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04/22/2012

Dissertation Chapter 2 - Retail & Services Marketing of UNIQLO in Hong Kong


Retail & Services Marketing of UNIQLO in Hong Kong

Chapter 2

Review of Relevant Literature

2.0 Overview

This part of the paper will provide the discussion of the marketing analysis of UNIQLO.  To better understand the corporation, diverse marketing instruments will be used.  These include, PESTLE, Industry analysis by Porter's Five Force, Competitors Analysis below with CPM Matrix a) Local Competitors such as Giordano or Bossini b) International Competitors H&M or Sara and Extended Marketing Mix - 8Ps of Services Marketing Developing the concept of "Servicescape" and Blueprinting to find out failure points on process

2.1 PESTLE Analysis

            It can be noted that the apparel retail industry has always been dependent on international business climate as well as its product cycles.  Consequently, the apparel retail industries have been deliberated as one of the growing industries throughout the years. The following figure shows the analysis of the political, economical, socio-cultural and technological, legal and environmental attributes and determinantsaffecting UNIQLO.

Figure 1 PESTLE Analysis

Political

Economical

Socio-Cultural

  • Taxation Policy of Hong Kong

  • Foreign trade Regulations

  • Political status and condition of Hong Kong and the global market

Technological

Legal

Environmental

  • Rapid transition in technology

  • Speed of technological transfer

  • Laws and regulations about that covers apparel industries

  • Following regulations in the foreign trade

  • Awareness of environmental protection

  • Existence of Green Products

 

 

One of the political determinants that affect UNIQLO is the diverse taxations which surrounds European market which lead to re-imports. In this regard, the vehicles are being bought overseas, re-imported to the locale market which influence the price of the product.. In the period of economical issues, clients do not substitute their casual wear products. On one hand, there are some brands and apparel retails which are common in the market environment which expresses a new way of lifestyle.   In line with technological determinants, apparel retail industries nowadays are being quicker in line with the business standards as well as consider shortened product life cycles.  In addition, so as to cope with the environmental determinants, further consolidation of the apparel retail industry is expected and consideration of green products must be given emphasis.

Aside from PESTLE analysis, the apparel retail industry will also be analyzed through the consideration of Porter’s five Forces model.

 

1. Suppliers.

In the case of the casual wear and apparel industry, speficifically in the current objectives and plans of UNIQLO, decision-makers of the corporation must have a clear comprehension of the business dynamics in which suppliers are directly involved in. Such consider the suppliers’ concentration or and core corporate interests, diversity of the products as well as the designs being offered as well as the alternative resources that are accessible for the UNIQLO in terms of business partnerships. Hence, it is most proper to build win–win relationships with suppliers or have an agreement on the  use of multiple suppliers in array to protect the interests of both ends.

2. Power of Clients/buyers/buyers. The power of clients/buyers describes the implicate clients/buyers/buyers have on an industry. When clients/buyers/buyers power is robust, the relationship to the producing industry becomes closer to market conditions wherein the clients/buyers/buyers have the most influence in shaping the price. As such the bargaining power of clients/buyers arises when they have the capabilities to (a) make agreements with other corporations providing similar products and services, (b) purchase a product that delegates an essential fraction of the expenses incurred by the corporation, (c) purchase of a product that is undiverseiated, (d) incur low transition in costs when they transfer vendors, (e) be price sensitive by bearing in mind the preferences accessible, and (f) integration to purchase the goods of the suppliers (Baldwin et al, 2002). These determinants must be highly deliberated by UNIQLO for the successful marketing of the casual wear retail in the market environment.   

3. New Entrants and Barriers of Entry. The plausibility of new corporations entering the industry influences the pace of the industrial competition. Therefore, the key is to analyze the entry technique as well as exit approach of the new player to the casual wear. Although any corporation must be able to enter and exit the sector, each industry presents diverse degrees of complexity influenced by economics. In terms of casual wear and apparel retailing, Birtwistle and Freathy (1998) noted that its market has gained criticism for a lack of diversification, possibly due to greater degrees of market concentration and the standardization of the casual wear and apparel retail offer across stores and regions. With the addition of new technological enhancements, casual wear and apparel retailers face both a diversification dilemma and a challenge in sustaining any long-term advantage over their competitors.

4. Substitutes.  “Substitute products” as those that is accessible in other industries that meet an identical or similar demand for the end user. As more substitutes become obtainable as well as price affordable, the demand becomes more elastic since clients/buyers/buyers have more options. The threat of substitutes often implicates price-based competition since substitute products may restrict the capability of corporations within an industry to raise prices and improve margins.

Fernie & Asuma (2003) noted that casual wear and apparel is an aesthetic expression that aims to communicate notions, subtleties, and therefore, as soon as an aesthetic array comes to be typically perceived as a code, then works of art tend to move beyond such code while exploring its plausible mutations and extensions. The creative aspect of casual wear and apparel in general cultivates the various ways of expressing oneself through other products accessible in the market. Casual wear and apparel products are noted to be a cyclical reflection of social, cultural, and environmental determinants that are distinctive to a certain point of time in a specified geographical setting, in addition to playing a crucial role in complementing one’s self-image. As such, the never-ending and ever-increasing plausibilities of portraying an individual’s self-image through other products accessible in other mentioned industries pose disadvantages as well as challenge in the entire clothing line of the casual wear and apparel industry (Forsberg & Towers, 2007).   

5. Industry Competitors. A considerable number of corporations have developed into an essential part of the period of global competition, increasing enhancement, enhanced corporate paradigms, and corporate restructure. The continuous transition from the conventional corporate framework with its hierarchical corporations to a worldwide, knowledge-founded financial system as well as intelligent corporations demands business management to realign and relocate its techniques (Mcmenamin, 1999). Along with the intense marketing nowadays, corporations are faced with the challenge to sustain their own competitive edge so as to survive and be successful. Techniques and marketing tactics are carefully planned and executed to gain the ultimate goal of all: corporation growth (Karp & Schlessinger, 2002). Among the largest apparel manufacturers in the global market that likewise operates clothing casual wear and apparel outlets such as UNIQLO international competitors are SARA and H&M and their local competitors are Bossini and Giordano. Accordingly, SARA and H&M, has become a common name in the international market as they are able to enhance competition in apparel and fashion industry. In the local aspects, it can be said that Giordano and Bossini are deliberated as the local retailers and franchisers which are featured with relatively stronger local market share as compared  with the foreign brands in the same price range such as  Mango and  Benetton (Cheong, 2004).

2.2 Competitive Profile Matrix

In order to evaluate core competencies of the fashion and apparel enterprise, the utilization Competitive Profile Matrix will be deliberated. CPM is an essential strategic management instrument which is deliberated to compare the company firm with other major firms in the industry. It shows the clear picture of the corporation about their strong and weak points as against their rivals.

Table 2

Competitive Profile Matrix (CPM)

LOCAL COMPETITION

 

 

 

UNIQLO

BOSSINI

GIORDANO

Critical Success Determinants

Wt

Rating

Score

Rating

Score

Rating

Score

Market Share

0.25

4

1

3

0.75

3

0.75

Price

0.15

4

0.6

3

0.45

2

0.3

Financial Position

0.25

3

0.75

3

0.75

3

0.75

Product Quality

0.2

3

0.6

3

0.6

3

0.6

Consumer Loyalty

0.15

4

0.6

2

0.3

3

0.45

Total

1

 

3.55

 

2.85

 

2.85

 

The table presented above have shown UNIQLO has been able to become competent their rival establishments like Bossini and Giordano. It can be noted that in terms of market share, price, and consumer loyalty, UNIQLO has outcompete both Giordano and Bossini. On the other hand, each of the three company have equal rating when I comes to financial position, and product quality.

Table 2

Competitive Profile Matrix (CPM)

INTERNATIONAL COMPETITION

 

 

 

UNIQLO

H&M

Sara

Critical Success Determinants

Wt

Rating

Score

Rating

Score

Rating

Score

Market Share

0.25

3

0.75

3

0.75

4

1

Price

0.15

3

0.45

4

0.6

3

0.45

Financial Position

0.25

3

0.75

4

1

4

1

Product Quality

0.2

3

0.6

3

0.6

4

0.8

Consumer Loyalty

0.15

3

0.45

3

0.45

4

0.6

Total

1

 

3

 

3.4

 

3.85

 

Based on the analysis provided above with the use of the competitive profile matrix (CPM) for international competition, it can be said that Sara has been able to outcompete both UNIQLO and H&M in terms of various aspects except for price in which H&M rated one rank higher.

2.3 Marketing Approach 8Ps of Service Marketing

Accordingly, as part of the marketing approach of UNIQLO, the company has been able to use differentiation approach. It’s goal is to differentiate itself from its rival industries and these are being achieved by considering the 8ps of Service marketing:

2.3.1   Product Elements

At UNIQLO, the products are being positioned as one of the top apparel products in terms of high quality as well as fashionable clothing, specifically with the consideration of their added 30 days or 1 month exchange guaranteed period set in the market of Hong Kong. UNIQLO clothing products is being marketed as a quality and innovative apparel without shrinking and discoloring. In terms of designs, the company considers innovative as well as high fashionable designs at competitive prices.

2.3.2   Productivity and Quality

Accordingly, imported products are considered to be more expensive and costly than locally made products. Giving emphasis on restricted range and aspects to attain scale of economies. The company’s clothing has been made under the license in both South East Asia and Mainland China under the standard quality and design controls. In this regard, the company management confronts typical prejudice of buyers in which clothing and apparel products made in china must be cheaper and affordable which is also attributed with having lower quality (Jackson & Tomioka, 2003).  In order to solve the issue of this, the company ensures that they are able to maintain tight quality control over each determinant of the business, from product planning, enhancement and procurement of the raw materials as well s clothing designs, through the production, distribution as well as sales. Based from the feedback of the consumers, from the frontline people of shops, the UNIQLO Design Studio expands products that are produced by closely tied partner factories in China.

2.3.3 Place and Time

In terms of distribution place and time, the store manager of the company has been able to consider greater chances for responding to local consumer demands. Herein, UNIQLO considered the point-of-scale inventory approach and has been linked directly to the firm’s storage, production, as well as transport operations or known as the logistics operations based in Mainland China. Herein, product delivery typically takes less than 4 weeks and shop displays are being altered on average every 8 weeks (Okamoto, 2000 cited in Jackson & Tomioka, 2003).

2.3.4   Price and Other User Outlays

Deliberately, distinguishing UNIQLO’s products with a lower retail price against foreign industries and competitors’ benchmark price while continuously recognizing that there is almost no conventional way of f wearing ‘cheap’ or casual and offhand casual clothes in public life (Jackson & Tomioka, 2003).

2.3.5   People

Part of the success of the marketing approach and service delivery of the company are their people or staffs who provide clients with a quality, convenient and efficient shopping experience as well as deliver and provide the excellent and standard products for apparel and fashion aspects. In the training and development of staffs, UNIQLO’s goal is to sustain an  in which each store manager, supervisor, head-office employee as well as sales staff functions as an accomplished professional representing the commitment of an independent business industry.

2.3.6   Physical Environment

UNIQLO is an industry which manufactures and retails their apparel and clothing products. The industry has built a very efficient as well as convenient distribution channel which combines shops in various locations in most convenience aspects.  The design of the shops is in line with the most comfortable shopping experience for their clients.

 

Figure 1 – UNIQLO’s shop design

 

In order to sustain their commitment to their clients, the company has been able to consider the context of “Servicescape” (See Figure 2).  This context presents the major determinants which are considered in service environments, that the service is being set and in which the seller and the clients interact. The concept presented that there are clients as well as staff response moderators.  The context of “Servicescape” design let the buyers to enter the service premise in first place and then to sustain tem for staying more.  This can be done by displaying high quality apparel products as well as shopping experience to sustain customer retention.

Figure 2

 

 

 

 

2.3.7   Process

  1. In the company it has been considered that the physical evidence has been shown from their used of the context “servicescape”.  When clients/buyers enter the shop, these people should be able to hear the greeting from sales personnel and soothing background music. In addition, the consumer should be able to feel the quality of the fabric used and feel also how it perfectly fit their needs. In addition, the consumer should also see the convenience of the uniforms of the personnel and look around the broad of color and several style clothes.   This has been the common process in the store of UNIQLO and to be able to ensure that their clients are being satisfied, they let them try the products that they choose. Clients are permitted to freely stroll and shop, without the immediate and intimidating attention of shop personnel, as is typically expected in various retail stores. On the other hand, online shopping is also considered and accessible which enables the clients to have more time to choose what products to buy (Jackson & Tomioka, 2003).

3.8       Promotion Strategy and Education

Adhering to the latest and innovative trends continuously y for the freeter (Japanese expression for individuals or consumers with age ranging from 15 to 34) generation as well as for buyers and end-users of all agars presently motivated by the lifestyle trends in the country. For instance, Uniqlo’s ‘Precision Basics’ have been able to consider designs which are appealing to a broader range of clients in different countries  by being well made, cost-efficient fashionables, as well as international and global and assume growing chances and preferences for leisure time as well as demand for ‘smart casual’ wear (Oumi, 2000 cited in Jackson & Tomioka 2003). The company also considers different advertising campaigns and materials, both in print ads and also online advertisements. The company is also highly relying on the context of word of mouth to spread the quality and uniqueness of the designs of their apparel products.

2.4 Blueprinting analysis to find out failure point of process

            In order to identify the failure of the point of process of the company, blueprinting analysis or model analysis has been considered. In this regard, it can be said that the following issues has been identified and the suggested approach to solve the issue.

2.4.1 Adjustments on the rules and the queuing system

1.    Signs must be provided in the shop’s fitting rooms, to indicate that some of the apparel products are not permitted to be tried

2.    The management must find better ways of preventing the long queuing time to prevent dismay and disappointment from the clients.

3.    UNIQLO should consider the adjustment of the exchange regulations. The sales personnel may encourage clients/buyers to purchase and try the products at home and still can exchange it within a period of  one month provided that the sales / security tag is still available and the corresponding receipt is given.

 

The Sales / security tag shall not be removed and the effective receipt shall be returned for product exchange within 30 days after purchase.

4.    The signboard that shows the Exchange Regulations shall have both of Chinese and English versions to be understood by local and international clients.

 

 

 

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