Muji Retail Company’s Strategic Management
MUJI is a retailer offering a wide variety of products such as household and consumer items. It was established in 1980 as a private enterprise under a Japanese superstore, The Seiyu (Toda, 2019). At this time, the luxury industry was rapidly developing due to the nation’s growing economy and brand-consciousness. This company progressed as a result of opposing consumer inclinations at the time, identifying a market gap for affordable and quality products with no embellishments (Toda, 2019).
It started operations with approximately nine domiciliary items and 31 food products. In the modern world, it has emerged as one of the leading syndicates with at least 7000 commodities in various categories, such as furniture and clothing (Toda, 2019). Its name is an abbreviation for Mujirushi Ryohin, which means “no-brand quality goods” (Toda, 2019). This paper explores the possibilities of this company’s entry into a new market, specifically home automation.
Internal Analysis
Strategic managers often adopt a Value, Rare, Imitable, and Organization (VRIO) technique to formulate tactical suggestions for a firm. The tool is used to assess an organization’s resources and determines its relationship with a syndicate’s competitive advantage (Ariyani & Daryanto, 2018). It is an abbreviation which stands for value, rareness, imitability, and organization (Ariyani & Daryanto, 2018). MUJI has a rich history of success in the retail segment, irrespective of the dynamic business ecosystem’s challenges. In its strategic landscape, the firm has core competencies associated with the tactical tool mentioned above. Therefore, the retailer exploits its core capabilities to ensure long-lasting competitive edge against stiff competition.
Table 1 below shows the resources and capabilities of the retail outlet. Each of the elements is assessed based on the VRIO components. Therefore, the syndicate’s long-standing competitive advantages are the critical assets and capabilities, which are denoted with either a “Y” or “N” for all four factors. Managers can use the information presented in Table 1 to formulate strategic decisions for the Japanese brand’s long-term expansion.
Table 1. The Resources and Capabilities of the Retail Outlet.
Non-core Competencies
In the table above, the elements of a firm’s primary capabilities do not correspond with all of the VRIO framework components. For example, MUJI’s non-essential strengths include its brand awareness, which is valuable, but it is widespread in the entire retail segment with corporations such as Walmart, Home Depot, Costco, and Target (Nagasawa & Suganami, 2019).
Moreover, product functionality is a capability which assists the syndicate by reinforcing its brand success by enabling customers to recognize the Japanese brand (Masuda, 2019). However, this element is regarded as non-essential in the retailer’s case because other companies such as Walmart and IKEA offer the same product features. Although these potencies differentiate the consortium from sector’s key participants, they do not contribute to the strategic landscape of the firm.
In relation, its wide variety of commodities is regarded as a trivial capability because other organizations in the retail segment have various offerings. For example, MUJI’s immediate rival, Marks and Spencer, is a multinational retail outlet that operates in Great Britain and offers various products such as foodstuff, apparel, and household goods (Jin et al., 2018).
From this strategic analysis, it is clear that these core capabilities and resources do not render the Japanese retailer distinguished because other corporations can easily replicate them (Ariyani & Daryanto, 2018). While offering a wide range of commodities is significant for businesses, it is not a considerable factor for establishing competitive advantages.
Sustained Competitive Advantages
The strategic tool has identified significant components which constitute MUJI’s long-lasting competitive edge. For example, the firm’s unique experience is its primary capability because it is significant, rare, and difficult to emulate (Toda, 2019). The syndicate is known for its brand personality, which invokes excitement originating from its “no-frills” concept (Nagasawa & Suganami, 2019).
The brand also appeals to the customers, and it is known for its sincerity, ethics, and innovation. Another vital aspect of its capabilities is “made in Japan,” representing quality (Masuda, 2019). As observed from the customers, all Japanese brands are expected to offer exceptional packaging and quality. MUJI decided to invest its capital in quality with the loss of frills. Its products are durable since most of them, manufactured in the 90s, still exist (Nagasawa & Suganami, 2019).
Finally, its strong identity has enabled it to emerge as a firm promoting sustainability. Its production process is also modified to encourage efficiency and reduce waste. Therefore, these components form the competitive advantage of MUJI over other firms and will play a vital role in the penetration of a new market.
External Analysis
A peripheral examination of the Japan market’s attractiveness is essential, particularly in the home automation industry. Michael Porter’s industry evaluation tool will be of significance in this sector because the smart home sector’s competitive environment will be determined. The strategic tool will explore this segment regarding the threat of new entrants, negotiating both buyers’ and suppliers’ influence, competitive landscape, and substitute products (Isabelle et al., 2020). Therefore, the Japanese market is regarded as a lucrative destination for long-term investment in the technology industry.
The negotiating power of consumers refers to the influence they have over businesses in an attempt to get quality products, services, and low prices. Technology strengthens the influence of customers over firms because they have access to various sources of information regarding smart home organizations (Wang & Wan, 2019).
Therefore, firms’ earnings and sales are based on the consumers’ significance in various locations around the world. Customers have access to several firms operating in this market, such as Panasonic and Sony. Due to this, corporations which intend to invest in this industry may not charge high prices for their services, and they should maintain their rates as per the customers’ demand.
The threat of new competitors penetrating this industry can be rated as low due to several reasons. It is because firms need massive capital investment to establish a syndicate that will operate globally against Japanese conglomerates such as Sony Corporation, Panasonic, Connected Design Inc, and et cetera. Examples of costs new firms will have to pay are legal, marketing, distribution, and licensing fees. Therefore, new entrants should also consider the strengths of the existing market players, especially in the Japanese market.
The threat of substitute products is also a significant aspect of a competitive environment. The revenue of home automation in Japan is projected to reach 5 billion in 2024 (Yamamoto et al., 2019). The country has majored in developing smart home and supportive technologies because the infamous Tohoku earthquake and tsunami has devasting consequences on the lives of individuals in 2011. Currently, customers in these markets have a wide variety of products to choose from corporations such as Sony and Panasonic. Therefore, the threat posed by substitutes can be rated as high because the competition in this market is intense.
The negotiating influence of suppliers also a vital component of Porter’s framework. It explores the relationship which exists between companies and their respective vendors. As such, suppliers’ power over Japanese companies is a high force since several producers supply entertainment and IT-based materials. Therefore, a firm such as MUJI, which intends to invest in this region, should be aware of such supplier characteristics to conduct a successful venture.
The Japanese smart home industry’s competitive environment can be classified as high, and it is expected to grow. For example, several factors act as drivers to this sector’s development, such as the increasing use of smartphones and other IoT gadgets (Yamamoto et al., 2019). Moreover, the market demand of smart speakers is projected to increase by 2025 accompanied by a rise in the use of intelligent voice helpers. The Japanese brand should consider the global market for smart home solutions because dominant players such as Sony Corporation, KDDI, and Panasonic operate.
PESTLE Analysis of the Japanese Market
This tool explores the market attractiveness of Japan, the home country of MUJI company. Japan is famous for its advanced telecommunication and infrastructures and is the third leading economy in the world. Its political landscape comprises of several factors such as its monarchical system headed by an Emperor (Reich, 2020). Its capital Tokyo plays a vital role in transnational community and also a significant aid donor. While the internal political landscape is stable, the country has some influential neighbors with a history of diplomatic obstacles (Reich, 2020).
It has regional clashes and political discords with nations such as China and Russia. However, it maintains a significant relationship with the US and it is an aspect of Japan’s international and security policies. It initiated a project to establishing and maintain relationship with the Great Britain, France, and other world power. Therefore, it is regarded as a politically antagonistic and may has detrimental effects on trade and foreign investment.
However, the country’s economic landscape has some features which may promote business ventures. For example, it is the third leading economy with a financial output of 4.971 trillion USD as of 2018 (Lim, 2018). It has membership in several blocs such as the Association of south Asian Nations (ASEAN). It also comprises of a mixed economic system although the administration closely collaborates with various sectors (Lim, 2018).
Japan is famous for its largest automotive sector comprising of brands such as Toyota, Honda, Nissan, and Suzuki. It depends on imports of products such as iron ore, aluminium, oil, and coal. However, corporations in this country are liable to pay corporate tax on their earnings. While it has several unfavorable conditions, its economy provides a good business environment for enterprises.
Its social environment is comprising of several trends in population, customs, and traditions of the inhabitants. The country is ranked as the tenth most populated nations in the world with a total population of 126.5 million as of 2018 (Lim, 2018). It has two predominant religious practices such as Shintoism and Buddhism.
However, the country suffers from an ageing population and declining birth rate which pose a risk to its long-term growth. several predictions have indicated that the nation’s number of Japanese residents will decrease significantly by 2060 (Lim, 2018). As such, its government has implemented an immigration procedure to attract more international workers in the country. a study also shows that most citizens prefer their home-based corporations rather than foreign firms. This factor makes it difficult for international corporations to establish their presence in this country.
Technology is a vital resource which attributed to the success of Japan as an industrial sector. It is also one of the leading innovative countries in the world with state-of-the-art infrastructure and equipment. For example, it has automation systems which are used to facilitate processes in healthcare, airline, and service industries (Chéron & Kohlbacher, 2018).
Another significant aspect of its innovation is electronic means of payment which has promoted the growth of several industries (Chéron & Kohlbacher, 2018). Moreover, its ecological laws account for its cleanliness and environmental consciousness. Finally, its legal landscape is favorable because it facilitates employment in several ways. For example, workers enjoy various contract privileges and compensation packages. In essence, this country depicts a favorable environment which promotes business opportunities and ventures.
Entry Mode
In the strategic expansion of a business, companies can use several entry methods to penetrate markets. The Japanese brand considers adopting an exporting entry method to enter the Japanese market successfully. This strategy involves sending products manufactured in one nation to sell them in foreign countries (Broocks & Van Biesebroeck, 2017).
Therefore, MUJI will consider developing a sales program which will promote its marketing objectives in Japan. After that, the syndicate will also contemplate hiring distributors to represent its brands in the foreign market. The intermediaries will work closely with the company to signify its interests and brand image to succeed in the Japanese home automations sector (Broocks & Van Biesebroeck, 2017).
In its exporting marketing mix, the brand will incorporate elements such as commodity description, promotional tactics, pricing approaches, and inventory support (Broocks & Van Biesebroeck, 2017). This method will be advantageous to the enterprise because it is less risky since production processes occur in Japan. It will also allow the brand to study its smart home industry before establishing a brick-and-mortar foundation (Broocks & Van Biesebroeck, 2017). Therefore, exporting will be an appropriate strategy for entering the business environment.
Consumer Analysis
Customer examination is a significant aspect of any marketing initiative aiming to help a company in internationalization. It is the process by which the customers’ characteristics from a specific market are identified to assess their needs, target market, and other appropriate demographics for the formulation of market segmentation (Humphreys & Wang, 2018).
The company can segment its Japanese consumers in several ways. For example, they can be identified based on their demographic attributes. As such, MUJI will be able to recognize its clients by age, income, gender, geographic location, education, and ethnic background (Liu et al., 2019).
In addition, the psychographic division will distinguish its customers by their personality traits, interests, lifestyles, attitudes, and motivation (Liu, Liao, Huang & Liao, 2019). In contrast, behavioral segmentation will identify MUJI’s consumers by studying their purchasing tendencies, user status, and brand interactions (Liu et al., 2019). Lastly, when the Japanese brand adopts geographic segmentation, it will be able to identify its buyers based on their urban or rural locations (Liu et al., 2019). Therefore, by utilizing the concepts of market segmentation, MUJI will be able to identify its customers while also reducing costs easily.
Competitor Analysis
In marketing, competitive assessment is essential for any firm to identify its potential rivals for its strategic planning. It is an evaluation process which determines the strengths and weaknesses of existing and future players in an industry (Isabelle et al., 2020). Suppose the MUJI brand invests in the smart home market, there are several companies which will aggressively try outperform it in the industry. For example, Sony Corporation is a technology giant which offers a wide variety of IT products. This syndicate offers potential substitute products to MUJI’s possible home automation services. It has several strengths, such as product diversification and strong brand and reputation (Dzwigol, 2020).
However, it has several internal limitations, such as inadequate dominant smartphones, susceptibility of networks, and imitability of business model. Another potential candidate for competition is Panasonic Corporation. The former is a Japanese multinational enterprise primarily offering electronic products. It has several core resources, such as brand recognition and product mix (Dzwigol, 2020). However, it is limited because of high priced products and ineffective management.
Most importantly, MUJI should consider the possibility of other brands such as Lay’s Crisps and Pringles emerging as its future rivals. Lay’s crisp is a brand managed by the world’s renowned food company Pepsico. This marque is popular among the customers and may compete against MUJI’s food segment. The former is well-known for offering products such as snacks and drinks, which may rival PepsiCo’s potato chips (Jin et al., 2018).
In contrast, Pringles is a trademark under the management of Kellogg’s. The former is also a food-based company operating in the United States. Therefore, considering the competitive environment in which it operates, MUJI has the ability to diversify its market operations in the Japanese industry.
Recommendations
The retail industry continues to develop as more technological advancements continue to emerge. Therefore, MUJI should consider improving its strategic resources and capabilities to perform well in global markets. For example, the Japanese brand can revamp its product offerings and implement differentiation strategies to strengthen its competitive advantage over potential rivals such as Sony Corporation and Panasonic.
Furthermore, investing in the home automation sector will require the corporation to develop state-of-the-art research and development program to improves its technological innovation. In regard to global market penetration, indirect exporting will be of significance because the brand will be able to use intermediaries to establish its operations in the Japanese industry. These middlemen will also act as sources of feedback as they will learn significant information from the markets. Moreover, this strategy will also play a vital role in conducting reconnaissance, familiarizing the company before establishing brick and mortar stores.
Conclusion
This paper has explored the strategic landscape of one of the leading syndicates in the Japanese business environment. Companies face various challenges while adapting to the changes in the business world; as such, a firm has to ensure that it is strategically capable of restructuring its tactics to remain relevant in the long-run. MUJI has had an inspiring success story since its inception in 1980. It established its presence in its home country and emerged as a dominant brand in the retail segment.
While offering a variety of commodities may be viewed as a strength, corporations should consider revamping the item catalog to improve and bolster their competitive advantage over other firms operating in the marketplace. In its pursuit of prosperity, the firm underwent several strategic transformations which enabled it to reach its pinnacle in the business universe.
While considering penetrating the home automation market, the company has to embark on a strategic audit to review its internal and external landscape in the hope of successfully entering the foreign market. As such, strategic managers should consider the analyses and recommendations highlighted in this paper to ensure an effective internationalization process for the Japanese consortium.
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