H&M originated in Sweden it is a retail clothing company that has become renowned for its range of clothing collections which are based on the most recent fashion trends in the market. H&M was established in the late forties in Sweden, and started business only with the sale of female clothes. (www.hm.com) They later extended their sales and production to men’s clothes in the later part of the sixties. Today, majority of the clothes sold in H&M stores are produced in Asia, Europe, and Northern Africa; specifically, Egypt, Pakistan, Bangladesh, china, India and turkey. (www.hm.com) H&M today boast of over 2200 stores in 38 countries ranging from the United Kingdom, Denmark, Germany, Switzerland, Russia, Austria, various Asian Countries and The United states of America. As of early 2011, H&M employs in the region of 87000 people across the world. (www.hm.com) Very recently, H&M began selling online and towards the end of January 2011 began offering online sales services in the United States of America. (www.hm.com)
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H&M has succeeded to thrive in this current fashion oriented world because they try to and with success stick to their corporate objective goal of providing fashion and quality at its best available price. (www.hm.com) Expanding and maintaining financial stability are this companies two strategic objectives and as of 2008, H&M had as goals to as much as is possible, increase and maximize sales in existing stores, and to increase the number of new stores by an average of ten to fifteen percent every year. (www.hm.com)
Considering that H&M has a desire to grow and maximize its financial capabilities, it is only but logical that as it company it should consider increasing its stores in other countries. A continuous saturation of stores in an existing country would not do the company as much good as if they decided to explore and make efficient use of all the resources available to them in a new market. This proposal will be looking at the avenues through which H&M can enter and take full control and advantage of the Indian fashion market. We will be looking effectively at the market entry strategy that can be used by this company to penetrate the market.
The market entry strategy will give us an idea of how H&M’s products can be sold, distributed and delivered in the Indian market. It s important to note that when goods and services get exported to another country, the market entry strategy will have to define the various methods by which these goods and services will be delivered and also how contracts can be acquired. Considering that India currently produces part of H&M clothing I am hoping that penetrating this market is not going to be a very difficult thing to do. This is because being an employer in the country already they have to an extent a platform with their employees from which they could start building on.
If H&M is going to have to consider conquering international market in general and India in particular, then they have to consider the options of risk, cost and control that the company is going to have to deal with in the new market. Therefore in planning a market entry strategy for a country like India, management of the company will have to decide which products are better off being sold in this region.
So far, it can be said that H&M is a considerably renowned brand, so amongst the options it has for penetrating this market, it could get into things such as joint ventures or set up in an export processing zones.( Menon, et al. ,1999). An export processing zone, more often than not is an area which is typically set up in developing countries by their governments to encourage an hence increase industrial and commercial exportation. (Menon, et al. ,1999). Exportation to an extent can be considered as the simplest form of a market export strategy, and it involves the use of direct and indirect exportation methods. Some of these methods include the use of agents as well as the use of counter trade. Counter trade is a process where by goods and services are exchanged for goods and services and their values are written off against each other when the company is balancing its accounts. (Menon, et al. ,1999). As a result of advancements in technology, companies are more likely to indulge in direct marketing. For example, The world has gradually become a global technology village. In the case of H&M, they could simply alter the delivery options of their online website to include deliveries in India. They could also simple just create an H&M website in local Indian languages which is going to effectively serve the Indian population.
Relationship marketing has totally evolved the ways in which traditional marketing is carried out and in more recent times has become the model of marketing practice. (Menon, et al. ,1999). It has not only done a lot by changing customer advocacy from satisfaction to delight, but it has tried to exceed expectation by increasing the quality of services offered. According to Berry and Parasuraman, ( 1991) Relationship marketing is concerned with a mix of trying to develop, retain and attract relationships with customers and potential customers. (Berry and Parasuraman, 1991) Taking relationship marketing and management into perspective, H&M will be able to develop an approach which is going to be able to target the various challenges of the modern Indian market. Relationship marketing has the ability to transform to multiple service usage from single service usage.
Competition nowadays, and demand for customers in the fashion industry keeps on growing at an ever increasing rate, therefore, as such, a positive attitude to customer care, attracting customer and the ability to retain them should be a top priority if penetrating the new market is going to be feasible. (Berry and Parasuraman, 1991) If H&M bear this in mind when trying to penetrate the Indian market, there is every chance that they are going to succeed. As this will strengthen their position to offer an effective and an efficient customer service in the Indian market. This evidently gives India the chance to introduce new products into the Indian economy as such providing a market entry strategy for the company. The components of Relationship marketing, include things such as sustained orientation, finding reliable buyers, making a difference between the different levels of relationships between a buyer and a seller, Long term orientation, very high levels of consumer satisfaction and service quality should be the duty and responsibility of every employee.
It should be noted that the benefits a successful marketing relationship plan is that indifferent customers are transformed into loyal customers and there is a real chance of retention of clientele and H&M can greatly benefit from this as customer retention is a good platform for long term profitability. (Menon, et al. ,1999).
Customer retention can be achieved through a customer relationship program, which focuses on retaining customers. Over time, customer retention has become more important to a company than customer acquisition. It has been said that if the rate of customer retention is high, there will be a corresponding high net present value of a customer. ( Dawkins and Reichfield ,1990) As such , if HM are able to not only acquire customers, but they do everything with in their ability to try and keep these customers, they will notice a tangible benefit from a sustained income stream. Saren and Tzokas ( 2000) brought up the usefulness of relationship marketing by coming up with a difficult to copy and unique knowledge though the channels of interacting and dialoging with customers. The long term goal of this to H&M undoubtedly is sustained long term profits.
The factors that determine the customers store choice, Loyalty of a customer, Customer retention and relationship marketing have been extensively studied around the world. It is therefore almost accurate to say that they is the existence of a rich literature review regarding the fashion industry. ( Dawkins and Reichfield ,1990) It must however be said that they is still considerable scope for improvement in existing literature. Very little has been done on the emergence of new store formats in India and how they impact on consumer behavior. These are thing, which H&M have to research on heavily in order to me able to penetrate the Indian market.
This marketing proposal therefore is going to take a look at how H&M can make use of the marketing mixes available to it, look at the market segmentation, targeted goals and it will make a SWOT analysis of the proposal looking at the possible, strengths, weaknesses, opportunities and threat involved in entering the Indian market. ( Dawkins and Reichfield ,1990)
MARKET SEGMENTATION.
A process of aggregation, are the words by which you can describe market segmentation. The ability to put people with specific needs into a particular cluster. ( Perreault & McCarthy, 2002). Customer segmentation is very important for an effective market entry strategy. If market segmentation is carried out properly, then H&M will be able to identify the particular market for its particular products. Market segmentation is a very important part of a successful market entry strategy. For market segmentation to succeed, segmentation has to be in line with the different levels of products that the company is will to put out in the market. As such H&M have to make use of this market segmentation resource to be able to make use of market segmentation properly to be able to identify the segment of the market that they intend to target. H&M can segment its market either by using demographics, geographic, psychographics and behavioral segmentation methods. . ( Perreault & McCarthy, 2002)
Life style, variability in personality, social class and life style form the bases of psychographic market segmentation. How important customers immediate environments are to them is of utmost importance Social class also brings with it different or altered demands and needs If these variables are used, a psychographic profile if the market can be built and with this in mind, H&M can know or have a better idea of what products will be better suited for that kind of market. . ( Perreault & McCarthy, 2002)
Variables which can be taken into consideration when doing a demographic segmentation include things such as age, gender, The size of families, family life cycles, income, education, population, ethnicity, religion and social class.. If H&M takes these things into consideration if it does a demographic market segmentation, then they will know what king of product to better serve the market and it will give them a better chance of better market entry.
Geographic market segmentation, can also be used, in this case the market can be segmented based on the climatic conditions, regions in the country, size of a metropolitan area etc. If a particular region in the country is known to be either too cold or too wet, this kind of information helps H&M to penetrate the market as it knows exactly the kind of fashion or clothing items that this sector of the economy can be interested in.
The market an also be segmented on the bases of behavioristic segmentation. This is based on actual consumer behavior toward the products and services. Various variables such as readiness to buy, brand loyalty, usage rate, and occasions available in the particular region will affect the way in which the market can be segmented. If there is a particular sector of the country that is constantly in festive mood, then H&M will have to take this into consideration when segmenting the market as it will give them a better idea of what products to supply that part of the country and It further gives the company a chance to penetrate the market. Market segmentation is vital for a company and in order that a company like H&M can be able to penetrate the Indian market, these various market segmentation techniques have to be taken into consideration.
Situation analysis.
The SWOT analysis can be made to see the strengths, weakness, opportunities and threats that H&M can be exposed to in its bid to penetrate the Indian market. I think that the first potential threat that this company is going to have to face in the new region is the cultural differences that exist between the lifestyle in what I can call the normal H&M markets and the lifestyle in this part of the world, with out trying to sound round, India is a culturally conservative country, as such it will be difficult to an extent to penetrate the market with what I will term “western trendy fashion” the culture demands that lot for the woman cover up their bodies, but modern day fashion design exposed a lot of the body and leaves very little to imagination.
A potential strength of entering this market is that H&M already use suppliers from this part of the world, as such with a little more research and changes in design, they will be able to produce goods which meet the requirement of the Indian market.
As opportunities go, penetrating the Indian market will provide a a great opportunity for H&M, the country has a very high GDP and a very large population. People are the bases of a business and with a large number of people available in India it is only right to say that there is a market for the goods and services that H&M has to provide, as such, this market really only needs to be tapped right
The major weakness that H&M will face in this market is that it will be entering this market as a novice as such it will face a lot of competition from other existing retail businesses in the area.
Goals Targeted.
Generally, the main goals of H&M will be to penetrate the market efficiently. This penetration is going to give the company a chance to build long term and long standing relationships with its clients which in turn will lead to a sustained source of income and profits generation in the Indian market.
The marketing mix
The marketing mix is a very important part of any marketing proposal, it is very important to note that the marketing mixes give and idea of how the goals and aims of the company can be achieved. Putting this into perspective, Having an idea of the product, the promotion technique which will be used, the market place, keeping the people at the center of the business, being aware of physical evidence, the process which will be used and ultimately the price at which goods are going to be sold. All in all, for the company to succeed in penetrating this market, the mixture of these seven P has to be gotten right.
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PRODUCT
H&M originated in Sweden it is a retail clothing company that has become renowned for its range of clothing collections which are based on the most recent fashion trends in the market. (www.hm.com) H&M was established in the late forties in Sweden, and started business only with the sale of female clothes. They later extended their sales and production to men’s clothes in the later part of the sixties. Today, majority of the clothes sold in H&M stores are produced in Asia, Europe, and Northern Africa; specifically, Egypt, Pakistan, Bangladesh, china, India and turkey. (www.hm.com) H&M today boast of over 2200 stores in 38 countries ranging from the United Kingdom, Denmark, Germany, Switzerland, Russia, Austria, various Asian Countries and The United states of America. (www.hm.com) As of early 2011, H&M employs in the region of 87000 people across the world. Very recently, H&M began selling online and towards the end of January 2011 began offering online sales services in the United States of America. (www.hm.com)
H&M operate with a business concept of giving customers the best value in fashion in todays market at the most affordable price. It is important to note that H&M do not produce their own goods; they buy their goods from various sellers and distributors in the Europe and Asia. (www.hm.com) Considering that H&M is trying to penetrate the Indian market. It can be an important point to make here that liaising a lot more with suppliers in the Indian market will be very useful, as they have a better idea of the kinds of products, which are in high demand in this market. (www.hm.com) It s also important to note that India has different cultural values, For example, the females in this region generally put on clothes which cover a lot more of their body.so it will still be important to liaise with the suppliers so that they supply the kind of items that are required in this kind of society. (www.hm.com) If H&M takes this these things in to consideration, there is a greater chance that they will be able to penetrate the Indian market more effectively and more efficiently. As Such, Know what exactly is required by the Indian market and enough research to find out what is good for this part of the country will therefore be very important in building a proper product customer relationship and enhance market penetration.
PRICE
Pricing is another very instrumental tool, which can all but determine if the company will be able to penetrate the market. It is important here to note that unlike a lot of markets that H&M currently operate in, India is a third world economy, better put, India is a developing country. ( www.economywatch.com)They have a gross domestic product of 1.43 trillion, making them the fourth biggest economy in the world. They have had an average economy growth rate of about 7.5% in the last couple of years. This shows that there is real market penetration potential in this economy for H&M. ( www.economywatch.com)It is however very important to note that even though they have one of the worlds largest and a very impressive gross domestic products figures, they are ranked in the 140,s for per capita income. When compared to other countries, this means that people in the Indian market generally have a lower level of disposal income to themselves. (www.economywatch.com) Putting of this this into perspective, in the case of H&M penetrating the Indian market, the pricing of the goods and services have to be done right. Pricing will be very essential in that the more affordable the goods are that H&M bring to the market, the more likely people in this market are going to buy these goods and services.
There are various pricing strategies that H&M can implement. For example, they make use of the penetrating pricing strategy, where in they set the prices of their good at a considerably low level, with the main aim of capturing the market, giving buyers a chance to have a feel of their product, and when they are convinced that they have attracted and retained their customers, and are sure that the customers fully appreciate the value of their goods, they can begin increasing the prices. Other pricing strategies that can be used by the company include the economy pricing strategy, premium pricing, price skimming, price discrimination, pricing based on geographic, psychological pricing and product line pricing. What ever the pricing strategy that H&M decide to implement, it is important that they get t right as this can totally make or me the whole market penetration strategy in the economy.
PLACE
Personally, I am of the opinion that because H&M already make use of producers and suppliers in this market, they are at an advantage because they are almost already aware about how the sector of the economy functions. Firstly, because these goods are going to be sold in the Indian market, H&M will have to source more cost efficient suppliers of their items. They therefore have to find a channel of distributions of their goods which is going to permit these good arrive in the hands of the customers at the most cost efficient price. In order to minimize cost, rather than maybe setting up or investing in building stores of their own, H&M can rent space in large well renowned departmental stores. This to an extent reduces the overhead cost of penetrating the market and this reduction is past on to the consumers in the form of lower prices and it gives H&M a real chance of penetrating the market through the penetrating pricing strategy. H&M can also get involved in joint ventures with already established organizations in the area. This will give them a real chance of placing their products in the Indian market. H&M can also benefit from research about the market, which has already been carried out by its partner in the joint venture. All of these will translate to a reduction in the prices at which goods will be offered to the Indian market. Generally, we can say that there are various channels that H&M can consider when doing this. They can decide to use a direct channel of distribution by selling directly to the consumers or and indirect channels by selling through a wholesaler.
PROMOTION.
If H&M is going to succeed in this market, advertisement is going to be very important. And it could actually e the deal breaker. Putting up billboards and engaging in radio and tv advertisement will be key. It is also important to know that the sporting culture in India centers heavily on cricket. As such it will be important for H&M to try to indulge in some form of cricket sponsorship. This will be striking their consumers at their softest spot and will go a very long way to attract customers and retain customers. E -marketing is another technique, which can be utilized. However the extent to which this can be used is limited as India is a developing country and the extent to which everybody can have assess to the Internet is limited. This might be effective but not as effectively as H&M might have wanted. On a whole, advertise is very important to and a very necessary ingredient to penetrating the Indian market.
PEOPLE
In order to succeed, H&M must put people at the forefront of its business. People in this case refers to the customers that it intends to serve. Customer satisfaction needs to be its priority and in order to achieve this, H&M will have to engage in effective training of staff who deal with customers. They will have to train them to respond and act in ways which are acceptable in the society within which they operate. The customer service teams have to me fully aware of the technical knowledge and should baa be to provide adequate technical support as and when required. This will go a long way to help H&M penetrate the market.
Finally, we have the physical evidence and the process in which these mixes have to be achieved. Presentation of items, which are for sale, is very vital; dealing with customer services is quite difficult as the material part is almost impossible to measure. As such people will base their judgments on things like the way in which the shop is arranged, decorations, presentation of staff, how nicely the website looks as well as how well the brochure has be resented.
The process by which these mixes will be achieved is also of utmost importance
Finally, the success of this proposal in penetrating the market will eventually be measured in financial terms. After the first year of operating in this market, we will see using a profit and loss account whether continuation is a good option for the business. The main aim of any venture is to generate profits as such we will have to continuously evaluate our position to make sure that we are striving to continually achieve our goals.
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