Niagara College Victoria s Secret Enters Japan Global Logistics Management Clara Zulu, Alma Ligata 11/26/2013
Page 1 Table of Contents Introduction page 2 Country of Interest page 2 Product Introduction page 3 Objectives page 3 PEST Analysis page 4 - Political - Economic - Social - Technological SWOT Analysis page 7 - Strengths - Weaknesses - Opportunities - Threats Trade Regulations page 9 Transportation Requirements page 10 Conclusion page 11 Works Cited page 12
Page 2 Introduction Victoria s Secret is one of, if not the most popular women s lingerie and clothing store in the United States. They are known for their higher priced, sexy, and sometimes promiscuous clothing and undergarments. Victoria s Secret has come up with many different innovative ideas throughout their years in the business. They have branched out into different markets such as a makeup line, body care line, and PINK teenage line because of its versatility they are able to target different markets and demographics but still manage to produce a quality product. Victoria s Secret opened their first store in 1977 San Francisco, after the founder Raymond sold the company to Limited Stores Inc. they have successfully opened more over 1000 stores throughout United States alone. They now have gone global opening stores in Canada, Turkey, Kuwait and the United Arab-Emirates. Victoria s Secret is now planning to move into the European market by opening their first location in the United Kingdom. Victoria s Secret factories are located mainly outside of the United States. Their main plant is located in Jordan. However, there are factories in China, Taiwan, and Sri Lanka and in Thailand as well. Country of Interest Victoria Secret products are distributed mostly through the Americas and very scarcely throughout the rest of the world with no brick and mortar stores in Asia. In order for Victoria Secret to penetrate the Asian market a number of factors that were considered different demographics, current competition, fashion and market trends as well as political, environmental and economic issues etc. As one of the biggest fashion capitals in the world with vast resources in technology and ability to absorb western culture and
Page 3 capitalism while ultimately maintaining their cultural identity Japan proved to be the most suitable country for this venture to be successful. Product Introduction In order to introduce Victoria Secret into Japan we delve into Japanese culture and introduce a product line called the Harajuku inspired by the most popular area found in Japan around the Harajuku station between Shinjuku and Shibuya. Made famous in the 80 s Harajuku has become one of the country s most popular shopping districts where fashion inspired teens would hang out every Sunday and show off their artistry, street style and music. This product will consist of colorful patterns and fabrics alongside with eccentric animated Anime and cosplay costumes. Objectives Victoria s Secret wants to obtain a global brand image. Worldwide, so that we are able to obtain every market within our reach. However, If Victoria s Secret enters the Asian market; they are able to reach other potential markets such as Australia, Thailand, China and Russia. Also with Victoria s Secret entering into the Asian market, we are able to have a competitive advantage entering into the market because our competitors are not widely known and not as promiscuous as they advertise. Although Asians have their own culture, the youth is vast-appealing to the westernized culture and makes it easier for us to enter into the Asian markets. Another benefit is that we will have cost-saving potential within entering Japan. Majority of our factories are located in China and Taiwan. Moving our supply chain process will
Page 4 not be as complicated or even costly if we entered into Japan. We would simply use a just in time strategy to reach our end consumers. PEST Analysis Political Japan is a democratic country, but rather it s a different kind of democracy to that succeeds in most of Europe in countries like France and Germany. The single most important reason for this is the dominant position of one party, the Liberal Democratic Party. The Liberal Democratic Party in Japan has held in power and almost undefeatable for more than 50 years. Unlike the American and British political system, essentially they have been existed in their current form for centuries. With the present Japanese political system is a relevantly more recent construct dating from Japan's defeat in the Second World War and its subsequent occupation by the United States. The post-war constitution of 1947 is an anti-militarist document which includes the renunciation of the right to wage war and prohibits the maintenance of armed forces although later a limited re-armament was permitted "self-defense forces" (Index Mundi). Economic The economy of Japan is the third largest in the world by nominal Gross domestic product, the fourth largest by Purchasing Power Parity and is the world's second largest developed economy. According to the International Monetary Fund, Japan s per capita was the 22nd highest in 2012. Japan is a member of Group of Eight. The Group of Eight also known as G8 is a forum for the governments of eight of the world's largest
Page 5 national economies as nominal Gross Domestic Product with higher Human Development Index. The economy of Japan is the 3 rd largest in the world, right after The United States of America and China but ahead of Germany by 4 th. Below is the current economic status in Japan (Economy of Japan, 2012): Currency: Japanese Yen ( JPY) GDP: $5.964 trillion (2012 est.) GDP growth: 0.9% (Q1 2013) GDP per capita: $46,736 (2012 est.) FDI stock: $161.4 billion (2010 est.) Inflation (CPI): 0.3% (2011 est.) Population below poverty line: 15.7% Unemployment: 4.6% (2011 est.) Exports: $788 billion (2011 est.) Imports: $808.4 billion (2011 est.) Japan has insufficient natural resources to support its growing economy and over populated, and therefore exports goods in which it has a comparative advantage such as engineering-oriented, Research and Development led industrial products in exchange for the import of raw materials and petroleum. Social According to the census Japan had a population of 128,057,352 in October of 2010. Then in March 2012 an estimated population was at 127,650,000 making it the world s tenth populated country. Japan has been experiencing a net population loss due to
Page 6 falling birth rates and almost no net immigration, regardless of having one of the highest life expectancies in the world at 81.25 years of age as of 2006. Japan's population density was 336 people per square kilometer (Analysis of Japan). The education levels in Japan are very high. It is estimated that 99% of the population are literate; both males and females. Education is mandatory at the elementary and lowers secondary levels. Religion dose not play a huge factor in the Japanese culture. However, there are 2 main religions in Japan; they are Shintoism and Buddhism. Technological Japan is highly advanced in automation. Most of the offices and forms are automated. Hospitals, restaurants, offices, airports, factories and all the other facilities are highly efficient because of the use of high tech automated system. Japan is also highly known for its contribution in the robotics field. Most probably it is the most advanced country when it comes to robotics. Also, they are using this knowledge in use for a more practical aspect of life. Now people are well aware with buying their train tickets, books, plane pass, doing shopping online. All these is possible in Japan because of the spread of internet and automated system installed (Analysis of Japan).
Page 7 SWOT Analysis Strengths As stated Victoria Secret is very popular in the United States and is known for its innovation and ability to stay ahead of the trends. This ability proves to be strength as the Japanese are known to follow western trends and be trend setters of their own while still being able to stay true to their culture. At the end of the 2012 fiscal year Victoria Secret recorded a 6% growth compared to the previous year which totaled to be $835.6 million dollars. These statistics show that Victoria Secret has the necessary capital into venture into Japan and under their parent company Limited Brands the potential to surpass expectations when penetrating markets. Weakness Victoria Secret has very little presence when it comes to the market we are trying to penetrate as our products usually reach Japan through our online stores through shipment methods. This proves to be a problem when trying to gain a reasonable market share. Our current sizes range from 32 band size and AA cup size to 38 band size and DDD cup size. Japanese women are known to be of a more petite frame and of lower body mas than the regular North American woman. In-fact the ranges of sizes for innerwear in Japan are one size fits all also known as free size. So in order for us to enter this market our regular sizes would have to be modified to suit the market. Also language barriers pose to be a problem as Victoria Secret is an American company
Page 8 even though the Japanese are open to western culture they have a different outlook on how they live their lives as well as the way the deal with their businesses. Victoria Secret would have to go into this market open minded and be willing to change the way they do things to benefit the Japanese customers (Sawyer). Opportunities Japan is an island country that is surrounded by many other countries such as Korea, Taiwan, The Philippines, China and India to name a few. All these neighbouring countries are potential markets for Victoria Secret. Their neighbouring countries are also a source of resources as illustrated in the supply chain China and Taiwan are instrumental to the manufacturing process. This is beneficial when it comes to easy transportation which will save money for Victoria Secret. Being in Japan gets Victoria Secret more brand recognition in the international market thus expanding their customer base and in turn having more loyal customers which will be profitable for Victoria Secret. Threats When it comes to women s inner wear Japan has a number of retailers that will pose as competition for Victoria Secret. These top retailer such as Asia Jam which is a good place to shop lingerie and products of such similarity where the sizes available in what they call "free size," or one size fits all. Wacoal which also has market presence in the United states and dominates as one of the most leading labels in Japan for women s inner wear (Samaras, 2011).
Page 9 Environmental threats are always a major issue when it comes to Japan. As it is located around the Pacific Ring of Fire Japan is prone to many natural disasters such as earthquakes, volcanoes and even tsunami s. Such natural disasters for any country would pose to be an extreme problem and as a result businesses and day to day life are disrupted indefinitely. If such disaster were to occur it would be costly to rebuild and set up our stores (Gerri, 2011). Japan ranks at number 5 as one of the worlds most polluted countries, this is a threat for Victoria Secret as of 20 (Sawyer)12 Victoria Secret has pledged to go green as it joined the green peace movement (Marinelli, 2013) (Gerri, 2011). The fact that Japan is so polluted would be a problem for the brand image for customers who are very conscious of where they purchase their products. Trade Regulations Japan's Trade Policy Bureau is dynamically implementing integrated domestic and external economic policies aiming at sustaining the established world free trade system and to create a business environment in which Japan's economic growth is sustainable and creating high value added (Economy of Japan, 2012). Although most goods do not need an import licence and can be imported freely. Japanese import licences are required for certain goods, such as hazardous materials, animals, plants, perishables, and in some cases articles of high value. All goods must be labelled with Japanese text and metric weights if needed (Poon, 2007). False or misleading labels of displayed names of countries or flags other than the country of
Page 10 origin, and/or names of manufacturers or designers outside the country of origin are not acceptable. Japan s tariff is around one of the lowest in the world, roughly 2% (Poon, 2007). Majority of machinery imports are duty free. Japan is a signatory to the WTO Information Technology Agreement which is an agreement to eliminate tariffs on information technology products. Transportation Requirements In our illustration of our supply chain our suppliers and manufactures are located fairly close to the consumer market. Yarn from Australia could either be shipped to Taiwan by water via ship or by air via an freight plane. All other materials such as silk, manmade fibers and cotton etc are to be transported from China via water on a ship to the manufacturing plant in Taiwan. Before the raw materials are sent to Taiwan a number of documents are required in order to make shipping of raw materials successful. Meeting customs requirements and acquiring documents such as the import declaration form, certificate of origin, commercial invoice, packing list, original and signed bill of lading in order to follow international regulations. The finished product would then be shipped to Japan through the port of Kaohsung in Taiwan to the Port of Tokyo in Japan this shipments will be done with all the necessary documentation required as done with the shipping of raw materials. From the port finished products can be distributed using containers on trucks to warehouses where inventory is kept and finally delivered to the retail store via rail or road where the customer can then purchase the product.
Page 11 Conclusion We strongly believe that entering into Japan will give Victoria s Secret a global brand image. Also, it will give Victoria s Secret a chance to expand to other potential markets. With the advantage of our supply chain, our process will not be difficult to allocate and supply to our end consumers. By simply opening our own store in Japan will give us the full potential to reach our diverse target market. With our extensive research we have the full potential in entering Japan. Our supply chain model will enable us to prevail our goals and attain a competitive advantage in the Asian market.
Page 12 Works Cited Analysis of Japan. (n.d.). Retrieved from Scribd: http://www.scribd.com/doc/134596052/pestel- Analysis-of-JAPAN Economy of Japan. (2012). Retrieved from Wikipedia: http://en.wikipedia.org/wiki/economy_of_japan Gerri. (2011, April 12). The Economic Impact of Natural Disasters. Retrieved from http://www.businesspundit.com/the-economic-impact-of-natural-disasters/ Index Mundi. (n.d.). Retrieved from Index Mundi: http://www.indexmundi.com/japan/ Marinelli, G. (2013, January 22). Refinery29. Retrieved from http://www.refinery29.com/2013/01/42129/victorias-secret-green-peace-initiative Poon, D. (2007, Decemeber 1). Trade Regulations of Japan. Retrieved from HKTDC Research: http://hong-kong-economy-research.hktdc.com/business-news/article/small-business- Resources/Trade-Regulations-of-Japan/sbr/en/1/1X000000/1X006N03.htm Samaras, T. (2011, March 15). Human growth, height, size: Reasons to be small. Retrieved from News Medical: http://www.news-medical.net/news/20110315/human-growth-height-size-reasonsto-be-small.aspx Sawyer, M. (n.d.). Where to Buy Lingerie from Japan. Retrieved from Lovetoknow Lingerie: http://lingerie.lovetoknow.com/where_to_buy_lingerie_from_japan