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Assignment 3

Competition

Theory of Patterns of Competition:


Professor Philip Kotler characterizes types of competitors and their reaction patterns:
• A laid-back competitor does not react quickly or strongly to a rival’s move.
• A selective competitor reacts only to certain types of attacks and not to others.
• A tiger competitor reacts swiftly and strongly to any assault on its terrain.
• A stochastic competitor does not exhibit a predictable reaction pattern.

I believe that the theoretical patterns of competition do exist in reality. The firms follow different
types of behaviors for different types of threats. To explain my answer I am taking example of
retailing industry in the U.S.

Retail industry is second among all the U.S. industries as far as growth is concerned. Yearly
turnover of the U.S. retail industry has been around US$4 trillion. I am analyzing the strategy of
Muji USA in the retail industry vis-a vis the other players, Wal-Mart, Ikea and Target.

Introduction
Wal-Mart and Ikea are tiger competitors, and are constantly on alert for the next threat. Their retail
model of selling low-cost branded items was being challenged by Muji, a Japanese retailer that
entered the market in 2008. Wal-Mart & Ikea opted to have a laid-back strategy against Muji, and
they were successful.
Background of Muji
The name Muji is derived from the first part of Mujirushi Ryōhin, translated as No Brand Quality
Goods on Muji's European website. Muji is a global retailing brand that hails from Japan with the
motto: “lower priced for a reason”.
Muji's "no-brand" strategy means that the little money is spent on advertisement or classical
marketing and Muji's success is attributed to the word of mouth, a simple shopping experience and
the anti-brand movement. Muji's no-brand strategy also means its products are attractive to
customers who prefer unbranded products for purely aesthetic reasons.
The retailer, well established in Europe and Asia, moved into the U.S. market in 2008.
Marketing Strategies
Muji could have been applying the Blue Ocean Strategy: by constructing a “no-brand” brand that
defies conventional marketing, it serves to make the competition irrelevant. At the time of
introduction, Muji stood out when the vogue was to pursue branded and luxurious good. Its
competitors were advertising fervently to customers, while Muji’s subdued approach got attention
from cynical consumers among the clutter. The Muji philosophy of simplicity was ahead of its
time and gained popularity for their no-frills, high-quality products.
In U.S. it adopted a Differentiation Strategy: it was selling its uniquely designed products which
are valued and perceived to be superior by customers at premium prices. The Muji aesthetics,
design sensibilities, and its belief in environmental sustainability, continue to add value to the
distinctiveness of its products. Moreover, Muji seem different from the overwhelming amount of
branded merchandises with its “no-brand strategy”
Hence, Muji’s position as a ‘no-brand’ brand was strategic and sustainable as it required
tradeoffs; it choose to limit what it could offer purposefully and thus thwarted other’s ability to
imitate. Established competitors had tremendous sunk costs to abandon their superfluous brand
image they had cultivated, while new entrants struggled to distinguish themselves either through
aggressive branding or copy Muji’s subtle marketing in the mass market.

Competitor Analysis
In the international market, Muji is often compared to the other famous purveyors of “good
designs” at affordable prices including Target and Ikea. In contrast to its competitors who relish in
superfluous details and ornamentations, Muji stood out because it contended with being ‘ordinary’
and neutral.

Slogans/ Positioning
Company Strengths Details
Statement
A popular discount retailer which is second after
Insists on “surprising Wal-Mart in the U.S.
Target and delighting” its Target uses artful, whimsical and outrageous
House ware
(U.S.) guests images to market its brand. They merchandise in a
“Up & up™” theatrical manner which adds whimsical touches
(visual flourishes) to the design of their products
“Be brave, not beige”
“Affordable solutions
Ikea for better living” Ikea influences the North American design taste
Furniture
(Sweden) “Home is the most towards a magnitude of cheerful hues
important place in the
world”
Muji revels in the minimalist approach; most of their
“Simple. Functional. products appear bland as they are devoid of colors
Muji Affordable” or in beige blanket of neutrality. Nonetheless, the
House ware
(Japan) “Lower priced for a fine simplicity and utilitarian provenance of Muji’s
reason” products are delightful and nondescript, and thus
attractive

Based on Kotler’s classical marketing theory, Muji garnered strong customer loyalty as people
could remember the traits of Muji at first sight.
Failure of the Strategy
The initial euphoria over the opening of Muji in the U.S. was replaced with disappointment.
Several consumers were writing on blogs over the exorbitant prices at Muji SOHO for plain
looking commodities, which is contrary to Muji’s stance.

Reasons for failure


Price: Muji’s market penetration to U.S. had been poor. It is unable to compete on prices due to
the high import cost and lack the economies of scale they enjoy in Japan.
Place: Most of Muji’s retail outlets are located in swanky and high-end cities, which translate into
higher overheads that interfere with their ability to offer cheaper prices.
Promotion: As Muji grew, it was finding harder to strike a balance between the dichotomy
between advertising (to attract sales) and no-branding (stay true to their principles). For a company
that claimed to be “no-brand”, their marketing strategies may not reflect this. Customers were thus
confused and may be turned off by Muji’s conflicting approach.
People: Muji U.S. opened in cities where people are brand and trend conscious. Unlike in Japan,
Muji seemed “insecure” over its customers’ appreciation and understanding of their brand,
especially in the U.S. market. It is plausible that Muji had become ambitious and was thus
targeting unsuitable segments abroad.
Summary
Hence, though Wal-Mart, Target and Ikea are tiger competitors, their laid-back attitude towards a
new entrant paid them off as the new entrant was not able to make a mark in the market.

References:
• Wikipedia: http://en.wikipedia.org/wiki/Muji
• Hsu, M. (2007). Coming to America: Muji, the Japanese design powerhouse, is opening
U.S. stores. Hallelujah!. Slate: Design. Friday 21 September 2007.
• Japan’s Muji to come to New York City. SCTWeek 12, no. 16: 3-3 2009
• http://search.japantimes.co.jp/cgi-bin/nb20080426a5.html

Sheenu Gupta
MPE090218