Introduction
Uniqlo is a Japanese clothing wear designer, manufacturer, and retailer. The company originated in Japan in the mid-20th century as a men’s clothing store. A bigger warehouse for Unique Clothing was later opened in 1984, leading to Uniqlo. It ventured into manufacturing men, women, and kids’ clothing and accessories with its expansion. Over the years, the company has expanded its business with over 300 physical stores in Japan and more than 30,000 workers internationally (Uniqlo.com, n.d).
The business had several challenges as all start-ups. However, it faced a consumer perception where the customers considered it to be a discount retail store that was selling and distributing products at a low price, thus presuming the products to be of low quality. However, with time the perception entirely shifted when the company launched its products in 2004 and assured consumers that they would be selling high-quality products at affordable prices. Over the years, the company evolved from a family business to an international business across several countries. Currently, the business is a wholly-owned subsidiary of Fast Retailing Company Limited, well-known for its high-quality clothes sold at affordable prices across the market. The company has grown to be the biggest clothing company in Asia with several physical stores across the continent and has spread in about 25 countries worldwide with over 2250 stores (Uniqlo.com, n.d). The brand’s value is estimated at 49.2 billion dollars. The revenues raised in the 2020 financial year accrued to 22 billion dollars with a margin profit of 2.5 billion dollars. Its Japanese market has contributed to about 38% of its total revenue (Statista Research Department, 2021).
The company purposes to be the world’s largest clothing manufacturer and retailer, with more expansion across all the continents. In 2019, the business decided to venture into the Indian market with its first store opening in New Delhi; this decision was made a month after the global investors had sold about 4.5 billion dollars shares in response to the IMF downgrading process (Thacker, 2020). Therefore, this paper focuses on the entry of Uniqlo into the Indian market and its advantages.
Location-specific Advantages Uniqlo can exploit from India
When dealing with an international market or looking into venturing into a global market, both location and country play a significant role in the business’s performance. In multinational companies such as Uniqlo, the location of the new market offers tangible advantages and provides solutions. They include;
Economic factors: trade access; the Indian market has a comprehensive trade network. The country can make trade agreements to ensure tariffs are reduced, enhancing a cost-effective approach for the business to gain a smooth entry into the new market and providing the products that are cost-competitive with similar products in the country (Oviatt and McDougall, 2018).
Institutional factors: political system, the political system in India permits international trade. Government agencies, laws, and regulations allow multinational companies to make better decisions.
Industrial cluster: infrastructure; the Indian market is developed; this factor is advantageous to the business because it reduces the customer proximity. Also, it ensures the company is visible to its customers.
Networks: market proximity; when considering Asia as a continent, India lies at the center, which allows the country to distribute its products. The main aim of this advantage is to ensure that customers have less travel time and the company maximizes its potential customers (Gillani et al., 2021). Therefore, locating the business in India could help the Japanese store maximize its customers from countries that border India.
Resources: The company’s advantage over the Indian market is labor and lower costs. The population in India is high; with such a population, most individuals are skilled and are competing for the few slots in the market, and the company can take the opportunity because it is likely to find cheap and skilled labor in the country, especially in New Delhi. Besides, location advantage can also lower the business’s costs. Cost savings depends entirely on taxes, labor, energy rates, and office rental as they vary depending on countries (Oviatt and McDougall, 2018).
International strategy: business community and culture. India has a robust business environment that supports the clothing business. With such a community, the business is likely to grow. Besides, with close customer proximity, business sales can upsurge within a short period (Gillani et al., 2021). In addition, the country is more politically stable than other countries, such as Middle-East countries, when it comes to new business ventures. Another factor to consider in most Asian countries is Muslim-based; therefore, they require unique clothing. However, India is multicultural; it has several cultures embracing different clothing; thus, investing in it provides a win-win solution.
Why did Uniqlo open its first shop in New Delhi?
Uniqlo’s first store in India was opened in New Delhi simply because the company wanted to focus on the market at the country’s capital. New Delhi is the capital city of India; therefore, the company considered the location to ensure it captures the country’s attention. Secondly, New Delhi is more established in infrastructure, consumer proximity, and culture. The town is multicultural, thus attracting different customers regardless of their culture. The city also has a high population to provide a business runs smoothly. Lastly, in New Delhi, the company has an opportunity for future expansion because of its proximity to its customers and market; with time, it can open another store in the city (Thacker, 2020).
VRIN Analysis on Uniqlo’s Ownership Advantages
In a business setting, VRIN is an internal analysis tool that companies use to classify their resources based on whether they hold certain traits outlined in the framework (Schroeder and Kotlarsky, 2015). This analysis tool can assist Uniqlo in identifying its advantages that could help beat the rivals in India.
Organizational Structure
The organization’s structure is a flat internal organizational hierarchy. This system allows the management to direct from their point of view. It is also the fundamental basis of an innovative and open culture where employees can share ideas and information openly, thus increasing effectiveness.
A decentralized strategy mainly supports Uniqlo; this is an organisational structure where day-to-day operations and decision-making duties are assigned to top management. A good example is that duties at the organisation are designed to be carried out with responsibility as the working personnel tend to set a goal of mutual understanding and coordination with the supervisors.
VRIN Tool
Valuable
Uniqlo possesses valuable products that could help the company develop, grow and expand in a new market. As a fast retailing store, the company has established a valuable brand image across Asia that could help with easy penetration into a new market. Its brand name is likely to gain new customers within a short period. Uniqlo penetrates the Indian market with international recognition, easily beating its rivals (Seliani and Pratomo, 2019).
Rare
Uniqlo is an international brand with experience in Asia, especially Japan. Its presence on the global map is rare, a notion that could help the company gain easy access to the market. Possessing valuable and rare resources builds the business and gives it a chance to be more creative and innovative to satisfy the customers’ tastes and preferences. The time the company uses this resource, it boosts its ideas, innovation, and creativity a notch higher, beating its rivals (Taneja, Pryor, and Hayek, 2016). However, this resource is quite limited, as competitors might find approaches to imitate.
Inimitable
Products and services are hard to imitate when they are costly for other companies to acquire them. Uniqlo’s products are valuable, rare, and hard to imitate, giving the organization a competitive advantage against its competitors. For instance, the products are high-quality and durable, which builds its relationship with its customers. The brand is also recognized internationally, making it more competitive than its rivals.
Organized
A company’s resource is organized to capture the value fully supported by the business’s structure, processes, and culture. Uniqlo owns unique resources that its competitors cannot imitate. The business needs to incorporate new ideas and opportunities to ensure the products are valuable to its customers. In addition, the company has shifted its technological advancements up-to-date to enhance its growth and development (Seliani and Pratomo, 2019). Besides, a resource cannot deliberate any competitive advantage
Oa
Based on product innovations, Uniqlo has two significant innovations, HeatTech and AIRism; these innovations are used to develop innovative products through high technology to ensure uniqueness.
Ot
Uniqlo is a fast retailing store. It is the 4th largest fashion retailer; this is advantageous because it has a significant presence in the Asian market. Its scale and scope are likely to have a smooth transition in the Indian market.
Oi
A flat organisation directs the organisation; there are few management levels between employees and the highest-level managers. This system ensures that the decision-making process is quick and efficient.
Subsidiary Role
Local implementer: this is a fundamental subsidiary role that focuses on meeting local needs in a country’s products, distribution, and marketing channels. As a local implementer, Uniqlo stays independently of HQ across India. Besides, it can be used to build local responsiveness in the market.
HQ – Subsidiary Relationship
Downstream; this refers to the final process during production, distribution and sale of goods, where final products are sold to customers. Sales might be made at retail, which entails businesses and customers, or wholesale level, which involves companies. On the other hand, upstream; is when necessary basic materials are used to produce final products. In Uniqlo, both systems are essential for the business.
The Global Factory
This is a system in which an organisation integrates international strategies by associating innovation, production, and distribution. The two leading global factory challenges Uniqlo is experiencing are regulation; with the introduction into a new market, the organisation faces more regulation measures. Some regulations are crucial; however, others are a huge burden. The other challenge is product innovation and development; Uniqlo is a consumer-driven organisation. For the organisation to stay relevant in the Indian market, it requires to keep up with the pace.
Dealing with forces of change, creating business agility and implementation capabilities
Uniqlo organisation has experienced an adjustment to changes to improve productivity, hire new staff, react to the new regulation, and other external pressures such as customer needs, technology, and competition. Some of the forces that create the changes include social, political, economic, technology and demographic. In addition, it is crucial to ensure the company creates business agility to ensure development enable company information is accessible when changes take place. Also, understanding the environment gives the business abilities to tackle issues, respond to any changes and seize opportunities.
Uniqlo Internalize Its Ownership-Specific Advantages
An international market-entry strategy is essential when dealing with multinational companies. A wholly-owned subsidiary entry mode; entails the business-owning 100% overseas entity as it gains entry into the market through establishing a new legal entity and operation. This strategy is essential because it retains its control; however, higher risks and expenses are experienced. Uniqlo applying this strategy in the new market could benefit the business’s growth because it permits the company to expand its operations without external interfering. Some of the advantages that Uniqlo could internalize include property rights. As a fast-growing retail store focusing on market entry in different countries, it is essential for the company to maintain its property rights; this ensures that it can retain its innovations. For instance, in a case scenario of Uniqlo, maintaining its HeatTech innovation during India’s market entry is crucial because such products can be produced in the country without importing. The company owns the innovation; however, the production can be done in each country without any partnerships. This process ensures that clients from different countries get similar products but unique features per country. Secondly, the organization has done detailed research on innovations. However, the wholly-owned subsidiary entry mode strategy permits the business to do more research without sharing the details with the mother company. The additional information can be used to expand, reduce operational costs, and improve the products and services provided, thus maintaining its competitive advantage (Gaur et al., 2019).
Another advantage is the company can have complete control of its resources. When a company ventures into a new international market, having full ownership allows it to manage financial resources, thus assisting the company in proper planning and execution. For a company that is not partnering with other organizations, their cost of production might be higher; however, all aspects might be considered with proper planning. Another approach that Uniqlo can internalize its ownership is through utilizing the local resources. The company can take advantage of the country’s cheap and skilled as compared to multinational management, a factor that might seem expensive—the marketing and distribution advantage. With complete ownership, the business can develop proper marketing strategies unique to the new market and help the company make more sales without interference. Besides, the company can also come up with better distribution methods that are cost-effective. For instance, the company can drive online sales of its products and services to maximize profits (Hollender, Zapkau, and Schwens, 2017). Managing the two aspects could enable the company to make better decisions and enhance employee skills in marketing to maintain the original purpose. Lastly, a wholly-owned subsidiary entry strategy Uniqlo could have faced partnership. When venturing into partnership, especially in a new market, there are several aspects to consider, such as different market perceptions, business operations, target audience, opinions, management, and agreements. The company is likely to consider those factors better (Villar, Dasí, and Botella-Andreu, 2018).
Barriers and Competitive Advantages – Culture Differences between Japan and India
According to Grott et al. (2019), cross-cultural differences are cultural values, norms, beliefs, language, and customs that differ from one culture to another or country to another. Different countries have different norms that they are accustomed to depending on their culture. Such norms have impacted businesses in both positive and negative ways. From the Hofstede cultural framework, the power distance between the two countries varies. In India, the business has an appreciation for top-down structure and hierarchy. The top management instructs Uniqlo employees on their responsibilities and what is required. Such control tends to impact the business.
On the other hand, Japan’s business has a borderline hierarchical power; decisions made in a business tend to be slow because consultations are done at all levels. It is quite time-consuming; however, better decisions are made regarding the business than in India (Andrijauskienė and Dumčiuvienė, 2017). The second dimension is individualism; in a business setting, this is the extent that a company is dependent on society. The Indian market has individualist and collectivistic traits; however, the individualist factor is more dominant due to the culture. Therefore, people here are individually responsible for their fashion, which influences the company. In Japan, it is dominantly characterized by collectivism. Fashion is decided as a decision from a group of people; this is important for Uniqlo because people are loyal to home companies, which could increase the company’s sales. The third cultural dimension is uncertainty avoidance; when a business deals with that, the future is not known. The Indian fashion market has a medium-low preference for avoiding uncertainty. In a business setting, the country accepts imperfection. Therefore, Uniqlo can find inventive and unique solutions without considering long-term benefits. This is advantageous to the company because its growth is expected with time. In contrast, Japan is one country that tries to avoid uncertainties. Businesses in the country prepare for disasters. Therefore, the Uniqlo market may be limited in producing unique or innovative products (Andrijauskienė and Dumčiuvienė, 2017).
From Trompenaars’ cultural dimensions, universalism vs. particularism, India believes in universalism, where a business receives instruction from the top management. Its advantage is that consistency in a business is maintained, and employees understand their workplace roles. While in Japan, particularism dominates the business world. Different people can make decisions that respect consumers’ tastes and preferences while building relationships, thus positively influencing the business. Another cultural aspect is individualism vs. communitarianism. In India, customers believe in individualism; they are given the freedom to select what they want; in return, it provides the company with a chance to make decisions that fit their preferences. In Japan, companies imitate communitarianism; they believe a group is better at making decisions; this leads to better company performance (McSweeney, 2016).
Innovation Strategy
The type of innovation strategy that Uniqlo has adopted is disruptive innovation. According to King and Baatartogtokh (2015), disruptive innovation is when companies or a concept of a product or service either creates an entirely new market or disrupts an existing market. The entry of Uniqlo into the Indian market is a wholly new idea to the country. In India, the company is competing against non-consumption in the lower margin sectors of the clothing industry. The major benefit of this innovation strategy is market expansion; adoption of the innovation culture by Uniqlo will lead to the expansion of their Indian market to a broader extent. This strategy makes it possible for the company to shift its consumer behavior to the established companies already in the market. Better results are viewed after a certain period of the company’s existence ((Distanont and Khongmalai, 2020). The second benefit is the improvement of processes. Current market issues require the adoption of modern approaches. A business such as Uniqlo requires adopting disruptive innovation; this will modify how it will evaluate its processes to ensure it provides high-quality products and services to its customers. As a result, Uniqlo will modernize and improve the company processes to further benefit the company (King and Baatartogtokh, 2015).
There are also drawbacks with the benefits that the innovation strategy adopted will cause. The first challenge is that this innovation is prone to a higher risk of failure. For instance, the company has developed two significant innovations, including HeatTech, a clothing line designed for the cold seasons. The business uses a thick fabric for these products that ensure the human body retains its temperature while keeping the thermal nature through absorption technology (Schulz-Müllensiefen and Stöckmann, 2016). Since it depends on this material for its products, in case of any failure for the material to be received on time, the risk of loss is higher than when there are a variety of fabrics. The second drawback of this innovation is that the company may perform lower than the mainstream market during the initial entry. With the rush to meet the market criteria, this innovation strategy might force the company to lower performance before getting used to the market.
Benefits and Challenges Uniqlo could face by Building its Local Innovation Networks in India
Several businesses have developed local innovation networks to ensure international operations meet international standards. In return, to attract a high clientele, however, such innovation has both benefits and drawbacks. One significant benefit that the benefit would face in India is the attraction of new customers; entry of Uniqlo in the Indian market would give the company new clients. Its introduction in the country will attract more customers that could not access the company products while the business is in another country (Reypens, Lievens, and Blazevic, 2016). The second benefit is skilled labor. In Asia, India is believed to have the most skilled people in the industry. Venturing into the country will expose the business to skilled labor. The third benefit is low production cost; building local innovation networks in the country minimizes the risks likely to occur, thus reducing production costs. Lastly, cheap labor; local innovation networks give access to cheap labor. With more customers, more people are employed (Reypens e al., 2016).
In such businesses, some drawbacks are experienced. The main challenge is appealing to a new culture. Different countries have different cultures, norms, attitudes, and values; it is essential to understand the business culture. Another challenge is different payment approaches and behaviors; clients expect a smooth payment checkout in any business. It is easy to ensure the local networks are designer similar to what the people are using. Most customers tend to run away with issues (Trigeorgis and Reuer, 2017). The third challenge is the regulatory barriers and considerations; the business needs to understand that their regulatory consideration varies with the country. For instance, it is crucial to understand approaches that could make the payment flow smooth depending on the customers. It is essential to consider things like contactless payment for different regions or STP to prevent payment issues (Trigeorgis and Reuer, 2017).
Conclusion
In conclusion, Uniqlo’s push into the Indian market results from expanding the business into the international borders. As a company that has indicated success in the Japanese market, it is crucial also to believe that it will thrive in the Indian market and later become the top market. The company conducted detailed research into India’s consumer landscape that indicated the need for international brands to engage with the local community for their success. The company entered the Indian market during a difficult moment when the IMF was downgrading. However, its expansion to the news was viewed as an essential strategy as its revenue increased. As a location for the fast retailing business, India is positioned as an untapped market driver; therefore, opening the company’s wing to this location is likely to increase business revenues. India lacks established retail space; thus, it requires brands to navigate through the country with a roadmap and adapt to consumer needs. With its challenging environment and the world’s economic drawbacks, Uniqlo has developed plans and strategies that could enable the business to focus on valuable products and services entirely. Ensuring the company captures the Indian market requires making total investments and developing better strategies involving evolving and diverse consumers.
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