What drove H&M to expand to China

What drove H&M to expand to chinaFrom 1964, HM started its set-back expansion of the europium in Nor dash, and accordingly continued ontogeny the European securities industry in the following 30 year, such as UK, Denmark, Switzerland, Ger umpteen a(prenominal) and France. In recent daytimes, HM was non content to stay in the European grocery store, it tangle withed US foodstuff in 2000, and Canadian market in 2004. Comparing with the period which it expanded European market, HM has improved its focal ratio of expansion faster and more effective in Asia market. It opened the first East Asian gunstock in Hong Kong in 2007 and then it arrive other(a) Asian countries quickly and successfully.According to Rolf Eriksen who is the CEO of HM, We argon very towering to open our first store in East Asia, in Hong Kong. china is a st rollgic and exciting market with dandy modal value cognizance and spending power. We therefore see a vast potential for expansion. We ar convi nced that we dismiss offer our Hong Kong customers added value by fashion and character at the best(p) expense. (HM, 2007a).Fashion has become essential elements in peoples day-to-day spicys. HM is the top leader in the Fashion argona. This paper evaluates what driving HM to expand to mainland China since 2007 and how the expansion leads HM to channel their schema using PESTEL analysis and SWOT analysis. HM is a bare-assed atom to the Chinese Market this paper ordain evaluate whether HM enter Chinese market is a estimable choice and whether they soak up proper strategy to deal with the new market. The first part is background and insinuate second part is PESTEL analysis third part is S.W.O.T analysis then is the recommendations final part is conclusion.Pestel psychoanalysisPoliticalChina has g iodin through more chances on the central market philosophy, Chinese government has changed many policies to withdraw remote investment. In the past, FTC (Foreign Trade C orporation), which is a government government for the particular goods to be exported, is the only way to export commodities to China in the directly method. After Chinese government drive outceled the closed distribution carcass and joined to WTO in 2001, many commodities could be exported to the Chinese market. That is a objective free market to reflect what are the real market needfully rather than the government control and provide goods which they decided for people. This movement do the living standards of most population in China has a great improved and people have more freedom of choice. Today, China stay at a stable political situation. Chinese Government incessantly attach conditional relationance of impertinent investment and welcomes foreign investment in China, it also has made unremitting efforts to improve the investment surround, protect the logical rights and interests of foreign investors. (China.com, 2004).It is the good chance to enter the Chinese mar ket, because HM can use the discriminative policies which given by Chinese government to apply their profit maximization in China. Chinese government collects low valuate on foreign enterprises and offer many preferential tax policies to back up the investment by foreign enterprises. For example The income tax on foreign enterprises is collected at the rate of 33 percent. If the foreign enterprises located in a special economic zone, it pull up stakes be collected at the rate of 15 percent (China.com, 2004).EconomicChina has become one of the fastest-growing economies in the world since the Chinese economic reforms in 1979. From 1979 to 2007, the GDP of China keeps a stable increase at an clean annual rate of 9%. Many economists predicted that if Chinese government continue and deepen the reforms of economic, particularly on SOEs (state-owned enterprises) and state banking system which are poor efficiency, China nab out become the self-aggrandizingst economic country in th e world in the years to come (Wayne, 2007). Commerce lock comprises an important role in the Chinese preservation. The total value of import and export has increased rapidly from $20.4 trillion in 1978 to $2.173 trillion in 2007. Thereinto, exports grew to $1.217 trillion and imports rose to $0.956 trillion, engendering a $261 trillion trade surplus. From 1979 to 2007 the average annual growth of export is 18.1%, while the average annual growth of export is 16.7% (Wayne, 2007). Nowadays, China has become the fourth-largest trading economy after the get together States, Japan and Germany. Chinas trade boom is largely as a result of large inflows of foreign investment which is accounted for over half(prenominal) of Chinas trade.The financial crisis which started at spring of 2007 is the biggest problem that HM was facing. If HM essential to pass the financial crisis, enter the Chinese market is the best way because with continuing fast increase on Chinese economy, the potential of Chinese market is enormous. When the global economy grows slowly, particularly, round developed countries are still in a sluggish status such as the United States and Japan, in these market HM have to use promotions and discounts to attract customers. While, Chinese government keep a strong rising momentum by the further opening up which creates a steady economic purlieu for foreign investment, HM took this occasion into the Chinese market and changed their strategy. Through their marketing strategy still is offer fashion and quality at the best set, however, the best price has the different meaning in Chinese market and other markets. In other countries, the most of target consumers in HM is lower class and middle lower class. to begin with the first HMs store open in Shanghai, there was a queue more than cholecalciferol people and most of them are office workers which belong to middle upper berth class in China. In addition, HM has got a highest gross sales quite a a l ittle about $7000,000 a day in China during the financial crisis (Businessweek. 2007). mixerChina, which is the fourth largest country, has a large population of 1.4 billion people and will be the largest economy of the world in the future. If you stand in some metropolis such as Beijing, Shanghai and Hong Kong, you will find that it has not any difference from the city in the developed country. A large number of cars run on the road, people wearing Adidas shoes and Calvin Klein island of Jersey are busy in the streets, eating KFC and drinking Coca dummy as a lunch. In the evening, people go to the bars where play the American music and serve German beer. These facts often made the foreign think that the foreign products and its influence will be easy to expect by Chinese. Actually, most of Chinese still keep their traditional usance and thinking methods. If the foreign enterprise wants to be call fored by Chinese market they should think twice and research the local culture.Wh ether the companys culture will be able to accept in the new environment which is not a biggest problem only for HM, but also for many business. For this part, HM should consider many problems, this is determining by the flexibility and the philosophy of the company. HM should consider whether the culture of this new environment can accept its new culture. And it should consider different religions and different trendy, whether the product will attract customers. If HM is not acceptable, they should change their strategy to enter Chinese market. However, Chinese market accepted HM because Chinese are globalization and western day by day. The most important fact is HM culture is accordant with Chinese consumer psychology. That is Offer quality and fashion at the best price (Lisa, 2008).TechnologyTelecommunication has forward-looking since 1990. Today, China has a high lecturer rate of the media, such as TV and internet has been popular in every family.EnvironmentalEnvironment is a principal(prenominal) issue in China. Green trade barrier appear in China in the end of twentieth century. It causes terrible effects on the trade of import and export in China. However, Chinese government has begun to manage the environment pollution. When they pack advanced applied science of Europe, the United States and other developed countries, they learn the ripening policy and environmental standards of foreign environmental industry, and they also learn advanced management methods and policies of foreign enterprises. On the environmental issues, Chinese government combine prevention with control, made strict environmental, increased investment of environmental technology and promoted the development of environmental technology and industry. By the end of 2005, the quality of environment has improved and total emissions of major pollutants have reduced 10% comparison with 2000.In this aspect, HM set an example for many Chinese enterprises. HM promotes environmental aw areness between their suppliers and employees. They adopted new technologies to use the resources as efficient as possible that could minimize waste. HM respect the decisions which be made by nature. HM adhere to use organic cotton wool which grow in the traditional environment without any chemical (HM, 2007b). effectiveHM is a Swedish clothing company, which is familiar with Swedish laws and Europe Lows which have many differences with Chinese laws. After HM entering Chinese market, they had to adapt to Chinese laws in order to get their license, then they rat in Chinese market. Chinese government will continue to validate that whether HM follows the Chinese laws. If they do not follow the Chinese laws their licenses will be taken away. That means HM has to change a few differences from other country on their strategy and operation methods in China.S.W.O.T AnalysisStrengthsOffer fashion and quality at the best price is the main reason why HM is so popular. It sells quality clothi ng with a low price. Through the prices of its items in Chinese market is not quite low for Chinese. However, it proves they still have space to lower their price to attract Chinese people.Products occupation cycle. HM can only take 12 weeks to obtain the items from the objective state to the sell state. The average time for other retailers is about 6 months which is 2 times time of HM. (Bruno,2007)They ask many guest designers to design for their product to keep their places fresh and enhance their make enter. Most of guest designer are celebrated designer, the rest are famous stars, such as Madonna, who designed a limited magnetic variation called M by Madonna. This limited series made the HM sales increased 17% in March, 2007.HM has many successful experiences of foreign expansion. They expanded the Unite State, Canada and many other Europe countries. Through China is their first step into East Asia, there may be many different culture value, they still can learn from the successful experience.Before HM went into the Chinese market, they had the production base in the Shanghai and Hong Kong and they has had many year experience of cooperation with these supplies.WeaknessesOverstocking of goods is troublesome problem for all retailers.They has sell their products in a low price, if they could not sell their products as quickly as they canthat means there is not room for the new array (EMCC, 2004).They will foucs maybe too narrow.Chinese culture could not accept western culture on some parts.OpportunitiesChinese Market launch could diversify potential into relevant market segment.Chinese Market could be a distribution channel for seeking new products.HM can promote blemish level via entering Chinese market because their products are s quondam(a) to middle upper class in China, they has increased their scar level in China Then they can increase their brand level gradually most the world Finally, their value that Offer fashion and quality at the be st price will be achieved.ThreatsFrom HMs experienced competitor such as ZARA and GAP. ZARA entered the Chinese market earlier than HM. Zara is famous with its quick production cycles. It can only take 2 weeks for the design to a sell state. Even if HM reduce 50% production time, they still cannot compete with ZARA. Since H M has entered the Chinese Market, many of its old competitors all entered Chinese Market after HM.From the local brand. If we say HM to some extent copied the top brand in the world, after it entered the Chinese Market, it will become the copied object.RecommendationHM should continue innovating in make clothing which can make them be well known around the world.HM should improve their brand level. In some extent, best price always be seem low price. They should change their brand image in peoples mind to obtain the real best price.Because China has get a high subscribers rate of internet, HM should open the online stigmatise in China. Now, HM has opened 33 sh ops in China, most of these stores open in the core city of China, there are many people they have ability to consume HM but they could not buy it because they live in different city, they need to ask friend or profit money to someone who live in the core city to buy the products. Why does HM not set up their own online shop which is easy for all people to consume in HM in China.ConclusionThrough above discussion, we can see from PESTEL analysis the reach out factors has attraction to HM to enter Chinese market and change their strategies in some extent. We get the result from S.W.O.T analysis, the strengthes of HM enter Chinese market are over the weakness. HM have chance to enhance their brand level in Chinese market, however, there are many threats or competitors HM should be care. Overall, Chinese market entry is a good chance for HM.ReferenceBruno,Z. (2007). Critical Success Factors for International Fashion Retailers ledger entry Foreign Markets. FIBRESTEXTILES in Eastern E urope October/December 2007, Vol.15.Businessweek. (2007). Swedens HM Lands in China. online. on tap(predicate) at http//www.businessweek.com/globalbiz/content/may2007/gb20070508_735792.htm?chan=top+news_top+news+index_global+business.China.com.(2004).What are the preferential policies offered to enterprises with foreign investment? online. procurable athttp//english.china.com/zh_cn/business/faq/11024764/20041015/11917364.htmlEMCC. (2004) Industrial change in the textiles and leather sector Hennes Mauritz. European Foundation for the Improvement of life story and Working Conditions 2004.HM. (2007a). HM OPENS FIRST STORE IN EAST ASIA. online. Available athttp//www.hm.com/us/press/pressreleases/__prfinance.nhtml?pressreleaseid=263905HM. (2007b). HMs environmental objectives and sustainability policy. online. Available athttp//www.hm.com/us/corporateresponsibility/environment__environment.nhtmlLisa,B (2008) HMs Magnus Olsson Swede success. online. Available athttp//www.retail-week.c om/hms-magnus-olsson-swede-success/1911483.articleRaphael,M. (2008) HM and INDITEXS global expansion strategy. THE sell DIGEST.Rupert, W.(2010) New Look aims to replicate HM success abroad . online. Available athttp//uk.reuters.com/article/idUKTRE6142TX20100205Wayne M .(2007).Chinas Economic Conditions.