Retail Chain Store, dedicated to

“continuously developing products of

exceptional quality, in order to create

clothing with new and unique value and

to satisfy customers worldwide.”

Originally division of

Fast Retailing Co., Ltd.

November 1, 2005 it

was restructured into a

separate wholly

owned subsidiary.

Headquartered in

Tokyo, Japan.

Now leading clothing

retail chain in Japan.

Uniqlo CEO, Tadashi Yanai

Name derived from

“unique clothing.”

Most innovative

clothing, HEATTECH.

Prize themselves on

mass-production

and manufacturing

of basic garments.

Research & Development: continuous research

in latest trends and fashion all over the world to

keep up with lifestyle changes.

Manufacturing: ensure high-volume supply of

top-quality materials.

R&D and Merchandise meet to collaborate on

products plans, materials, and seasonal trends.

Inventory Control: end of season take over of

merchandise to coordinate with marketing to

markdown and sell remaining clothing.

• Stores located in primary

and prominent locations that

sell high volumes of

merchandise.

• Flagship store opened in

SoHo, New York is an

example of companies

success.

Stores set up in highly populated, urban areas,

offer only staple garments.

Uniqlo does not have

foothold in high

fashion like H&M and

Zara.

Shift to focus on the

high quality of their

basic garments to fit

the high volume

demand.

Surge in the yen is a perfect opportunity for

Uniqlo to expand globally.

Looking to transfer part of the 85% of

manufacturing in China to other Asian

countries.

Expansion into other countries will help lower

cost of mass production.

Economic Imperative: › Uses middle managers

› Creates value for the products

› Good for companies that produce homogenous products

Environmental Scanning

Strategic implementation › Deciding where to locate

operations

No restrictions on foreign direct investment

30%

25%

20%

15%

10%

Leadership/Interpersonal

Skill

Functional (marketing,

manufacturing, service,

etc.)

Political

Economic

Diversity of Local and

Japanese Workforce

http://www.youtube.com/watch

?v=rcWUp6m8jLQ

President of Latin America Division

Co-President of Brazil Operations

(Japanese Manager)

Co-President of Brazil Operations (Local Manager)

Vice President of Brazil Operations

Manager: Head of Marketing

Division

Manager: Head of E-Commerce

Manager: Head of Finance

Division

Manager: Head of Supply Chain

Manager: Head of Inventory

Management

Manager: Head of Human Resources

Manager: Head of Legal Issues

Organizational

Description for

Brazilian

Operations

Labor Laws › “2.1m Brazilians opened cases against their

employers in the labour courts. These courts rarely side with employers. The annual cost of running this branch of the judiciary is over 10 billion reais ($6 billion).”

› "Brazil's Labour Laws: Employer, Beware | The Economist.“

Financial and Regulation › Fiscal Responsibility Law (Corrupt Government

Spending)

Political Law › German/Roman civil law

› Federal Constitution is the rule

Geographic & Environmental › Rainy Season

› Retail is focused on urban areas

Economic › BRIC country

› Top 10 economies in the world

› High growth rate

Financial › Real (currency) has risen 35% since 2005

› Inflation is increasing combat w/ increase in interest rates upward pressure on the Real

Workforce

› Uneducated, need training

› Women are a large part

Labor Market

› High job turnover rate (labor laws)

› Labor Market Bubble (IMF warns)

Continued increase in hiring w/ economic

downturn

Industries & Business/Competition

› One of the fastest growing markets

› “Brazil's high spending on apparel items and

strong clothing imports — along with its

consumers' preference for the latest fashions

— make the country the most attractive

emerging market destination for apparel

retailers.” › A.T. Kearney Global Management Consultants. 2 June 2008.

Ranked higher than India and China

Local production offices are the links between

their business and the manufacturing facilities

operated by their production partners in each

region.

They check regularly to make sure products

are manufactured under appropriate working

conditions in factories that don’t employ

children or engage in forced labor,

constantly strive to improve working conditions

and disclose information in a transparent

manner.

“Takumi”

FRMIC trains business managers and

encourages corporate innovation.

A crucial issue is cultivating people who

will be competent on the global stage.

They realize that to develop and grow

highly profitable businesses throughout

the world it is particularly vital to train

personnel capable of managing

companies, such as Uniqlo.

Creating ideal personnel for stores and

headquarters, they systematically support the

career progression of employees through

training courses for new store managers,

improving services and career development.

permits employees to set up an independent company and operate a Uniqlo store as a franchise

The “superstar” store manager designation is reserved for individuals who have greater authority than ordinary store managers

Managers are expected to quickly identify problems and issues that concern the entire Uniqlo organization, and then play a part in finding solutions

The goal is to select people with the skills to set standards for all their stores and to have a positive impact on the entire company.

Partnered with their careful monitoring of their partnerships, they have developed a system to efficiently manage their multinational brand.

Implemented more stringent initiatives such as introducing new evaluation criteria established in 2008 in order to monitor working conditions.

Uniqlo controls quality and safety right up to delivery to the customer.

Data that is being

analyzed

Current Numbers

(As of 10-12-2011)

Forecasted numbers

2012

(Company Plan)

Total Assets 533 575

Total Liabilities 213 250

Total Stockholders

Equity

319 325

Net Sales 820 870

Operating Profits 116 145

Net Income 54 65

Cash Flow from

Operating Activity

57 70

Cash Flow from

Investing Activity

26 30

Cash Flow from

Financing Activity

26 28

› Assets:

When moving into a new market, we will

acquire more assets in order to meet the

potential demand

› Liabilities:

Increasing, as we take on more debt to

finance our expansions

› Net Sales

When emerging into a new market, we expect

a huge spike in net sales

› Profitability

Will rise simultaneously with Net Sales

› Net Income

Due to our recent expansion, we project out

net income to keep growing at a constant

rate

Brazil’s GDP (as of 2011) – 2.194 trillion

› Worlds 8th largest economy

Per Capita GDP – $10,900 (real)

› This has Risen 40% over the last 8 years

Rio de Janeiro – Economically active

population of 7.6 million people

› 47.5% of Rio’s GDP is made up of services

50% of all citizens living in Rio are less

than 20 years old

1 Group 1

U

N

I

Q

L

O Erica Insel, Bridget Kelley,

Billy Kozain, Danielle Rellas,

Michelle Thornhill

2 Group 1

1. COMPANY OVERVIEW:

Company Description:

Uniqlo is a Japanese retail chain store dedicated to “continuously developing products of

exceptional quality, in order to create clothing with new and unique value and to satisfy

customers worldwide.” The company was originally a division of Fast Retailing Co., Ltd. but on

November 1, 2005 the company was restructured as a separately wholly owned subsidiary and

was named Uniqlo Co., Ltd. In terms of sales and profits, Uniqlo is Japan’s leading clothing

retail chain and has operations in China, France, Hong Kong, Malaysia, Russia, Singapore, South

Korea, Taiwan, Thailand, the United Kingdom, and now the United States.

This is a unique retail company, its name deriving from “unique clothing,” and has

developed certain teams to meet certain responsibilities. Research and Development centers for

Uniqlo are continuously researching all of the latest fashions and materials all over the world to

keep up with the different customer lifestyles. Uniqlo also has to ensure a high-volume supply

of the top-quality materials to make sure that all of its clothing, such as HEATTECH, can be

manufactured. The way they do this is by directly negotiating with the material manufacturers.

Product planning is a vital part in the process for manufacturing and production. The

Merchandise team meets with R&D designers to determine the product plans, materials, and

designs for the up and coming seasons. After they set up the line-up for products and the volume

for each season; the hardest part of their job is to decide when to increase or reduce productions

throughout the season. Finally, inventory control takes over and at the end of the season it works

with the merchandisers and marketing to coordinate the timing of markdowns to ensure that

everything is sold.

Many of the stores located throughout Japan and highly populated urban areas are set up

as roadside stores with a sales floor of 500 square meters. The stores that have been upgrading

now offer 800 square meters to offer a richer array of products. Recently, Uniqlo stores are

opening on an even larger scale, close to 1,600 square meters, and are focusing on more urban

areas. The shift from smaller to bigger stores in urban areas will allow for more customers to

purchase a wider variety of clothing. As of the end of the fiscal year in 2010, Uniqlo

International had 136 stores overseas. There was an increase in stores in Asia as well as an

increase in profitability. The company has also begun to open more flagship stores around the

world. Flagship stores are stores in a prominent and primary location which sell high volumes of

merchandise. The flagship store that was opened in SoHo, New York has proven to be very

successful.

Company Highlights:

Name: Uniqlo Co., Ltd.

Location (Headquarters): Tokyo, Japan

Company Annual Revenue: 54 billion Yen

Number of Employees: 30,000

Type of business: Retail Chain Operation

Purpose: Continuously developing products of exceptional quality, in order to create clothing

with new and unique value and to satisfy customers worldwide.

3 Group 1

Company Strategic Plan and Goals:

Uniqlo is expecting to see an increase in Net Income within the upcoming 12 months

based on their forecasted financial statements. Competition from other domestic companies is

going to be a challenge, but Uniqlo is looking to expand globally to utilize the surge of the yen.

Currently 85% of all manufacturing for the company is located in China. Not only has Uniqlo

expanded its global sales but it is looking to expand production into other Asian countries in the

future. Those countries they are looking to include are Vietnam, Cambodia, Thailand, and

Bangladesh. The reason behind this is to lower the costs and reduce their risks of dependence on

China. In the future, Uniqlo hopes to expand one-third of production outside of China.

Expansion into other country will help lower the cost of their mass-production which will help

them compete in the long run.

Another aspect of the company that Uniqlo is forced to confront is the excessive

competition involving top competitors such as H&M and Zara. These companies are well

established in the fashion world, providing fashionable and affordable clothing. Uniqlo does not

have a foothold in key fashion forward pieces and therefore are falling behind their competition.

What Uniqlo proposes to do is focus on the basic garments and continue to focus on mass-

purchasing to ensure large quantities of functional clothing. Also, it should continue its

expansion into the international market because the market of Japan is becoming too saturated

for the stores.

The bottom line that Uniqlo is faced with when looking to the future is how well will

they adapt in comparison to other supply retailers similar to themselves. They need to acclimate

to the new markets they are penetrating and familiarize the stores to the areas they are entering.

If they continue to produce quality clothing by mass-production they will have a unique hold in

the industry. By utilizing their strengths they can keep their prices lower than the competition

like H&M and Zara while still maintaining desirable clothing. What Uniqlo must do now is

realize that they are no longer dealing with a domestic market; the world is globalizing and that

is what the company needs to do. Within the next two years Uniqlo will need to focus on

international markets and utilizing the low cost of production in order to keep up with the trends.

4 Group 1

Structure of Company Operations:

3. INTERNATIONAL MANAGEMENT STRATEGY:

I. Theory Foundation

International strategic management is an integral aspect of managing a global company.

In order for us to extend our business to a new region overseas, we need to develop a new

strategy to determine our mission and objectives to be able to implement a plan. This expansion

will open up many opportunities for a larger market share and is a critical phase for growing our

company. To be successful throughout our international growth process, management must

carefully consider plans for strategic management and strategic implementation. A detailed and

well researched strategy will allow us to thrive in the Latin American market and expand at a

much faster rate than we can do without a plan.

Tadashi Yanai

(President/CEO)

Tokyo, Japan and Asia Division

(Headquarters)

Marketing: Conducts

promotional campaigns, focusing on unique qualities and features,offer

limited pricing.

Finance: Because the yen is worth

more now it will be in the companies

interest to buy rather than sell,

enabling them to expand.

Expansion in South America: Utilizing the lower prices to fit the

target market of youth wich make up a large

majority of the population.

International Expansion:

Expaniding into South America to target the

surges in the youth with a flagship store

in Rio de Janeiro.

Customer Center: Reaching out to

customers for advice via phone, e-mail,

post and then forwarded to the

appropriate department.

North American Division

European Division

5 Group 1

Without strategic management, it would be impossible for us to succeed in foreign

markets. Planning and researching opportunities for global expansion is the only approach for us

to grow. There are many obstacles that can obstruct global outreach including differences in

culture, politics, and economic conditions. The first step to work towards expanding is to

formulate and implement a strategy. The four most common strategies to expanding to a new

overseas market are: focusing on the economic imperative, addressing the political imperative,

emphasizing the quality imperative, and implementing an administrative coordination strategy. 1The economic imperative is used by companies to base their strategy on cost leadership,

differentiation, and segmentation. The economic imperative strategy uses middle managers as an

essential aspect of creating profit growth in company locations overseas. It also creates value for

the products through research and development, manufacturing, and distribution. This strategy is

typically used by companies that produce homogeneous products that can be the same from

country to country. Companies using the political imperative “utilize strategies that are country-

responsive and designed to protect local market niches.”2 The political imperative strategies are

important when the citizens of a country have particular preferences, usually based on cultural

norms. Since Uniqlo uses the same products globally through our fast fashion strategy, we will

not have to take this route to differentiate our products. The Brazilian market is likely to

embrace our products just as likely as any other market. The quality imperative is the third

strategy for globalizing a company and uses quality management to meet or exceed customers’

expectations. Quality management is a very complex and specific quality strategies often vary

from company to company but always focus on product quality and customer satisfaction.

Administrative coordination is another strategy that can be executed and includes making

decisions based on the specific situation instead of using typical strategies based on a country’s

economic and political systems. By implementing the economic imperative strategy, we should

be able to best reach the Brazilian market to establish ourselves with the help of many local

managers.

Strategic management also includes environmental scanning to supply management with

“forecasts of trends related to external changes in geographic areas where the firm currently is

doing business or is considering setting up operations.”3 This is extremely important for us to

obtain market share quickly before other firms start to settle in. Included in environmental

scanning is having awareness of demographic shifts and of the regulatory environment, including

governmental regulations and laws. Many developing countries and emerging markets have

many restrictions on foreign trade as well as strict regulations on new products and services due

to stringent government control. We must understand the restrictions of the Brazilian market and

alter our strategy based on what is possible for this opportunity. Once we fully understand the

political implications of this market, we can begin developing a strategy by understanding the

demographics of Brazil, especially Rio de Janeiro. Since we have determined that 50% of

citizens living in Rio de Janeiro are less than 20 years old, we see this as a perfect opportunity to

step in with our stores. Although we do have customers that are older than 20, this young market

will likely draw in other ages via word of mouth. Without predicting and understanding the

trends of a country, a company may lose the opportunity for a large share of the market.

1 Luthans, F., & Doh, J. (2012). International strategic management. In International Management: Culture,

Strategy, and Behavior. 274. New York: McGraw-Hill Irwin. 2 Luthans, F., & Doh, J. (2012). 273. 3 Luthans, F., & Doh, J. (2012). 281.

6 Group 1

Strategy implementation is just as important as strategic management and involves

implementing the plan into action. One of the first areas to consider in strategy implementation

is to decide where to locate operations. Choosing a country to set up business can depend on

several conditions. Since Brazil is a highly growing market, we think this is a great time to open

up our business to the country. Additionally, governmental control and restrictions on foreign

investment must be considered since they may limit the potential of the original plans set by a

management team. The type of country also heavily indicates which types of strategies should

be implemented. For example, BRIC countries (Brazil, Russia, India, and China) were

previously overlooked by many global companies but are now huge market opportunities due to

their growing economies and each need a different set of strategies to accommodate their unique

positions. But now that we already have a presence in China and Russia, it is time for us to

expand to Brazil to take advantage of the hugely growing market. In order to implement any

strategy in a foreign country, a company must understand the operations of that country.

II. Key International Management Statements

The most important aspects of our strategy to expand into Brazil are the economic

imperative, environmental scanning, and strategy implementation.

1. Economic Imperative:

a. Based on:

i. Cost leadership

ii. Differentiation

iii. Segmentation

b. Uses middle managers

c. Creates value for the products:

i. Research and development

ii. Manufacturing

iii. Distribution

d. Good for companies that produce homogenous products

2. Environmental Scanning:

a. Forecasts trends

i. External changes in potential markets

ii. External changes in current markets

b. Important to obtain market share quickly

c. Awareness of demographic shifts and regulatory environment

i. Governmental regulations

ii. Laws

iii. Restrictions on foreign trade

iv. Restrictions on new products and services

3. Strategic implementation:

a. Deciding where to locate operations

i. Growing market

ii. Demographics relate to target market

iii. No political or economic unrest

iv. No restrictions on foreign direct investment

7 Group 1

III. Key Considerations Affecting Key Statements

1. Economic Imperative: We must understand how we are going to use middle managers

to create more value in our products through proper R&D, manufacturing, and

distribution from the key warehouse in Brazil. Additionally, it is important that we

establish ourselves in this new market full force to completely reach all areas of the

market. This strategy would be best for Uniqlo since our products do not differ from

country to country and we produce the same products here that we do in Japan, which

cuts down the time it would take to create different products.

2. Environmental Scanning: This is important to consider because we would not have

come up with the solution to expand into Brazil without recognizing the different aspects

of environmental scanning. Since we target our products toward young markets, it is

important to pick regions that have a lot of young potential consumers that will follow

Uniqlo. Additionally, Brazil is moving towards an open market and has been welcoming

opportunities to grow their economy through international expansion. Since Brazil has

fairly high tariffs on apparel, in our case, it is best for us to establish a manufacturing

plant in the region to reduce costs it would take to ship our products from China.

3. Strategic implementation: In order to expand into Brazil, we must implement the

strategy in order for everything to work out. If we do not put our strategy into effect,

there is no purpose of making a plan in the first place which is why we must ensure our

strategy is implemented. We will use the knowledge and experience that our Japanese

managers have to make sure our Brazil stores become successful.

IV. Key Goals of Strategy

The key goals of this strategy include scanning all aspects, economic and political, to

ensure the best entry strategy into the Brazilian market; ensure managers oversee the operations

and development of the market, make an efficient plan that will utilize our objectives in the

timeliest manner, and establish a clear representation of the Uniqlo brand.

V. Strategic Areas that Need to be Addressed

8 Group 1

International Management Department Plan:

I. Organizational Description

30%

25%

20%

15%

10%

Strategic Areas That Need to be Addressed

Leadership/Interpersonal Skill

Functional (marketing,manufacturing, service, etc.)

Political

Economic

Diversity of Local and JapaneseWorkforce

President of Latin America Division

Co-President of Brazil Operations

(Japanese Manager)

Co-President of Brazil Operations (Local Manager)

Vice President of Brazil Operations

Manager: Head of Marketing Division

Manager: Head of E-Commerce

Manager: Head of Finance Division

Manager: Head of Supply Chain

Manager: Head of Inventory

Management

Manager: Head of Human Resources

Manager: Head of Legal Issues

9 Group 1

II. International Management Manager Descriptions:

1. President of Latin America Division: This position will be held by an experienced

Japanese Uniqlo manager who is ready and willing to be relocated to this position in Rio

de Janeiro, Brazil. Duties will include relaying information from corporate offices in

Tokyo and ensuring the Latin American division, particularly our presence in Brazil, is

presented in the correct manner and that employees are held to the same standards as in

the home offices.

2. Co-Presidents of Brazil Operations: There will be two people holding the position of

Co-President. One will be an experienced Japanese Uniqlo manager who has been with

the company for over seven years, and the other will be a Brazilian manager who has had

extensive experience in the operational aspects of the retailing industry. These co-

presidents will work side by side to ensure a smooth transition into the Brazilian market

and to have both perspectives put together.

3. Vice President of Brazil Operations: One person will hold this position and key duties

will include overseeing the rest of the management team in Brazil and reporting to Co-

Presidents on problems and successes within the system.

4. Manager of Marketing Division: One person will hold this position and will be in

charge of the overall marketing operations including overseeing advertising, market

research, and e-commerce. It would benefit the company most to have a Brazilian citizen

in this position to maximize our outreach to the local consumers. In our initial stages into

the Brazilian market, advertising and promotions will be the most important method of

building brand awareness and customer loyalty.

5. Manager of Finance Division: One person will hold this position and will oversee all

accounting and financial management practices. They will ensure the company’s

Brazilian operations are in good standing and are profitable and will report to the vice

president if any financial issues arise.

6. Manager of Supply Chain: One person will hold this position and will oversee all

aspects of the supply chain from the manufacturing plant to the distribution and delivery

of products to stores.

7. Manager of Human Resources: One person will hold this position and will be in charge

of recruiting and hiring, payroll, and employee satisfaction. A Brazilian manager may be

more understanding of Brazilian employees needs on the job because they are more

relatable.

8. Legal Expert: The legal expert will be a lawyer who fully understands international

trade, with a specialty in Brazilian law. This person will lead a very small team that will

ensure the defense of our company under any scrutiny or lawsuits.

9. Manager of E-Commerce: The manager of e-commerce will work under the marketing

division and will manage all online aspects of the company. Although the Japanese

headquarters will be in charge of maintaining the website for sales, the e-commerce

manager will ensure that the Portuguese language on the website is accurate as well as

maintain tracking information of online orders and marketing the company through the

Uniqlo website as well as through other technological means.

10. Manager of Inventory: The manager of inventory will work under the supply chain

manager and will specifically manage the inventory in each distribution center and store

to ensure we meet the needs for demand.

10 Group 1

III. Implementing the Plan

Alongside the corporate managers, the President of the Latin America division will be

responsible for finding the best possible candidates for the aforementioned positions.

5. COMPANY INTERNATIONAL MANAGEMENT & ISSUES:

I. Key Laws

1. Labor Laws

a. The labor laws are originally derived from the corporatist’s labor code of

Mussolini. An article written in the economist gives the best summary of the

difficulties with Brazil’s labor laws. “2.1m Brazilians opened cases against their

employers in the labor courts. These courts rarely side with employers. The

annual cost of running this branch of the judiciary is over 10 billion reais ($6

billion).”4 It is known in Brazil by employers and employees that labor laws need

reform, and with Brazil’s high growth this will most likely come about, but until

then prospective business entering the market need to be aware that they will

struggle in this sector.

2. Financial and Regulation Laws

a. The mentality of the Brazilian government used to have few boundaries on

expenditure (mostly personal). In order to combat this corrupt mentality the Fiscal

Responsibility Law was passed. It provided more regulation and delegated certain

responsibilities in order to keep government spending in check. This law is still

heavily debated within Brazil, but it is a move in the right direction. The bottom

line is that financial and regulation efforts are better than they have ever been.

3. Political Laws/Common Law

a. The Brazilian legal system is based on civil law, and the federal constitution is the

rule of the country.5 It is based off of the German-Roman form of law. This form

is quite rigid, but leaves little room for surprises. The law is available for all the

read, and if business do their homework they should know what they are getting

into. If it’s written down and you break the rules, then you will receive a form of

punishment pure and simple.

II. Other key considerations

1. Geographic and Environmental conditions

a. Regardless of the different geographic and environmental conditions in Brazil it

will not affect the industry. There is a rainy season, but it does not experience

annual tropical storms, or tornadoes or other natural disasters. There may

sometimes be flooding in rural areas where there has been intense deforestation,

but it will not be near any of the store locations. The stores will also be located in

4 "Brazil's Labour Laws: Employer, Beware | The Economist." The Economist - World News, Politics, Economics,

Business & Finance. 10 Mar. 2011. Web. 23 Nov. 2011. <http://www.economist.com/node/18332906>. 5 "The Brazilian Legal System Is Based on the Roman-Germanic Tradition." Information Exchange Network for

Mutual Assistance in Criminal Matters and Extradition. OAS - Organization of American States:

Democracy for Peace, Security, and Development. Web. 23 Nov. 2011.

<http://oas.org/juridico/MLA/en/bra/en_bra-int-des-ordrjur.html>.

11 Group 1

urban areas where there weather is much more manageable from a business

standpoint. The retail industry is not contingent upon weather as much as it is

infrastructure.

2. Economic

a. Brazil’s economy has been seeing very high growth, but like much of the world

right now is seeing that growth slow. “The economy has slowed from over 7%

growth last year to 5.1% growth for the 12 months ending in the first quarter and

is expected to top out at 4% this year.”6 It will bounce back with the rest of the

global economy, and when the world cup comes around, which is being hosted in

Brazil, the country will be on the global stage.

3. Financial

a. The Real is the Brazilian currency, and it has seen a dramatic rise in value of 35%

since 2005. On the other hand inflation is rising, which is not at 6.5% and is

expected to increase. “Ironically, the government’s principal means of combating

inflation… to raise interest rates, which further increases the flow of investment

money into Brazil, putting upward pressure on the Real.”7 This is prompting

Brazilian citizens to actually buy dollars as a safe guard because of the

uncertainty surrounding the Brazilian Real.

4. Workforce

a. Much of Brazil’s workforce is uneducated therefore companies have taken the

initiative. They are offering more technical training programs and schools for the

workers. There needs to be an investment made in Brazil’s future labor force if

companies wish to have success in the long-run. Therefore it is in their best

interest to help train the workforce, no matter if the labor laws may be a deterrent.

Women are a large part of the workforce as well giving access to a larger

workforce, but most are still not found in the higher paying jobs.

5. Labor Market

a. Low productivity growth and high job turnover. This is directly a result of the

labor laws. Poorly laid out severance packages cause workers to move a lot,

which creates a vicious cycle. Employers are not willing to invest much in their

employees if they are likely to leave.

b. There is also a Labor Market bubble. The IMF (international monetary fund) gave

the warning to the Brazil finance minister a few months ago. Brazil businesses

may be greatly overestimating demand locally and internationally causing them to

hire more workers even though the economy is slowing down.8

6. Industry and Business/Competition

a. Brazil is one of the fastest growing markets in the world right now, so there will

be lots of competition. A study conducted in 2008 by A.T. Kearney a Global

6 "In Brazil, a Labor Market Bubble? - Forbes." Information for the World's Business Leaders - Forbes.com. Forbes,

15 July 2011. Web. 24 Nov. 2011. <http://www.forbes.com/sites/kenrapoza/2011/07/15/in-brazil-a-labor-market-bubble/>.

7 "Brazil’s Financial Position as U.S. Edges toward Default | Observing Brazil." Observing Brazil | A Blog about

Brazil, Its Politics and Political Culture. Web. 24 Nov. 2011.

<http://observingbrazil.com/2011/07/27/brazils-financial-position-as-u-s-edges-toward-default/>. 8 "In Brazil, a Labor Market Bubble? - Forbes.

12 Group 1

management consulting firm concluded that, “Brazil's high spending on apparel

items and strong clothing imports — along with its consumers' preference for the

latest fashions — make the country the most attractive emerging market

destination for apparel retailers.”9 It ranked even higher than China and India the

two BRIC countries with the highest growth. This is great news for clothing

retails, but there will be heavy competition. Since the release of this study in 2008

it can be expected that competition has increased with Brazils continued growth.

6/7. INTERNATIONAL MANAGEMENT POLICIES AND THEIR IMPACT

Uniqlo manages all of the production and distribution of their clothing through

partnerships in various countries. They make their products in manufacturing facilities that are

owned by their partners in Asian countries such as China and Bangladesh. Local production

offices are the links between their business and the manufacturing facilities operated by their

production partners in each region. Throughout the world, these offices are constantly seeking

ways to harness the expertise needed to expand and improve their business. Uniqlo’s parent

company, Fast Retailing is committed to the “correctness” of all its corporate activities. Working

together with about 70 production partners they check regularly to make sure products are

manufactured under appropriate working conditions in factories that don not employ children or

engage in forced labor, and constantly strive to improve working conditions and disclose

information in a transparent manner. They provide technical guidance with these partner

facilities with textile experts known as “takumi” who provide on-site technical guidance and

assist with process management and human-resource development.

Fast Retailing uses external auditors to conduct on-site monitoring of working conditions

at factories operated by its partners. The auditors usually begin with an opening meeting, which

is followed by interviews with the factory workers, document checking and inspections of the

factories as well as cafeterias and dormitories. Monitoring concludes with a closing meeting

during which the auditors go over their findings with factory representatives for confirmation. In

this way, Fast Retailing examines monitoring results and clarifies what the factory has achieved

and what requires further attention, fueling an ongoing cycle of constant improvement.

In 2009 Fast Retailing launched the FR Management and Innovation Center (FRMIC)

which trains business managers and encourages corporate innovation. It was tasked with the

mission of training 200 business managers within a five-year period. A crucial issue is

cultivating people who will be competent on the global stage. They realize that to develop and

grow highly profitable businesses throughout the world it is particularly vital to train personnel

capable of managing Fast Retailing companies, such as Uniqlo. The Chairman, President and

CEO Tadashi Yanai serves as the president of FRMIC. The most important issue in global

9 "Brazil Is Most Attractive Emerging Market for Apparel Retailers Looking to Invest Abroad | News &

Media." A.T. Kearney Global Management Consultants. 2 June 2008. Web. 23 Nov. 2011.

<http://www.atkearney.com/index.php/News-media/brazil-is-most-attractive-emerging-market-for-apparel-

retailers-looking-to-invest-abroad.html>.

13 Group 1

recruitment is that the hires clearly understand the Uniqlo philosophy and what it aims to

achieve.

Uniqlo also established its Uniqlo University in 2000 for the training and development of

store staff. With the objective of creating ideal personnel for stores and headquarters, they

systematically support the career progression of employees through training courses for new

store managers, improving services and career development. They also have systems to meet

individual career goals, such as the Employee Franchise Scheme for employees starting their

own business as a Uniqlo franchise store owner and the Superstar Manager Program for

distinguished store managers working toward having more authority and greater responsibilities.

The employee franchise program permits employees to set up an independent company

and operate a Uniqlo store as a franchise. Thus far, 8 Uniqlo store managers have used this

system to become franchise owners. The “superstar” store manager designation is reserved for

individuals who have greater authority than ordinary store managers. Through the operations of

their stores, these managers are expected to quickly identify problems and issues that concern the

entire Uniqlo organization, and then play a part in finding solutions. The goal is to select people

with the skills to set standards for all their stores and to have a positive impact on the entire

company.

Uniqlo’s basic principle is to create comfortable workplaces and continuously enhance

employee satisfaction. They foster corporate and personal growth by establishing environments

that cultivate personnel into becoming capable of performing innovative work from a global

perspective. They remain aware of issues facing the international community and the global

environment. They seek to grow and develop in unity with the community through unique

corporate activities. The Uniqlo brand is expanding internationally and continues to improve

with the growth of their store network which has given the brand presence in the United States,

the United Kingdom, France, Russia, China, South Korea, Hong Kong, Singapore, Taiwan and

Malaysia.

Fast Retailing and Uniqlo have managed their international corporation through close

monitoring and partnerships with their various manufacturers. Through their strict code of

conduct for production partners that was established in 2004, Uniqlo has used external

organizations to monitor working conditions, primarily at major sewing factories, which have

signed a pledge. They have also implemented more stringent initiatives such as introducing new

evaluation criteria established in 2008 in order to monitor working conditions. Through their

system of product and safety control Uniqlo thoroughly controls quality and safety right up to

delivery to the customer.

8. FLOW CHART

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9. INTERNATIONAL MANAGEMENT METRIC REPORT

(Unit: Yen In billions)

Data that is being analyzed Current numbers

2011

(as of 10-12-2011)

Forecasted

numbers 2012

(Company plan)

Total Assets 533 575

Total Liabilities 213 250

Total Stockholders Equity 319 325

Net Sales 820 870

Operating Profits 116 145

Net Income 54 65

Cash Flow from Operating

Activity

57 70

Cash Flow from Investing

Activity ∧26 ∧30

Cash Flow from Financing ∧26 ∧28

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Activity

As a company, it is very important to look at the numbers from your previous years in

order to properly forecast for the future. Not only is it important to look at our company’s

financial statements for forecasting data, but it is imperative to look at the market we are tapping

into and make sure that the city’s infrastructure is sound in order to maximize our revenue. The

balance sheet is important for our company because it allows for it to look at total assets, total

liabilities and total stockholders equity. These numbers are vital in representing our future

growth. The income statement also houses equally important information including, net sales,

operating profits and net income. The statement of cash flows allows the company to interpret

its numbers by showing the growth (or loss) represented by cash flow from operating activity,

cash flow from investing activity and cash flow from financing activity.

Along with our financial statements, we looked at the GDP of Brazil and the per capita

income in Rio de Janeiro. If Uniqlo were to enter into a market that does not have the financial

infrastructure to support its new stores then it will never make it in that region. Uniqlo also

looked at the population of Brazil as a whole and the prospective region, to make sure the target

market was prominent there. If the target market is not sufficient, then there would be no point in

entering that region. Lastly, we looked at the market saturation, to make sure that there is room

for our company to grow.

10. SUCCESS FOR THE INTERNATIONAL MANAGEMENT PLAN

In moving our company to the new market of Rio de Janeiro, Brazil, we first had to look

at our financial statements and project our future numbers so that we could properly go about

entering the market. Our total assets for the fiscal year of 2011 were 533 billion yen. When

expanding into a new market our assets are going to increase significantly; hence, why we need

to acquire more in order to meet the potential demand in Rio. We have projected for an increase

of 42bn yen; however, our liabilities are also going to increase, seeing as we have to take on

more debt in order to finance this move. Our stockholders equity will also increase as this debt is

going to be financed from our investors, which allow for our balance sheet to equal out

(A=E+S/E).

Our net sales are projected to increase by 50bn yen. We were able to forecast this high

due to the constant increase in net sales over the last 5 years. Also, when emerging into a market

as large Brazil we can expect to see a huge spike in our sales numbers. Profits will rise

simultaneously with net sales which in turn allow for our net income to increase by 11bn yen.

This is very positive growth, seeing as in 2011 we had a decrease in net income by 7bn yen.

The statement of cash flows does not actually show us our cash flows, but helps to

compare our numbers in the balance sheet and income statement to show us how our money is

working (in both positive and negative was). Thankfully, our company has only seen increases in

activities over the past 5 years, therefore we projected cash flows from operating activity,

investing activity and financing activity to all increase by a slight, but not significant amount.

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In order to ensure our success, we looked at Brazil’s GDP (PPP) which as of 2011 is

2.194 trillion, not to mention they are now the world’s eighth largest economy. This is a huge

untapped and growing market for our company. More importantly, Per Capita GDP (PPP) is

$10,900, which has risen 40 percent over the past eight years.10

Rio de Janeiro has an

economically active population of 7.6 million people, and 47.5 percent of the states GDP is made

up by services11

. This will allow for our company to grow substantially in a market that is largely

based on the sector we fall under. Since we have determined that 50% of citizens living in Rio de

Janeiro are less than 20 years old, we see this as a perfect opportunity to step in with our stores.

With little to no place in market saturation, a huge untapped percent of people within our

target market, and a country with the 8th largest economy in the world, Rio de Janeiro is an

excellent opportunity that we cannot pass up. In forecasting our financial statements, Uniqlo can

significantly increase its net income and continue to grow into an even more global company by

expanding into Brazil.

11. EXECUTIVE SUMMARY

Uniqlo is a unique clothing company that was restructured from a successful Japanese

retailing company into a leading retail clothing company in the country. The drastic success lead

to the expansion into other global markets, predominantly in Asia to begin with and then later

into Europe and North America. Their focus on mass-production of basic garments has helped

them gain a competitive advantage over other high fashion companies like H&M and Zara.

Uniqlo also focuses heavily on research and development to ensure that they are maintaining

current trends and fashion worldwide. The surge of the yen in Japan has given Uniqlo an

opportunity to expand to even more countries as well as help them to look outside of China for

their manufacturing. Complete dependence on China is an unsettling thought given the

unpredictability of certain regulations they have. In the near future Uniqlo will expand to other

parts of Asia to continue their mass-production of top-quality clothing.

We believe it is a great opportunity to expand into Latin America, primarily Brazil,

because of the tremendous growth and young market that is present in the country. In order to

successfully enter this market, we are focusing on the key strategies of international management

that include the economic imperative, environmental scanning, strategic implementation, and the

fact that there are no significant restrictions on foreign direct investment in Brazil. We have

placed the majority of the importance on leadership and interpersonal skill in relation to what

needs to be addressed because we understand how important management is in implementing

facilities in a foreign market. Along with this importance on leadership, we will focus on the

diversity of local and Japanese workforce within management to ensure there is a seamless

transition for Uniqlo in our new market. Within our Brazilian operations, we will include both

Brazilian and Japanese managers throughout the organization to bring the two cultures together

for the best possible results.

10 "Brazil." U.S. Department of State. 8 Mar. 2011. Web. 20 Nov. 2011.

<http://www.state.gov/r/pa/ei/bgn/35640.htm>. 11 "Why Invest in Rio de Janeiro?" Sistema Firjan. Web. 20 Nov. 2011.

<http://www.firjan.org.br/data/pages/2C908CE92593A8810125B15DD6F80126.htm>.

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As part of our international expansion it is important to understand and be aware of

international management issues that the company may likely face. Labor Laws will be the most

difficult area to deal with, but the area has come under heavy bombardment and will be likely

seeing reform in the future. The financial and regulatory laws have just seen a reform in order to

combat corrupt government spending. Being one of the BRIC companies there is huge growth in

the economy. Additionally the clothing retail industry in Brazil is booming, outranking China

and India in 2008, meaning that competition will be steep. The Real, the Brazilian currency, has

seen such a quick increase in value, that many citizens are worried about the currencies stability.

The IMF has also noted its concerns of a possible labor market bubble. The continued increase in

hiring of businesses in Brazil is believed to be creating a bubble with the current economic

downturn. Brazil is taking steps to ensure that it is a more attractive location for foreign

investors, but there are always situations that companies that have to be wary of.

Uniqlo’s system of safety and control, partnered with their careful monitoring of their

partnerships has created a system to efficiently manage their multinational brand. The company

began and thrived in Japan and has grown globally through the use of franchises and partnerships

with manufacturers. With the introduction of their company in South America, specifically in

Brazil, they can effectively spread their brand name and raise awareness.

In order for our company to be successful in expanding to Rio De Janeiro, Brazil, we

needed look at a few key pieces of information. As Brazil is the 8th largest economy in the

world, we will get a huge share of the market to tap into. We found out that 50 percent of the

population is less than 20 years of age, which is consistent with our target market, allowing our

net income to increase significantly. Over all, moving our company to Brazil will allow us to

grow and expand in this growing global world.

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WORKS CITED

"Brazil’s Financial Position as U.S. Edges toward Default | Observing Brazil." Observing Brazil

| A Blog about Brazil, Its Politics and Political Culture. Web. 24 Nov. 2011.

<http://observingbrazil.com/2011/07/27/brazils-financial-position-as-u-s-edges-toward-

default/>.

"In Brazil, a Labor Market Bubble? - Forbes." Information for the World's Business Leaders –

Forbes.com. Forbes, 15 July 2011. Web. 24 Nov. 2011.

<http://www.forbes.com/sites/kenrapoza/2011/07/15/in-brazil-a-labor-market-bubble/>.

"Brazil's Labour Laws: Employer, Beware | The Economist." The Economist - World News,

Politics, Economics, Business & Finance. 10 Mar. 2011. Web. 23 Nov. 2011.

<http://www.economist.com/node/18332906>.

"The Brazilian Legal System Is Based on the Roman-Germanic Tradition." Information

Exchange Network for Mutual Assistance in Criminal Matters and Extradition. OAS -

Organization of American States: Democracy for Peace, Security, and Development.

Web. 23 Nov. 2011. <http://oas.org/juridico/MLA/en/bra/en_bra-int-des-ordrjur.html>.

"Brazil Is Most Attractive Emerging Market for Apparel Retailers Looking to Invest Abroad |

News & Media." A.T. Kearney Global Management Consultants. 2 June 2008. Web. 23

Nov. 2011. <http://www.atkearney.com/index.php/News-media/brazil-is-most-attractive-

emerging-market-for-apparel-retailers-looking-to-invest-abroad.html>.

"Brazil." U.S. Department of State. 8 Mar. 2011. Web. 20 Nov. 2011.

<http://www.state.gov/r/pa/ei/bgn/35640.htm>.

"Why Invest in Rio de Janeiro?" Sistema Firjan. Web. 20 Nov. 2011.

<http://www.firjan.org.br/data/pages/2C908CE92593A8810125B15DD6F80126.htm>.