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Muji in China - Introduction to Business Management

Essay by   •  April 22, 2017  •  Research Paper  •  2,728 Words (11 Pages)  •  3,245 Views

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Table of Contents

1        Introduction        2

2        Company Background        2

3        PESTEL Analysis        3

3.1        Political        3

3.2        Economic        3

3.3        Social        3

3.4        Technological Changes        4

3.5        Environmental        4

3.6        Legal        4

4        Porter’s Five Forces        5

4.1        Low Threat of New Entry        5

4.2        Low Bargaining Power of Suppliers        6

4.3        High Bargaining Power of Buyers        6

4.4        Medium Threat of Substitutions        6

4.5        Competitive Rivalry        7

5        Strategic Recommendations        7

5.1        Adjustment on Price of Products        8

5.2        Featured Products        8

5.3        Brand Image Improvement        9

5.4        Localization        9

6        Conclusion        9

7        References        10

  1.  Introduction

The strategic management is significant to the long-term development of the organizations. This paper focuses on discussing the external environment of MUJI in China, a retail company which sells large amount of consumer goods and household ware. Firstly is the introduction of MUJI, basic background of this organization. The Second and third part is respectively the PESTEL analysis and Porter’s Five Forces of MUJI. According to the above analysis, there will have some related strategic recommendations in the final part. The analysis and recommendations can help people have a clearer understanding of strategic management.

  1. Company background

The original name of MUJI is Mujirushi Ryohin which means no-brand quality goods; its slogan is “lower priced for a reason”. It was founded as a product brand of the supermarket chain in 1980 in Japan. In 1983, the first store of MUJI was opened, followed in 1986, MUJI had its own factory to sell products overseas, In 1991, the first international store was opened in London, UK. In 1999, it used MUJI as its brand name. Except its large retail outlets in Japan, MUJI has 344 international retail outlets of 2016. The global sales volume in 2014 was reached to 11.92 billion in 2014 (Annual Financial Report, 2017). In addition, MUJI won the gold product design award by the International Forum Design in German in 2005, followed in 2006.

The products of MUJI are ranged widely, including household goods, furniture, stationary as well as luggage, storage, consumer goods and some others. The design concept of its products is simplicity, environmental, and priced, just as mentioned in its slogan that lower priced for a reason, so the products are looks simple with less color and packaging. Because of its no-brand policy, MUJI has little marketing or advertising, so its success mainly relies on the public praise and shopping experience (Eishler, 2017). In 2005, MUJI opened its first retail store in Shanghai, China. In 2016, MUJI has already opened 150 retail stores in China, which is closed to the half of its international retail stores.

  1. PESTEL Analysis

A PESTEL analysis is an efficient tool used by marketers to analyze and monitor the macro-environmental, it not only can analyze external marketing environment, but also monitor factors which influence the organizations (Oxford, 2017). PESTEL is abbreviation of political, economic, social, technological, environment and legal. The result of the analysis can be adapted to a SWOT analysis to understand its weakness and strength. The PESTEL analysis will base on the followed table:

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3.1 Political

Political is significant to international businesses and companies, the policies such as tax, tariff, and commercial law and so on can intervene in a country. Primarily, China has a stable political environment. Governed by the Chinese Communist Party, China is keeping development since the foundation in 1949. Besides, China is a large developing country in the world. After the opening up in 1979, the government encourages foreign investment and international organizations to stimulate the economic development, its favorable policies like tax preference for foreign investment, are helpful for MUJI to enter into Chinese market.

3.2 Economic

China is a booming developing country and also the largest developing country in the world. In 1995, China participated in WTO to follow the trend of global economy. Its domestic market brings plenty of opportunities and chances for foreign investment and international businesses. Besides, in 2016, China’s GDP was 0.744 billion RMB and the increasing speed increased 6.7%, ranking the first economy in the world (Walson, 2017).

However, the growth rate of GDP is slow down in recent year. The higher property price affects its domestic purchasing power. In a conclusion, the developing economic environment is benefit for MUJI in China.

3.3 Social

China is the world’s most populous country, despite the policy of family planning, the base figure and youth predominance is still large, the population growth is rapid as well. So, the consuming ability and amount of labor force is competitive in the world. The majority customers of MUJI is between the age 19-35 who are prefer to simple and no-brand products. 70.14% of the population in China is between the age of 15- 60. In addition, the aging people are increasing in China. However, the youth predominance in China provides MUJI large market and more customers.

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