Hudsons Bay Business - Case Study Example

CASE STUDY ASSIGNMENT Question There are hundreds of companies that consider international expansion as the next step in their business prosperity. However, when developing a strategic plan to launch overseas, growing companies should take into account potential barriers and business issues during their international expansion. These may be marketing and legal barriers, regulatory and quality control concerns (Sherman, n.d.). For such company as Hudson’s Bay, the expansion in European countries should also be reasonable and all business issues considered. Canada-based company, Hudson’s Bay is now a premium retailer in North America. As a fur-trading business, the company owns and operates retails stores under brands of Hudson’s Bay, Lord & Taylor and Saks Fifth Avenue with the main office in Canada (Jervel & Mahadevan, 2015). Being present in the U.S. market, the company also wants to prove its strategy by diversifying its portfolio and position itself as the international retailer. Thus, there is a considerable reason under Hudson’s Bay desire to acquire European market, and German in particular. Specifically, the company is taking over Galeria Kaufhof stores in Germany from Metro Group. However, retailing in Europe is not of the same format as in North America, especially when it comes to Germany market. Despite that fact, Germany is the best place to start European expansion, and for Hudson’s Bay it can also bring new opportunities in terms of international business. Thus, the company should consider its strategic approach in running new European business and spend its money wisely. As the great attempt to move in the European market, where there’s good potential growth there, Europe at the same time represents a retail market with challenges especially for such players as Hudson’s Bay that are struggling to compete effectively against other malls and online shopping in the recent decades. For Hudson’s Bay, potential business issues connected with its newly acquired Galeria Kaufhof can be connected with that fact that Germany, companies and unions are connected. This was the main obstacle to Wal-Mart it its striving to establish successful business relations with its German customers (Landler & Barbaro, 2006). For Hudson’s Bay future strategy regarding Kaufhof, it is obvious that no significant changes will be made, and respect to the store footprints and levels of employees will be left. Based on Wal-Mart’ bad experience with undesirable location of its stores and forced quitting of employees when the headquarter of one of the chains was shut down. While such strategy was good in U.S., it was a bad thing in Germany. Thus, Hudson’s Bay should consider these German consumer habits and expectations. Thus, German customers tend to be more frugal and demand more than the customers in U.S. for example. If Hudson’s Bay will continues to operate Kaufhof under their current brands and will establish friendly partnership with the current Kaufhof team, it will help the company to conquer the German customers. Besides, there are other companies such as Carrefour, which left Hudson’s Bay best practices to create further company’s growth. Question 2. The acquisition of Kaufhofs brand is a great milestone for Hudson’s Bay strategy in unlocking real estate value and strengthening its business presence in Europe. However, such move is also a significant step forward in its plans to become a larger international retailer, which will operate not only in Germany and Belgium, but in Canada and the U.S. In the current time, Hudson’s Bay operates in ninety full-line locations in Canada with two outlet stores and thebay.com. Another fifty full-line locations are presented in Lord & Taylor brand in the U.S. and Saks Fifth Avenue adds thirty-nine U.S. stores. Sixty-seven locations operate as Home Outfitters in Canada. All these brands are owned by Simon-HBC JV (Hudson’s Bay starts joint real estate ventures in U.S. and Canada, 2015). It is obvious that Hudson’s Bay should expand its Kaufhofs brand to the U.S. and Canada where it is already a strong player. Combined with the current company’s portfolio, the company will operate more than four hundred stores, which will constitute about forty-four percent of U.S. sales, thirty-one percent of sales in Germany and twenty-three percent of stores’ sales in Canada. In addition, if the company uses its e-commerce platforms for selling products, it will obtain a competitive advantage, which in German, for example, if quite low. There is a reason to compare potential Kaufhofs brand expansion results to those, which another Hudson’s Bay brand has in the U.S. market. According to Mckinnon (2015), the sales growth for the fourth-quarter raised more than nine percent, supported by the digital sales and same store sales across the banners. The company announced about the opening of two Canadian Saks locations in order to pursue its expansion in Canadian market. These measures can explain Hudson’s Bay well-planned strategy in promoting its products. Therefore, pursuing Kaufhof in U.S. and Canada will be a successful business step. Thus, the company can introduce its new acquired brand in new stores across main sales locations in Canada and U.S. These stores can be present in the cities of Toronto, Montreal, Ottawa, and Vancouver along with the other company brands. Question 3. Before planning an expansion strategy on a new territory, for the modern businesses it’s important to understand the specific culture, customs, needs, and unspoken rules of the country where they plan to enter. These cultural characteristics enable companies to better tailor expansion concept for that market. It is also important to identify the motivations behind one’s decision to explore entering the international marketplace. If there is a strategy to capture more markets with the products and services, a company should examine what its domestic marketing strategy is and how this plan can be employed by the company. Then, examine and identify how it can be utilized within the new market. Based on the negative experiences of those companies such as Wal-Mart, Gap and Carrefour had in the European market of Germany Hudson’s Bay can identify other approaches as to conducting business. In terms of making business, U.S. and German entrepreneurs are both direct, honest and are punctual. They are result- focus and strive to reach competitive and practical advantage. However, as it is known from Wal-Mart history of presence in Germany, Americans do not always take into account the tome of speaking and presentation. In Germany, people put more business approach when doing business, while it is normal for Americans to use certain personal attitude to matters (Schmidt, 2002). It is also important that international business considered ethical decisions as they are paramount to the company’s ability to meet the market requirements. Thus, Germany as a marketplace is different cluster from that of U.S. where it has a moderate individualism and high level of avoidance of uncertainties. Less attention is given to the corporate codes of ethics; however, more attention is paid on strengthening of the legal framework of business. While in U.S. there are many incentives from government that help to promote business ethics, such country as German does not receive such incentive. In addition, ethics in business is different in German and U.S. in terms of introduction of ethical programs, where Germany is the country less inclined to such programs. Additionally, German managers are more particularistic and U.S. managers perceive business ethics more legalistic. Again, public and private is more separated in Germany, there are more norms of understanding of norms and values, the human potential for moral improvement is more pessimistic, however (Ardichvili, n.d.). If the company is able to understand how the culture differences affect marketing decisions, such knowledge will help to predict strategic moves of the business and design effect competitive strategies. There is also a great role in languages used for making international business. While researches (Bautu-Gomez, 2014), consider the importance of the common language to help business performance, it is the leaders defense contractor of surveillance, secure communications and intelligence. Germany, Canada, U.S. and Australia use English as much, however, they do also respect if the business leader is capable to master their own language. Thus, inability to speak German and inappropriate business appearance have created a negative outlook to one of the Wall-Mart’s executive. Also, hiring multi-language speaking employees is how companies realize the need to understand the new business environment. Another important factor that impacts the way international businesses cooperate with their customers, is the ethical and unethical decisions, which are able to bring either benefits or negative outcome for the organizations. Thus, giant multinationals such as Gap and Wal-Mart are always under the scrutiny, as their usual ethical decisions lead to the unethical ones as a result of financial benefits that company obtain. For that reason, modern companies develop and follow corporate social responsibility as the main concept of ethics in the international business (Bautu-Gomez, 2014). For Hudson’s Bay, as an international business, new market in face of Germany means that brands will be recognized throughout the world. However, to reach business success and excellence in performance, it is necessary to examine and understand how new market customers perceive the new brand. This requires Hudson’s Bay to consider differences in business, legal and ethical factors within the new market as well as communication differences. In terms of corporate culture, Hudson’s Bay should maximize interaction with the customers, enabling them to advice the company what should be better in performance and products. Social interaction is necessary; however, it is not sufficient. The attention should be given on the building a friendly company, where it is capable to share and develop the sense of community in which it operates. Diversity among executives within the chosen market will enable the company to understand the local needs and requirements and be at the same time closer to the customers. Along with diversification, it is important so the new market understood principles of new business in the common language and customers could perceive the strategies of new owner in the appropriate way. In terms of corporate social responsibility, Hudson’s Bay should understand and predict solutions addressing the issues of corporate accountability which are the sovereignty of the nation that makes a global community, diversity of culture and business practices and the important uncertainty about the operations within the foreign jurisdiction. References Ardichvili, A., (n.d.). Dimensions of Ethical Business Cultures: Comparing Data from 13 countries of Europe, Asia, and the Americas, University forum of human resource development, Retrieved from http://www.ufhrd.co.uk/wordpress/wp-content/uploads/2009/07/7-1-refereed-paper.pdf Banutu-Gomez, M., 9(2014). The role of culture, language and ethics in global business, European Scientific Journal, Retrieved from http://www.eujournal.org/index.php/esj/article/viewFile/3280/3062 Jervel, E. and Mahadevan, N., (2015). Hudson’s Bay to Buy German Department Store Chain Galeria Kaufhof From Metro Operator of Saks Fifth Avenue set to expand in Europe, The Wall Street Journal Hudson’s Bay starts joint real estate ventures in U.S. and Canada, (2015). The Men’s wear industry magazine, Retrieved from http://www.mr-mag.com/hudsons-bay-starts-joint-real-estate-ventures-in-u-s-and-canada/ Landler, M. and Barbaro, M., (2006). Wal-Mart Finds That Its Formula Doesn’t Fit Every Culture, The New York Times, Retrieved from http://www.nytimes.com/2006/08/02/business/worldbusiness/02walmart.html?pagewanted=all&_r=0 Mckinnon, J., (2015). Hudson’s Bay profit triples on strong Sake sales, The Wall Street Journal, Retrieved from http://www.wsj.com/articles/hudsons-bay-profit-triples-on-strong-saks-sales-1428410642 Sherman, A., (n.d.). Expanding abroad: strategic issues, Entrepreneurship Schmidt, P., (2002). American and German Communication Styles, American- German cross-cultural consulting, Retrieved from http://www.agcc.de/media/U.S.-German.pdf Read More