Taking H&M to India

The CBR Analysis

Adrija, Annika, Gaurav, Pritha, Valentina

AGENDA

TheInvesting
The Target
Company
Market

R
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m
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H&M
Sweden in 1947

Fashion
& Quality

at the Best Price

37 markets
2,000 stores
76,000 employees
sales including VAT EUR 12,4 billion*
Profit after tax EUR 1,7 billion*

* in 2009
The World of H&M

Expansion (1947-2009)
 H&M and Retail

 Despite the economic downturn total sales increased by 14%

 H&M optimistic about future expansion and business opportunities

 Growth target:
 grow while maintaining profitability

 increase the amount of stores by 10-15% per year

 increase sales in existing stores

 Target Market

 Population: 1.18 billion

 More than 2000 ethnic groups

 1652 languages among them

350 are major ones

 Has 2.4% of the world's area

and 17.5% of the world's
population

 Median age: 25.1 years

 KOF Globalization Index

rank(2010): 112
 Political Environment

 Largest democracy in the world

 Currently ruled by United Progressive

Alliance with Indian National Congress with
centre-left ideals as the major party

 Pro-industry

 Political decisions are largely influenced by

mass agendas
Political Risks
 Political Risk Rating:

 Bribe Payers Index: 19th rank

 High Corruption Perception: Rank 84
 Education

 Urbanization
 Urban Population: 29% Of Total Population (2008) 
 Rate Of Urbanization: 2.4% Annual Rate Of Change (2005-10 Est.)

 Literacy
 Definition: Age 15 And Over Can Read And Write 
Total Population: 61% 
Male: 73.4% 
Female: 47.8% (2001 Census) 
Legal & Technological Environment

 Legal
 Based on English common law
 Elaborate Contract Law
 Has a separate set of laws for families as
well as the religions

 Technological
 Low technological penetration
 IT and telecommunications at par with
global standards
 Easy availability of technically-skilled
labour
 Economical Environment
●
Nominal GDP $1.236 trillion in 2009(Rank

GDP
11)
GDP in PPP is $3.526 trillion
Sector Wise GDP
●

●
Per Capita GDP : $1030 in 2009
●
Growth rate: 7.4%
Gini Index: 36.8
Agriculture Industry
●

Services
Size of ●
Total Labor force = 467 million
52% employed in Agriculture, 14% 18%
Work-
●

industry and 34% in Services

Unemployment rate in 2010: 10.7 %
force
●

20%
63%

Retail ●

●
Contribution to GDP: 10%
Contribution to
Industry employment : 8%
Foreign Trade

As per the Federal China RPM

Ministry of Commerce USA
GOI: United Arab Emirates
 Exports: US $ 168704
Saudi Arabia
million
 Imports: US $ 287759 Germany
million Singapore
 Trade Balance: -US $ United Kingdom
119055 million
Belgium
Netherlands
FDI Policies in India
 FDI up to 100% for cash and carry wholesale trading and
export trading allowed under the automatic route

 FDI up to 51 % with prior Government approval (i.e. FIPB)

for retail trade of ‘Single Brand’ products

 Single brand retailing to encourage manufacturing in India:

H&M already has production unit in India

 Multi-brand retailing prospects being discussed by

Government
 Economic Freedom Index

 Economic Freedom Index: 53.8 Score

Labor Freesom
 Rank: 124th (mostly free) Frm fm corruption
Property right
 Starting a business takes 60days as
Financial freedom
compared to world average of 35 days Invest. Freedom
Monetory frdm
 Non-tariff barriers and high income
Govt size
tax Fiscal frdm
Trade freedom
 No discrimination for licensing Business freedom
procedure 0 20 40 60 80
 Industry Preview

 AT Kearney 2010 Global Retail Development Index Rank: 3

 Fifth largest global retail destination
 No Government or public enterprises
 90% of market under unorganized retail
 Oligarchic private organized retail
 Organized retail to grow at 25-30%, implies low local competition
 Local competitors: AV Birla Group, Trent, Landmark group,
Reliance & Pantaloons
Cultural and Social
Environment
 Cultural Environment

Hofstede’s Cultural Dimensions

80
Organizational Culture
70
60
 Loose Control
50
 Results Oriented
40
 Employee Oriented
30
 Profession Oriented
20
 Open System
10
 Pragmatic
0
PDI IDV MAS UA LTO

Sweden India
Culture specific information

Sweden Team and Humane

Oriented Leadership style
India
●
●Task before relation ●Building trust and
●

●Codes of conduct fixed in

●
relationship as a goal in itself
contract Motivating employees:● ●Oral agreement
- Make use of moral
●Equal treatment is obligations to leaders
● ●Special treatment is expected
●

-Inducing the need to

expected, regardless ofto norms and rules for people in superior
conform
- Training positions
status or sex opportunities
●Status is ascribed
●Status can be achieved
● - Professional ●
achievement
Religion & Language

Religion Percentage Share of Language

Hindi dialects Bengali Telegu

Hindu Muslim Christian Marathi Tamil Urdu
Sikhs Gujrati Kannada Malyalam
Oriya
CBR Analysis

Cost Benefit Risk

●
●Poor infrastructure
●Single brand FDI
●
●Large unsaturated ●
Local
● market
norm ●Less local competition
●
resistance
●Inexpensive skilled

High
●
●High income tax
● ●
labor
●Cost of adaptation
●
●Low cost of operations
corruption
●

●Political risk
● ●Bridge to S.E Asian
●

insurance Countries ●
Trade Union
Recommendation

ENTRY PRODUCT &

STRATEGY PRICE

●
Joint Venture with an ●
“High quality with
established local player competitive prices”
●
51% equity share ●
Rebranding if required
holding ●
Value for money
 Location &
Logistics
Segment
●
● Target Metro cities: Delhi, ●
● Urban dwellers
Mumbai, Kolkata and ●
● Growing middle class and
Chennai
high earning individuals
●
● Lower Logistics cost ●
● Specifically the youth
●
● Next move could be to enter ●
● New product line for
states with higher growth
upscale customers
rates
THANK YOU !