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Uniqlo is a Japanese company that deals with designing, retailing and manufacturing casual wear. The company developed from a division of Fast Retailing CO. Ltd (Hyde 2007). It is has been owned subsidiary since 2005 and listed in the Tokyo Stock Exchange. The company traces its origin from 1949, when a Yamaguchi-based company called Ogori Shoji operated in Yamaguchi. Ogori Shoji opened a unisex casual wear store in 1985 at Fukuro-machi, Hiroshima and Naka-ku and changed its name to Unique Clothing Warehouse. This is where the name Uniqlo was created to form a contraction of unique clothing. In 1991, the company changed its name from Ogori Shoji to Fast Retailing. By the year 1994, there were over a hundred Uniqlo stores operating in the entire Japan.
Uniqlo adopted a set of strategies in 1997 from an American retailer The Gap. The strategy was named SPA, i.e. Specialty store of Private label Apparel (Hyde 2007). This meant that the company would produce its own clothing and sell them exclusively. Uniqlo started outsourcing their clothing manufacturing to various factories in China, where labour was perceived to be cheap. This was a well-established and proven corporate practice. At the time, Japan was in bad shape of recession. Therefore, low-cost and high-quality goods were in great demand. The company conducted advertising campaigns that appeared to be fruitful. Uniqlo’s first store was opened in Tokyo and outlets spread to major cities throughout Japan in 1998. Sales turnover and gross profit set a new peak as of 2001. Later, Uniqlo was separated from the parent company in an effort to expand overseas. The company’s first outlet in China was opened in Shanghai along with other four outlets in London. Unfortunately, sales didn’t go well as expected in England and stocks were overflowing in the Japanese warehouse. Uniqlo’s profits dropped dramatically between 2002 and 2003. In 2004, Uniqlo decided to try joint ventures with Japanese fashion magazines. It hired celebrities to appear in commercials. They were made to team up with designers. Profits rose rapidly including London outlets. Fast Retailing acquired other fashion companies and this helped it to get back to its feet.
By 2005, overseas expansion was the order of the day with stores opening in Hong Kong, the United States and South Korea. Uniqlo had 700 stores by the end of 2005 within Japan. Sales were recorded at $4 billion in 2006. The company set a global sales objective of $10 billion and a rank among top global retailers. This would leave the company at the same level with Gap, Inditex, H&M and Limited Brands. Fast Retailing signed a design contract for Uniqlo products with the help of a designer named Jil Sander in 2009. The company had a mandate of furnishing the Japan’s Olympic athletics team with uniforms in 1998, 2002 and 2004. The company’s 2020 goals are annual sales of 5 trillion Yen.
Market Expansion Overseas
It is evident that Uniqlo has flooded its market share in Japan. Over 700 stores have been operating in Japan. The target market in Japan seems to be tapped. This means that there is no room for realizing increased profitability. A company can easily become dormant or stagnant, whereas it is expected to grow and expand (Bartett 2009). This creates a need to search new markets overseas with growth intensions. By going overseas, Uniqlo will expand its geography and realize the benefits of entering a new market. This will fuel the growth of revenue thereby increasing the operating income. Its main geographic growth strategy will be the unique product and adoption of the local culinary culture. Diversification of product offering is another reason why Uniqlo should enter a new market. This will help the company spread and significantly reduce risks. The search to appeal to a different customer segment is critical (McDonald, Burton & Dowling 2002). This gives Uniqlo a reason to enter new markets. Uniqlo has a long term goal of increasing profitability and achieving revenue of $5 trillion. Therefore, it has to look for markets with higher potential for growth and revenue generation. Since entering new markets brings diversity, Uniqlo will have an opportunity to build new skills, acquire new brand modifications to fit the target market requirement and achieve competence successfully.
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Uniqlo should consider entering the Indian market and, particularly, Mumbai. It is a country with a potential market for fashion and design. This is a new market for the company meaning there are many uncertainties that might be faced by the company’s management. By entering India, Uniqlo will introduce its services closer to the Middle East. This might offer challenges given that the country’s culture, religious orientation and lifestyle are different from those of Japan or Europe. To help understand the market better and to have reasons to invest in India, it is vital to conduct a PESTE analysis. This will help Uniqlo strategists have a clear picture of this potential market.
The political situation in India is stable. It has a sovereign socialist and democratic republic. Its stability presents a favourable political environment, where business can operate securely. The federal government of India has regulations and practices that impact on business environment. It has set rules of trade, foreign relations and issuance of trade licenses to foreigners. In addition, labour laws in India have set guidelines on how workers should earn wages and their welfare at the work place. The government of India requires that the goods imported or sold to its citizens should be of merit. It helped improve infrastructure and educational levels in the country. Uniqlo will have a secure, stable and favourable environment to operate in. There are no tough laws to prevent it from entering the Indian Market. Furthermore, the company is aimed at providing quality, modern and merit goods to the Indian market.
The economic situation in India is encouraging. It is divided into two classes on the basis of majority and minority, i.e. middle class and low class (Walsh 2005). This means that Uniqlo will have two market segments in Mumbai. India has an advanced and quality man power. The country’s exchange rates are favourable and the interest rates are encouraging. The infrastructure in Mumbai is modern and the population is high. The high population of middle-class provides a big market for Uniqlo products. Consequently, investment in Mumbai is risk worth taking.
Socially, Mumbai has an enticing lifestyle. They have adopted the modern way of life making Mumbai to be called the film city of India. The people here speak English, Hindu, Urdu with a local dialect. The locals are considered to be chirpy and tireless a lot, who are shaped for a fast paced lifestyle. This presents a hard working and result-oriented labour. The cultural diversity is immense and the religious conviction, as well as secularism goes together. The people in Mumbai are diverse as far as religion is concerned. They are divided into Hindus, Christians, Zoroastrians, Jains and Buddhists. Their mode of clothing is the same. Uniqlo will have to deal with quantity together with quality to earn respect and confidence of this target market.
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Technologically, India has proved to be on the front line globally. The country has acquired modern equipment and systems in business operations. This maximizes production efficiency while influencing outsourcing decisions positively. Uniqlo will be required to adopt modern technology in all its operations so as to fit in the market. Technological advances in Mumbai will reduce operational costs thereby increasing sales revenue significantly.
There are several environmental issues in Mumbai that would affect Uniqlo’s operations. Ware pollution, air pollution, garbage and pollution of natural environment are the examples. The high population of people in India causes high pressure on the environment. Weather and climate will affect the clothing patterns in Mumbai. It is hot most of the year with minimum variations. Uniqlo’s business strategists will have to understand the environment in order to operate successfully.
As mentioned earlier in this discussion, legal issues in terms of business operation, employment and labour relations are favourable. This means that Uniqlo will have nothing to fear as far as business operations terms are concerned. Customs and excise duties are levied by India’s central government. Sales tax is also levied under VAT legislation, but at the state level.
Reasons for Choosing Mumbai
Mumbai has a wide market to venture. Its numerous population provides potential for customer base that is worth exploitation (Walsh 2005). Therefore, investing in Mumbai guarantees revenue and hence profitability. Another reason that justifies the decision to choose Mumbai is that it is strategically positioned as far as the global market is concerned. Entering this market will bring the Middle East at a closer check thereby enhancing brand awareness. It is important to realize that the Middle East lags behind in terms of modern fashion and design. This means that people in Mumbai adopt western culture gradually. By Uniqlo entering this market and presenting its product, awareness will be created, thus becoming a first choice during consumer purchase decision. Since the city has a hot climate throughout the year, product specification and modification will not be complicated.
Switzerland was a potential alternative, but was surpassed by Mumbai. It’s located farther from Japan than India. This means that expansion in India will incur less cost as compared to Switzerland. Secondly, the Swiss culture has a disparity with that of Japan. Therefore, an understanding of the country’s values, customs and beliefs is vital before venturing in the market (Reynolds 2003). India has a culture that is closer to Japan and other Asian countries. This makes coping easier and quicker. The fashion and design market in Switzerland is crowded. This means that there are many businesses operating in this market that have captured the customers’ loyalty. Penetrating in such a market is rather hard than in Mumbai. Other alternatives foregone are Germany, Australia and France. These countries failed to qualify due to the same reason that Switzerland failed.
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However, there are risks and uncertainties associated with the decision taken. One of the risks is market responsiveness. There is no surety that the market will respond positively to Uniqlo’s products. It is uncertain whether the culture would allow fashion different from what they used to wear. Control involved in this decision is that business is risk taking. Brand awareness, personal selling and vigorous marketing will be involved to tap the market. Competition and market segmentation is also uncertain and this presents some risks. The kind of competition in a particular market determines a new entrant’s survival chances. To manage this uncertainty, market research will be conducted prior to entry.
Market Entry Strategy
Entering a new market is no an easy task. Companies, firms and business enterprises have to come up with a strategy that will guarantee success and growth (Reynolds 2003). As mentioned earlier in this discussion, there are risks and uncertainties involved during market entry. Uniqlo is no an exemption. It is important to decide which market to enter, when to spearhead the entry, the entry scale and the best entry mode ever. It is important to note the size of the market targeted. Mumbai is a city with a wide market. Its population is divided into two classes, i.e. the middle-class and the low-class. The middle-class is the majority living in Mumbai. Therefore, they have the purchasing power for current and future purchase. Due to the high literacy levels, technological advancement and foreign investment, Mumbai has a bright future as far as economic growth is concerned. This means that businesses venturing in Mumbai are likely to realize fast growth and profitability in future. The country offers a free market and has a great capacity for growth derived from its high population. Indian inflation is mostly caused by the Reserve Bank of India in its efforts to weaken rupee against dollar. However, domestic inflation is nothing to worry about.
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The important part of entering a new market is timing (Lymbersky 2008). Uniqlo will conduct an early entry in the Mumbai market. This will enable the foreign company to enter the market before other foreign companies are aware. Once Uniqlo enters this new market, it will pre-empt its competitors and capture demand through establishment of a strong brand name in Mumbai. In addition, the company will build a sales volume and ride down the experience curve while earning a cost advantage. Uniqlo will create switching cost that will help tie customers into its products and services. While we talk about timing, scale of entry is also a point to consider. Since Uniqlo is a fast mover that will do an early entry into the new market, large scale entry would be appropriate. This will be facilitated by the commitment of management and significant resources. It will be a rapid entry and it will require a huge investment. Risk taking is a factor in business operations. However, only the risks that are worth it are considered. The decision to perform a large scale entry is long-term. This means that it has long-term consequences that are difficult to reverse. It is uncertain how competitors might react. Therefore, the competitive playing field will obviously witness a number of changes. Large scale entry will limit strategic flexibility. Consequently, brand awareness will be enhanced within a short time. It will also be possible to build a market share within a short period of time. This is a sign of immediate revenue generation. Uniqlo will be able to outdo its competitors in the market by capturing their customer base.
Once Uniqlo has entered Mumbai, it will need to inform customers of its existence through brand awareness. The advanced technology provides for an effective alternative to conduct marketing. The internet is a crucial tool for foreign marketing. Advertisements and online operations increase market share and enhance customer service (Lymbersky 2008). Internet will offer Uniqlo an easy strategy implementation. Personal selling and sales marketing should be conducted to assist online marketing. This will enable customers to try the products and eventually become loyal.
International marketing is complicated and requires lots of details. To make a decision on the marketing mix, there is a need to pay more attention to details. Here Uniqlo will have to deal with the four Ps of the marketing mix. The first is product support. Uniqlo will deal with clothing and fashion. These products will be imported from Japan and stocked in Mumbai. The product will be modified to fit the expectations of the target customers (Rosenbloom and Dimitrova 2011). Clothing will have features of the modern fashion. To understand the features acceptable to the Mumbai customers, product testing will be done. It will be conducted months prior to the entry. This will allow ample time to modify the products accordingly. Labelling and packaging will be done according to the recommendations derived from market research. This will help design unique, attractive and appealing labels and packaging. Production will be proportional to consumption. To facilitate this relationship, monitoring and control will be conducted. Market information provided by market research team will be essential.
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Price is always the unit of value for any given product. Uniqlo will have a difficult task of determining prices of its products. It is vital to note that price is inclusive of costs, mark-up and applicable taxes. Therefore, Uniqlo will be required to understand the tax laws, determine the costs of production and set the expected profitability level to come up with prices. Since the firm is entering a new market, giving discounts will be critical (Rosenbloom and Dimitrova 2011). Customers, who purchase from Uniqlo, will receive discounts either in form of cut prices or supplements. Market analysis will be essential in determining the prices offered by competitors. Customer education will also be provided to make them understand Uniqlo better and in details. This can be done through commercials, brochures and promotional physical campaigns.
Promotion support is high at the entrance stage of a product. Uniqlo will advertise its product through all means possible. This can be done through the social media, internet, local and printed media. Promotion will be done in various forms, such as offering cut prices for goods bought within a specified time period, physical promotion and offering supplements after purchase of certain products. Exhibitions and trade shows will be utilized accordingly to tap potential customers. Direct selling is vital (Pehrsson 2004). Uniqlo will hire competent sales agents, who will transverse the city selling products at a commission. Promotion is vigorous at this stage because of creating brand awareness, earn customer loyalty and acquire a market share to be way ahead the competitors.
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Place support is another vital issue. It has to be strategic so as to offer a good face to the company. Although appearance is not reality, it matters to customers, who discover a firm for the first time (Zimmerer and Scarborough 2008). Uniqlo will look for a building that is in the central business district of Mumbai. This location will make the company noticed by clients even before promotion commences. It will also facilitate distribution, accessibility and coordination during operations. Uniqlo’s stores will have to be in a place, where cloths can be displayed to capture the customers’ attention. Other stores will also be located in strategic areas according to the market segments.
Uniqlo deals with retail, manufacturing and designing of casual wear. The company has a Japanese origin. It has entered different markets, such as the United States, Hong Kong and South Korea. Uniqlo should enter Mumbai market as well. This is because it has a high potential for growth as compared to other global markets. Other alternatives that failed to be selected are Switzerland, Germany, Australia and France. Uniqlo will apply an early market entry mode and large scale investment. This is aimed at acquiring a market share at the expense of competitors. After entering the new market, Uniqlo will adopt a marketing mix that will spearhead production, selling and customer service. This will be through managing and presenting the product, setting prices strategically, conducting promotions vigorously and selecting a place that is accessible. Should Uniqlo follow the guidelines and recommendations offered in this discussion, it will achieve success.