Group 2

Dranreb D. Oco
Mary Grace G. Payla
DBA 355: International Business
Case Title: Uniqlo: A supply chain going global

Background of the case

The company began in 1984 as a family-run business named "Ogori Shoji

Co." in Japan that sold ready-made men's suits. The owner's son, Tadashi Yanai,
took over the family business as the CEO in 1984 and radically changed the
company's offerings to affordable basic casual wear under the "Unique Clothing
Warehouse Brand." 
After testing store sites in urban and roadside areas, the latter mode became
a successful store expansion strategy up till 1998, wherein the company's first
flagship store was opened under the "Uniqlo" brand. Coinciding with the flagship, the
introduction of their new polar fleece jacket boosted brand expansion to the top
fashion retailer in Japan.
The company focused on "price and quality," adopting a counter-current
approach and not relying entirely on fashion trends in developing and marketing its
clothes. Based on practical everyday needs, direct customer feedback was as crucial
as fashion trends in shaping R&D and research on natural and synthetic textiles. As
a result of this strategy, Uniqlo could offer basic fashion styles in a great variety of
colors and quality materials. The company's unique position is the world's only
LifeWear brand.
Uniqlo pioneered "Specialty Store Retailer of Private Label Apparel" (SPA)
with an agile supply chain model. This SPA model has been implemented by GAP in
the US and was common in major "fast fashion" companies like Inditex, and H&M.
Most Uniqlo suppliers were long-term Chinese partners. Uniqlo's supply chain
has been demonstrated to be effective in Pacific Region, but the same concept
cannot be replicated globally. Uniqlo's slow expansion in the United States, and
Europe, was owing to the constraints of its present supply chain.

Introduction
Effective supply chain management is crucial for successful business
operations.Uniqlo is a leading fashion retailer, producing stylistic, affordable, and
comfortable clothing. While Uniqlo is a dominator in the Asian market, it has not
enjoyed such success in the European and American markets. This analytical work
will assess whether Uniqlo's Asian regional supply chain is compatible with European
and American markets and if the company's supply chain should be reorganized to
suit a global market. This piece will further consider whether localized supply chains
in Europe and America would benefit the organization, and how Uniqlo's supply
chains can manage the large and new assortment of products for Europe and the
United States.

Problem Statement
Uniqlo currently operates under a complex and dense regional supply chain in
Asia. However, considering the international success experienced by rival fashion
retailer firms H&M and ZARA, Uniqlo’s central problem is how to best effectively
transition from a multi-domestic organization to an international business aligned with
a global business strategy. The company is exploring whether to expand operations
into Europe and the United States through localized supply chain development or to
hone existing supply chain infrastructure through reorganization or intensification.
The unique differentiation of Uniqlo's existing supply chain is its intense focus on
functionalism and product quality, which may be undermined by supply chain
expansion due to demand pressures. Further, implementation problems concerning
distribution and competition in the mature retail markets of the United States and
Europe may affect the strategies that Uniqlo implements.

Analysis
This group will foster a comparative analysis of Uniqlo’s competitors.

Fashion Business
Description
Retailer Model

Inditex Fast fashion  First to use responsiveness in a vertically integrated,

tightly controlled, and localized supply chain with
reduced time to market (by close involvement with
suppliers) over cost advantages
● 10-15 days from design to retail.
● Vertically integrated and owned 14 automated
factories, all located in Spain. Production processes
were all under control, only outsourcing lower value-
added activities, like sewing, to smaller cooperatives
in La Coruna and northern Portugal
● Inditex's operational model greatly influenced the retail
clothing industry by allowing the production of new 'in
season' designs that could be rolled out to stores
quickly
H&M Fast fashion  Design and planning were centralized in Stockholm
headquarters.
● Operating without directly owned production facilities
with longer planning time than Inditex.
● The design process was integrated with sourcing and
merchandising, as H&M outsourced its production to
over 700 garment manufacturers and 60 pattern
suppliers (60% of which were based in China).
● Close involvement with suppliers, offshoring all
production processes to low-cost locations.
● Over 30 directly owned production centers (controlled
supplier quality and a sophisticated IT infrastructure
connecting its design center with the entire supply
chain
● supplier network monitored by production offices
overseeing a global supply change

Uniqlo Speciality Store  Based on an agile supply chain where tight

Retailer of partnerships with a select number of suppliers were
Private Label arranged in a network-like structure
Apparel ● Restructuring the supply chain by bypassing trading
(SPA) companies and lowering purchase costs
● Maintaining high-quality product
● Advanced IT system to connect supplier's factories,
stores, and HQ for improved inventory management
and forecasting.

By comparing Uniqlo's operations with Inditex (ZARA) and H&M, Uniqlo can
identify and manage weaknesses while capitalizing on its corporate strengths. 
A Spanish brand of Inditex Group, ZARA's constant updating of its clothing
range builds its brand as a "fast fashion" operation. ZARA designs all its products,
and its use of an "in-season" focus underpins its rapid response supply chain). 
A Swedish brand, H&M develops fashionable clothing at reasonable prices. In
contrast to ZARA, H&M offers a "seasonal collection," which underpins its slow
response supply chain. Having over 100 in-house designers allows H&M to capitalize
on current fashion trends and produce clothing products tailored to specific consumer
demands. 
By being opposite to ZARA and H&M, Uniqlo's anti-trend model serves as its
unique differentiation and hones its brand as a life wear clothing retailer. 

Recommendation
The market climate and consumer behaviors in the United States market are
significantly different from the Asia Pacific market. Indeed, the extensive product
assortment will place significant pressure on Uniqlo's existing supply chain. This
group offers three possible solutions, with our primary recommendation being to
reorganize and intensify Uniqlo's existing Asian supply chain alongside the
development of e-commerce. 

Solution 1. To intensify investment in e-commerce in light of H&M and other fashion

retailers' online success. This strategy will minimize supply chain pressure and will
offer a cheap and effective way of market penetration in new countries.

Solution 2. To utilize and further expand the existing Asia region supply chain.
Developing the existing Asian supply chain to tailor European and American
demands will be the most cost-effective option. Uniqlo's existing knowledge of Asian
production laws and norms will also ensure production efficiency and cost reduction. 
Uniqlo has already set up production lines in Bangladesh and Vietnam, and, despite
potential ethical considerations, Uniqlo can utilize meager labor costs in these
countries. Honing its existing supply chain infrastructure and using some e-
commerce is the most pragmatic option that ties in with Uniqlo's comparative
advantage in its regional solid supply chain.

Solution 3. Transform the company itself. The Japanese cachet may appeal to
something other than the US and EU markets. Including US/EU designers may
increase brand acceptance, and the US/EU local LifeWear adaptation may prove
successful.