A Market Analysis Document for Womens H&M Clothing to sell in India

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 Introduction

In the course of operations for any company in any industry, it is important that a

company be in a position to understand the dynamics that are operating in the

immediate environment that it operates using market analysis to facilitate in decision-

making. This paper aims to presents a market analysis for Womens H&M clothing to

sell in India. There are four main sections provided in this paper that consist of a)

Company & Industry Analysis, b) Market specific Issues, Challenges and Risks, c)

Political & Economic Analysis and d) Entry Strategy Plan. Finally, the conclusion and

recommendations for H&M Clothing to be successful in India are provided.

PART A: Company & Industry Analysis

Background of H&M and Womens H&M Clothing

Hennes & Mauritz AB, H&M is a multinational corporation established in 1947 under the

brand name Hennes that has its base in Sweden. In the year 1968, the company

rebranded giving the company a different name, Hennes & Mauritz, and soon after

diversified providing different products ranging from clothes, accessories and home

furnishings (Hennes & Mauritz AB, 2012).

Today the company markets its brands across the globe as indicated in annual records

of the company where it raked in 129 billion (SEK) inclusive of VAT. Deloitte Global

Powers of Retailing ranked the company in the year 2011 at an impressive 58 th position.

According to the Euromonitor International (2013), market share records for the year
2011 and 2012 as indicated below, the company H&M ranked third, possessing a

market share of 1.2% and 1.2% respectively.

Table 1: Top 10 Companies: Clothing and Footwear Retailers, 2011-2012

To get ahead of the competition the company utilizes various strategies to ensure that

they remain competitive as a brand within the apparel and clothing industry. These

strategies include,

i) Collaborating with famous models and designers

ii) Ensuring that all their stores are adequately stocked at all times

iii) Use of sustainable resources and methods in the conduct of their business

The target customer base for the company H&M is that of the youth and those classified

as being young adults of both sexes and therefore not only women. However, according

to the differences that may arise out of the location, the company can alter their target
market to suit the needs of the market but the general perception is that of marketing to

the younger generation of both sexes.

The popularity of the brand H&M has been occasioned by the companies, approach of

utilizing the works of designers, utilizing famous models as brands to market their

products such as Madonna, David Beckham among others who all have the capability

of attracting the attention of the market inevitably marketing their brands. In addition, the

company utilizes all possible means of marketing such as use of the internet as well as

video advertisements to capture the market.

A SWOT analysis of the brand H&M reveals the strengths, weaknesses, opportunities

and threats that the brand has in relation to the industry within which it operates.

Table 2: SWOT Analysis of H&M Clothing

Womens Clothing Industry in India

Market Size

The domestic apparel industry in the Indian economy is mainly comprised of five

different segments namely the mens, womens, unisex, kid and uniform wear

categories. In the Indian country, the mens wear segment is regarded as the largest

segment within the culture followed by the womens wear category. The womens wear

clothing industry in recent times has emerged as the fastest growing segment in the

country especially in the organized segment specifically the lingerie and western wear

sub-categories.

Market Trends

According to Jin et al. (2013), Indian women mainly associate and engage themselves

with designer clothing only when they have occasions but the rest of the time they

engage themselves with routine types of clothing that are mainly in the unorganized

segment. The organized segment of women clothing in India is significantly growing but

altogether the women wear segment is dominated by the unorganized segment. It is

believed that the organized women wear segment comprises of only 3% of the total

women wear market in India (Jagga, 2010).

Market Growth Rate

The Indian apparel industry in the financial year of 2012 was estimated to be worth Rs.

2,020 billion, with the domestic apparel rate of demand growing by 10% (Research and

Markets, 2013). The womens apparel industry contributes approximately 32% to the
total Indian apparel industry (Research and Markets, 2006). The illustration (Table 3)

describes the rate of growth for the Indian apparel industry.

Table 3: Indian Apparel Industry Forecast; Source: MbaSkool (2012)

Market Competition

Because of the easy availability of textiles, among other favorable conditions within the

economy, many international companies have outsourced some of their activities such

as designing and manufacturing in India. Some of these companies include GAP, Nike,

Tommy Hilfiger, and Adidas among many others. Therefore, the competitive

environment in India is competitive.

PEST Analysis of Womens Clothing Industry in India

Political Analysis

The Indian government is keen on attracting more investors into their country has

applied favorable policies meant to benefit the apparel industry in the country (Saini,

2011). These incentives include:

1) The government has the textile industry material subsidized giving the industry

US$533.87 to improve technology within the industry.

 2) The government has plans in place that are intended to ensure that the country is

self sufficient in fiber to promote and improve consumption as well as facilitate

exportation of fiber.

3) The government has in place a 10% subsidy in capital for the acquisition of

machinery while a 5% interest subsidy for the installation of machinery especially

those of the processing nature (Sharma, 2012).

Economic Analysis

This refers to those economic factors that are bound to affect an industry as well as the

rate of growth of the economy and how they are able to affect an industry or a business

(Ngai et al., 2013). The global economy in recent times has been volatile and this has

seen costs of production shoot up in many countries across the world; India included

thus reducing profit margins for these companies.

Social Analysis

The social situation in India has been undergoing various changes as people adopt

different lifestyles from what was there previously (Khaire, 2013). Currently many in

India are urbanized and time has seen them adopt western and sub-western

approaches in their lifestyles. These changes have also affected the demand in different

demographics of the society.

Technological Factors

Technology can have an impact on production levels as well as those of outsourcing

among other varied decisions. Technological advancement in India has been

widespread affecting nearly all industries in the country (Ngai et al., 2013). The textile
apparel industry has not been spared either and advancements and efficiencies in

production have been witnessed.

PART B: Market specific Issues, Challenges and Risks

Market specific Issues

The womens clothing industry in India is affected by various challenges and key issues

especially when operating within the country. These challenges and issues are of a

societal background while others are legal issues that compound the industry of

organized clothing. For a company such as H&M these issues are bound to be

formidable challenges when setting up in the country (Bennur & Jin, 2013). The three

key issues include cultural conflict, competition and negative image amongst the

communities towards a foreign investor.

i) Cultural Conflicts

The first challenge that would face H&M in India would be the slow adoption of

organized clothing amongst the population (Bennur & Jin, 2013). The population in the

country of India is deeply tied to their cultural backgrounds and moving away from this

adopting a westernized approach to dressing could be an uphill task for the women

community in the country.

ii) Competition

The second issue H&M would be likely to face would be from competition. The

organized clothing industry in India is relatively crowded with various multinational

companies having set up their operations within the state. Companies such as Nike and
Gap, which are leading apparel producers with vigorous marketing incentives, could

prove to be an issue that H&M would have to face (Research and Markets, 2013).

iii) Negative Image

The final issue likely to affect the company would be negative reception from the

community. The reason for this is that many western or foreign companies have been

cited amongst Indian society as having taken advantage of the people paying them the

minimum wage rates while making huge profits back at their home countries (Czinkota,

2012)..

Key challenges and risks for Market Entry

The main challenges bound to affect operations of H&M in India are include selection

and management of a local partner in a joint venture also known as the alliance risk,

different business practices in India that could be different from those experienced in the

developed nations and finally, human resources related challenges (Deloitte, 2012).

a) Alliance Risk

Alliance risk poses a challenge for H&M as the company has to not only ensure that

they will be establishing a good foundation in the country with a partner who is keen on

ensuring the company survives and grows but also additionally have to ensure that the

global reputation of the company has to highly valued (Deloitte, 2012).

b) Varying business practices

Different business practices are witnessed in every community and country. In the

developed world, most of the business practices have been harmonized but in an

emerging economy such as that of India, some of the business practices encountered

are highly irregular. Corruption for example is a problem within India. High levels of
corruption are annually reported with government officials seeking out bribes to give

certain favors to companies and other operations.

c) Human resource challenges

Human resource challenges are evident in nearly all emerging economies with India

being inclusive. Some of the most common challenges are include those of different

minimum wage rates between men and women where women are not highly

considered, hours of service as well as underage employment. Human resource

challenges are sensitive issues within emerging economies inclusive of India (Deloitte,

2012).

These challenges of market entry are faced by many investors when trying to penetrate

the growing economy in India and for H&M while considering penetrating the economy

this challenges and risks have to be considered.

Risk Mitigations

Risk mitigation is the process of addressing laid out challenges and issues and seeking

out strategies with which to counteract the impacts that these challenges could have on

the business penetrating the Indian economy the above-mentioned challenges could be

mitigated by;

a) The Alliance risk

This risk could be mitigated by a company when venturing into a working relationship in

a new environment by initially performing an intensive screen test of the organization or

individual with whom the business could potentially be interacting (Deloitte, 2012).

Having performed this screen test, the next strategy would be to agree in contractual

form agreeing on acceptable terms of cooperation while at the same time addressing
the repercussions of failure to meet on any of the agreed terms (Ghauri & Cateora,

2010).

b) Varying business practices

To mitigate the differences in business practices it is advised that a company undertake

a thorough analysis of the market to ensure that a thorough understanding of the market

is grasped (Prange & Verdier 2011). This could be done by identifying all policies that

could relate to the industry as well as the company (Deloitte, 2012).

c) Human resource challenges

Mitigating human resource challenges requires a thorough understanding of the labor

laws operating in the country (Deloitte, 2012). To mitigate the possibility of such

challenges such as labor hours, minimum wage rates among others it is essential that

the company set up a human resource office well equipped with the legal requirements

and applications within the country of India to ensure that the company operates within

the stipulated frameworks (Czinkota, 2012).

PART C: Political & Economic Analysis

Political Analysis

Various political implications are bound to affect the womens line of H&M Clothing in

the Indian market. The political impacts would have an effect on the political government

of the Indian nation that range from increased employment opportunities for the people,

better infrastructure, and better living standards amongst the local community (Lee &

Lieberman, 2010).
India has one of the highest populations in the world and nearly most of these people

are unemployed. Setting up a store in the country would highly benefit the country, as

the store would help the government in providing gainful employment for the people

(Research and Markets, 2013).

Another implication would be that of better living standards amongst the people (Majaro,

2012). Having employed personnel in the Indian economy, the company H&M would be

helping directly towards alleviating the high levels of poverty existent in the country.

Through the wages and salaries paid out the employees would be in a better position to

provide for their families and relatives thereby improving their levels of well being.

Another effect that would result in the provision of better living standards for the people

would be through the companys strategic goals geared towards corporate social

responsibility. Firms today especially those that invest in other countries are required in

many cases to engage in CSR activities to ensure that they improve the lives of the

immediate community and other stakeholders as well as taking care of the environment.

Through provision of charitable activities, the company would eventually be improving

the lives of the people in the society.

Infrastructural development would be another impact, as the government would be

required to provide essential services to the company such as better security, in the

area that the company would be setting up its activities (Research and Markets, 2013).

These developments would not only be favoring the company but would also be

favoring the community and the society in this area.

Economic Analysis

The economic environment in the Indian economy for retailing womens clothing favors

H&M setting up a base of operations in the Indian economy. This is facilitated by two

strong reasons, which include a growing trend of urbanization and changes in the

demographic nature of the country (Lee, Archana & Kim, 2010).

In recent years, the emerging economy was strongly regarded as one of the most least

developing nations but with time, this has changed as more people are moving away

from the rural areas and are basing themselves in the more urban area. As a result,

more opportunities have come up especially for the women where they now have

access to formal employment in the corporate world (Jagga, 2010). These shifts are

seeing these women adopt a more westernized approach to their dressing and are

purchasing designer clothes to fit in their new roles in the corporate world (Research

and Markets. 2013).

Demographic changes favor the setting up of a womens clothing company in the

country. Majority of the population in the country comprise of the youth and the younger

generation. With the advancements in technology such as the internet and phones, the

country is seeing the countrys youth being influenced by other cultures other than their

own and in this eventually is the potential for the company to generate more sales and

revenue because of the demographic changes.

A negative economic implication for H&M in India would be a volatile and uncertain

global economy risk. H&M by virtue of having most of its operations in Europe has the

opportunity of dealing with a standard currency, the euro, however in India the Rupee
has suffered greatly especially during the recent global recession where the country

experienced a sharp decrease in the value of the currency. These currency fluctuations

pose a challenge for H&M and the possibility of being negatively affected as a result.

PART D: Entry Strategy Plan

Market entry strategies before entry into the Indian market by H&M should endeavor to

identify the most appropriate manner by which they could penetrate into the new

market. H&M in order to identify the ideal market entry strategy should initially identify

the objectives of entering into the new market. Strategy identification would consider the

laid out objectives, costs, risks involved and degree of control that they desire.

Objectives of entry

The main objectives that the company H&M seeks to achieve from establishing

themselves in the Indian market include

i) Global recognition- H&M has steadily grown as a reputable company and

therefore it is ideal that the company ensure that they retain a positive image

even in new markets.

ii) Attracting customers and increasing their level of market share- Setting up in

a new environment would require the company to develop strategies to

acquire new customers and gain a share of the market.

iii) Identification of the competition- H&M should recognize the competition and

strategize on competing with the competition.

Market Entry strategies

To perform this effectively the recommended strategies would be those of forming

partnerships with other companies to set up the operations of the company in new

territories, franchising as well as joint ventures (Research and Markets, 2006).

Forming partnerships is one of the ideal strategies with which a company can penetrate

the market as it minimizes costs and the risks that are involved (Majaro, 2012).

However, control in this strategy is diminished significantly, as the power of control is

shared.

Franchising is the activity of penetrating a market by issuing the brand name to an

independent party and giving control to that party based in that location who additionally

will assume all forms of risk (Majaro, 2012). The benefit of this strategy is reduced risk,

diminished costs and more control.

Joint ventures involve a company getting into an agreement with another business with

a mutual interest in penetrating a new business environment (Research and Markets,

2006). Both companies agree on a mutual agreement where they share the

responsibilities, costs, risks as well as control to penetrate the market with a strong

position.

Gaining market share and increasing the customer base is an objective for H&M. To

achieve this objective the recommended strategies would involve the company utilizing

effective marketing skills to gain the market. The ideal entry strategies are those of

partnership, joint venture and franchising (Research and Markets, 2006).

The competitive industry in apparel clothing in India is highly competitive with

companies such as Nike and Gap already established in the country (Deloitte, 2012).

Effective strategies of handling the competition would be by using appropriate strategies

such as providing products that suit the needs of the market, pricing strategies, and

promotional campaigns among other marketing techniques the company could gain in

the market share.

Value in Marketing

Expanding into new territory like India the company would need to add value to the

market to ensure that the company builds itself on a strong foundation. The company in

the delivery of value should concentrate on ensuring that they understand the needs of

the market and thus produce products relevant for this particular market. Another

strategy to raise value through marketing would be by reviewing the pricing of the

products. Conducting an analysis of the marketing mix principles would invariably assist

H&M raise the value of the company in the new market. These principles should

concentrate on improving and maintaining strong good relationships between the

company and the stakeholders of the company (Deloitte, 2012).

Challenges of a New Market

Controlling the new environment and the challenges that H&M would be bound to face

in India, the company should engage in appropriate relationship marketing practices

and place the company in a position where growth within the new market could occur.

Relationship marketing would involve the company ensuring that they are able to build

and gain the trust of their stakeholders. H&M additionally could divide the market into
segments and tackle each of the segments individually thereby handling all forms of

challenges.

The appropriate strategy of entry therefore, in the Indian market would be that of getting

into a partnership with an established Indian clothing company. By doing this, the

company would benefit from more control over the running of the company, reduced

risks and costs. By extension, other benefits would be gaining suppliers and an existing

market share of the other company.

Conclusions

This research paper undertook to perform an intensive market analysis of the Indian

apparel industry as well as that of an analysis of the company H&M. The focus of the

paper was geared towards identifying the viable possibilities that existed for H&M in the

Indian apparel market.

In conclusion, the paper has identified that the apparel industry in the Indian economy

favors entry into the market of apparel company H&M. This is mainly facilitated by rapid

economic growth of the country, the changing demographics within the country as well

as the changing needs of the consumer market. An analysis of the company H&M

concludes that the company is well suited to enter and meet the needs of this market.

Recommendations

The research conducted recommends H&M to adopt the practices below:

i) Partnership entry strategy

Entry into the market it would be the recommendation would be by engaging into a

partnership relationship with an established apparel company in the Indian economy

(Arnold & Quelch, 2012). This would not only reduce the costs of entry, establishment,

risks involved but would additionally make it easier for the company by marketing their

products to the established companys customers.

ii) Meet the needs of the consumer market

The needs of the consumer market are subject to change often. It is the responsibility of

the company to ensure that they understand the needs of the market and follow up on

ensuring that the needs of the market are always met (Czinkota, 2012).

iii) Establish strong relationships with the consumer

Establishing a positive image with the consumers is necessary as it provides a

rewarding experience for the customer and boosts loyalty (Czinkota, 2012).

iv) Engage in a mutually beneficial relationship with those stakeholders in

distribution, and supply.

Good relationships are bound to benefit a company through ensuring various activities

are always met.

v) Establish and maintain a good image within the industry

The company should engage only in practices that improve on its images in the

industry.
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