Group-2(Groupwrittenreport- Uniqlo) PDF

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GROUP ASSIGNMENT COVER SHEET STUDENT DETAILS Student name:

Nguyễn Kim Tuyến

Student ID number:

B1111914034

Student name:

Nguyễn Thị Thu Tuyết

Student ID number:

B1121923276

Student name:

Nguyễn Thị Anh Thư

Student ID number:

B1111914001

Student name:

Nguyễn Thị Thu Yến

Student ID number:

B1111914039

Student name:

Nguyễn Lê Kim Phụng

Student ID number:

B1111910239

UNIT AND TUTORIAL DETAILS Unit name:

INTERNATIONAL BUSINESS

Tutorial/Lecture:

Lecture

Lecturer or Tutor name:

Unit number: Class day and time:

IB-T121WSB-3 Friday, 12:00pm-3:15pm

ADAM BRIFFET

ASSIGNMENT DETAILS Title:

Group 2 - Group written report - UNIQLO

Length:

3636 words

Due date:

17/04/2012

Date submitted:

16/04/2021

DECLARATION I hold a copy of this assignment if the original is lost or damaged. I hereby certify that no part of this assignment or product has been copied from any other student’s work or from any other source except where due acknowledgement is made in the assignment. I hereby certify that no part of this assignment or product has been submitted by me in another (previous or current) assessment, except where appropriately referenced, and with prior permission from the Lecturer / Tutor / Unit Coordinator for this unit. No part of the assignment/product has been written/ produced for me by any other person except where collaboration has been authorised by the Lecturer / Tutor /Unit Coordinator concerned. I am aware that this work may be reproduced and submitted to plagiarism detection software programs for the purpose of detecting possible plagiarism (which may retain a copy on its database for future plagiarism checking). Student’s signature:

Nguyễn Kim Tuyến

Student’s signature:

Nguyễn Thị Thu Tuyết

Student’s signature:

Nguyễn Thị Anh Thư

Student’s signature:

Nguyễn Thị Thu Yến

Student’s signature:

Nguyễn Lê Kim Phụng

Note: An examiner or lecturer / tutor has the right to not mark this assignment if the above declaration has not been signed.

GROUP WRITTEN REPORT UNIQLO GROUP 2

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Table of Contents I/ INTRODUCTION .............................................................................................................................. 4 A. EXECUTIVE SUMMARY ........................................................................................................ 4 B. COMPANY BACKGROUND ................................................................................................... 4 II/ INTERNATIONAL BUSINESS ...................................................................................................... 6 A. INTERNATIONAL BUSINESS STRATEGY .......................................................................... 6 1.

Pressures for cost reductions ................................................................................................... 6

2.

Pressures for local responsiveness .......................................................................................... 7

B. ENTRY MARKET ..................................................................................................................... 8 C. SUPPLY CHAINS ...................................................................................................................... 9 III/ ISSUES/ CONCERNS ................................................................................................................... 12 A. MACRO-ENVIRONMENT ..................................................................................................... 12 B. MICRO-ENVIRONMENT ....................................................................................................... 13 IV/ RECOMMENDATIONS............................................................................................................... 16 V/ CONCLUSION ............................................................................................................................... 18 VI/ REFERENCE LIST ....................................................................................................................... 19

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I/ INTRODUCTION A. EXECUTIVE SUMMARY UNIQLO is operated and possessed by the biggest garments retailer in Asia: Fast Retailing Co. The organization can possibly acquire the North American market constantly in 2020, which is really the drawn-out objective set by its owner, President and CEO (Mr. Tadashi Yanai). UNIQLO is situated among contenders by its high-quality design products and its celebrated Heat tech. In contrast to the majority of its rivals, its SPA Business model permits the uniqueness and quality of its items dependent on client feedback. Moreover, with its strong service mind embedded within Japanese culture, the relationship between UNIQLO and its customers is exceptionally solid. UNIQLO has recently achieved popularity for its reasonable basics offered associated with its sleek and modern design. Moreover, the company is also facing challenges with the supply chain model in global markets and product size inconsistent between Asia and U.S. markets. Besides, the competitors are intense, challenges with development to another market and other issues may obstruct the accomplishment of the company. This report is intended to investigate UNIQLO's business operations, along with the process whereupon its global plan of action and strategies have been carried out and some recommendations will be offered in regard to the company's strategic development in the future.

B. COMPANY BACKGROUND The trademark was initially founded in 1949 in Yamaguchi Prefecture in west Japan by present CEO Tadashi Yanai - the richest man in Japan. After that, the company was established in 1984 in Hiroshima under the name of Fast Retailing Co.Ltd and developed quickly by its different suburban roadside stores. Especially, UNIQLO Group Mission is making truly great garments with new and unique worth, and to enable customers all over the world to encounter the joy, happiness, and

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satisfaction of wearing such incredible garments and enriching customers' lives through our unique corporate activities, and to develop our company in unity with society. In 1998, UNIQLO became famous throughout Japan for its fleece campaign and now UNIQLO is the country's biggest attire corporate store with 852 stores, 830 direct-run stores, and 28 franchise stores, records of a 6.2% portion of the Japanese clothing market. UNIQLO has executed a restructuring in 2005 when purchasing: Comptoir des Cotonniers, Princesse tam. tam, France-based women’s fashion. UNIQLO presently extends its distribution network to in excess of 22 nations with more than 820 stores in Japan and more than 1400 ones worldwide alongside online channels. In 2014, UNIQLO turned into the greatest retail chain company in Japan that has in excess of 30,000 employees, and generating annual net sales of over ¥715.6 billion (Fast retailing, 2014). In addition, it sets the target to reach 5 trillion yen ($49 billion) by 2020 (Bloomberg, 2014). The flagship label of Fast Retailing Co. Ltd is UNIQLO which has several different brands: GU, Theory, Helmut Lang, CDC, PTT, J Brand, PLST. UNIQLO is celebrated for its advanced styles and high-quality basics collection and turns into the foremost garment company in Asia and globally because of its special highlights and the implication of advanced technology in every item, for example, Heat Tech, Airism, and UltraLight Down. In 2001, its first abroad store opened in London, which was the start of UNIQLO's worldwide extension. Today, notwithstanding being the no.1 clothing brand in Main land China, UNIQLO opens roughly 100 new stores every year and is presently growing to Asia, North American, and European markets. Our report gives an analysis of the global business climate and strategy, followed by an in-depth analysis of concern problems the company is dealing with. In the end, there will be room for possible solutions that will provide UNIQLO more strategies for future business operations.

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II/ INTERNATIONAL BUSINESS A. INTERNATIONAL BUSINESS STRATEGY Transnational strategy Since 2002, even though UNIQLO has been owned by Fast Retailing Co company, its business has continuously expanded to more countries. Their successes had caused the company to pressure more on cost reduction to the local responsiveness. According to Charles W.L. Hill G. Tomas M. Hult (2017), for managers of a multinational enterprise to balance the competitive and the inconsistent demand in each local, they have to put different pressures on the company and place a global standardization, so the Transnational Strategy has become a suitable solution for their issues. It is a plan where an enterprise carries out its operations in other markets, including invested in activities and assets overseas but not least tight the relationship with nations where their store’s places. Companies pursuing Transnational Strategy are trying to simultaneously achieve lower cost through location economics, economies of scale, and learning efficiency. Also, through differentiating their product offerings in geographic markets to account for local differences.

1.

Pressures for cost reductions

UNIQLO is famous for its Transnational Strategy to fight against the pressures for cost reductions due to the fierce competitiveness in the fashion industry. Since dealing with reduced cost pressure requires a company to try to minimize its unit costs. According to Fast Retailing reported, UNIQLO has minimized costs by negotiating directly with partners, material manufacturers around the world to place the orders in large quantities to achieve the most beneficial terms on prices. Lower the pressure of cost is their goal, on the other hand, they still highly appreciate the quality of their products, so that they have researched the materials very carefully combined with cooperating with large companies, such as Kaihara Corporation, Toray Industries. (Kaihara Co. is specialized in supplying denim fabrics based on specific standards, and the Toray Industries are known as the 6

world's leading producer of synthetic fiber). Looking at manufacturing, UNIQLO does not have any factories, for instead, they have built strong relationships with foreign factories to supervise and improve production for the best quality to create mutually beneficial relationships between partners. Besides, UNIQLO has employed cheap labor in China and other countries to massive their cost savings which resolved the cost reduction problem quite well in terms of supply and labor angles. But in fact, UNIQLO is an enormous company, which has been operational worldwide, so the cost pressure on UNIQLO remains as huge.

2.

Pressures for local responsiveness

To successfully enter overseas markets, UNIQLO has tried to adapt its products to reach differences in the local consumer tastes, preferences, and requirements in each market. Because of originating from Japan, they include their psychological understanding of consumer culture in Asia on every product. Such as the event of first entering Vietnam, UNIQLO brought to this market the new Mickey Mouse T-shirts design with Non-La the Vietnamese signature symbol to deliver an implied message about national pride. Not only was successful in Vietnam but also China. In China, most consumers, especially middle-aged people, who make up the majority of China's population, prefer simple clothing styles and minimizing clothing mix & match. Therefore, the simplicity and the reasonable price offered by UNIQLO products are both a characteristic of UNIQLO and a key to the success of UNIQLO in this market. Otherwise, in the US and EU countries, UNIQLO's development is intensively downsizing. UNIQLO opened its first store in the US in 2005, however, there have been only 51 stores by 2020, greatly lower than the number of stores opened in China since 2002. The reason for all of this is that Westerners prefer multi-style outfits, UNIQLO has various competitors such as H&M or ZARA and its products are quite small compared to the size of Americans and Europeans. The above points show that UNIQLO is not overly different culturally knowledgeable, consumer tastes and preferences in these markets. This can have more or less influence on the international operation of UNIQLO. 7

B. ENTRY MARKET

China

USA

Viet Nam

Year entered market

2001

2005

2020

Entry mode

wholly owned foreign subsidiaries

wholly owned foreign subsidiaries

wholly owned foreign subsidiaries

• Advantages of entry mode

• •

Disadvantages of entry mode Number of outlets in year 2021

• •

maintained control over the technology, marketing, and distribution of its products. research and select the locations => applying strategies to expand the urban market share. monitor the price and get full management of the product quality and ensure superior service.  highly competitive in international business bear the full costs and high risks cost time to research market and evaluating the growth potential.

791

51

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There was a correlation between China, USA, and Viet Nam, when UNIQLO ran business overseas, it was fully in charge with the entry mode wholly owned foreign subsidiaries. One of the primary advantages of wholly owned foreign subsidiaries entry mode is that UNIQLO could protect its advanced technology, such as innovative fabric technology (HEATTECH and AIRism). According to UNIQLO’S financial report at the end of May 2015, Fast Retailing Co. 's profit boosted 52 percent since the HEATTECH, and AIRism collections sale has strongly risen. Thus, individual operations abroad would be the best strategy for a company to preserve the technology along with profits captured from its technology. This entry mode also allows UNIQLO to evaluate and independently choose store venues in order to pursue its strategy of increasing urban market share and attracting local attention. After penetrating the Vietnam market, the firm has opened seven outlets located in the two biggest economic areas are Ho Chi Minh and Hanoi. The same strategy has been applied in 8

the USA and China, UNIQLO stores tend to be located in metropolitan cities and large shopping centers where crowded citizens reside. In terms of price and quality, UNIQLO is well known for its high quality and low-price appeals and accessories in the marketplace. Therefore, using a wholly owned subsidiary strategy has supported the company in taking control of the price, product quality better, and together with its service. But not least booting UNIQLO's competitive advantages in the international marketplace. Besides the advantages, there are still many drawbacks to using the wholly owned foreign subsidiaries. Firstly, UNIQLO must bear the full costs and suffer high risks. It could be the risk of political and economic, or because of changing in consumer preference. On the part of issues that the company is facing, a depth analysis around these risks will be demonstrated. Secondly, researching the market and evaluating the growth potential are time-consuming. UNIQLO took two years to open its first store in Vietnam due to the high cost of real estate in the country, also a long time of searching a suitable location.

C. SUPPLY CHAINS

Figure 2. UNIQLO’s supply chain model

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As can be seen from the figure above, UNIQLO uses the SPA Model to manage its supply chain and controls the whole process from the initial concepts to actual products. It engages in three main stages that are Planning, Production and Sales. •

Planning: The function of the R&D department is to investigate the new materials and the lifestyle from around the world, which support the company in developing products to satisfy customer demands (Fast Retailing 2021). R&D centres interact with merchandising team to finalize the cloth concepts for upcoming seasons. Next, they surpass the samples to the production department before placing orders to external partner factories.

•

Production: In this stage, production department has job duties such as monitoring products' quality and visiting partner factories each week to resolve any outstanding issue, while UNIQLO’s Takumi team is responsible for advising partner factories on technical issues. In addition, because of not owning any factories to produce goods, majority UNIQLO products are made in China. However, UNIQLO has expanded its partnership relationship with many Asian countries such as Vietnam, Indonesia, Bangladesh and India (Hara, 2019) in order to reduce reliance on China and the cost of production. In terms of quality control process, UNIQLO's total quality management to six sigma level is less than one defect per million garments while the six sigma standard is 3.4 defects per million units. With this low number of defects, it will reduce the burden on personnel to check individual garments; thereby increasing manufacturing capacity.

•

Sales: As shown in figure 2, decentralized distribution system is used. UNIQLO outsources its distribution system to external partners, which are more optimal at this activity. Therefore, this system can reduce delivery time as well as reach customer’s expectations. Furthermore, UNIQLO began applying RFID (radio frequency identifier) tags, whose function is to label and track objects, into all of its merchandise in 2017 and is now linking RFID data to its

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digital network at 3,000 stores nationwide each year. This is because using electronic labeling often shortens checkout times, guarantees inventory availability, and has other advantages.

Applying the SPA Model into its business model, UNIQLO has successfully managed its operation activities. This method helps UNIQLO shorten the average time of inventory turnover days (Wei, 2017) and directly connects with its partners and customers.

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III/ ISSUES/ CONCERNS

A. MACRO-ENVIRONMENT The US economy is considered as a market economy with a private enterprise system that has only limited government intervention in areas such as health care, transportation, and retirement. However, it does not have a real market economy. Still, it has a mixed economy, which ‘has elements of both free-market and centrally planned economic controls by the government’ (Ross, 2019). Therefore, it results in efficient production and allocation of resources, as well as improvement of social welfare. The U.S. economy is considered as the largest and most important in the world. However, recently, the Covid-19 pandemic is also a tremendous trouble for the US economic situation as well as the whole business market around the world. After U.S. President Donald Trump announced a national emergency over the coronavirus outbreak which affected many apparel market developments, it included UNIQLO. Fast Retailing Company confirmed to close temporarily all 50 of its UNIQLO-brand casual fashion outlets in the US which raised fears of a major hit to UNIQLO’s profits (Kyodo News, 2020). Moreover, UNIQLO is also experiencing a downturn, with U.S seaborne imports of apparel falling 41.1% year over year in June after a 33.2% slide in the three months to May 31 (S&P Global Market Intelligence, 2020). Therefore, this pandemic has affected UNIQLO's strategy serious...