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Strategic objectivesThe retailing businesses place their shops outside the home countries with a view to stimulate the sales growth. (Diamond et al. 2015) But if we talk about manufactures, they expand their businesses to foreign markets with an eye to look for the lower costs. As data from the official H&M website says, H&M Company does completely the same thing. Simply speaking, H&M is growing through setting new stores in foreign markets. For today, it has already established around 1,500 stores in 29 countries and in the past years, “sales including VAT have increased by 72 per cent and profit after tax by 183 per cent” (Facts about H&M, 2007). Local Character of the Market As somebody says, when a retailer drives its business to a foreign market, it has to pay a huge attention to this market’s nature. To wit, it must entirely know that market, the consuming behavior, the culture etc. (Ramamurti, 2012) Talking in case of H&M, it is no doubts that retailing company, which looks for a foreign market to enter, needs to select much about the purchasing power of the people in particular market. The Outlet is the Retailer’s Product The sales outlet is the real product of a retailing company and, as it follows from this, the stores have to be designed appropriately in order to attract more consumers. What about manufactures, the goods they sell are simply a final product. (Diamond et al., 2015) It is well known, that H&M has its own "rule" to set the stores in the best location at all times. Besides that, they pay much attention on how the store windows are designed with an eye to "invite" the customer. Network Structure of Retail Organizations As it was said earlier, H&M, as a retailer, owns about 1,500 stores all over the world, whereas an average medium-sized international retailer has around 500 or more stores. In addition to that, both relations between local units and head office and bonds between the local sectors play a significant role in a retailing business. Also it is not a secret, that H&M is using a common IT platform to link all the departments together in due to make them the knots of a net. (Müller et al., 2015) Big amount of Suppliers and Customers The cost structures in retailing are rather different from manufacturers’, as both the demands and competitive processes are local in retailing. (Swoboda et al., 2012) From all the data, I have looked for, I can say, that H&M faces the competition from international/local retailers, individual/department stores, no matter which market it enters. Psychic distance In the end of the analysis, I would like to go deeper talking about factors, which affected the extension solutions of H&M with the help of the psychic distance concept. Internationalization process of H&M started from penetrating neighbor Nordic countries like Norway and Denmark (H&M Annual Report, 2007). When I look at these markets from the standpoint of diversity in language, legal, educational and political systems, which are the decisive factors influencing the psychic distance, I see, that extremely similar with the home market. For example, Swedens, Norwegians and Danish can talk to each other even by speaking their own tongues, also legal and political systems develop in a single direction through all the history. Hereby, I can sum up, that the psychic distance between Sweden, Denmark and Norway is quite low. In 1976 H&M penetrated a couple of Western European markets, first were UK, Switzerland, Germany and Netherlands (H&M Annual Report, 2007). These countries can be represented as the following phase from the standpoint of escalating psychic distance. I would like to bring your attention to the fact, that English and German speaking countries were entered first. This way the communication is not really a big "block", even if it is rather less comfortable than using mother tongue. In 2003 H&M Company decided to enter to USA market and one year later to Canadian one (H&M Annual Report, 2007). The psychic distance from the domestic market is increasing again, because of difference in political and legal system, business practices, marketing infrastructure, industry structure and culture, but H&M Company was lucky to gain some experience in foreign operations before. As you can see from that, all the risks, connected with foreign markets, have largely declined over time. Next stage was Central-Eastern Europe countries, I suppose, because of 15 years after the break-through in this part of the Europe, so legal, educational and political systems of these countries became quite consimilar with other European countries, and also because of desire of these countries to join the EU. The last and most challenging stage is entering Middle East markets. Those countries are extremely distant because of all the factors in the concept of psychic and cultural distance, including geographical point. Even range of products is of different because of Muslim clothing restrictions. Conclusion As you can see in the analysis above, I found, that H&M has successfully entered international market by holding owned branch offices. While being a retailer, H&M cannot be an exporter, as licensing and turnkey projects are also excluded. It is becoming real for H&M Company to keep the logistic and distribution control by following the strategy of fully owned subsidiaries, what is vital for H&M competitiveness level. Nevertheless, the situation is different in the Middle East, where Alshaya, the franchise partner, takes place, because of inability to hold branch offices there. Despite the fact, that company really does not hold its factories, we could represent production offices like a sort of entities placed in external markets. As the conclusion, I can say that establishment chain of H&M Company consists of three steps: franchising, wholly owned sales subsidiaries and manufacturing offices.
Appendix 1. Milestones in H&M development. Source: Li, J., & Frydrychowska, M. (2008). The international expansion of a multinational company: A Case Study of H.
2. Market entries and international operations of H&M. http://about.hm.com/content/dam/hm/about/documents/en/Annual%20Report/Annual_Report_2007_en.pdf [Accessed 19 November, 2015]
3. Conceptual framework concerning the question «How did H&M enter the international market». Source: Li, J., & Frydrychowska, M. (2008). The international expansion of a multinational company: A Case Study of H&M.
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Date: 2016-04-22; view: 896
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