About H&M Group
Discuss about the Entrepreneurship in Multinational Enterprises.
The report has been prepared on internationalism topic. For this report, a company has been focused. The company must have entered into international market and running the business at a great and significant level at international market. In this report, it has been studied that how the company have entered into the international market? What were the strategies of the company? What challenges have been faced by the company and how did it overcome with it? In this report, a company H&M group has been evaluated. The company has been internationalized a lot and running its business successfully at international level. The H&M group has been chosen for the study because of two reasons: first is the data availability and accessibility on H&M group was easier and second point is that this company is related to fashion industry. Fashion industry is always enhancing industry which gets change with the time and market share of the fashion industry is also higher.
In this report, it has been discussed that what the main goals of the company were. How the company has chosen the policy of internationalism and how did it enter into the new market? The study would make it simple to understand the international market and the process of a company to enter into international market and operate the business at better level. This report has been prepared to understand the concept of internationalism. H&M is a Swedish company which has covered all the Asian market to retail the fashion products of the company.
H&M (Hennes and Mauritz) is a Swedish international company which is operating its business in retailing the fashion products. The company’s main products are clothing segment in man category, woman category and child category, the company and its subsidiary companies are operating in more than 62 countries to sell the products along with the 4500 stores worldwide. Annual report (2017) of the company explains that there are 132000 people who are working with the company to achieve the common goal of the company. H&M is the second largest company in global clothing retailer company. The company is offering its product to the customers through online business as well.
The products of the company are clothing of man, woman, teenage and child and the various accessories such as shoes, fashion accessories etc. The subsidiaries company of the company are Monki, COS, Cheap Monday, ARKET and other stories. The company has been founded in 1947 by Erling Persson. The company is registered into the Stockholm Stock exchange. In 2008, the company had just announced in a media conference that the company would sell the furniture options as well in the market. The company has expanded its market into Asian market and Middle East with the brand name of COS, Weekday, Cheap Monday and Monki (About us, 2018). The company has been awarded as 21st most valuable global brand and it has been found that the company is operating its activities and the business at a very significant level.
Internationalization Process
Internationalization is a procedure in which the organizations enhance their operations and the market at the international level. The enterprises involvement in the international market is called internationalization. However, no economist and managers have briefed abut perfect definition of internationalism. This process is just followed by the company to diversify the market and enter into the new market to achieve the goals and objectives of the company (Wingborg, 2006). There are numerous theories of internationalization which explains that why the companies enter into the new market and at the international market. These theories explain that how could an organization enter into the international market.
The internalization theory explains about the absolute cost advantage, gravity model of trade, comparative cost advantage, Heckscher –Ohlin model, Leontief Paradox, Location theory etc. These theories explains that how could a company easily enter into the international market to grab the opportunities and achieve the goals and objectives of the company. There are various decisions of entering into the international market on the basis of that it becomes easier for an organization to enter into the foreign market (Berrell, Gloet and Wright, 2001).
Firstly, it is important for an organization to decide that which foreign market is the best choice among all the available options to enter into the market and operate the business of the company. The foreign market must be decided by the company after evaluating all the related parts of the company and thus make a decision that which market is the best option to enter. Further, the timing of the entry must also be decided by the company (Wild, Wild, Han, 2008). Company should not enter too earlier before the other companies and it should not enter tool late is the market. In both the condition, the company would lose the market share and the objective of the company could not meet.
Further, the organizations should evaluate the scale of entry. It evaluates that on which level the company should enter into the market, the company should decide the large scale, small scale etc on the basis of the market and the objectives of the company. The company should also choose one options among the various different methods which are available in the market (Wigley, Moore, 2007). These different methods of foreign entry are exporting, projects, franchising, licensing, and establishing joint venture and host country firm.
On the basis of the internalization study, it has been found that if the organization follows the proper strategy and the process of the company than it becomes quite easier for the countries to enter into the international market and perform the study into the international market (Zhu and Dowling, 2000).
Theories of Internationalization
Strategies are the plan which is prepared by the company to prepare a plan and implement it in better way in an organization. Strategies and policies of an organization measure that how well the company is performing and what would be the future performance of the company on the basis of the strategies. The strategies and policies of H&M has been evaluated which has been used by the company to enter into the Asian market and grab all over the Asian market.
Verbeke and Yuan, (2007) explains that the retailing companies only enter into the international market and the foreign markets to promote the products of the company and enhance the sales growth of the company. On the other hand, manufacturing companies enter into the foreign market to rescue the production cost and enhance the production capacity of the company (Trompenaars, 1997). According to the study over the H&M, it has been recognized that the company is following the same rule. The H&M has entered into the Asian market and opened the store into the Asian market to enhance the sales of the company. According to the recent news and annual reports, it has been found that the profitability level of the company has been enhanced by around 183% after entering into the new markets and due to the various new stores of the company (Pitelis, 2007).
In last 30 years, the company has a great marketing mix as well as low end image. Until that time, the company has not achieved any height. Although, in 1980, the formers MD of the company has made few changes into the strategies and the producer of the company to improve the quality, reduce the operational cost, bring new items in the market and manage the market presence of the company (Hammarkvist, Håkansson and Mattsson, 1982 ). New design directors have also been employed by the company to manage the presence.
Currently, the main concept of the company is to offer the quality and fashion t the customers of best quality in better prices. The strategies of the company explains that these concepts could be achieved by the company through entertaining few middleman, purchasing huge stock, in depth idea about the fashion, textiles, current trend, designs, right product in right market, efficient distribution etc. (Market and expansion, 2018)
In case of H&M international strategy, it has been evaluated that the company has prepared a proper plan to enter into the Asian market and the preparation on entering into the Asian market was followed by the company from a long time (Oviatt and McDougall, 2005). The company has firstly evaluated the foreign market and discussed with the top level management of the company about the foreign market, their culture, their strategies, choice of the people etc. (Trompenaars,1997).
Factors affecting Internationalization
The company has entered into the partnership and offers the franchise business in the host countries to manage the business of the company. In 2006, the company has decided to change the strategy of general expansion to the franchise and partnership expansion strategy and franchise strategy (Steen and Liesch, 2007). Franchise strategy explains about a business in which a license is provided to a business to privilege to the franchisee to offer an assistance to organize, merchandise, trade, manage and marketing and do the business in return of the monetary amount.
Franchise is kind of business which is onward by the franchisor of a service, product or methods which are obtained by the dealer through the strategy of distribution. Franchise is one of the better options for the companies to enter into the foreign market as through this policy, they need not to invest lot in the operations and the set up of the business and the risk involvement of the company also becomes lower in the case. The company has expensed into the following foreign markets till 2007.
However, company has also entered into the various markets after 2007 and the business in each market is better. According to the new franchise business of H&M, it has been found that the company sells the cloth to its partners on the wholesale basis which kept the stock and sells the stock through its stores (Deresky, 2010). Till now, the company as captured almost entire Asian market, the company has planned the strategy in such a way that the company could achieve the heights with minimum investment (Entrants, 2018).
The franchise strategy of the company has helped the company to enter into the market and the profitability level of the company has also been enhanced. The firm has focused on the politically stable developed foreign country and the developing foreign country to enter. It has been focused by the company has chosen the countries which which has a good market system so that the company could set a good relationship among the total cost, risk and the benefits of the company (Johanson and Vahlne, 2003).
In Asia, the company has firstly entered into the chain market which is still developing the economy of the country. The country is highly growing its market with spend and the purchasing power of the developing country’s people (Bartlett, 2011). In the same way, the entering into the Asian market was quite helpful for the company to manage and set a better relationship among the cost, risk, profits, benefits etc of the company (Ball et al, 2008).
H&M International Strategy
However, on the basis of the study, it has been found that the H&M has entered into the Asian market much later. Before the entering into the Asian market, the various other fashion retailing companies have entered into the market and due to which the performance of the company has been better (Swoboda and Anderer, 2008). The late entrant of H&M has affected the market share and the profitability ratio of the company. Late entrant is the position where the company entre into the foreign market last even after entering the other companies of the same industry in the market.
During the whole process of expansion and internationalization of H&M in Asian market, it has been found that the H&M directly evaluates and investigates over the foreign market in order to have a great evaluation and a better control on each factor if the company. On the basis of the current report, it has been evaluated that the performance of the company has been better and the marketing policies, strategies etc of the company has also been better (Chetty and Campbell-Hunt, 2004).
On the basis of entire evaluation on the performance, internationalization, and the other strategies of the company, it has been found that the comapny has impacted a great impact on the Asia fashion industry. Though, it has been evaluated the company was late entrant in the market, still, it has managed to manage the performance and the attractiveness level of the company in the market.
Challenges’ and problems which have been faced by the H&M while preparing the strategies and implementing the strategies to enter into the foreign market has been studied further to manage and evaluate that how the internationalization process make an impact on the organization. Ghoshal and Westney, (2005) explains that the internationalization and globalization are used by the companies when explaining about the new entry of the country at international level and in the foreign market. On the basis of the study over the internalization process, it has been found that an organization is required to manage the various factors while entering into the foreign market (Dawson, 2007).
The main issue with the internationalization process is to identify the perfect time in which the comapny should enter into the new market. Further, the main issues with the internationalization process are to determine that what the perfect foreign market to enter is. This evaluation is quite tough for the company to measure and make better decision about the performance of the company (Forsgren, 2002). To decide that which foreign market is the best choice among all the available options to enter into the market and operate the business of the company is also a challenge for the company.
Franchise Business Strategy of H&M Group
The foreign market must be decided by the company after evaluating all the related parts of the company and it is a big challenge for the company as the data are not enough to evaluate the process of the company. Further, the timing of the entry is also a challenge for the company. In case of the above challenges, the company would lose the market share and the objective of the company could not meet.
In case of H&M, it has been found that the company was late entrant in the market. It is the position where the H&M has entre into the Asian market after entering the other companies of the same fashion industry in the market. Due to this problem, the market base and the opportunity of the company has been hampered at a great level. Hovered, it has also been found that the company was using the different strategies for entering into foreign market before 2007 and company has faced few issues in that strategy (Doyle, Moore amd Morgan, 2006). Thus the company has planned to switch the strategy to other strategy.
The company has adopted the franchise strategy further. Franchise strategy explains about a new business type in which a company is required to take a license which is provided by a business to privilege to the franchisee to offer an assistance to organize, merchandise, trade, manage and marketing and do the business in return of the monetary amount.
With the help of the franchise business, the performance and the position of the company has been improved a bit (Dawson, 2007). It has been found through the analysis on the market and the company that the few challenges have been faced by the comapny in last few years. However, the policies and the strategies of the company were enough strong which has planned the new plans for the management of the business and reduce the level of the risk of the business.
Conclusion:
The research paper has been evaluated and it has been found that the internationalism is a huge topic nowadays. Every company is trying too adopt the strategy of internationalism to enhance the market share and achieve the goals of the company. In the study, the evaluation has been focused on H&M which has successfully entered into the international market (Asian market) and the company is running its business at a great level. According to the report, it has been found that the company has enter into around 68 countries at a great level. the company has adopted the franchise strategy which has helped the company to manage the business as well as the performance of the company. However, it has been found that few issues such as late entrant has been faced by the company and the strategies and plans have helped the company to enhance the sales turnover and the profitability level of the company. The company has been internationalized a lot and running its business successfully at international level.
H&M Group Expansion
Further, on the basis of the evaluation, it has been identified that the main goals of the company are to enhance the performance and measure the position of the company. The company has planned the strategies and the plans after evaluating all the foreign market through direct evaluation. This explains that the international market and the process of a company to enter into international market and operate the business are quite better.
The performance and the study explains that the H&M is better option for the company and the internationalization process of the company is also attractive.
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