MUJI’s market entry strategy into VietNam

In MUJI’s case, the most practical way for entry into the Vietnamese market is through
licensing. The factors illustrated below form the justification and rationale behind the
decision.

3.2.1 High Corporate Tax

As highlighted in Appendix 3, VietNam recorded a corporate tax of 20%
( https://tradingeconomics.com/country-list/corporate-tax-rate?continent=asia)
, a relatively
competitive figure comparing to some neighbouring countries. By entering the market
through a licensee, the high cost incurred due to the tax will be significantly reduced. Aside
from that, other restrictions and trade barriers imposed by the local government will not
become an issue through a licensing agreement with a licensee in Vietnam.

3.2.2 Distribution Channel in VietNam

Another possible method of entry strategy suitable to be employed is the wholly-owned
subsidiary method where MUJI acquires and takes over the operation of a local company
in Vietnam. This enables MUJI to have total charge over the distribution and marketing
operations, therefore ensuring better control over quality and standards of the company.

This method however is not conducive as mentioned in Appendix 4, the distribution

channels in Vietnam are tightly controlled, the bond and
relations between suppliers and their companies exceed the business level. Distributing
licenses to potential business operators in VN seems a viable and preferred strategy
as it eliminates the challenge and effort in penetrating the distribution channels.

3.2.3 MUJI as an established brand name

Another reason for employing the licensing strategy in entering this new market is due to
MUJI’s longstanding reputation and history in retailing. For an established brand name
like MUJI, it is not practical to invest money, time and effort in a wholly owned
subsidiary either through acquisition or Greenfield where product and market research
will be carried out as products manufactured by MUJI have undergone extensive R&D to
be marketed in various locations.

3.2.4 Reduce risk and cost / increase opportunities

Looking at MUJI’s ‘Sales Breakdown by Type of Channels’, it is shown that the majority
of the profit is channelled through directly managed stores (Appendix 5). However, most
of these directly managed stores are located in Japan where management and operations
of stores are more straightforward and cost effective. In establishing a licensing strategy
in a new market such as Vietnam, it will not only reduce risk significantly, it also helps
cut unnecessary cost. One good example is the expansion strategy of MUJI in Thailand
where since its opening, MUJI now has two licensed stores in Thailand. With the
employment of licensing as an entry strategy, there are also better opportunities and
possibilities for development of new stores due to its low risk and low cost features.

The plan B for join venture

A partnership(equity) between two or more companies to form an alliance
Different coalition types are possible depending on cooperation forms
‘Economies of scale by pooling skills and resources (resulting in lower marketing
costs)’ (p.349)
Eliminates/ reduces problems associated with host government restrictions; local
tariffs and non-tariff barriers.
Equal share of risk of failure

Plan B for whole owned…..

Can exert great control over the whole business
Have quick access to distribution channels
Tho: high cost and high risk and time consuming

Plan A whole owned sub…..

Both Russia and Swit… are developed economies so the strategies appied might be
different. They learnt the lesson from the experience while opening their business in United
kingdom
For Russia

Our initial foray into Britain—the joint venture with Liberty—didn’t satisfy us. That
wasn’t because the products didn’t sell; they did. The problem was strategic
misalignment. We had quite a clear vision for how to properly introduce and deploy
Muji abroad, and we thought we could leverage Liberty’s resources. But ultimately
we decided that a stand-alone shop that we could operate in a hands-on fashion
would be the best way to present our concept to customers.

Rely heavily on Liberty for administration and logistics. That eventually led to
difficulties. Its managers had their own business to run; we weren’t their top priority.
And we were forced to incorporate our high operating costs into our prices, so the
“inexpensive” part of our concept was missing.

Still, the customer response continued to be encouraging. So in 1994 we ended the

partnership with Liberty and created a European subsidiary to run the first London
store,

For swrtzerland: Muji first entered into a licensing agreement with Ahlens AB in 2004
( https://ww.fashionnetwork.com/news/muji-establishes-swedish-subsidiary-ahead-of-
ahlens-ab-contract-expiration,905022.html)
. Ahlens AB is the country’s largest department store and, for the past 13 years, has held the
exclusive rights to distribute Muji products in Sweden.

Both Muji and Ahlens AB have decided, however, to terminate this contract in August 2018.
In place of this, Muji Europe Holdings will work to give the brand a stronger presence in
Sweden through the establishment of their new subsidiary and make a more significant
impact on the whole chain.