Term Paper: Hennes &amp Mauritz

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Hennes & Mauritz Case Study

The many marketing challenges of competing as a clothing retailer in multiple nations has forced Hennes & Mauritz (H&M) to take a customer- and cost-centred approach to managing their marketing, cost, supply chain, and production operations. H&M's core strength is the ability to deliver trendy and chic clothing at a fraction of the price of originals. This product positioning strategy, supported by the philosophy of treating fashion as if it were perishable produce, pervades the company's culture and is reflected in how H&M manages its product development, retailing, and financial management operations as well. Underscoring all these characteristics of the company however is the consistent marketing positioning of deliver exceptionally trendy, chic and fun clothes for young women in the 15-30 age segment. H&M designs all merchandise in-house relying on a design team of 95 in Stockholm, that deliver designs to outsourcing manufacturing partners globally. The outsourcing network is comprised of a network of 900 garment shops located in 21 low-wage countries including Bangladesh, China and Turkey.

H&M is challenged in its distribution and retailing locations, which is the weakest area of its marketing strategy, despite the 4% of revenues spent on marketing. This is related to H&M's challenges in expanding globally as well, as the company has at times selected locations that put them literally in the same shopping centers of low-price leaders in their same segments, as was the case with the selection of retailing location in Newark, New Jersey. The many challenges the company has from keeping current with designs, keeping suppliers focused on responding rapidly to demand, continual price management, and the global expansion into retail locations are all major strategic challenges for H&M. This paper analyzes and marketing strategies H&M needs to pursue to ensure continued profitable growth.

Hennes & Mauritz Marketing Strategy Recommendations

At the center of H&M's appeal to young women in the 15-30 age segments is the company's ability to deliver fashionable, trendy and chic clothing at low prices which has earned the company the reputation for delivering "cheap chic" in each of its retail stores. This is a unique, differentiated and defensible market position the company must continue to strength and refine based on their customers through customer listening systems, advisory boards and an increasing reliance on the Internet as a means for communicating with customers as to what they want and how they view H&Ms' clothing and brand. The design team that is comprised of 95 clothing professions, managed by Margareta van den Bosch, are instructed by her to not look to the catwalks of London, Milan, New York, Paris, or Tokyo for fashion ideas. The need for continually developing and producing highly unique clothing for the 15- to 30-year-old women's segment need sot pervade the designers' priorities and efforts. As the seasonal changes in fashions and their designs are the biggest strategic risk the company has of either generating successively higher levels of customer loyalty or alienating their customers as they search out other brands, H&M needs to do much more than they are today to develop ongoing communication with their customers. Creating an Internet Panel of 15- to 30-year-old women to review designs, share their ideas of how they want their clothing to more fit with their leisure and professional interests and activities, and also have the chance to win gift certificates for H&M merchandise for submitting their ideas for new accessories and clothing could all be contributing sources of new product ideas for the design teams. In addition, H&M needs to go out and have events for their most loyal customers including sponsoring the up-and-coming bands to further increase loyalty yet also to get feedback on their latest proposed designs at the events as well. The design team needs to work to turn the entire creative process into a very collaborative one with its customers, and this could also include having the H&M website have a designer section where women in the primary segment would have intuitive, easily used Web-based applications to create their own designs for the competition of winning an H&M wardrobe and the opportunity to see their own design actually turned into a product produced by H&M. All of these strategies taken together invite their most critical customers H&M have to the design table, so to speak, on a global basis, regardless of their time zones, nationality, or prior experience with the brand. The company has the beginnings of brand and store loyalty already begun with same-store sales increasing between 4% to 5% per year as defined in the case study, yet H&M must create entirely new and innovative programs to stay in touch with their most critical customer segment if they hope this figure to increase, in addition to staying relevant with their product designs.

H&Ms' pricing strategies continually stress "cheap chic" which is supported by the rapid design-to-production process the company has created for quickly delivering fashionable clothing for 15- to 30-year-old women at low prices. Relying on a low price strategy is risky over the long-term and it forces the company to continually focus on innovative new designs and a highly efficient product launch process at the beginning of each fashion season to quickly recapture the costs of development, production, and distribution. The vertical integration of new design development and production is highly efficient today with a 52% gross margin generated, according to the latest figures as defined by the case. As pricing is just as much a part of the company's positioning and differentiation as are the unique designs, H&M needs to take a more aggressive approach to managing pricing strategies through distribution, look at how to define price optimization strategies on its most popular apparel, and create greater levels of pricing enforcement on materials obtained through its supply chain and the managing of its network of garment shops to clear and achievable, yet aggressive costs targets as well. Pricing as a differentiator needs to be managed aggressively both from a distribution and supply chain perspective as well. The risk is that if a fashion season is missed due to production delays or delays in logistics systems, the company may be forced to drop the price on existing designs, which would impact their gross margins significantly until another generation of clothing designs could be launched. Clearly pricing needs much more aggressive and focused effort as ensuring its long-term competitive differentiation is assured.

Making their supply chains more market-driven is also critical from a marketing strategy standpoint as well, as the continual flow of new fashions that exemplify the position of "cheap chic" are predicated on having supply chain partners well informed of demand levels. This is a major challenge for any company, yet for retailers who have rapid product lifecycles based on rapidly changing fashions, the need for making the supply chain integrated into the demand management aspects of H&M need to be well integrated into how H&M places and manages orders corporate-wide. Creating a demand-driven supply chain by making sure its suppliers have immediate visibility into orders while also coordinating with its retail outlets is critical to making the most of every design generation. Using collaborative techniques including Internet-based supplier management applications, portals, and ordering systems will ensure suppliers stay sychronised with the needs of each of the retail locations the company maintains globally. H&M must turn its supply chain into a strong differentiator by relying on it to deliver the right products at the right time to the stores that need them.

The company's biggest marketing weakness however is its distribution channel and selection of store locations. The selection of the store location in Newark, NJ for example is a case in point. Clearly H&M needs to gain greater insights into how to select retail locations that will give them a competitive advantage… [END OF PREVIEW]

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