UNIQLO Fashion Consultants Eric Postma | Tom Epp Jesse Perry | Amanda Macdonald Asper School of Business

AGENDA

Analysis of Opportunity

Evaluation of Alternatives

Recommendation and Implementation

Financial Analysis

Risks & Risk Mitigation

KEY ISSUE

Analysis Alternatives Recommendation Financials Risks

 Uniqlo has saturated the Japanese market. What do you do next?

KEY ISSUE International Expansion Strategy

Uniqlo ¥100 billion

Top Global Fashion Brand

Analysis Alternatives Recommendation Financials Risks

ANALYSIS OF OPPORTUNITY

Analysis Alternatives Recommendation Financials Risks

Value Proposition

Functional Clothing

Low lead times Partnerships Low Pricing

ANALYSIS OF OPPORTUNITY: POSITIONING

Analysis Alternatives Recommendation Financials Risks

Function

Fashion

Quality Low Price

H&M

GAP

Zara

Uniqlo

ANALYSIS OF OPPORTUNITY

Analysis Alternatives Recommendation Financials Risks

29%

13%

1% 1% 10%

46%

UNIQLO STORE NUMBERS BY LOCATION Japan China USA Europe Other Global Brands

ANALYSIS OF OPPORTUNITY

Analysis Alternatives Recommendation Financials Risks

Supply Chain Partners

Planning

- Research & Development Toray

- Merchandising

- Production Planning

Production

- Partner Factories Chefeng, Crystal, Pacific Textile, Ananata, Bros

- Takumi (technical guidance)

Sales

- Distribution and Warehousing 3PLs, Daiwa

- Uniqulo Stores Casio, Microsoft

- Online Sales JD.com

ANALYSIS OF OPPORTUNITY Strengths •  Partnerships •  Low cost, high

quality product •  Proven business

Concerns •  Japan-centric

business •  Lead times

Threats •  Big competition •  Reliance on latest

trends •  Trend-driven

industry

Opportunities •  Untapped markets • Online sales

Analysis Alternatives Recommendation Financials Risks

EVALUATING THE ALTERNATIVES

•  Utilize existing partnerships and manufacturing •  Ship products overseas

Same Suppliers, global shipping

•  Build manufacturing plants in geographically advantaged areas •  Ship products to direct to distributors in US/Europe

Vertically integrate

•  Partnerships with geographically advantaged plants •  60% manufactured in house, 40% partner Joint Venture

Analysis Alternatives Recommendation Financials Risks

ALTERNATIVE 1: SAME SUPPLIER, GLOBAL SHIPPING

Analysis Alternatives Recommendation Financials Risks

Advantages Disadvantages

Lead Times

Shipping Cost

High Inventory

Quality

Startup time

ALTERNATIVE 2: VERTICALLY INTEGRATE

Analysis Alternatives Recommendation Financials Risks

Advantages Disadvantages

Capital Intensive

Slow Startup

Risky

Quality Control

Profit margin

ALTERNATIVE 3: JOINT VENTURE

Analysis Alternatives Recommendation Financials Risks

Advantages Disadvantages

Lead Times

Less Risk

Capital

Quick Startup

Dependence

Less Control

CRITERIA

Analysis Alternatives Recommendation Financials Risks

Rapid Growth

Partnerships

Low Pricing Lead Times

Quality Control

EVALUATION OF CRITERIA

Analysis Alternatives Recommendation Financials Risks

Rapid Growth Partnerships

Low Pricing Lead Times

Quality Control

Same Suppliers, Global Shipping X Y X X Y Vertically integrate X X Y Y Y Joint Venture - Partnerships Y Y Y Y Y

RECOMMENDATION

Localized Adaptation • Utilize existing partnerships • Create new joint ventures and partnerships

Analysis Alternatives Recommendation Financials Risks

RECOMMENDATION

Analysis Alternatives Recommendation Financials Risks

Leverage Existing Partnerships • Material suppliers – innovative textiles • Production and quality control

New Joint Ventures/Partnerships •  Latin American manufacturing joint venture • US distribution partnerships

US IMPLEMENTATION

Analysis Alternatives Recommendation Financials Risks

•  Continue material production in India/Vietnam •  New sizes and labels •  Ship to North America

Material Production

•  Manufacturing joint venture – Honduras/Nicaragua •  North American Takumi Team – Kaizen and Quality Control •  US distribution partnership – DHL logistics and warehousing

Garment Manufacturing

•  Flag ship stores – Research and Design/POS Systems •  Outlet malls across US •  Online partnership - Amazon

Retail Sales

EUROPEAN IMPLEMENTATION

Analysis Alternatives Recommendation Financials Risks

Local Manufacturing Joint Venture •  Latvia/Slovakia

European Distribution Partnership •  DHL

Retail Mix •  Flag ship / Outlet / Online

IMPLEMENTATION TIMELINE

Analysis Alternatives Recommendation Financials Risks

    2015   2016   2017   2018   2019   2020  

Partnerships      

       

           

   

NA    Opera/ons      

Manufacturers              

Distribu/on  

   

                   

Online  

   

               

Store  Openings          

   

US   20   22   30   40   50  

Europe  

       

20   25   35  

Marke/ng                      

   

US                      

Europe                          

FINANCIAL ANALYSIS

Analysis Alternatives Recommendation Financials Risks

Implementation  Plan  Incremental  Costs    (Million  Yen)2015 2016 2017 2018 2019 2020

Supplier  Partnerships 0.3$               -­‐$               -­‐$               -­‐$               -­‐$               -­‐$               0$                      Supplier  Investment 20.0$           20.0$           20.0$           6.0$               4.0$               -­‐$               70$                Distribution  Partnerships 0.3$               -­‐$               -­‐$               -­‐$               -­‐$               -­‐$               0$                      Takumi  Team   0.6$               -­‐$               -­‐$               -­‐$               -­‐$               -­‐$               1$                      Distribution  Centre  Opening 1.0$               1.0$               -­‐$               -­‐$               -­‐$               -­‐$               2$                      Store  Openings -­‐$               50.6$           51.5$           61.6$           68.2$           77.0$           309$            Marketing  Costs 40.0$           40.0$           40.0$           40.0$           40.0$           -­‐$               200$            Technology  Costs 4.0$               4.0$               4.0$               4.0$               4.0$               4.0$               24$                

66$                 116$             115$             112$             116$             81$                 606$            

FINANCIAL ANALYSIS

Analysis Alternatives Recommendation Financials Risks

0.0

500.0

1000.0

1500.0

2000.0

2500.0

3000.0

3500.0

4000.0

1 2 3 4 5 6

UNIQLO Growth

Total Stores Total Sales (Billion Yen)

FINANCIAL ANALYSIS

Analysis Alternatives Recommendation Financials Risks

0

500

1000

1500

2000

2500

3000

3500

4000

Worst Case Normal Case Best Case

Scenario Analysis

Total Stores Total Sales (Billion Yen)

CONTROLS & MEASURES

Analysis Alternatives Recommendation Financials Risks

2016 2017 2018 2019 2020Sales China  Sales >15% >15% >15% >15% >15%

USA  Sales >30% >30% >30% >30% >30%Europe  Sales >5% >5% >20% >20% >20%

Supply/ProductionQuality  level 95% 95% 95% 95% 95%Lead  Time  (Design  to  Production) 6  weeks 6  weeks 6  weeks 6  weeks 6  weeks

Controls  &  Measures

RISKS & RISK MITIGATION •  Takumi Team implemented •  Transparency from the start •  High Impact (P < 0.10)

Quality Control with partners

•  Expertise in supply chain management •  Reputation and leverage existing partners •  Medium impact (P < 0.60)

Time Required to develop partnerships

•  Designers from U.S. and Europe •  Low lead times, responsive manufacturing •  Low impact (P < 0.55)

Uniqlo products not well received

Analysis Alternatives Recommendation Financials Risks

CONCLUSION

Top Global Fashion Brand

Localized Adaptations

Japanese Market Saturation

Analysis Alternatives Recommendation Financials Risks

APPENDIX

Analysis Alternatives Recommendation Financials Risks

2015 2016 2017 2018 2019 2020UNIQLO  Japan

Stores 842 842 842 842 842 842Sales  per  store  (Billion  Yen) 0.8$                   0.8$                   0.8$                   0.8$                   0.8$                   0.8$                  Total  Sales 674$                 674$                 674$                 674$                 674$                 674$                

UNIQLO  InternationalChina  (including  Hong  Kong)

Stores 364 444 524 604 684 764Sales  per  store  (Billion  Yen) 1.0$                   1.0$                   1.0$                   1.0$                   1.0$                   1.0$                  Total  Sales 364$                 444$                 524$                 604$                 684$                 764$                

USAStores 39 59 81 111 151 201Sales  per  store  (Billion  Yen) 0.8$                   0.8$                   0.8$                   0.8$                   0.8$                   0.8$                  Total  Sales 31$                     47$                     65$                     89$                     121$                 161$                

EuropeStores 24 29 34 54 79 114Sales  per  store  (Billion  Yen) 0.8$                   0.8$                   0.8$                   1.0$                   1.0$                   1.0$                  Total  Sales 19$                     23$                     27$                     54$                     79$                     114$                

OtherStores 289 294 299 304 309 314Sales  per  store  (Billion  Yen) 0.5$                   0.5$                   0.5$                   0.5$                   0.5$                   0.5$                  Total  Sales 145$                 147$                 150$                 152$                 155$                 157$                

FranchiseStores 1314 1319 1324 1329 1334 1339Sales  per  store  (Billion  Yen) 0.30$             0.30$             0.30$             0.30$             0.30$             0.30$            Total  Sales 394$                 396$                 397$                 399$                 400$                 402$                

Total  Stores 2872 2987 3104 3244 3399 3574Total  Sales  (Billion  Yen) 1,627$         1,731$         1,836$         1,971$         2,112$         2,271$        

Store  Sales  Growth  Projections

APPENDIX

Analysis Alternatives Recommendation Financials Risks

Supplier Location   Supplier target by 2020   Markets Served  

China/Vietnam/Taiwan   60   China, Japan, Other Asian markets  

Latin America   30   USA  

Eastern Europe   5   Europe  

APPENDIX

Analysis Alternatives Recommendation Financials Risks

By  2020 Worst  Case Normal  Case Best  CaseTotal  Stores 3340 3574 3732Total  Sales  (Billion  Yen) 1,870$                 2,271$                       2,534$