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In the competitive market, the companies are looking onward to expand their business in the global market. The companies merely rely on global strategies to achieve something in today’s world. The global expansion gives companies a good opportunity to tap into a new market and diversify their products in different regions of the countries. The global strategy helps the company to increase its sales across the world. Taking business internationally can help companies to stay competitive in an increasingly globalized world(Matovic,2019). Globalization can help a company to gain a competitive advantage and expand a company. International expansion of a business provides an entirely new market of people that can allow a company to grow significantly. Companies should analyze foreign markets for their potential size, cost of operations, and potential customers available. A Company can establish a legal presence in the new country through a subsidiary company. Global expansion will help the company to establish new revenue streams and facilitate growth opportunities. This report will also evaluate how the global expansion will help the company in the international market. In this report, the H&M clothing company is based in Sweden(Chuvankova,2019). This report will discuss the expansion of H&M Company into the Maldives by adopting various strategies in the new target market.
H&M (HENESS AND MAURITZ) is a global company which is based in Sweden; it is a clothing brand that has over twenty six hundred stores in different market globally. The company is known for trendy, lower prices, and high-quality products. Their aim and goal are to provide class fashion at reasonable prices. H&M can grow its business in the potential market. H&M is pursuing subsidiaries in Singapore and Malaysia as these countries are politically constant. It gain a competitive advantage of little risk in Singapore as well as Malaysia(Arrigo, 2018). Their market strategy is to enter new markets and focus more on growing their stores in the whole world. A company owns a subsidiary as a future expansion strategy because of the great opportunities in china.
represents that the net global sales of H&M Company in 2021 have amounted to about 22 billion. In 2020 over three billion were generate from Germany. The company aim to be a more sustainable alternative for today's aware consumers. The H&M invests in social improvement and reduces environmental crash through product life cycle.
H&M product range
The company's prices of products under this fashion product includes accessories and clothing including jersey dress, jumpsuits, sportswear, shoes, pants, tops, t-shirts, undergarments, jackets, cardigans, jewelry, etc. The company focuses on quality and at reasonable prices and launch new product lines at regular intervals. It has become leading fashion companies by its supply chain as a core cutthroat advantage and due to the complex supply chain structure, the company relies on an IT system that integrates offices, and stores. The business has created an operating model that is flexible and responds to market trends and reaches the market at a low price. As the competition is ever-increasing, the company is focusing on research and predict customer trends with a elastic operating system. Their focal point is on customer preference as a core competitive advantage.
The company is known for high-quality clothes at an average price and winning accessories that are admired according to the fashion trends. Price is the crucial element of the company in marketing and the reason is its affordable price range. The pricing of company products is comparatively less than its major competitors like Zara and GAP. It features many celebrities endorsing their products, customers tend to follow celebrities. H&M featured many celebs like Kendall Jenner, AditiRoaHydari, Tyler Posey, Peyton List, and many more. This company also makes sponsorship deals with some of the well-known names like Caitlyn Jenner, the weekend, etc. it also collaborates with high designers, style icons, and pop stars to make their brand appear more authentic. The brand also collaborates with Myntra, Moschino, Kenzo, and many other big fashion industries(Su, 2020). H&M also uses social media platforms to promote brands and sell on social media. The company regularly updates social media and features the post. A forming customer community is one more strategy of a brand that run a digital loyalty plan on an e-commerce stage where customer get points for every purchase and can redeem the points for future purchases and get additional discounts. The company offers discounts both online and in stores.
The top markets for the company are Germany, the USA, the UK, France, China, Sweden, and many more stores worldwide. The company can expand its stores by focusing on omnichannel sales. For better expansion, the company can increase the price range as it is a very famous brand and customers are loyal to the brand. The company can also take advantage by expanding its business in local areas of the country(Pérez-Bou et. al. 2021). The offline and online retail channels can also help the business to establish its retail operations and set up a robust distribution network across the country. The brand can operate its business in the Maldives because there are no other competitors in fashion industries like Zara, Gucci, or GAP, so the company can take this as an advantage.
In the expansion stage, H&M can use the Ansoff matrix to run its operation effectively and efficiently.
According to this model, the company can develop its market strategies and expand its product by engaging new market shares with existing goods. The H&M can sell products to existing, new, and customer competitors. Market development of business involves minor changes to the products to get used to new markets. The company can also replace existing products or expand its product range according to the geographical location. Diversification in the business offers great growth potential, as it is a famous brand the degree of risk is also low. Introducing offers and discounts will help the company to increase its sales in the Maldives or new markets. H&M is a big company that can optimize production expenses by producing it in bulk and make profits(Dawes,2018). The product development strategy is developing new and improved products for a consumer and they need to understand the need of the customers. Businesses can also take the help of pestle analysis in a different market to check the outcome.
Before entering any new market the company needs to focus on the market effectively. The case H&M is focusing on growing into the Maldives, the major advantage for a company is the tourism of the Maldives. A huge number of tourists visit the Maldives each year which would help a company in better sale and growth opportunities. All along with this, the Maldives government supported the expansion into their country which would help H&M in doing business expansion successfully in the new market(Shakoor, 2020). The Maldives is the perfect tropical landscape surrounded by sandy beaches and natural island beauty. It is known for its high world-class resorts situated in southwest Sri Lanka. Tourism is the largest economy in this country and contributes about 32% to its GDP. The Maldives has a great opportunity to expand the business; marketers are devising strategy's enhance the image and develop the business while simultaneously sustaining the tourism industry. Maldives promotion is actively taken by a government organization. The country has an enviable brand image in the marketplace and entrepreneurial drive. It is a good opportunity for H&M to establish its store in the Maldives, as it is a tourist place, and there is a good growth advantage for the company.
Opportunity for H&M in the Maldives
All the consumers have different perspective and buying behavior that is greatly influenced by their cultural values, as this is not in the case of Maldives as this is a tourist place the customer prefers trendy clothes according to the location. While entering the Maldives the case the company has to focus on the latest fashion trends of the customers. In Sweden, the company H&M target stylish and trending customers who are fascinated to spend their money on purchase high-quality clothes. H&M aim to target women’s, as they usually spend a lot of money on trendy fashion style item like clothes, footwear, undergarments, accessories, jewelry, etc of good quality(Sheikh Salman, 2018). H&M is a fast fashion clothing industry that owned outlets and sells them worldwide. It has a great opportunity to operate its stores in the Maldives because of high tourism. Its campaigns always make people with ideas and modern clothes at affordable rates. Products like travel bags to find stylish holdings and overnight bags for women, it has a great opportunity for the company to expand in Maldives (Giampiccoliet. al.2020). H&M business is financed by its resources and pursues different expansion strategies in each country. The company pursue licensing and a wholly own subsidiary as a mode of entry. It aims to compete with its competitor by rising its resources in all the market. The pricing strategy of the company is determined by the market price of the niches. Their inter-cultural strategy and expansion of stores have reached the brand worldwide. It provides people with fashionable products ideal for age grade.
The Maldives is a fast-growing economy because of its tourism and for economic development the government supports the expansion of business in Maldives market. H&M can get better growth opportunities, as it is a tourist place. While entering the new market the company is required to consider all the pros and cons carefully. There are different methods or strategies which a company can employ such as licensing, franchising, exporting, joint venture, piggybacking and acquisition are the strategies which can be used by H&M (Schwenset. al.2018). Franchising and licensing is effective mode of entry that can make easier for the company to divide profit and loss with another band while enter in a new market for doing commerce. Licensing will allow other companies in Target Company to allow the use of their property, this would lower the cost, and also franchising partner knows the local market. This will help them in entering the new markets successfully and would not require much funds and other capital of the company to establish new stores.
The company can also use a joint venture as acore strategy by establishing a jointly owned business in the Maldives with known brands like Mango which is a big fashion brand as both the partners can leverage their respective expertise to grow the market (Watson IVet. al.2018). But using a joint venture can create significant risks relating to liability and the potential of conflict and dispute between the associates. The issue arises when the venture is unclear, communication gap, resources are not distributed evenly and the difference between culture and management style. Partnership with a different business can be complex and takes point in time and efforts to build the right business connection. It also enables the transport of technology, assets, and information of the overseas market between partnership businesses. There is another mode of entry which is a strategic alliance in this the company can acquire a control interest in an existing company in the new market. H&M can get benefits from the knowledge, and experience of the existing organization.
Franchising is an agreement where the company grants a few rights and authority to other party. It is the best plan for the company for business growth in a new market. This agreement takes place between two parties' i.e. franchisor and franchisee. The franchisor sells products and rights to use their brand name. This gives the company a big way to grow a business without incurring extra costs on expansion because all operating expense of selling are borne by the franchise (Onyusheva, 2020). It also help in building a increasing goodwill, brand name, and reaching more consumers in the different markets of the world. The company not need to spend money on training because the franchisor provides this.
A positivity of an organization is regarded as potential and it does not disclose automatically. The crucial role is played by employee behavior as the main factor in a company's development. The employee's behavior in the company's performance has been identified as almost 50%, which can be regarded as significant in comparison with other factors. A positive organizational potential creates positive organizational culture and climate.
International trade has its own set of issue and challenges. Each country has its own policies, laws and cultural differences, rules, and regulations. Among these differences the time horizon, currency, and language are also important factors to be considered while expanding the business in another country. Language of other countries can also create a barrier for the company like the name of the product should fit well in other countries (Saleemet. al.2019). Every country has its own culture. Maldives apparels are diverse with a combination of different cultures clubbed into one island. It is a great tourist magnet that impresses a lot of tourists with its traditional costumes.
H&M has a wide variety of products all in one place (SeoandSuh, 2019). The exchange rate can be a big challenge for a company to expand its business in a new location, as price varies in different regions, which may affect the business profits and sales. Product pricing in the new market is the biggest issue. The company should consider its costs, logistics costs, and the price of the same products from local competitors to survive in the market. They also need to consider planning the position of their product as a low-cost or luxury brand in a different country. Every country have a different business attitude, this will help business to react to different situation in the market. Developing a successful team is a tough task for a company in a new market or country. There are language and cultural differences along with varying times and levels of technology access; it becomes more challenging for a company.
It is a good option for a company to set up a subsidiary company in the new market for expanding their business worldwide. A subsidiary company can provide the holding company with lots of advantages such as tax benefits, profits, increased sales, and property. H&M by entering the Maldives can expand its business and increase its brand recognition. The subsidiary company which will operate in the Maldives can grant a company access to new markets and increase its profit margin (Abdullaand Schmidt di Friedberg,2022). It can enable the company to diversify risk. As risk is a key factor for every business, the subsidiary may prove the safest option. The subsidiary company should focus on centralization and formalization of decision making, as well as integrate a portfolio to maximize the usefulness to headquarters. They should focus on innovation, research on trendy fashion styles, and the price strategy of the parent company. The company expands into different regions and comes up with new consumers and new selling opportunities that enable H&M to construct its brand in the potentially profitable fashion industry.
While entering in the new market the brand need to develop special strategies as per the new market. If the business strategies bring into line well with the market trends it will assist them in doing business effectively in a new target market. The strategic mode for entrance is the most important which is required to be associated well with the market trends of the new market. Selling a company's products in other country can introduce them to a big market, increases sales and profits, increase brand recognition, and extend the product life cycle. The company should require consulting locals to research regional laws to ensure that the business can take products into that country (Oishi, 2018). Alongside with this, the trade and industry condition of the brand and the normal earnings of the people in the market are requiring to keep in mind while deciding the price strategy. H&M should make use of a penetration price strategy while ingoing the new market. This will help the company to attract new regulars and managing better sales in the new market.
Expanding business in a new market is a tough assignment as the company needs to pay attention to diverse factors. The company has to go through all the relevant research processes before operating its business in the new market. Based on above-mentioned report it can be concluded that many different factor related to the new market should be keep in mind by the company while forming the global strategies for expansion. H&M was doing well in their existing marketplace but to attract new customers and increase sales. Effective marketing strategies and using both online and online modes of selling goods can help the company in entering the new market. The selection of the entry modes and price strategy should be aligned properly with the regional situation of the Maldives. So it can be accomplished that the company needs to focus on different strategies and growth factors while incoming the Maldives and should conduct its operation effectively. The above report states that H&M can operate in the Maldives as it is the best to place for tourism and they prefer fashionable trendy clothing styles according to the location. It is a good opportunity for the company to expand its business in this country.
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