Marketing Strategie - of COS Australia - Case Study Example

Student’s Name Instructor’s Name Course Name Date of Submission Marketing Strategies: A Case of COS Australia Executive Summary H&M AB is a Swedish leading multinational clothing firm. The company was founded in by a Swedish entrepreneur and has since grown to become a global company with stores more than 3600 stores in over 57 countries. The just opened its first store in Australia recently, where it introduced its famous COS brand. The COS brand did attract a huge number of Australian shoppers on its first day of operation and has maintained good performance since 2014 despite the stiff competition that the brand faces from both local and international firms. However, for the COS brand to compete effectively in the Australian market, the company has to consider enhancing its marketing strategies and improve the quality of its clothes and increase its distribution channels to make the clothes easily accessible to Australian customers. Introduction H&M AB is a Swedish leading multinational clothing firm. The company was founded in by a Swedish entrepreneur and has since grown to become a global company with stores more than 3600 stores in over 57 countries (Cummins par. 2). H&M AB specializes in the retail of fashion clothing for men, women and children. H&M AB ranks the second largest clothing retailer in the world just after the Spanish Inditex. H&M AB recently opened its first doors in Australia in 2014 and is already causing excitement among Australia consumers. Despite having been operational for barely a year, H&M AB is already offering a serious challenge to the Australian local and international clothing retail companies. H&M Australian branch is located at GPO building in Melbourne (Hibbit par. 2). The company intends to open additional stores in all major cities in Australia starting with Sydney. Although H&M AB sell six different autonomous brands, including H&M, Monki, Weekday, COS, and Cheap Monday among others, the COS brand has created a lot of excitement among Australians. COS stands for collection of style, which it first launched in Sweden in 2007 (Cummins par. 3). This report will review the recently launched COS brand in Australia with a view to establish the competitiveness of the brand in Australian fashion industry. Situation Analysis Product Launch COS, which is a Scandinavian brand was launched in April 2014 in Melbourne, Australia for the first time (Robb par. 4). To the surprise of the company management, the shop was full to capacity on its first day of opening, which was a clear indication of Aussie’s craving for fashion clothing from foreign companies. The company registered huge sales on its day of launched with the brand increasingly registering huge demand as its popularity grows in Australia. Porters Five Forces Model Porters five forces model is a useful management tool that managers use to analyze the competitive environment of an industry where they operate or intend to enter (Porter 5). Understanding the competitive environment is important for a company since it aid in developing effective product features and marketing strategies to establish a position in the market. Porter’s Five Forces of competition include competitive rivalry, threat of substitution, buyer power, seller power and threat of entry. Competitive Rivalry Although the COS brand has taken the Australian market by storm with almost every Australian craving to wear a COS brand, the company faces still competition from both local and international firms. The local competitors that COS brand will have to mount a strong challenge against include fashion brands sold by fashion companies, such as Portmans, Katies and Witchery. In addition to the local competitors, the H&M COS brand also compete with other foreign brands, such as Marks & Spencer, Sephora and River Island (Robb par. 6). These fashion companies compete on the basis of prices, product features and customer service. Threat of Substitution Before launching a new brand in a market, it is important for a company to consider the availability of close substitute to its product offering. Analysis of the Australian consumer market shows that the threat of substitution for fashion clothes is high. There is a variety of cheap alternative clothing that consumers can buy instead of the expensive COS brands. The alternatives include second-hand clothes that attract high demand from Australian consumers. Buyer Power The bargaining power of customers in the Australian clothing industry is low. According to analysis, there are many customers that are looking to buy clothes, such as the COS brand as was witnessed during the recent launch of the brand in Melbourne store (H& M par. 1). The fact that customers are many leaves them with very little bargaining power to influence the prices charged by retailers, such as H&M. Additionally, because there are different clothes, this gives retailers more power to determine prices charged for each clothe without customer influence. Supply Power The bargaining power of suppliers is low. There are many suppliers in the clothing industry that compete against each other for clientele. This gives retailer companies, such as H&M choice to choose that which provide high quality clothing materials at affordable prices. The fact that there is high competition among suppliers also results in price reduction for clothing retailers, such as H&M. H&M AB, for instance, has more than 800 independent suppliers for its garments, which gives the company greater control over prices (Hibbit par. 7). Threat of New Entry The threat of new entry is low in the Australian fashion clothing industry. The existing retail-clothing companies in Australia have established strong brand names with customers being loyal to the existing brands. Additionally, Australian fashion clothing industry requires large economies of scale that creates a barrier to entry to small firms. Accordingly, this favors companies, such as H&M AB that has launched the COS brands in Australian clothing market. SWOT Analysis Strengths Strong brand image: H&M AB enjoys a strong brand image that it has built for over 6 decades. Currently, H&M AB is the second largest clothing retailer in the world with more than 3500 stores in 57 countries across the globe (H& M par. 6). The popularity of the retailer gives it a competitive edge over rivals in the clothing industry. Fashionable and trendy clothing: H&M AB offers cheap but fashionable trendy clothing in its stores. The company ensures that quality is not compromised at all cost. This became apparent when COS was launched in Australia, where customers thronged the shop citing that they buy COS brand because they are not only of trendy, but also affordable in terms of price. Great store location: H&M AB has over 3500 stores across the globe. All the stores are located at strategic positions that make them easily accessible to customers (H& M par. 8). For instance, the just opened COS brand store is located at GPO building in Melbourne. The place is frequented by residents of Melbourne and its environs. Low delivery time: It takes only about 12 weeks for H&M AB products to move from the design stage to the retail phase, which is a great strength. Excellent marketing skills: The retailer has well-developed marketing skills that makes it easy for the firm to persuade customers to buy its products. Weaknesses Low quality clothing: Although H&M AB strive to provide its customers with quality and affordable clothing, the quality of its clothing ranks low in comparison with its competitors. This has seen the company being criticized by customers for offering low quality clothes. Dependent on suppliers in the far east: H&M AB suppliers mainly come from the far east (Euromonitor International par. 3). This is a major weakness as the retailer end up incurring high cost to get the clothes in its stores. Lack of control over clothing production: H&M AB usually lacks control over the production of its garments as the retailer buys its garments from independent suppliers from Europe and Asia. As such, it becomes difficult for the retailer to ensure consistent quality clothing is made for customers. Lack of backup stock: Because H&M AB displays all of its clothing on the floor, this results in lack of backup stock for its customers. Bulk buying: H&M AB have the tendency of buying its garments in bulk, which posses the risk of overstocking, which might affect the affordable prices charged by the company further. Opportunities Expansion into international market: H&M AB have great opportunity of expanding into the emerging market, such as India and China. Growth of online shopping: H&M AB has great opportunity of exploiting the growing online shopping worldwide. Currently, the retailer provides online shopping is just a few European countries, but can reap huge by introducing online shopping into more markets. Growth in kids market: H&M AB has opportunity to exploit the growth of kids market. Threats High competition: H&M AB faces serious threat from competitors. In Australia, for instance, H&M faces stiff competition from well-established domestic and international fashion retailers. Some of the major competitors of H&M ABin Australian clothing industry include such as Portmans, Katies, Witchery, Marks & Spencer, Sephora and River Island (H& M par. 9). Rising cost of labor: H&M’s performance is threatened by ever rising cost of labor in China, India, Australia, and Bangladesh among others. Recession: Because the performance of H&M AB depends on the ability of households to purchase its clothes, the recent recession has affected the performance of H&M AB in most European countries (Euromonitor International par. 4). Although the economy of most countries, where the company operates has been improving, the uncertainty associated with economic growth is a serious threat to H&M. Changes in tastes and preferences: The changes in consumer tastes and preferences that has seen many consumers going for cheap and throwaway clothes instead of fast fashioned clothes is a threat to the survival of H&M. Exchange rate fluctuations: because most of the profits made by H&M come from foreign countries and have to be converted to Swedish currency, this puts the performance of H&M at threat of currency fluctuations. Poor performance in foreign countries: H&M has in recent months being posting declining performance in international markets, which raises questions as to its survival in the foreign markets in the future. Segmentation Properly defining a segment and serving the market effectively is critical for the success of a company. The market segment served with the COS brand in Australia are the fashion conscious persons who are interested in spicing up their wardrobe and want to look stylish all the time (Euromonitor International par. 7). It is for this reason that COS brands are associated with celebrities. Target Market COS brands is targeted at men, women and children, especially those that fall within medium to high income. Similarly, the COS brand targets mainly consumers that have a rebellious and vibrant attitude. Positioning COS is positioned as a high class brand that is trendy and fashionable at affordable prices (Robb par. 8). Branding Strategy Branding is a critical marketing strategy that must be done properly. This is because branding has a huge influence on the way customers perceive a product. Flemming and Christensen define branding as the process of creating, improving, maintaining and exploiting a product’s brand equity (3). H&M AB has used a simple and unique branding technique for its COS brand. The simplicity and uniqueness of COS brand makes the brand easy consumers to remember and distinguish from other brands in the market. Additionally, the branding of COS enables the company to enjoy goodwill associated with the brand, as well as communicate the benefits that consumers derive by buying the COS brands. Marketing Mix Strategies Product Strategies Product is a critical element of marketing mix that must any company that intends to succeed must position properly in the market (Walker, and Mullins 11). Accordingly, H&M has ensured that it COS brands that it recent launched in Australia is not only fashionable and trendy, but also of high quality to enable the brand meet the needs of its Australian customers (Robb par. 11). The clothing sold under COS brand are of high end design that is capable to live beyond season. The company believes that it is because of the quality and Pricing Strategies Price is another key element of the marketing mix that plays a critical role in ensuring success. If prices are done properly, a company stands a huge chance of succeeding. COS brands are sold at affordable prices. The company marketing manager reveals that most of the COS brands are sold at a price below $100 (Glein par. 2). Charging low prices than its competitors has given the company a competitive edge over its rivals. This was seen during the April 2014 launch of COS brand that saw hundreds of Aussie clothing shoppers throng the Melbourne-based store to get fashionable and elegant clothes at affordable prices. Distribution Strategies Place denotes the distribution channels that a company uses to make products available to customers (Walker, and Mullins 15). COS brands are distributed to customers through stores owned by H&M AB (Glein par. 3). In order to make products available to customers, H&M AB has been opening up stores in most major towns and cities in countries, where it has set food. For instance, after opening a store in Melbourne, H&M AB intends to make the clothing easily accessible by opening up stores in Sydney and other major cities in Australia. In addition, COS brands are also available online, where a shopper can order a cloth online from any part of the world and have the cloth delivered within a short time. Online shopping has made it easy for customers to shop at the comfort of their homes something that has given the brand a competitive edge over competitors in the market. Promotion Strategies Promotion is a marketing mix element that denotes the strategies that a company uses to create product awareness and persuade targeted customers to buy a product (Walker, and Mullins 21). H&M Group uses a variety of strategies to promote the COS brand in Australia. Firstly, the company uses a print media, especially the lifestyle magazines to promote its fashion clothes in store (Glein par. 5). H&M Group also promotes its COS brands in Australia through its official website and social media sites. Currently, the company plans to launch aggressive TV, newspaper and sponsorships, as well as billboards as a way of promoting its products. Recommendations The Scandinavian COS brand that was just introduced in the Australian market was well received by Australian customers on the first day of its launch in Melbourne as hundreds of shoppers thronged the store to get taste of the clothes. The high demand for COS brand was based on the strong brand reputation that H&M has built over the years. However, because the company faces stiff competition from both local and international fashion companies, H&M AB must do a number of things to help enhance its competitiveness. Firstly, because quality of clothes is a major weakness of the company, the management of the company should consider enhancing the quality of its clothes to match or exceed those of its competitors in the Australian market. Secondly, because H&M AB has no control over garment production, it has not been able to ensure quality control. Therefore, the company should consider putting up a garment manufacturing plant to give it control over the production. Additionally, COS brand lacks enough distribution channels for its clothes in Australia, which gives its competitors an edge over the brand. Therefore, to enhance its competitiveness, COS brand should increase its distribution to make the products easily accessible to customers in the entire Australia. Works Cited Cummins, Carolyn. H&M Ready For Australian Fashion Battle, 11 March 2014, Web. 24 August 2015 Euromonitor International. H&M Hennes & Mauritz AB in Retailing. April 2015. Web. 24 August 2015 http://www.euromonitor.com/handm-hennes-and-mauritz-ab-in-retailing/report Glein, Kelsey. H&M's High-End Spinoff Brand COS is Set to Launch in the USA, 14 March 2014. Web. 24 August 2015 http://www.instyle.com/news/hms-high-end-spinoff-brand-cos-set-launch-usa Hansen, Flemming and Lars Bech Christensen. Branding and Advertising. Herndon, VA: Copenhagen Business School Press DK, 2003. Print. Hibbit, Claire. H&M Sister Brand Opens, 28 Nov. 2014. Web. 24 August 2015 H& M. The H&M group. Web. 24 August 2015 http://about.hm.com/en/About/facts-about-hm/about-hm/hm-group.html Porter, Michael E. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York, NY: Simon and Schuster, 2008. Print. Robb, Kirsten. Just COS: H&M’s Sister Opens As Aussie Appetite For Overseas Fashion Brands Continues, 1 December 2014, Web. 24 August 2015 Walker, Orville C., and John Walker Mullins. Marketing Strategy: A Decision-focused Approach. London: McGraw-Hill/Irwin, 2011. Print. Read More