Module tutor: TODD ENDRES - BM5104

Diep Dang Khoa - UoG0112

ASSESSMENT 2

Regional Studies in Business

BM5104

Module tutor: TODD ENDRES

Assignment due date: April 28, 2019

Submitted date: April 28, 2019

Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

Write a comparative report of two non-European national business

contexts, one of which should be Japan and the other an emerging

economy (not China), focusing on either the retail or IT sectors. You

are expected to refer to Rugman, Collinson & Narula (2017) in

your report and should give examples of both foreign and domestic

competitors already operating in your chosen regions.

Wordcount: 1871

Table of Contents
1. Executive summary ................................................................................................................... 3

2. Introduction ................................................................................................................................. 3

3. CONTEXT COMPARISON ............................................................................................................... 4

4. MODEL APPLIED COMPARISON .................................................................................................. 5

a. PESTLE Analysis ........................................................................................................................... 5

b. Porter’s Diamond Model............................................................................................................. 6

5. RECOMMANDATION ....................................................................................................................... 8

6. Conclusion ................................................................................................................................... 9

Referrence............................................................................................................................................ 9
Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

1. Executive summary

The apparel retail industry in Japan is already famous and developed form the past.

Meanwhile, the same industry in Vietnam is considered as a new market for

international firms.

This report provides the analysis, evaluation and comparison in the apparel retail

industry between Japan and Vietnam. In details, there are some factors in models

which are used to support the comparison, such as Porter’s Diamond model and

PESTEL analysis. Therefore, comparison of the apparel retail industry between

Japan and Vietnam will point out the differences between 2 economic environments.

There will be 2 elements in PESTEL which will be chosen to analysis, the economic

factors and also the social factors. Furthermore, by evaluating Porter’s Diamond

model on both countries will show the distinct natures of both environment, creating

a closer look at each of them will help fashion companies build their business plan.

There will be some statistic showed below to support the analysis, such economy

statistics relating to the fashion retail industry and data about the demographics of

each country.

After analyzing the background of the garment retail market in recent years and

based on these numbers, the recommendation will be suggested the solve the

reality's problem. Moreover, these advises can be also applied to improve the

business and prepare for future changes.

2. Introduction

Japan is one of the large clothing retail industry in the world, they have some big

clothing companies not only being widely used in the domestic market, but their

business network even covering in many countries. For example, Fast Retailing
Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

Company, Wacoal or Adastria of Japan have their store in many parts of the world.

Otherwise, Vietnam is just a growing market, especially in the fashion retail industry.

Besides, being a low-cost country, Vietnam does not have any popular brand

worldwide. The background of the apparel retail industry of each region in the past to

the present will be discussed to make the situation to be understandable. After that,

Porter’s diamond model and PESTEL analysis will be applied to analyze the

differences in the natures of each market. Then, from the current situation and the

analysis, there will be the recommendation section which points out the suggestion

about the appropriate adjustment or strategy based on reality.

3. CONTEXT COMPARISON

In recent years, Japan’s clothing apparel industry growth rate is always in the

fluctuated state because this is the system which is a multilayered structure

(Urakami. and Wu, 2010). However, for a long time, garment retail industry still plays

an important role in the economic growth of Japan (Urakami and Wu, 2010). To be

more specific, Urakami and Wu (2010) commented that the most contribution was

from small-scale retail stores. However, the top 10 popular clothing companies

occupied 30% of all of Japan’s fashion market in 2016 (Yano Research Database,

2016). In Japan, there are competitions between small and medium scale local

garment companies with the Fast-fashion foreign business such as Top Shop, H&M

or Zara (Urakami and Wu, 2010). Meanwhile, Vietnam apparel retail industry is in

the process of expanding the market and improve the position in the industry (Gereffi

and Frederick, 2010). Moreover, Vietnam is one of the countries in the low-cost

fashion trend which also include China, India or Bangladesh (Gereffi and Frederick,

2010). In addition, the growth of Vietnam clothing retail industry becomes noticeable

in recent year. Especially in 2016, the revenues of garment retail in Vietnam reach
Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

117.6 billion USD, increased 10.2% compared with the previous year (British

business group Vietnam, 2017).

Additionally, according to Rugman and etc. (2017), the important partners of Japan

in import and export apparel goods is China, taking up more than 70% import and

export activities from Japan’s apparel retail industry. Besides, there are Vietnam and

Italy are also one of the main countries cooperating with Japan in the fashion retail

industry. In the period that the fashion retail industry of Japan is maintaining in

generally, the imported clothing market has risen by 15% (Business Sweden, 2018).

In other respect, Vietnam is considered as one of the country having the most

substantial clothing industry for worldwide export. Blue Exchange, Vinatex or Nhabe

Corporation is the enterprises which hold most of the clothing market share.

Furthermore, the demand for high-quality clothes and branded clothes are going up

in Vietnam. For that reason, there are many famous brands in the world is coming or

expanding their business in Vietnam such as Bossini or Mango, Gucci, etc. (Duc et

al., RNCOS 2008).

4. MODEL APPLIED COMPARISON

a. PESTLE Analysis

Japan’s economy is one of the top economies in the world largest economy, and

apparel wholesalers had noticeable contributed in the time when Japan’s economy

growth (Urakami and Wu, 2010). The strong economy helps clothing enterprises

easier to approach any customer classes. In addition, the strong economy is also

attractive to foreign firms and investors. Especially, Japan was well known as the

luxury cloth market from the 90s (Berg et al., 2017) and the luxury international firms

‘continue to enter the market and expand their store networks within Japan’ (Jetro,
Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

2010). Meanwhile, there are more challenging for luxury garment companies to

maintain their business in developing countries, including Vietnam. For example, in

2016, luxury menswear becomes the top consumption commodities of Japan retail

industry. In contrast, Vietnam belongs to developing country group, however,

Vietnam is evaluated as a potential market for any kind of industries. In details, with

the GDP growth rate of Vietnam in recent years according to World Bank Group (n.d)

is more than 6.5 percent since 2015, Vietnam is one of the most dynamic mergings

in Asia.

Besides the economic factor, the social landscape is also important in doing

business. Japan is commented that become old population country, with the fertilities

rate is low over the past 40 years (East-West Centre, 2017). It leads to the situation

which the decrease in productivity and losing their main customer group, which is the

group of young people in 30s, the affluent group (Business Sweden,2018).

Additionally, Vietnam is a country which owns a profuse workforce with the quite low

employment rate, about 5% in 2018 (The World Bank, 2019) equal with the

unemployment rate of Japan (Rugman, Collinson and Narula, 2017). Moreover,

more than a half population in Vietnam is in the working age, which is 53,748 million.

Therefore, there will be a favorable situation for apparel companies in recruitment. In

contrast with Japan, the population of Vietnam is growing in recent years, it is about

1% (Le, 2015). It allows clothing wholesaler can approach diversity customer ages in

different social class.

b. Porter’s Diamond Model

In generally, Japan better than Vietnam in most factor conditions element, for

example, Japan has the more skilled labor force while Vietnam worker still

considered as under-skilled (Le, 2015), and also better technology, which allows
Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

Japan apparel retailer easier to approach to the customer, serve better services and

telecommunications. Jesús Echevarría, who is Chief Communications Officer used

to comment about the quality of Japanese in a fashion that ‘Japan and Japanese

customers have one of the highest knowledge and sensibility for fashion. No one

related to the fashion movement can develop their business without being in contact

to the Japanese market’ (Jetro, 2010),

Moreover, the infrastructure in Japan is way better than Vietnam, which can bring

benefits to wholesalers, such as more convenience in the delivery sector. However,

the low-cost workforce of Vietnam, the fashion retailer will be easier to recruit

employees and it does not waste too much money. In addition, in Japan appeared 2

growing phenomenon which has an effect on the fashion demand (Jetro, 2010).

They are the grown of “baby boomers”, who reach their retirement and enjoy their life

now and the second group is their children, called “second-generation baby

boomers”. As well, the demand for luxury brand is increasing. This demand for high

quality mainly comes from middle-income and high-income Vietnamese. Therefore,

more and more brand come to Vietnam market such as Bossini or Mango, D&G or

Zara (Duc et al., 2010).

Meanwhile, as mentioned, there is market competition between local fashion retail

SMEs in Japan with international brands. Moreover, Urakami and Wu (2010) also

said that small-scale retail stores contributed mainly to the fashion retail industry in

Japan. Similarly, there is a small apparel store in Vietnam is the majority, because of

it’s convenient, low-price and diversity in style as well as a luxury brand. However,

there are more and more foreign apparel brands operate their business to Vietnam

or even partner up with the local firms (EU-Vietnam Business Network, 2018).

Especially, in 2018, the Uniqlo from Japan is one of the international brand deciding
Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

to set up their first store in Vietnam and also acquire 35% stake of Elise Vietnam, a

local fashion company with more than 100 branches in the area (EU-Vietnam

Business Network, 2018). Additionally, Urakami and Wu apparel retail industry in

Japan is benefited from the large manufactures related to the clothing industry.

Besides, in Vietnam, according to Duc, Kim and Ono (2016) that ‘Importing inputs for

apparel production is not subjected to VAT in Vietnam for the apparel enterprises in

export processing zone’. For that reason, the related manufacturers can enjoy the

VAT-free in sourcing material which allows them to lower the producing cost and

finished commodities price.

5. RECOMMANDATION

In the technology era, fashion wholesalers should also improve the technology

applied in their business. For example, many enterprises create their own e-

commerce system, which helps customer check the price and collect the information

more convenient (Berg et al, 2017). For example, big brands such as Gucci, Louis

Vuitton just have their online shopping recently, this strategy gives customer buy

clothes even before being worn by the models in the fashion show, improve the

buying speed to compete with SMEs, and also prevent the design copied situation

from other brands. Nowadays, customers aware of the convenient of using mobile

and do online transaction and online payment (Berg et al, 2017). For that reason, the

trend of apparel retailers is not only creating shopping website, but they have to

make their own app serving for the mobile phone to limit the time of clothes from the

time it becomes available to the time that on the customer's hand. Furthermore,

according to Berg and many other authors in Fashion State 2018 (2017), there are

more than 75% of garment retailers in the world intending invest in AI technology in

the 2018, 2019 period. In other respect, the fashion retail industry must pay attention
Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

to the wealthy customers which forecasted to be growth in the future (British

business group Vietnam, 2017).

6. Conclusion

In conclusion, while Japan already had the developed fashion retail industry, one of

the lead market in the world, Vietnam was still in the developing process and also a

potential market for foreign apparel enterprises. In addition, the main problem of

Japan was their population became older and it was difficult for the retailer in

recruitment and selling. In the other hand, Vietnamese customer was still preferring

low and middle-quality product cause be their limited income, but it was forecasted

will be changed in the near future. The suggestion to solved the problem is

shortening the buying time by improving the technology. Besides, clothing retailers

had to determine the trend of customer’ behavior and the trend of aging in local

society.

Referrence

Urakami, T. and Wu, X., (2010). Specialty store strategy within Japanese apparel

wholesalers: an empirical analysis. Journal of Fashion Marketing and Management:

An International Journal, 14(4), pp.634-647.

Business Sweden, (2018). Explore apparel & fashion opportunities in Japan fashion

insight & inspiration from Japan. [pdf] Yano Research Database. [online] Available

at: https://www.yanoresearch.com/press/pdf/1754.pdf [Accessed 25 April 2019].

Lee, J., (2013). Competitiveness of textile and apparel industries in the United States

and Japan. Ames, Iowa

Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

Business Sweden USA. (2015). The U.S retail industry: Strategize for success in a

changing landscape. [pdf]. [online] Available at: https://www.business

sweden.se/contentassets/35c752683ac6415090a3fc3489a2cba1/the-us-retail-

industry---a-business-sweden-fact-pack-new.pdf [Accessed 26 April 2019].

Gereffi, G. and Frederick, S., (2010). The global apparel value chain, trade and the

crisis: challenges and opportunities for developing countries. The World Bank.

Duc, D.T., Kim, M. and Ono, Y., (2016). Policy Priority for Vietnam to Facilitate

Apparel Enterprise Upgrading.

British business group Vietnam, (2017). VIETNAM – 2017 RETAIL/FASHION.

[online] Available at: https://bbgv.org/wp-content/uploads/2017/09/Sector-Brief-

Fashion-Retail-in-Vietnam.pdf [Accessed 27 April 2019].

Berg, A., Amed, I., Kappelmark, S., Hedrich, S., Andersson, J., Drageset, M., and

Young, R., (2017). The State of Fashion 2018 - The Business of Fashion.

Jetro, (2010). Attractive Sectors: Retail. [pdf]. [online] Available at:

https://www.jetro.go.jp/australia/topics/20100720965-topics/retail.pdf [Accessed 28

April 2019].

World Bank Group, (n.d). GDP growth (annual %). [online] Available at:

https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG [Accessed 28 April

2019].

World Bank Group, (2019). Unemployment, total (% of total labor force) (modeled

ILO estimate) [online] Available at:

https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS [Accessed 28 April 2019].

Module tutor: TODD ENDRES - BM5104
Diep Dang Khoa - UoG0112

West-East Centre, (2017). Low fertilities in Japan – No end in Sight. [online]

Available at:

https://www.eastwestcenter.org/system/tdf/private/api131.pdf?file=1&type=node&id=

36147 [Accessed 28 April 2019].

World Bank Group, (2017). Population growth (annual %) [online] Available at:

https://data.worldbank.org/indicator/SP.POP.GROW [Accessed 28 April 2019].

Rugman, A.M., Collinson, S. and Hodgetts, R.M., (2017). International business.

Pearson Education.

Le, B.D., (2015). Challenges in entering Vietnamese market for companies in the

sharing economy.