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In The International Expansion of a Multinational company- A case of H&M by Jun Li and Maja F.(2008, p.20), they note that for an international retailer, no matter the size of the market, it is just local. This means that entry into Indonesia requires for the retailer to pay extra care to identify the nature of the market there, including the local culture, the local consumption situation, the buyers' behavior, because they are necessarily different from the situation that the company faces in their home market. This is somehow different from the manufacturers' point of view, since they just look at their markets as international or at times, global as a result of the fact that foreign operations often focus on the production.
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As in many countries, Indonesia has seen the gap between the salaries of its workers widen in the past two decades, a condition that has protracted in Indonesia's case because its informal sector holds a huge portion of the total work force, an ILO study( World of Work Report, 2008) has revealed. Informal sector workers are estimated to receive an average salary of Rp. 603,000(US$ 54) a month, one quarter of the amount earned by employees at medium and large enterprises. These people are potential customers at H&M and this means that they are unable to access their favorite clothes because they live in abject poverty.
The idea of setting up new stores in a foreign market is a strategic way to increase the sales growth for a retailer.Although push and pull factors are often discussed in the reasons for internationalization Jun Li (2008, p.19) notes that sales is more fundamental to retailers. As a retailer, the relationship with large number of customers is an important factor when growth is concerned. H&M has to check what the Indonesian customers want, and ensure that they give it to them. All the items that they provide in their stores should take into account the Indonesian culture.
H&M already operates in 28 markets and has developed a net of 700 suppliers in many different countries (H&M Annual Report, 2007). This means that it is entirely dependent on just one supplier. However, according to Windborg, 2006 they are also interested in long-term relationships because they have invested in mutual relations. The company is entering new markets at a fast pace, using its strong position in the fashion industry and its vast knowledge on international operations.
The greatest experience that a company can ever hope to have is to put a smile on the face of a customer. This is because no amount of advertisement can beat the effect of a referral by a customer. Every time a customer finds what they were looking for at H&M, they are most likely going to refer a friend, workmate, family member to the store to try it out. This long chain of good association with customer increases the reach of the company into the market.
The CSR level of a company is a good indicator of the level of financial health of an institution. This is true in all organizations. CSR is also a way of the company being grateful to its customers and suppliers for the good relation that they enjoy. The community that H&M will operate in will have to give a go-ahead to H&M to be able to operate in peace.
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It is imperative to consider the financial burden on existing markets, if the idea of venturing into a new market is to be considered. The main task of a company is to ensure that costs are at a minimum. If the financial resources are being extremely strained in a company, it is difficult to think of venturing into a new market. The focus will be shifted to working on H&M profitability first, before thoughts of starting into a new market can begin.
The aim of a shareholder or franchise owner is to get profit at the end of the day. If costs are managed well, and sales are at a satisfactory level, then it is reflected in the level of profits that H&M report at the end of the year. If the profit level is not as expected, then H&M needs to rethink if it will stick to this market, with the hope of a turn for the better in future, or leave altogether.