External Influences On Uniqlo: PESTLE And Porter’s Five Forces

Political factors affecting Uniqlo

In today’s competitive business environment, each and every organization makes efforts for managing its processes strategically. In order to manage these processes, companies use different strategies and frameworks of strategic management. Additionally, they make efforts towards society, people and natural environment. These efforts are known as Corporate Social Responsibility (CSR) activities of the company. This report is focused on evaluating the primary external influences on the chosen organization i.e. Uniqlo. Uniqlo is Japanese organization that is originally known from Fast Retailing Co. Ltd. or Uniqlo Clothing as a manufacturer and retailer of casual wear. The company mostly offers different clothing options like socks, t-shirts and sweatshirts etc. There are various external factors which may affect the growth and success of Uniqlo in its external environment. In this report, two of the major frameworks i.e. PESTLE analysis and Porter’s five forces are taken into consideration. In the task 2, there is the discussion about the CSR activities and initiatives of Uniqlo Organization. It evaluates the effectiveness of Corporate Social Responsibility (CSR) of Uniqlo and some recommendations are provided which can be used by this organization to make improvement its CSR activities and processes.

Task 1

External Influences

Uniqlo Company operates its business in highly competitive industry. There are various players like Zara H&M etc. which are operating their business in the same industry. In addition to competition, there are some other external forces which affect the growth and success of Uniqlo in its operating environment. These factors can be analyzed by using PESTLE analysis and Porter’s five forces analysis. External analysis of Uniqlo Organization is stated below:

PESTLE Analysis of Uniqlo Organization

The factors of PESTLE and their influence on Uniqlo are given below:

Uniqlo is Japanese Company that is operating its operations in various nations. Japan has a powerful democratic system with stable policies. The country has strong relations with United States that can assist Uniqlo to expand its business into American market. Moreover, political conditions for Uniqlo are not stable in Latin, Asian and American region. So, it is very important for the company to measure the political risks and adopt new marketing strategies (Choi, 2011). In Japan and Canada, the political conditions for Uniqlo are suitable which may enhance its market share and in these nations, it can grow faster and enhance their operations. In a capitalistic economy, retailers make most of their microeconomic decisions but they have to comply with some agreements. There are two major examples of these agreements such as US-China textile MOA and Mainland and Hong-Kong closer partnership arrangement (CEPA). The former offers Uniqlo with the tariff-free treatment, referring that product which has no current CEPA rules of origin will enjoy tariff free treatment on applications by domestic manufactures. In addition to this, there is an internal pressure on textile industry to implement a transparent CSR process (Fernie, and Azuma, 2004).

Economic factors impacting Uniqlo

Uniqlo is a Japan based organization and economy of Japan is the third largest all over the world after United States and China. It has increased the performance and profits of Uniqlo in fiscal 2016. Talking about the Hong Kong’s economy, it can be stated that GDP of this country is forecasted at US$ 206.7 billion (Shirai, 2018). It shows that overall impact of economic factors is positive for Uniqlo as there is increase in disposable income of people. They prefer to spend their money on clothing and apparels. If inflation will be reappeared in these countries then the company will need to increase its prices. In addition to this, there are various cities where the rent of shops is very high that affects the operations of company in that country. In Asian nations, economic situations are not more appropriate for the business of Uniqlo.

Uniqlo is confronting various social and international community issues with its ethical approach. Customers are becoming very much concerned about their personal rights and corporate social responsibility of nations. Considering this fact, it is significant for Uniqlo to engage in these activities. For example, it has introduced a fund i.e. ‘Clothes for Smiles’ that is created for children to assist to fulfill their dreams (Freise and Seuring, 2015). In addition to this, fast fashion has increased the expectations of customers in terms of quality, styles and prices. Moreover, the people prefer to buy the products online as they are actively using social media and online shopping sites. It has an adverse impact on Uniqlo’s business (Teeuwen, 2015).

There are various technology factors which can affect Uniqlo’s business both positively and negatively. Technology innovation is a priority for clothing and apparel retail industry but it will stay as labor intensive as today. Technology in material science will assist Uniqlo to develop the new sources of fabric and functional apparel. The company can use innovative and updated technologies in manufacturing of casual wear for its targeted population.

Uniqlo Company needs to comply with different laws and policies related to work safety and environment. It needs to implement effective policies for the safety and protection of employees at workplace. In addition to this, the organization has a pressure to stop the use of polymer fabrics in its clothes as they have long-term impact on environment. Looking at this, Uniqlo has created a comfortable working environment for employees where their legal rights are protected and they can work in healthy and safe environment for long term (Epstein, 2018).

Social and community factors influencing Uniqlo

In today’s modern environment, people have become very much concerned about their lives and environment. Currently, the industry is seeing a trend of utilizing eco-friendly materials like water footprint and carbon footprint in manufacturing apparels. People prefer to buy the products from the retailers who are concerned about them and environment. The company needs to understand that protection and sustainability of environment is responsibility of textile organization (Ho, 2014). Uniqlo needs to use pollution free technology and waste recycling techniques so that it can grab the attention of government and population.

Porter’s Five Forces Analysis

Industry Rivalry

However, Uniqlo is one of the leading brands in specialty and casual apparel sector, but still it faces high competitive rivalry not only in the traditional retailing but also in e-commerce. In the fast fashion industry, there are various players like Zara, H&M, and GAP etc. which pose intense competitive threat on Uniqlo. Some of these companies have a well-established global presence. For Uniqlo, the products are major source of competitive advantage. The company strives at creating the products of higher quality, in several collections to allow the company to approach maximum number of customers. As such, the competing brands would be threatened when it is about to launch innovative products. Uniqlo needs to differentiate its products from other brands with similar products (E. Dobbs, 2014).

Bargaining power of buyers is very strong in fashion and textile industry. There are various players which are offering similar products to the targeted customers worldwide. They can easily switch to other brand as they have very low switching cost. The loyalty of customers towards apparel changes with brand perception and apparent value of products. Uniqlo has the opportunities to establish brand loyalty, but new collections and styles should meet customers’ demands. Emerging buyers are new pressures to corporate social responsibility.

In fashion and textile industry, this force is very higher hence it takes more time to develop quality partnerships with the suppliers (Kansara, 2016). For Uniqlo, the bargaining power of suppliers is strong as competitors are fighting to get quality raw materials by finding quality suppliers. Before making partnership, Uniqlo ensures that their suppliers are familiar with the safety and quality standards. Apart from this, the suppliers do not have control over the commodity pricing as it is determined by future markets. They have less bargaining power over the polymer textile materials because textile/chemical mills are highly united.

Technological factors impacting Uniqlo

In apparel retail industry, threat of new entrants is moderate for Uniqlo as new companies can enter into this market with low capital requirements. There are very few regulations that the cloth retailers are abide by. They just need to comply with child labor law and fair labor laws. Sportswear manufacturers and some other firms like Nike and Adidas have entered into fashion wear industry which has affected the business of Uniqlo (Kim, 2013).

For Uniqlo, threat of substitutes is moderate as there is no substitute for apparel but techniques of manufacturing and product offering can be substituted. Uniqlo is using traditional methods for manufacturing the cloths and casual wear (Fernie, and Azuma, 2004). There are various new and emerging players which are using technologies in apparel industry such as 3D printing on t-shirts and smart materials. Additionally, people are shifting to online retailers due to lower prices and convenience of product delivery.  

In this way, the above external factors affect the growth and development of Uniqlo in global textile industry. It can be stated that this organization needs to emphasize on its CSR activities so that it can reduce the adverse impact of above factors.

Task 2

Corporate Social Responsibility of Uniqlo Organization

The above external analysis indicates that there is an extreme ecological and CSR pressures on international apparel industry that has affected Uniqlo (Uniqlo, 2018). Considering this trend in its external business environment, Uniqlo has adopted an effective Corporate Social Responsibility and formulated effective policies. CSR activities of Uniqlo Organization are stated below:

CSR Policies of Uniqlo (Fast Retailing)

Nowadays, Corporate Social Responsibility (CSR) is an important aspect for each and every organization in any industry. CSR is an initiative that is taken by an organization to evaluate and take the responsibility for impact of company on social and environmental well-being (Carroll, 2015). Generally, it implements to the efforts which go beyond what may be needed by the environmental protection groups and regulators. Uniqlo is one of the most popular brands in global apparel industry that is well-known for its strong sense of corporate social responsibility that is reflected in its exclusive CSR programs and activities all over the world.

Fast Retailing Group (official name of Uniqlo) has formulated different policies for its related areas like human resources, production, community and environment. With the intention of implementing CSR activities, Fast Retailing has established a mission statement i.e. “to utilize the power of clothing to enhance the lives of people and benefit the society”. To meet this mission, the organization is fully integrated its CSR and business operations, listen and give response to the concerns of stakeholders (Fast Retailing, 2017). It uses its daily operations to make the universe a better place. Looking at the changing trend in the society, this company has developed CSR policies and taken initiatives for each and every related area of organization. The CSR policies and initiatives of Uniqlo Organization are stated below:

Legal and regulatory factors affecting Uniqlo

FR’s Production CSR policy and Initiatives

Production of FR is one of the most important activities that support its growth and success in global apparel industry. This company has extreme respect for employees who are engaged in manufacturing its cloths. Under its production CSR policy, the company has established strong partnerships with supplier factories and it is making efforts to create working environments where legal and moral rights of employees are safeguarded (Dickson, Eckman and Loker, 2009). In resolute efforts with these partner factories, working conditions are supervised on a continuous basis by third-party firms that production is being processed in a sound workplace environment. Uniqlo believes that enhancing working conditions at production sites is essential. In addition to this, the company has created a team named as Takumi team monitors safety management systems and makes sure that highest standards of the product quality are used.

The production CSR policy of Uniqlo is totally focused on three dimensions such as quality partnerships, quality business processes and quality from a social perspective. CSR sourcing team of FR holds the regular training the employees who are working on production sites. This retailer also works with other firms like Sustainable Apparel Coalition (SAC) to ensure safety at workplace, better labor practices and environmental effect. To provide effective safety and security to production employees, the organization has adopted various measures in its production CSR policy (Huang, Kobayashi, and Isomura, 2014). These measures are such as health and safety measures, fire prevention, and quick payment to workers and empowerment to the female factory workers. FR’s production CSR policy has taken various initiatives for the benefit of its factory workers.

FR’s Environment CSR policy and Initiatives

Fast Retailing Company has formulated a CSR policy so that it can contribute to protect the environment and natural resources. The core environmental CSR policy reflects that Uniqlo seeks to follow all the regulations and laws which are related to natural environment and it aims to become an environmentally responsible company (Fast Retailing, 2017). The company makes efforts to reduce its effect and to run business efficiently, eliminating wastage emission and looking for different ways to extract more value from limited resources. Under this policy, one of the foremost initiatives of FR is that it is implementing continuous efforts to reduce the environmental impact. The stores of Uniqlo gather the used products from people in March and September month and provide them to refugee camps.

Environmental factors affecting Uniqlo

This recycling initiative supports environmental protection and people’s lives as well. It is working with its major stakeholders like NGOs, industry peers, business partners and factories so that they can reduce the wastage of water by regular testing. The company has given major focus on reducing the emission of hazardous chemicals. To deal with this issue, the management team of company meets with the partner factory and chemical producer and advices them on using some alternative material. In this context, the company conducts regular meetings with top level managers for addressing to fabric making and dyeing on eliminating hazardous chemicals (Fast Retailing, 2009). It assists them to update them knowledge with key stakeholders like NGOs and experts. To eliminate harmful materials, the organization has developed a systematic process that is explained in the given diagram: Additionally, it has made separate initiatives for its each process like supply chain, logistics, raw material storage, sales, productions and recycling so that it can reduce negative environmental impact of its business operations (Rhee and Choi, 2012).

FR’s Human Resources CSR Policy and Initiatives

Respect for employees and employees diversity is in the heart of Fast Retailing business’s philosophy. The CSR policy of the company shows that it respects each and every employee and encourages their personal growth. There are different types of people which are employed as Uniqlo all over the world. It maintains human rights as its first priority and seeks to remove all types of discrimination at workplace. It strives to provide a working environment where ambitious people can come and work together (Fast Retailing, 2016). It is making efforts to develop supporting and efficient working environment that contributes to better work-life balance. Management of diversity is one of the major challenges in a workplace so it is very important to consider it.

To fulfill the commitment given in the human resources CSR policy, the organization has taken various initiatives. It makes efforts towards the empowerment of female employees and person with disabilities. It has encouraged the employment of people with disabilities since the year 2001 at its stores and has increased the legal quota in Japan for the employment of person with disability (Yamaguchi and Yoshida, 2011).Additionally, it responds to the diverse career development and different working styles. It has introduced a 10 year training program for its employees so that they can work safely (Rupp, et al, 2015). Moreover, FR group has taken some more initiatives to support and enhance the life of its human resources. These initiatives are such as global HR management, infant care programs, fair and transparent evaluations, skill assessments and employee transfers, emotional and physical wellbeing of employees and occupational health and safety program (Ma, Lee and Goerlitz, 2016).

Competition facing Uniqlo

FR’s Community CSR Policy and Initiatives

Apart from its internal stakeholders, the company has taken various initiatives to support the community and its people all over the world. It has formulated a CSR policy that benefits community people. Fast Retailing Group is an organization that is fully committed member of local and global community (Ruggie, 2017). In its policy, company stated that they have responsibility to contribute to the sustainable development of all the people. To practice this, FR has taken advanced initiatives to address the global issues like increasing number of refugees and other local issues. Uniqlo considers clothing as a fundamental need of human being and its uses its business operations to give to the community. It is providing support in form of clothing to the disaster victims and displaced people across the globe.

Employee communication and participation with different stakeholders via its retail stores are also vital to the success of company’s CSR initiatives (Fast Retailing, 2017). It implements local community and global assistance programs in ways which enable thee employees to contribute as part of its store operations. In this way, it engages its employees in community initiatives. One of the most significant initiatives taken by Uniqlo Organization is to offer the assistance to the refugee people. In order to handle refugee issues, the company entered into an international partnership with UNHCR. This partnership emphasizes on four major areas emergency aid, clothing assistance, awareness raising and self-reliance support (Fast Retailing, 2016).

Internal Process

In order to implement and practice the above mentioned CSR policies and initiatives, FR has established two bodies for higher level decision making process (Fast Retailing, 2017). All the senior operating officers serve on the CSR committee to make sure that decisions of company are fully aligned with its CSR objectives.  In addition to this CSR committee, two other bodies are created i.e. Code of conduct committee and Business Ethics Committee. These bodies are staffed by both external and internal experts and they are accountable for carrying out the corporate governance. The office for every committee is situated in Tokyo and works with CSR division to ensure the responsibilities of company towards environment and community are met (Lieber, 2014).Under this internal process, managers and officers analyze the relevance of major issues with the external agencies. This process assists the organization to find out the challenges and evaluate the effectiveness of its CSR activities with the help of its stakeholders (Schwartz, 2017).

Bargaining power of customers

Maximization of Customer Satisfaction

From the above analysis, it can be stated that First Retailing Company is making all the CSR initiatives in order to maximize the customer satisfaction. The organization is engaged with its customers in different ways via its physical stores, online and via community initiatives. To provide effective customer satisfaction, the company has taken various actions such as Uniqlo has opened customer service centers which convey customers’ feedback to related department and stores. It receives the customers’ complaints as valuable feedback. In addition to this, Uniqlo conducts offline and online surveys of customers so that they can understand the customers’ perspective towards their products (Frederick, 2018). The questionnaire analyzes the satisfaction level of customers with company’s products. In Japan, FR has adopted service program to improve the customer experience at its stores. To make the shopping more convenient, FR is offering some additional facilities to its customers like restrooms, parking lot, step-less floor plans, signs for disabled customers etc. It provides a comfortable and excellent shopping experience to its customers so that it can retain existing ones and create new customers (Vertigans and Idowu, 2017).

Corporate Governance and Compliance

Along with the above policies, Uniqlo Organization has created a corporate governance system that includes all the processes, rules and practices by which it is controlled and led. It includes balancing the interests of company’s different stakeholders like customers, suppliers, government, community, shareholders and management. This organization maintains a solid focus on compliance and ethical impacts of its actions. It maintains its effective management systems, supported by the detailed system of checks and balances and strict regulations in global apparel sector (Kozlowski, Searcy and Bardecki, 2015).

This is how FR group ensures the corporate governance and transparency with the stakeholders. It has adopted corporate auditor governance program and manages the committees to provide assistance to the BODs. Uniqlo has established a code of conduct that includes a set of guidelines and fundamental requirements for all the human resources to follow from a business ethics and compliance viewpoint. It has a separate governance committee that assists the decision making duties of Board on sustainability, human resources, IT investment and code of conduct, disclosure and business ethics (Mamic, 2017).

Evaluation

By analyzing the above CSR policies and other initiatives of Uniqlo Organization, the effectiveness of Uniqlo’s CSR activities can be evaluated. As a social responsible global apparel retailer, Uniqlo has always wanted to change the world for making its better place. These efforts of company are very effective as they are unique and affected the lives of many people. Having this point in the mind, the company has formulated its policies for different areas and taken required initiatives which enable the organization to give back to its stakeholders and society. The CSR activities of FR are effective as they assist the organization to attain its CSR objective i.e. to assist the people and employees, not to increase profits only. Through its community CSR initiatives, the company is able to address three major problems in the society such as education, poverty and sanitation (Grayson and Hodges, 2017). Its efforts enabled to create employment, promote sanitation and education.

Bargaining power of suppliers

Moreover, Uniqlo has engaged key stakeholders of its business with its core operations and enabled them to spend a quality life. Initiatives taken by company for human resources assisted it to retain the employees and attract more employees. Effectiveness of this effort can be evaluated by looking at the growing number of its employees i.e. 99500 employees in 23 nations (Fast Retailing, 2017). This figure includes 29000 men and 70,500 women. It reflects that company is able to increase employment in the regions where it is operating its business and manufacturing premises. Furthermore, the environmental efforts of Uniqlo contribute to a more sustainable global apparel industry (Rossi, Luinstra and Pickles, 2014).

Recommendations for Improvement

However, Uniqlo Organization has adopted the most impactful initiatives and policies to become socially responsible in global clothing industry. But still, there are some areas which need improvement. It is hereby recommended that Uniqlo Company should focus on the utilization of resources in its manufacturing process. Under its environmental initiatives, the company is only focusing on elimination of harmful emission that is not enough to protect the environment and natural resources. It needs to become more active towards environmental impacts. Under its production and manufacturing initiatives, company should emphasize on encouraging the development of organic and eco-friendly farming of natural fabric and other raw materials.

Furthermore, it should decrease the use of chemical fabric materials as it can cause the damage to natural environment. It should conduct the events to make the community aware about its initiatives. There are various people who do not know about the company’s actions so they should conduct awareness programs for society. It should undertake the social contribution activities in the domestic communities so that it can contribute to serve as a firm that is reliable and required by the society and its people.

Conclusion

In the limelight of above discussion, it can be concluded that Uniqlo is one of the leading organization that is highly committed in Corporate Social Responsibility activities and initiatives. The company has been taking various actions since many years which have enhanced the company’s business operations all over the world. Uniqlo is one of the retailers who came across different nations to manufacture high quality and affordable clothing. Looking at the trends in the society, it has introduced exclusive CSR activities to assist its stakeholders and society. Uniqlo has considered its stakeholders as key resources to its future growth and success in international apparel industry. Thus, it has made various efforts to improve their lives. From the above report, it is found that company is very much focused on the CSR efforts. The external analysis of company indicates that there are various factors which pose challenges to its business activities. Uniqlo can overcome these challenges by getting engaged in CSR activities and efforts.

Threat of new entrants

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