Strategic fit in a new Market: H&M's Expansion to China

Helene Juliusson

Student thesis: Master thesis

Abstract

Strong economic growth, increased domestic consumption, these are statements often heard in combination with China and its economic status. The Chinese market is considered to be highly dynamic and to offer plenty of opportunities for international retailers. The vast market with its 1.3 billion potential consumers can make any business developer dream about sales going through the roof and a forever green bottom line. However, it is not always easy to assess and understand how to expand to a market that is likely to be relatively different from ones domestic market. Moreover, business developers need to understand what global strategies can applied to fit the new market and what strategic choices need to be adapted (if any). The aim of this thesis is to provide an answer to this issue This thesis investigates H&M that expanded to China in 2007. First the thesis presents the methodology and research procedures chosen to provide an answer to the research question: How does H&M’s strategy apply to the new business environment in China and how does the strategic fit between H&M and the Chinese market influence the company? Second, relevant literature in the fields of international business, marketing and strategic fit are assessed to provide a theoretical framework for the thesis. Third, the Chinese market is investigated through market studies based macro and micro level factors. Fourth, the case company and its development and strategies are assessed with a focus on the marketing mix. Fifth, the analysis section combines the above chapters to evaluate whether H&M managed to obtain a beneficial fit with the Chinese market. Sixth, the discussion part highlights the importance of the findings in the analysis. H&M expanded to China by largely applying its existing strategies that were used in its global markets. The retailer made few significant changes to its strategy and these were related to price, icon style collaboration and what social networks the company used to promote its products and brand. H&M was well received on the Chinese market and its performance was much higher than previously anticipated by the company. H&M’s year-on-year sales increased between 2007 and 2014 and the growth target of opening new shops with an annual rate of 10- 5 15 percent was easily obtained. The actual rate of store openings in China was between 42 and 108 percent during the same period. The reason that H&M chose to follow, to a large extent, the same strategy in China as in many others of its international markets is most likely to be able to leverage economies of scale.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2015
Number of pages89