Pattern of Expansion of Global or Multinational Retailer - Assignment Example

1- Is the retailer classified as a global retailer or multinational retailer? Explain its pattern of expansion. What expansion strategy did/ is the retailer use/ using? H&M can be classified as a global retailer rather than a multinational retailer since Hennes and Mauritz operates on a centralised system by opening wholly owned subsidiaries and investing in many countries of the world and having a complete control over its product offering .Its global strategy is further controlled by the holding company and it offers its products keeping in mind its objective of fashion, price and quality then adapting their products as per the local market demand which is generally done by multinational retailers. H&M uses a centrally owned subsidiary system of expansion, they do not enter into any joint ventures or give franchise of their brand rather they exclusively own their outlets and stores opened in different countrieswhich gives them complete control over their stores and help them build on expansion and marketing strategies as per their requirement. H&M is using Dunning’s electric theory of ownership, location and internalization, H&M usually opens their stores in prime locations and follows a centralised management system which enables them the advantage of asset based ownership, geographical proximity doesn’t plays a major role in their expansion strategy. They do not follow the policy of first mover advantage, rather they wait for the right time and target the upper segment group of consumers in the customer pyramid. H&M further benefits more by opening their own stores then hiring local independent firms to sell their products and services which given them the advantage of internalization. 2- Based on Dunning's eclectic theory, how do ownership, locational and internalization factors play in your retailers' international expansion? H&M is a global retailer which has done exceptionally well in expanding their market globally in a very short span of time. They follow the Dunning’s electric theory in their international expansion which gives them the advantage of ownership, location and internalization, since H&M follows a holding-subsidiary system, they open their own stores with centralised management system having complete control over their stores. H&M follows asset based ownership which enables them to have competitive advantage over their competitors which further escalates their expansion strategy keeping in mind their objectives of delivering fashion, price and quality. Location plays a major role in their rapid growth, H&M usually open their stores in prime location of different countries and target the higher income group of consumers. They further expand their business in only those countries which are economically and politically stable. H&M has an edge of opening their stores in different countries than only in their own countrydue to their expansion strategy and demand for their products worldwide. Geographical proximity of opening their stores doesn’t plays a major role since they follow a centralised management system and have complete control over their stores right from regular stock taking to price, quality and fashion. H&M, thus enjoys the advantage of ownership and location which further helps them to enjoy the benefit of internalization, since they do not follow the policy of franchise or entering into joint ventures which enables them complete control over their stores and it proves advantage to open their own stores then hiring local firms to exploit the local market. 3- What role does cultural proximity and geographical proximity play in the retailer's international moves? H&M keeps their major objectives of delivering good quality, low price and fashionable products due to which demand of their products is always on a high in different countries. H&M further open their stores as wholly owned subsidiaries which gives them complete control over their stores. They expand their business in only those countries which are economically and politically stable due to this reasons cultural and geographical proximity does not plays a major role in their expansion strategy. Further, unlike their competitors who follow first mover advantage policy H&M waits for the right time and then expand their business in different countries by opening their own exclusive stores and targeting the higher income consumers than trying to target the whole of customer pyramid. Geographical and cultural proximity is further ruled out due to their centralised management system and delivering uniform products in all stores. H&M policies are implemented simultaneously in each of their stores which enables them to run all their subsidiaries effectively and in a uniform manner. H&M has further learned from their mistakes of opening giant stores and then latter opening smaller ones which they corrected immediately. H&M has expanded their business globally exceptionally well in the recent past which further shows that the internal policies of the company are strong enough to handle geographical and cultural issues and those does not create a hindrance in their smooth running of business globally. 4- Can you predict the retailer's future international expansion? H&M has been a global retailer, and have exceptionally expanded their business in rapid way by means of their centralised management system. It hardly seems that the corporation shall change their system of expansion in the near future. H&M does not follow the policy of first mover advantage as mostly done by their counterparts but rather wait for the right time and then makes a move. There is still immense scope of expansion in countries like Germany, Italy, France, Spain, United Kingdom and Poland and further in Asian countries like China, Japan or Russia. H&M shall definitely expand their business in near future since markets of countries like Austria, Netherlands and Scandinavian are at the verge of maturity stage. Demand of their products worldwide will also push H&M to expand their business at a faster rate. However, it seems unlikely that the corporation shall enter into any Joint Ventures or bring Franchisee system as this shall dilute their control over those stores and might also reveal their business secrets and might hamper their objective of low cost, god quality and fashionable clothing. Further the corporation has created a new label for their products in each store which has led to increase in demand of their products. It seems unlikely that they shall enter into any retail chains rather they shall continue to sell their products from their own exclusive stores and continue to target the higher income group of consumers in the customer pyramid then trying to target the middle income group. Read More