Uniqlo, Study notes of Material Science and Technology

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Uniqlo

EGADE/MTY CONSULTING

Agenda

1. Problem Statement and Recommenda2on
2. Analysis
3. Alterna2ves
4. Evalua2on
5. Jus2fica2on
6. Implementa2on
7. Risks
8. Financial
9. Q&A

Background

• Japanese family owned business, started in 1984
• Pioneer of the SPA model in Japan
• Strong presence in also China and S. Korea
• Focused on affordable, basic casual wear
• Main compe2tors are Inditex and H&M
• Consistent growth for several years

Analysis-­‐SWOT

Strengths IT Infrastructure Solid/low cost supply base in Asia Quality control Weaknesses Falling behind compe2tors in some key markets Fiber supplier produc2on capacity Fewer SKUs when compared with compe22on Opportuni2es Growth of e-­‐commerce Untapped market in Europe and The Americas Op2mizing the Takumi approach Threats Very strong compe22on Wages increasing in China Risky joint venture par2cipa2on

Current Supply Chain

China based to fulfill regional demand Joint Venture in Bangladesh, Uniqlo has low par2cipa2on Migrated from trading partner model to direct manufacturer to minimize costs and 2me Supply base ra2onalized from 120 to 40 suppliers 3PL Logis2cs for inbound

Takumi Method

-­‐ Process and skills Oriented. Gembutsu Gemba -­‐ Use of experience (30 plus years) -­‐ Demanding Quality and inspec2on controls -­‐ Just in 2me philosophy -­‐ Kaizen Philosophy to adapt customer feedback -­‐ The boss is the customer Japanese heritage applied

AlternaKves

El sombrero op2on

• Source in La2n American markets for US Market. E-­‐ commerce.
• Source in Eastern Europe for European Markets The kimono op2on
• Grow in US and Europe by sourcing in Asian countries and focusing on distribuFon channels on site. Op2miza2on strategy
• Focus on lean opera2ons
• Asia region since growth rate is 9.5%

EvaluaKon Criteria

qInvestment qOpera2on cost qImplementa2on Time qShort term benefit qLong term growth qRisk

EvaluaKon

The sombrero The kimono OpFmizaFon Investment Opera2on cost Implementa2on 2me Short term benefit Long term growth Risk

Risks

• Direct customer feedback strategy
• Focus on product benefits (quality and innova2on) Fierce compe22on
• Start with a local partner to get to know the market *New manufacturing sites *Culture
• Complement strategy with online presence Brick and mortar decline USA
• Direct customer feedback strategy
• Focus on fashion Assume consump2on pakerns same than US
• Monitor constantly for planning purposes Economic Crisis EUROPE

Sombrero

RD

◦ Use current IT func2onality to communicate ◦ APP Integra2on to track trends both in models and sizes ◦ Use Store device to project forecast based on sales data Manufacturing ◦ Use Mexico for Americas Supply Chain Hub ◦ Supplier partnership model over JV op2on ◦ NAFTA Maquila ◦ Loca2on ◦ Cheap Labor -­‐ $1US / $17.5Pesos, minimum wage $62 pesos a day ◦ Qualified workforce for clothing industry ◦ Takumi model would take less Fme to implement ◦ Composite material to be sourced from the US vs Japan (no Composites in Mexico) ◦ Ban child labor suppliers NAFTA Opportunity

Sombrero

DistribuFon ◦ Partnership with an online retailer such as Amazon for quick turn around online sales and e-­‐presence posi2oning ◦ Established and mature distribu2on network for expedite deliveries ◦ Installed customer base Marke2ng ◦ Use an “offer a discount” model if customer retweets or posts in facebook with the cloth ◦ Use Current Stores and as flagship stores to reinforce brand posi2oning Vendor Management Inventory ◦ Contractual Terms with Suppliers so inventory levels can respond to demand on 2me ◦ Cost absorbed by Supplier in lieu of longer contracts to ensure future business LaFn American Market opportunity ◦ Installed Capacity ◦ Purchasing habits fit Uniqlo product line

Financials

2010 2011 2012 2013 2014 2015 Revenue/ store in Billion Yens *Rev/store increase of 50% *Stores growth rate: 47% *Assuming: same growth rate for next 5 years

Financials Forecast

39 57 84 123 180 265 0 50 100 150 200 250 300 Stores 2015 Proyec2on 2016 Proyec2on 2017 Proyec2on 2018 Proyec2on 2019 Proyec2on 2020 Proyected Stores 65 addiFonal stores than originally projected Conserva2ve assump2on: 145 billion yens Aggressive assump2on: 218 billion years