Porter’s Generic Strategies:

The Porters Generic 5 Strategies can be used to determine the direction (strategy) of an
organization. According to this strategy, he believes that a company must choose a clear course in
order to be able to beat the competition.
The 5 strategies to choose from are:

Type 1: Cost Leadership- Low Cost

Type 2: Cost Leadership- Best value
Type 3: Differentiation
Type 4: Focus-Low cost
Type 5: Focus- Best value (Differentiation)

Michael Porter described the theory in his 1985 book ‘Competitive Advantage: Creating and
Sustaining Superior Performance’. The basis was formed by three strategies, namely cost
leadership, differentiation and focus. He divided the latter into cost focus and differentiation
focus.
 Applying the Porter’s Generic Strategies for the brand Uniqlo:

Cost leadership Differentiation Focus

BROAD
TYPE 1 TYPE 3
Size of the market

Supply chain
TYPE 2
NARROW TYPE 4 (low cost)
TYPE 3
Innovation fabrics TYPE 5 (differentiation)

Type 1: Cost Leadership- Low Cost

Type 2: Cost Leadership- Best value
Type 3: Differentiation
Type 4: Focus-Low cost
Type 5: Focus- Best value (Differentiation)

Cost leadership Type 1 and Type 2:

This strategy is applied when a brand targets a broad market (large demand) and offer the lowest
possible price. There are 2 options within this course. You can opt to keep costs as low as possible;
or ensure that you have a larger market share with average prices. In both cases, the point is to
keep the company costs as low as possible. The consumer price is a different story.
Organizations that apply this strategy successfully usually have substantial investment capital at
their disposal, efficient logistics and low costs when it comes to materials and labor. The
organization is generally focused on internal processes. (ref: tools hero )

Uniqlo faced one of the main challenges was consumer perception of the brand – it was perceived
to be a discount retailer selling cheap and low-quality apparel to the suburbs. This perception
completely changed when the brand opened a 3-storey store in iconic Harajuku in central Tokyo
in 1998 – people started noticing Uniqlo for its high-quality fleece jackets. The brand perception
instantly shifted from being cheap and low-quality, to being affordable but high-quality.
The answer lies in the company’s strategic, low-cost operational strategy. By being the first to
establish the SPA (Specialty store retailer of Private label Apparel) manufacturer retailer model
in Japan, Uniqlo possesses control over its product planning, design, manufacturing and
distribution processes. A link is formed between its stores and suppliers - products that are sold in
the store are directly translated into manufacturing orders. This process dramatically reduces a
lengthy six or nine-month-long planning cycle, helping the company to gain agility as it manages
to replenish stock swiftly.
Differentiation Strategy Type 3:
This strategy is applied by targeting a broad market (high demand), but their product or service
has unique features. With this strategy, you make your product as exclusive as possible, making it
more attractive than comparable products offered by the competition. Succeeding using this
strategy requires good research & development, innovation and the ability to deliver high quality.
Effective marketing is important, so that the market understands the benefits of your unique
product. It’s important to be flexible and to be able to adapt quickly in a changing market, or you
risk the competition beating you at it. Such an organization is focused on the outside world and
has a creative approach. (Ref: tools hero)

Uniqlo being a design driven clothing brand offers unique functional performance owing to in-
house fabric and design innovation. The company distinguishes itself from its price driven
competitors by branding its signature innovations with names like HeatTech, LifeWear and
AIRism. Uniqlo provides a superlative physical shopping experience by impeccably managing its
stores, inculcating a positive employee culture and through in-store technology like video tutorials
that describe product attributes. It also has

1. Delivery system supporting a clear brand promise: By consistently delivering effective brand
promise across all touch points of the customer experience journey.
2. Product development approach and efficient supply chain: As the brand itself names as a
technology driven industry than the cyclical, trend-driven rhythm of the fast fashion retail industry
while comparing it with the leading competitors like Zara and H&M has built the world’s largest
apparel business based on rapidly responding to fast-changing fashion trends, getting items from
factory to store in approximately two weeks, Uniqlo takes the exact opposite approach, planning
production of its wardrobe essentials up to a year in advance. Unlike its competitors who sell a
large variety of trendy fashion inspired by the global runway, Uniqlo focuses on producing a few
styles of urban practical basics.
3.Mass Production Model: Massive cost savings: The adoption of a mass production model
allows Uniqlo to achieve significant cost savings. Unlike other fashion retailers, the company does
not offer a diverse variety of clothing following the latest runway trends. Instead, it sells a narrow
selection of high-quality basics, such as jeans, undergarments, jackets and polo shirts in a plethora
of colours.
The company also runs a highly robust supply chain. Through development of a detailed marketing
strategy by the marketing department for each season, merchandisers are able to adjust production
by style to align with demand well in advance. Concept meetings with all key product creation
teams are held about a year before a product is launched. Once a garment is in production, about
400 skilled staff members visit production centers to ensure quality and resolve outstanding issues.
This makes a differentiation and a stand alone in the market.

Cost Focus and Differentiation Focus Type 4 and Type 5:

Type 4: When we target a niche market (little competition, ‘focused market’) and offer the lowest
possible price. In this strategy, we choose to target a clear niche market and through understanding
the dynamics of the market and the wishes of the consumers, you can ensure that the costs remain
low.

Type 5: When we target a niche market (little competition, ‘focused market’) and your product or
service has unique features. This strategy often involves strong brand loyalty among consumers.
It’s very important to ensure that your product remains unique, in order to stay ahead of possible
competition. In order to choose the right strategy for an organization, it’s important be aware of
the competencies and strengths of your company.
Uniqlo’s innovation and marketing are the only two functions of any organization. Uniqlo
understands this well as the brand is well-known for its fabric innovations. The company also hires
Japanese textile masters called “Takumi”, who work closely with factories in China and Japan to
continually develop new high-tech fabrics for Uniqlo. While fellow fashion retailer giants, such as
Zara and H&M are driven by latest trends, Uniqlo’s focus when developing new lines is
predominantly on quality and durability of the fabric. “What’s different about Uniqlo is that they
have chosen fabric, rather than fashion, as the area where they want to excel,” says Luca Solca, an
analyst specializing in retail at Bernstein Research.
Product concept meetings begin a year from the planned product launch date. Designers and
product teams develop new fabrics, before studying up-and-coming fashion trends. Once a new
fabric has been developed, they work on designs that will best suit the fabric. These unique features
creates a unique differentiation focus.

Uniqlo has opened a series of mega stores in the United States, designed to draw
the attention of the locals, and to help the company gain greater brand prominence.
Take Uniqlo’s retail outlet at the new Garden State Plaza as an example - the store
measures an impressive 43,000 square feet, and offers external exposure, with
Uniqlo’s signs clearly visible from a nearby highway, as well as the mall’s parking
lot.
These mega stores may have been a vital aspect of the company’s success in
breaking into the U.S. market, but the management understands that localization
of its growth strategies is key, in order to achieve the company’s planned targets.
“We need to go where the customer is, and in the United States, malls are the
premier location where Americans shop,” Yasunobu Kyogoku, chief operating
officer for Uniqlo’s United States division states. With this in mind, the company
is set to expand through setting up smaller stores within malls
throughout American cities, as well as increasing its reach through the company’s
eCommerce site.
Localization is also applied to the social media marketing strategies implemented
by the company. Uniqlo's eCommerce stores contain a link to social media sites
targeted at the local community. Consumer engagement is also carried out over a
selected range of channels that appeal to the locals in a particular country. For
example, Facebook, Twitter and Google+ accounts are used in the US and UK
markets, while Facebook and Twitter are used in France. With this they follow
focus differentiation strategy
Hybrid strategy of porter:
Several commentators have questioned the use of generic strategies claiming they lack specificity,
lack flexibility, and are limiting.
Porter stressed the idea that only one strategy should be adopted by a firm and failure to do so will
result in “stuck in the middle” scenario. He discussed the idea that practicing more than one
strategy will lose the entire focus of the organization hence clear direction of the future trajectory
could not be established. The argument is based on the fundamental that differentiation will incur
costs to the firm which clearly contradicts with the basis of low cost strategy and on the other hand
relatively standardized products with features acceptable to many customers will not carry any
differentiation hence, cost leadership and differentiation strategy will be mutually exclusive. Two
focal objectives of low cost leadership and differentiation clash with each other resulting in no
proper direction for a firm. In particular, Miller questions the notion of being "caught in the
middle". He claims that there is a viable middle ground between strategies. Many companies, for
example, have entered a market as a niche player and gradually expanded. According to Baden-
Fuller and Stopford (1992) the most successful companies are the ones that can resolve what they
call "the dilemma of opposites". Furthermore, Reeves and Routledge's (2013) study of
entrepreneurial spirit demonstrated this is a key factor in organisation success, differentiation and
cost leadership were the least important factors.
However, contrarily to the rationalization of Porter, contemporary research has shown evidence of
successful firms practicing such a “hybrid strategy”. Research writings of Davis (1984 cited by
Prajogo 2007, p. 74) state that firms employing the hybrid business strategy (Low cost and
differentiation strategy) outperform the ones adopting one generic strategy. Sharing the same view
point, Hill (1988 cited by Akan et al. 2006, p. 49) challenged Porter’s concept regarding mutual
exclusivity of low cost and differentiation strategy and further argued that successful combination
of those two strategies will result in sustainable competitive advantage. As to Wright and other
(1990 cited by Akan et al. 2006, p. 50) multiple business strategies are required to respond
effectively to any environment condition. In the mid to late 1980s where the environments were
relatively stable there was no requirement for flexibility in business strategies but survival in the
rapidly changing, highly unpredictable present market contexts will require flexibility to face any
contingency (Anderson 1997, Goldman et al. 1995, Pine 1993 cited by Radas 2005, p. 197). After
eleven years Porter revised his thinking and accepted the fact that hybrid business strategy could
exist (Porter cited by Prajogo 2007, p. 70) and writes in the following manner.
Though Porter had a fundamental rationalization in his concept about the invalidity of hybrid
business strategy, the highly volatile and turbulent market conditions will not permit survival of
rigid business strategies since long-term establishment will depend on the agility and the quick
responsiveness towards market and environmental conditions. Market and environmental
turbulence will make drastic implications on the root establishment of a firm. If a firm’s business
strategy could not cope with the environmental and market contingencies, long-term survival
becomes unrealistic. Diverging the strategy into different avenues with the view to exploit
opportunities and avoid threats created by market conditions will be a pragmatic approach for a
firm. Critical analysis done separately for cost leadership strategy and differentiation strategy
identifies elementary value in both strategies in creating and sustaining a competitive advantage.
Consistent and superior performance than competition could be reached with stronger foundations
in the event “hybrid strategy” is adopted. (Ref: Wikipedia)
Overall Analysis of the brand Uniqlo based on porter’s strategy:
As we can see the brand Uniqlo has its own timeline in its each stage. While entering the market
initially they offered low price fashionable products, which created a perception on peoples they
are being cheap and low-quality but later in 1998 – people started noticing Uniqlo for its high-
quality fleece jackets. The brand perception instantly shifted from being cheap and low-quality,
to being affordable but high-quality. This results the brand has followed cost leadership.

After few years as per their market growth and success they stand along with other successful
global retailers like Zara,H&M, Gap, where they also stand out with a differentiation market
focused on their implementation of best supply chain and innovation in their fabrics materials.
Their unique ness is a new strategy they implement. With all this in hand now the brand tries to
follow the differentiation strategy.
Now currently the brand is planning to expand their markets in Europe and US markets, where
their focus is becoming the world’s biggest apparel shop by the year 2020 says Tadashi Yanai,
Chairman, President & CEO of Fast Retailing.

A combination of operations, branding and growth strategies has propelled Uniqlo to the top of
the retail fashion industry. Depending on the market and competitive conditions hybrid strategy
should be adjusted regarding the extent which each generic strategy (cost leadership or
differentiation) should be given priority in practice. Thus different strategies with respect to
different markets is being followed to sustain in the market and this brand follows a hybrid
strategy.