Characterized by a variety of competitive supply chains, niche endeavours and different business models, fashion industry is one such sector that makes up a major portion in the global apparel and textile industry (Anwar, 2017). With the rise of the globalisation, firms are becoming highly mobile and the industry has been spreading all around the world at the speed of rocket. One such brand is Uniqlo who have capitalized on their capability to fabricate apparel that reflect the latest trend at a reasonable price to become a major player in its respective field. Uniqlo, introduced back in 1984 in Japan is now a global brand, which is known for its outstanding products and services (Uniqlo.com, 2018). The brand not only operates in the Japan, rather it has expanded its business to the various places like London, Europe, USA, and other places in Asia too making it a global apparel brand (Caro & Mart?nez-de-Alb?niz, 2014). With their superiority product the brand has become a famous high quality fashion brand in the Australia and this essay is aimed to analyse the market of the same for the Uniqlo. Through this essay, it will portray the market knowledge of the firm and considering the market structure, it will highlight the short run and long run profits in order to depict its sustainability.
Number of sellers and market structure:
Uniqlo is one of the fastest growing retailing group in the fashion industry, which is often acknowledged as the most successful brand in the world at present (Schulz & Stockmann, 2016). With their vast global expansion since 2001, the brand has marked itself as one of the market leader that has potential to operate both in the US and the UK market, considering the differentiated demand structure of both the states. Presently Uniqlo has been operating in Oceania region too in order to keep up their pace to become global. In Australia it is accounted as one of the largest apparel brand that has vast amount of potential to become the market leader (Liu, Liu & Fan, 2017). Considering the market structure of the apparel industry in the Australia, it can be said that the brand operates in oligopoly market, where the arch rivals of the brand are GAP, American Apparel, Zara, Benetton, H&M, United Colours and others (Anwar, 2017). In Australian apparel industry, there are almost seven to eight large market players that makes it an oligopoly market.
As it has been observed from the apparel industry of the Australia has moderate number of market players that makes the marker oligopoly in nature. Under this scenario, market knowledge is incomplete, where the sellers do have complete information regarding their market demand, whereas, the buyers do not have the information regarding the best price in the market (Bischi, Lamantia & Radi, 2015). On the other hand, in oligopoly market, market competitors do not have proper information regarding their rivals that makes the decision of one firm related with the other.
Market entry and exit:
Considering the market structure of the Uniqlo in the Australia, it has already been clear that the firm operates in an oligopoly market, where more than seven to eight players operate. Under this market structure there exist good amount of barriers in the market that restricts the new entrants to enter the market. In the case of the apparel industry of Australia following barriers can be observed (Anufriev & Kopanyi, 2018):
- Strong customer loyalty of the present brands
- Large amount of investment by the brand to introduce business in Australia
- Economies of scale achieved by the existing firm provide cost advantage to the rival organisations
In case of the apparel industry, there is exit barrier too. Following are the exit barrier in the market:
- Fixed exit cost in the form of contract cancelation cost and indemnities to the employees
- Non-transferable asset cost
Type of the product:
The firm is mainly acknowledged as the producer of the casual wear, however, in addition to this, it produces various types of apparel in order to satisfy different customer demand. The brand’s Unique Selling Proposition lies within its affordable price and high quality garment, which are curated in such a way that it can curtail the demand of wide range of customers. The targeted customer of the brand is women who are aged between 25 and 45, due to the fact that most of the demand for the brand, comes from the specific range of customers (Kotabe & Helsen, 2014).
Short-run and long-run profit:
Utilising the high entry barriers in the market Uniqlo can have supernormal profit during the long run. With the aid of the entry barriers he firm can restrict the new entrants from entering into the market and enjoy considerable amount of market share to have better amount of profit in the long-run (Feng, Li & Li, 2014).
During the short run, the firm will gain only the normal profit due to the fact that that in short-run it has expand its business and make market dominance, which will allow it to earn only normal profit (Neary, 2016).
Considering the figure 1, it can be seen that the oligopoly market has kinked demand curve and depending upon the same Uniqlo utilise the differentiated pricing strategy at different market in order to gain much amount of market share. For instance, the price of the goods and services from the brand is high in the US and UK market owing to the fact that it has well established market and customer base in these regions; however, on the other hand it produces low priced products with good quality in the Australian region (Feng, Li & Li, 2014). Considering the market of the Australia, price determination of the brand is collusive in nature. Under the oligopoly market structure, firms possess incomplete knowledge regarding the rival’s strategy that makes them take collusive pricing strategy in order to hold their market position. On the other hand, there is a scope that the oligopoly firms go for the collaborative pricing so as to gain more amount of producer surplus from the operation, however, the brands in the Australia has chosen for the collusive pricing strategy that has provided separate entities (Luo, Gao & Huang, 2015).
In the oligopoly market products produced by the rivals are almost similar to one another that makes the market scenario for the business houses hard. Under this scenario, rather than pricing strategies, non-price competition become more useful in order to entice the market demand (Wang & Li, 2018). As the mechanism of the non-price competition, Uniqlo uses advertisement as their strategy. In addition to this, the brand has been observed to utilise celebrities to promote the brand, TV ads and sponsoring events are some of the strategies utilised by the brand in order to stand out from the crowd (Chan & Luk, 2015).
Considering the market operation and the market structure of the Uniqlo, it can be said that the firm has been operating really good in the Australian region. With their low and affordable pricing of the good quality product has been enticing the market demand effectively and with the strategies to deal with competitors through the non-price competition has proved to be effective.
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