Socio-cultural factors that may affect Muji’s relationship with partners and franchisees
MUJI is a Japanese company involved in international trade in household and consumer goods. Being an international company, MUJI has established many retail outlets in UK, France, Italy, Germany, Ireland, Sweden, Norway, Spain, Turkey, USA, Hong Kong, Singapore, Korea, Taiwan and Thailand.
In order to create a close contact with customers in the international market, MUJI has formed partnerships with other retailers from its international market locations. These partnerships are more pronounced in Sweden, Spain and Ireland. Through expansion, the company is planning to consolidate its markets in Western Europe.
In this pursuit, the company is planning to form partnerships with local retailers in Western Europe. In this regard, the company is also maintaining its retail operations through franchisees.
However, this move will be affected by various socio-cultural factors prevalent in international market settings. In this case, socio-cultural factors are those elements which reflect the manner in which we do things (Doole & Lowe, 2008). Ajami (2006) identifies the specific socio-cultural factors affecting international business operations include: religion, values and attitudes, language, education, law and politics, social organization, technology and material culture, and aesthetics.
The relationship between Muji and its partners and franchisees in Western Europe may be affected by one or more of the above factors. These social cultural factors will influence the way MUJI communicates with its franchisees and partners in its business dealings with them. Since MUJI is a company based in Asia establishes franchises and partnerships with foreign retailers in Europe, the social and cultural differences between the company managers and international partners is likely to influence the relationship between the company and its partners and franchisees. The values, ideas and other significant symbols used in communication may differ between the company and its international partners. Therefore, socio-cultural factors will play a big role in the company’s relationship with its international partners and franchisees.
The socio-cultural factors that may affect MUJI’s relationship with its franchisees and partners as mentioned above may be represented in the cultural framework below.
Figure 1: Cultural Framework
Values are the guiding principles on what is wrong or right or what behavior is appropriate and which one is inappropriate (Doole & Lowe, 2008). The perception of Japan where MUJI originates on what is right or wrong may differ from what is considered or wrong in business environments in Europe. This will affect the relationship between MUJI and its partners in Western Europe because what MUJI considers right may be considered wrong by its partners and what is right may be considered wrong. Language is also one of the socio-cultural factors which may affect MUJI’s international relationship with retail partners and franchisees. Being a Japanese company, most members of MUJI’s staff speak Japanese language while its partners in Western Europe speak English, Swedish, Spanish and other languages. Learning a language is like learning a culture and if MUJI has to relate well with its Western Europe partners it has to learn their language. For instance, Belgium which is a country in Western Europe has several languages which results in many cultures. Learning these languages is an essential part of MUJI’s strategies to establish partnerships with franchisees from Belgium. While dealing with Western Europe’s partners and franchisees, MUJI will need to engage in agreements and contracts with them. This calls for the company to debvelop negotiation skills because negotiations will be part of its deals. Negotiations will be influenced by MUJI’s understanding of foreign languages. Sign and body language may also be an important element in these negotiations but body language is culture sensitive too, thus affecting the negotiations.
Aesthetics is also one of the socio-cultural factors that may influence the relationship between MUJI and its international partners. This factor refers to perceptions of beauty, design and taste. This aspect is critical in the use of brands and images (Doole & Lowe, 2008). MUJI does not use a brand and this may not be accepted by other partners in Western Europe who prefer certain brand names. The design of MUJI’s products may also be suitable in Japan but may be unacceptable in Western Europe due to aesthetics. This may result in partners defecting from the relationship. Education may also affect the relationship between MUJI and its Western Europe partners. Education reflects people’s literacy rates and qualifications (Saleem, 2010). Difference in education systems among countries often affects international business because the literacy rates and qualifications acquired through education differ across countries. This often impacts on communications, product instructions and packaging. It is therefore difficult for Japanese workers to instruct or follow product instructions from international partners from Western Europe because the education of Western Europe differs substantially from that of Japan.
Religion also plays a major cultural influence role in MUJI’s international relationships with partners and franchisees (Dlabay & Scott, 2011). While Western Europe is inhabited mostly by Christians, Japan’s main religions are Shinto and Buddhism. Shinto believes that there is no absolute right or wrong while Christianity believes in right and wrong things. This affects the levels of understanding of values between MUJI and its partners concerning values inherent in their business activities. Therefore, the attitude to work and leisure as well as consumption and marketing may differ between MUJI and its partners from Western Europe. Attitudes and values may also differ between the two partners, hence affecting their relationship. Japanese needs may differ significantly from the needs of Western Europe. This may cause misunderstanding between staff members of the Japanese company and their partners from Western Europe. Such needs as physiological, safety, social and self-actualization are highly valued and desired by Western cultures. This may cause differences in the attitudes and values of Japanese MUJI workers and partners from Western Europe. Materialism is also extremely valued in Western Europe as compared to Japan. This may cause differences in attitude towards material possessions between MUJI and its partners from Western Europe.
Finally, social organizations also affect the relationships of businesses and its international partners in international business context (Dlabay & Scott, 2011). MUJI being one of the international companies is also influenced by social organizations. For instance, the role of women in Japan differs from that of Western Europe. In Western Europe, women play equal roles in business as men but Japanese culture limits the role of women in business. This may cause conflict between the Japanese Company and its Western Europe partners in issues involving women and business.
Therefore, it is clear that various socio-cultural factors affect the relationship between MUJI and its partners and Franchisees from Western Europe.
Opportunities and challenges for Muji if adopting a joint venture market entry mode in Western Europe.
A joint venture is an agreement in a business environment where companies or business firms agree to form a new entity for a period of time by contributing equity (Regan, 2011). This can be applied by MUJI through collaboration with its international partners and franchisees. Joint venture is an international market entry strategy whereby the parties involved share expenses, revenues and assets. Since engagement in business projects is expensive, a joint venture will allow MUJI to share the projects’ expenses and revenue with partners. This strategy will also help the company to diversify its assets.
There are specific opportunities that joint ventures enjoy in their joint businesses. MUJI will benefit a lot from these opportunities. The opportunities favor the joint ventures mostly when the ventures converge in strategic goals rather than diverging. One of these opportunities is the chance for each of the partners to learn from each other in conducting businesses (Harrigan, 2003). Muji will be able to perform better if it learns new business strategies and tricks from its partners. Although joint partners are not obliged to expose their proprietary skills to joint partners, it is important for the two ventures to learn from one another.
Another opportunity for joint ventures is the sharing of risks and rewards. By coming together with joint partners, Muji will be able to share its burden with its partners. For instance, the investment in assets will be contributed by both the company and its joint partners and the equity will also be contributed by both partners. This will increase the initial investment capital for the company. The expenses of running the business will also be shared by the company and its joint partners. The profits and other revenues and rewards of the joint venture will also be shared by the businesses.
The company will also benefit from technology sharing in the joint business. Since technologies differ across countries, a company that partners with other international companies will be able to share technology with them (Regan, 2011). Muji will adopt new technologies from other countries while at the same time sharing its own technologies with its partnering ventures. This will enable the company to increase its technological advancement and increase efficiency in its operations. As a result, the company will increase the quality and quantity of its products. Consequentially, the company sales and profitability will increase. The company can also enjoy the benefit of joint product development by engaging in joint partnership with other ventures. Furthermore, the company can be able to conform to government regulations by joining ventures with venture partners. This is possible since partners will contribute the liabilities required of the company by law as well as adding more to other government requirements of the company.
Muji can also enjoy the opportunity of political connections through joint partnerships (Regan, 2011). Joint ventures often share links and networks which may lead to desirable political connections. Muji can be linked by its partners to international political connections which will be of great significance to its business. Political connections will enable the company to get a boost in terms of legal and political factors. Finally, access to distribution channel is an opportunity that Muji can also get from engaging in a joint venture. For instance, if the company engages in a joint venture with international companies, those companies may form a distribution channel in their host countries for the company.
However, there are challenges that Muji may face in joint venture partnerships (Harrigan, 2003). First, conflicts may arise between Muji and its joint partners in regards to asymmetric new projects. What Muji may consider as the best project to engage in may not be considered so by its partnering joint ventures. This then leads to conflicts and a lot of time and resources may be wasted trying to resolve the conflicts. The conflicts may also lead to collapse of those joint ventures or even the company’s business ventures.
Another challenge to be faced by the company in joint venturing is how to share work performance. Each company in a joint venture has a role to play in the venture but how to share the tasks may pose a real threat to the joint venture. The rules on termination of the joint venture may also cause conflict between the company and its joint partners (Harrigan, 2003). Furthermore, cultural differences between the company and its joint ventures may cause conflict which may lead to poor performance or even collapse of the business.
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