Hennes & Mauritz in 2005: Managing Global Expansion
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Case Details:
Case Code : BSTA133
Case Length : 16 Pages
Period : 1980-2005
Organization : Hennes & Mauritz
Pub Date : 2005
Teaching Note :Not Available
Countries : Europe, US
Industry : Fashion
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
Background Note
Erling Persson (Persson), the founder of H&M had begun his career delivering cheese, for his father, to Stockholm restaurants on a bicycle. During a visit to New York in 1947, Persson marveled at the success of retailers such as Macy's.
Upon his return, he opened a women's clothing store called Hennes (hers, in Swedish) in Viiisteras, a small town in Sweden. The store's low prices proved a huge hit in Sweden, where retailing, as in the rest of Europe, was dominated by pricey department stores...
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Business Model
H&M believed in rapid growth, the norm being 10-15% increase in annual profits and opening several new stores every year. H&M believed in organic growth, financing expansion with its $1.1 billion cash reserves. It was quick to learn from its mistakes. In 1974, H&M decided to introduce shoes as part of its accessories. It soon realized that shoes were a different ball game altogether and involved stricter trade regulations and larger stocks. H&M abandoned the venture...
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H&M and Competition
With annual sales of about $7.26 billion in 2004, H&M was much smaller than Gap Inc. (Gap Inc's sales topped $15 billion, and the Gap brand represented 46% of that) but bigger than its closest rival, Zara, which reported annual sales of just over $4 billion, nearly three-quarters of its parent Inditex's total sales.
H&M's market capitalization of $15 billion outstripped that of Gap Inc. and Zara International, its closest competitors. What set H&M apart from most competition was its rapid responsiveness... |
Excerpts Contd...>>
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