniqlo’s signature innovations is HeatTech, a fabric developed in conjunction with Toray Industries (a Japanese chemical company) that turns moisture into heat and has air pockets in the fabric to retain that heat. The HeatTech fabric is thin, comfortable which has enabled the brand to create stylish designs which are very different from the standard traditional warmth clothing segment. The HeatTech innovation keeps improving over time with new fiber technology, allowing the brand to come up with different collections of thermal clothing. In 2003, 1.5 million HeatTech products were sold while in 2012 over 130 million units were sold across 250 items. Besides HeatTech, Uniqlo has also created AIRism (a soft fabric with quick-drying inner fabric), LifeWear (a blend between casual and sportswear) and UV Cut (material designed to prevent 90% of ultraviolet rays from reaching the wearer) technologies. These new fabrics

are all branded and copyrighted, which poses a struggle for competitors who want to try and attempt to match this point of differentiation. Uniqlo’s global sustainability approach Sustainability has been a hot topic in business for the last decade and is now quickly becoming a must-have hygiene factor for companies that want to resonate with and win the loyalty of its global customers. One of Tadashi Yanai’s 23 Management Principles is to contribute back to society. The brand strongly believes that company’s value is intrinsically linked to the value it brings to society as a whole and that successful companies must serve society. It believes that companies that only focuses on profit will not survive. Its corporate statement “Changing clothes. Changing conventional wisdom. Change the world.” reflects the company’s desire to transform society and enhancing the environment and lives of all its stakeholders. Global competition: Uniqlo comes in third in global ranking of fast fashion retailers with sales of USD 22 billion, just behind Spain’s ZARA (sales of USD 33.7 billion) and Sweden’s H&M (sales of USD 24.3 billion). Nonetheless, Uniqlo’s quick growth in recent years has seen it overtaking America’s Gap (sales of USD 16.4 billion), who has been long dominant in basic wear. Looking ahead, there is indeed a lot that Uniqlo needs to do to meet its ambitious goal of being the world’s largest fast fashion retailer, but it is without doubt on track to challenge the global players in the fashion retail industry. International expansion: When a brand starts to gain popularity in its country and region, the next natural step would be to look to expand globally. This is especially so for Uniqlo, but the brand has met with considerable challenges. Up till now, the brand footprint and awareness are relatively low outside of Asia, something the company is tackling through global retail store expansion programs, advertising and marketing. In its products, notable differences between global customer groups have been overlooked and Western consumers often complain about its clothes size and fit to body shape. To tackle this, Uniqlo has started partnerships with Western designers like Christophe Lemaire and launching collections like the Uniqlo U line.

In terms of non-organic growth, the brand has its own share of acquisition talks. In 2012, its first step to penetrate the US market saw Fast Retailing paying USD 290 million for J Brand, a California-based denim firm. In 2004, it purchased Theory, an affordable luxury brand which is quickly developing into a one billion dollar business. More recently, Uniqlo had wanted to enter into a merger with J Crew Group in 2014, but the company eventually pulled out of the deal due to the hefty USD 5 million price tag. Run by well-known executive Mickey Drexler, J. Crew is a multi-channel retailer and distributor of women’s, men’s and children’s apparel, shoes and accessories, and has deep expertise about the retail infrastructure in the US, The deal would have given Uniqlo access to 400 stores in the US. Moving forward, Uniqlo needs to be very focused in its international expansion strategy with clear and achievable plans tailored to each market. With profits declining due to margin erosion over the years and an impairment charge on J Brand premium denim clothing, international operations are getting increasingly important for Uniqlo to sustain its profitability. It is looking at specifically targeting the US and China markets. Currently, Uniqlo only has a few stores in the US but its brand popularity is steadily increasing due to its bold and clear colors design aesthetic, and value-for-money cashmere products. Conclusion: Uniqlo’s runway to become a global Asian brand is massive The Uniqlo brand was set up to be all about the Japanese philosophy of simplicity and essentiality, and this is reflected throughout the brand’s marketing, communications, and operations. It is indeed impressive how Uniqlo has managed to transform from a single inherited men’s tailoring shop from Tokyo into a global casual wear giant and one of the most impressive brands from Japan and Asia today. Under Tadashi Yanai’s effective and visionary leadership, Uniqlo’s parent company Fast Retailing targets to become the world’s largest fast fashion retailer. One of the secrets behind Uniqlo’s success is its strong delivery system supporting a clear brand promise, and its relentless commitment to innovation. By clearly defining its brand promise to provide high quality, performance-enhanced, universal, basic casualwear at

affordable prices and by running a robust and efficient supply chain to produce its apparel, the brand has created an environment where it continually exceeds customers’ expectations. Building and sustaining a brand that is relevant and one that resonates with the customer base is one of the most difficult aspects of building a strong brand today. Uniqlo, with its presence in diverse markets, has managed to hold up well to this challenge of building a relevant and resonant brand personality. There are indeed many opportunities that Uniqlo can leverage in order to reach its goal of becoming the largest global apparel retailer. In particular, the company plans to focus on growing Uniqlo internationally and expanding online sales. With Uniqlo’s impressive company culture, bold and daring leadership, and proven consistent financial growth in the past 15 years, it is no doubt that the Japanese fast fashion retail brand is on the right path to global success. Question 1 How did Uniqlo manage to compete well in the fast fashion retail market so quickly? Give 5 reasons with example based on the above case.

Question 2 From the above case, do you think Tadashi Yanai is consider a strategic leader? Justify 4 reasons why do you say so.

Question 3 Perform a SWOT analysis for Uniqlo according to the above case (Strengths, Weaknesses, Opportunities and Threat)...