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STRATEGIC MARKETING PLAN FOR

RYOHIN KEIKAKU Co., Ltd. (MUJI as a brand)

MUJI recently has closed several stores in Europe due to unprofitability. What
changes in strategic marketing plan should MUJI apply to remove cultural
barriers and gain competitive advantage in the European market?

A thesis submitted to Anglo-American University for the degree of


Bachelor in Business Administration with an emphasis in Marketing and Communication

Spring 2018

ANH DOAN

ADVISOR: GABRIELE MEISSNER, MBA


SCHOOL OF BUSINESS ADMINISTRATION
DECLARATION

I hereby declare that no portion of the work referred to in this thesis has been submitted in
support of an application for another degree, or qualification thereof, or for any other
university or institute of learning.
I confirm that this thesis represents my own work. External contributions to the thesis are
acknowledged. Sources and literature used for research are cited and provided.

I hereby acknowledge that my thesis will be made publicly available pursuant to section 47b
of Act No. 552/2005 Coll. and AAU’s internal regulations.

ANH DOAN

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ACKNOWLEDGEMENTS
I would like to express my gratitude towards Gabriele Meissner, my thesis advisor for her
dedicated help during my research and writing thesis. Thanks to Chris Shallow, Mark
Wiedorn, and David Muir for devoting their time and efforts to give me useful advices about
my thesis topic.
I also would like to thank all the professors at AAUNI for instructing and providing me with
necessary academic knowledge for my future career. Furthermore, to schoolmates and
friends who have given me their unconditional support and motivation, I would like to show
my greatest appreciation.
Last but not least, I would like to dedicate this thesis to my parents. Without them, I could not
get to where I am today.

- Anh Doan

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ABSTRACT
Strategic Marketing Plan for Ryohin Keikaku Co., Ltd. (MUJI)
Author: Anh Doan, Business Administration with an emphasis in Marketing and
Communication, Anglo-American University, Prague.
Globalization and digitalization allow customers to have cross-culture experience when they
are exposed to advertising campaigns or use products of foreign companies. In recent years,
besides household names in retailing industry established in Western countries such as IKEA,
H&M, and Marks & Spencer, global customers witness the rise of retailers coming from the
East (Japan, China) with distinctive marketing approaches due to the differences in cultures.
Despite the uniqueness in product design and features from the Asian brands, it is still
difficult for them to enter Western markets owing to cultural barriers and higher price, as
results of import taxes and currency exchange.
Ryohin Keikaku Co., Ltd., a Japan-based company, has successfully spread its MUJI brand to
the rest of Asia and aimed at expanding its name in America and Europe. As other Asian
brands with the ambition of becoming a well-known brand in Western markets, MUJI
struggles to compete with Western companies. The apparel and household products industry,
in which MUJI establishes have been affected by major changes including digitalization,
market saturation and rapid improvements in customer services, and threats from fast-paced
lives of Millennial customers. Following the increasing number of closing MUJI stores in
2017, MUJI needs to re-evaluate the effectiveness of merchandising channels, build key
partnerships, improve e-commerce system and resources, which are now the advantages of
Western retailers.
This thesis aims to analyze Ryohin Keikaku Co., Ltd.’s marketing strategy using appropriate
marketing tools, assess the company’s performance and financial status so that a proposal for
an alternative marketing plan to remove the cultural barrier and achieve sustainability. During
the research and analysis, the researcher is expected to gather information from both English
and Japanese sources to gain most objective insights from people from different cultural
background. Language and cultural factors are considered limits in the research as the
researcher does not reach the proficient level of Japanese, which requires external help for
translation. Based on the analysis, alternative strategies are recommended to strengthen the
company’s position in the European market.

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TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION........................................................................................... 1

1.1 Historical Background  .............................................................................................................  1  

1.2 Company Background Information  .........................................................................................  2  

1.3 Personal Interest  .......................................................................................................................  2  

1.4 Purpose  .....................................................................................................................................  3  

1.5 Conceptual Framework  ............................................................................................................  3  

1.6 Methodology  .............................................................................................................................  3  

1.7 Statement of Sources Cited and Consulted  ..............................................................................  4  

1.8 Structure of Thesis  ...................................................................................................................  4  

CHAPTER 2: LITERATURE REVIEW .............................................................................. 5

2.1 Marketing Strategy  ..................................................................................................................  5  

2.2 Apparel and House Supplies Industry  ......................................................................................  5  

2.2.1 Apparel Industry  ......................................................................................................................  5  

2.2.2 House Supplies and Furnishings Industry  .................................................................................  5

2.3 European Retail  ........................................................................................................................  7  

CHAPTER 3: MARKETING AUDIT ................................................................................... 9

3.1 Data gathering  ..........................................................................................................................  9

3.1.1 The organization structure .........................................................................................9


3.1.2 Historical timeline ...................................................................................................11
3.3 PLEESTIC  .............................................................................................................................  15  

3.4 Porter’s Five Forces Framework  ............................................................................................  14  

3.5 SWOT Analysis  ......................................................................................................................  15  

3.6 TOWS Matrix   ...............................................................................  Error!  Bookmark  not  defined.  

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3.7 Business Model Canvas  ..........................................................................................................  16  

3.8 Ansoff Matrix  ................................................................................  Error!  Bookmark  not  defined.

3.9 Activity Map  ..................................................................................  Error!  Bookmark  not  defined.

CHAPTER 4: ASSUMPTIONS ............................................................................................ 20

CHAPTER 5: STRATEGIC MARKETING PLAN........................................................... 21

5.1 Corporate Strategy  .................................................................................................................  21  

5.2 Markets and Segments  ...........................................................................................................  21  

5.2.1 Macro Analysis .................................................................................................................... 22

5.2.2 Micro Analysis ..................................................................................................................... 22

5.2.3 Current State of the Market .................................................................................................. 22

5.2.4 Market Trends ...................................................................................................................... 22

5.2.5 Competitor Analysis............................................................................................................. 23

5.3 Products / Services  ..................................................................................................................  24  

5.4 Marketing Objectives  .............................................................................................................  25  

5.5 Marketing Strategies  ..............................................................................................................  25  

5.5.1 Porter’s Competitive Advantage Grid .................................................................................. 25

5.5.2 Segmentation & Targeting ................................................................................................... 27

5.5.3 Differentiation ...................................................................................................................... 27

5.5.4 Positioning............................................................................................................................ 28

5.6 Gap Analysis  ...........................................................................................................................  29  

5.7 Product Strategies  ..................................................................................................................  31  

5.8 Price Strategies  .......................................................................................................................  32  

5.9 Place Strategies  .......................................................................................................................  32  

5.7.1 Distribution Strategies .......................................................... Error! Bookmark not defined.

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5.7.2 Relationship Marketing ........................................................ Error! Bookmark not defined.

5.10 Marketing Communications Strategies  .......................................  Error!  Bookmark  not  defined.  

5.10.1. Sales promotion ................................................................. Error! Bookmark not defined.

5.10.2. Word-of-mouth and Public Relations ............................... Error! Bookmark not defined.

5.10.3. Advertising and digital marketing ..................................... Error! Bookmark not defined.

5.11 Customer Relationship Management  ..........................................  Error!  Bookmark  not  defined.  

5.12 Corporate Social Responsibility and Ethical Audit  .....................  Error!  Bookmark  not  defined.  

5.13 Internal Marketing  ......................................................................  Error!  Bookmark  not  defined.  

5.14 Branding Strategy  .......................................................................  Error!  Bookmark  not  defined.  

5.15 Implementation  ...........................................................................  Error!  Bookmark  not  defined.  

5.16 Monitoring and Control  ..............................................................  Error!  Bookmark  not  defined.  

5.17 Recommendations and Conclusion  ..............................................  Error!  Bookmark  not  defined.  

CHAPTER 6: EVALUATION OF THE CURRENT SMP .... Error! Bookmark not defined.

6.1 Evaluation   ....................................................................................  Error!  Bookmark  not  defined.  

6.2 Corroboration of Thesis  ................................................................  Error!  Bookmark  not  defined.  

CHAPTER 7: FINANCIAL ANALYSIS ............................................................................. 39

7.1 Revenue and Income Analysis  ................................................................................................  39  

7.2 Key Ratios in comparison to MUJI’s direct competitors  ..............  Error!  Bookmark  not  defined.  

7.2.1. Profitability ratios................................................................ Error! Bookmark not defined.

7.2.2. Liquidity ratios .................................................................... Error! Bookmark not defined.

7.3 Financial Analysis Conclusion  .......................................................  Error!  Bookmark  not  defined.  

CHAPTER 8: DISCUSSION ..................................................... Error! Bookmark not defined.

8.1 Strategic Recommendations  ..........................................................  Error!  Bookmark  not  defined.  

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CHAPTER 9: CONCLUSION .................................................. Error! Bookmark not defined.

9.2 Research Limitations  .....................................................................  Error!  Bookmark  not  defined.  

9.3 Suggestions for Future Research  ...................................................  Error!  Bookmark  not  defined.  

WORKS CITED .................................................................................................................... 55

BIBLIOGRAPHY ....................................................................... Error! Bookmark not defined.

APPENDICES ........................................................................................................................ 65

Appendix A: Extended Marketing Mix  ...............................................  Error!  Bookmark  not  defined.  

Appendix B: Extended PLEESTIC Analysis  ......................................  Error!  Bookmark  not  defined.  

Appendix C: Extended Porter’s Five Forces  .......................................  Error!  Bookmark  not  defined.  

Appendix D: Extended SWOT Analysis  .............................................  Error!  Bookmark  not  defined.  

Appendix E: Extended TOWS Matrix (Strategic Recommendations)  Error!  Bookmark  not  defined.  

Appendix F: Extended Business Model Canvas  ..................................  Error!  Bookmark  not  defined.  

Appendix G: Activity Map description  ...............................................  Error!  Bookmark  not  defined.  

Appendix H: Extended Business Model Canvas  .................................  Error!  Bookmark  not  defined.  

Appendix I:  ........................................................................................  Error!  Bookmark  not  defined.  

Appendix J:  ........................................................................................  Error!  Bookmark  not  defined.  

Appendix K:  .......................................................................................  Error!  Bookmark  not  defined.  

Appendix L:  .......................................................................................  Error!  Bookmark  not  defined.  

LIST OF ABBREVIATIONS

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CAGR - Compound Annual Growth Rate
CSF – Critical Success Factor
CSR – Corporate Social Responsibility
WOM- Word of mouth
ibid. – ibidem, reference source previously used
ITR – inventory turnover ratio
n.d. – no date
n.p. – no page
locit.-

LIST OF FIGURES

Unless otherwise indicated, all figures in this thesis are created with Sketch or Word by
Justine Tom, Anglo-American University, Prague 2017.

Figure 1: Marketing Strategy ..................................................................................................... 5

Figure 2: European House Furnishings Industry ..................... Error! Bookmark not defined.

Figure 3: European Retail Situation .......................................... Error! Bookmark not defined.

Figure 4: MUJI Organisation Structure ................................................................................... 14

Figure 5: MUJI International Corporate Structure................................................................... 14

Figure 6: Porter's Five Forces Framework of MUJI ................. Error! Bookmark not defined.

Figure 7: Ansoff Matrix ............................................................ Error! Bookmark not defined.

Figure 8: Activity Map.............................................................. Error! Bookmark not defined.

Figure 9: MUJI's Strategic Group Map...................................................................................... 5

Figure 10: Porter's Competitive Advantage Grid ...................................................................... 5

Figure 11: Product life cycle ...................................................................................................... 5

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Figure 12: MUJI Sales Promotions offer ................................................................................... 5

Figure 13: MUJI's CSR Program ............................................................................................... 5

Figure 14: Advantages and disadvantages of MUJI's SMP ...... Error! Bookmark not defined.

Figure 15: Japanese Yen/US Dollar 2010-2018 ....................... Error! Bookmark not defined.

Figure 16: MUJI Revenue from Operations Year on Year ...... Error! Bookmark not defined.

Figure 17: MUJI's Mobile Application Interfaces .................. Error! Bookmark not defined.

Figure 18: MUJI's Polish Website .......................................... Error! Bookmark not defined.

Figure 19: MUJI's Japanese Website ...................................... Error! Bookmark not defined.

Figure 20: MUJI's Sourcing and Distribution ........................... Error! Bookmark not defined.

LIST OF TABLES

Unless stated right under, all tables in this thesis are created by Anh Doan, Anglo-American
University, Prague 2018.
Table 1: Company Background Information ............................................................................. 2

Table 2: MUJI Historical Timeline .......................................................................................... 23

Table 3: PLEESTIC Analysis .................................................................................................. 13

Table 4: Marketing Mix ........................................................................................................... 15

Table 5: SWOT Analysis .......................................................... Error! Bookmark not defined.

Table 6: Business Model Canvas ............................................................................................. 16

Table 7: MUJI Market Trends ................................................................................................. 23

Table 8: MUJI's Direct Competitors ........................................................................................ 23

Table 9: MUJI in Asia (Japan) and Europe- Gap Analysis ..................................................... 23

Table 10: MUJI Gap Analysis-Corporate Level ...................................................................... 23

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Table 11: MUJI's Income Statement ........................................................................................ 23

Table 12: MUJI's Profitability Analysis .................................................................................. 23

Table 13: Profitability of MUJI versus competitors' ............................................................... 23

Table 14: MUJI- Liquidity ratios ............................................................................................. 23

Table 15: MUJI's Cash Flow from 2013 to 2017..................................................................... 23

Table 16: Strategic Recommendations ................................................................................... 23

Table 17: Alternative Marketing Mix Proposals .................................................................... 23

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CHAPTER 1: INTRODUCTION
This thesis is to analyze Ryohin Keikaku Co., Ltd. (Muji as its brand name)'s marketing
strategies, financial performance, and corporate social responsibility in relation to the
company’s internal and external environment as well as assess its products’ position and
competitive advantage in the market. Following that, the researcher will propose alternative
strategies that answer the strategic question: “MUJI recently has closed several stores in
Europe due to unprofitability. What changes in strategic marketing plan should MUJI apply
to remove cultural barriers and gain competitive advantage in the European market?” raised
from the identified marketing issues by investigating the company's background information
and financial data.
The research is up-to-date to May 17th, 2018 .
1.1 Historical Background
Ryohin Keikaku Co., Ltd. or MUJI is a Japan-based distributor and retailer of
household, food, and apparel products, which operates in America, Europe, and the Eastern
Asia. Founded in 1980 by The Seiyu Ltd., a Japanese famous supermarket chain, the brand
provided 9 household goods and 31 types of food with the mantra “Low price for a reason",
which refers to the offering of affordable quality products (Ryohin-keikaku.jp, 2018). 5 years
later, due to the brand's rapid development, its own division was created within The Seiyu Ltd.
setting the foundation for its departure from the parent company to become an independent
brand in 1990 (ibid.). Through joint venture and wholly-owned subsidiaries, MUJI has made
its entrance into various foreign countries and continuously expanded its business into new
industries growing the product portfolio to 7000 products in approximately 700 stores in
Japan and worldwide (Muji Annual Report, 2017). In 1991, Muji opened its first store in
London starting the company’s expansion to the European market; 3 years later, Ryohin
Keikaku Co., Ltd. established its Europe subsidiaries (Ryohin-keikaku.jp, 2018). As 91% of
revenue from operations comes from Japan and East Asia, the company focused more on
developing strategies in Asia and its local market than new markets like EU (Muji Annual
Report, 2017). The thesis, therefore, will be an analysis of the company’s operational
activities in EU and recommendations based on the analyzed situation (ibid.).

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1.2 Company Background Information

TABLE 1: COMPANY BACKGROUND INFORMATION

Name Ryohin Keikaku Co., Ltd.


Corporate Structure Public
Accounts settlement date Annual end of February

Founded June 1989


Headquarters 4-26-3 Higashi-Ikebukuro, Toshima-ku, Tokyo, Japan
Industry Apparel and House Furnishings ??Retailing
Total employees 6,992
Total Revenue $63.4 billion
6,766,250,000 yen
(Exchange rate: 1 yen = 0,0937USD)

Board of Directors Chairman and Representative Director Masaaki Kanai


President and Representative Director Satoru Matsuzaki
Director Kei Suzuki
Director Satoshi Okazaki
Director Yuki Yamamoto
Director Satoshi Shimizu
Outside Director Isao Endo
Outside Director Toshiaki Ito
Outside Director Masayoshi Yagyu

(Information taken from MUJI Annual Report, 2017)

1.3 Personal Interest


The researcher chose MUJI due to personal interest in Japanese culture and lifestyles.
According to Porter, most Japanese companies emphasize more on operational efficiency to
achieve sustainability, which raises curiosity about how differently a Japanese company
manages its internal system and develops strategies to adapt to foreign markets (Porter, 1996).
While Marks & Spencer and IKEA are the biggest names of retailers in Europe, Muji rises as
a retailer giant in Asia. The company decides to focus more on improving brick-and-mortar

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store experience by making every store a unique playground (Aaker, 2010). However, being
unique by concentrating on physical stores while the market on digital devices is growing fast
does not seem a wise step. Therefore, as a MUJI’s customer, who have experienced its
customer services, the researcher would like to explore how MUJI handles e-commerce and
improve customer relationship without depending on online services and make necessary
recommendations in response to changes in customers’ buying patterns.
1.4 Purpose
By analyzing the company's background, examining its financial performance
regarding the changing external environment, the thesis will evaluate the effectiveness of
MUJI's marketing strategy and its synchronization with operational activities to achieve
strategic goals and increase profits. Accordingly, the researcher will perform gap analysis to
figure out room for improvement, propose marketing strategic alternatives, identify strengths
and weaknesses of each recommended strategy to conduct the marketing plan that suits the
company’s situation most.
1.5 Conceptual Framework
To deliver strategic recommendations for the company, the thesis follows the
conceptual framework that can be divided into 4 steps:
•   Identify MUJI's strategic issues by investigating the company's current
performance
•   Gather information via secondary sources such as books, academic journals,
articles, and business reports
•   Analyze and evaluate the company's current marketing strategy based on the
available data using various marketing tools
•   Formulate a marketing plan after assessing the internal and external factors of
the company
1.6 Methodology
Realizing the need to conduct a thorough analysis of MUJI’s strategic marketing plan
(SMAP) based on numerical and textual data, the researcher used quantitative and qualitative
methods to explore, gather reviews as well as quantify the market size and competitors’
performances. Using these two methods, various types of researches (mentioned below) are
performed to collect and process the secondary data to identify and understand the causes of
the company's problems.
Types of researches (are conducted step by step as the below order):

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•   Exploratory research is used in the first place for gathering data of the market situation
and discovering the problem MUJI is facing with. It gives the researcher enough
information to design the framework and develop a comprehensive analysis of the
issue. (Kothari and Garg, 2004)
•   Descriptive research is to gain a more accurate insight into the competitors, customers,
public's expectation, future demand for the company's products applying the
quantitative method that can help describe and explain MUJI's performance (ibid.)
•   Causal research aims to explore the causal relationship between variables after a
hypothesis is formulated, which is applied to test the researcher's assumptions (ibid.)
Types of secondary sources used in the thesis are online available information, the
company’s customer database, and business reviews.

1.7 Statement of Sources Cited and Consulted


The sources chosen for references in the thesis are from credible academic origins
including business reviews, digital market reports, books, articles from trustworthy newspaper,
governments and universities' publications. The sources are listed as Work Cited (directly
cited in the thesis) and Bibliography (used for additional information in the research process).

1.8 Structure of Thesis


To clarify and organize ideas and information, the thesis is divided into 9 chapters as
addressed below:
§   Chapter 1 introduces the research topic and strategic question. It also briefly states the
purposes, objectives and methods of the research as well as provides key information
about the company.
§   Chapter 2 demonstrates the literature that links to the research process
§   Chapter 3 is the analysis of MUJI's internal and external environment based on
various marketing auditing tools such as SWOT, PLEESTIC, and Ansoff Matrix
§   Chapter 4 integrates the researcher's assumptions about the company following the
above analysis
§   Chapter 5 presents MUJI's strategic marketing plan (SMP) in relation to its internal
and external environment that are analyzed above.
§   Chapter 6 critically examines and evaluates the company’s SMP setting the
foundation for the researcher's recommendation.
§   Chapter 7 serves as the financial audit of the company

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§   Chapter 8 proposes the researcher’s recommendations and advised SMP as well as
offers the assessment of each proposed strategic alternatives
§   Chapter 9 summarizes the research results and drives to the conclusion.

CHAPTER 2: LITERATURE REVIEW


2.1 Marketing Strategy
According to Kotler and Armstrong (2016), marketing strategy acts as the blueprint of
the company to map out a strategic plan by identifying the market segment the company's
products target and the marketing mix to create customer-driven values. It demonstrates how
a company can utilize its capacity to fulfill the requirements of the market while satisfying the
demands of other stakeholders (Ferrell & Hartline, 2011, p.19).

FIGURE 1: MARKETING STRATEGY

(Graph achieved from Sharma, 2004)


2.2 Apparel & House Supplies Industry
With digitalization, the apparel and house supplies industry have faced many changes
in customers’ buying patterns, supply chains and consumption volume, which will be
specified below. Due to the aim of this thesis to focus on MUJI’s strategy in European market,
mainly European apparel and house supplies industry are mentioned.

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2.2.1. Apparel Industry
Despite reaching saturation, the apparel industry is still an attractive field for current
market participants?? and new entrants. In Europe, it generates more 300 billion Euro each
year with the annual growth rate of 1.8% making it among the most significant segments
besides food (Statista, n.d., n.p.). It is reported that by 2020, revenue of online sales in the
industry will account for 21% of the total revenue due to the fast growth of e-commerce,
while physical stores still play an unchanging significant role of contributing to the total sales
in the next few years. It is also indicated in the figure below that price per unit only slightly
increases over the recent ten years (Statista, 2018) (trend- increasing manufacturing costs in
emerging markets- fast fashion).

2.2.2. House Supplies and Furnishings Industry


Including 25 countries in the region, Europe is a large household products
consumption market with the 3% CAGR (Technavio.com, n.d., n.p.). European consumers are
difficult; in the recent years, there is a growing need for “ready-to-resemble”, DIY,
multifunctional furniture and eco-friendly products while the long-replacement cycle and
quality raw materials are lacking, which appears as a challenge to manufacturers and retailers
(Technavio.com, n.d., n.p.; BusinessWire, 2016, n.p.). Four major markets are UK, France,
Italy, and Germany , in which key players are IKEA, JYSK, and Steinhoff International (EU
Furniture Market Study-Summary, 2006; BusinessWire, 2016, n.p.).

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FIGURE 2: EUROPEAN SHARE OF FURNITURE CONSUMPTION (2003-2012)

(Taken from Statista.com, n.d.,n.p.)

2.2.3 European Retail


There is a huge gap between market value between Western and Eastern Europe (the
western value was 2.6 trillion euro while the Eastern market reached around 600 million in
2017) , despite the increase in the Eastern consumers’ purchasing power (Statista, n.d., n.p.).
In 2016, the purchasing power rate in the Eastern Europe was recorded to be highest in the
region, which was 0.7%. Stationary retail is growing at a slower pace as European consumers
spend more on gastronomy and personal expenses including insurance and real estate (Hille,
n.d., n.p.). Along with the trend of communicating with the customers via online channels, big
retailers in Europe with periodic consumption products go with “expansion-oriented”
strategies (mostly applied in Western Europe) (ibid.).

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FIGURE 3: EUROPEAN RETAIL SHARE OF PRIVATE CONSUMPTION (2014-2016)

(Taken from Eurocommerce, 2017, p.11)

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CHAPTER 3: MARKETING AUDIT
3.1 Data gathering
3.1.1 The organization structure
The organization structure affects how a company communicates its corporate
strategy and implements suitable acts in response to the external environment. Since MUJI is
an international company, it is important to take its organization structure into consideration
to examine the value integration among functional departments and different regional offices.

FIGURE 4: MUJI ORGANIZATION STRUCTURE (MUJI Annual Report, 2017)

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FIGURE 5: MUJI INTERNATIONAL CORPORATE STRUCTURE

(MUJI Data Book, 2017, p.)

There are two major takeaways from the MUJI’s organizational structure figures.
•   The organization has internal audit office, which is responsible for advising and
managing potential risks. Served as a department of the company, the
recommendations could be subjective influenced by the company’s cultures and the
leader’s opinions (Figure 4).
•   MUJI’s regional companies also operate based on licensed stores, which may raise
concern for the delivery of the brand message and the consistency of product value
(Figure 5).

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3.1.2 Historical timeline
TABLE 2: MUJI HISTORICAL TIMELINE
(Achieved from Ryohin Keikaku Corporate Information, 2017)
1980 The Seiyu, Ltd., a Japanese retail company, established Mujirushi Ryohin
(MUJI) as its private brand
1982 Wholesale business started
1983 First directly managed store, MUJI Aoyama, opened in Japan
1985 Mujirushi Ryohin Division established within Seiyu

1986 Production and procurement started outside Japan (full-scale consignment


production in overseas)
1989 Ryohin Keikaku Co., Ltd. established

1990 MUJI business transferred from The Seiyu, Ltd. to Ryohin Keikaku
1991 First London store opened (in partnership with Liberty Plc)
1994 RYOHIN KEIKAKU EUROPE LTD. established
2000 Promoted to listing on the first section of the Tokyo Stock Exchange
MUJI.net Co., Ltd. established (currently MUJI HOUSE Co., Ltd.)

2003 MUJI (SINGAPORE) PRIVATE LTD. established

2004 MUJI ITALIA S.p.A and MUJI Korea Co., Ltd. established

2006 First international design competition, MUJI AWARD 01 organized

2012 First store in Malaysia, MUJI Pavilion, and first store in US west coast, MUJI
SOMA, opened

2013 Middle East business started with the first store openings in Kuwait and in UAE

2016 Entered the market in India as the first Japanese retailer

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3.2 Marketing Mix
The marketing mix are tools that the company uses to implement its marketing plan to deliver
values to customers (Kotler & Armstrong, 2016). An extended marketing mix (7Ps) is
conducted to analyze the company's marketing plan to build a lifestyle brand (MUJI Annual
Report, 2017). It is the researcher's revised version developed from the marketing mix of
MUJI mentioned in Oh, Han, Nah & Kwon 's report in 2016 (p.47).
TABLE 3: MUJI MARKETING MIX

Products Price Place


•   Household •   “Low price for a •   Global presence
goods/Personal reason" •   Online stores
care/Home appliances •   Weekly sales deal •   Flagship stores in the
/Apparel (Discounts on certain most crowded areas
•   Simple packaging with products each week) in the cities
small or no brand names
•   Sustainable and
environment-friendly
materials

Promotions People Physical Evidence


•   no-brand branding helpful and eco-responsible Smell, calm music and
•   Social media employees simple layout in physical
•   Public relations stores
•   Sales promotions
including “Inventory
sell-off”

Process
•   Treasure data to merge online and in-store customer behaviours
•   Recommendations system from customers via emails

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The mantra “Low price for a reason” states two mainly-focused tools of MUJI's
marketing strategy, which are price and quality. Accordingly, the other Ps are planned to
integrate with the two main tools. As MUJI believes that the quality speaks itself, the products
are designed to be sustainable with streamlined production, minimalistic design and no brand
name (Isomura, 2016, n.p.). Instead of spending large amount of budget on advertising, the
company invests more on CSR activities to be “helpful in different aspects" by involving its
employees in these programs (Suh-young, 2016, n.p.). MUJI also actively works on
improving customer satisfaction through in-store experience by applying technological
process of emerging customers' data online and in stores as well as creating occasions for
them to send feedback and recommendations to the company (Information Technology
Newsweekly, 2014, n.p). More details of the marketing mix will be discussed in Chapter 5.

3.3 PLEESTIC

As the company operates in the international environment, a PLEESTIC analysis as an


extension of PLESTLE is used to examine MUJI’s external forces that includes
political/legal, economic, environmental, socio-cultural, technological, international, and
competition factors. This analysis helps to identify current market situations and future trends,
which are the fundamentals to conduct SWOT analysis in the next part.
Table 4: PLEESTIC Analysis
(Adapted from "The Business Environment", Worthington, I. and Britton, Ch., 2006, p7)

Political/ Tax burden in Europe


Legal Poor work conditions in manufacturers in developing countries

Economic Increase in labor costs in developing countries and manufacturing costs in


China

Environmental Lack of high-quality natural materials

Socio-cultural Rising usage of digital devices for shopping


More concerns for environmental protection
Preferences in no-brand and unique products

Technological E-commerce
Intellectual property issue

  13  
International Increasing needs to partner with local organizations to enter foreign markets

Competition Intensifying competitions

3.4 Porter’s Five Forces Framework


Besides examining the external environment, understanding the changing forces that
shape the industry is necessary to determine a more potential and profitable strategic position
for the company in the industry.
FIGURE 2: PORTER'S FIVE FORCES FRAMEWORK OF MUJI

(Modified from Porter’s work, 1979)

As depicted in the framework, the bargaining power of buyers and competitive rivalry
are two main forces that reduce the profitability of the industry while moderate barriers to

  14  
entry and low threats of substitutes (since household products are listed as human basic needs)
make it easier for companies to have sustainable prices. More information will be provided in
Appendix A (p.66).
3.5 SWOT Analysis
Based on the PLEESTIC analysis and Porter Five Forces where the researcher
evaluates MUJI's external factors, this part will assess the company's internal strengths and
weaknesses, opportunities and threats from the external environment, which can help the
company to specify the key issues and room for growth and improvement (Ritson, 2008, p.44).
Due to the aim of the thesis, the researcher will conduct a SWOT analysis revised from the
version by Julienne and Charlotte Ho (2014) with the focus in the European market.
Strengths Weaknesses
Unique in-store experience Low awareness of the brand
Made-in-Japan quality reputation Lack of mobile platform and
Efficient streamline production online presence
Strong customer relationship Overdependence on brick-and-
mortar stores
Opportunities Threats
Increasing demands for eco- Yen strength
friendly and sustainable products High competitiveness from
Attractive airport store locations Western retailers
Innovation in logistics and
payment channels

TABLE 5: MUJI SWOT ANALYSIS

(Refered to Julienne & Ho, 2014, n.p.)


As MUJI was introduced to Europe market a few years ago, the company faces
challenges as other new foreign entrants do, which are local competitors, brand’s low
awareness. Besides the obstacles mentioned, specific strengths and weaknesses arising from
the company’s corporate strategy and opportunities and threats from the European market will
be discussed in the Appendix B (p.67).
3.6 TOWS Matrix
Accordingly, a TOWS matrix is generated from the SWOT analysis above. By
matching internal factors and external situations, the TOWS matrix help the company to form

  15  
strategies that can utilize strengths, minimize weaknesses to exploit opportunities and
overcome threats. A detailed explanation of TOWS matrix will be included in the Appendix C
(p.69) as well as mentioned in Chapter 7.
3.7 Business Model Canvas
In this part, the researcher examines the effectiveness of a company in creating and
delivering values to the customers by identifying 9 building blocks of its business model
depicting which activities and resources the company concentrates on to build a value
proposition among targeted groups of customers using suitable communication channels.
Along with the Activity Map, which will be analyzed in the next paragraph, the Business
Model Canvas determines if the company is on the right tract to have product-market fit and
produce and deliver the right product value (Osterwalder & Pigneur, 2010).
TABLE 6: MUJI BUSINESS MODEL CANVAS

Customer Segments Niche market: young urbanists, environment


friendly customers, customers that are
interested in Japanese culture

Value Proposition “non-branded” quality products with


minimalist design and reasonable price
Channels physical stores, website, social media

Customer Relationships MUJI online community, MUJI passport*,


mailbox system to receive customers’ feedback
and recommendations, MUJI summer camp
Revenue Streams Asset sale, fixed pricing (product feature and
customer segment –based on geography
dependent)
Key Resources Stores, natural and recycled materials, human
resources including designers, manufacturers.
Key Activities Crowd-sourcing products ideas, simplifying
products’ packaging, streamline production,
managing and synchronizing customer data in
store and online, creating unique in-store
experience, managing retailing system.

  16  
Key Partnerships Product packaging designers, logistic partners,
Strategic alliances
Cost Structure Value-driven, costs mainly for R&D,
marketing, CSR, and operation activities
*MUJI Passport: MUJI’s mobile application that allows customers to extend their customer
experiences and enjoy the brand’s sales promotions as well as their benefits wherever they go
(Only applied to 5 above-mentioned countries)
This business model canvas is based on corporate-level activities, in which some of
them have not been applied to the new market (Europe) or have not been widely-known by
customers and partner. An extended analysis is presented in Appendix D (p.70).
3.8 Ansoff Matrix
In addition to TOWS Matrix, which helps to identify suitable strategies based on current
internal factors and external situations, the researcher conducts the Ansoff Matrix for strategic
planning focusing on finding opportunities in new products or new markets.
FIGURE 6: ANSOFF MATRIX

  17  
3.9 Activity Map
To leverage the “fit” level of the company, main activities are visualized and examined if they
synchronize with each other to serve the company’s unique value propositions. More
thorough descriptions of the main activities are attached in the Appendix E (p.72).
FIGURE 7: ACTIVITY MAP

  18  
  19  
CHAPTER 4: ASSUMPTIONS

Based on the analyzed data and information of the company’s performance and external
environment in chapter 3, several assumptions are made as following:
1.   No brand branding can be harmful since MUJI is still new to the European market.
MUJI believes that their products can speak themselves by quality enhancement and
lifestyle inspiration (MUJI, n.d.). The no-branding strategy includes no brand on
products’ packages, consumption experience in stores with no posters or logos (36).
The company also limits its advertising expense and focuses on spread word of mouth
by improving customer services and product features (Gupta, 2009, p.5) . However,
the no-brand branding does not work when MUJI has not been widely-known in
European market. As brands are associated with quality and lifestyle in customers’
mind, which helps them to shorten the decision process, no-brand packaging may
cause doubt and distrust in the very first impression (Erskin, 2017, n.p.). Pursuing this
strategy also makes it difficult for MUJI to compete with other European household
names such as IKEA and Marks & Spencer, which already have high brand
recognition.
2.   MUJI is struggling with strategic alliances in Europe. The company enters a foreign
market mainly via joint venture and recently MUJI department in Europe has offered
franchising opportunities to local retailers. The Chairman of MUJI mentioned that
store management and operational activities overseas did not align with the strategies
decided in the headquarter as the partners did not thoroughly understand MUJI’s
values (Kanai, 2018, n.p.). He also stated that MUJI heavily depended on their
partners in logistics and resources including HR and store locations. In 2001, MUJI
also went through a crisis in which product quality is not consistent due to extremely
fast expansion. It can be assumed that MUJI has difficulties with managing its
international branches raising concerns about how will raise concerns about the
quality as well as customer services.
3.   Online stores. MUJI claimed to offer 7000 product types. However, its online store
shows much less products with little focus in design as well as ad copy. The
assumption is that MUJI wants to deliver its value as simplicity and product quality
message via the online website design, which may be perceived by Europeans as poor
design website with few efforts to communicate with the customers.

  20  
CHAPTER 5: STRATEGIC MARKETING PLAN
5.1 Corporate Strategy
5.1.1 Mission and Vision Statement

The vision statement is stated as “There is no answer to what a good product is.
Simply asking questions, though, create infinite possibilities, and we pursue them.”, which
seems vague for its stakeholders (MUJI Corporate Profile, 2017, p.3). In general, MUJI
positions itself a lifestyle brand that provides aesthetically simple and functional products to
lead its customers to live a simple life. Even though the vision is not clear and the mission
statement is barely found on any official statements or websites of the company, MUJI,
instead, states its three main philosophies that can describe what the company is doing and
planning to do, which are to deliver the company’s core values- simplicity and functionality;
to operate a fair and transparent business, and build trustworthy partnerships (ibid.).

5.1.2 Corporate Strategy

MUJI’s competitive advantages lie on cost effectiveness and high product quality,
which are supported by streamlined production process, limited marketing, and simplified
packaging. The company also pursues differentiation strategy by promoting simplicity and
functionality via its packaging and product features. Accordingly, at the very beginning, the
company targeted and was welcomed by customers that are surfeited by “mass consumerism”
(Isomura, 2016, n.p.). The strategy has been re-examined and developed based on the
company’s consistent core values and brand messages.

5.2 Markets and Segments


As MUJI generates most of its revenue from furniture and apparel products and the
thesis focuses on the company’s strategies in Europe, this part will mainly analyze the
European furniture and apparel industry as well as the retailing market in general.
Furniture market
Overall, the European furniture market is considered one of the biggest in the world,
which accounts for nearly 30% of the global industry consumption (Statista.com, 2018, n.p.).
However, in recent years, the industry has faced a slowdown in profitability affected by
raising manufacturing costs, and climate changes, which is shown in the decrease in the
number of enterprises by 10000 in 2014, and the consumption shares reduced from 30% to 23%
  21  
in 2012 (Duncan, n.d., n.p.) With the recovery signal in 2015 from the crisis, spending has
been increased from 12 billion EUR to 17 billion EUR in the UK; the growth rate is 2,9% per
year, which could be considered a bright scene for the market attracting a considerable
number of new entrants to enter the industry making the number of enterprises rise to
approximately 120000, which is still lower than the number before the crisis (Statista.com,
2018, n.p.; Duncan, n.d., n.p.). IKEA is the market leader with 35 billion EUR sales, which is
expected to grow year by year (ibid.).
Apparel market
Noticeably, digitalization has contributed to the fast growth in profits of European
apparel retailers (Duncan, n.d., n.p.). For more thorough description, please refer to chapter
2.2.1.

5.2.1 Macro Analysis


The macro analysis involves in assessing external factors that may influence the
market situations, competitiveness, and consumption power and industry forces, thus,
indirectly affecting the company’s performance (Birnleitner, 2013, n.p.). Understanding
thoroughly the changes in external environment can help the company to conduct short-term
and long-term marketing strategies to adapt to positive changes and resist to negative ones.
The factors have been mentioned in chapter 3 and will be explained in details in the
appendices.

5.2.2 Micro Analysis


This section will evaluate forces that directly affect the company including the
suppliers, competitors, customers, public, and intermediaries (Oxford College of Marketing,
n.p, n.d). A more detailed analysis will be presented in the Appendix F (p.73).

5.2.3 Current State of the Market


Analyzed in previous parts, even though household furniture and apparel are highly-
competitive, with the growth of demand and profitability for fast fashion and do-it-yourself
furniture trends after recovering from economic crisis, these markets are still promising fields
for companies to invest in. Detailed assessment is in chapter 2.2.

5.2.4 Market Trends

  22  
Giving the insights into market trends can help the company identify opportunities of
new business models and product development to gain competitive advantage or develop
“Blue Ocean strategy” that allows them to build loyal customer base (Please refer to
Appendix G- p.74 for more information about the mentioned “Blue Ocean Strategy”). The
table below will depict the most important trends in the industry.
TABLE 7: MUJI - MARKET TRENDS

Positive Trends Negative Trends


Increasing demand for online services Intensifying competition

Customers’ consciousness in Interest in second-hand furniture


environmentally friendly products

Demands for high-tech multi-functional


furniture in developed countries and low-
price and simple products for low-income
countries

Changing attitude towards brand name


(preferences for no-brand packaging)
Rising demand for sustainable products

5.2.5 Competitor Analysis


MUJI faces competition from global and local retailers of food, apparel, and furniture.
Accordingly, direct competitors of MUJI are as followed
TABLE 8: MUJI’S DIRECT COMPETITORS

Industry Companies
Food Mark & Spencer, IKEA

Apparel Uniqlo, Mark & Spencer, H&M, Zara


Furniture IKEA, JYSK
Another competitor should be mentioned is Amazon, which competes indirectly with
MUJI but has noticeable influence on MUJI’s profitability.
Direct competitors

  23  
As most of MUJI’s revenues come from household products, in this analysis, the researcher
will focus on leveraging the players in the household products retailing industry. In Europe,
the biggest retailers are IKEA and JYSK, which specializes in kitchen and home appliances,
furniture and accessories (Statista.com, n.d., n.p.). IKEA also establishes in the same food
industry as MUJI being a major threat to the market share growth of the company.
FIGURE 9: MUJI’S STRATEGIC GROUP MAP

A more detailed comparison of financial performance among competitors will be


presented in chapter 7.
Indirect competitor
Amazon has been branching into many industries including food, apparel, and home
furniture. With the customer-centric approach and platform-based business model, Amazon is
taking the lead of the market and becomes the threat of other retailers (Zhu, 2016, n.p.).
5.3 Products / Services
As stated by the company, at the present, MUJI offers 7600 SKUs in a standard-scale
store, which are categorized mainly into household goods, food and apparel (MUJI Data Book,
2017, p.21). Among those, the household product category has the largest number of items
accounting for approximately 70% of the total number, thus, generating the most revenues,
which is 50% of the cumulative sales (locit.). The food segment (only available in Japan), as
newly-established, only generates 7% of the total revenue, however, is expected to grow fast
in the next few years (MUJI Annual Report, 2017, n.p.; MUJI Data Book, 2017, p.21).

  24  
Stated in the Annual Reports, MUJI lays a strong concentration on developing
products that are simply functional, easy to use, and aethestically designed (Rattray, 2005,
n.p.). The choices are limited to plain and neutral colored products, which are white, beige,
black, and brown with no brand names on (ibid.). The company also focuses on increasing
“strategic products” and MUJI Selection, which are identified as high value-added products
and specially designed by MUJI that could not found in any other brands as the results of
product idea-sourcing from places all over the world; for example, clothing dyed with indigo
inspired from Thailand, right-angle socks from Czech Republic, and steel bows from India
(Mint, 2016, n.p.).
Besides, the company offers consultation services to improve communications with
customers including styling, interior, organization and storage (home visits and listening to
house and moving-relates stress of customers) consultations by appointment; however, these
services are only offered in Japan (MUJI Annual Report, 2017, p.6.).
5.4 Marketing Objectives
Based on the analysis and the annual report, it is considered that MUJI pursues the
following marketing objectives:
1.  Increasing the operational revenue outside Japan

2.  Develop stronger loyal customer base

3.  Become a representative brand of minimalistic lifestyle.

4.  Become one of the major furniture and apparel retailers in Asia

5.  Enter new markets and expand the number of stores in the existing overseas markets to
reduce the dependence on Japan customers.

5.5 Marketing Strategies


The marketing strategy acts as the outline of a business that defines objectives,
targeted market and desirable position of the brand and lays foundation for a marketing action
plan to deliver the most customer value (John & Bennett, n.d., pp.71-74).
5.5.1 Porter’s Competitive Advantage Grid
To achieve sustainable profitability and position industry, the company must have a
distinctive positioning or competitive strategy to differentiate itself from other industry
players. Porter has introduced three generic strategies including focus, cost leadership, and

  25  
differentiation that help the company to perform above the average of the industry formulized
by combining two types of competitive advantages with the competitive scopes (broad or
narrow) (Porter, 1985, p.11-15). Accordingly, it is believed that MUJI pursues cost leadership
and differentiation focus simultaneously. At the corporate level strategy, as presented in the
company’s mantra “Low cost for a reason”, the company delivers products with affordable
prices to customers by optimizing cost efficiency, focusing on streamlining simply functional
products, and limiting advertising expenses targeting the entire customers in the market
(Aaker, n.d., p.13). At the same time, MUJI wants to be a lifestyle brand, which focuses on a
group of customers with psychographic segmentation- urbanists, who are tired of loud
branding, excessive logos and want to lead a simple, but aesthetic lives by delivering
minimalism via their packaging, no-brand branding, and store and product design (ibid.). The
graph will demonstrate MUJI’s competitive position.
FIGURE 10: PORTER’S COMPETITIVE ADVANTAGE GRID

However, considering MUJI in the European market, the company could not pursue
cost leadership positioning due to the additional logistics and importation taxes since the
production process is in Asia and its strong competitors: Amazon and IKEA, which are better
at cost efficiency (Kanai, 2018, n.p.).

  26  
5.5.2 Segmentation & Targeting
Segmentation refers to the act of dividing customers into specific groups that serve a
common need or characteristics to choose a group and some groups the company can deliver
the most values based on its capacity (Stone & Demond, 2017, p.173). Following the
segmentation process, the company continues to evaluate chosen market segments in terms of
attractiveness, size, accessibility, and threats and then select its target markets (Stone &
Demond, 2017, p.191).
Even though MUJI establishes in both B2C and B2B business models, it concentrates
on the B2C segmentation that generates 80% of MUJI the total sales (MUJI Data Book, 2017,
p.20). In terms of demographic segmentation, the targeted customers of the brand are at the
age of 19 to 50, from low to upper-middle income. Identifying itself as a lifestyle brand, the
company takes a stronger and more specific approach to psychographic segmentation. It
targets customers with a simple lifestyle, are conscious of environmentally friendly and
sustainable materials, and prefer no-frills products (Aaker, n.d., p.13). Based on the data
collected, MUJI is believed to use concentrated marketing to target its customers regarding its
specialization in the above-mentioned customer segment allowing the company to reduce
costs for using one marketing mix but at the same time putting the company at risk when it
expands to a new market with lack of understanding in local customers’ experience (Stone &
Demond, 2017, p.193).
Due to high taxation and cost of logistics, in practice, MUJI brand in Europe offers the
prices that can only attract high-income customers.
5.5.3 Differentiation
Differentiation refers to the ability of the company to offer a value customer
proposition that attracts and keeps the customers stay loyal to the brand consisting of a set of
attributes such as logos and packaging known as brand property (Stone & Demond, 2017,
p.203). By those distinctive and unique properties, customers can recognize and distinguish
the brand from the competitors as it offers added customer value (ibid.). Accordingly, the
attributes contributing to MUJI’s differentiation strategy are listed below:
•   Unique in-store experience, good customer services
•   Product quality
•   Sustainable materials
•   No-brand branding

  27  
5.5.4 Positioning
Combining MUJI’s value proposition and its customers’ perception and their criteria
to choose household and personal products, two perceptual maps are created based on four
attributes: price, variety of product choices, quality, and design, which also includes MUJI’s
direct competitors to clearly define the company’s position in the market and its unique
selling point. The maps are only applied for the European market.
FIGURE 11: MUJI’S POSITIONING PERCEPTUAL MAP

  28  
5.6 Gap Analysis
With the data collected, in this part, the researcher will perform gap analysis to
identify the room for improvements in the current strategy and optimize the company’s
resource allocation by comparing the company’s current performance and desirable state (..).
Recognizing a considerable difference between MUJI’s strategic implementation in Asian and
European market, two gap analysis will be conducted, among which the first gap analysis
compares the current strategies in Europe and in Asia, especially in Japan, where roughly 80%
of the company’s profits come from while the second will define the space between MUJI’s
actual strategies at the corporate level and the expected performance for the company to
specify its realistic goals (MUJI Annual Report, 2017, p.9).

  29  
TABLE 9: MUJI IN ASIA (JAPAN) AND EUROPE - GAP ANALYSIS

(MUJI Annual Report, 2017, n.p.)


Muji in Europe Muji in Asia Gap
High price tags Affordable brand image Provide more customer-
Low brand awareness Growing in the number of centric marketing
new stores by 56 and develop communication tools and
a strong loyal customer base develop unique customer
Store closure Increasing operational experience so that
revenues customers perceive the
brand more valuable than
others in the market
High competitiveness in the Become the trending and Develop a clear
market against the global leading lifestyle brand in differentiation proposition
largest furniture, IKEA Asia
Poor digital presence MUJI passport* in 5 major Develop a brand
countries including Japan, digitalization plan
China, Hong Kong, Taiwan,
and Korea reaching nearly
7000 users
Interactive and responsive
website with many support
services and product rating
system
Mainstream customer Excessive customer services Develop a more tailored
services including household and customer services
fashion consultation services approach to fit the
European “taste”
MUJI passport*: MUJI’s mobile application that allows customers to extend their customer
experiences and enjoy the brand’s sales promotions as well as their benefits wherever they go
(Only applied to 5 above-mentioned countries)

  30  
TABLE 10: MUJI GAP ANALYSIS- CORPORATE LEVEL
(MUJI Annual Report, 2017, n.p.)
MUJI Current performance MUJI desired goals Gap
A household name in Japan, Grow market shares in Japan Acquire new customers and
loyal customer base Enlarge stores keep the old ones by adding
Increase sales per physical communication channels to
store meter connect with customers
Diversify product lines and
types
Profitable in Asia and Expand to more countries in Choose the suitable strategic
America Asia and states in America partner to distribute products
Increase the number of and introduce to the new
flagship stores market

Low awareness in Europe Improve supply chain Reach customers via


management omnichannel marketing to
Be acknowledged by raise brand recognition and
European customers earn customers’ loyalty
90% of profits are from Shift profitability source to Offer more exclusive online
bricks-and-mortar stores online channels services and products

5.7 Product Strategies


Since the launch of MUJI as an independent brand, the company’s product
management process has gone through several changes adapting to changes in customers
buying patterns and company’s corporate strategies. The researcher will analyze the
company’s product strategies according to five aspects including:
•   Product line management
•   New product development
•   Product levels
•   Product life cycle
•   Customer adoption process

  31  
For further details, please refer to Appendix H (p.76).
5.8 Price Strategies
As the mantra stated, “Low price for a reason”- charging reasonably (or sometimes
even at low prices) is MUJI’s pricing strategy since it was found. MUJI is only considered as
a reasonable-price brand in Japan due to its domestic market advantage; however, in other
foreign markets, its price is approximately 30% higher than in Japan due to taxation and
importation costs (Jiji Press English New Services, 2005, n.p. proquest). Moreover, the price
is not consistent across borders. For example, the price in MUJI Canada is higher than in the
U.S. stores (Tencer, 2014, n.p.). Besides, the researcher has examined the price herself and
discovered the price in countries in the European Union is 25% higher than in the UK
(MUJI.eu, n.d, n.p). If the company wants to keep the price low at the affordable level,
product margins have to be reduced, which may result in slower expansion process
(Milner,2014, n.p.). At MUJI, there is “rational pricing” strategy, which is only applied for
some specific products that are categorised in Global Strategic Products (GSP) including best-
sellers, and special products inspired by different cultures around the world, charged only at
20% to 30% of the price in Japan (The Economist,1992, n.p.; Miller,2014, n.p.).
5.7 Place Strategies
5.7.1 Distribution Strategies
MUJI has distributed its products via various channels including directly managed
stores, online websites, licensed stores (B2C), and Japanese resellers (B2B), in which, around
90% of the revenues comes from physical stores and only 10% is from online sales (MUJI
Data Book, 2017, p. 20). As the directly managed business, which is operated in the B2C
model accounts for 85% of the total revenues, the company pays more attention to it than the
wholesale business in the domestic market (locit.). In Europe, MUJI mainly distributes its
products in brick-and-mortar stores offering only limited amount of products compared to the
number of products availability in Japan and Asian countries (information conducted by
research on MUJI Japanese website and German website).
5.7.2 Relationship marketing
Relationship marketing is the process of enhancing the relationship with the
company’s customers and other key stakeholders to improve customer knowledge, build
partnerships to increase profitability (Kotler & Armstrong, 2008, p.387; Kanagal, n.d., p.9-11).
Based on the research, MUJI is considered to establish relationships with customers on
proactive level when it publicly opens IDEA PARK- an online community for customers to
share their feedbacks and ideas to the company and does take their suggestions into product

  32  
development process (idea.muji.com). More details about relationship marketing will be
provided in the Segment 5.9.
5.8 Marketing Communications Strategies
MUJI mainly uses WOM, public relations and sales promotion as its main tools of
marketing communication. The company spends little on advertising due to cost saving and
its brand philosophy: no-brand branding - “anonymity” (Zachariah, 2013, n.p.).
5.8.1. Sales promotion
MUJI offers sales deals on specific products in limited time and discount codes for
new products on the first days of their launch (MUJI.com, n.d., n.p.). It also provides online
exclusive offers to encourage customers to buy online (ibid.).

FIGURE 13: MUJI SALES PROMOTION OFFERS (Taken from MUJI.com)

5.8.2 Word-of-mouth and Public Relations


Since its foundation, MUJI has depended on word-of-mouth as a free form of
promotion rather than loud advertising, which does not fit MUJI’s no-brand policy and is over
the company’s budget according to its senior managing director (Obe, 2007, n.p.). The
company attracts new customers by its Japanese culture inspired store environment, product
packaging and develops relationship with customers by offering extra customer services,
encouraging customer engagement in product development process and CSR program named

  33  
“100 Good things” to generate positive publicity and attract media attentions (Booth, 2010,
n.p.).
5.8.3 Advertising and digital marketing
As mentioned before, MUJI invests little in advertising; however, some campaigns
still engage with advertisement, which will be provided in the Appendix I (p.79). The
company also reaches customers via social media platforms including Facebook and
Instagram.

5.9 Customer Relationship Management


MUJI enhances its customer relationship, especially in Japan, by setting up many
projects and offering extra services to customers, which are listed below:
•   MUJI Passport (see explanation in Gap Analysis section)- available in Japan, Korea,
China, Taiwan, Hong Kong
•   IDEA Park (see explanation in Product Development section)-only available in Japan
•   MUJI Camp, where customers can enjoy camping while using MUJI products-only
available in Japan
•   My MUJI, an online social review platform-only available in Japan
•   +Air- Energy saving system installed in houses built by MUJI -only available in Japan
•   Developing and offering products that could be used in emergency, safe and
convenient for customers
•   Caring for children by holding summer camps, partnering with non-profit children
organizations and building play area for children in stores

Besides, the company shows efforts to understand customers’ needs by sending their
employees to observe and talk to customers in their houses listening to their feedbacks
(Isomura, 2016, n.p.). Moreover, by actively taking part in community improvement, MUJI
receives positive reactions from its customers.
5.10 Corporate social responsibility and ethical audit
Corporate social responsibility refers to the organization’s self-regulated system that
ensures its ethical conduct of business aiming at satisfying stakeholder’s needs and building
long-term sustainability (Tai & Chuang, 2014, p.115). To support sustainability development,
the company has built the five pillar of social responsibility including environmental impact,
community interactions, employees care, ethical partnership, concerns for customers, which
are stated in “100 Good things”- the name of the company’s CSR program revealing ethical

  34  
and CSR activities MUJI has done in the past 30 years (Ryohin Keikaku, n.d., n.p.). The main
activities of MUJI’s CSR program will be shown in the below table.
FIGURE 14: MUJI’s CSR PROGRAM (Ryohin Keikaku, n.d., n.p.)

• Streamlined • Job • Respect for


production opportunities Women in

Employees
Community
Environment

process in Laos workplace


• Material • Post Disaster • Care for the
selection Recovery disabled
• Textile Project • MUJI
recycling • Fundraising Laboratoty
• Plastics • Workshops for Living- a
Recycling and public platform for
• Solar Energy exhibits in open
use in MUJI information
production locations exchange
• Local Nippon among
• Package
website to colleagues
simplification
support Japan • Better work
• Joining UN
regional programme
Global
Impact activities

• Natural, non- • Supporting


allegic Farmers
Partnership  
Customers

ingredients in and
personal care Flowerists
products as the main
• Kid suppliers
organization • Shokoku
and summer Ryohin-
camp introducing
sponsorship regional
• Developing products
products for • Fair
emergency relationship
situations - with partner
earthquakes
• +AIR program
• Selling
replacement
parts
• Universal
product design
• Learning from
customers

  35  
More information about MUJI’ CSR programs will be discussed in Appendix J (p.81).
5.12 Internal marketing
Little is known about the company’s internal marketing practices. Due to information
on journals and articles about MUJI, the company holds centralized staff training focusing on
the core value of the company based on customers-generated data so that the employees/staff
are knowledgeable and understand thoroughly about MUJI to deliver the most relevant
recommendations and valuable experience to customers (Reinmoeller, 2002, n.p). Besides,
MUJI also operates MUJI Laboratory For Living, which is an online platform allowing its
employees to get informed and exchange opinions about corporate decisions (MUJI.com, n.d.,
n.p.).

5.13 Branding strategy


The company’s branding strategy is formulized as the figure below:
FIGURE 15: MUJI’s BRAND EQUITY

5.14 Implementation
In MUJI’s case, marketing implementation includes its promotion activities, employee
training as mentioned in the Internal Marketing segment, CSR projects to earn publicity. As

  36  
the company does not provide details about its marketing budget and cost (only advertising
expenses are clarified in the Income Statement), it is difficult to evaluate the effectiveness of
the company’s marketing strategies. Implied from the market share, revenue growth as well as
its brand recognition across marketing channels, at the corporate level and in Asia, MUJI’s
marketing and communications are considered successful; however, in Europe, due to the lack
of applied marketing channels and programs, the brand does not grow as planned.
5.15 Monitoring and Control
As MUJI believes that quality and the aesthetic and simple lifestyle are the core values
of its brand development, the company sets strict and demanding standards for idea
development and production process that fulfill its designed criteria (Reinmoeller, 2002, n.p).
It also sends employees to loyal customers’ places to rediscover the product values and
observe their needs (Isomura, 2016, n.p.). Besides, store lay-out and environment are
standardized; the company also tries to have more directly-managed stores than franchised
ones (ibid.). To improve its value chain for rational corporate decisions, MUJI also builds
“Mujigram”, which is the project to form a committee for leveraging and reducing the
company’s general expenses (ibid.).
5.16 Recommendations and Conclusion
According to the research and analysis, the researcher concludes that despite having
appropriate and applicable corporate strategies and clear marketing objectives, due to intense
competition, cultural barriers, difficulties in logistics, inadequate adoption of marketing
practices and EU economic policies, MUJI has struggled to develop its brand reputation
across Europe. The following recommendations are drawn from chapter 5 analysis:
1.   Define a more distinctive value proposition (low-cost or differentiation)
2.   Re-evaluate marketing channels used and add more marketing tools
3.   Observe European customers’ buying patterns and address their needs
4.   Improve digital interactions with customers

  37  
CHAPTER 6: EVALUATION OF THE CURRENT SMP
The figure below will demonstrate the most significant assessment of the company’s
current SMP including strengths and weaknesses, which is based on the analysis discussed in
the previous chapters.
FIGURE 16: ADVANTAGES AND DISADVANTAGES OF MUJI’s SMP
ADVANTAGES DISADVATAGES

GOOD PRODUCT DEVELOPMENT POOR WEB PRESENCE


PROCESS SOLE FOCUS ON PHYSICAL STORES
UNIQUE APPROACH OF BRANDING
STRONG FINANCIAL SUPPORT LIMITED MARKETING
STRONG FORMULIZED CRM ON COMMUNICATIOSN CHANNEL,
CORPORATE LEVEL OVERDEPENDENCE ON WORD OF
STRONG LOYAL CUSTOMER BASE MOUTH
HARD TO MAINTAIN LOW COST
STRATEGIES AGAINST EUROPEAN
MARKET LEADERS
POOR UNDERSTANDING OF LOCAL
CUSTOMERS’ MENTALITY
LOW BRAND AWARENESS
STUCK IN THE MIDDLE

6.2 Corroboration of Thesis 


The evaluation of MUJI’s current marketing strategy is conducted by making use of


secondary resources and research on online public database. Due to the lack of access to
primary sources and limitation of the research’s scale, the researcher could not gain a deeper
insight into the topic, especially when the company discloses information about its operations
and performances in Europe. Some information can only be assumed based on available data.

  38  
CHAPTER 7: FINANCIAL ANALYSIS

This chapter is to assess the company’s financial performance including its financial
strength and potential to support the implementation of strategies by conducting key ratios
calculations of MUJI and compare the indexes to its direct competitors. Following that is the
researcher’s conclusion explaining the relationship between global finance situation and the
company’s profitability as well as how the financial status of MUJI can affect its expansion
plan.
7.1 Revenue and Income Analysis
TABLE 11: MUJI INCOME STATEMENT (KEY INDEX)

All numbers in millions 2017 2016 2015 2014 2013


(USD)
Revenue & Gross
Profit
Revenue 333,281 307,532 260,254 220,620 188,350
Percentage Change 8,37% 18,17% 17,96% 17,13% -
Revenue
Gross Profit 165,160 150,118 122,232 101,665 86,719

Percentage Change GP 10,02% 22,81% 20,23% 17,23% -


Operations

SGA Expenses 127,583 116,012 98,984 80,749 69,024

Percentage Change SGA 9,97% 10,91% 17,20% 16,98% -


Operating Income 38,278 34,439 23,846 20,916 18,351

Net Income
Net Income 25,851 21,613 16,643 17,208 10,970

Percentage Change NI 19,61% 29,86% -0,03%

(Adapted from Ryohin Keikaku Ltd,Co, 2017, 2015 & 2013 Annual Report, n.p.)

  39  
It can be referred from the numbers provided and calculated above that the growth rate
of the company is declining. In 2014, 2015, and 2016, MUJI’s revenue grew at approximately
17% per year, while in 2017, it reduced to 8,37%. The same situation happened with the
company’s gross profits, compared to 2016, the gross profit growth declined by 10%.
The main factor leads to the noticeable decline in the revenue growth is currency
conversion, which is stated in the figure below.
FIGURE 3: JAPANESE YEN/U.S. DOLLAR 2010-2018

(FIGURE TAKEN FROM BARCHART.COM , 2017, N.P.)

The figure shows that the JPY/USD index faced a slump last year meaning Japanese
Yen became stronger, which costed the company a considerable amount of revenues and
profits (respectively) to convert EUR or USD to JPY.
Another factor that should be put into consideration is the expansion of new stores. It
could be seen that MUJI’s sales is increasing with the growth in the number of new stores
demonstrated in the figure below. However, in the period of 2015-2017, the growth rate of
revenue fell much behind than the increase rate of store expansion, which raised a concern for
the effectiveness of expansion, marketing strategies and new store management.

  40  
FIGURE 4:MUJI REVENUE FROM OPERATIONS YEAR ON YEAR (MILLION YEN)

(Figure taken from Ryohin Keikaku, n.d, n.p.)

7.2 Key Ratios in comparison to MUJI’s direct competitors


As mentioned before, the main competitors of MUJI in the European are IKEA and JYSK. As
IKEA and JYSK are private companies, the researcher will conduct a table of key ratios and a
stock comparison chart for MUJI; other companies’ ratios are rarely obtained and will be
included in the table if available.
7.2.1 Profitability analysis
TABLE 12: MUJI PROFITABILITY ANALYSIS

(Ryohin Keikaku, 2017, n.p)


Gross Margin Operating Net profit ROE ROA
Margin margin
2013 46,04% 11,43% 7,75% 12.5 17.8
2014 46,08% 11,21% 7,03% 17.0 17.8

2015 46,97% 9,16% 6,39% 14.3 16.3


2016 48,81% 9,48% 7,79% 16.4 16.9
2017 49,55% 9,74% 5,82% 17.7 18.6

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Indicated in the table, the ROE and ROA has been increasing year by year except for a
noticeable decrease in 2015, which could be explained by the company’s struggling period to
keep the prices low while dealing with the rise in manufacturing and operating costs
mentioned in the previous chapters. The industry’s ROA is around 8-9% in 2017 and the
industry’s ROE is 17.4% in Q4 of 2017 meaning the company is above average of the
industry.
The figure below will show the comparison among JYSK, IKEA, and MUJI to define
the influence of these competitors to the company’s profitability.
TABLE 13: PROFITABILITY OF MUJI VS. COMPETITORS
MUJI IKEA JYSK

Gross Margin 49,55% 34,62% NA


Operating Margin 9,74% 8,35% NA
Pre-taxed profit margin 11,6% 8,3% 8,8%
Net profit margin 5,82% 6,81% NA

EBIT growth 8,79% 7,9% 5,26%


ROA 18,6% 4,67% NA
(Ryohin Keikaku, 2017, n.p; IKEA,2017, p.74; JYSK, 2017,pp.6-7)

The pre-taxed profit margin of MUJI among three companies are the highest
indicating that the company generates more percentage of pre-taxed earning in comparison to
the total revenues. JYSK has higher profit margin than IKEA, which can be assumed that the
company is more profitable in terms of pre-taxed earnings. Despite having higher gross and
operating margin than IKEA, MUJI has lower net profit margin due to higher operation
expenses as IKEA is the market leader and is an expert at cost efficiency and the tax burden in
Europe. The EBIT growth indicator also shows that MUJI has highest earning potential and
the second is IKEA, which could not be certain in this case due to different tax policies in
different locations causing inaccuracy in measuring profitability. According to the table, ROA
of MUJI is larger suggesting that the company is using resources and assets more effectively.

7.3 Liquidity Ratios


The table depicts the company is in a “healthy” financial situation. Current
ratio calculation shows the results above 1. The total debt/ assets ratio is also low and was

  42  
even reduced to 0.1. However, the quick ratio decreases from 1.3 to 1.1 which indicates the
longer collection period of cash and account receivables.
TABLE 14: MUJI- LIQUIDITY RATIOS

Current Ratio Quick Ratio Total Debt/Assets

2017 2.64 1.1 0.1

2016 2.7 1.3 0.3

(Calculated from MUJI Annual Report, 2017)


TABLE 15: MUJI CASH FLOW FROM 2013 TO 2017

(following the order from the left to the right)

Cash flows from operating activities (100 milion yen) 131 151 146 261 197

Cash flows from investing activities (100 milion yen) (49) (178) (221) (86) (98)

Free Cash flows (100 milion yen) 82 (27) (75) 175 99

(Taken from ryohin-keikaku.jp, 2017)

Cash flows from investing activities due to the company’s global expansion plan
increased dramatically during 2014-2016 and then slowed down in the recent two years. As
the company generates much more cash from operating activities thanks to the growth of
stores overseas and Japan, the company’s free cash flow grew steadily in 2016 and remained
strong in 2017. Analyzing from the cash flow table and the debt per assets ratio, the
researcher concludes that the company has strong financial base to support any of its strategy
implementation plans.
7.4MUJI’s Price Stock Chart
The researcher provides the company’s stock chart in 4-year period from 2015 to
2018. Respectively, the stock price of the company is increasing rapidly in recent years,
which is a good sign for Ryohin Keikaku.

  43  
(Taken from Yahoo Finance, n.d., n.p.)

Chapter VIII: Recommendations


8.1 Discussion

This chapter will provide appropriate recommendations for Ryohin Keikaku Co.,Ltd.
and MUJI as a brand after drawing a critical assessment of the company’s current SMP using
the marketing and financial audit tools above. Based on the analysis in the previous chapters,
which illustrates challenges, weaknesses, and opportunities of the company, the researcher
raises concerns about the company’s unclear strategic position in the European market and
unprofitability leading to store closure and limited marketing communication channels to
connect with customers despite the increase in sales revenue at corporate level. Taking the
company’s current situation into account leveraging with the external environment, the
researcher suggests necessary changes in the company’s marketing and planning to formulate
a strategic fit that improve MUJI’s competitive advantage. The following recommendations
will be explained and justified in the order of importance and priority for the company to
implement.

8.2 Strategic recommendations


Recommendations Tool Schedule

Repositioning the brand TOWS (S1, O2, O3), Marketing Immediate for loss
mix, Porter’s competitive prevention and
advantage, PLEESTIC, Financial Long-term

  44  
Analysis

Improving the brand Marketing mix, TOWS (W1, O3) Immediate


awareness Short-term
Digital revitalization plan SWOT, Gap Analysis Implemented along
with brand awareness
raising plan
Long-term
Managing products Gap Analysis Begin reassessing
distribution globally supply chain and
implementing globally

1. Repositioning the brand (choose either to be low-cost or different)


The company pursues low-cost and differentiation strategy at the same time putting it
in the “stuck-in-the-middle” position when the low-cost strategy does not work facing fierce
competition from IKEA, which is well-known for its cost efficiency system and
disadvantageous logistics location and European tax policies; besides, the company’s
differentiation strategy could not be utilized because of low brand awareness. The researcher,
therefore, suggests the company redefining its value proposition. If the company chooses to
be low-cost, it must consider reducing its profit margins and find a way to optimize resource
allocation and cost reduction; for example, moving one of its manufacturing factories/
warehouses to Europe, shifting its model to online retail, which means eliminating its lifestyle
delivering via in-store experiences. If the company chooses to be different, MUJI can
continue developing the minimalistic lifestyle via various channels but it must increase the
price point/level to be premium and different.
Following differentiation strategy is more recommended since there is a little chance
for MUJI to compete with IKEA in the European market. Based on the recommended
proposition, which is differentiation and going premium, some aspects of the marketing mix
and marketing communication tools must be changed accordingly including:
•   Brand focus group
•   Brand personality and value
•   Marketing mix
•   Marketing channels

  45  
Justification: Repositioning a brand means changes in customers’ perceptions about the brand,
which requires efforts to alter communication channels and messages to increase relevance to
customers (Manocha, 2014, p.226). Accordingly, the researcher proposes changes that should
be implemented as followed:
•   Targeting middle and upper middle income white-collar customers (urbanists with
simple and minimalistic lifestyles as MUJI is focusing on)
•   Brand value and personality: not only simple, minimalistic but also sophisticated and
elegant
•   Marketing mix:
Price Need to be high

Product Products should be available with better personalization options.


The company could consider the adoption of premium materials/
advanced technology in production process. And only limited
choices of products in a same line are offered so that customers
feel what they own are rare, extraordinary and special.

Promotions Placement in premium brands magazines. Advertisements with


simple and elegant images. Partnership with other premium
brands.

People Offering extra personal services as MUJI is implementing in


Japan: style, interior (housing) and organization consultations;
advanced technology and membership (MUJI passport) in stores.

Place Airports, premium malls and outlets

•   Communication channels: Social media (Instagram is more recommended), well-


designed website, brick –and-mortar stores, magazines, paper advertisements, WOM

Limitations: The situation requires a trade-off between a new pricing and production system
with higher standards and the traditional Mujigram built and developed by MUJI to minimize
production expenses for years. The recommendation not only demands more expenses for
materials and technology in production stage but also demands a large budget for marketing
to increase brand awareness. Besides, the alternative strategy could not apply for all the

  46  
current products due to changes in brand image and identity. Thus, the company must prepare
to face strong increase in expenses in the first phase of implementing the strategy.
2. Improving the brand awareness by more intensive marketing communications
As mentioned before, little about MUJI has been known in Europe due to its slow
expansion of stores and no-brand branding. However, limited investment in marketing the
brand to a new market and overdependence on WOM as well as product quality can weaken
the company’s financial performance and brand growth. Taking MUJI’s core philosophy as
no loud marketing campaigns into consideration, the researcher proposes strategies that are
not too “visible” and annoying.
Justification: The intensive marketing communications aim to attract customers by providing
solutions to their problems without pushing them to buy (Hubspot Academy, 2017, n.p.) It
involves the creation and distribution of marketing content, networking, social media and
exclusive offers (ibid.). Accordingly, the marketing plan for MUJI should be:
•   Create and distribute the story of MUJI, news about the brand, and related product
functions and innovation online and in magazines, newspaper regularly to drive
website traffic.
•   Partner with bloggers, content generators (for example, Instagram or Facebook
influencers), local community (in CSR programs) to improve the brand image.
•   Actively interact with customers on social media. As no loud marketing is the
restriction, the company would spend limited amount on social media paid ads and
focus on generating social publishings and brand mentions instead.
•   Offer exclusive deals in limited time.

3. Digital revitalization plan


MUJI has succeeded in adopting its digital ecosystem in 5 Asian countries: China,
Korea, Japan, Hong Kong, and Taiwan via its mobile application: MUJI Passport while in
Europe where customers are used to e-commerce due to its convenience, few efforts to
improve online shopping experience has been made. Therefore, a digital revitalization plan
has been proposed to better customer experience, develop brand recognition and formulize a
MUJI global digital ecosystem to integrate in-store and online customers’ data.
Justifications:
There are four main goals in the digital revitalization plan, which are:
•   Build a mobile application for European customers in local languages

  47  
MUJI Passport, explained above, is a MUJI mobile application that allows
MUJI customers acquire membership awards while travelling across MUJI
international locations (Muji.com, n.d., n.p.). Buying from any MUJI stores from 5
countries listed above, customers can check in and earn “miles” for each bill, which
later can be generated for a discount or a gift from the brand (ibid.). MUJI can activate
this application in European countries, which can contribute to its differentiation
strategy and set a foundation for the company to build a MUJI digital ecosystem all
over the world. The below figure demonstrates the MUJI application interface.

  48  
•   Change website design and add more customers’ interaction features.
The website for European countries is poor-designed with small fonts,
unattractive images, and limited online services compared to MUJI website in
Japanese, which offers a large diversity of options including consultation, product
reviews, application for MUJI camps, and suggestions for new product ideas with
easy-to-use and aesthetically visualized interface.

  49  
To make better online customer experience, MUJI Europe is suggested to redesign the
website with more appealing images, simpler design, and more interactive features and
services as its website in Japanese.
•   Develop social media communications

  50  
Millennials are important to every brand due to their long-term purchase potential, which
requires them to reach them from the early ages to turn them into loyal customers. To attract
them, social media communications are necessary. Using Instagram/ other social media
platforms and generating reviews from influencers can help with content marketing and create
interactions between the brand and customers.
•   Apply data-driven approach to merge online and in-store experience –a omnichannel
marketing plan)

In 2014, MUJI started Treasure Data- a cloud commuting system to collect customers’
data from multi-channels and integrate in-store services with online benefits. The system,
however, is only available in U.S. and Asia, which raises a demand for a similar system in
Europe to create more personalized brand experience.
4. Managing products distribution globally
As mentioned in the Product Strategies segment, MUJI offers small product variety in
Europe and has logistics problems when it places logistics hubs in China, from which its
online orders are delivered around the world (KPMG, 2016, n.p.; Dawson & Mukoyama,
2013, pp.171-172). Taken from Dawson & Mukoyama, the figure that demonstrates MUJI’s
sourcing and distribution is presented below (ibid.).

Accordingly, the shipping time within Europe takes 7-14 days at high costs (around
8EUR per 0.5kg), which discourages customers to buy online (MUJI.com EU, n.d.,n.p.). The
recommendation, therefore, focuses on equal product variety distribution in foreign markets
and improvements in logistics system.

  51  
Justifications: To achieve the goals of the alternative strategy, the company is suggested to:
•   Communicate and build the right partnership with cost-effective logistics companies
in Europe to reduce the freight cost and save time.
•   A logistics hub/ distribution center should be established in Europe
•   Based on the Treasure Data system to forecast product consumption to improve
inventory management
•   More transparent shipping and return terms and conditions

Limitations:
As logistics conditions are subjective to the EU import and logistics policies, it is not
easy for the company to implement the suggestions immediately.

Evaluations of recommendations:
Investment Risk Priority
Repositioning High High 1
the brand
Improving the Low Low 1
brand
awareness by
inbound
marketing

Digital Medium Medium 2


revitalization
plan
Managing Medium Low 2
products
distribution
globally

  52  
CHAPTER 9: CONCLUSION
The thesis is to evaluate MUJI’s current strategy and market positioning in Europe by
analyzing the company’s external, internal environment, strategy practices, and financial
performance using strategic analytics tools such as SWOT analysis, Ansoff Matrix, and
Marketing Mix. The researcher, thus, concludes that MUJI has healthy financial situation
allowing it to conduct any further marketing plans and strategic moves in the future; however,
the company’s confusing value proposition and lack of marketing communications in Europe
make the landscape of the European market not favorable for them leading MUJI to close
several stores for unprofitability. With the growth of e-commerce and omni-channel
marketing, MUJI need to recognize the urge of technological advance adoption to re-evaluate
its market positioning by exploring and addressing its local customers’ needs and buying
behaviors.
9.1 Personal Opinions
In terms of corporate-level strategies, it is believed MUJI is going on the right track of
improving communications with customers by using data-driven approaches to merge in-store
and online customer experience, actively participating in CSR activities as well as having
clear product value proposition which are simplicity and functionality with no frills and
innovative product development process requiring intense customer engagement. However, at
the local level (in Europe), the company has been struggling entering foreign markets due to
the lack of consideration for local customers’ mentality, ignorance of technological advances
and overestimation of WOM marketing effectiveness without having strong brand recognition.
Seeing few efforts of improving profitability and fixing the current situation in the European
market of MUJI, the researcher also raises doubt about the behind?? aims of MUJI’s business
operations in Europe: Is it simply for expansion and sales growth or to serve unethical
purposes?
Having enough financial sources to implement any major changes in the strategic
direction, the company is recommended to take European customers’ perspectives seriously
and adopt effective marketing communication tools to increase sales and brand awareness in
Europe.

9.2 RESEARCH LIMITATIONS

Due to the lack of data from primary sources and disclosed information of MUJI and
its relevant private companies, the researcher has to make several assumptions based on

  53  
available sources to support the following analysis and recommendations. Additionally, since
the researcher does not have good command of Japanese, the research faces difficulties in
discovering customers’ and public perspectives about MUJI in different geographical regions.

9.3 SUGGESTIONS FOR FUTURE RESEARCH

Regarding the limitations of this research, further researches should be conducted on


the basis of the above analysis and recommendations to leverage the practicality and
applicability of the suggested strategic alternatives. The questions and topics should be
addressed in the next researches on the same topic are:
•   The possibility of developing a sub-brand adapting to the rising demand for eco-
friendly and green products.
•   How do the rising manufacturing costs in Asian developing countries affect MUJI’s
product and pricing strategies?
•   Address typical cultural barriers that Asian international retailers like MUJI face in
Western markets and suggest solutions.

  54  
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APPENDICES
Appendix A: Extended Porter’s Five Forces
According to Porter, understanding the direct five forces that shape the industry is of
the most importance as it helps the company to aim at a more profitable value proposition; the
five forces are listed as threat of entry, bargaining power of suppliers, bargaining power of
buyers, threat of substitutes, and competitive rivalry (2018). MUJI is categorized as a
diversified retailer with the other 21 companies listed in the Deloitte report (2018, p.30). As it
is required to have large capitals and investments in human resources, physical stores and
products as well as recognize the need of an effective network of supplies and distribution, the
barrier to entry to the market is high. With the presence of many retailers operating globally
with variety of shipping options, customers’ switching cost is low leading to the high
bargaining power of buyers. Depicted in the PLEESTIC analysis, due to the lack of natural
fine materials with low cost, the bargaining power of suppliers is moderate considering the
growing manufacturing industry in developing countries. Competitive rivalry is being
intensified with the rising of Amazon with its unique approaches to customers becoming
standardized for the whole market.

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Appendix B: Extended SWOT analysis
Strengths

•   Unique in-store experience  


MUJI focuses on creating a unique in-store experience, which includes store design, customer
services, and settings. The products are in the same color theme, mostly plain, simple but
functional; the music and senses bring relaxation and calmness to customers. Furthermore,
MUJI continuously adds personalized services to customers visiting and buying at the store;
for example: styling consultations (for apparel section), interior consultations (for house
furnishing section), and organization and storage services that offer house visits to rearrange
customers’ living space (MUJI annual report 2017). As a company that offers house supplies,
having well-designed physical locations with good customer services to connect the brand
name with customers’ emotions can serve as the company’s competitive advantage.
•   Made-in-Japan quality reputation
Due to their quality and sustainability, Japan’s products are perceived as “excellent quality”
receiving high trust score from customers.
•   Efficient streamline production (MUJI Annual Report 2017)
•   Customer relationship focus
MUJI is open to customers’ opinions. It considers customers’ suggestions in its product
development process by publishing a website called IDEA PARK http://idea.muji.net/ where
it opens projects of product innovation for customers to register and vote for the best idea
online, which then is produced for a test commercialization and become an official product if
the idea meets the commercialization requirement Harhoff & Lakhani, 2016, p. 446-447).
Furthermore, the company opens outdoor camping activities for customers and provides them
MUJI’s products to set up their base camp (MUJI.com Japan, n.p., n.d.).

Weaknesses

•   Little brand awareness in new markets. For example, European and American markets

According to MUJI, the brand itself is special due to its no-brand branding (Si, 2016).
However, the strategy is barely applied in the new market when a little is known about the
company. MUJI spends less on advertisements when it believes word of mouth about its
product quality and lifestyle is a better method of marketing s (Aaker, 2010).

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•   Overdependence on brick-and-mortar stores
Creating aesthetic physical stores with great customer services and exciting experience is the
company’s main strength but also the cause of its weakness. According to MUJI Data Book,
approximately 90% of revenues in 2017 are generated from its physical stores while online
sales only accounts for 10% of the total sales (MUJI Data Book, 2017, p. 20)
•   Discrepancies in online presence among different geographical markets
It could be analyzed from the company’s online website in different locations that the website
offerings, design, and technical features have a huge gap. In MUJI’s Japanese website, the
company provides product rating system, online consulting services, and IDEA PARK
(explained above) with nice and organized design while in Europe, the website is
oversimplified serving as a source of product information rather than an online store.
Opportunities
•   Growing needs for eco-friendly goods

Due to the rising concern for environment protection, more and more customers are more
willing to pay and demanding for eco-friendly products (Edelstein, n.d., n.p.)
•   Advance technology applied in logistics and payment channels as well as customer
services for example Blockchain, which is used to store, utilize, and monetize users’
data (Schmarzo, 2017, n.d.)
Threats
•   Growth in Yen strength, which results in the company’s profit loss in 2017 as the
company had to exchange its profits in foreign markets from US dollars to Japanese
Yen.
•   Intensifying competition from global retailers such as Amazon, Marks & Spencer.

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Appendix C: MUJI- TOWS Matrix
TABLE  2:  MUJI-­‐  TOWS  MATRIX  

Strengths Weaknesses
1.   Unique in-store experience 1.   Low awareness of the
2.   Made-in-Japan quality brand
reputation 2.   Lack of mobile platform
3.   Efficient streamline production and online presence
4.   Strong customer relationship 3.   Overdependence on brick-
and-mortar stores
Opportunities S/O Strategies W/O Strategies
1.   Increasing (S2, S3, S4, O1) With the standardized (W1, O2) Placing stores in airports

demands for streamline production system, MUJI can can help to increase brand

eco-friendly and develop and commercialize an eco-friendly recognition


product line. Its loyal customers base and (W2, W3, O3) Applying innovation
sustainable
Made-in-Japan quality reputation can help in payment channels and logistics to
products
the product line generate WOM and social create more options of shipping and
2.   Attractive
media traffic. payment for online customers. Big
airport store
(S1, O2, O3) Placing its stores in airport data helps the brand design more
locations
malls can increase brand awareness. The relevant customer experience and
3.   Innovation in unique and aesthetic store environment integrate online and in-store benefits.
big data, appeals potential customers waiting for a (W1, O3) Inbound marketing
logistics and long transit.
payment
channels
Threats S/T Strategies W/T Strategies
1.   Yen strength (S1, S2, S4, T2) Invest in core
2.   High competencies including in-store

competitiveness experience, streamline production, strong


customer relationship program to reinforce
from Western
its competitive advantage.
retailers
(S2, S3, T1) Take advantage of the growth
in Yen strength to acquire more high-
quality production materials to strengthen
the quality reputation and improve
operational effectiveness.

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Appendix D: Extended Business Model Canvas
Customer Segments: Producing low-cost simple, aesthetic, plain-colored products with
sustainable materials and growing concerns for the health of environment and people in the
surroundings, MUJI targets young urbanists, environment- friendly customers, customers that
are interested in Japanese culture from low to upper middle income.
Value Proposition: As stated in its mantra “low priced for a reason” and its name Muji,
which stands for Mujirushi Ryohin meaning “no brand, but good products”, the value
proposition of MUJI can be inferred as “non-branded” high quality products with minimalistic
design at a reasonable price (Isomura, 2016, n.p.).
Channels: Since MUJI pays more attention to creating in-store experience, most of its
products are available in physical stores. The company offers its products via directly-
managed and franchised stores (MUJI Data Book, 2017,..) . Other main channels are MUJI’s
online website and social media, which, however, are not managed effectively to utilize
profits.
Customer Relationships: MUJI has an effective customer relationship management via a
system of programs and services including MUJI online community, MUJI passport*,
mailbox system to receive customers’ feedback and recommendations, and MUJI summer
camp. However, most of the listed services are only available in Japan and some Asian
countries.
Revenue Streams: Based on the Income Statement and Balance Sheet, MUJI’s revenues
come from asset sales at fixed price stated in its terms and conditions on its online website.
The price depends on product features and geographical locations due to different tax policies
and logistics cost.
Key Resources: Being a retailer and manufacturer of clothing, household furniture, and food,
selection of materials and human resources are of high importance. The company claims to
consider natural, sustainable and recycled materials key production resources. Besides, human
resources including designers, engineers, and customers (serve as a precious source of ideas
as described in the Product Development segment) also contribute to the company’s value
chain.
Key Activities: Three main activities recognized by the company are selecting materials,
streamlining products, simplifying packaging since they act as three pillars supporting the
company’s value proposition. Other main activities are crowd-sourcing products ideas,
managing and synchronizing customer data in store and online, creating unique in-store
experience, managing retailing system.

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Key Partnerships: Product packaging designers, logistic partners, Strategic alliances
Cost Structure: MUJI’s cost structure is value-driven. According to the MUJI Annual report
2017, expenses are mainly for R&D, logistics, CSR, and operation activities. Only small
amount is used for advertising purposes.

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Appendix E: Activity Map
The activity map of MUJI is conducted to identify the relationship among the
company’s main and sub activities aiming at creating and delivering product values to
customers (Margretta, 2012, p.141). As an international retailer with minimalism lifestyle
orientation, there are four main activities of the company including expanding internationally,
managing stores, simplifying packaging, and reducing production costs. The activities at the
corporate level strongly connect and support each other to build a strategic fit making it
difficult for the competitors to imitate. However, MUJI’s strategic fit at the corporate level
could be damaged if it is not implemented properly at the local level.

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Appendix F: Micro Analysis
Suppliers

The company’s product strategies depend on the supplier of raw and fine materials. Human
resources also play a key role in MUJI’s cost effective system. MUJI has been sourcing from
skilled local handicraft in many places in the world; for example, dyeing plant workers from
Cambodia (AllAfrica.com, 2013, n.p.). This human source is of the most important as being
the core element of MUJI’s strategic product formulization (ibid.). Therefore, the company
needs to manage its supply chain regularly for price negotiations and quality control

Marketing Intermediaries

Publics

As an international company, local governments and public perspectives should be MUJI’s


priority so that the company can adjust strategies and build better CSR activities to promote
the brand.

Competitors

Facing many diversified retailers and other indirect competitors internationally, the company
should understand and research on competitors’ strategies, current market shares and
positions to choose the suitable strategies among defensive and attacking.

Customers

As MUJI establishes in both wholesale and retailing industries, MUJI’s customers are
individuals (mainly), end-users, and several Japanese retail chains. Market trends and
customer needs change constantly, especially in apparel industry, which requires MUJI to
update and adopt changes regularly.

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Appendix G: Blue Ocean Strategy explanation

Blue Ocean strategy refers to the strategic moves that drive a business to an
uncontested marketplace ensuring higher profit margins and create sustainability by adopting
numerous tools including

•   The strategy canvas

•   The sequence of the strategy

  73  
•   Four actions framework

(The figures and info taken from Kim & Mauborgne, n.d., n.p.)
  74  
Appendix H: MUJI’s Extended Product Strategies

5.7.1 Product Management


The product management is considered a process of supervising, improving and
identifying opportunities for the company’s product offering, which has been given the main
four tasks including understanding customers’ demands and needs, creating functional,
accessible, and valuable products, recognizing new product trends and developing products
(Stanford, n.d., n.p.). Thus, the following criteria will be assessed to draw evaluations of the
company’s product management:
•   Product line management
•   New product development
•   Product levels
•   Product life cycle
•   Customer adoption process
Product line management

As mentioned in the Products/ Services and Product Strategies Section, MUJI offers a
wide range of products including household furniture, personal care, apparels, food, and
extending its product offerings to hospitality business as other giant retailers giving the
customers wide choice selection; however, wide product offerings also makes customers
confused (Varley, 2014, p.15). The brand makes sure that customers can find what they want
walking in the store by providing products of the same type but serving different functions
thus, having different designs, for example, bicycles for mountain-riding and bicycles for
daily activities (Varley, 2014, p.212-213).
5.7.2 Product development
Pursuing its brand philosophy as simplicity and functionality, the company develops
products with its “meant-to-be-functions” omitting other unrelated design details (Aaker, n.d.,
p.13). MUJI also ensures product quality by focusing on the selection of materials along with
streamlined production process (MUJI Annual Report, 2017, p.13).
New product development
One unique thing about MUJI is its crowdsourcing ideas for new product references,
which allows customers to submit their ideas, feedbacks and suggestions for improvements on
a public published website created by called IDEA PARK http://idea.muji.net/. Based on the
suggestions made online, the company follows 7 steps to create a new product/ product line:

  75  
1.   The design team starts a project that give a call for all the customers to register and
state their ideas on the Bulletin Board on the IDEA PARK.
2.   From all the ideas collected, a product development theme is defined.
3.   With the indicated theme, customers continue to contribute their ideas on the Bulletin
Board.
4.   The ideas are gathered and proposed to customers so that they could vote for and add
their own opinions and suggestions to their favorite ideas.
5.   The most voted idea will be visualized and specified with more detailed about types
and functions to be proposed to customers again for voting before processing to
production.
6.   The company then chooses the final most voted proposal to turn it into a product
followed by detailed discussions about materials, production methods,
commercialization, and sales prices. At this stage, MUJI produces the proposed
product in limited quantity and open pre-orders.
7.   If the number of preorders exceeds the minimum standard for commercialization, the
final product then could be officially sold on MUJI’s websites and stores.
(Information taken from Harhoff & Lakhani, 2016, p. 446-447)
5.7.3   Product life cycle

FIGURE 12: PRODUCT LIFE CYCLE

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(Taken from Stone & Demond, 2017, p.230)
Product life cycle describes product stages from the launch of products to its
withdrawal from the market including introduction, growth, maturity, and decline property
(Stone & Desmond, 2007, p.230-240). Knowing the product life cycle thoroughly can help
the company extend its growth and maturity periods by using repositioning, reverse
positioning, breakaway positioning methods and scheduling the most appropriate time for the
marketing campaign of the product (ibid.).
Due to the company’s broad product offerings and limited available information
obtained for the research on MUJI’s different product categories life cycle, the researcher can
only draw assumptions from analyzed data that MUJI uses price penetration in the
introduction stage to obtain market shares by offering low prices; however, as the strategy
does not work in Europe due to fierce low-cost oriented competitors and tax policies, the
company stuck between introduction and growth stage.
Another study by Nishikawa et al. (2012) researches MUJI’s product life cycle in
different perspectives by dividing products into user-generated and designer-generated types
concerning the fact that the company is underestimating its design team and focus more on
customers’ ideas. After three years of observation, it is concluded that the user-generated
products have longer lifetime span, generate twice as much profitability as the designer-
generated products and always rank in the top-rated products, which suggests the company
continuing and developing its crowdsourcing process through close interactions with leads
and loyal customers (ibid.).
5.7.4. Customer adoption process
To accelerate customer adoption process, the company decides to localize the products
to suit the needs of local customers; for example, offering bigger rice cookers to the Chinese
market. (Mint, 2016, n.p.)

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Appendix I: MUJI’s Advertisements examples

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Appendix J: MUJI’s Extended CSR Program
MUJI’s social responsibilities, firstly, lie on its environmental initiatives. As streamlined
production, material selection, and packaging simplification are decided as three main
components of its product process, which eliminates redundant product design and materials
to pursue simplicity, they help to reduce industrial waste and promote sustainable lifestyles
among its customers. The company also focuses on recycling used clothing MUJI products
and plastics components of its goods to save materials and minimize plastic effects on the
environment. In terms of customers, MUJI carefully selects safe and natural materials and
ingredients in production process and encourages them to involve in its product development
and assessment. Besides, it claims to provide open, respectful, and non-discriminating work
environment for its employees and shows responsibilities for the community and its suppliers
by creating jobs, providing locations for local events, offering assistant products in occasion
of disasters. One of the most noticeable effort is MUJI’s participation in UN Global Compact,
in which it commits to environmental labor and human rights protection, and anti-corruption
(UN Global Compact, 2016, n.p.)
However, on the contrary to its claims, MUJI has encountered problems with product
materials and labor working conditions. In 2002, customers found out that the company used
cheap materials while claiming that materials used are high-quality and sustainable making it
issue public apologies and re-examine its production chain (Isomura, 2016, n.p.). Additionally,
MUJI involved in the controversy of using child labor (from 14-15) in its Myanmar factories
despite being aware of this misconduct act (Davies, 2017, n.p.).

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