cent of its revenue on advertising whilst its competitors average 34 per cent

Cent of its revenue on advertising whilst its

This preview shows page 12 - 14 out of 19 pages.

cent of its revenue on advertising whilst its competitors average 3–4 per cent; rather, it relies upon dramatic presentation and impressive visual staging in its stores. In 2011 it registered an annual increase of 32 per cent in net profits, much higher than its major competitors. Because its products are fashionable and capture latest consumer trends, it has successfully married logistical and cultural components that other quick response firms have not managed (Cachon & Swinney, 2011). H&M Sweden’s H&M embraces many of the fast fashion concepts of Zara but competes more on the basis of price than timely fashion. Founded by Erling Persson as a women’s clothing store in 1947 called Hennes, it acquired Mauritz Widforss (a hunt- ing and fishing store) in 1968 and became a men’s, women’s and children’s store called Hennes and Mauritz. Listed on the Stockholm Stock Exchange in 1974 as H&M, it then opened its first store outside of Scandinavia, in London in 1976. It currently has 3000 stores in 53 markets and employs around 104,000 people. Its business concept is to offer ‘fashion and quality at the best price and always have the best customer offering in each and every market’ (). According to the company, it wants to offer inspiring fashion with unbeatable value for money. To achieve this goal, H&M does not own any factories and instead buys products from independent suppliers, 75 per cent of whom are located in Asia. Some have long-term relationships with the company, but many are utilized for specific products and are selected on the sole basis of their ability to meet strict cost, quality and delivery guidelines. Unlike some other fast fashion companies, H&M does not use middlemen. It relies upon large production volume and an efficient logistical system to keep costs low. It relies upon extensive advertising, complemented in recent years by celebrity endorsements, yet has fewer designers (60 per cent fewer than Zara), and refurbishes its stores much less frequently than competitors (Ghemawat & Nueno, 2006). The former adds costs, whilst the latter diminishes its fashion credibility by not being at the cutting-edge of creativity. Since its longer supply chain means that it cannot always keep pace with new trends in fashion, its competitive focus is much more on price. Its products retail on average about 60 per cent cheaper than Zara’s. Despite this cost-consciousness, how- ever, it is not the lowest-priced competitor in this market segment, as Forever 21 and Ireland’s Primark offer less-expensive products. The latter retailers have relentless driven their costs down by finding lower-cost suppliers, most recently in Bangladesh where labour costs are significantly lower than in China, and using middlemen to
Image of page 12

Subscribe to view the full document.

258 IAN MALCOLM TAPLIN constantly search for ways to find cost-savings in materials procurement as well as manufacturing.
Image of page 13
Image of page 14

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Ask Expert Tutors You can ask 0 bonus questions You can ask 0 questions (0 expire soon) You can ask 0 questions (will expire )
Answers in as fast as 15 minutes