H&M keeps its strategy to work as a wholly-ownedcompany wherever possible, which sometimes had the consequence of the companywithholding from entering a market wherever it was not allowed to enter aswholly owned company.
H&M did this so that it can keep full control overits operations in its markets. In the Middle Eastern markets, H&M was boundto franchise and cooperate with local players to launch the brand. Thesecriteria also applied to the expansion into a new city within an existingmarket. In order to reduce capital risk and to keep the company flexible,H&M also continued to rent its store space in the majority of its markets.
H&M has done consolidated international expansionat a moderate pace. H&M selects international markets based first on l physical and culturaldistance to the domestic market and then on economic indicators such aspurchasing power, employment rate and purchasing behavior. Local informationabout demand, competitorsland accessibility is also considered.Entryinto China: H&M entered into China in 2007, a year late thanits rival Inditex (Zara).H&M’sl strategy to enter the market at a later stage was made in order to beable to assess the success of other retailers before establishing l its brand there.
Thiswas l because ofthe potential differences in ltastes, sizes, marketing and advertising possibilities between China l and Western Europerequired careful investigation before making the decision l on how to enter the newmarket. By l enteringin China later than its competitors, H had the opportunity to makepost-market studies related to its competitors’ success and failure in thetarget country. H&M expanded into China by applying the existingstrategies that were used in its global l markets. The retailers made few significant changes toits strategy.
They were related to price, icon style collaboration and whatsocial networks the company used to promote its products and brand. H&M waswell received in lthe Chinese market and its performance was much higher than previouslyanticipated by the company. lH&M’s year-on-year sales increased between 2007 and 2014 and the growthtarget of opening new shops with an annual rate of 10-15 percent was easilyobtained. The actual rate lof store openings in China was between 42 and 108 percent during the l same period.
Thereason that H chose to follow, to a large extent, the same strategy was mostlyto leverage economies of scale in the large l Chinese market. H’s previous CEO said that China had thepotential to become H&M’s biggest market and l stated that H could use theexperience gained in the different, l yet similar, market l such as USA, where the company had established in 2000. Itwas also stated that the amount lof products sourced from China was likely to increase with growing sales and anincrease in demand in the local market l would make China an increasingly important location for H’sproduction and sales