Term Project – Part 2
Question 1: Yes. H & M operates in Venezuela and Brazil which are considered economically or politically risky. Operating such countries gives the company procedural distributive and political risk as a result of Brazil’s high corruption degree as well as nationalization in Venezuela.
Question 2: H & M operates primarily in common or civil law countries. The major implication so such ventures are that in legal systems with common law, precedents are set by common rulings which make them more binding as well as contracts which are written on the basis of agreement of both parties. In the civil law case, only actions that are legislated are referred to as being and there are some legal requirements that require to be met in the process of contract development.
Question 3: H & M has purchased insurance from OPIC especially in countries in South America, Asia and Africa where there are turbulent political and economic influences.
Question 4: H & M holds some hundreds of automotive related patents, which have the 20-year shelf life. The company also does a job that is fairly good in the provision of ample warning to potential violators. For instance, in Portugal, there exists a lot of small boutique, that started using E-Commerce in increasing their sales. Nevertheless, the market in Portugal only grows in the E-Commerce. As a matter of fact, boutiques that are small in size are not the main H&M rivals in Portugal due to the fact that it is impossible to be in competition with an international company that has lowers costs and outsourcing partners. On top of that, they have no reputation or brand awareness that helps in gaining equal access to channels of distribution. Therefore, the market in Portugal provides a higher barrier to fresh entrants in the business of retailing (Adrian & Alison, 2008).
Question 1: H & M’s mode of entry into foreign market is based on the strategy of providing commodities that its competitors have not yet provided in the foreign markets, which gives them a great advantage against their major rivals in the global market. Its risk –return tradeoff is characterized by provision of similar better products with similar or better benefits than those of their competitors but at costs that are relatively lower. This is the right approach taken by the company as it gives the company a competitive advantage as well as a unique mechanisms for production, know-how, or any other competencies that occur in the firm. It achieves this competitive edge through either cost leadership or differentiation. This differentiation entails that the company takes out prices that are higher for products that are unique, whereas cost-leadership implies that the company sells huge amounts of similar product at a price that is relatively lower which increases its sales volumes (Adrian & Alison, 2008).
Question 2: The company has used certain strategies for entering foreign markets such as manufacturing and sales to pursuit of natural resources. Since H&M appears to be so diverse in its approach, many experts and stockholders alike appear to be supportive of the firm’s efforts overseas.
Question 3: The host country’s attitude towards H & M is quite positive because the company sells collections that are more basic throughout the world that the ones for special designers. This makes the focus to lie more on standardization rather than differentiation, which is the main factor for the H&M’s success and positive attitude by the host country.
Question 4: H&M appears to be like any other corporation that operates for profit, however, it does try to apply an approach of ‘do no harm’ in its international operations. It has set high ethical standards as well as reports on its progress every year.
Question 1: The mission statement is that “Fashion and quality at the best price, to everyone, and we do so in a sustainable way-today, tomorrow and in the future.” This is carried out through constant development and analysis of new possible target segments, products demands not yet saturated and market openings. This is demonstrated by the company through the manner in which it does its day-to-day operations (Adrian & Alison, 2008).
Question 2: Based in the information contained in the Company’s website, H&M would be put in the category of shareholder model.
Question 3: The current operational tactical plans being used are constant development and analysis of possible new target segments, openings of markets and products demands that are not saturated yet. These plans fit in the company’s longer term strategic posture as due to the long history, heavy campaigns for marketing and successful expansion, H&M has built up brand image that is very strong all over the world and will go a long way in enhancing its competitive advantage in future (Azam, 2010).
Question 4: H&M is currently involved in following of a strategy for cost-leadership with a differentiation hint due to the latest strategic partnership trend with fashion designers and houses that are famous. As quoted by Maud Diesen, on matters pertaining H&M strengths, the biggest strength for the company is the concept of the business itself which focuses on quality and fashion at the best price to all customers, and this is done in a manner that is sustainable, today, tomorrow and in the future (Azam, 2010).
Azam. (2010). Internet Tips and Tricks: 4 common types of political risks for International Markets operations. Internettrickstips.blogspot.com. Retrieved from http://internettrickstips.blogspot.com/2010/11/4-common-types-of-political-risks-for.html
China – Geert Hofstede. (2016). Geert-hofstede.com. Retrieved from https://geert-hofstede.com/china.html
Adrian Haberberg & Alison Rieple (2008) Strategic Management: Theory and Application. Print.