H&M
Introduction
If an industry has decided to conquer the international market, there are many choices that will be opened. These options may include the cost, risk and the degree of control that the company will encounter. In entering an international business, it is important that the management of the company should be able to choose a marketing entry strategy and carefully choose the product that the company will market. Exporting, is the simplest form of marketing entry strategy which includes direct or indirect method such as using an agent, in the case of direct method and counter trade if the company opted to implement an indirect method. Moreover, if the business firm wants to be known globally, there are many other ways to choose from like joint venture or export processing zone. If the management of the company has decided to choose the export strategy, they must include in their operation the specific channels to market their product.
Since, fashion has invading people style of living the product that has been chosen to go international market is the fashion cosmetics such as clothes, denims and other beauty cosmetics. Hence, this paper will provide a marketing entry strategy for the clothing company using Porter’s Five Forces model (, 1980) (See Appendix 1) and SWOT analysis. The company is a new entrant to the Chinese Market, thus, this paper will provide a marketing entry strategy analysis for the company as it invade the market of China.
Competitors Analysis
Competitor’s analysis is very important when a company will be considered as a new entrant within the market place. It is essential so that the company will be able to know their competitors and the possible strategy that they may use to level up such competitors and know the needs of the target market. There have been several clothing and cosmetic companies in China. These companies have spent three years to increase their levels. Actually, there have been 4 leading clothing companies in China (i.e. Baoxiniao, Bosideng, Dayang and Ever-Glory International). Thus, this means that H&M will enter the China as a beginning industry considering many competitors within the market place.
Marketing Entry Analysis
Utilising Marketing Mix
Traditionally, marketing has been utilised by the private sector in decisively increasing the capabilities of an organisation. Marketing can be considered as one of the most important element underpinning successful business creation (1994). Perhaps because of its complex applications, marketing has been defined in a variety of ways ( 1988). The marketing concept was first promulgated in the late 1950’s (1990). The importance of marketing concept incorporates oft-repeated elements such as: customer orientation; integrated marketing efforts; and resultant profitability ( 1990). Part of a marketing strategy is the utilisation of the marketing mix.
The marketing mix principles is controllable variable that is why it can be adjusted on a frequent basis to meet the changing needs of the target market and other dynamics of marketing environment (, 2004). In relation to marketing plan, marketing mix includes both short term and long term strategies makes for a more profitable marketing mix. Long term strategies build brand/company awareness and give sales revenue a permanent, gradual boost. Short term strategies create a temporary, immediate revenue boost by giving buyers an incentive to purchase. By implementing both long and short term strategies, you can attend to immediate sales goals while building your business reputation and goodwill (, 2004). (See Appendix 2)
1.1. Product
H&M AB (originally known as ), is a Swedish clothing company, known for their inexpensive and fashionable clothing offerings. It was established in in Sweden in 1947 by , though at the time it only sold women’s clothing and was called . Swedish for “hers.” In 1968, acquired the premises and inventory of a Stockholm hunting equipment store named . Included in the inventory was a supply of men’s clothing, prompting to expand into menswear. Accordingly, he renamed the store later abbreviated to H&M ().
H & M is considered as one of the world’s favourite and preferred designer of apparels and clothing for man and women. In addition, H & M is also known not only for their fashion cosmetic but because of the quality of the clothes designed durability and the funkiness of its clothes. Through the online stores, H&M provides the US, UK and European Market an exclusive clothing designs. The main goal of this company is to provide innovative designs of apparels and clothes for different types of people in different countries all over the world. The company has been known because of its strategy of providing clothing designs exclusively for each country’s preferences and needs.
1.2. Pricing
One of the advantages of the H & M is when it comes to its pricing tactic. In order to be known into the market place and as a new entrant, the company will provide its target market with an affordable cost while providing them a high quality products and services. The company will be given the customer and client a price that is lesser than its competitors so that the consumer will be enhanced to buy and patronise the H & M clothes and cosmetics.
1.3. Placement/Distribution
To be known in the market place, the product will be distributed directly to its clients and consumers. And to be known internationally, one of the strategies that the product will utilise is going on a joint venture with distinguished distributor of apparels, clothes and cosmetics, providing them with great offers, so as to market the product of the H & M.
In 2003, H&M announced its entry into the traditionally exclusive Milan fashion scene. Initial analysts declared that the high-fashion Italian market would be extremely resistant to the entry of this low-end competitor. It remains to be seen if H&M and other low-end retailers will be able to find a market there. In February 2004, The Gap, another prominent international retailer, sold off all of its German outlets to its competitor, H&M.
H&M is co-operating with and introduced a line by her in the autumn of 2005. The planned face for this campaign was British model . On 20 September 2005, H&M announced they have dropped for the advertising campaign of their autumn clothes range, stating that her image was “inconsistent with H&M’s clear dissociation of drugs” in light of recent drug allegations. The contract was reportedly worth £4 million a year. Singer and model was featured in a short film and promotion campaign for the new denim jeans for women as well.
H&M launched its first American outlet on March 31, 2000 on New York’s famous Fifth Avenue. Following the success of that flagship, additional outlets were opened in the SoHo, Gramercy, and Herald Square areas of Manhattan, followed by outlets in Upstate New York in Syracuse, Utica, and West Nyack. The brand then expanded to other regions of the country, including Chicago and its outlying suburbs.
The first two H&M stores to appear on the West Coast of the US opened in San Francisco, California on November 19th, 2005. One store is located at 150 Post Street (next to Brooks Brothers), and the other store–H&M’s bigger West Coast flagship–is located at 150 Powell Street.
H&M opened its first Canadian store in Fairview Mall in Toronto and soon after, its flagship store in Toronto’s Eaton Centre in March 2004. Following great financial success, H&M opened ten other stores within the Greater Toronto Area. Stores will be opened in Montreal in Spring 2006.
H&M continues its expansion in the Canadian market, planning to double the current 11 stores to 22 in Canada by end of FY2006. Planned new markets include Barrie, Hamilton, London, Kitchener/Cambridge/Waterloo, St. Catharines and Windsor. Although current expansion is primarily in the Ontario market, plans for expansion into Quebec continue, with the opening of 5 new stores in Montreal, beginning in March of 2006. The first store to open will be in the Fairview () shopping centre on March 30, followed by one in the Rockland Centre (April 6), the (April 13), and the (May 18). So far, only Rockland and Laval locations will be stocking menswear. Certainly, expansion into Western Canada will start in 2007, continuing into 2008 through 2010. ()
1.4. Promotion/Communication
To promote the company and its product, the company will use video advertisements, print advertisements and the concept of e-marketing. These promotion and communication strategy will tend to meet the consumers form different places everywhere, especially those target markets or the consumers in the working place (See Appendix 3).
Moreover, since the trend in the market place today is the usage of e-marketing, the company will provide a website that any client can access. The use of the Internet is changing high-tech marketing overnight while different industries have been trying to use it as part of their marketing strategy. It does not only reconfigured the way different firms do business and the way the consumers buy goods and services but it also become instrumental in transforming the value chain from manufacturers to retailers to consumers, creating a new retail distribution channel (, 1999). E-marketing is a powerful tool used by different business organisations around the world. It is defined as the process of achieving marketing objectives through the use of electronic communications technology. (2001) have provided a 5Ss’ mnemonic for how the internet can be applied by all business firms for different e-marketing tactics. These 5S’s are selling, serve, speak, save and sizzle.
E-marketing is also known to be the online marketing strategy utilised by different company whose objective is to be the best company in their field. Thus, the H&M will create its own website (). The main objective of utilising e-marketing strategy is to keep in touch to different internet users to be able to attract more clients and consumers. All in all, through the website, whether the user is a customer, employee, stockholders, vendors, retailers or end customers, the true strength of e-marketing is acceleration of the business portfolio.
1.5. Market Segmentation
Here, H&M will provide its target consumers for its product. Primarily, the context of the market segmentation for this company will be the Psychographics. Psychographics includes social class, lifestyle, and personality variables ( 2000). The end result of using these variables is a psychological profile of each market segment. Issues also examined the customers’ loyalties, habits and self-concept. Social class describes how individuals want their office automation will meet their comfort and satisfaction, what they consider important about their immediate surroundings, their opinions on various issues, and their interests.
As lifestyle studies concentrates on what the consumer requires, using these study results as marketing strategies eventually became a marketing concept. (1960) is one of those highly credited for popularising this specific marketing concept. The marketing concept is a basic philosophy that maintains that an organisation should endeavour to satisfy the needs and wants of customers through a coordinated set of activities that also allows the organisation to achieve its goals at a profit. Some firms fail in this task since they are more concerned with making a product and selling the product than satisfying potential customer wants and needs.
The H&M must be able to consider its consumer, especially the demands of the consumer so as to let the business have an opportunity of having an expansion of its business portfolio as required by the consumers and the clients’ need (See Appendix 4).
SWOT Analysis
In order to determine the different resources and capabilities of H&M, a SWOT analysis is appropriate. This specifically analyses the strengths, weaknesses, opportunities and threats of a company. Situational analysis, where the SWOT technique is applied, is an integral procedure and a very powerful tool for businesses to instigate effective marketing plans. As the initial procedure of creating a market plan, situational analysis aims to comprehend the environmental as well as the organisational influences that surround a particular business establishment. A SWOT analysis actually has two parts and both are equally significant. One is the external analysis and the other focuses on the internal environment. When conducting an external situational analysis, the business’ customers, market and competitors are analysed. Relevant information regarding the company’s market segments, their competitor’s relative weaknesses and strengths as well as the industry as a whole.
An analysis of the external environment requires more than just a summary of what the competition is doing. The external environment is comprised of two elements — the societal environment and the industry. The societal environment includes a review of major trends in society affecting organisations across all industries. These trends include political, economic, social and legal. An analysis of the industry takes a look at factors that have a more direct bearing on the business. Hence, in addition to analysing the competition other groups must be similarly evaluated to ascertain that no opportunities or threats within the environment are overlooked ( 1997). On the other hand, internal situational analysis focuses on the identification of the company’s distinctive competencies, expected growth, their assets as well as their liabilities. The internal analysis also illustrates the core values of a company, and in what ways can these values be enhanced or beneficial to the market plan ( 2002). Below is the SWOT analysis for H&M:
Strengths:
Weaknesses:
Basis for strong management team
Possibility to evolve into range of offerings
Very focused management/staff
Well-rounded and managed business
Efficient Marketing plan
Focus maybe too narrow
Lack of awareness amongst prospective customers
Potential need for larger premises
Absence of strong sales/marketing expertise due to new environment
Threats:
Opportunities:
Major player may enter targeted market segment
Economic slowdown could reduce demand
Market may become price sensitive
Market segment’s growth could attract major competition
Market segment is poised for rapid growth
New markets offer great potential
Distribution channels seeking new products
Potential to diversify into related market segments
Emerging new technologies may move market in new directions
Synthesis
China is the fourth largest country, and with a population of 1.3 billion people, it is bound to be the largest economy of the future. That is, if it could set right its marketing policy after long years of economic “dark ages” under Mao Zedong’s autocratic socialist system. After the World War II, the communist government imposed a Soviet style centrally planned economy. Although this system ensured that the country was free from foreign intervention, there was a strict control over the everyday lives of the people, and the economy suffered, became sluggish and inefficient. DENG Xiaoping, who succeeded Mao, started focusing on a market-oriented economic development (: 2005).
China went through a major marketing philosophy change after the government initiated the policy shift. Previously, the only way to export goods to China is by directly approaching a government FTC (Foreign Trade Corporation) for the particular commodity to be exported The closed distribution system of the government has been shattered and this meant that the free market gave birth to systems that provide goods based on real market needs instead of what the bureau decides to supply. The advantage of this move quickly became evident as the living standards of much of the population have improved enormously and the people have more freedom of choice. The objective of this essay is to show the importance of further enhancing China’s marketing philosophy to maintain this development. After a free market has been established, the next step would be import and export. In the 20th century, the major concepts that should be incorporated in China’s marketing plan are GLOBALISATION and e-commerce. China had opened its door to the rest of the world, but it is still not that simple for the foreign investors to capture the Chinese market.
China had indeed embraced globalisation, but of a sort. Travelling through Shanghai, it would be hard to distinguish it from Taipei, Hong Kong, or any US city for that matter. The wide streets are packed with automobiles. Bright Neon lights decorate the shops. You will find Chinese wearing Nike shoes or Calvin Klein tees, and drinking Coca Cola. Patrons fill the Discos and bars, where rock American rock music played and German beer were served all night. The impression is that foreign products and influence flows freely and accepted readily at China, but those who think they understand Chinese market completely better think twice. In his article “: ”, compared China to an awakening dragon who tossed down the large number of foreign investors who sat atop it, trying to ride it without fully understanding the dragon (2000). The Chinese market is not as accessible as should be.
There were of course foreign companies able to set a stronghold in the Chinese soil, but only those who came utterly prepared, knowledgeable in Chinese society, and committed to do business. After all, China is a large country with its transportation and communication sector still under development. Regions are separated and fragmented, and therefore cannot be considered a unified market. The immediate issues faced by the early investors were cultural differences, trade barriers and government restrictions. Coca cola, Philips, Kentucky Fried Chicken, Nokia, Microsoft, and Johnson and Johnson were some of the companies who succeeded in taming the “dragon”. There is social behaviour in China that in itself is not bad, but it does affect the country’s globalisation process. The predominant thought in Chinese Marketing System is that in order to do business successfully in China, the business must be organised, implemented, and operated in China. A business have no hope of much success if operated through long distance management, controlled by overseas main branch, or implemented by a foreign team that excludes participation by the locals. The Chinese are like westerners after all, sincerity and friendship is appreciated. A business in China must show acceptance of the host country. Donation to the government and charities , company leaders’ visits during China’s important days, company participation in China’s activities or drives, these are likely to make a foreign company accepted by the Chinese market. There were a lot of examples that illustrate this, involving the big foreign corporate names in China today.
Developing e-commerce is another impact that is brought about by globalisation. The principle of doing business internationally raises connectivity issues, which are better solved by e-commerce, which means doing business transaction electronically through the internet. E-commerce removes the geographical separation between regions, and made dealing with foreign trade a snap. E-commerce is just on its initial phase in China, but it is expected to grow as the Ministry of Information Industry starting to structure the basic framework for e-commerce development, rules and regulations.
Thus, we find that for China to emerge as a economic leader, it must embrace a significantly different marketing philosophy. The future of any developing country lies on globalisation, in trading with other countries without bias and discrimination. China must practice readiness to accept the trends in marketing strategy. Contact with the outside world market should be welcomed, not doubted. That way, china and its 1.3 billion people, would stand as the new pillar of world economy
Recommendation
The above discussion has evaluated the marketing entry plan of the H&M as an emerging clothing and cosmetic business in China. Through this analysis, the company has utilised some marketing concept to be able to be competitive in the business world, specifically, the clothing and cosmetic industry. And since the main mission of the company is to provide apparel, clothing and cosmetics suitable for the current trend, the company should efficiently create a product that would enable the client to buy it and be satisfied about it.
It is recommended that the company should be more innovative in making clothing and cosmetic that would make them known in the marketing arena, locally and internationally. To be able to be known worldwide, the company must include in their strategy the acquisition and merges, to properly utilise branding strategy. By acquiring, other famous company within the software field, the company can easily enter the marketing arena in the global competition.
Conclusion
Although, H&M is a new market within the business arena, the company has been utilised a strategic marketing move, including a strategic planning in order to make the market be know in the marketing environment. The company has also made it possible to be connected to their target market thru the use of technological advancement like the e-marketing. Moreover, this marketing entry strategy can be considered as effective since the company has included all the factors to be assessed in order to make the business prolong its competitiveness and survive in the threatening place of the market.
References:
Appendices
Appendix 1
Figure 1: Porter’s Five Forces Model
Source: . (1980).
Appendix 2
Marketing Mix
Figure 1: The Concept of Marketing Mix
Appendix 3
Figure 2: Marketing Communication Process
Source: 1965.
Appendix 4
Figure 3: Buyer Decision Process
Source: 1991
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