Internationalization analysis

Table of Contents

Abstract 3

Methodology 3

Introduction3

1. Brief introduction of H&M 4

2. Company’s profile and beginning of expansion 5

3. The internationalization analysis 6

Conclusion10

Appendix11

Appendix 1 11

Appendix 2 11

Appendix 3 12

Reference list 13

Abstract

The main problem of my research is how did H&M go to international market and what difficulties did it face. The goal is to describe the internationalization process of H&M and to explain its way of expansion using various concepts and theories.

Methodology

In my research, I basically used the qualitative method for study of H&M. In addition, all used data and empirical surveys are given in the end.

Introduction

I decided to focus my research on the internationalization process of a successful company, because it gives me an opportunity to put the theories I have learnt into practice. Now I study in Norway and hope to set up more knowledge about the Scandinavian market.

There are three key reasons for why I have decided to choose H&M Company for a topic. Firstly, there is a huge variety of data available about H&M, which can be a good base for research. Secondly, retailing in fashion is always a sharp topic, so writing about H&M will make research fresh and actual. Finally, I am planning to work in fashion industry, so it is a good idea to gain some theoretical experience before. To sum up, in my research, I talk about the internationalization process of H&M.

1. Brief Introduction of H&M

According to the official website H&M was founded in Vasteras, Sweden in 1947 by Erling Persson. For the start, the name Hennes (the Swedish it means “her”) was given to the first shop, because the assortment included only women's clothes at that time. Some years later in 1968, Erling Persson bought a hunting store Mauritz Widforss in Stockholm. (Youell, 2013) Since that moment, the men’s clothes also appeared in the stores. In this way, soon Erling Persson’s company gained a new name Hennes & Mauritz (H&M in short). In subsequent years, company has started to expand successfully. Especially after 1982, it developed on the big turns. Currently, H&M has already managed more than 1,500 stores in 28 countries. (Divita, 2013) The most of them are in Europe and the rest are in China, Canada and the United States, Kuwait, Qatar and United Arab Emirates. Moreover, at the moment H&M has extended variety of products for children and teenagers, and started to produce cosmetics under its own brand. In addition, apart from the ordinary stores shopping, H&M has launched online-catalogues. As all the successful companies, H&M always follows its business motto, which is «to provide people fashion and quality at the best price» (Facts about H&M, 2007). It is not the last fact, that H&M has special design and buying department creates, which creates all the collections. Talking about good product quality, H&M takes care about the quality control, reducing the impact on the environment while producing and also about controlling good working conditions on factories. What about the price, it is just formed by “having few middlemen, buying in large volumes, having a broad, in-depth knowledge of design, fashion and textiles, buying the right products from the right market, being cost-conscious at every stage, and having efficient distribution”.(Facts about H&M, 2007) Summing up, H&M does not have its own factories, but it cooperates with more, than 700 independent suppliers principally in Asia and Europe. H&M counts about 68,000 employees worldwide and has become one of the largest world fashion retailers.

2. Company’s profile and beginning of expansion

The first store “Hennes” had a great success and in following years the company spreaded firstly in the domestic market and then internationally. During the first 30 years of H&M existence, the company had a low budget image, so the price was a vital element of marketing-mix that time (appendix 1). Everything changed, when in 1980’s Stefan Persson became a new managing director and paid attention on increasing quality, creating new designs, advertising and decrease operational costs. (Ding, 2011) Today the company follows its business concept completely, which is “to offer fashion and quality at the best price”. According to Annual Report (2007), this goal can be implemented by: “having few middlemen, buying in large volumes, having a broad, in-depth knowledge of design, fashion and textiles, buying the right product from the right market, being cost-conscious at every stage, and having an efficient distribution.” Its development is not only swift but also gainful – during the last five years sales has increased by 73% and profit after tax by 139%. H&M Company's goals are forwarded to increasing the number of stores by 10-15% a year, and to increase sales at the already existing stores. (Giertz-Mårtenson, 2012)

H&M launched its international expansion in 1964 by penetrating other nordic markets – Norway and Denmark. Until 2007 the network, accounting more than 1500 stores in 28 countries has been created and that is how company became one of the largest advanced fashion retailers among others. Details about market entries and current operations in different countries are showed in the appendix 2. In 2006, the company made an exception from its main extension strategy and started to work in collaboration with franchise Alshaya, one of the largest retailers in the Middle East. Until the end of November 2007, there were 10 franchise shops in Dubai, Kuwait and Qatar. (Mo, 2015) In 2007 H&M spread to China by opening shops in Hong Kong and Shanghai. In 2008 penetrated Japanese market by setting shops in Tokyo, and expanded to new Middle East countries, such as Egypt, Saudi Arabia, Bahrain and Oman still in cooperation with partner Alshaya. In 2009 H&M entered Russian market also. (Jonsson, 2013)

Internationalization analysis

I used the 4-stage establishment chain, which is a part of the Uppsala Model, as the background for my analysis (Appendix 3), because it makes me easier to explain, how H&M has penetrated the international market. (Paliwoda et al., 2013) Further, I will represent the short analysis of H&M internationalization with the help of some theoretical concepts, which will help to resolve the problem of my assignment.

Date: 2016-04-22; view: 736