This report will analyse the internationalisation of Jack Wills and will conclude with a justification for entering the Japanese market. The principal motivating factor for retailers seeking to develop a trading presence outside their home markets has come from the perception of a relative absence of growth opportunities at home, matched by the perception of identifiable growth opportunities overseas. (Treadgold 2007:5)
1.1 History of Internationalisation
In 2010, Jack Wills had a total of 35 stores around the UK, and a fully transactional website which had grown on word-of-mouth recommendations and viral marketing. (Goldfingle 2011) This is when Jack Wills expanded overseas, opening their first store in Nantucket followed by two more in the same state, Massachusetts: one on Martha’s Vineyard and the other in Boston. (Oxberry 2010)
It was seen as a US push for the retailer, as in 2007, the company sold a minority stake (27%) to a London based private equity firm, Inflexion. Jack Wills sought their partner to help improve its infrastructure and operations to support a multi-national model whilst maintaining its brands integrity. (Inflexion.com) While, the founders Peter Williams and Rob Shaw, own the majority stake (70%) as they want their brands British roots to remain clear throughout their growth. (Jones 2010)
1.2 Market Analysis
Table 1: PEST Analysis
POLITICS
In 2010, the US economy was still in the midst of a recession caused by the economic crisis in 2007-8. Negative growth led to the value of assets depreciating, significantly leading to people withdrawing their money from the banks. This crisis led to a sharp reduction in bank lending, which in turn caused a severe recession in the US economy (as well as across Europe and the rest of the world). (Moseley 2010) The policies, such as reducing unemployment by adopting expansionary fiscal and monetary policies, including more government spending, lower taxes and lower interest rates meant that it generally resulted in higher rates of inflation, as capitalist firms responded to government stimulation of demand by rapidly raising prices in order to restore the rate of profit.
This meant that businesses profits declined significantly, companies became too cautious to expand, as they were less likely to be able to borrow money from banks. Moreover, an article published by WWD speculates that the expansion, ‘mostly in the US but also in Hong Kong’, was funded directly from the company’s cash flow which would mean that they did not need to borrow money from banks and had an advantage during their expansion into the US, at the time. (Conti 2012)
In addition, a response to this bankruptcy in the US, was to cut wages and benefits drastically which caused great suffering for many workers – higher un-employment and higher inflation, lower living standards and increased insecurity and stress and exhaustion on the job. (Moseley 2010) This meant that consumers were not being paid as much so they had less disposable income to spend on fashion. However, for a company like Jack Wills, “which has a very specific approach to college-age clientele” The locations of expansion in the US had a customer profile of ‘up market, premium and niche’ especially Boston which is a college town, and the resort towns are where customers will visit on holiday. (Weisman 2010)
ECONOMY
Jack Wills entered the USA, with a market similar to the UK, moving into markets which reached similar levels of economic development, so they could operate the same type of retail stores as in the domestic market and consequently had the same set of customers. They used the same strategy by opening stores off the mass media retail track. (Jones 2010) A strategy they had implemented when expanding throughout the UK, they opened stores in small coastal, and university town before they targeted central London.
As well as the political terms, Jack Wills needed to understand and be aware of the fundamental differences that exist within national markets in the global environments- to help explain the different growth patterns of international operations. (Alexander & Doherty 2009) As the US has the highest GDP in the world, the purchasing power of the consumers varied considerably between the states of the union. As they opened their first three stores in the same state, Massachusetts, this meant that purchasing power was similar amongst one another, with similar levels of GDP per capita. Appendix I indicates the total population in 2010 and also shows geographically, where the Jack Wills stores went first. (US Census Bureau 2010)
Another economic cooperation between countries within regions, particularly in the form of free trade areas, is increasing internationalisation opportunities for retailers. The North American Free Trade Agreement (NAFTA) means that there is free movement of goods amongst the UK and North America, without the imposition of tariffs or quotas. (Doole & Lowe 2012)
SOCIAL
It may also be considered that Jack Wills entered the U.S, as it was not culturally distant. They were cautious, by entering a market similar to the UK, this is called perceived cultural similarity. (Varley 2014) More specifically, Britain and the US share a common language, however there are differences between American and British English such as spelling and grammar of vocabulary. (Harbeck 2015) The younger, affluent customer took a warming to Jack Wills especially. (Clements 2013)
It was important that Jack Wills targeted the right demographic with similar buying behaviour, as there are considerable differences in the social conditions across the country. (Alexander & Doherty 2009) According to Census (2010), the total population of Massachusetts was 6,547,629. Family households accounted for 1,603,591 and Husband-wife family accounted for 1,178,690 of the population. However, in 2010 a total of 3,999,386 births were registered in the United States, 3% less than in 2009 and 7% less than the recorded number of births in 2007.
Jack Wills had begun to target their international consumer using viral marketing to build their presence in the US, at two of the biggest universities – Harvard and Yale using the same strategy they had used for the UK. As well as using Universities, they employed ‘seasonnaires’ around Martha’s Vineyard and Nantucket handing out their product, gathering names and addresses of potential clients and holding events on the beaches for those interested in the brand. (Kuchler, 2010)
TECHNOLOGY
Technology is a major driving force in international marketing and the move towards a global marketplace. (Doole 2012) The Internet, the World Wide Web, client server technologies, cable as well as email, faxes, and advanced mobile phone applications have all led to dramatic shrinkages in worldwide communications. According to the United States Census Bureau, in 2011, 75.6% of households reported having a computer and 71.7% reported access to the Internet. Young generations, aged 18 – 34 years, were much more likely to report high connectivity (37.1%). (File 2013)
More over, during the financial year 2010-11, Jack Wills had stores in the UK and US, the sales in the rest of the world grew from £1.05m to £1.65m during this period, (Faulkner 2011) this suggests that their online presence of niche products will have served internationally to a critical mass of customers. (Clements 2013)
1.3 Motivations
According to Treadgold (2007) the path towards achieving a meaningful and successful international presence has been made smoother by ‘facilitating factors’ for example, it is suggested that Rose Marie Bravo, former Burberry chief executive joined Jack Wills as a non-executive director to help the brand enter the US, as it faced competitors such as Abercrombie & Fitch and Ralph Lauren. (Kutchler 2011)
Another strategic move included James Hardy, previously the senior vice president of Rugby Ralph Lauren, appointed as president for the US operations as his knowledge of the US market was an important asset in the company as they strategically planted their 13 stores around the US, to date. (Faulkner 2011) As well as these two important additions to the brand, Wendy Becker, former Vodafone marketing boss, joined the company as chief operating officer in September 2012 and helped introduce a new organisational structure to strengthen the operating board in order for successful growth. (Bearne 2013)
As Jack Wills decided to focus on their organic growth (Barrett 2011) meaning high cost, high control market entry strategies, it allowed them greater control over their international operations. (Treadgold 1998:59) This allowed them to maintain operational control and to manage identity and brand awareness. (Alexander et al 2009) On the other hand, according to Treadgolds (1988) framework, low cost entry strategies will demand the loss of control.
Jack Wills could have been described by Treadgold (1988) as ‘emboldened internationalists’ showing a preference for high cost/high control entry modes and their willingness to move into markets more geographically and physically distant from their domestic market. (Alexander & Doherty 2009) They became more ambitious through their international expansion, they outweighed the geographical and cultural proximities and a year after their US entry; they opened a franchise in the Middle East and two stores in Hong Kong. (Drapers 2015) This model fails to explain that not all retailers will choose to locate in culturally close markets, Jack Wills has a strong market positioning and product assortment and their international involvement, so far, has gone to markets that are geographically and culturally disparate from their domestic market. (Bruce et al. 2004)
1.4 Entry Methods
As previously explained in section 1.1 of the report, Jack Wills acquired a minority stake in 2007, this is known as non-controlling interest, it allows the firm to obtain market intelligence at minimal risk, research has stated that this was to help with their international expansion. (Bruce et al. 2004)
Another method they have used and will continue to use is; internal expansion, using the same format as they used within the UK, opening their own individual stores, with the exception of their franchise stores (partner Alshaya) a push into the Middle East. (Barrett 2011) To date, they have opened 79 stores globally, 56 stores in the UK and Ireland, five stores in Hong Kong, one in Singapore, one in Macau and four in the Middle East. (McGregor 2015) Franchise-type agreements means that the entry barriers of closed markets can be overcome and risks reduced, the Far East represented an increasingly important market for the brand and they have succeeded with their partner; Alshaya. (Geoghegan 2014)
In the Far East, Jack Wills appointed Lord Davies as their chairman, he had a deep understanding of the UK and Asia, providing the management team with valuable guidance and a clear strategy for driving the continued growth internationally and online. (Gallagher 2014) They opened a 6,000-square-foot flagship store (company owned large scale store) in Hong Kong’s Causeway Bay shopping district and another store in the Harbour City Complex, another large shopping mall in Hong Kong, this could be seen as a push in the Far East too. (Barrett 2011)
As well as an opening in Singapore in 2014, the store is located in Raffles City shopping centre. (Inside Retail Asia) Followed by the opening in The Venetian Macao’s, and in New Town Plaza in Sha Tin. (Sheppard 2014) As observed, Jack Wills adopted a range of market-entry methods, this appears to have suited the market conditions and helped with their strategic expansion, best suited for their company.
1.5 Supply Chain and logistics
The logistics is essentially a planning orientation and framework that seeks to create a single plan for the flow of products and information through a business including a triangular linkage of the company its customers and competitors. (Christopher 2011)
The driving force for internationalisation of logistics practise has been achieved through formal and informal transfer of ‘know-how’ between companies and countries. (Fernie 2004) Inflexion has contributed significantly to the supply chain as well as Jack Wills‘ development as a leading brand. (Inflexion.com) In 2014, Jack Wills decided to outsource the operation at it’s own distribution centre in Greenford, West London to support its domestic and international growth. However, the transition struggled, particularly during the Christmas period. An article from Drapers has clarified that the distribution centre is now running smoothly. (McGregor 2015)
Sourcing is the first stage in the supply chain - Jack Will’s clothes are sourced from a variety of countries; China, India, Portugal, Turkey, and the UK, one considered a thriving clothing manufacturing industry. Portugal and Turkey are two major sources that have short lead times. This helps retailers take costs from the supply chain, due to the low labour costs. (Alexander 2009)
The UK manufacturing is what sells the products; it holds the brand value and identity, with the decline of textiles manufacturing in the UK, Jack Wills and the Fox Brothers share an apprenticeship scheme to understand and improve the supply relationship between one another. (The Manufacturer 2012) As the brand prides itself on commitment to a sustainable British supply chain, they also sponsor a flock of Wiltshire sheep to provide wool for their products. (Sky News 2014) By interacting with firms and their resources, ultimately forms value chain partnerships and subsequently networks. (Fernie 2004)
The supply chain process has been forecast-based, so runs the risk of stock-outs or overstocking. The consumer demand for disposable fashion has resulted in significant amount of production now being outsourced to low cost labour countries. (Alexander 2009) The theories explain how to gain competitive advantage by the supply chain more effectively. Christopher (1997) shows how value is added to product through manufacturing, branding, packaging and display at the store through his supply chain model. At each stage cost is added in terms of production costs, branding costs and overall logistics costs. Time-to-market, time-to-serve and time-to-react must be managed effectively if companies are responsive to market changes. (Fernie 2004)
1.6 SWOT analysis
In order to make a strategic decision, a SWOT needs to be constantly updated.
(Table 2)
STRENGTHS
WEAKNESSES
- Jack Wills have a total of 79 stores worldwide and have established a strong online presence.
- There sales were up by 5.1% for the year to February 2014 at £117.7 million. (Honslea 2015)
- They produce high quality products sourced from different countries and manufacturing in the UK. They pride themselves on commitment with a sustainable British supply chain.
- They have a UK distribution channel where they outsource their operation to support domestic and international growth.
- Jack Wills thrive on word of mouth and viral marketing (guerrilla marketing). They employ “Seasonnaires” to create brand awareness, through promotional activities such as events, they did this prior to their expansion into the USA, to create a clientele of email addresses and engage with potential customers –university students. This has worked for both the UK and USA.
- Jack Wills is a middle market retailer and the price of their products are higher than a lot of high street retailers as they offer high quality, niche products. Originally aimed for university students, and those that have left. This would mean that they lack competitive strength against middle market competition offering a wider range of fashion products.
OPPORTUNITIES
THREATS
· Jack Wills acquired a minority stake that has ‘pushed’ them into new markets, they already have 5 stores in Asia, but further expansion into East Asia, such as Japan would bring new opportunities, a market that demands high quality produce.
· Their love for British heritage brands would mean that they have a competitive advantage against retailers such as H&M.
· Jack Wills face competition from British heritage retailers such as Paul Smith, whom have established a strong presence in Japan. Moreover, they face competition from middle market retailers such as Zara, Topshop, Mango, as the demand for fast fashion by consumers might affect Jack Wills whom provide more lifestyle ranges.
· As Jack Wills use viral marketing to attract their target consumers it may not be as effective in some countries as this could be due to language barriers or less engagement amongst consumers.
2.0 New market
2.1 Japan
Through observing Jack Wills’ international expansion in the UK and Ireland, the United States, the Middle East and their recent further expansion into the Far East. There has been push into the Far East, which has preceded potential expansion opportunities in the Japanese market. The privately owned group, majority owned by the co-founders Peter Williams and Rob Shaw have said that the stores in Hong Kong and Asia hope to serve as a ‘platform’ for expansion into main land China and Japan. (Barratt 2011) Since 2007, when they sold a minority stake, the brand has expanded aggressively and therefore a further expansion into Asia, by entering the Japanese market would be a beneficial move for Jack Wills.
After establishing the external factors of the market, in table 3, to follow. More in-depth research has been conducted on the most appropriate locations for entry. This has depended on where the universities are located in Japan, and also following the strategy implemented previously in the UK and the US - entering markets somewhere off retail mass track. Kyoto, is Japan’s old capital city, and Kyoto university is one of the oldest and highest ranked universities in Japan so this could serve as a good location. (Kyoto University 2015) An hour away from Kyoto there is Osaka, the second most populous city, where another university is located, also known as ‘Handai’ they both have a strong reputation. (Osaka University 2015)
Furthermore, Osaka serves as a good destination for shopping, Americamura referred to by the Japanese as Ame-Mura, serves as the place to go for contemporary urban youth. It is a popular shopping locale for trendy fashion seekers, and could suit for Jack Will’s customers too. (americamura.jp) Many luxury brands are located on Midosuji avenue. Jack Wills may fit into this location, as the customers will be buying high-end luxury apparel, however it may not serve for the younger target market.
2.2 Motivations
A strategic addition to the company, Lord Davies whom joined as Chairman in 2014, will be an important asset in helping with this expansion to Japan. His knowledge of financial and consumer sectors and understanding of the Asian market will mean that he can provide the management team with valuable guidance in this new market. (Gallagher 2014)
It could be assumed that this will be a push into the Asian market, from their minority stake, providing the recruitment of international experience, their focus is now on pursing global opportunities and they have become more ambitious through expansion. (Hounslea 2015) An advantage of using the strategic management approach suggests management can be proactive and gain competitive advantage. (Knee & Walters 1985)
In accordance with Ansoff’s matrix, Jack Wills will be developing their market by entering new geographical proximities. They will be using Market development, by selling their existing products to new customers, this entitles a high level of risk, but with the same strategy as they have used in the USA and Middle East, it can have high control so that the growth is successful. (Bruce 2004)
2.3 Entry Method
Jack Wills have grown organically, using the same strategy with most of the retail operations and have gained considerable experience. Organic development has allowed Jack Wills to maintain operational control, whilst maintaining identity and brand awareness. There expansion into the Middle East has been an exception due to the domestic legalisation controlling the entry methods. They have a Franchise-type agreement with Alshaya, a corporation responsible for bringing British high street retailers to the UAE. This has meant some of this control was lost, but entry barriers overcome, allowing for further expansion in the Middle East. (Alexander 2009)
A flagship store opening in Japan would be a powerful and important platform for growth in the Japanese market. Franchising is considered to be a more effective mode of entry to the fashion market in Asia because of reduced risk, reduce cost of entry, and the impact of capitalising the brand. As local franchises understand the market and consequently brands can expand faster. (Chu and Yick 2004) This appears to apply to Japan too, by acquiring a business in Japan, it has been said that foreign companies will ‘usually establish a business presence in one of three modes’. This is explained in the macro analysis (Table 3) of Japan including the political, economical, social and technological factors that will need to be considered.
2.4 Market Analysis
Table 3: PEST analysis
POLITICAL
Foreign companies generally establish a business presence in Japan in one of three modes. They can be done by a representative office, branch office or subsidiary company. The branch office would mean that a company could begin business operations as soon as an office is secured, the branch office representative determined and the necessary information registered. It is also not expected to engage in independent decision-making, this would be a good mode for Jack Wills as they can use their own strategy during their entry into Japan. A branch office does not have its own legal corporate status, but instead encompassed within the corporate status of the foreign company. In terms of registering, it must be done with the Legal Affairs Bureau. (JETRO 2015) The recent depreciation of the yen has put upward pressure on import prices and has made consumers price sensitive which may affect Jack Wills as their products are higher priced however Japan consumers prefer to buy high quality fashion over cheaper, low quality clothing so therefore purchase.
The taxes levied in Japan on income generated by the activities of corporation include corporate tax (national tax), corporate inhabitant tax (local tax) enterprise tax (local tax), and special local corporate tax. The income calculated for each business year is used as the tax base for determining these corporate taxes to be levied on a corporation’s income. Appendix II presents a table taken from JETRO: Laws and regulations to setting up business in Japan.
ECONOMICAL
In the year following World War II, government industry co-operation, a strong work ethic, and mastery of high technology helped Japan develop an advanced economy. (CIA 2015) The economy has largely recovered in the four years since the tsunami and earthquake disaster in 2011. In 2014, Japan stood as the fourth-largest economy in the world after first place China. To help raise government revenue, Japan adopted legislation in 2012 to gradually raise the consumption tax rate to 10%, it is currently at 8% which already has had a contractionary effect on GDP, therefore this final phase of increase will not happen for a couple more years so entering the market now would be beneficial as consumers will be able to trust the brands high quality products and therefore continue to purchase the products when the tax rate increases. (CIA 2015) Following this tax hike, consumer spending declined by 1.3%. However, retailers will benefit from the recent tourist boom triggered by the depreciation of the yen since 2012, which has seen tourist numbers double. Visitors spent USD $14 bn. (BMI research 2013)
Since 2013, the EU and Japan have participated in on-going negotiations towards concluding a broad-based bilateral economic partnership with the Free Trade Agreement at the core. Since Japan is the EU’s second biggest trading partner in Asia, after China, the FTA can help to strengthen relationships between all EU member states and Japan. There is still not agreement as of yet, however in May 2014 both counterparts had come to the agreement to speed up discussions by late 2015. Both Japan and the EU are involved in separate regional agreements, the Trans Pacific Partnership and Transatlantic Trade and Investment Partnership. Once all of these partnerships are in place the business environment will transform, resulting towards a sustainable economic growth and a new norm for regional and global trade. (gov.uk)
The Asia Pacific Economic Co-operation (APEC) is essentially a forum among 21 member economies that border on the pacific. This includes the NAFTA member states including Japan. The APEC forum has worked to reduce tariffs and other trade barriers across the Asia-pacific region, with an aim of creating efficient domestic economies and increasing exports. The US is giving a high priority to the APEC grouping and intends to forge closer trade and investment ties across the Pacific. (Doole et al. 2012) The Asian pacific region has the fastest growth in the world. Japan currently has a GPD per capita of US $27595.18. (Trading economics 2015) The country has been viewed to have no overt barriers, however many business experience great difficulties when trying to enter the Japanese market, so it could be suggested that adopting a franchise-type agreement would be beneficial for Jack Wills.
SOCIAL
Japan has a population of 126,919,659 (July 2014 est.) The growth rate however is estimated at 0.16% and the birth rate is 7.93 births/ 1,000 population. The death rate has been estimated at 9.51 deaths/ 1,000 population. The declining birth rate and aging population on the Japanese economy is increasing, this means that in an estimated 20 years, there may be demographic decline of target customers for Jack Wills in this market, however as Jack Wills has changed their name from ‘University Outfitters’ to ‘Fabulously British’ it doesn’t segment their consumers.
Japan is trying to accept more investments from foreign companies, and at the same time this will achieve growth of Japan as a whole. (Meti 2015) This will result in job growth in the regions in which foreign companies set up stores.
Japanese consumers have started to look like their counterparts in Europe and the United states. Japanese consumers show a willingness to pay for quality and convenience rather than cheaper products. Their love of brands prompted the emergence of mass-luxury market where owning expensive, exclusive products seemed essential rather than aspirational. This helped boost the country’s retail sales to an estimated ¥135 trillion in 2008 ($1.48 trillion) (Salsberg 2010)
The shift in attitudes and behaviour seem to persist, irrespective of any economy recovery. This change has come from the digital revolution and also the emergence of a less materialistic younger generation. (Salsberg 2010)
TECHNOLOGICAL
Japan is a developed country with high living standards and a world leader in technology, machinery and robotics. In 2014, China, the country with the most users (642 million), represents nearly 22% of the total, with more users than United States, India, and Japan combined.
Japan was ranked as the fourth country with 109,252,912 Internet users in 2014, an 8% growth. (Internet Live Stats 2014) More over, Japan has one of the worlds highest broadband penetration rates, but they still fall behind the UK and the USA, however, the Japanese consumer prefer to physically shop because of mobile devices being too small. The density of retail establishments means that online shopping has less of an advantage, the credit card penetration is low. This explains why they fall behind their counterparts. (Salsberg 2010) When it comes to those using 3G mobile phones, the US have the greatest number at 179 million, followed by japan with 117 million, which is growing 10% year on year. (WGSN 2011) Recent statistics have also shown that Twitter and Facebook are the most popular social networks in Japan. (Statista 2015)
2.5 Situation Analysis
Jack Wills will be adopting a strategy of adaptation when entering Japan; an evaluation of the 5C’s is presented in table 4. This is done so that the marketing mix is appropriately adapted to Japan. (Lea-Greenwood 2012)
Table 4: The 5C’s
CUSTOMER
The Japanese market is re-emerging. It is now seeing growth and potential for British brands, the Asian consumer warms to British brands that are unique, exclusive and not mass-produced. They especially love the heritage of British labels, which is what makes up Jack Wills’ brand identity. (Geoghegan 2013) Jack Wills offers products for a niche, middle market customer.
· Japan has a population of 127, 103, 388. While Osaka has a population of 11.494 million. (Mundi 2014) In appendix III, there is a population pyramid illustrating the age and sex structure of Japan’s population. As Jack Wills produces clothing for menswear and womenswear, this means that both genders need to be monitored. As well as this, they also produce lifestyle products, such as home ware and accessories. Japanese consumers spend a large amount on apparel but also social exchanges such as gifts. (Larke et al. 2005)
· Japan’s senior baby boom, was the first generation of Japanese too boom after the war, (the generation that pulled Japan to the peak of its economic prosperity). They worked hard and became the driving force of the export engines, better educated and dedicated to the success and health of the nation. The junior baby boom generation, are the children of the senior baby boom that never knew the hardship. They are more interested in lifestyle and enjoyment of the present. (Larke et al 2005)
· The Japanese consumers love the physical shopping experience rather than online and mobile devices; therefore this will work for Jack Wills and how they will market to the consumer. (Salsberg 2010)
· Japan’s retail market is relatively fragmented, as many Japanese consumers prefer to shop at small chains that offer a unique selection and fresher produce. (BMI research 2015)
· Disposable personal income was 391.35 Thousands JPY in August 2015. (Statistics Bureau 2015) The workingwoman is fashion conscious and has large disposable incomes, are the most important customer for American brands.
· Global Blue tax-free is available when shopping in Japan, which means that the tax is deducted from the total amount of purchase at till point. (Global Blue)
CULTURE
· Whilst conducting research on the culture in Japan, it appears there are no issues with the modesty in dress. The dominant religions are Shintoism and Buddhism. (CIA.org)
COMPETITION
· In the domestic market Jack Wills main competitors are Ralph Lauren, Abercrombie and Fitch, Hollister and Tommy Hilfiger. Those with a similar target market include, Topshop, Zara and River Island. In Japan, Ralph Lauren and Tommy Hilfiger have both been established and in Osaka. Abercrombie and Fitch and Hollister are also located in Japan but not Osaka. However these companies are different to Jack Wills, they are all American brands. Therefore, as they are a British Lifestyle brand they have a competitive advantage.
· British retailer, Paul Smith has more than 200 stores in Japan and has exceeded in the market so there is an opportunity for Jack Wills. Moreover, Paul Smith is a high-end retailer and therefore has a different target market to Jack Wills so it cannot be compared closely. (Moore 2004)
CLIMATE
· Japan has four well-defined seasons. Western Japan (where Osaka and Kyoto are located, has very hot and humid summers, and moderate cold winters. (JMA) Therefore, the product selection would be similar to the range in the UK, with the same seasons. (JETRO 2011)
CONSTRAINTS
· As observed in the MACRO analysis on Japan (Table 3), there are not any barriers to entry, however foreign companies generally establish a business presence in Japan, it could be suggested that Jack Wills would benefit from using a branch office to establish their business in Japan. (JETRO)
· In accordance with recruitment, Japan has a government-run employment agency known as “Hello Work” that offers free support for people looking for work and companies looking for workers. As far as labour contracts go, the principles of freedom of contract applies to the hiring of workers, and allows for an employer to decide what kind of workers and how many to hire. Although they must abide by the Equal Employment Opportunities Act. (JETRO)
· Opening hours of stores are similar the UK, opening at 9.00 hours and closing around 18.00 hours. The ‘Ame-Mura’ opening times are 10.30 hours – 18.00 hours. It is closed on Saturday and Sunday but most of the stores vary in opening times.
COMPLIANCE
· According to the labelling regulations provided under the Household Goods labelling law for textile goods, if domestic and imported goods are sold in Japan they must be labelled accordingly. Labelling must be made in Japanese with the exception of a few terms. Therefore the labels on the inside of an item of clothing will need to be changed. The care labelling must be indicated using pictorial symbols specified in the Japanese Industrial Standards, placed left to right in a specific order: washing, possibility of chlorine-based bleaching, ironing, drying cleaning, wringing and drying. (JETRO 1998) As well as types of fabric and textile yarn content, size in metric measurements and name of the manufacturer/supplier. (METI) Products certified by a third party authorised by the Japanese government are allow to carry around the Japanese Industrial Standards (JIS) mark. The mark can be labelled on products or/and packages, showing that the products meet strict quality requirements provided by the Act or JIS. (JETRO 2011)
· This is part of inward processing which can be done in Jack Wills UK distribution centre, where the quality is checked, un packing of products and relabeling is done to meet the correct standards.
COSTS
· Employers must pay wages in legal tender, directly to the employee, not less than once per month and on a specified date. The employee must pay a wage that is not less than the minimum wage, the minimum wage in Tokyo following revision on October 1st 2015, is 907 yen per hour.
· In terms of costs for a potential place in Osaka, monthly asking rents range from JPY 1000,000 per tsubo for ground floor units, in Shinsaibashisuji-shotengai shopping Arcade. Nearby, Midosuji Avenue, where many luxury retailers have opened flagship stores, monthly asking rents range between JPY 60,000 and JPY 80,000 per tsubo, however higher rents can be taken depending on the specific location. (Savills 2014:6)
COMMUNICAT-IONS
· As Jack Wills use viral marketing to attract their customer, it would be essential to continue. As it has been suggested locating in Osaka or/and Kyoto because of the universities located in these cities, they would use the same marketing strategies, holding events prior to entering the market to create brand awareness and attract their Japanese customer. However, they still rely on social media to spread the brand and 86.0% of Japans population use the Internet, Twitter and Facebook the social media platforms they use mostly. (CIA 2014) As well as this, the Japanese consumers prefer to physically shop then shop online, this would mean that using their marketing strategy it would attract the market.
3.0 Servicing the new market
In a new competitive environment, it is evident that a successful marketing strategy is needed. The underpinning to developing new products to customers is a strong brand appeal, as the Japanese consumer like retailers with a British Heritage and it could be assumed that Japan will be a good market to enter. A strong customer relationship is also important, including quality service. There should also be an underpinning of supply chain effectiveness that delivers superior service at less cost. (Christopher 2011)
On-time delivery is very important as Japanese retailers start selling spring items in early February and start bargain sales in early July for the summer season. They sell winter items from late July and start bargain sales in early January. Therefore, shipment must be on time so sales are not missed, as products will not be sold at regular retail prices afterwards. (WCF) To help with long term strategic planning, the BCG matrix is divided into quadrants derived on market growth and relative market share, Jack Wills will need to take their Stars – products with high market growth and market share and Cash cows – low growth markets and high market share. (Moore et al 2004)
3.1 Distribution
It is important that all of the stock will get to Japan, quickly and efficiently. A source from Jack Wills, confirmed that ‘when the number of stores in the UAE, reached critical mass, and the partner could manage and understand the business model, the distribution there was via re distribution of all stock from the UK hub to overseas markets. Now the franchise partner (Alshaya) takes 40% of the bulk production from the source, whilst 60% is still controlled from the UK.’ (Jack Wills source, former UAE internationalisation direction 2015)
This means that the distribution of produce is more efficient. Distribution centres provide intermediary service in the distribution channel between producers and consumers, saving on transportation costs and refining assortments in the light of regional or specific locational demand. The distribution centre can prepare an assortment of products from all different suppliers tailored to the needs of the store. There are usually other processes involved with the preparation of stock including; removing all packaging, putting price tickets on products and collating products by department and organising according to the stores requirement. (Varley et al 2014)
Therefore it could be suggested that if the UAE reached critical mass with 4 stores, this could mean that Hong Kong may also have a distribution hub, as they now have a total of 5 stores. If so and Asia already have a distribution hub, they could keep the same strategy of taking 60% stock from their UK distribution centre (inward processing) where they can change the labels for the Japanese consumer and check the quality too. Like Alshaya, who take 40% of stock from the production, Hong Kong might be able to too, since a lot of the produce is coming from China suppliers already. It would take 3 days for produce to come by sea freight from China to Japan; this would be a quick lead-time. (Cargofromchina.com)
Alternatively, if possible, Alshaya could ship stock to Japan as they take 40% bulk production from the sources, they could take a larger quantity instead and then send to Japan that way - by airfreight, for a quick response as their would be a smaller quantity from UAE and the 60% from the UK would go straight to Japan to be there at the same time.
Although, if Hong Kong has a distribution hub, they will have hit critical mass, and it could be assumed that the stock could be shipped by boat across the East China Sea to Osaka, Japan, where a port is located. (Cargofromchina.com) The port of Hong Kong has been an ocean traffic hub for many centuries. However it is hard to identify whether or not there is a distribution hub already in Asia. The 40% and 60% shows control so it could be assumed that this would be kept the same when expanding further. In appendix IV, is a map to illustrate how and where stock could come from – the Middle East or Hong Kong.
4.0 Conclusion
To conclude, Jack Wills have been very controlled and adopted high control strategies throughout their internationalisation to date. They tackled the US market during an economic crisis and succeeded, they opened franchise stores in the Middle East, which allowed for further expansion of 4 stores in total. More recently they have entered the Asian markets where they have stores in Hong Kong, Singapore and Macau. Therefore, it is time to further expand, into Japan. In order for Jack Wills to succeed in this market, they must be perceived as unique, high quality and fashionable. They will be able to enter the Japanese market by adapting to the market environment, following all regulations and using a high level of control, as they have used to date.