Post on 31-May-2015
description
Elin Larsson, Cand. Merc. IMM |Max Josef Jäger, Cand. Merc. IBS Svenja Troll, Cand. Merc. IMM |Hanna Ögren, Cand. Merc. AEF
COPENHAGEN BUSINESS SCHOOL
Turning a Global Epidemic into a Business Opportunity
ExploiJng the “Plus-‐Size” segment ensures $63M of new sales in otherwise stagnaJng markets
Challenge
ComplicaJon
QuesJon
Answer
• Maintain annual sales growth target of 10 to 15% • Keep the business simple
• Western Europe (82% of sales): stagnaJng market • USA (9% of sales): declining market • Changing consumer needs due to growing obesity
How can H&M ensure for sustainable growth in their stagna5ng/ declining key markets?
• Exploit opportuniJes within new segments: • Introduce “plus-‐size” product line for men, women and children • Expected yearly sales of $63M and sales growth of 0.5%
• Ensure success through improved HR funcJon
Choice of strategies with lowest risk, lowest costs, and high expected returns
-‐ Current market expansion strategy is sufficient -‐ Porfolio expansion has proven to be too costly and risky in recent years -‐ H&M is adding complexity to corporaJon due to internaJonalizaJon -‐ Huge market potenJal in “plus size” market
H&M should focus on a new recruiJng strategy and a line extension for achieving growth targets
Market expansion
Por;olio expansion
Recrui@ng strategy
Line extension
PotenJal revenue
Demand
High costs of implementaJon
High risks High Low
H&M can uJlize their core competencies to exploit the plus-‐size trend
Market share by region Plus-‐size trend H&M's Core Competences
2010E
%
Middle East & Africa
Western Europe
Eastern Europe
Americas
Asia Pacific % Total Growth
Children Men Women
Plus-‐size Apparel
2005 -‐ 2010
Source: Report linker, Euromonitor, Package Facts
# Fashion forward
# Affordable prices
# Western core market
• Asia Pacific, MEA and Eastern Europe are H&M's growth markets • H&M faces declines in Americas and Western Europe
• Key trend in Americas and Western Europe: Plus-‐size demand increase • Customer needs not saJsfied: Fashionable low-‐priced clothing
# Can meet the Plus-‐size demand
MEN Big & Tall
WOMEN Big is Beau@ful
CHILDREN Bumblebee
Target Group Demographics
• Plus size and tall • Age: 20 -‐ 45
• Plus size • Age: 20 -‐ 45
• Plus size • Age: 10 -‐ 15
PromoJon Spokesperson: sports focus
Spokesperson: style icon focus, e.g. Beth Dimo
Spokesperson: teen star focus, e.g. Hillary Duff
Product New collec5on based on H&M LOGG Full range (50 items) Fashionable
Price 10% above H&M price Below compe5tor’s “plus-‐size” price
Sales Channel Internet sales Catalogue sales
With the implementaJon of the line extensions H&M can reap higher margins in core markets
© 2011 Deloime
Most likely
Es#mates pr. year, in tsd. USD.
Market share (1%) 930 Projected revenue 27,578 Projected costs 13,789
Profit 13,789
Best case
Es#mates pr. year, in tsd. USD.
Market share (2,3%) 2,139 Projected revenue 63,430 Projected costs* 31,715
Profit 31,715
Worst case
Es#mates pr. year, in tsd. USD. Market share (0,5%) 93
Projected revenue 2,757 Projected costs 1,378
Profit 1,378
397,475,574 ppl
2,3% 1% 0,5%
Best case (current)
Most likely
Worst case
93,009,284 ppl
Western Europe popula@on Overweight/obese % in WE H&M’s current market share
Expanding the plus-‐size line will lead to posiJve revenue streams
* EsJmated to 50 % of revenue
Aqer exploiJng Western markets, emerging economies offer growth potenJal
• In Brazil 48 % of all women and 50 % of all men are overweight
• In China obesity rates are 25 % and growing
Source: World Health OrganizaJon
To overcome the added complexity of the line extensions, new HR pracJces need to be set up
Student zone
Graduate Program
• SecJon for thesis and project wriJng
• PotenJal research topics • Download center for H&M
documents • Network Expansion • Coca Cola benchmark
• The right people for the right job
• Academics with theorecJcal management knowledge
• InternaJonal rotaJon • Vestas benchmark
Possible risks Level of risk
Deteriora@ng brand image
Risk of diluJng H&M’s core segment. Can be avoided through e.g. online channels.
Sunk costs If the launch is proven unsuccessful, H&M will not incur large sunk costs due to minimal fixed costs.
Heavy compe@@on Many established clothing lines within these categories will make it harder for H&M to get a strong foothold in the market.
Opportunity costs Risk of missing opportuniJes in other markets. Can be overcome if H&M conJnues their current market strategy,
The risks that could occur with the strategy implementaJon can easily be overcome
Within a four year Jme horizon H&M can roll out their new strategies internaJonally
2014 2013 2012 2011
Product line extension
New style development
Spokesperson search
Online Launch and sales
InternaJonal Launch
Graduate Program
Retail Launch and sales
Student zone
Human Resource Restructuring
Network expansion
Ac@vity