Strategies in Action – UNIQLO
Introduction
Strategies are central to the achievement of sustainable development. These are the driving force of practically every organization that are motivated to grow fast ahead of the competitors, grow in line with the industry or to simply catch-up and defend an existing status. Organizations are also initiated by efforts to maximize profit and minimize risks through strategizing. Such initiatives were undertaken to drive sustainable competitive advantage of the company. According to Porter (1985), competitive advantage is the position that a firm occupies against its competitors. Under the circumstances that its competitors were and could not able to duplicate or imitate the value-creating processes and position of the firm, sustainable competitive advantage is achieved. As such, sustainable competitive advantage should be the basis of above average performance.
To achieve competitive advantage, the role of strategic management and the application of strategic positioning, the power of strategic choices and putting such strategies into practice must be well understood. In this report, how UNIQLO strives to achieve competitive advantage will be addressed. Different strategies in action for UNIQLO will be discussed towards making the company sustainable.
Overview of UNIQLO
A 100% consolidated subsidiary of Fast Retailing Co. Ltd which is a Japanese retail holding company, UNIQLO formed a portmanteau for ‘unique’ and ‘clothing.’ Such brand served as the evidence of creativity and individuality of Japanese apparel industry hence UNIQLO was known as Japan’s retail success story. UNIQLO offers fashionable and high quality clothing at reasonable prices. The company initially offers its products for highly brand conscious consumer group. The company focuses on fine materials initially available in China while also limiting their product range to achieve economies of scale. Since all the resources ad facilities are already available in China, UNIQLO maintains close control of every aspect of the business such as production planning, development, procurement, design, manufacturing and distribution and sales (Fast Retailing, 2007). UNIQLO strives to be a leading global casual wear company that targets high sales and profitability growth. With this in mind, UNIQLO seized the opportunity to expand domestically, regionally and internationally as well as combined all the facets of the business from product design and final sales. UNIQLO now operates with its 790 geographically dispersed stores. Today, UNIQLO is Japan’s third largest retailer and is described as the apparel giant Gap Inc.’s counterpart with its 4, 000 increase in share price.
Strategies in action at UNIQLO
External strategies
Strategy into action is derived from the company’s effort to ensure that strategies are functioning. Strategy development within UNIQLO involves the continuous reports on what must be developed, why and how. UNIQLO conforms to specific agreements such as Closer Partnership Economic Arrangement (CEPA) and Textile Memorandum of Understanding. Such conformance provides UNIQLO with the opportunity to expand the 21 categories of Chinese textiles and clothing for export and achieve the annual growth of 8-17% (RSCA, 2006). As Doshi (2006) puts it, consumers are increasingly becoming particular with ‘investing in quality’ clothing thereby resume spending with premium apparel finds. As such, the price and quality characteristics of UNIQLO clothing lines has a strategic fit wherein UNIQLO makes people look fashionable and confident in world-class clothes at a reasonable price. What makes this possible is the companywide integration of a low-cost but effective operation model known as the Specialty Store Retailer of Private Label Apparel (SPA) model. Through this model, UNIQLO is able to stabilize its production capabilities by means of aligning sales and production schedules. UNIQLO is able to strive at responsiveness whereby the goal is to avoid inventory build up and higher level satisfaction among the customers.
Further, Doshi (2006) also relates that people in Hong Kong and elsewhere acquire the growing interest for private labels with time. Consumers aspire to have private labels as part of their everyday garments. Casual wear made in Asia, particularly China and Japan, is known for good design and quality and has a positive image on global consumers. Strategic choices provide an array wherein the companies could decide what approaches, directions, or methods use in achieving business-level and corporate-level objectives (Johnson and Scholes, 2002). A strategic choice for UNIQLO was investing in such brand sensitivity initiatives through providing high-quality merchandise and generating values to the society. UNIQLO, not to mention, is a company that is committed in creating positive reputation as manifested in its vision and mission, styles of management, ways of doing business and requirements to employees.
A factor for enabling is the development of technology. The idea is to use, abuse and exploit technologies at hand and extract limitations and then draw strengths from those limitations. UNIQLO also invests in technological innovations although the company remains to be as labor-intensive as it is today. Though automation has limited functions as sewing and making patterns still require human intervention, UNIQLO make sense of computer system software via making rough sketches, printing detailed designs and storing of information for easy retrieval. UNIQLO, moreover, utilizes automation in order processing, costing analysis, order tracking, material management, reporting and connectivity (Hong Kong Productivity Council, 2004). Technological integration could be viewed as a strategic capability for UNIQLO. Strategic capability concerns the adequacy and suitability of resources and competences as the requirements of survival and growth. These are tangible and intangible elements inherent to the organization that enables the continuous improvement or the ability to continually develop strategic capabilities.
Industry strategies
At UNIQLO, there are established strategies including low cost management, cheapest manufacture and marketing schedules and prioritizing customer requirements. Because the company is well aware that this would be inadequate, UNIQLO builds brand awareness and consumer loyalty. UNIQLO, in addition, implement quick response programmes with its website as the primary tool. Marketing strategies of UNIQLO, in particular, integrates the brand principle to create a strong distinctiveness in the fashion and clothing retail market. The customer orientation of UNIQLO was basically construed from its website in which customers can give feedbacks by email and discussion board. Groucutt, Lydley and Forsyth (2004) assert that because a brand name is built overtime it becomes costly to imitate thereby providing a sustainable competitive advantage in the apparel industry. Its brand name, which is now synonymous with comfortable, high quality and cheap clothing, is one of the major sources of competitive advantage. Although brand awareness outside the home country is a challenge, it is of intangible value to UNIQLO as a business asset.
Byoungho (2004) contend that being responsive to market trends shifts in the apparel industry should be the focus towards more extensive product development and improvements at the least possible cost. Companies are pressured to divert on product differentiation due to the fact that products are deemed to be ‘equal.’ For UNIQLO, the keys to differentiation are brand image, reputation and prior existence. The products themselves are an important source of competitive edge. UNIQLO strives at developing products of high quality, in various collections to enable the company to reach the highest possible number of customers. It would be also necessary to note that UNIQLO is positioned in the fashion capitals of the world for the purpose of taking advantage of the new information about fashion trends. As such, product differentiation inside UNIQLO is brought by its quick responsiveness to adapt to new trends. Johnson and Scholes (2002) mention that strategic positioning illustrates the implications of strategies on the external environment, the strategic capability of the organizations and the corporate expectations.
Laszlo (2008) states that there are five main parts of the apparel value chain including raw material supply, provision of components; production networks; export channels and marketing networks at the retail level. UNIQLO has an ownership on production and thereby a complete control on the supplies procurement, logistics and marketing decisions. UNIQLO insures its production and handles the majority of the operational details. Sourcing is a go-to in the apparel industry but it is not rare although it can add value to UNIQLO. Further, UNIQLO has a geographically dispersed operation: fashion designers are in Tokyo, New York and Paris, garnering first hand information in fashion trends; manufacturing departments are in China where cheap labors reside; headquarter is still in Japan which takes responsibility in strategic decision making. As such, resource management or the formal and informal systems and procedures that enable transfer of knowledge and information are also regarded as strategies for acquiring competitive advantage.
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. Important is that apparel stores must not fall dependent on a specific class of customer. 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. UNIQLO is involve in selling to the customers through specialty store marketing, with a minimalist strategy of ‘pile ‘em high, sell’ em cheap’ concept that is. In addition, the unbranded fashion or the no-logo concept was perceived to be the main reasons for people’s warm attention (Williamson 2007; Parrish, Cassill and Oxenham 2006).
Competitive strategies
Development direction is categorized into protect and build, product development, market development and diversification. To wit, competitive advantage could be only achieved one the organization learned to develop strategic capabilities that are appreciated by its customers in a manner that competitors are finding difficulties to imitate. UNIQLO has major local and international rivals including Bossini, Giordano and Muji and Gap and Benetton, respectively. International expansion strategy known as the judo strategy is common to all competitors. Hilburt-Davis (2002) defines this strategy as the conscious decision to move rapidly into new markets where there is uncontested ground through providing the best value of money based on distinctive brands. UNIQLO like its competitors opted for product differentiation, low cost production and gateway market penetration.
Business-level strategies hone an environment of better competition. The development of these strategies necessitates distinguishing different strategic business units. This can be carried-out through different strategies as ‘no frills’ differentiation, hybrid and focused differentiation. To sustain the basis of competitive advantage, it is essential for every organization to safeguard their position in the market and emerge as the market leader (Johnson and Scholes, 2002). It is important for UNIQLO to conform to the needs of the customers of varying age structures and preferences and producing brands where value was integrated from the very first step. Quality and customer service are the main concerns, followed by style or design and functionality. Brand development and building brand awareness as well as the overall look of the establishment are also the priorities for UNIQLO. UNIQLO, further, resorts in the closure of unproductive stores/outlets like its competitors.
The company carefully watches the strategies and changes of its competitors and reaped these off as new strategies and the strengths could be manipulated as new advantages. UNIQLO upgrades its store portfolio through opening flagships stores in every gateway market so as to equally diversify brands and gateway locations, catering to all forms of demographics. The company believes that product mix and shopping spree would be plausible especially if it will come in bolder shades, with better quality and cheaper prices, but are manufactured based on forecasted demands. To take advantage of the opportunities that competitors impose, UNIQLO must also open its horizon into new product trends including the silver market and the plus-size market as part of the brand concepts. Although all of the competing companies including UNIQLO are into casual, everyday wear, the company is also thinking of investing in the potential of easy care clothing where fabrics are very fluid and/or wrinkle free.
Internal strategies
The success or failure of different strategies must conform to the following criteria: suitability, acceptability and feasibility. Suitability is the rationale of the strategy, acceptability deals with expected return, risks and reactions of stakeholders and feasibility is the probability of delivering strategies. Such criteria manifests that competitive strategies ought to be compatible with methods and direction of development. UNIQLO was deemed successful because of its commitment in divergence which supports the individuality of each family member as well as those with fashion-forward and edgy people. These products are of expected high quality because of the effective global materials procurement. UNIQLO’s products are designed parallel with the customer requirements and worldwide markets trends. Voice of the Consumer (VOC) is one of the key in building the most effective brands. For UNIQLO, however, this is not enough, it should be joined with direct engagement in value chain process and doing it through a low-cost, quality-driven manner. In the post production stage, it is also important for UNQILO to obtain effective distribution management and inventory control. Moreover, UNIQLO is an expert in store development thereby efficient store operation.
Japan and Fast Retailing are devoted in simple, functional clothing with minimalist clothing details rather than cutting edge, extravagant clothing and this is the mark of UNIQLO. Nevertheless, UNIQLO belongs to a multi-layer distribution structured industry; making distribution digestibility hard and often leads to clogging in distribution inventory. What UNIQLO did was to acquire the necessary managerial and operational competences prior to establishing a presence in various places including London, Paris and New York. These are business strategic units that are used to drive both business-level and corporate strategies development and decision-making processes. Nearness to innovations sets UNIQLO apart form its competitors as key customers are prioritized. Belonging to an industry where fashion and apparel market trends are unending as well, UNIQLO operates in a global business where companies’ direction and business activities are always expanding. UNIQLO focuses on a specific market and provides them with value shopping that impacts its preferences of where to shop and how to shop. Aside from profitability, UNIQLO invests on its social responsibility or simply its social influences also.
Conclusion
Described as the equivalent of Gap, UNIQLO is increasingly becoming known in the global apparel industry. UNIQLO continued to be a brand of preference because of the quality, simplicity, functionality and cheaper prices of the merchandises. UNQILO invests only on opportunities that are profitable, advantageous and will purport the continuous geographic expansion of the company. UNIQLO has an advantage when it comes to individual spending basically because clothing is a basic need. Because of the SPA model, UNIQLO’s processes are inherently rare; sense of ownership in process responsibilities is the key. The ‘pile ‘em high, sell ‘em cheap’ concept, as well, is an attribute unique to UNIQLO. There are at least five major rivals for UNIQLO – Bossini, Giordano, Muji, Gap and Benetton. All these rivals are involved in continuous product differentiation since, depending on the fashion trends, substitutes could instantly emerge. In sum, the prevalent strategy at UNIQLO is the continuous domestic and global expansion and low cost production and management, achieved through continuous strengthening of the already reputable brand, ownership of processes, obtaining the VOC, sound distribution and inventory control and efficient store operations.
References
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