Discussion report strategic management topic strategic analysis of the business

The political environment of countries reflects the country's ability to develop the fashion industry, including domestic and foreign policies.. Meanwhile, when the economy slows down du

THUONGMAI UNIVERSITY

DISCUSSION REPORT STRATEGIC MANAGEMENT

TOPIC

Strategic analysis of the business Class : 23114SMGM0111E

Teacher : Võ Hạnh Quyên

I BUSINESS INTRODUCTION

Uniqlo Co., Ltd is a Japanese casual wear design, apparel, and retail company Originally a division of Fast Retailing, Uniqlo became a subsidiary in November

2005 and was listed in the first class of the Tokyo Stock Exchange The fashion, quality, and value of Uniqlo carry on their own the qualities of Japanese Industrial culture, civilized and sophisticated The decisive factor in the "unique" of the brand name is the perfectionism in the growth and completion of new materials, with common properties such as heat retention, helping to maintain skin temperature, antibacterial, High elasticity and thinness, cooling, and quick drying

In addition to Japan, Uniqlo also operates in China, Hong Kong, Taiwan, France, Malaysia, Bangladesh, Philippines, Russia, Singapore, Korea, Thailand, United Kingdom, USA, Indonesia, India, and Vietnam Uniqlo opened its first store in Vietnam on October 2, 2018, under the name UNIQLO VIETNAM CO., LTD In addition to the first store, the company also plans to open more stores in Ho Chi Minh City before expanding to other provinces in Vietnam

Vision

To become the number 1 clothes retailer in the world They truly believe that this dream can be achieved by providing the best customer service experience on the high street Uniqlo’s business is and has always been, customer-driven, and customer-first Products, stores, services, people, management Everything they do centers around the individual who wears the clothes

Mission

Uniqlo (Fast Retailing Group) has adopted a new sustainability mission statement,

"Unlocking the Power of Clothing" With a focus on products, supply chains, employees, stores, and communities, we will change the world for the better through our business

II.

EXTERNAL ENVIRONMENT ANALYSIS

1 Political

The political environment makes a difference in the environment and conditions

of fashion development in each country When businesses enter the fashion market, they often focus on carefully studying the legal system and policies of that country to build an appropriate business plan

The political environment of countries reflects the country's ability to develop the fashion industry, including domestic and foreign policies Policies to encourage import and export or combine with foreign investment sources to help develop the

domestic fashion industry The government has the ability to encourage companies

to buy fabrics locally, especially if the taxation on imports from other countries increases

We can see some examples of politics that have a great impact on the fashion industry, especially here are the free agreements signed between countries For example, the Regional Comprehensive Economic Partnership (RCEP) is opening

up new export opportunities, such as with Japan, China, and India, thereby saving costs and making supply chain processes more flexible Free trade agreements with other countries can help Vietnam's textile and garment industry attract new global brands

2 Economy

The economy has an important influence on the fashion industry

Economic growth rate

During periods of economic growth, people have higher incomes They have a higher demand for clothes and are willing to pay more to buy clothes from high-fashion brands This helps increase revenue for high-fashion brands Meanwhile, when the economy slows down (during the period of covid 19), consumers reduce spending on fashion items and create greater competition among firms in the industry

 Monetary policy and exchange rate

This factor can be a good opportunity or it can also be a risk for fashion brands It can affect the adjustment of import-export relations Exporting fashion brands will

be more profitable when the exchange rate between VND and other currencies in the world is high and vice versa For example, in recent times, the falling euro may reduce profits for domestic fashion companies that want to export goods to Europe such as May 10, but it is beneficial for firms that import materials from abroad

Inflationary

Due to the epidemic, the supply chain of fashion materials is disrupted, and fewer clothes are produced, so the brands increase the price of clothes When consumers' income does not increase but the price of the product increases, they will tend to shop less

Tax

The change in the tax system or tax rate is also an issue that fashion businesses need to pay attention to It can change the level of expenses or income of the business

3 Social

Social culture has a significant impact on the fashion industry and fashion businesses Vietnamese people's fashion consumption is divided into three major groups: those who follow fashion trends (33.9%), those who care about fashion -know how to be beautiful (33.6%), and those who only shop when necessary (32.5%)

At the age of 23 to 29 years old, the trend-following and fashion-conscious groups know how to make beauty a major focus Meanwhile, the 30-39 age group is dominated by those who only buy when absolutely necessary Comment on Generation Z and late-Millennials are generations of young people who enjoy flaunting and asserting themselves through social networking platforms Young people in this class have witnessed the rapid growth of Facebook, Instagram, Tiktok, and Snapchat

This generation is oriented and instilled with strong ideas of sustainable fashion, environmental protection, and climate change due to the need to express themselves through fashion This has a significant impact on their decision to purchase fashion products because they are the generation with the most sway over the current fashion industry

User requirements are more minimal than previously.

In recent years, the Vietnamese fashion market has witnessed the arrival of global fashion brands and received numerous positive business results The ability to provide customers with access to the latest designs at reasonable prices has contributed to the appeal of "fast fashion" among Vietnamese consumers The short life cycle of these "fast fashion" items, however, has had a negative impact

on the environment, people, and resources

Meanwhile, sustainable fashion - providing, producing, and consuming fashion products that ensure environmental, social, and economic sustainability - is expected to be an unavoidable trend as Vietnamese people's incomes gradually improve and young people's sense of responsibility for fashion and the environment grows In the future, the fashion industry will place a greater emphasis on sustainability, including materials derived from environmentally friendly sources, recycled materials, and less use of chemicals; the manufacturing process will ensure factors such as energy savings, labor welfare, and safety

Consumer preference for imported goods

Foreign students' psychology is one of the majority of Vietnamese people's social realities Vietnamese people believe that only foreign goods are committed to quality, and that only foreign goods are good Even if foreign goods are two or three times more expensive, consumers still prefer to buy more domestic goods The same is true for fashion items This has a direct impact on the market share of domestic fashion brands

The popularity of influencer marketing

In recent years, influencer marketing has gradually become the most invested media of fashion brands Facebook, YouTube, Instagram, TikTok, and other social media platforms are popular places for KOLs to introduce new brands and designs Furthermore, KOLs serve as brand ambassadors in lookbooks and promotional videos

Brands frequently select influencers who have a following that is relevant to the brand's target audience Today's famous fashion KOLs in Vietnam include Chau Bui, Decao, Son Tung MTP, and others

The emergence of video content

With the rise of e-commerce, video content of fashion products or viral fashion trends is becoming increasingly popular and is expected to take over social media Whether it's short videos like those on TikTok or Facebook/Instagram stories or longer videos like those on YouTube, video content will clearly demonstrate its superiority in the future According to Cisco research, by 2022, approximately 82% of online content will be in the form of video

Furthermore, Livestream is demonstrating its utility in promoting sales for fashion brands Many large-scale shopping events are being streamed live, and this is becoming more common

The online shopping culture is becoming increasingly popular

Previously, people only preferred traditional forms of purchase due to the risk that the product received was not the same as the photo, the loss of the goods, the difficulty in exchange and return, and so on

Customers, especially when it comes to fashion items, have the mentality of going

to the store to try them on and then buying Consumers have become more reliant

on online shopping channels in recent years Furthermore, Covid-19 is the driving force behind the online fashion shopping trend People have formed the habit of online shopping to limit the spread of the disease due to social distancing and

restrictions on large crowd gatherings Therefore, fashion brands have built a more convenient and attractive online shopping channel, improved quality management

on e-commerce sites, as well as stricter regulations on product images and descriptions, which boosts consumer trust in online clothing

4 Environment

Fashion becomes a "victim" of climate change The source of raw materials like cowhide sheepskin is getting less and less Environmental pollution and climate change such as droughts, warming, and water scarcity, can affect the production of cotton crops This causes business disruptions and increased production costs Under the pressure of animal protection organizations and the trend of "green" products to the throne, fashion companies are having to invest and develop environmentally friendly man-made materials to replace scarce materials to supply enough for consumers

Natural conditions such as the Covid-19 epidemic or storms and floods severely affect the fashion industry.During the epidemic, factories that physical stores have

to close down, reducing consumer demand, reducing the revenue of the entire fashion industry Natural disasters can also affect the transportation of goods by air

or by sea

5 Technology

Developed technology shortens the time from design to production and distribution AI will come up with algorithms to recommend products that match customer needs.Using machines to increase productivity during production and packaging 3D printing technology contributes to promoting production, reducing costs and production time of products significantly .Easily perform complex shapes and patterns that make a breakthrough in the fashion industry

Improve shopping experience as well as satisfying customer needs .Online shopping is more and more popular because it saves time for consumers, especially during the Covid-19 period .Customers can try on clothes with virtual reality glasses to customize their measurements to fit, saving time and money on shopping

Expanding business reaches more customers Use social networking sites or e-commerce platforms to run ads and sell

6 Legal

The fashion industry is a multi-trillion-dollar industry that needs skillful legal protection to ensure its harmonious existence

Intellectual property laws protect brands and prevent plagiarism

Intellectual property law protects fashion designs, which fall under the category of

“artwork” which includes paintings, sculptures, drawings, sketches, and patterns for clothing, apparel, and accessories Since the images above the canvas are also protected as artwork

+Trademark Law protects brand names and symbols used on goods and services,

to distinguish them from other goods and services

- Protects consumers by helping to ensure that they receive genuine items from suppliers they trust

-Branding is extremely important for fashion brands and designers that add significant value to goods

For example, 2 stores of imitation Hermes fashion brand at 38 Hang Bong and No

4 Dien Bien Phu are as follows These two stores have the act of selling products with the signs "HERMÈS", "HERMÈS & pic", and "H & pic" identical to the trademarks "HERMÈS", "HERMÈS & pic", "H & pic" is protected households in Vietnam For this violation, the store in Hang Bong was fined 20 million dongs and collected organs including 25 bags, 11 wallets, 2 key chains, 2 belts, and 3 bracelets

+ Copyright law

- Protection of copyrighted products

- Does not protect embossed or fabric-printed designs

-Protect one designer's clothing design sketches, but do not prevent others from creating and selling clothing similar to those sketches

Environmental protection laws limit the waste that the fashion industry generates

The fast fashion industry is the world's second-largest water consumer and manufacturing accounts for 8-10% of carbon emissions The industry ranks in the list of 10 industries that destroy the environment Fast fashion model: Produce according to the trend => When the trend ends, it will be thrown away => Large amounts of waste cannot be destroyed The laws require businesses to treat wastewater, collect and classify solid waste, and reduce and treat emissions into the environment When not meeting the requirements to avoid environmental pollution, businesses will be fined according to the prescribed levels

Labor law protects the rights of workers in the fashion industry

In addition to the technology industry, the fashion industry is a "great funnel" that exploits more labor than any other industry Fast fashion develops, brands have to compete with each other to increase production.Fashion firms must increase their workforce, they will go through the company providing labor resources

The problem comes when many human trafficking organizations "disguised" as labor supply companies have taken advantage of the cooperation program to work abroad to lure children and people who want the opportunity to earn income In foreign countries, workers have to sign a contract with the employer for a long time, cannot change jobs because their papers and wages are kept, and suffer harsh exploitation According to the Labor Code 2019, the working age of men is from

15 years old to 60 years old 09 months; the Working-age of women is from 15 years old to 56 years old The fine levels are determined by the liability to pay administrative violations Based on the number of exploited workers, the fines also increase In many places, the law requires large enterprises to disclose specific information, policies, and wages to workers in order to avoid labor abuse and have appropriate penalties

III INDUSTRY ENVIRONMENT

1 Competitive Rivalry

After competing with giants like Zara, H&M, Forever 21, etc Uniqlo has gained specific recognition in the market, ranking third behind Zara and H&M Two companies have been in the industry for a long time, have a significant market share, and are taking advantage of economies of scale, creating stiff competition for market share Because of that Uniqlo's market share declined Uniqlo carries a simple product design, not too many shapes, and many styles like H&M and Zara,

so it has not yet attracted many Genz customers, but this is an era when it is imperative for businesses to grasp the trend

Distribution channel

- Part of H&M's strategy to increase sales is to launch products that are advertised

as co-designs with big names in the fashion world such as Versace and Alexander Wang

- Zara's strategy is to launch more models than the competition This approach allows Zara to attract a wider range of customers with different interests

Meanwhile, Uniqlo's distribution channel is mainly concentrated in Japan, with more than 700 Uniqlo stores located in the country of the rising sun Uniqlo's distribution strategy focuses on the moment the product is on the shelf, with meeting the existing needs of consumers as the goal The brand focuses on

responding to changing trends in Japanese fashion, emphasizing designs that match the minimalist style favored by the Japanese

Brand

- Through acquisition and development of distinctive style brands, H&M wants to attract a wider audience of fashion shoppers Each of its brands has its own price range and style ideas Collection of Style, for example, costs more than the average price of H&M products and focuses primarily on the European market Meanwhile, Monki brand products are only half the price of Collection of Style products, with more youthful designs

- Zara divides products into a lower-end group and a higher-end group Its goal is

to be seen as an affordable luxury fashion retailer Its main stores are always located in prime areas in major cities around the world, where rent is very expensive, such as on Fifth Avenue in New York Unlike Uniqlo, in its brand strategy, Zara does not emphasize advertising issues Instead, the company poured money into opening new stores The learning strategy from The Gap that Uniqlo applies is to position its brand as a "private-label apparel" brand This means that Uniqlo creates its own products at all stages and only sells them in its stores and website This company also uses sports events to attract public attention

2 Importance of suppliers

Uniqlo deals in a restricted variety of fabrics and product planning are done one year in advance As a result, they can estimate the demand for raw materials in advance and participate in bulk purchases This reduces the cost of raw materials and they have more time to buy them Thanks to the brand reputation that Uniqlo holds, they are able to attract suppliers and maintain long-term relationships with them Uniqlo will negotiate directly with suppliers worldwide and place orders in bulk to achieve economies of scale With the strategy of "long-term fashion", Uniqlo is also focused on building strategic partnerships with high-quality and innovative Japanese manufacturers They have a highly qualified R&D and innovation team focused on the in-house development of fabrics such as HeatTech, LifeWear, and AIRism helping them reduce their reliance on suppliers There is less scale for forward integration, and at the same time, the raw materials have a limited range Moreover, labor is available in large quantities and labor cost is cheap when Uniqlo advocates hiring factories in South and Southeast Asian countries All these factors are beneficial to the company, and therefore, suppliers have low bargaining power

3 Bargaining Power of Buyer

Currently, Uniqlo's target market is both men and women, between the ages of 18-40

- Age 18-30: regularly update youthful design trends

- Age 30-40: simple design, convenient in daily life

Customer-centric, Uniqlo has continuously strived to improve the customer experience by assessing each touchpoint and addressing their needs and expectations from the company There are countless substitutes and competitors with negligible switching costs for Uniqlo customers Furthermore, variable customer income affects Uniqlo's sales There are 2 types of customers Loyal customers: customers with high and stable income sources and customers leaving: high prices compared to income levels lead to not buying at Uniqlo So customers with many choices, the bargaining power of customers are high

4 Threat of New Entrants

Fashion trends are continuously changing in the clothing segment People are getting more aware and hence seek more variety and options Uniqlo has captured

a specific set of customers who prefer comfort and casual wear over this trendy drift Uniqlo currently operates in more than 2250 stores and has focused on improving its research and development It is coming up with improved designs and in-house fabrics and maintaining a low cost, making it very difficult for any new entrant to copy It gives the company a unique value proposition If any new brand wishes to enter the market, it will have to spend a lot on innovation and achieving economies of scale Small companies might have to face fewer hindrances Still, the global ones will have to draft out the entire costs for online selling, distribution channels, store set-up price, standardization, etc., making it a costly project However, if a company does cross all these barriers and establishes

a brand name in the market, then Uniqlo will have to compete by differentiating its product from them All these factors show that threats from new entrants are moderate, and the company should keep on innovating more to stay high on the competition ladder

5 Threat of Substitutes

Uniqlo has a brand image of selling high-quality products with the main focus being on comfort and casualness Uniqlo's alternative products are more focused

on the latest fashion and keeping up with ongoing trends Switching costs are low

so any change in customer preferences and choices could cause the consumer base

to switch to substitute products Because of the widespread urbanization process, the higher the standards of consumers, the more they can use substitute products