HM market free essay sample

HM (Hennes Mauritz AB) is the world second largest retail-clothing company. It was founded in 1947 in Sweden. In recent years, it has expanded rapidly, about 3,000 branch stores existing over 50 countries which include in Asia, Europe and America. As a â€Å"fast fashion† clothing company, HM’s business concept is offering latest popular design and good quality at the best price. The HM Group offers fashion from the HM, COS, Monki, Weekday, Cheap Monday, Other Stories and HM Home brands. Therefore, its product line is various, including not only clothes but also shoes, cosmetics, home supplies and accessories. Customers of any age group are able to select suitable products, no matter young or old, men or women. However, the main marketing target is young people between 15 to 30 years old who chase fashion but cannot afford to buy luxury clothes. Based on Fast-Fashion concept, the biggest characteristic is that the time of the whole process including designing, producing, delivering and selling is very short, and all can be done even in only 21 days (Fahy Jobber, 2012). We will write a custom essay sample on HM market or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Compared with its competitor, ZARA, although they have similar fashion designs, HM has lower price of about 30 per cent to 50 per cent than ZARA (Figure 1) (Boyu-linen, 2011). Moreover, it usually cooperates with world famous designers or super stars, such as Karl Lagerfeld in 2004 and Madonna in 2007, to design its products (HM. com). Product life cycle Product life cycle theory was proposed by Raymond Vernon, a professor of Harvard University, in 1966. Most product life-cycle curves are presented as bell-shaped including four stages: introduction, growth, maturity and decline (figure 2) (Baines, Fill Page, 2013). In introduction, when a products is brought to market, sales growth is slow and profits are virtually nil because of heavy introduction expenses. While the new product is accepted in the market, it could generate improvement of profit in growth. In maturity, the demands of market are of stabilization and saturation, and the profits stabilize or decrease due to higher competition. In decline, with the development of science and technology, new products or new substitutes appear which will make the customers turn to other new products. As a result, original product sales and profits decline rapidly. The products are entered into a recession (Kotler Keller, 2012). However, there are three special categories of product life cycle, style, fashion and fad (Kotler Keller, 2012). As a â€Å"fast fashion† clothing industry, the main feature is fashion and fad, so HM belongs to the life cycle of fashion and fad (figure3), its life cycle is very short. Generally, it takes only 21days to get a product from the design to a retail store and its products are updated about every two weeks (Fahy Jobber, 2012). 2. 4 Competitive positioning According to Kotler Keller (2012), all of marketing strategies would be based on STP concept, segmentation, targeting and positioning (Appendix 4). HM is a clothing retailer, who focuses on â€Å"fast-fashion† in clothing industry. It has numerous competitors including Gap, Top Man and Uniqlo. As a founder of â€Å"fast-fashion†, ZARA, part of the Inditex Group, HM’s key and most similar rival (Ganesan, 2012). By the end of the financial year 2012, HM had a total of 2,776 stores in 48 countries. In China, it has 134 stores and its sales (include Vat. ) was 5,411m (SEK) (HM annual report, 2012). Facing the fierce competition of clothing industry, HM has got its own competitive advantages. According to Kotler (1997), positioning is the act of designing the company’s offering and image so that they occupy a meaningful and distinct competitive position in the target customer’s minds. It means that the company need to concern with how customers in different parts of the market perceive the competing companies, products, services and brand (Hooley, Piercy Nicolaud, 2012). Competitive advantage According to Best (2014), a company competitive advantage could is divided into three main parts to analyze from differentiation, cost and marketing (Appendix 5). 2. 4. 1 Differentiation advantage It includes product quality, service quality, brand image and relative price. 2. 4. 1. 1 Product quality and relative price HM business concept is fashion and quality at the best price. Although HM usually stuck in problems of product quality in China, its quality is good comparing with its competitors ZARA (People’s daily online, 2012). Therefore, its relative price got 6 score and quality got 4score (Appendix). 2. 4. 1. 2 Brand image and product service The brand of HM is well known to most people in China, especially young people who live in first-tier cities. When HM opened new store, many people queued to get into the store (WantChinaTimes ,2011 EChinacities 2010). Although the brand image of HM is good, its service is not approved. For example, as the clothing size of HM is followed with European’s, so the trousers may be too long for Asian customers. Therefore, many trousers have to be cut short, but this service is not offered in China. By contrast, its competitor, Uniqlo, offers it for free, customers could get suitable trousers only with waiting for two hours (Uniqlo. cn, 2013). 2. 4. 2 Cost advantage It is an essential factor that enables HM to keeps a lower price in competition. 2. 4. 2. 1 Unit Cost and Transaction Cost It does not own any factories; instead, the company buys its products from approximately 800 independent suppliers (HM annual report, 2012). HM has own unique supply chain system. In order to reduce cost, it uses double supply chains. One is fast reaction chain to manage and control epidemic goods in Europe, primarily in Turkey, about 50 per cent of its products are produced here, and the process of production within no more than 4 weeks. The other is an efficient chain to manage and control production of basic style in Asia, primarily in China and Bangladesh. The process of production has long period, about 6 months. That is to say, one is European quick supply chain; the latter is Asian efficient one. The important point is about 30 per cent suppliers are based in China (Fahy Jobber, 2012). Therefore, the unit cost of HM is lower than other competitor’s. In contrast, ZARA has its own 22 factories in Spain, in order to ensure â€Å"fast-fashion† concept, most goods are produced in Europe, with higher product cost. Consequently, HM is able to keep lower price than its competitors in China. Compared with ZARA, the average price of HM is lower 30 per cent to 50 per cent. Some prices of basic clothes are lower than Uniqlo (Boyu-linen, 2011). Therefore, for the unit price, HM has more competitive advantages. Base on its mature supply system, the transaction cost is also lower than its competitors. 2. 4. 2. 2 Marketing expenses and overhead expenses To consider the marketing expenses, ZARA almost does not pay to advising. In comparison to other retailers, who spend 3 percent to 4 percent of revenues on big brand-building campaigns, Zara only spends 0. 3 percent (Kotler Keller, 2012). HM spends a hefty 4 per cent of revenues on marketing. It usually cooperates with top name designers, such as Karl Lagerfeld, Chanel’s designer, in 2004 (Jobber, 2010). Therefore, its marketing expenses are higher than ZARA. However, HM has not its own factory, which lead to reduce its overhead expenses. 2. 4. 3Marketing Advantage 2. 4. 3. 1 Market Share and Sales Coverage By the end of the financial year 2012, HM has 134 stores in China, a little more compared with ZARA’s 121 stores, and it had 0. 2 market share, ranking 36th (Hansegard Burkitt 2013). On the other hand, for the sales coverage, ZARA’s and HM’s are approximate 80% and 73% respectively in China, HM is lower (HM annual report, 2012 and ZARA annual report, 2012). 2. 4. 3. 2 Brand Awareness and Distribution The brand of HM is well known to most people in China, especially young people who live in first-tier cities. However, its brand awareness is lower than its competitors, such as ZARA Uniqlo (Appendix 6) (Aip, 2011). The distribution has been referred to the part of cost advantage, which has two supply chains to produce its products from suppliers. In addition, there are three main channels for its customers in the world, physical stores, catalogues and the internet (Fahy Jobber, 2012). However, HM has not only physical stores in China, but ZARA and Uniqlo both have online shop. Although HM has a better supply chain system, if it cannot appreciate online shopping, it will lose marketing share.