Saville Streets Suits - Marketing Plan - Japan.
Saville Streets Suits
Marketing Plan
- Japan -
Laura Geron ( 00145221B)
I. Geographical/Social/ Cultural Analysis p. 4
. Some reasons why selecting Japan p.4
2. Are there any factors in this market which could impact on the ability to be successful? p.5
3 Consider climate, geographical location, language, cultural and religion norms etc. p.6 - p.10
II. Product Analysis p.11
. Describe the product, the function it serves etc. p.11
2. What products are currently available in the target export market etc ? p.12
3. Describe the product strength and weaknesses in relation to competitor's p.12
4. Describe the technical aspects of the product etc. p.13
III. Customer Analysis p.14
. Describe the profile of the present customer base, what is their buying habits etc. p.14
2. How are the customers in the target export market? p.15
3. Are customers in the target market loyal to their suppliers and products presents? p.17
4. What are some of the concerns that foreign customers may have etc.? p.17
IV. Distribution Analysis p.18
. What are the main channels of distribution for the product at the present time? p.18
2. What are the common industry distribution channel practices in the target export market? p.19
3. For the target market discuss the quality of the infrastructures, transportations etc. p.23
4. Discuss briefly the logistics of getting the product to the target export area. p.23
V. Promotion/ Advertising Analysis p.24
. What promotional activities are undertaking at the present time? p.24
2. List the promotional vehicles available in the target export market. p.24
3. What are the packagings/ labelling requirements in the target export market etc? p.26
4. What are the terms and prices of existing competitor's products? p.30
VI. Pricing Analysis p.31
VII. Financing Analysis p.33
. What are the potential currency problems in the target export market? p.35
2. Discuss the target export clients' ability to pay for the goods etc. p.35
3. Describe the contractual methods the foreign clients will expect. p.35
4. What method of payment the company intend to use for the billing of customers? p.36
VIII. Industry Profile/ Competitive Analysis p.36
. Describe the industry structure in the target export market p.36
2. What foreign standards should the product meet? p.37
3. Is there a requirement to maintain and service the product locally in the market? p.37
4. How will the government of the target area influence the marketing of the product? p.37
Conclusion p.37
Bibliography p.38
Appendix 1 p.39
Appendix 2 p.40
Appendix 3 p.41
Appendix 4 p.42
Appendix 5 p.43
Appendix 6 p.44
Appendix 7 p.45
Appendix 8 p.48
Appendix 9 p.49
Appendix 10 p.50
Appendix 11 p.51
I. Geographic/Social/Cultural Analysis
. Some reasons why selecting this area over other possible areas of the world. (see appendix 4)
Japan and the UK have many things in common. Both are a collection of islands, combine monarchy with democracy, have imperial pasts and strong traditions of craft-based businesses.
Here is common heritage between the two cultures but it would be wrong for UK tailored businesses to think that this gives them a special 'inside track' to winning business in Japan. Japanese businesses' have a keen interest in innovation and winning in global markets. They will buy what they need from wherever they can find the best. 'Britishness' is not necessarily enough however Saville Street Suits provides an extremely high quality product and the UK has a reputation for quality, for example, woollens and knitwear.
But perhaps what makes UK-based tailored businesses most attractive to Japanese buyers is that they can genuinely claim experience of tailoring for multi-cultural markets such as Europe. To the Japanese this can contrast favourably with many American tailored businesses if their experience does not extend outside the USA. The Japanese also can and do see the UK as a possible gateway into the European market fashion.
The economic liberalization has made Japanese domestic markets much more competitive and dynamic than in the past. At the consumer level, imports and foreign brands made in Japan are increasingly popular across the board. There has also been a significant increase in foreign investment in consumer goods and services industries. As a result, average Japanese consumers now enjoy a larger selection of imported products -- and far better prices -- than they have in the past. Japan has a labour force of over 67 million, of which 65 per cent are involved in services, 30 per cent in industry and 5 per cent in agriculture. The unemployment rate is 4.7 per cent. Nearly 25 per cent of the labour force is members of trade unions, of which 12.4 million workers belong to the Japan Trade Union Confederation. Japanese is the official language but English is widely used in commerce. 1
To be successful, a company must take a long-term approach to entering the market. A foreign company should have a presence in Japan in order to develop relationships that will show its Japanese business partners that it is a sincere member of the business community. Foreign companies with quality, competitively priced products that are willing to undertake the high cost of initial market entry in Japan can achieve a respectable market share with a reasonable or even large profit. Distribution is an important factor to success, as it is crucial to establish sales and distribution networks needed to get its products onto Japanese shelves and its components designed into Japanese products. Experience gained in Japan responding to the exacting standards of Japanese customers can result in improvements to a company's products made and sold throughout the world.
Finally, the Standard of living in Japan is very high the per capital income in 2001 was19, 289£ (compared to the UK's 14,001£)2. Consequently Japan appears to be a very attractive market considering that our product is relatively expansive.3
2. Are there any factors in this market which would impact on the ability to be successful?
Appendix 3 shows a summary of problems that Saville Street Suits might encounter when entering the Japanese market. Further researches must be done.
Changes in the Japanese Market
At nearly 148 trillion yen, the Japanese retail market is tremendously appealing to foreign retailers, and the desire for entry is significant. However, legal restrictions, epitomized by the Large-scale Retail Store Location Law, the complicated distribution system, and the high land prices are among many constraints that have impeded significant foreign entry.
Nonetheless, recent changes in Japan have encouraged the entry of foreign companies. Relaxation of retail business regulations, lower land prices and the streamlining of the intermediary-ridden distribution system all contribute to easier entry and start-up in this market.
There are almost no barriers to apparel imports into Japan. However, importers are responsible for custom duties and labelling. Japanese are, in general, smaller than Americans .Therefore, Japanese importers tend to buy smaller sizes than larger sizes.
Compared to others countries under review, labelling requirements applied by Japan cause fewer difficulties to our exporters than those applied in other markets. The importance of the market is also a good incentive for the EU companies to adapt their labels and packaging to the Japanese requirements. In Japan, the presentation of labels and packaging is considered as very important. Therefore, our companies do not consider (in general) these additional costs as unbearable. When labelled in the country of origin, the imported products do not generally encounter difficulties with the Japanese authorities during or after the clearance process. If a label has to be corrected, this can be done in the importer warehouse before the retail.
Exporters and importers encounter other type of difficulties which are indirectly linked with the labelling issue. These are the requirements on products composition. It is long, difficult and costly to get the approval from Japanese authorities on additives not included in the positive list.
Operators and Member States' representatives mentioned another issue considered as more important than labelling: the necessity to put in contact the shops and the EU producers. There is a strong need to find the way to do a campaign to inform the Japanese public (final consumers and buyers) that they could directly buy their products in the EU. The distribution system in Japan remains very complex. The existence of intermediaries renders the products more expensive for the shops and the consumers. The idea is to establish a contact between the EU producers and the final consumers. An idea launched by some trade representatives is to favour the creation of the EU buying offices in Japan in order to stimulate this trend and to provide necessary information. This issue could be outside the scope of the research but the EU companies operating in Japan have insisted that the problem should be mentioned in the study.
3. Consider climate, geographic location, language and customs, cultural and religious norms, business practices, population, disposable income level of imports and their sources. (see appendix 3)
Attracting foreign businesses to Japan is a top priority for Japan External Trade Organization (JETRO), a non-profit organization established by the Japanese government to promote international trade. Many of the foreign businesses that have entered the Japanese market regard their operations here as very successful. Indeed, a survey conducted by JETRO in October 2002 found that over 5,000 foreign companies are now operating in Japan, with some 1 million workers on their payrolls. Furthermore, the average ratio of pre-tax profit to sales at these foreign firms stood at 4.6% in fiscal 2000, far surpassing the 2.5% average of Japanese companies overall.4
The deregulation of Japan's telecommunications, financial and insurance markets during the 1990s helped enable a large number of foreign companies to enter those markets. Moreover, revisions in the commercial code and corporate law have made it much easier for foreign companies to launch business operations or make acquisitions in Japan. On top of this, business costs in Japan have declined substantially. The effective corporate tax rate, for instance, has fallen to about 40%, or roughly the same level as in major western industrial countries, and communications costs have dropped to the lowest levels in the world. Land prices in commercial areas now stand at one-sixth their peak 12 years ago.5
And Japanese companies have been rethinking their traditional lifetime employment and seniority-based pay systems, resulting in higher labour mobility. Japan has 120 million consumers with 1,400 trillion yen in financial asset, constituting a vast market for quality goods and services. It is a highly industrialized country with an advanced manufacturing and marketing infrastructure. As a gateway to Asia, Japan is an ideal location for establishing a regional business headquarters.6
The current economic climate in Japan
Japan's economy is on track for recovery this year, with export demand providing the main stimulus. But most economists believe that Japan is unlikely to sustain rapid economic growth without significant progress on economic reform. Japan's 1980s asset bubble burst at the start of the 1990s generating a large number of non-performing loans in the banking system, a problem which has not yet been resolved. It also reduced confidence amongst Japanese households who, as a result, are reluctant to spend. In an effort to boost the economy, interest rates were reduced to zero and government spending was increased. But these measures had only a limited effect, leaving the country with deflation (falling consumer prices), a high and rising government debt (140% of GDP), and few remaining levers to stimulate the economy.7
Further complicating the government's problems are the intensifying competition from China, which is depressing prices in a wide a range of industries, and a rapidly ageing population. Despite these major challenges, Japan remains a wealthy and successful country. It has the world's second largest economy, a GDP per capita in 2001 of 19,289£ (compared to the UK's 14,001£), and a host of world beating companies in key industries.8
Our market is a niche-market and an expansive product, the spending pattern of our customer is very specific but the fluctuations affecting the Japanese economy still has to be taking into account.
COMPETITIVE ANALYSIS
Domestic Production: As in the U.S., Japanese apparel manufacturers have been shifting to overseas production because of a shortage of labour and high labour costs. Therefore, domestic production has declined and will continue to decline.
Third-Country Imports9
In 1998, total apparel imports in terms of value were Yen 1,765.7 billion or $13.5 billion, a decrease of 5% from the previous year according to "Japan Exports & Imports," published by Japan Tariff Association. China is dominant in the import market with a share of 67.9% in 1998. Most products imported from China are manufactured by Japanese apparel companies or by Japan-China joint ventures located in China. South Korea increased its apparel exports to Japan in 1998 by 19%. It is analyzed that Japanese manufacturers and SPA companies used factories in Korea for faster delivery than China.
Because imported apparel already has approximately 38% of the total market, industry experts expect imports will not increase dramatically as they did in late 1980's to the early 1990's. Especially, imports of Japanese companies' overseas production in Asian countries will not increase largely. Imported apparel with special features still has potential.
LANGUAGE (see appendix 2)
It is inextricably linked with all other aspects of culture and reflects the nature and values of a society. Learning the language is not enough, cultural nuances must also be understood. The number of different languages in a country reflects the number of different cultures.
Problems associated with language:
* Written and verbal communications
* Semantics/concepts/slang
* Translation and interpretation
* Non-verbal communications - signs and gestures
Marketing implications:
* Brand names
* Instructions/labelling
* Foreign language competence
When considering Japan it is essential that the exporter work closely with its Japanese partner to ensure his product meet applicable regulations, standards, and quality marks. Much information on Japanese regulations and standards is only available through the appropriate Japanese governmental ministry and/or only exists in written form in the Japanese language. It will be virtually impossible for the company to accomplish this work without someone knowledgeable about regulations, standards, and quality marks in Japan. The company will most likely have to provide detailed information on the product in Japanese and the firm or Japanese partner will have ...
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When considering Japan it is essential that the exporter work closely with its Japanese partner to ensure his product meet applicable regulations, standards, and quality marks. Much information on Japanese regulations and standards is only available through the appropriate Japanese governmental ministry and/or only exists in written form in the Japanese language. It will be virtually impossible for the company to accomplish this work without someone knowledgeable about regulations, standards, and quality marks in Japan. The company will most likely have to provide detailed information on the product in Japanese and the firm or Japanese partner will have to know the appropriate contacts in the relevant Japanese Government ministry or ministries responsible for granting relevant product approvals.
Furthermore knowledge of the Japanese language, orally and written, is essential to control translations and translators, to understand fully the explanations of Japanese legal or technical experts. This ability of an understanding of the Japanese language and the Japanese people involved, plus the command of other languages used in the arbitration proceedings, enables one to mediate between the parties, if a deadlock in the arbitration negotiations seems to be appearing.
A lack of familiarity with the Japanese language should not be a deterrent, but the services of a good interpreter are essential. Some Japanese speak reasonably good English but it is wise to take an interpreter to meetings at which business issues will be discussed.
AESTHETICS
Relates to cultures ideas concerning beauty, good taste, appreciation of colour, form and design. Also to tastes in music, art, drama dance, literature etc.
Design - design of a product must take into account local preferences despite companies' desire for uniformity. Attention must also be paid to physical attributes of the population.
Colour - in different cultures colours may have different symbolic meanings e.g. black for mourning in western cultures, white in eastern societies. Colours may also have different symbolic meanings e.g. 'green with envy'. Colours may have particular religious, political, patriotic or aesthetic significance which must be considered when planning new products, or designing packaging, brochures or other promotional materials.10
EDUCATION
Education covers not just 'schooling' but also the process of transmitting skills, ideas and attitudes. It can be used to transmit existing culture and traditions to a new generation, or as an agent for change (e.g. family planning programmes, health education, etc.)
Literacy rates are the principal indicator of formal education, but are notoriously inaccurate. Some marketing implications of low educational standards are:
. If consumers are illiterate advertising campaigns, packaging and product instructions will have to be modified
2. If women are excluded from formal education, marketing programmes will differ greatly from those aimed at western women.
3. Conducting market research will be difficult
4. Finding representatives with suitably trained staff may be problematic
5. Quality of marketing support (e.g. advertising agencies) may vary
The segment of customers targeted (high income and working customers) have received a formal education and there will not be any problem of literacy. Saville Streets Suits only makes men's suits and even if women were concerned, in Japan they are as educated as men etc.
To conclude, the level of education in Japan is as good as in England if not even harder.
RELIGION
The principal religions in Japan are the Buddhism & Shinto. Other faiths total less than 4 per cent of the population.11
Possible economic effects of religion
. Different religious holidays
2. Different consumption patterns
3. Role of women in society
4. Impact on family structure and effects on consumption patterns
5. Role of religious institutions in economic matters
6. Market segmentation/fragmentation
7. Religious divisions can cause social, economic and management problems
8. Attitudes to wealth and material gain, risk taking etc.
9. Attitudes to change and fundamentalism
0. Social organisation
Further researches must be conducted considering the following aspects to see if our products could be concerned in any ways.
SOCIAL ORGANISATIONS
* Kinship - family structures
* Individualism vs. collective societies
* Special interest groups - religious, economic, political - e.g. 'grey panthers', students, eco-warriors, etc.
OTHER ELEMENTS OF CULTURE
* Concepts of time - punctuality, decision-making
* Concept of distance - physical, personal 'space'
* Gifts and bribes
* Choice of brand name
* Cross-cultural influences and humour
II. Product Analysis
. Describe the product, the function it serves, why customers value it and the problems it solves for an end user if relevant.
Having a suit custom made to personal specifications requires a meticulous hand-crafted process.
Each garment is expertly tailored, hand cut, sewn and finished by our skilled Shanghainese craftsmen. Measurements are re-checked each time we receive an order to allow for variance in weight, and a unique cutter's pattern is updated accordingly.
Personal patterns are first drawn on paper and then on to fabric. Each garment is individually sketched from initial outlines and patterns before any fabric cutting begins. We keep paper patterns for future orders so re-ordering can be as simple as picking up the phone. We also keep a complete record of every suit, shirt, jacket and pants that we make for customers. With this reference of all the fabrics, it is simple for customers to see what they have and what they might want to add to their wardrobe.
Creating for them an unfair advantage over the competition through the improvement of their physical appearance is a vital key to success -- in business and in their personal life. An investment in their physical appearance pays handsome dividends.
Saville Streets Suits does not export only a good but as well a service which include the following aspects:
CHARACTERISTICS OF SERVICES
. Intangibility - Therefore buyers will seek evidence of service quality from the physical evidence surrounding services (place, people, equipment, communications materials, symbols etc.). Marketers must attempt to "tangibilise" the offering
2. Inseparability - Services are typically produced and consumed at the same time and provider-client interaction is a special feature with both affecting the service outcome. However, certain types of services may be distance-independent.
3. Variability - Services may be highly variable depending on who provides them and when and where they are provided. Investment in good personnel selection and training is crucial. Monitoring delivery and customer satisfaction is also important.
4. Perishability - Services cannot be stored. It is therefore important to match supply and demand very carefully
INTERNATIONAL PRODUCT/SERVICE AXIOMS
. The product is not what you make; it is what the customer wants to buy
2. The customer seeks benefits not features
3. Services are an important element of all offerings
4. Perceptions of products may not be the same in different markets
2. What products are currently available in the target export market to meet the needs of potential customers?
There is already many other tailors in Japan however sources were impossible to find concerning our specific niche market. The advantageous point of our products is the English, Scottish high quality hand- tailored and clothes. If products of our quality or origin are already available in the market, our standards will have to be even higher to be able to distinguish ourselves from the competitors. This is an extremely important point to consider but it has been difficult to find relevant information link to Japan about this particular domain.
3. Describe the product's strengths and weaknesses in relation to your competitors' products. Will it do a better job, improve accuracy, save time or do it more cheaply?
An order from Tokyo would normally take about four weeks; six for the UK, which is compared to the competition: relatively fast delivery.
Such service would not be possible without a reliable and highly-skilled workforce. Back in Hong Kong, Saville Dtreets Suits will try to have three divisions: "Shirts", "Jacket", "Men's" and an administration staff.
The success of Saville Street Suits lies in the personal service provided and the quality of the finished products. We have our own quality control, with no room for carelessness. We also have firm ideas on correctness. "The ideal wardrobe for any businessman of standing in six suits, a dozen white shirts and 10 ties". "With this he's set for success. Wearing a noble suit he cannot fail."
It will be difficult for our company at the beginning maybe to give a service as high as the competitors if we cannot have staff trained to our criteria.
Tailoring has embraced the Internet age and gone high-tech with remote tailoring online however, in custom tailoring it is advisable to meet the customer in person, so they can select the fabric from samples, be carefully measured and discuss the style, it is also most important for the tailor to see the body form of the individual. What shape are the shoulders? Is there a slight hump in the back? These and other questions are vital when crafting a suit and can only be answered by seeing the customer.
Whether you opt for a local tailor or the long-distance approach the criteria for selecting a good tailor is service. Knowledge of the body form and how fabrics hang, attention to workmanship and detail, and access to the latest fabrics and styles are the key to finding the perfect tailor. And ultimately, it's the fit that counts.
Consequently the shipping of the English, Scottish tissues will have to be perfect and follow the trend of the fashion if the company wants to remain competitive with the domestics companies.
At the beginning as well as making suits and shirts for our Hong Kong visitors and customers, Saville Street Suits will be visiting cities in Japan on a regular basis. Customers can contact us when they are next in Hong Kong or check our Travel Schedule to arrange a meeting the next time we will be visiting their area.
This will be a disadvantage compared to local firms because the client will have to plan and wait for us to be reachable however, it will only be at the beginning, time for us to become local too. Besides our products are very special to our customers and they will not mind waiting if they are satisfy with the good and the service they receive.
FACTORS ENCOURAGING MODIFICATION (see appendix 5)
. Different consumer tastes and preferences
2. Inadequate consumer spending power
3. Poor service/maintenance standards
MANDATORY PRODUCT MODIFICATIONS
. Legal requirements (product standards)
2. Technical requirements (voltage, calibration, etc.)
3. Climatic considerations
4. Government regulations (high tariffs, "local" content, etc.)
4. Describe the technical aspects of the product that users in the target export market may find advantageous or difficult to use.
Availability of suitably trained staff could prove a problem in the future. With the increased number of stand-alone stores, franchise designer shops and wider availability of brands within department stores and independents, the demand for suitably trained staff will become even more acute. It is likely that staff will be increasingly incentives by salaries and conditions to be attracted to working in this market.
Customer service is a key for driving sales in the top end of the market. It is possible that an elite core of trained sales staff will emerge, with product knowledge especially of fabrics and manufacture. They will be trained to measure customers for suits, be knowledgeable about fashion trends and understand the needs of their high-profile customers. It is possible that these sales staff will be in demand and will build a following of core customers. There is an opportunity for colleges to develop suitable courses designed for the top-end sector of fashion retailing.
These problems of skilled staff will be well under control in our services, knowing that our reputation is vital in order to be successful in Japan. And it will be impossible for Saville Streets Suits not to be local after a certain time concerning the after sale services for example. If a customer is not happy about a product, he would have to wait another 12 weeks before receiving a new one or 6 weeks for a new one. Local competitors will have a strong advantage.
III. Customer Analysis
. Describe the profile of the present customer base. What are their buying habits etc.(see appendix 6)
Men's lifestyle magazines are helping to increase interest in men's and boys' fashion and men are more interested in fashion than they were ten years ago.
Home shopping through catalogues, the Internet, and interactive television means that goods, including clothing, can be bought at any time of the day, 7 days a week. However, people will always prefer to see the clothing and feel fabrics and textiles before purchasing so it is unlikely that home shopping will seriously threaten the High Street retailers.
Over the period 2002-06 the male population in the UK is expected to grow by 1.2%.12
Between 1997 and 2002 the population of 15-24s grew by 2.7%, and is expected to further increase by 5% between 2002 and 2006. This group are more concerned about quality than price when buying clothes, and are more likely than average to prefer designer labels13.
There was an 11% decline in the number of 25-34s between 1997 and 2002, and there is a further 6.5% decline expected between 2002 and 2006. Men in these age groups are generally high spenders on clothing, and this is possibly due to the fact that at this age they are acquiring a 'working wardrobe' including suits and shirts, although this age group tend to be more price conscious, as they are more likely to be setting up home and starting a family.
The 35-44 age groups grew by 10.8% in the 1997-2002 periods, and are expected to grow by a further 1.1% between 2002 and 2006.14
Consumer expenditure surpasses PDI levels, growing by 19% for the same period, slowing down to 9% from 2002 to 2006. 15
This high level of consumer confidence is good for retail markets, but clothing has to compete with many other products for that pound in the pocket. In recent years there has been much greater growth in consumer electronics for example. The speed of technological advances and the excitement that generates means that for the next few years clothing will only gain marginal growth from this increase in wealth.
More men will continue to seek early retirement and there will continue to be a growth in the number of self-employed people. The growth in self-employed will have a detrimental impact on sales of suits and formal clothing. Consequently, the tailored sector has been under pressure, while casuals and smarter casuals have witnessed growth in demand.
In 2002, the market fell in value terms by 13% compared to 1997, although because of continual price erosion, sales in real terms saw a slight 2% increase in the same period. The decline in suits is largely due to dressing down at work where the suit is the most formal outfit of all. There has been a slight movement against dressing down at work, but this has not helped to lift the market, which is also suffering from price reduction, especially in the discount and supermarket sectors.16
Price points for suits have continued to fall, with £99 being the most significant high street entry point. But prices are even lower than this in the discounters and supermarkets, where a suit can be bought for as little as £69. Along with price reduction there has been much product development. The fabrics are tougher, crease and stain resistant and some suits are even machined washable. The lower priced suits represent better value for money and put pressure on the £100-200 price bracket to compete.
2. How are the customers in the target export market similar to those in the present market, what are the characteristics that are different? Will they have the same buying patterns?
The Japanese Market
a. Fashion spending is not linked to social class
In other countries, one's job or income usually determines social class and influences where one lives and the clothes that one buys. In Japan, however, it is difficult to see such a clear connection between these factors. Ordinary people, even teenagers, consider it normal to own expensive brands such as Louis Vuitton or Prada handbags.
b. Narrow market segmentation based on age
Women's wear is a good example of narrow market segmentation with regard to age. Depending on the targeted age, the hot-sellers, trends and price range all differ.
c. Young people are the leading consumers of fashion items
Young people buy the most, from overseas brands to domestic labels, to boutiques alike. Fashion retailers have the unenviable task of keeping up with the ever-changing fads among young people.
Characteristics of Market
The spending power of women in their mid twenties to mid thirties is becoming increasingly important in the Japanese clothing industry. They are looking for competitively priced products, along with innovation and individuality, whilst maintaining high quality. UK suppliers are especially well positioned to meet the needs of this growing market.
Shoes, suits, blouses, etc are usually purchased in department stores, and many store chains, eager to attract new consumers, are expanding their floor space and mixing products to appeal to the younger female market. Speciality stores are also popular purchasing sites for menswear and womenswear, followed by supermarkets and mail order.
Imports from the USA and Europe are now growing, with the UK gaining an increase in market share over the Italians (the second largest supplier of clothing to Japan after China). British apparel exports to Japan currently total around £232 million. 17
Japanese companies compete in a tough domestic market where customers are still reasonably willing to pay a high price for quality. The Japanese consumer, being essentially conservative in taste, is highly brand conscious. At the same time, Japan's group-oriented and conformist culture means that when a new item or brand catches on, it catches on big.
A new generation of more individualistic consumers is emerging, centring on the 8.1 million Japanese between ages 18 and 21, who have an estimated £ 19 billion in disposable income. Japanese consumers under 30 are increasingly deciding on purchasing based on price and overall value. 18 Unfortunately further data concerning another specific segment group could not have been found.
Although sectors of Japan's society are committed to "internationalization," Japan remains a highly homogeneous country, with longstanding, close-knit relations among individuals and firms. Regulatory processes and local business practices in Japan have reflected a society which is traditional, and which formulates systems for its own needs with no consideration given to potential participation by foreign companies. Even for Japanese businesspeople, it takes time to develop relationships and become an "insider"; for a non-Japanese business, the task is formidable, but not impossible. 19
3. Are customers in the target market loyal to their suppliers and products presently in use? Will this present problem in penetrating the market?
The Japanese have very clear ideas of what they want and very often whom they are prepared to buy it from. They have a reputation for being shrewd buyers of the original and the unique, making their decisions quickly and enthusiastically. Without originality as part of 'the offer', UK design businesses will be less attractive. This coupled with the 'buyer' culture means it is not easy to sell to the Japanese. An important factor in winning new business therefore lies in knowing how to get known and recognised.
For our particular market, the threat of the loyalty would be a problem if our standards were not as high as they are actually with recognised high level of services. What distinguish our product is especially its origin and specificity. Our target customers are looking for something that would be seen as "haute couture", with a connotation of product from abroad.
If a customer is already purchasing a similar product, at the beginning it might be difficult to compete with the existent presence of foreign competitors (because Japanese suits are not our main threat knowing that the label made in England or Scotland is what our customers are looking for).
However, if a customer is only buying from Japanese or non-English tailored, the foreign connotation and reputation should easily attract this customer. We will have to keep in mind that customers are expecting a service as high as domestics companies can produce.
To conclude it might be hard but not impossible.
4. What are some of the concerns the foreign customers may have in buying the product?
These following points might become problems if not dealt with correctly unfortunately because of our very specific market, relevant information are very difficult to found.
Important Points to Remember in the Japanese market
The "Report On Foreign Companies in the Japanese Distribution Industry" (Published March 2000: Manufactured Imports Promotion Organization) pointed to four important factors that lead to success when entering the Japanese market.
a. The ability to supply the product
To meet the needs of today's Japanese consumers, products need to be supplied at prices that seem inconceivably low compared to the recent past. This means developing a global business with sufficient capital, superior sales power and quality standards to compensate for not having intermediate wholesalers in the traditional Japanese distribution system.
b. Making improvements tailored to the current situation in Japan
There is no guarantee that what worked or sold in the home market will be successful in Japan. Momentary success may be possible, and a new outlet may initially garner a large number of visitors for its novelty value. However, if the sizing, product choice, and overall store atmosphere cannot bridge the cultural gap, patronage may fall off. Localization is absolutely imperative to succeed in the Japanese market.
Examples: If the life cycle of the product is short, frequent sales are a must, so the sales floor should be continually refreshed. Japanese are much attuned to the change of the seasons, so a spring-fall; Japan-specific line up for clothes is advisable.
c. Maintaining good relationships with Japanese partners
Speed is important when trying to keep up in Japan. Toys R Us and The Gap both have their headquarters in Japan, so they can respond quickly to changes. Operations that must for approval from overseas headquarters are at a disadvantage.
Tying up with a Japanese partner can also play a vital role in future success. The office services supplier Kinko's Japan placed their first Japan store on the outskirts of Nagoya in accordance with the policy from the headquarters in the U.S. When the sales figures did not meet their expectations, their Japanese partner insisted on a different policy, one in which key stores would be situated in Tokyo, Osaka and other large central cities. Moreover, 80% of the stores were managed in a more Japanese style. The results were such that the American side acquiesced to the wishes of the Japanese partner. The company is now doing very well with its present product mix and the placement of locations now conforms to the new policy.
IV. Distribution Analysis
. What are the main channels of distribution for the product at the present time?
Source of purchase:
Department stores prove to be significant outlets for designer menswear. More men have purchased designerwear from department stores than from any other kind of outlet. A total of 47% of the men who had bought designer labels had purchased them at department stores compared with 25% from independents and 20% at multiple clothing chains20. Appendix 6 illustrates purchasing patterns for department stores, independents, multiple chains and through mail order.
Respondents who shop at independent stores buy more formal shirts and knitwear than those who shop at the three other outlets. Many who shop at multiple clothing stores buy more formalwear, such as suits and smart trousers, than from any other outlet. Mail order shoppers are more likely to buy jeans and casual shirts than any other products.
2. What are the common industry distribution channel practices in the target export market? How does your proposed method compare (eg. in terms of price, available middlemen, etc.)?
Distribution/Business Practices
Importers have been used to selling imported apparel to wholesalers. Now, importers often sell imported apparel directly to retail stores. Japanese department stores used to sell imported apparel on a consignment basis, returning the unsold apparel to importers or wholesalers. However, many department stores have revised their buying systems to import apparel directly to cut down retail prices.
In Japan, apparel manufacturers generally act as integrated producers and wholesalers. They direct the product planning and development, supervise their own sub-contract factories, or contract with retailers for marketing/distribution of their products and in some cases operates retail stores. Many manufacturers have established a "QR" (Quick Response) system which enables them to monitor consumers' preferences as quickly as possible. Manufacturing retailers, called "SPA" (Specialty store retailer of Private label Apparel) companies have been doing well since they can reflect consumer demand in a timely way.
The pricing structure in Japan varies according to the types of distribution channels and services that an importer or wholesalers may provide (e.g. inventory, marketing, packaging, financing, acceptance of unsold/returned goods, etc.) In a typical scheme, the pricing structure is as follows:21
Consumer Retailer Wholesaler Importer Foreign exporter :100 60 50 43 25
However, in some cases, retailers import products directly, selling them directly to consumers at their own retail shops at 40-50% discounts. These discount outlets are increasing in number, are doing well, and are well received by consumers. Please note, however, that if products are sold at discount outlets, it will affect the brand image, making it difficult if not impossible to sell elsewhere at full price.
UK companies entering the Japanese market should be careful when quoting prices to potential agents or distributors, paying particular attention to where the Japanese company "fits" in the distribution chain, in order to ensure that retail prices of the same goods in different distribution channels are consistent.
Japanese consumers are extremely price conscious, and wide variations in retail prices can degrade the product's image. Therefore, UK companies should also pay some attention to the retail prices of their goods sold in Japan.
Entering the market: Depending on their market strategies, UK apparel companies can
mainly consider three different ways to export their products to Japan: 22
First, direct export is the easiest and most common strategy for new-to-market companies. At the beginning, the UK Company can export its products to many Japanese buyers, and over time, it can select some buyers as regional distributors in Japan.
Secondly, some UK companies might consider establishing a subsidiary or a joint-venture company in Japan. This could be the most costly option. However, the subsidiary can monitor and
control inventory, management, pricing, marketing, distribution, brand image, intellectual property, and fashion trends. This would be the final method use by Saville Streets Suits because we need to be close from our customers and for other reasons developed underneath.
Thirdly, the UK Company might wish to consider licensing out its production. Licensing is the least costly market entry alternative and offers the ability to adjust design, prices, and production quickly to suit the market and consumer tastes, including producing the products in the correct sizes for the Japanese market. It is true that the number of licensing agreements between UK and Japanese companies has been increasing. However, without a control of the brand image, licensing may result in damage to the brand image, if licensees sell to discounters or go bankrupt. By licensing out, a UK company also loses one of the strongest appeals of UK fashion --its Made-in-the UK authenticity. For this specific reason Saville Streets Suits does not want to be using the licensing method, because of our niche market our brand must be known and recognized.
Following are some examples of concerns from both Japanese and English companies.
A) Complaints from Japanese companies:
- Wrong colours, wrong sizes, wrong quantities: Japanese companies complain most often that foreign suppliers ship the wrong products without notice. They find products in the wrong colours, wrong sizes, and shorted quantities.
- Late Delivery:
In Japan, retailers start selling spring items in early February and start bargain sales in early July for the summer season. They sell fall/winter items from late July to early August and start bargain sales in early January. Therefore, late delivery means that importers lose the sales opportunity and cannot sell the products.
B) Complaints from UK suppliers:
- Huge orders on one specific style in a year, but no order the next year: Some UK suppliers complain that many Japanese importers purchase the same specific styles one year when the styles are very popular in Japan. However, the next year, if the trend dies, no body want to buy the styles.
C) High-quality and new-to-market UK apparel manufacturers take time and care to enter the Japanese market. A boom in Japan may seem to make the company a millionaire, but a boom ends quickly. And after a boom, the brand is "old," and no one wants it. If a UK company has high-quality products with a good and firm company/brand image, it may start by building up good and solid business relationships with Japanese importers/distributors. To build a good business relationship, a UK company may need to come to Japan regularly and must ship orders as promised. By supplying consistent fashion, with details reflecting various world fashion trends, UK apparel suppliers have good potential in the Japanese market.
Saville Streets Suits is considering a presence in Japan for several additional reasons:
* to gather information on the Japanese competition and new Japanese technology
* to compete with the Japanese firms on their own turf, thereby enhancing competitiveness and market share ultimately in their country of origin
* to establish relationships with Japanese business and government entities and gather information about Japanese-financed development projects in third countries, as Japan's official development assistance program is now the world's largest provider of Agency for International Development (AID)-type grants and loans.
Licensing is widely used in the tailored industry. The main stimulant of demand in this market is the perception of the brand and its overall image of inimitability and exclusivity. One possible deterrent to growth in this market therefore is that, as distribution and availability widens, brands will find it increasingly difficult to maintain their exclusivity and appeal. Wide availability will remove the inspirational property of these products and design-conscious consumers will lose the exclusivity and credibility afforded them by these products. Manufacturers and retailers must thus debate whether they want to increase market share at the expense of destroying perceptions of exclusivity, which could in turn reduce demand.
CHANNELS WITHIN MARKETS: A firm should not assume that the channels employed in its domestic market are necessarily similar or suitable for a foreign market. In many cases additional channel intermediaries will be required.
See the following graphs: (1) Distribution channels for domestic apparel in Japan and (2) Distribution channels for imported apparel in Japan.
Multiple Tiers between Manufacturer and Retailer
Not so many years ago one of the main characteristics of distribution in Japan was that there were many tiers, each with its own wholesalers, interposed between the manufacturer and the retailer. In each of these tiers, the wholesaler added a margin to the unit price, resulting in high retail prices. It has also been pointed out that Japan's complicated distribution structure was a barrier to foreign companies entering the Japanese market. However nowadays as the figure below show, channels from foreign makers directly to retailer is more and more common.
3. For the target market, discuss the quality of the infrastructure, including suitable transportation (roads, trucking, trains, planes) services (reputable banks, electricians, etc.), warehousing, communications (dependable phones), and an accessible legal system. (see appendix 6 and 7)
The quality of the infrastructure, transportation, services and communications are extremely satisfying in Japan. Unfortunately, it was difficult to find information linked to the target market. But we think that it is not risky to assume that it should not be a problem for a particular market
4. Discuss briefly the logistics of getting the product to the target export area (eg. the mode of transportation, insurance, documentation required, terms of sale such as FOB and CIF).
The delivery of the goods or tissues will be done by plane or shipment knowing that Japan has 142 Airports with paved runways and 31 Airports with unpaved runways. All the most commercial towns like Tokyo have ports or harbours. However it has been impossible to find information on the existing trading to be able to know which mode of transportation would be the best and cheapest. It was impossible to find information for our particular market without being charged.
CHAMBERS OF COMMERCE
The first point of call for personalized advice regarding documentation should be the local Chamber of Commerce, who can provide basic advice on export documentation as well as provide accredited training in all export procedures including documentation.
Useful links:
* Find the Chamber - ask them for advice on export documentation and finance.
* Simpler Trade Procedures Board website provides additional useful information on export procedures.
* British Trade International/Trade Partners UK
* NCM - Credit management
* Export Credits Guarantee Department - A UK government department reporting to the Secretary of State for Trade and Industry
V. Promotion/Advertising Analysis
. What promotional activities are undertaking at the present time?
Advertising and promotions were given as a key reason for driving sales of men's designerwear.
"Menswear advertising at the moment is so standard, if you have to put your hand over any advert to cover the brand, they'd all look the same. We're trying to do something a bit different. We've introduced different designer adverts by artist. The adverts show interest in pictures with off-key shots, which are then linked to our product."
- Merchandise manager, international luxury brand23
"We produce mailshots five times a year and we also have an Internet site but we don't sell from it. We advertise in GQ and the local paper, which has a circulation of a quarter of a million and we do that about every three months. We get one good customer each time we advertise in a magazine. We also produce our own in-house magazine, which is very successful."
- Owner, leading menswear independent retailer24
Saville Streets Suits is using most of the promotional activities used by the above organisations. However, the word and mouth advertising is as well highly used especially in our market, relying on customers trust, quality and services.
2. List the promotional vehicles available to promote your product in the target export market (eg. trade publications, trade fairs, competent representatives and distributors, etc.). Are they sufficient and of good quality? Which ones will be used? (see appendix 1)
Creating and maintaining brand awareness
It is important to saturate the market with a brand in order to capture the interest of Japanese consumers. Depending on the amount of capital that can be invested, there are cases where an overseas company has successfully increased its number of outlets rapidly, advertised on TV, in newspapers and magazines and increased its brand awareness accordingly. On the other hand, there are examples of word-of-mouth type advertising being successful in creating brand awareness. All of these promotional vehicles are perfectly available in Japan at a very good standard.
The Internet is an increasingly popular means of retailing, but does it have a role to play in the retailing of men's designerwear? On the whole tailored felt that the Internet did not have a role to play in retailing of upmarket brands.
"We do have a website and it does and it doesn't have a role to play in retailing. Shopping for clothing has become a man's pastime now. Before, men didn't like to go shopping; it was considered a feminine thing. Now men have more of an appreciation of clothing and enjoy browsing more, like the ladies. The Internet is impersonal; you can't feel and touch the clothes. Unless you are comfortable with a brand, it may prove useful to buy basics over the Net like underwear or sweatshirts. Clients who can afford designerwear usually have the time to buy clothes. There is also a security issue, many are reluctant to part with over £500 over the Internet and give their credit card details. There is definitely a security issue."
- Merchandise manager, international luxury brand25
Most leading countries with a strong clothing industry hold trade fairs. Some are very influential. But it doesn't really apply to Saville Streets Suits. We tend to deal with a small group of key suppliers, and we are in constant contact with them to do exclusive line for us. The benefit of going to trade fairs is that you can judge a response to colours and fabrics and tell what's going to be the next big story. Pitti Uomo in Florence seems to be the most important trade fair.
Brands that have widened their appeal and made their product more widely available sometimes sell through supermarkets and other discount chains. There was a mixed response as to whether it did have an impact upon the market. Those retailing in the top end of the sector appreciated the impact it may have on the brands, but not for their business in particular.
"I'm sure it does, for instance Tommy Hilfiger is a good example of over-marketing. In terms of brand image it does nothing whatsoever to justify it, in the eyes of the consumer it just cheapens the brand. Designer clothes that are sold in supermarkets are usually overstocks, which brands are pleased to get rid of."
- Merchandise manager, international luxury brand26
HOW TO WIN BUSINESS IN JAPAN
One of the most significant differences between Western and Japanese business practice is the importance which the Japanese place on developing long-term relationships and the time they take to get this right. This holds true even in the case of the fast-moving design sector, where it can take several years to get the first contract. This section attempts to analyse key factors for success and give guidance on establishing, building and maintaining the business relationship.
Establishing an identity
In a contracting and highly competitive market such as the Japanese tailored sector, it is crucial for UK design businesses to develop a profile that raises them significantly above the competition in order to catch the client's eye. Being both new and unique in their offer can add to the attraction as can coming from another culture, especially one like the UK with a high-profile reputation for doing things differently. However, simply being 'British' is not enough. Not all Japanese share the modern vision of the UK that many, especially those in London, have.
Getting noticed
Getting alongside a Japanese client can often be based initially on an element of good fortune, such as simply knowing someone who knows someone else. However, careful promotion and sound networking are probably more reliable factors in helping establish the connection. With regard to the latter, UK based consultancies might consider the following options to help raise their profile in Japan.
(In fact, the first three can be undertaken without even setting foot in Japan):
* establishing the company as 'Japan friendly' i.e. by opening your UK office to a Japanese tailored with the aim that they will lead to contacts in Japan with other tailored businesses
* collaborating with other tailored businesses already working with/specialising in Japanese clients
* working with an international conglomerate with known subsidiaries in Japan
* developing contacts with a Japan-based tailored business interested in collaboration (this can be done in-market or in a third country base)
* finding an agent in Japan who can introduce to clients - remembering that good agents are few and in demand
3. What are the packaging/labelling requirements in the target export market? What language translations or modifications are needed?
Textiles and apparel
EU Textile producers had also to adapt to the labelling rules. For example, as cleaning instructions are concerned, the symbols used in the EU are not accepted. Cleaning instructions are to be affixed in a text in Japanese language. However, the importance of the market for most of the apparel producers justified the additional costs resulting from the requirements to produce a specific cleaning instructions label for Japan. Most of them affix the cleaning instructions before shipping the goods to Japan (ex Italian exporters which are mainly SMEs).
METI is working on the revision of the relevant JIS standards (JIS L 0217) so as to harmonise it with the latest revision of ISO 3758 in May 2001. The drafting will be finalised by March 2003 and the revision will be announced in the autumn 2003 (after a WTO TBT notification).
Under the Quality Indication Law applicable to consumer products, there are some mandatory labelling requirements for some consumer products.27
According to the METI officials, these requirements apply to the following products:
- Textiles: some 35 products are concerned.
- Synthetic resin products: bathrooms, kitchen, plastic bags and polyester bags.
- Electronic appliances: refrigerators, cocker, water boilers, washing machines, electric coffee maker.
- Miscellaneous: various products.
- Furniture: wood and non wood products.
It is not compulsory for the EU producer to affix the label in the country of origin. Therefore the label can be affixed by the importer just before the retail. There are no compulsory requirements concerning the size of characters.
The compulsory data to be affixed are:
- Size or dimension of the item
- Material (ex natural wood)
- Surface processing (if resin)
- Cushion material
- Care instruction (ex: not to expose to sun). This is mandatory only for some components: for synthetic leather.
Control of labels
Under the Consumer Quality law, the importers are responsible for the compliance of their products with Japanese requirements.
If there is a problem (information missing on the label), this will depend upon the contract concluded between the Japanese importer and the EU exporter. If a label is missing, METI will issue a warning to the importer. The METI will verify that the importer has notified the exporter the compulsory requirements to be affixed on the label. The exporter should however give all necessary information on the product composition to the importer if he affixes the label.
The Japanese Trade Fair Commission controls the labels under the Law for the prevention of illegal prices and illegal labelling.
Advertising
In practice English is the foreign trade language, but it is best not to assume that companies outside the large international companies and banks are happy to operate in English or have good English-speaking staff. Trade literature should normally be translated into Japanese by one's agent, though it is handy to have something in Japanese when first approaching the market. All literature should be of high quality with good pictures, particularly for consumer products, and clear diagrams and specifications for industrial products, with supporting text. Weights and measures must be given in the metric system. It is best to try and secure an introduction to a Japanese company and address correspondence to individuals as the cold soliciting approach is not so effective. Remember too that Japanese companies do not conduct as much business by letter as British ones, preferring the personal approach.
Internet / E-commerce
There are over 3,000 Internet Service Providers in Japan today, the fastest growth rate of any OECD nation. The internet revolution is expected to further increase the opportunities in new technology in Japan. The use of Internet and email is now a basic part of the Japanese business infrastructure assisting easier communication with potential business partners for UK exporters. Japan also boasts the highest percentage of mobile phone users in terms of population.
Regulations: Importers in Japan must show certain information on a label under the Labelling of Household Articles' Quality Law. Although the details that are specified by the Ministry of International Trade and Industry (MITI) varies with the product. Types of information required includes the following:
- Type of fabric and textile yarn content, with percentage figures for lining, thread, materials, etc.
- Care and Washing Instructions
- Size in metric measurements
- Name of manufacturer/supplier or officially registered number with the Ministry of International Trade and Industry (MITI) other28
b) Size Standards:
) Japanese people are in general smaller and shorter than Americans. Below are average heights and weights of Japanese male by age groups. Therefore, UK suppliers interested in the Japanese market should expect that Japanese buyers seek more small or medium sizes than extra large.
Average heights of Japanese male by age group:
Age Group Height (centimeters) Height (feet/inches)
20's 170.6 5'7"
30's 169.3 5'7"
40's 167.2 5'6"
50's 164.6 5'5"
60's 161.0 5'3"
(Source: Research Institute of Human Engineering for Quality Life)
Average weight of Japanese male by age group
Age Group Weight Weight
20's 65.4 kg 144.2 lb
30's 66.7 kg 147.0 lb
40's 65.7 kg 144.8 lb
50's 64.0 kg 141.1 lb
60's 60.4 kg 133.0 lb
(Source: Research Institute of Human Engineering for Quality Life)
2) Sizing Table:
JIS (Japanese Industrial Standards) for ready-made men's garments serving as guidelines to the standardized sizing system for ready-made men's.
In these days of a global economy, it's hard to ignore the selection and options offered by overseas mail order. With global credit cards like Visa and Mastercard, the problem of converting currency is eliminated and overnight express delivery eliminates the weeks of waiting for shipments to arrive.
One problem that remains is sizing. Even average size people have a problem with this, and in the case of tall you may not even know if the supplier carries clothing in your size if you can't convert it. Sizing varies from country to country, as well as from manufacturer to manufacturer, so exact size conversions are really not possible.
The best bet is to provide as much info as possible to the supplier when ordering. Include measurements, your local size, in the case of shoes and gloves send a tracing of your hand or foot. The more they know about you, the more likely they are to get the size right.29
4. What are the terms and prices of existing competitors' products in the target export market?
It was difficult to find this information but after many comparisons on different websites of competitors (not in Japanese), we can assume that the average price target for suits in Japan would be:
* A British made-to-measure two-piece suit from £325 so 60,362.50 JPY
* A Saville Streets Suits consultant will visit the client at his office or home
* A large selection of British-made fabrics
* Choice of plain linings
* Create his own unique garment with our style portfolio
* Free half-hour consultation
* The garment will be delivered to your address within 4-6 weeks
* Free alterations service is available if required
* The ultimate in made-to-measure
However further analyses should be conducted.
VI. Pricing Analysis (see appendix 9)
International Pricing
Unlike other elements of the marketing mix, price is the only one which generates revenue. It is, therefore, very important to set appropriate export prices based on:
* Company internal factors
* Market factors
* Environmental factors
Nevertheless, the traditional approach has often been to:
"take the domestic product price, add insurance and freight, put in a hefty cushion for contingencies and slap on a profit mark-up to the exporter" (Kistler, 1984)
KEY PRICING ISSUES
Bases for pricing
Cost + versus market-oriented pricing
Pricing Strategies and Objectives
Penetration/skimming/competitive pricing
Establishing initial prices
Determining frequency, timing and amount of price changes
Market by market versus uniform pricing
Price Escalation (see appendix 10)
Additional export costs controlling price escalation
Currency Fluctuation
Deciding which, currency to quote in managing foreign exchange risks.
A much more realistic approach is to adopt "retrograde" pricing based on the price range for similar products in the foreign market.(See appendix 11)
Several problems with this approach are:
a) the difficulty small firms have in gaining information on prices in foreign markets and appropriate mark-ups
b) the difficulty small firms have in accurately estimating production, distribution and marketing costs
c) the fact that competitors may have considerable scope to reduce prices
d) currency fluctuation
Possible strategies for dealing with price escalation
. Reduce manufacturing costs by eliminating costly product features, lowering quality, or offering a stripped-down version
2. Shorten channels of distribution by eliminating intermediaries and/or setting up own distribution
3. Seek to reclassify product into a different tariff category (most often achieved by shipping components and assembling/packaging in the foreign market).
4. Seek to reduce physical distribution costs
. What is the domestic market price structure and price list?
2. Describe how the price structure may change in the target export market. Discuss the effects of the costs for transportation, insurance, duties, taxes, mark-ups for middle men, changes in packaging, and technical translation, etc.
3. What is the price list for the target export market in their currency?
4. How will any required price changes affect your competitiveness in the target export market?
Concerning this particular section, it has been impossible to find relevant data. The positive point of our target market is the strong spending pattern of our customers. We can assume that miner fluctuations in prices will not affect our market and even bigger fluctuations thinking that "haute-couture", foreign brands and expansive price is part of our product. An un-expansive price for our market could mean less quality and devalue our brand.
VII. Financing Analysis
. What are the potential currency problems in the target export market (eg. foreign exchange risk, inflation, multiple exchange rates)?
THE YEN EFFECT
While the strength of the mighty yen has been making life hard for Japanese exporters, it has been making imports more attractive in price. A large number of consumer goods that can be imported from overseas are competitive in Japan at exchange rates anywhere up to ¥170 to the dollar, and recently it has been trading at around ¥100. However, the exchange rate and import aspects may have been exaggerated - direct imports of finished goods still account for less than 10% of total retail sales, but they are growing very quickly. Much more of the impetus has come from deregulation in the retail industry.
Despite their small numbers, imports are putting strong downward pressures on a much larger number of domestically produced goods by setting price points to shoot for. Retailers before were under no pressure to take the risks of going overseas to buy merchandise. Buying overseas, they have to pay for the goods directly, whereas in Japan it is common to take them on a sale or return basis. Now with selling space growing and consumption basically flat, retailers have to take those risks. But imports are not the only way to get prices down. They have been able to reduce the number of personnel per square meter so that while there is growth in selling space, there's no growth in personnel, it is becoming a leaner, more efficient industry.30
Shifts in the relative value of currency - even between "strong" currencies - can have a dramatic effect on firm's international competitiveness and on the profitability of export activities. Exporters can choose to quote and invoice in either:
* own currency
* the client's currency
* the currency of a third country (US$, D.M., Swiss Franc etc.) or the ECU
Each method has its advantage in terms of ease of administration and level of risk involved.
Exporters own currency
Administratively simple for exporter
Lower risk for exporter but:
* More complicated for client
* Client takes risk
* Quotation in foreign currency not acceptable
* Potential for "windfall" profits ignored
Client's currency
Administratively simple for client
Customer oriented but:
* Exporter carries the risk of potential exchange losses
Third Currency
Used in trading with countries which have volatile exchange rates where the US $ is often used by importers and exporters alike often used in commodity trading (US$) or tendering for EU contracts (ECU) or UN/World Bank development projects (US$)
Potential consequences of exchange rate fluctuation
Irish firm obtains order from Germany for £10,000. Payment is due in 90 days from date of invoice.
Exchange rate at date of invoice: £1=DM 2.20
Cost to German client at prevailing exchange rate DM 22,000
. Assume £ weakens to DM 2.00 within 90 days
Cost to German client DM 20,000
Potential saving to German client DM 2,000 (-9.1%)
2. Assume £ strengthens to DM 2.35
Cost to German client DM 23,500
Additional cost to client DM 1,500 (+6.8%)
Assume exporter quotes and invoices in DM
. Invoice value DM 22,000
Exchange rate on due date £1=DM 2.00
Exporter receives £11,000
Forex windfall profit £1,000 (+10%)
2. Exchange rate on due date £1=DM 2.35
Exporter received £9,362
Forex loss £638 (-6.4%)
Good marketing practice dictates that exporters should quote in the client's currency - wherever possible - and carry the exchange risk themselves. Advice concerning the most appropriate methods can be obtained from the international divisions of banks.
These include:
* Forward fixed-rate contracts. These allow the exporter to fix the exchange rate for a currency which he will have to sell at a pre-determined definite date.
* Forward option contracts. Used when the exporter does not know the exact date of payment.
* Currency Options. The exporter pays the bank a fee for the right to sell D.M. at a pre-arranged rate, but - unlike contracts - is not obliged to do so if currency movement is to his advantage. The exporter retains any upside advantage but eliminates downside risk.
Another alternative for firms which, export and import from the same country is to open a foreign currency account and use it to pay for imports.
2. Discuss your target export clients' ability to pay for the goods. Do the target clients have the convertible funds to buy the product? Will purchases be tied to foreign aid or concession financing? Will it be available? Discuss other important financing considerations.
We do not have sufficient data to answer these questions concretely but we could assume that our target export clients have high income and mostly are business men which involve the fact that they are using credit card on a common basis which eliminate most of the conversion and payments problems.
3. Describe the contractual methods the foreign clients will expect. What recourse do the company have if the contract is violated?
Data not available.
4. What method of payment do the company intend to use for customer billing in the target export market? What is the common industry practice in that market?
If the company is not selling directly to the clients (end-user) the usual terms of payment is:
Imports can be paid for either by confirmed irrevocable letter of credit, a method which Japanese firms readily accept by normal usance terms: up to one year in the case of capital goods (consumer durables and goods being imported on a consignment sale basis) or up to six months (in the case of other goods) on either a documents-against-payment or a documents-against-acceptance basis. Exporters should investigate the standing of their customers before transacting business. Where capital equipment is involved, the importer may ask for extended terms in excess of normal usance facilities; in these cases he must obtain permission from the Ministry of International Trade and Industry (MITI) for each individual transaction.
Although it is dangerous to generalise too much, the Japanese nearly always pay on time, and for this they expect delivery on time.
Other Methods of Payment
* Open account.Goods and documents are despatched to foreign customer. Payment is made on a previously agreed date (e.g. 30/60/90/120 days from date of invoice or receipt of goods
* Cash against documents. Once goods are shipped the exporter hands the required documents to his bank who claim against the importer's bank.
However end-user customers are expecting to use credit cards or cash like method of payment like British customers.
Terms of Credit
These are becoming increasingly important as an integral part of pricing strategy in both consumer and industrial markets. Extended payment terms can be an attractive incentive even when the actual price is higher than that of a competitor.
VIII. Industry Profile/Competitive Analysis
. Describe the industry structure in the target export market. Who are the competitors?
Unfortunately it has not been possible to encounter the relevant data to answer this question with sufficient accuracy. Our target market being a niche, it is harder to find precise information without being charge for it. We cannot use data concerning the retailing market or apparels market in general.
2. What foreign standards (eg. consumer, government health and safety, etc.) should the product meet?
This question has already been answered earlier in the Marketing Plan.
3. Is there a requirement to maintain and service the products locally in the target market?
This question has already been answered too but to briefly answer it we could say that it is primordial for our company to become local because of:
- the service that goes with our product and
- above all because of the particularities that define the Japanese markets.
Because most of our clientele would normally be travelling, they can as well come to one of our branch in the UK or other countries where we are based.
4. How will the government of the target area influence the marketing of the products? What are the import regulations and restrictions? Are there requirements to trade through local representatives or through Government bodies?
It has been impossible to find correct data but the good news is that there is a sound support infrastructure available, through Trade Partners UK both here and in Japan and the British Chamber of Commerce Japan (BCCJ), which not only helps UK companies obtain this vital local knowledge but also helps them to network and grow.
Because we are new to the market or require specific information, the first point of contact in the UK should be the Japan Unit of Trade Partners UK. They can put us in touch with the sector managers and sector specialists - the Export Promoters - who have a wealth of knowledge and experience of the Japanese market. They will also be able to advise us of any trade missions, seminars, buying missions, trade fairs and other Japan-related events which we may be able to take part in, as well as the extensive range of subsidised research services available to UK companies. Even when visiting Japan independently (especially in the early days), it is always worth contacting both the Embassy as well as the British Council to let them know we are coming, why and who we are.
Another good source of information is JETRO, a semi-governmental trade promotion body which, uniquely, encourages imports as well as investment and other forms of industrial and technological co-operation. It also runs several programmes to help British companies enter the Japanese market.
Conclusion
To summarize, Saville Streets Suits will have to be extremely cautious when entering the Japanese market. The deregulation of Japan's telecommunications, financial and insurance markets during the 1990s helped enable a large number of foreign companies to enter those markets. Moreover, revisions in the commercial code and corporate law have made it much easier for foreign companies to launch business operations or make acquisitions in Japan. The economic liberalization has made Japanese domestic markets much more competitive and dynamic than in the past. At the consumer level, imports and foreign brands made in Japan are increasingly popular across the board. When considering Japan it is essential that the exporter work closely with its Japanese partner to ensure his product meet applicable regulations, standards, and quality marks. Much information on Japanese regulations and standards is only available through the appropriate Japanese governmental ministry and/or only exists in written form in the Japanese language. It will be virtually impossible for the company to accomplish this work without someone knowledgeable about regulations, standards, and quality marks in Japan. The success of Saville Street Suits lies in the personal service provided and the quality of the finished products.
Bibliography
* Jeannet, J.P. and Hennessey H.D. (1995), Global Marketing Strategies, Houghton Mifflin
* Albaum, G., Strandskov, J. , Duerr, E. and Dowd, L. (1994), International Marketing and Export Management, (2nd Ed.), Addison-Wesley
* Young, S., Hamill, J., Wheeler, C. and Davies, J.R. (1989), International Market Entry and Development, Harvester Wheatsheaf
* Jeannet and Hennessey Chapter 1 and 2
Course notes pp. 1-7
* Miesenbock, K.J. (1988), "Small Business and Exporting: A Literature Review", Intemational Small Business Joumal, Vol. 6.2, pp 42 61
* Jeannet and Hennessey Chapters 3 and 4
Course notes pp. 10-16
* Johnston, M. and Moran, R.T. (1992), Cultural Guide to Doing Business in Europe, Butterworth-Heinemann
* Hall, E.T (1960), "The Silent Language of Overseas Business", Harvard Business Review, March-April, pp 106-111
* Randlesome C., Brierly, W., Bruton, K., Gordon, C. and King, P. (1990), Business Cultures in Europe, Heinemann
* Terpstra, V. and David, K. (1985), The Cultural Environment of International Business (2nd Ed.), Southwestern Publishing
* Jeannett and Hennessey, Chapter 5 and 6
Course notes pp. 8-9
* Jeannet and Hennessey, Chapters 7-9 and 12
Course notes pp. 17-21
* Young,S; Hamill, J.; Wheeler, C. and Davies, J.R. (1989), International Market Entry and Development, Harvester Wheatsheaf
* Jeannet and Hennessey, Chapters 14 and 15
Course notes pp. 30-34
* Jeannet and Hennessey, Chapter 13
Course notes pp. 35-44
* Cavusgil, S.T. (1988), " Unravelling the Mystique of Export Pricing", Business Horizons, Vol. 31, pp. 54 63
Appendix 1
Media Constraints (Source:Mintel)
* What media is generally available
* What specific restrictions are imposed on particular media
* Can firm's products be advertised via such media
* Media costs
If for any reason, one type of media is not available/suitable, the firm will have to consider allocating larger budgets to others or increase spending on alternative promotional techniques
Restrictions on TV Advertising
Brazil:
No alcohol or tobacco until after 9 p.m.
Germany:
No tobacco, religion, charities, narcotics, prescription drugs
No advertising to children, no comparatives, unwarranted claims
TV advertising restricted to 2 hr period in evening
Japan:
No overstatement, comparisons, sensual messages
UK/US:
No alcohol, tobacco
Appendix 2
Communications Issues
Source: Adapted from Jeannet and Hennessey
Appendix 3 - Uncontrollable Environment - The Nature of Export Problems
Source: Bannock and partners
Appendix 4
The Market Selection Process
Source: Adapted from Walvoord
Appendix 5
Factors Affecting Product Adaption Decisions
Source: Yorio
Appendix 6
Figure 8: UK retail sales of men's outerwear by type, 1998-2002
998
2000
2002 (est)
% change
£m
%
£m
%
£m
%
998-2002
Shirts
,425
23.6
,310
22.4
,360
22.6
-4.6
Jackets
755
2.5
750
2.8
780
3.0
+3.3
Casual tops
835
3.9
800
3.6
760
2.6
-9.0
All trousers*
785
3.0
775
3.2
740
2.3
-5.7
Suits
697
1.6
628
0.7
600
0.0
-13.9
Jeans
517
8.6
493
8.4
580
9.7
+12.2
Knitwear
355
5.9
380
6.5
420
7.0
+18.3
Raincoats
345
5.7
352
6.0
360
6.0
+4.3
Other
312
5.2
373
6.4
410
6.8
+31.4
Total
6,026
00.0
5,861
00.0
6,010
00.0
-0.3
Source:Mintel
Figure 9: Evolution of retail sales of men's outerwear, by type, 1998-2002
Source: Mintel
Figure 30: Proportion of men purchasing major items of outerwear during the last 12 months, 1997-2002
Base: men aged 15+
997
2000
2002
% point change
%
%
%
997-2002
Shirts
68.1
68.3
66.1
-2.0
Trousers
55.9
59.1
62.1
+6.2
Jeans
55.0
54.5
51.9
-3.1
Jumpers and pullovers
45.2
44.0
46.6
+1.4
Jackets
35.6
38.5
34.3
-1.3
Suits
9.2
20.4
8.8
-0.4
Raincoats
9.8
1.3
0.4
+0.6
Overcoats
9.0
0.4
3.0
+4.0
Source:Mintel
Figure 4: PDI and consumer expenditure, 1997-2006
Source: National Statistics/Mintel
Figure 31: Purchasers of outerwear, by demographic sub-group, 2002
Base: 10,965 men aged 15+
Source: TGI, BMRB 2002/Mintel
Shirts
Trousers
Jeans
Jumpers and pullovers
Jackets
Suits
%
%
%
%
%
%
All
66.1
62.1
51.9
46.6
34.3
8.9
5-19
66.2
54.8
70.4
59.6
41.4
5.6
20-24
73.4
67.1
71.8
63.6
47.2
22.2
25-34
72.6
65.9
71.4
53.3
36.8
24.3
35-44
70.9
67.4
64.8
46.7
37.9
21.7
45-54
67.3
58.6
52.8
44.5
31.4
21.6
55-64
59.7
61.9
31.9
39.5
26.3
2.7
65+
53.4
56.5
1.3
32.3
27.0
0.9
AB
75.2
64.4
46.3
52.4
31.6
24.1
C1
70.2
65.9
53.0
48.0
35.9
23.0
C2
65.0
66.4
55.9
45.7
37.8
2.9
D
57.0
52.6
55.7
41.0
33.7
5.2
E
45.9
50.0
46.5
37.8
29.0
2.5
Greater London
65.9
62.4
52.2
44.6
36.2
22.2
South East/East Anglia
63.9
60.3
48.9
45.8
26.2
6.6
South West
68.1
62.7
49.8
44.4
33.7
9.9
Wales
66.3
57.9
51.0
49.2
30.5
21.9
Midlands
66.1
60.4
52.4
49.4
35.1
8.9
North West
66.7
64.7
54.0
45.5
41.9
21.5
Yorkshire and Humberside
69.1
67.6
53.4
48.6
39.9
5.3
North
68.9
58.1
58.9
42.5
34.7
20.2
Scotland
64.6
65.0
53.0
48.8
39.7
5.8
Working:
Full-time
72.0
66.6
62.3
49.6
37.3
23.0
Part-time
67.4
65.0
48.9
55.1
40.0
9.5
Not working
57.8
55.4
38.0
41.2
29.3
2.8
Single
67.5
59.1
65.3
54.0
37.7
5.9
Married/living as married
66.7
64.1
48.4
44.8
33.5
20.6
Separated/divorced/widowed
57.9
55.6
40.7
39.7
30.7
3.9
Appendix 7 (http://www.1uptravel.com/international/asia/japan.html)
Japan Transportation
Railway: total: 23,670.7 km
standard gauge: 2,893.1 km 1.435-m gauge (entirely electrified)narrow gauge: 89.8 km 1.372-m gauge (89.8 km electrified); 20,656.8 km 1.067-m gauge (10,383.6 km electrified); 31 km 0.762-m gauge (3.6 km electrified) (1994)
Highways:
total: 1,152,207 km
paved: 863,003 km (including 6,114 km of expressways)
unpaved: 289,204 km (1997 est.)
Waterways:
,770 km approximately
note: seagoing craft ply all coastal inland seas
Pipelines:
crude oil 84 km; petroleum products 322 km; natural gas 1,800 km
Ports and harbors:
Akita, Amagasaki, Chiba, Hachinohe, Hakodate, Higashi-Harima, Himeji, Hiroshima, Kawasaki, Kinuura, Kobe, Kushiro, Mizushima, Moji, Nagoya, Osaka, Sakai, Sakaide, Shimizu, Tokyo, Tomakomai
Merchant marine:
total: 630 ships (1,000 GRT or over) totaling 11,691,174 GRT/15,484,848 DWT
ships by type: bulk 137, cargo 51, chemical tanker 15, combination bulk 22, combination ore/oil 3, container 22, liquefied gas 49, passenger 9, passenger/cargo 2, petroleum tanker 194, refrigerated cargo 15, roll on/roll off 49, short-sea passenger 6, vehicle carrier 56 (2000 est.)
Airports:
73 (2000 est.)
Airports - with paved runways:
total: 142
over 3,047 m: 8
2,438 to 3,047 m: 36
,524 to 2,437 m: 38
914 to 1,523 m: 30
under 914 m: 30 (2000 est.)
Airports - with unpaved runways:
total: 31
914 to 1,523 m: 4
under 914 m: 27 (2000 est.)
Appendix 8
Japan
Communications
Telephones - main lines in use:
60.381 million (1997)
Telephones - mobile cellular:
63.88 million (2000)
Telephone system:
general assessment: excellent domestic and international service
domestic: high level of modern technology and excellent service of every kind
international: satellite earth stations - 5 Intelsat (4 Pacific Ocean and 1 Indian Ocean), 1 Intersputnik (Indian Ocean region), and 1 Inmarsat (Pacific and Indian Ocean regions); submarine cables to China, Philippines, Russia, and US (via Guam) (1999)
Radio broadcast stations:
AM 190, FM 88, shortwave 24 (1999)
Radios:
20.5 million (1997)
Television broadcast stations:
7,108 (plus 441 repeaters; note - in addition, US Forces are served by 3 TV stations and 2 TV cable services) (1999)
Televisions:
86.5 million (1997)
Internet country code:
.jp
Internet Service Providers (ISPs):
73 (2000)
Internet users:
27.06 million (2000)
Source:
http://www.1uptravel.com/international/asia/japan/communications.html
Appendix 9
SETTING AN INTERNATIONAL PRICE
Pricing Issues
Source: Adapted from Jeannet and Hennesey
Appendix 10
Prices must include the following costs where appropriate:
* The direct cost of manufacture
* Apportioned overhead costs and specific export sales costs
* Apportioned R&D costs
* Export Packaging
* Additional transport costs
* Insurance in transit
* Export insurance
* Agents commissions and margins for other channel members
The exporter should also take account of:
* Additional export documentation and administration costs
* Damage or pilferage in transit
* Tariffs and duties
* Delays in shipment/payment
* Forward exchange cover
* "Commission" to third parties
Appendix 11
http://www.link2exports.co.uk
2 http://www.trade.uktradeinvest.gov.uk/
3 "And last but not least Japan does not have any common border with my country of origin"
4 www3.jetro.go.jp/iv/cybermall/jetroservices/ newsletters/special_1_2003/2-3.pdf
5 www3.jetro.go.jp/iv/cybermall/jetroservices/ newsletters/special_1_2003/2-3.pdf
6 www.tradepartners.gov.uk
7 http://www.trade.uktradeinvest.gov.uk/
8 http://www.trade.uktradeinvest.gov.uk/
9 Idem
0 These are the main factors to consider but it has been difficult to find relevant information link to Japan about this particular domain.
1 www.britishchambers.org.uk/exportzone/emrs
2 Source: National Statistics/GAD/Mintel
3 Idem
4 Idem
5 Idem
6 Source: National Statistics/GAD/Mintel
7 www.jetro.go.jp
8 www.jetro.go.jp
9 Jeannet and Hennessey, Chapters 14 and 15
Course notes pp. 30-34
20 Mintel
21 Cavusgil, S.T. (1988), " Unravelling the Mystique of Export Pricing", Business Horizons, Vol. 31, pp. 54 63
22 Shipley, D.; Cook, D. and Barnett, E. (1989) "Recruitment, Motivation, Training and Evaluation of Overseas Distributors", European Journal of Marketing, Vol. 23(2), pp. 79 93
23 Source: National Statistics/GAD/Mintel
24 Idem
25 Source: National Statistics/GAD/Mintel
26 Idem
27 http://www.japanconsuming.com
28 Although importers are responsible for labeling, information on exact labeling requirements can be found by contacting the MITI office below.
Textile and Apparel Products Div., Consumer Goods Industries
Bureau, Ministry of International Trade and Industry
-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100
Tel: 03-3501-1511 Fax: 03-3501-0316
Consumer Products Guidance Office, Industrial Policy Bureau
Ministry of International Trade and Industry
-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100
Tel: 03-3501-1511 Fax: 03-3501-6203
29 Misc. Conversions-
kilogram is 2.2 pounds
I stone (UK) is 14 Lbs. (US)
inch is 2.54 centimeters
Yard is 0.9144 meter
meter is 39.37 inches/1.09 yards
Men's Suits and Coats
U.K. sizes are the same as U.S.
European sizes are 10 more than U.S.
Japanese sizes are in letters, see below
Example: UK 36 = US 36 = Euro 46
US/Japan = 34/S 38/M 40/L 44/LL
30 1.00 JPY = 0.00538414 GBP
Japan Yen United Kingdom Pounds
