Case Study of Muji - Grade: B PDF

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MKTG500

Case Study of MUJI MUJI’s Lifestyle and Marketing Strategy

Class: CMBA-AIM0316 676441560 Wen-Pei, Chen 658095884 Qian, Wu

INDEX 1. Executive Summary

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1. The Introduction of Ryohin Keikaku (MUJI) 2 2. Products Offering 3 2.1 What about MUJI’s design and where is the design from?

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2.2 How does MUJI manufacture their products? 5

3. Market and Competitor Analysis 3.1 PESTEL Analysis

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3.2 Porter’s Five Forces 7 3.3 SWOT Analysis 4. STP Strategy

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4.1 Market Segmentation Strategy 4.2 Target Market Strategy

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4.3 MUJI’s Positioning Strategy 10 5. Pricing Strategy

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6. Communication Strategy 11 7. Distribution/Experience Strategy

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8. Marketing Strategy Recommendation 15 9. Marketing Case Report Learning

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10. Reference Lists 17 1

1. Executive Summary Ryohin Keikaku Corp., LTD launched the brand, MUJI, a Japanese retail company which sells a wide of household and consumer goods. It was created to provide a better quality product in relatively lower and reasonable price; with the tag line “Lower priced for a reason”. MUJI is distinguished by designing minimalistic, functional and no-logo products. Moreover, it sells not only goods but also a lifestyle. MUJI’s popularity is attributed to power of people, word of mouth, they make a good use of their customers to share their simple but affluence shopping experience. Also, they are a head of the increasing popularity of the ani-brand movement. As a result, those who are tired of frivolous and prescriptive branding are turning to support this pure aesthetic and core essence. The report has divided into 10 aspects to introduce and to analyze how MUJI infuses its philosophy into marketing strategies as well as how it stands out in this dynamic competitive industry. 2. The Introduction of Ryohin Keikaku (MUJI) Ryohin Keikaku Co., Ltd. is a Japan-based company mainly engaged in the retail of self-brand goods. It use the brand name of MUJI, and the company is focused in planning, development, procurement, logistics and processing of a wide variety of household and consumer goods. Its business includes stationary, electronics, home appliances, cosmetics, food, furniture, apparel, and MUJI also provides business like Café, Campsite, home furnishing, consulting and so on. Founded in 1979 in Japan, Ryohin Keikaku Ltd was a subsidiary of a supermarket chain The Seiyu Ltd at the very first time, only with about 40 kinds of products including 31 foods and 9 groceries. Their original goal is to create simple, low-cost, good quality products. In 1983, the first directly operated store opened, and this attracted public attention in a very big volume. Later in a few years, Mujirushi Ryohin started overseas production and procurement, the company was gradually going in Later in 1989, the company was separated from Seiyu and established single entity to have planning, development, production, distribution and sale of all Mujirushi Ryohin products, and start to use MUJI as their brand name to expand market domestically and overseas. According to the latest annual report of MUJI, the total revenue achieved 2,547.5 million dollars by Feb 2016, while sales in China market contributed about 12% at 305.7 million dollars, ranking No.2 of their global business next to Japan. To take a closer look at the brand name, we can easily find what they are aiming for. Ryohin Keikak u, short in MUJI, translates as “no-brand quality goods” in Japanese. For MUJI’s brand vision and mission, they present their vision to become a sustainable global company that offers pleasant life to customers, and it dedicated to create a simple, elegant, and comfortable lifestyle at reasonable price s to people. The philosophy of the brand is to deliver functional products that strive not to be the bes t, but “enough”. Enough is not a compromise but the feeling of satisfaction, any features and design unrelated to the function of products are omitted. MUJI's goal is to give customers a rational satisfaction, expressed not with, “This is what I really want” but with “This will do.” “This is what I really want” expresses both faint egoism and discord, while “This will do” expresses conciliatory reasoning. The aspiration is to achieve the extraordinary by modesty and plainness in the pursuit of the pure and ordinary. In other words, MUJI is always the icon of being “resource-saving”, “lowpriced”, “simple”, “anonymous” and “nature-oriented”. The unique brand value helps MUJI to achi eve great success, and it indeed influences their marketing strategies in many ways.

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In today's urban life, all aspects of people's life was marked by a variety of labels, the contained behind the brand on the basis of the psychological consumption values, social class and vanity often obscures the people really think. But MUJI’s concept is just the opposite. It abandon all external label, simplifying - remove the trademark, remove all unnecessary processing and color, simple packaging, remind people to appreciate the beauty of the raw material and the material, also items to true colors, users will be liberated from external constraints, and achieve a more close to the inner self and the natural state, this also is the Japanese satori's pursuit of self. For tired of pursue famous brand and luxury life urbanite, MUJI is indeed refreshing. How the company approaches its marketing activities? Many activities related to value chain help th e brand to become successful. MUJI is known for its distinctive design, and in 2005 it was awarded five gold product design awards by the International Forum Design in Germany. Their production o f products focused largely on the design, and collections of customers’ opinions on function improv ement are accepted throughout years, later considered and carried on the new production. Meanwhil e, besides common marketing activities carried by other companies, MUJI pays more attention on re sonate with customers with every part of product experience, in turn the spread of outstanding exper ience will help the brand value be widely known and accepted. That is a typical way of communicat ion between company and customers, and it is the reliance on people’s feeling and lifestyle to help t hem strengthen its brand value and awareness. 2. Product Offering MUJI takes an integrated way from product planning, design, production to retail sales by the Corporation, so that products can better meet consumer demand, reduce costs, and in a very short period of time to respond to consumer demand quickly. MUJI covers not only commodities, like appeal, snacks, cosmetics, cookware and stationary but also furniture, luggage, Ultrasonic Aroma Diffuser, lights and background music albums. Except what can be found in the store, they also provide services, like consulting, delivery and experience.

Figure 1. MUJI’s Product Catagory 2.1.

What about MUJI’s design and where is the design from?

MUJI is composed of Japanese aesthetic and practically reflecting on the product design. Due to the limitation on geography, Japanese is very good at making the most of their surrounding environment and few resources. They favor in a particular sense of beauty of cleanness and high 3

quality-oriented which are from the craftsmen’s spirit and have a widely influence on the Japanese art and architecture industry. Thus, MUJI’s design philosophy is combined with Japanese virtue and their own concept toward a kind of lifestyle on simplicity, functionality and sustainability. All MUJI’s products are non-branded, muted colors and minimalist design which is against the current mainstream fashion design in the consumption society. With the plain and anonymous design, MUJI leaves more rooms for showing personal identify by customer themselves. MUJI promotes a practice from a lifestyle which is moderate, humane and self-restraint by infusing these attitude into plain, functional and high quality but affordable products. On the other hand, there are four ways that MUJI develop their new products. Firstly, Customers providing designs and having an e-campaign. MUJI build on an online customer service platform, called “ MUJI-Lab”, and enable consumers to share their using experience or raise any related questions. MUJI based on these reflection to amend the products. Also, they will hold a design campaign, “MUJI Award”, and demonstration event worldwide to down selection and award those best designs from their customers. Secondly, MUJI group a detail observation on living and domestic elements. The corporate interviewers will visit their customers in house to understand consumer’s needs and living obstacles. They also like to know what consumers think of the existing design of product, not limited to MUJI’s but for ordinary design of things. For instance, MUJI’s body-fit sofa, which favors with worldwide consumers, is created through interactions with end-users. The interviewer asked those users about what kind of sofa they would like to have and they provided three types of sofa with different heights. In sum, this famous product was produced after ten years with constantly reviewing and customer testing in 2013. It also earn a nickname of “people-spoiling sofa” on Japanese social media with extraordinary sales performance globally.

Figure 2. MUJI’s body’-fit Sofa Thirdly, work with famous design masters to raise the global aesthetic. There are several worldwide famous designers worked with MUJI, such as Jasper Morrison and Enzo Mari, there’s no single propaganda taking advantage of their fame to drawing attentions for sales. In the reverse, MUJI has a lot designers advocated and agreed with their core value on focus on the product itself rather than others. The non-brand mission thoroughly implement in every move of MUJI. Last but not least, MUJI is to broaden the meaning of ‘design’. The aim of MUJI’s product is to find a solution to real life problems which means none of them is created for the sake of design. They could simply refine the ordinary design of normal stuff like power strip aside. This design is not only to add multiple different socket like USB insertion, but also provide various different length can be replaced or prolonged.

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Figure 3. MUJI’s Power Strip 2.2.

How does MUJI manufacture their products?

The MUJI’s design principle is based on three elements fundamental, practical and necessary in daily life. With this philosophy, the firm frequently review all the materials, time of streamline, labors in operating processes and simplify the packaging. These simple, elegant and functional products are represent our pursuit of Pleasant Life which is committed and implemented in MUJI’s product development which defined into three criteria. Firstly, Problem Solving through Product Design. MUJI’s products are most plain-looking outfit with sophisticated designs. These design are from daily observation of how human acts, goods using behaviors, raising the online discussion of whether what customer really buy thing is for needs or for desire and held annual campaign for people design their own products then having an e-election for the design which is the most consideration into account. Meanwhile, MUJI’s simplelooking design is endurable with time since it’s not about fashion or stylish but about basic requirement of living. With this idea, none of MUJI’s product showed and published designers’ name or logo which strength the focus of the basic fundamental on product itself. Secondly, Scrutiny of Materials and Processes. MUJI favors unfinished or natural materials and uses many discarded industrial material in poor appearance which can be acquired n bulk at low cost. It’s easy to see Polypropylene, rattan, linen, unbleached cotton, and bare metal with subdued or matte colors among their products. On the other hand, MUJI refuse to use any harmful materials such vinyl chloride, formaldehyde, fluorine, and food additives. The most interesting is that they also make the most use of discard but still fully functional materials that other company refused to use those scarcity inappropriate materials. For example, MUJI sells a product from broken shiitake mushrooms that other companies threw away by its fragmentary but the mushrooms still taste the same. It can show how faithful MUJI is to their philosophy of simplicity, this approach is also in keeping with their policy of conserving resources and reducing waste. Not to mention, MUJI values on the true quality during the manufacturing and eliminates unnecessary processes, such as coloring, polishing and sizing. This is not only for cost reduced to have a better streamline in operation but also waste reduced.

At last, Simplification and Standardization on Final Packaging. MUJI tends to promote their core value, Simplicity, in every way of their marketing strategy, even on the final packaging. They prefers to show the natural colors and shape of products rather than decorating fancy accessories. All the MUJI products display on store shelves or on the cashier, they are only product-related information with their price-tag only. Through aforementioned values and commitments, they are able to giving a simplicity, harmony 5

and beauty lifestyle for customers and contribute to a greater community. MUJI deliberately pursuit of the pure and the ordinary in product designs in order to achieving the extraordinary overwhelming. 3. Market and Competitor Analysis As the corporate mission of MUJI “Lower price for a reason”, the brand value is reflected througho ut the company’s beliefs, operation, marketing and business model. The key components of MUJI’s philosophy can be summarized: - Reasonable price; - Simple, moderate, and functional design; - Basic, understated colors; - Essential parts for people to design their lifestyles at their discretion. To have a more vivid view of market and competitors, we use the analysis methods as below 3.1 PESTLE Analysis Political/Law Factor In a large range of view, Chinese market is big enough and full of varieties. The industry market co ntains not only many local retailers, but also companies from overseas. However, in the Muji case, s ince the company decided to produce quite a few amount of products in Japan to make sure the qual ity and design, according to Chinese government regulation, import tariffs will be added on these pa rts of products. Also, export tax refund policy may lead to lower cost of products produced in China and sell in Japan.

Economic Factor Over the past ten years, China’s economy experienced significant GDP growth rate, ranking NO.2 i n world range. Reports suggest that if China continues to excel at this rate, it will surpass U.S. GDP soon. China’s GDP rate suggests that each citizen is adding more and more values to the society, thi s is in turn increasing consumers’ purchasing power. What’s more, China owns the world’s largest a mount of population, though the growing rate is decreasing, but the it still has enormous influence o n purchasing level. Based on the huge population and rapid growth of income, China is no doubt a b ig and potential market for MUJI. Socio-cultural Factor The social and cultural aspect of China plays an important role as the demographics constantly change. For example, population growth and age distribution fluctuate, the literacy rate in China als o reach over 90%. In this case, younger people with certain income and financial independency, em phasizing on enhancement of lifestyle and life value, may regard as the main purchasing power now adays. On the other side, people in Asia mostly share the similar value and culture, oriental culture i s gradually gaining more attention worldwide with the immigration power and spread of knowledge influence. So MUJI’s brand image of lifestyle and value is easily accepted by customers, especially in China market. Technological Factor New technologies change the way company go to market. In recent years, accompanied by the widespread expansion of network, online communities and social networks tend to have more influe nce on customers’ purchase, marketing events are widely and quickly spread on the internet too. Ba 6

sed on the new trends, MUJI make full use of crowdsouring to develop new products, and reinforce their brand value at the same time. They hold MUJI awards to collect creative design of new-launch ed products, and they also consistently collecting suggestions from their loyal customers by mobile apps and website. The intellectual property of products and new ways of marketing help them to fac e the technological factors in the industry. Ecological Factor Analysis from the aspects of ecological factors, the vast majority of industrial activity inevitably destroy the natural environment quality, and now environmental pollution issue draws great attentio n from the UN to governments around the world, and relative regulations are formulated and perfect ed to protect environment. It is not only the objective need to protect earth's environment, but also the trend of "the human and the nature harmonious coexistence”. Environmental protection is one of the most important product feature of MUJI, from recycled raw materials to extension of product lif e, they emphasize the factor on every aspects of operation. 　 3.2 Porter’s Five Forces Analysis Bargaining power of suppliers From the products range we can easily see that all the raw materials MUJI need for production are basic and common, and suppliers of the materials have quite a lot buyers too, so each of buyers can’ t be the indispensable clients for suppliers. Since the core value lays in MUJI is the design but not p roduction, there is no switching costs for MUJI and it’s also possible for them to realize forward of backward integration, so the bargaining power of suppliers is insubstantial for MUJI. Bargaining power of buyers In the grocery or clothing industry, competition is quite intense and customers have a wide choice o f alternatives, switching cost for buyers is very low when consider about to meet the functional need s of products. However, due to less competitive on price, MUJI emphasizes the product added value for customers. Many customers tend to find buying sets of MUJI’s products give them a uniform style of design a nd special feeling of using, instead of buying one single products. Through understanding of custom ers’ demand, the company extend their product offerings, design special usage based on various sce narios from daily life, which aiming to provide a complete solution to improve the efficiency and qu ality of customers’ everyday life, thus reduce the bargaining power of buyers. Threat of new entrants Considering about the policy and capital requirement factors, there is no entry barriers in this indust ry. But due to the wide range of products covering groceries and clothing, as well as current situatio n of saturated market, though there may exists many new entrants, but few of them can develop larg e enough to threaten MUJI’s position. Threat of substitutes According to the study of substitutes, buyers are more prone to accept prices of products if other alt ernatives are not readily available or if the existing qualities of substitutes are not satisfactory. In the case of MUJI, there are little alternatives that offer the product ranges, good quality and relatively lo w costs as MUJI does, therefore the threat of substitute is relatively low. 7

The intensity of rivalry among competitors in this industry Even with saturated market and low threat of new entrants, the rivalry in the market is still regard as intensive. Companies like IKEA and Uniqlo share the same value of MUJI, they all provide large ra nges of products with relatively lower price, and the brand awareness and market presence are comp etitive enough too. The most apparent strength lays in MUJI is the strong identity of the brand. Whe n thinking of MUJI, messages like recycling, simplic...