Environmental Analysis

All the businesses are subjected to change from the operational environment, which consists of internal and external factors. It is compulsory for the managers at UNIQLO to consume ample knowledge about the desired market and its environment. The company must conduct a macro-environmental analysis as it can provide a way to understand the environment of the market.

The macro-environmental analysis enables us to provide information about the relations and events about the future environment of the company. The analysis of the political, legal, economic, cultural, technological environment would help the management in charting the future of the organization and the course of action that is suitable in order to attain the desired competitive advantage.

UNIQLO has to consider the environment of the country where it wants to expand in a number of ways so that the chances of cusses are at the maximum level. The policies in place for investors and the culture of people with respect to the gender difference must also be analyzed by the company. Each country presents its own sets of challenges, but the potential for growth is also present, so environmental analysis can help being prepared for the market.

The company first expanded to the UK, and the fashion retailing market was booming at the time. The company witnessed very low sales in the country due to the challenges. The fashion industry has fierce competition in all of its retail sectors, whereas the main structural changes have changed the way most retailers do business in the past.

Economic Environment

Economic factors such as inflation rate, exchange rate, interest rate, gross domestic product, the present stage of the economic cycle in pact the country, and UNIQLO. The factors and their results have a direct impact on the aggregate demand, aggregate investment, and the overall climate of the business. The economic factors in the analysis are macroeconomic.

The factors that UNIQLO may be sensitive to and should be careful before investing in are discussed below.

• The economic system that is operational currently in the sector could be a monopoly, oligopoly, or something that could be the same as a perfect competition economic system.
• The rate of GDP growth of the country will impact the growth of UNIQLO and how fast it will grow in the near future.
• The willingness of the individual to borrow and invest can be analyzed by the interest rates of the country. High-interest rates manes that the investment would be much more, and there would be much chance of growth for UNIQLO.
• The efficiency of the financial market would also be impacted by how well UNIQLO can generate capital at a fair price by keeping the demand and supply in mind.
• The exchange rate of the country that UNIQLO operates in would impact the profitability of the country. This is very important in the case of international trade. The stability of the country’s currency is also important as an unstable currency will discourage international investors.
• The unemployment level is also an economic indicator for the company. A high level of unemployment would mean that there are more jobs than demand. It indicates that people would be willing to work for less and thus will reduce the operational costs for UNIQLO.

The management team at UNIQLO should be aware of the fact that the operations of the company will be subjected to economic changes. The international fashion industry has gone through a great transition in the past two decades. The UK fashion industry is also a great example of economic changes. These changes were majorly related to economic uncertainty. The global economic recession in the year 2008, combined with the sovereign debt of the Euro Zone, made the customers skeptical about the future. As a result, the consumers reduced the purchasing of luxury and fashion products to a great extent. There was an increase in the propensity to save than to spend. The government of the UK is committed to the economic recovery in order to improve the purchasing power of the customers. The trend will lead to the improvement of UNIQLO’s sales in the UK.

Cultural Environment

UNIQLO must research about the cultural environment of the desired. The customers’ demands and willingness to spend on different types of products according to their culture must be considered by the company. UNIQLO is a Japanese brand, has different values and cultures, and has to consider the cultural values of the desired country.

Fast retailing being the parent company of UNIQLO, takes pride in its strive for excellence and efficiency for the measures it takes in adopting the culture of the targeted market. The cultural changes that take place in the business environment are of critical importance to UNIQLO.

• The company must analyze lifestyles and the buying habits of the potential markets in the target country.
• The cultural factors like Religion and beliefs, sex distribution, and the emphasis on safety can also be potential information about the cultural environment.
• The average disposable income, social classes, family sizes, and structures, and the proportions of minorities are important for the cultural environment.
• The attitude of the people towards saving and investing and the rate of population growth can impact the success of UNIQLO in the environment of the country.

The cultural environment focuses on the forces that are present within the society. The culture of friends, family, neighbors, and the media plays a part in the cultural environment. These factors can have an effect on the interests and opinions of the customers, which are the market for the company. The changes in culture with the passage of the time and the willingness of people to spend of fashion products offered by UNIQLO can be very informative before moving to the market.

Technological Environment

Technology can very rapidly discard and change the competitive landscape and the price structure of any industry in very little time. The will to innovate constantly and repeatedly has become very important in order to increase profits and lead the market in the respective category. The world is filled with revolutionarily products that change the entire industry in a matter of days. The example of Lyft and Uber as they dominated the taxicab market is an example and the use of smartphones that have left all other types of phones unviable option for most.

The technological factors that can include the market of UNIQLO are

• The developments and technological breakthroughs made by competitors can impact the performance of UNIQLO in sales. A new technology that the company acquires must be analyzed in terms of popularity and how fast it is growing and impacting the revenues.
• About the amount of time the technology will be diffused with other competitors in the industry that can lead to them copying the unique features of UNIQLO.
• How much technology will impact the products that UNIQLO originally offers. If the improvement is analyzed to the drastic them, the other competitors are intended to suffer more heavily.
• The technology impacts the costs and results in an increase in operating costs and thus reducing the profits to a greater extent. If the profit of UNIQLO is high, then it can be reinvested in the department of research and development. This can lead to a further increase in technological innovations and, as a result, can increase sustainable profits even more.

Technology has enabled retailers from the line of fashion to share the data on fashion and thus enabling them to make the decisions that are most suited for the business. Retailers are using social media networks like Flickr, YouTube, and Facebook as a part of their market communications strategy. Adopting the right technology will improve and efficiency and effectiveness of UNIQLO for communicating with potential customers.

Legal Environment

The legal factors like the policies of the government institutions and the framework of the country also need to be analyzed for UNIQLO to operate in a smooth fashion. The individual policies of the company are not enough to protect the company and its workers. This can make UNIQLO an unwanted place to work for the employees and talented workers.

The legal environment factors that need to be analyzed include the following

• Data protection and other intellectual property laws are designed to protect the ideas and patents of the companies that are making most of their revenues due to the ideas. If the data is stolen, then UNIQLO can lose advantage in the maker amongst the competition and is likely to fail.
• The discrimination laws must also be considered as they are placed by the country to protect its citizens and make sure that all the employees of UNIQLO are being treated fairly. All the employees have the same opportunities irrespective of age, ethnicity, gender, region, and sexual preference.
• The safety and health laws were established after cases of horrible conditions and workplaces that the employees were forced to work during the industrial revolution. The implementation of the proper workforce safety regulations can be expensive, but UNIQLO has to abide by it. The law is not the only reason as these regulations allegations with the company’s personal feeling of social responsibility towards other humans.
• The legal laws are enforced for a reason to ensure the level of quality and price for products in order to keep the customers safe and to prevent them from being provided. The categories to which these laws are applied to find an unwanted increase in their costs often.

Every country has enforced effective legal structures to boost the country’s economic growth through new businesses entering the country. Different countries have established special economic zones in an effort to support economic growth. UNIQLO cannot lose its products to other cheap rip-offs. The company must check for the laws implemented the target the curbing of unfair practices of business.

Social Environment

The social environment the impact UNIQLO is a direct reflection of the society that the company operates in. The environment includes cultures, beliefs, attitudes, and values that most of the people hold dear as a community. The social environment is not only important for the operational aspect of UNIQLO but also for the marketing aspect for the company. A complete understanding of the customer behavior, their education and lifestyle would help to design a campaign that markets the products with the appropriate message and eventually lead it to success.

The factors that can affect the social environment of the UNIQLO are stated below

• The complete details about the demographics of the population, like the age gaps and the genders. This data explains whether a product is viable or not for the country. Makeup is a major project of UNIQLO, and it mostly caters to women. Targeting a population that is majorly male would be less effective than targeting a female-dominated population.
• The class distribution between the country’s population is of extreme importance. UNIQLO would not be able to promote a product of premium category of the majority of the population is from a lower class. The niche of marketing would be very small if premium products are marketed to a low-class population.
• The difference between the educational background of the marketing experts and the target would make it more difficult to relate effectively to the target market. UNIQLO should be very careful and try not to lose the connection between the market’s likings and interests.
• The company must be fully aware of the social environment and health standards of the country. Reaction to the harassment claims and the importance of protection of the environment in the industry overall.

Companies are subjected to change from the prevailing social environment. These changes are related to the different tastes and varying preferences of the population. The changes are motivated by the lifestyle considerations of the customer’s preferences and tastes. The beliefs and attitudes of customers play a major role in driving the change from the social environment. Branded products are more in demand than non-branded products. The whole industry of fashion has witnessed an outstanding change in terms of customer preferences and tastes. The requirements of the customers are linked to both the service that is being offered and the product being purchased.

It is very important for UNIQLO to understand the prevailing demographics of structures and trends of the market. For example, the UK market has the key element of young teens to determine the spending potential of the market. It is compulsory for fashion retailers like UNIQLO to forecast the possible demographic demands and their influence on the behavior of the consumer.

Political Environment

There are very diverse factors that state that the political environment impacts the profitability and the chances of survival of UNIQLO. The political risks can vary from changes in the political system to civil upset to the decisions taken by the present government. UNIQLO being a multinational company, the political environment would affect not only the host country but also the countries that have the business operations of the company.

The following political environment factors need to be considered by the UNIQLO before expansion.

• The political stability of the desired country in recent years.
• The personality profiles of politicians and the chances of them to engage in corrupt actions which can lead to resignation or impeachment of government employees at high levels.
• The laws that are enforced by the country that is in regard to the business of UNIQLO. Contracts laws about what the company can and cannot do. Like some countries prohibit pork or alcohol or have other conditions. Some governments also discourage businesses from outside the country.
• UNIQLO must check whether the country protects the intellectual property of the company. A country that has no laws for IP protection can be too risky for investors to invest in UNIQLO.
• The level of taxation in the country must be checked as it would restrict UNIQLO from receiving the maximum profits.
• Military invasion in countries that are considered to be hostile can cause divestment for the UNIQLO’s venture.
• The laws related to minimum wage as the low wage would mean high profits and increase the chances of survival for the company.

The retail sector business is connected to political trends and structures in different ways. Some are related to the political stability and policies on land using various planning systems. The desired country must be politically stable. The stability that arises from the system of government is very important for UNIQLO. A country that is characterized by low political risk can make the country an attractive investment destination for foreign investors.