INTERNATIONAL MARKETING UNIQLO
In reacting to the growing globalisation and untapped Brazil Market, Uniqlo would like to export its products and services to Brazil. This business report will explore the internal and external market analysis of Brazilian market for Uniqlo. It will also analyse the capabilities and weaknesses of Uniqlo in the global market. Brazil is the fifth largest population mainly filled an average of between 29 and 31 year old individuals and this is a perfect target market for Uniqlo. The above internal and external analysis on Brazil requires the work of an expert in international marketing. This field covers the guidelines on possible market entries and the strengths that will attain sustain Uniqlo in the new market. As an international market expert, one is able to provide recommendations and possible strategies for value creation, employees, customers, target audience, marketing and promotion and competitive advantage.
The main problem being tackled is the choice of Brazil as the international market selected by Uniqlo if it is in deed a wise choice for the company and performance growth. Solutions to this problem involved gathering information on taxes, imports, exports, customers, demographics and locations from an extensive secondary research. Brazil is an attractive in South America for Uniqlo products mainly due to the upcoming FIFA World Cup and Summer Olympics. Brazil is also an open economy for globalization despite its language barrier. The main recommendation will be to use a franchise or joint venture as a market entry strategy and invest in corporate social responsibility, Brazilians value a company that plucks back into the society. Despite the above conclusions, it is difficult to compete in the clothing industry with the competitors exploring the quick to respond strategy while Uniqlo is exploring cost leadership strategy. This strategy cannot be sustained in the long run.
INTERNATIONAL MARKETING UNIQLO
UNIQLO Co. Ltd became a separate holding from Fast Retailing Co. Ltd in 2005. UNIQLO main vision is to become a global leader by the year 2020 with a target of $50 billion annual revenue. Its main competitors include H&M and Inditex. However, UNIQLO through its energetic CEO argues that Apple is its competitor since they are a technology innovation company and not a fashion industry. UNIQLO’s mission statement states that it aims at consistently providing high quality fashionable casual wear for every individual at any place and at the minimum possible market prices. It is in regards to this goal attainment of $ 50 billion annual revenue that UNIQLO wishes to expand to the untapped Brazilian Market.
Brazil though faced with high corruption, regional inequalities, heavy bureaucracy and heavy barriers to growth; it is the perfect choice for UNIQLO global expansion. This is because of the opportunities that include; FIFA World Cup 2014, open economy and the development of economic reforms. However, its success is highly threatened by highly dependence on Japan, possibility of a global recession effect and possible reforms slowing down economic growth.
Background: The environment
Brazil is the fifth largest nation in geographical area and a population of approximately 200 million. It has five regions with Southeast region being highly populated at almost one third of the entire population. Portuguese is its main language and the ethnic groups include 49.7 % White, 6.9 % Black, 42.6 % Brown, 0.3 % Amerindian and 0.5 % Asian. Brazil is always prepared for disasters. For example, Brazil had initially predicted a global crisis before it occurred and when it occurred, it was ready to face it. It lowered its interest rates and regulated the inflation rates.
Brazil is an attractive untapped market due to its increased rate of consumption. Also, it is highly attractive in relation to foreign direct investment. Globally it is ranked at the third most attractive state. In addition, Brazil is creative, flexible and adaptable. Lastly, over the past few years, Brazil has enjoyed positive economic conditions.
UNIQLO cannot only rely on Japan as its main market due to ageing demographics and the greatest worst recession after the Second World War two. Initially, UNIQLO was focused in expanding to the continent of Asia due to easiness of language and strong presence of UNIQLO products. It then drew a corporate strategy on Europe and America and Brazil is a Latin America nation chosen as the target market. In relation to stores, as the sales increases thus boosting profits, the store space tend to decline. UNIQLO clothes are utilitarian and serve every gender in the market and this leaves a less vulnerable trend for the target masses. This is UNIQLO competitive advantage over the competitors quick to respond strategy.
When it comes to location, Brazil is the largest state in South America and the fifth or sixth largest economy globally. Its large population is at least 190 million will be an open consumer market that will contribute to positive financial results and enhance growth in a few years time. Availability of workforce and customers is also high. Unskilled and semi-skilled labour is highly abundant. Researchers describe Brazilian workforce as willing to learn, relatively mobile and very hard-working. However, skilled labour is in short supply (Apparel Retail 2013).
UNIQLO has a sense of happiness and optimism in Brazil with its motto that in deed it is making clothes that will change the world for everybody. Pop culture filled with spirit and energy captures the Brazilian market.
UNIQLO’s main internal strengths include the following. First, it has a strong workforce of about 30000 staff. Secondly, it has been outsourcing the manufacturing process to China due to availability of cheap labour. Thirdly, its cost leadership strategy allows it to offer discount on its products. Fourthly, it is a leading retail store line in Japan. Finally, UNIQLO has a strong international market presence in Britain and Japan
Despite the above mentioned strengths, it has internal weaknesses. First, customers tend to have a low brand recall of UNIQLO products. Secondly, the low switching costs has affected its brand in that it has affected its value since the bargaining power of purchasers is high.
UNIQLO is highly threatened by intense competition in clothes industry and retail business. Also, UNIQLO uses costs leadership strategy, however, this strategy cannot be sustained in the long run. Finally, the switching cost of brand by the suppliers is high.
However, it has some opportunities that it needs to explore in order to become a global retail leader. First, there is an opportunity to increase the global market presence. Secondly, the brand can promote itself having survived in the market for a long period of time. Thirdly, Brazil will be hosting the FIFA World Cup 2014 and Summer Olympics in 2016. This is great opportunity to maximize on the sporting events and tourism sector. Lastly, UNIQLO is a brand that is able to enhance portfolio.
Accordign to Bernes Consulting (2013) the main UNIQLO competitors include Benetto, American Apparel, Gap, Inditex, Giordano in China, Esprit, Zara and Li & Fung in Hong Kong. These competitors provide UNIQLO with the threat of substitution and stiff competition. Globally, the clothing retail business has already matured since purchasers have a wide range of products and brands to select from. This is a reflection of the market in Brazil where seasons affects the rate of demand. Inditex as the main competitor has a competitive advantage of quick response just like Zarra while UNIQLO’s competitive advantage is cost leadership differentiation strategy.
Politically, President Dilma Rousseff has ensured there is political and price stability in Brazil in addition to fighting inflation and corruption. However, there are some power fights between unions and chambers and this affects the conflict of interest. Similarly, on the economic concept, Brazilian economy is supported by falling interest rates, tax rebates and industry incentives. World Bank classifies Brazil as a middle income nation with 11 % poverty levels and high inequality levels. The extreme poverty level is 2.2 %. The domestic market is strong in Brazil with the majority composed of the middle class and a sustainable rate thus it is a solid credit market (Chu, 2012).
It is necessary to consider the exporting and importing concepts associated with Brazil. According to Seratini et al. (2011), over the last few years, Brazil has continued to receive trade surpluses being a global agricultural exporter. These trade surpluses have been contributed by political stability, devaluation of local currency, improvement on exports and increase in tax incentives for the exporters. At the moment, Brazil is trying to make its exports and imports less bureaucratic from a foreign exchange point of view. The foreign exchange rules in Brazil, forces the importer to fill excess registration requirements in relation to financing the imported goods and services. The Chamber of Foreign Trade (SECEX) and Ministry of Development, Foreign Trade and Industry control the import and export transactions. However, the restrictions on imports situation is changing due to low trade barriers and enhanced global economy.
The Brazilian economy is well diversified in that it offers several international companies an opportunity to export their services and goods into Brazil. To succeed in Brazilian market requires the maximization of the local environment intimate knowledge for both implicit and explicit costs often referred to as ‘Custo Brasil’ as noted by Export.gov (2014). These costs include tax structure that is complex, employee benefits, distribution, environment laws and government procedures. UNIQLO will be faced with the complex legal system, complex customs systems and tariffs problems. The infrastructures are also a problem given the expanding economy.
Different research including the Euromonitor (2014) approximates the Brazilian population by 2030 to be 223 million which is at least 12.1 per cent increase from 2012. The death rate has been on the rise with a decline in the fertility rate and birth rate and this will lead to a decline in population growth between 2014 and 2030. There will also be an increase in urbanisation with rural population declining by 11.1 per cent. The median age in Brazil is 29.6 years thus more potential for a consumer market in taste, education and retail products. This population is also a large tax base. This is the target age group for UNIQLO products mainly in the urban areas.
The highest concentration of retail consumption is between 25 and 44 years age bracket with the medium being 31 years. Out of this, 61 % is male and 39 % is female. 55 % of this target market is single. 71 % of this audience have practised some sort of sport but only 67% of this, contribute to a healthy lifestyle. The customers are mainly urban and in Brazil in the next few years the urban population will be highly populated in consideration to people leaving their rural areas to source for better opportunities.
In Brazil the past retail consumption market was composed of the following; family management, high informality, high financial earnings, low consumer maturity, fragmented market, low credit volume of sales, low internationalization and high inflation. The present status for retail consumption in Brazil include; stable inflation, credit increase, internationalization increase, professional management, focus on the operation, high consumer maturity, minimum wage, relative prices, informality decrease and market towards concentration (Fast Retailing 2013a). The possible retail consumption in the future by the year 2020 include; a new consumer, a lot of technology advancement, stiff competition increase, more market concentration, total formality, a new consumer, high professional management, multiple channels, new global forces, global retail and collaboration. These retail consumption concepts will be used as a marketing approach concept. For example, the marketing team should concentrate on a particular maker and continue globalizing the company’s products to other nations.
According to Fast Retailing (2013b), the main organisation culture in Brazil is reliant on an effective and strong relationship of individuals. For an international company to succeed, it requires a strong local presence and support, usually developed over time in Brazil. Investors are encouraged to participate in Brazil local trade as an entry strategy, so as to be able to pre-screen the potential retailers and customers. Using a franchise or licensing, international representative, joint ventures and contract manufacturing will be some of the available market entry options. For UNIQLO, franchising or joint venture gives it a local touch to its concept its acceptability will be ease in the foreign market. Brazilians identify more with their own than with foreigners.
Prahalad and Ramaswamy (2004) define value creation as the process where customers and companies play the distinctive role of consumer and producer respectively. It a process controlled only by the firms as a one way flow from the company to the consumer. It is therefore, the main concept in service marketing. In the case for UNIQLO it has to produce clothes for the Brazilian customers. this value is co-created through a mutual effort between the employees, company, shareholders, customers, government and other stakeholders. Usually, value creation does not occur until the product or service on sale or an item on offer such as clothes sold has been used since perceptions and experience determine value. In Brazil, UNIQLO is creating value by first, creating job opportunities in their retail stores thus reducing poverty and improving the standards of living.
Corporate Social Responsibility
As a global clothing retailer, UNIQLO should create a volunteer and donation program that will distribute clothes to the challenged individuals in Brazil. The program is suggested to last at least 10 weeks. The donated items such as tights, t-shirts should and Ultra Light Down jackets favour men, children and women. This program should organize local volunteers so as to visit the local communities and deliver at least $2.2 million worth of clothes. The volunteers should be both customers and employees. Also, UNIQLO should partner with the Mayor’s office so as to select the location mainly in need of clothes. In addition, UNIQLO should post the invitation of volunteers on its website for every individual willing to participate to get details.
Over the next decade, Ryall (2011) predicts that UNIQLO will be a global clothing retailer to be reckoned. However, it will be faced with different problems such as poor public relations. Based on outsourcing its ideas to manufacturing firms in China, UNIQLO is able to use cheap labour but on high quality productions.
As a global company, Brazil presents the challenge of a language barrier. Portuguese is not yet a mature trading language and English is its second trading language but it has not yet developed to the status of fluency since the surrounding area is mainly Spanish speaking nations. Secondly, poverty is a major issue. Thirdly, crime rate is still high in Brazil.
Brazil is a leading agricultural export nation and importing clothes will add to its untapped market. Also, Brazil is the World’s seventh largest economy in relation to the nominal gross domestic product and by the purchasing power of customers. From 2012, it has been rated among the top largest growing economies globally with a population of approximately 200 million. in addition, tourism is a major growing economy for the nation. For instance the 2014 FIFA World Cup will be a perfect market to explore. However, these strengths are threatened. First, REAL, Brazilian currency is growing stronger and its strength will challenge the export and import driven economy by slowing it down. Secondly, Brazil is mainly an export and not an import nation.
Brand equity and promotional opportunities
Blog users were viewed by UNIQLO as the main brand awareness without a feeling that the users were promoting. The blog features girls wearing UNIQLO’s clothes, 5-second dance and 5-second clock animation. This is a recommended promotional method in Brazil since their internet and Information Technology infrastructures are strong in the urban areas.
In addition to using blogs as a promotional tool, door to door selling will also market UNIQLO clothes. Door to door selling is essential in a new market. This promotion process ensures the sales teams are able to explain the key features of every product to customers within their network as argued by Taiar (2012). The sales tea will be playing the role of the producer and also as customers thus creating value. Secondly, raising literacy is the key in areas with children. Thirdly, production of sweat pants promotes proper sanitation and this is value creation.
Recommendations and conclusions
In conclusion, UNIQLO expanding to Brazil is an excellent idea. UNIGLO should enter the Brazilian market as a joint venture or franchise. UNIGLO should also change its cost leadership strategy into a quick to respond strategy so as to compete with its competitors adequately. This cost leadership and differentiation strategy is not highly sustainable in the long run. The main target market should be the urban middle age customer of between 29 and 3 years, though every customer should e treated equally with respect so as to create value.
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