Question

STRATEGIC MARKETING MANAGEMENT

Read the article below and complete the task at hand.

Foreign retailers seek to overcome barriers to India expansion

Fashion groups eye a growing market long resistant to western brands


Foreign retailers’ presence in India is still much sparser than that in China © Bloomberg

Foreign retailers are embarking on ambitious expansion plans in India, where regulatory reform, the rise of ecommerce and shifting attitudes towards female clothing are finally widening access to a challenging market that has long resisted western brands.

But with many Indians still fiercely loyal to traditional dress — and with less purchasing power than their counterparts elsewhere in the world — analysts warn that commercial success will not come easily.

Ten years ago, India relaxed rules restricting foreign investment into retail. European companies such as Marks and Spencer and Benetton, which already had stores in India through franchise and licensing agreements, were joined by Mango, Next and Debenhams as well as big Spanish fashion group Inditex, the owner of the Zara and Massimo Dutti brands.

H&M, Gap and Adidas followed suit after further reforms in 2012 that allowed international retailers to trade under their own names — provided they sourced 30 per cent of their materials locally.

Progress has been slow. “The ones that will succeed are doing better at understanding the Indian consumer psyche,” says Baqar Naqvi, director at Wazir Advisors, a consultancy for international retailers in India. “Even if you are an international brand, it’s only an initial impetus you get from that — consumers don’t have that euphoria about foreign brands anymore.”

Nonetheless, Inditex Trent Retail India, the joint venture between Zara’s owner and the retail arm of the Indian conglomerate Tata, recorded a rise in sales of 16.9 per cent to Rs8.4bn ($125m) for the year to March 31 2016. H&M reported sales of Skr606m ($68m) in the year to the end of November — only a year after its launch in the country.   

Early entrants such as UK retailer M&S struggled to capitalise on their cultural cachet because prices were too high as a result of costly import duties. This changed for M&S after it partnered with Reliance Retail, a unit of the Indian conglomerate Reliance Industries, and developed a domestic supply chain.

“Through our local sourcing — around 60 per cent of which is from South Asia — we are competitively priced in India,” says Venu Nair, managing director for Marks and Spencer Reliance India.   

These initial challenges mean foreign retailers’ presence in India is still much sparser than that in China, another fast-growing market.



Inditex has 18 stores in India, compared with 607 in China, while H&M has 12, compared with 444 in China. Both plan to expand in India, with H&M saying it will open 50 stores by 2020, targeting middle-class shoppers in smaller cities. Retailers are optimistic despite their relatively small footprints in India.

“We believe there is tremendous potential in India today to open stores in metros as well as tier two and three cities,” says H&M.


Inditex and H&M, which both have garment factories in India, have aggressively cut prices and take a lead among foreign fashion chains targeting urban Indian women.

Devika Kundu, a 28-year-old shopping at H&M in a New Delhi mall, says the brands have “cracked the pricing for India”.   

She encourages her mother, who is dressed in a traditional salwar kameez, to wear western clothes. “You get more respect and independence from men in western clothes,” agrees Lovely Kundu, her mother.

Shreyansh Kocheri, a research analyst at data provider Euromonitor, says younger Indians are more comfortable with western clothes and will drive future demand. However, he says international retailers are “still very niche” in a country where traditional dress is commonly worn, and supply might outpace demand. “There are challenges: the country is diverse . . . . 50 per cent of womenswear is still ethnic-wear like saris and churidhars [tight-fitting under-trousers].”

Radhika Chopra, a sociologist at Delhi University, says globalisation has nevertheless shifted women’s aspirations. “They’re trying to make a statement about themselves as global citizens . . . able to meld into any boardroom across the globe or any shopping mall or streetscape,” she says. “Western evening wear has become very important” in terms of female emancipation.   

Nitin Chhabra, chief executive of retail consultancy Ace Turtle, says the internet will catapult foreign brands into the mainstream by reducing distribution costs. “It’s taken so long [for foreign brands to grow] because of distribution challenges. What has changed in the last couple of years is the internet.”   

Still, only 10 per cent of India’s internet users shop online, according to data from the internet and Mobile Association of India, compared with almost 50 per cent in China. Some say rising incomes are key. As India’s middle classes grow along with its economy, more of the country’s consumers will turn to branded, western clothes. Euromonitor forecasts the number of middle-class households in India will increase by 5.6 per cent to more than 80m by 2020.   

But data gathered by the Pew Research Centre has questioned the assumption that India’s middle class is growing rapidly. It shows middle-income earners in India increased from 1 per cent of the population to just 3 per cent between 2001 and 2011 — compared with an increase from 3 per cent to 18 per cent over the same period in China. Pew argues that poverty reduction in India has contributed to growth in the number of lowerincome, not middle income, workers.

Retail executives say Gap, which plans to open 40 stores in India by 2020, is a test case for the spending power of Indians — and brands that attempt to keep prices high.

Mr Naqvi says Gap has not “done anything to capture the share of the market while H&M and Zara are doing more. Pricing here is a lot more competitive.” Gap declined to comment. Yet foreign retailers caution that it is early days for India and remain pragmatic in their outlook. The chief executive of one UK high-street retailer, which has a supply chain in India but no stores, says “the size of the prize” might not offset the risks of “red tape, poor infrastructure and foreign investment constraints”. Source: https://www.ft.com/content/299457fa-ef7c-11e6-930f-061b01e23655

TASK: Inditex has 18 stores in India, compared with 607 in China, while H&M has 12, compared with 444 in China. Both plan to expand in India, with H&M saying it will open 50 stores by 2020, targeting middle-class shoppers in smaller cities. Retailers are optimistic despite their relatively small footprints in India. Having been appointed as Marketing Manager for H&M India, the board has requested you to assess the market and prepare a Strategic Marketing Plan to expand the Indian market.

The plan should cover the application of relevant theoretical frameworks and must address the following key areas:

QUESTIONS
4. Marketing strategy (30)

Present the broad marketing mix approach to be used to achieve the plan’s objectives. Ensure that you also visit the organisation’s internet web-site and incorporate e-commerce as an integral part of your marketing strategy.

5. Action programmes (10)

6. Budgets (10)

7. Marketing Controls (10)

8. Presentation (5)

Answer 1

4. Marketing strategy of H&M :

Segmentation, targeting, positioning in the Marketing strategy of H & M:

Companies that operate in the trendy clothes and accessories business use a mix of different variables of demographic, psychographic and regional segmentation, such as age, employment, sex, race, nationality, personality traits, customer loyalty, benefits requirements, and many others. The company uses marketing strategy differentiation, as it operates on the market with diverse products of specific sub-brands. H & M has placed itself to be ahead of the changes offering design and quality at the best price, based on its innovative perspective.

Marketing Mix:

(i) Product: H&M is a brand for supermarket outfitting. It offers fast fashion clothes for people, women and kids. H&M markets lines of clothes that suit in different countries around the world. The company will begin selling its products online and will increase variety of products on this platform.

(ii) Price: H&M sells higher-priced high-quality clothing. H&M's main rivals are GAP and Zara. H&M goods are priced comparatively lower as part of their marketing mix pricing policy compared with any of these brands. Those were attributed to H&M's reduced costs of production and distribution.

(iii) Place/ Distribution: H&M offers its goods through its exclusive outlets (4135 outlets) situated in big cities all over the world. H&M sells its goods through franchising agreements in certain areas due to legislative norms. It also sells its goods through online retailers from which the consumer can pick from the product list available and purchase them by online payment.

(iv) Promotion:  There are many types of advertisement used by H&M such as TV advertising: H&M comes with imaginative ads that reflect on the new groundbreaking products. Each brand manages its own marketing choices. To raise its popularity, the advertisements are telecasted at frequent intervals and on platforms that are primarily watched by teenagers.

(v) People: The staff at H&M are well educated at all levels. The corporate culture is very innovative and workers at each department are inspired to innovate and show up with the latest wear of clothing on a rotational basis. H&M also teams up with other clothing designers all over the world to create the latest fashion trends. Staff comes from various backgrounds with different competencies.

(vi) Process: Customer relationship management is given great importance. Employees are educated by providing them with improved support and services to attract highly successful customers. In the event of any grievances, the H&M team takes every effort to address them as soon as possible. There is a Customer service Number which addresses customer queries.

(vii) Physical Evidence: With a great atmosphere and respectful workers, H&M stores are suitably lit. The clothing is designed in order to provide a good look that appeals to the clients. The products are of outstanding quality and with the latest trends. H&M diversifies its portfolio and it joins more foreign markets. It engages in PR practices to generate a Sensation in the marketplace.

Competitive advantage in the Marketing strategy of H & M:

(i) Small Markets Exposure: As the company is present in only 65 countries worldwide, it helps the company to concentrate on the operating aspect and protects the government's interest from systemic risk and boundary-country attention.

(ii) Retail store sales model: In developed markets / developing countries, because customers demand to try clothes and accessories in physical shops rather than order online, and because of this company, well countries like India have been conducting where their sales have increased.

BCG Matrix in the Marketing strategy of H & M:

The company operates with the community of brands including H & M, & other news, COS, Weekday, Inexpensive Monday and many other. Because of its limited supply and market reach, it operates in, all of the H & M group products are the comma in the BCG matrix.

Distribution strategy of H & M:

The company has been entering the advanced economies globally with an employee number of even more than 161000 nationwide. Through a large web presence in relation to 4350 + outlets in far more than 65 markets and e-commerce in 35 countries, H & M has extended its scope in different nations.

Competitive analysis in of H & M:

Since the business model of the company is primarily focused on physical shops where footfall is declining quarterly, the company is unable to capitalize on the same, while its competitors such as Inditex, Zara's owner, Chanel, Dior and others are capable of outperforming due to the powerful supply chain that helps businesses follow the evolving demand pattern.

Market analysis of H & M:

As the business operates in the low product lifecycle fashion industry, due to evolving & changing fashion patterns, the businesses function with the risk of excess inventory. While the company is present in a limited number of states but is expanding, the company has scheduled to open 400 branches in 2017 and aims to improve its online retail channel.

Customer analysis of H & M:

H&M represents the wide and varied spectrum of customer classes, ranging from teenagers, men & women. H&M consumers are mainly from either the upper-middle-income community and middle-income community and are in the 15-40 year age range. Variety in H & M collections allows the consumers the ability to select and pursue their own style.

5. Action Programmes:

The marketing mix approach that should be used to achieve the plan's objective is:

(i) Product: H&M is a retail outfitting service. It offers people, women and kids fast fashion clothes. H&M sells clothing brands following in different countries worldwide. The company will start selling its products online and increase product selection on this site.

(ii) Price: H&M sells higher-priced high-quality clothing. H&M's main rivals are GAP and Zara. H&M goods are priced comparatively lower as part of their marketing mix pricing policy compared with any of these brands. Those were attributed to H&M's reduced costs of production and distribution.

(iii) Place/ Distribution: H&M offers its goods through its exclusive outlets (4135 outlets) situated in big cities all over the world. H&M sells its goods through franchising agreements in certain areas due to legislative norms. It also sells its goods through online retailers from which the consumer can pick from the product list available and purchase them by online payment.

(iv) Promotion: There are many types of advertisement used by H&M such as TV advertising: H&M comes with imaginative ads that reflect on the new groundbreaking products. Each brand manages its own marketing choices. To raise its popularity, the advertisements are telecasted at frequent intervals and on platforms that are primarily watched by teenagers.

Action program is a detailed plan that shows all the steps that one should take to achieve its goals. To achieve and develop business on online networking sites as well H&M should work on its plan .It will contain a detailed analysis of how you can introduce different strategies to work on the action programs. It will help H&M to know that how can various methods and strategies help it to improve its business and compete in the market.

6. Budgets:

To start this online business of H&M a budget should be prepared by the company of how much resource and money would b required to implement this business successfully.

7. Marketing control of H&M:

Marketing control is a process to evaluate, monitor, and control the proposed plans for marketing the products and adjust any deviation, if any, occurs in the controlling process. Like every company, H&M also monitors and evaluates its proposed marketing plans.

H&M undertakes the marketing control process for adequate evaluation:

(i) Marketing objectives: H&M sets the marketing objective for the company to fulfill, that is H&M thrives to achieve the marketing objective by conducting various activities. For instance, H&M established a goal to lead generations that is to sell and promote its products and reach every age group or generation customers by providing high-quality products at low or affordable prices.

(ii) Performance Standard: At this stage, the company evaluates the standards that the company has actually achieved. For instance, the company has reached teenagers smoothly but is yet to reach the old generations.

(iii) Comparison of actual performance with planned performance: At this stage of marketing control, the company measures the targeted performance with the actual performance and evaluates the deviation. For instance, at this stage, H&M will measure whether the company able to reach and lead the generation to which the company will evaluate that they were only able to reach teenagers or the younger generations.

(iv) Correction: At this stage, the company adjusts the deviation that has occurred in their planned and actual marketing objectives. H&M will use the corrective measures to adjust the deviation that has occurred in achieving the marketing objectives. H&M can use advertising techniques as corrective measures to achieve the set objective to lead generations.

8. Presentation:

A presentation should be made on the marketing mix approach and that how will the different strategies be incorporated in the e-commerce business to conduct the business properly. This presentation would include all the parts explained above in detail.

(i) The current market situation and how various policies can be adopted to improve the current market situation. Moreover, the presentation will show how the online market effects the current market situation.

(ii) The marketing strategy will be altered with the e-commerce platforms as more changes would be made to make this platform successful in the market.

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