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Presentation by National University of Singapore - Winners of CBS Case Competition 2011

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Presentation by National University of Singapore - Winners of CBS Case Competition 2011

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Presentation by National University of Singapore - Winners of CBS Case Competition 2011. Congratulations to Caroline Ng, Candice Lim, Peh Che Min, and Tobias Chen. Presented at the Finals March 4, 2011.

This presentation form part of CBS Case Competition. Views, opinions and suggestions expressed in these presentations are the sole work of the case study writers, and are not neccessarily shared by H&M

Visit www.casecompetition.com to see more.

Presentation by National University of Singapore - Winners of CBS Case Competition 2011. Congratulations to Caroline Ng, Candice Lim, Peh Che Min, and Tobias Chen. Presented at the Finals March 4, 2011.

This presentation form part of CBS Case Competition. Views, opinions and suggestions expressed in these presentations are the sole work of the case study writers, and are not neccessarily shared by H&M

Visit www.casecompetition.com to see more.

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Presentation by National University of Singapore - Winners of CBS Case Competition 2011

  1. 1. H&M:  Bolder.Bigger.  Be8er    Caroline  Ng                                Candice  Lim                                    Peh  Che  Min                                  Tobias  Chen                                 F . O . C . A . L
  2. 2. H&M’S Identity: Our winning proposition Analysis Stage Runway Backstage Implementation Conclusion Objec+ve   Winning Proposition 1.  “Sustainable growth with High Impact strategic initiatives whilst keeping things Simple” 2. 10-15% growth in number of stores per year Affordable Chic Fast Fashion Inclusive
  3. 3. Challenges Ahead Analysis Stage Runway Backstage Implementation Conclusion Key  Issues   1   Stagnating growth in Europe 1.  Prioritizing growth options 2   Diverse consumer preferences 2. Maximizing shareholder’s value 3   Intense Competition 3. Managing Challenges cost to support growth 4   Increase in raw material prices 5   Talent attraction & retention
  4. 4. Criteria to evaluate growth options Analysis Stage Runway Backstage Implementation Conclusion Degree of High Impact Growth Competition Complexity (x2) Potential •  imple S •  ales S •  uture potential F •  imilarity S •  ongruent with C •  mpact on brand I •  calability S •  lustering effect C core business & •  xpertise E •  ost-benefit C •  conomies of E expertise analysis scale •  ost effective C
  5. 5. Evaluating Growth Opportunities Analysis Stage Runway Backstage Implementation Conclusion Degree of High Impact Growth Growth Options Complexity (x2) Potential Competition Improve day to day performance Expand online channels Geographic expansion Expand product category (Home) Brand Expansion Favorable   Unfavorable  
  6. 6. Recommendations:Project Runway Analysis Stage Runway Backstage Implementation Conclusion Managing Set the Stage Strut the Runway Backstage 1. Increase no. 1. Geographic 1. Secure new of customers Expansion suppliers - Focus on male -Asia Pacific -South East Asia segment 2.  Online Channel 2.  H&M’s talents 2.  Increase sales -Advertise on - Increase efficiency per customer ‘taobao’ of sales people - Increase - H&M online - Management accessories segment wardrobe associate programme
  7. 7. Recommendations: Project Runway Analysis Stage Runway Backstage Implementation Conclusion Managing Set the Stage Strut the Runway Backstage 1. Increase no. of 1. Geographic 1. Secure new customers Expansion suppliers - Focus on male -Asia Pacific -South East Asia segment 2.  Online Channel 2.  H&M’s talents 2.  Increase sales - Store on Taobao - Increase efficiency per customer Mall of sales people - Increase - H&M online - Management accessories segment wardrobe iphone app associate programme
  8. 8. Recommendations: Project Runway Analysis Stage Runway Backstage Implementation Conclusion Managing Set the Stage Strut the Runway Backstage 1. Increase no. 1. Geographic 1. Secure new of customers Expansion suppliers - Focus on male -Asia Pacific -South East Asia segment 2.  Online Channel 2.  H&M’s talents 2.  Increase sales -Advertise on - Increase efficiency per customer ‘taobao’ of sales people - Increase - H&M online - Management accessories segment wardrobe associate programme
  9. 9. H&M: Project Runway Managing Set the Stage Strut the Runway Backstage
  10. 10. Backstage  –  Make  it  Happen   Analysis Stage Runway Backstage Implementation Conclusion Grow existing segments Increase number of Increase sales per customers customer
  11. 11. Backstage  –  Make  it  Happen   Analysis Stage Runway Backstage Implementation Conclusion Increase number of Increase sales per customers customer H&M MEN H&M ACCESSORIES 1. Greater Variety of Designs 1.  The Fashion Fraternity 2. Integration with Apparel 2.  Guest Designers CAGR: 3% (2005-2010) CAGR: 4.6% (2010 Inc.) Market Value 322.3Bn USD
  12. 12. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
  13. 13. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories Purchasing Behaviour Process 1   2   3   Increase Male consumer Cater personal Need advertising to preferences Recognition Look Good space for men men Information Online Self- reliant Search Financial risks Evaluation of Market Size Acceptance Creatures of Habit Comfort, Price, Quality Alternatives Purchase Pilot Testing: Flagship stores in Beijing & Shanghai Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
  14. 14. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories Shanghai & Beijing The Fashion Fraternity Internet/Mobile: Chinese Information ‘ ’ forums Search Personal Space
  15. 15. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories Shanghai & Beijing The Fashion Fraternity Internet/Mobile: Chinese Information ‘ ’ forums Search Personal Space Newly Affluent middle class Trendy males seeking fashion tips
  16. 16. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories Shanghai & Beijing The Fashion Fraternity Internet/Mobile: Chinese Information ‘ ’ forums Search Baidu: Year 2010 Personal •  hina: 64.02 billion C Space queries •  AP and PDA based W mobile search •  xclusive forums for E males – ‘ ’
  17. 17. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories Brick & Mortar Information Search Key  Takeaways   1.  Pilot  market  in  Shanghai  &  Beijing  –  12  months   2.  Personal Interna>onal  roll-­‐out  of  improved  H&M  man  in  year  2012   Beijing Shanghai Space 3.  Target  60  stores  by  Year  2013     Personal   Entertain   Music   (Fuᶔball)/   Lounge   Magazines  
  18. 18. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories H&M ACCESSORIES HELPING  YOU  FIND…    
  19. 19. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories H&M ACCESSORIES Sales  /sqm   0.5%  to  Grp  revenues  
  20. 20. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories Integrating accessories with apparel Do it your way
  21. 21. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion 1   2   H&M’s Men Accessories Integrating accessories with apparel Trend,  Modern,   Classic,  Everyday   Mamma,  Divided,  &   denim,  L.U.G.G  
  22. 22. H&M: Project Runway Managing Set the Stage Strut the Runway Backstage
  23. 23. Strengthen  exis+ng  forts  while  expanding  new  markets   Analysis Stage Runway Backstage Implementation Conclusion 250  new  stores  in  2011   Aggressive  pursuit  of   Increase  dominance  in   Asia-­‐Pacific   W  Europe  and  N  America  
  24. 24. Iden+fying  KEY  new  markets   Analysis Stage Runway Backstage Implementation Conclusion Growth   Posi>ve     Untapped  markets   Market  Size   Ease  of  Entry    Poten>al   Compe>>on   Spillovers   Asia-­‐Pacific   Middle  East     &  Africa   Eastern  Europe   South  America   Favorable   Unfavorable  
  25. 25. Where  to  expand  in  2011   Analysis Stage Runway Backstage Implementation Conclusion Growth   Posi>ve     Emerging  markets   Market  Size   Ease  of  Entry    Poten>al   Compe>>on   Spillovers   Asia-­‐Pacific   Middle  East     High  sales   &  Africa   Ranked  3rd  in  value  sales  behind  North  America  and  Europe   Eastern  Europe   High  CAGR   CAGR  of  13%  from  2010-­‐2013E   South  America   Dominant  Chinese  market   Favorable   71%  of  total  Asiapac  sales   Unfavorable   Source:  Euromonitor  
  26. 26. Where  to  expand  in  2011   Analysis Stage Runway Backstage Implementation Conclusion Growth   Posi>ve     Emerging  markets   Market  Size   Ease  of  Entry    Poten>al   Compe>>on   Spillovers   Asia-­‐Pacific   Aggressive  greenfield  expansion  –  large  poten>al,  large  growth   Middle  East     Franchise  mode  –  cultural  and  legal  constraints   &  Africa   Eastern  Europe   Sizeable  market  near  H&M  stronghold   South  America   Lucra>ve  market  to  enter  in  the  future   Favorable   Unfavorable  
  27. 27. Strengthen  exis+ng  forts  while  expanding  new  markets   Analysis Stage Runway Backstage Implementation Conclusion Western  Europe:   45%   N  America:     15%   Eastern  Europe:     10%   Asia-­‐Pacific:     25%   MENA:     S  America   10%   250  new  stores  in  2011  
  28. 28. Asiapac:  Focus  on  China   Analysis Stage Runway Backstage Implementation Conclusion North  Asia   Southeast  Asia   1 China,  Japan,     South  Korea,  Taiwan   2 Singapore,     Indonesia,  Malaysia   Source:  Euromonitor  
  29. 29. Much  poten+al  for  growth  in  China   Analysis Stage Runway Backstage Implementation Conclusion CF  Market  Share  (USD  billions)  in  2009   Germany   71.252   Large  poten+al   China   169   for  growth  in   Chinese  market   0   50   100   150   200   Source:  Euromonitor,  H&M  
  30. 30. Domina+ng  the  Chinese  stage   Analysis Stage Runway Backstage Implementation Conclusion 42  stores,   concentrated  in   Eastern  China   Source:  H&M  
  31. 31. Domina+ng  the  Chinese  stage   Analysis Stage Runway Backstage Implementation Conclusion 4.5%  popula>on   4%  of  GDP   44.5%  popula>on   32%  of  GDP   42  stores,   concentrated  in   51%  popula>on   Eastern  China   64%  of  GDP   Source:  Ogilvy  
  32. 32. Opportuni+es  for  growth  in  2nd  and  3rd  +er  ci+es   Analysis Stage Runway Backstage Implementation Conclusion Rapidly  emerging   middle  class  in  2nd   and  3rd  >er  ci>es   42  stores,   concentrated  in   Eastern  China   Source:  Ogilvy  
  33. 33. Effec+ve  way  to  reach  out  to  Chinese  masses   Analysis Stage Runway Backstage Implementation Conclusion Source:  Ogilvy  
  34. 34. Leveraging  on  the  Chinese  e-­‐commerce  trend   Analysis Stage Runway Backstage Implementation Conclusion
  35. 35. Efficient  expansion  via  Taobao.com   Analysis Stage Runway Backstage Implementation Conclusion Cri+cal  mass   • 370  million  users     • 50  million  unique  visitors  daily     Efficient  expansion   • Low  capital  investment     • Aggregated  distribu>on  centers    
  36. 36. Efficient  expansion  via  Taobao.com   Analysis Stage Runway Backstage Implementation Conclusion Cri+cal  mass   UNIQLO  SUCCESS  STORY   • 2  million  RMB  sales  daily       • Exceeded  retail  store  sales  in  just  4  days     Efficient  expansion  
  37. 37. H&M  on  Taobao  Mall   Analysis Stage Runway Backstage Implementation Conclusion  
  38. 38. Maximising  the  m-­‐commerce  plaform   Analysis Stage Runway Backstage Implementation Conclusion The  current   The  poten+al   H&M  applica+on   In  m-­‐commerce   Smartphone   Basic     penetra+on   features   M-­‐shopping   Limited   takeup   geographic   reach   Poten+al  in   mobile   Source:  Forrester  Research,    ABI  Research,  Modus  Associates  
  39. 39. Maximising  the  m-­‐commerce  plaform   Analysis Stage Runway Backstage Implementation Conclusion The  current   The  poten+al   H&M  applica+on   inm-­‐commerce   Basic     features   My Limited   Wardrobe geographic   reach  
  40. 40. H&M:  cheap  chic,  24/7,  everywhere   Analysis Stage Runway Backstage Implementation Conclusion Brand  Saliency   Network  Effect   New  Retail  Channel   My Wardrobe
  41. 41. Increasing  visibility  24/7,  on-­‐the-­‐go   Analysis Stage Runway Backstage Implementation Conclusion Brand  Saliency   Network  Effect   New  Retail  Channel   My Wardrobe • Create  your  oueit  using  H&M     Catalogue  items     • May  also  use  your  personal     items  
  42. 42. Increasing  visibility  24/7,  on-­‐the-­‐go   Analysis Stage Runway Backstage Implementation Conclusion Brand  Saliency   #  02  out  of  107  oueits   Network  Effect   New  Retail  Channel   • Create  your  oueit  using  H&M     Catalogue  items     • May  also  use  your  personal     items   My Buy  it.   Wardrobe Keep  it.  
  43. 43. Increasing  visibility  24/7,  on-­‐the-­‐go   Analysis Stage Runway Backstage Implementation Conclusion Brand  Saliency   #  02  out  of  107  oueits   Network  Effect   New  Retail  Channel   My Buy  it.   Wardrobe Keep  it.  
  44. 44. Leveraging  on  network  effects   Analysis Stage Runway Backstage Implementation Conclusion Brand  Saliency   #  02  out  of  107  oueits   Network  Effect   New  Retail  Channel   • Average  of  220  friends     My • Photo  album     Buy  it.   Wardrobe Keep  it.   • Newsfeed  (and  no>fica>ons)     • Wall  post    
  45. 45. Complementary  revenue  stream     Analysis Stage Runway Backstage Implementation Conclusion Brand  Saliency   #  02  out  of  107  oueits   Network  Effect   New  Retail  Channel   Average  of  150%  increase  in   sales  voume   My Buy  it.   Wardrobe Keep  it.   Source:  BCG  
  46. 46. Increasing  visibility  24/7,  on-­‐the-­‐go   Analysis Stage Runway Backstage Implementation Conclusion Brand  Saliency   #  02  out  of  107  oueits   Network  Effect   New  Retail  Channel     Increased  purchase  frequency   • Average  of  220  friends   • Photo  album   likely  to  buy     40%  more   • Newsfeed  (and  no>fica>ons)     • Wall  Larger  purchase  sizes     post   20%  higher  expenditure   My Buy  it.   Wardrobe Keep  it.   Case  study:   Source:  Informa>onWeek  
  47. 47. H&M: Project Runway Managing Set the Stage Strut the Runway Backstage
  48. 48. Backstage  –  Make  it  Happen   Analysis Stage Runway Backstage Implementation Conclusion Limiting Agents 1   Cost of Production 2   Speed to Market 3   Human Resources
  49. 49. Backstage  –  Reducing  Costs   Analysis Stage Runway Backstage Implementation Conclusion (1) Soaring Cotton Prices Source: International Monetary Fund
  50. 50. Backstage  –  Reducing  Costs   Analysis Stage Runway Backstage Implementation Conclusion (2) Rising Cost of Production in China Labor Cost Rental Cost Other Fixed Cost Affordable Fashion?
  51. 51. Backstage  –  Reducing  Costs   Analysis Stage Runway Backstage Implementation Conclusion NhonTrach Industrial Park, Dong Nai Province • Established Textile Cluster • Heavy FDI Investments • Developed infrastructure • Proximity to Saigon • Proximity to Ports
  52. 52. Backstage  –  Increasing  Speed  to  Market   Analysis Stage Runway Backstage Implementation Conclusion NhonTrach as production base for Asia Pacific •  entralised Production C • Shipping cost offset by production cost savings • Boosts speed to market
  53. 53. Backstage  –  Increasing  Speed  to  Market   Analysis Stage Runway Backstage Implementation Conclusion NhonTrach as production base for Asia Pacific •  entralised Production C • Shipping cost offset by production cost savings • Boosts speed to market
  54. 54. Backstage  –  Overcoming  Manpower  Constraints   Analysis Stage Runway Backstage Implementation Conclusion Salespersons  Need to keep up with rapid expansion of physical stores 1   2   ↑  Number  of   ↑  Revenue  /   Salespersons   Salesperson   Managers Management Associate Programs •  Targets Business students •  Accelerated program, job rotations, international experience
  55. 55. Financials   Analysis Stage Runway Backstage Implementation Conclusion Assumptions  WACC of 11.2%  Base growth rate of Sales Revenue (without Runway) at12% per annum  COGS at 30% of Sales Revenue in 2011, decreases by 0.5% per annum until 2016, constant thereafter  Selling expenses at 34% of Sales Revenue in 2011, 35% in 2012~14, decrease by 0.5% per annum until 33%, constant thereafter  Aggregated Group tax rate of 25.3%  Straight-line depreciation of capital expenditures over 5 years
  56. 56. Financials   Analysis Stage Runway Backstage Implementation Conclusion SEK 23.5 Billion Incremental Profit in 2021 Break-even in 5 Years
  57. 57. Financials   Analysis Stage Runway Backstage Implementation Conclusion Worst Case Base Case Best Case SEK 28.4 Billion SEK 35.4 Billion SEK 44.3 Billion
  58. 58. Implementa+on  Timeline   Analysis Stage Runway Backstage Implementation Conclusion Project  Runway   2011   2012   2013   2014   2015   Set.  Stage   1.  Pilot  H&M  Man  project   in  Shanghai  and  Beijing     1   Pilot   Interna>onal  roll  out   2.  Increase  accessories   2   market  
  59. 59. Implementa+on  Timeline   Analysis Stage Runway Backstage Implementation Conclusion Project  Runway   2011   2012   2013   2014   2015   Set.  Stage   1.  Pilot  H&M  Man  project   in  Shanghai  and  Beijing     1   Interna>onal  roll  out   2.  Increase  accessories   2   market   3   Interna>onal  expansion  with  a  focus  in  Asia  Pacific   Strut  .  Runway   1.  Geographic  expansion   4   2.  H&M  applica>on  
  60. 60. Implementa+on  Timeline   Analysis Stage Runway Backstage Implementation Conclusion Project  Runway   2011   2012   2013   2014   2015   Set.  Stage   1.  Pilot  H&M  Man  project   in  Shanghai  and  Beijing     1   Interna>onal  roll  out   2.  Increase  accessories   2   market   3   Interna>onal  expansion  with  a  focus  in  Asia  Pacific   Strut  .  Runway   4   Develop   1.  Geographic  expansion   2.  H&M  applica>on   Support functions ongoing through fiscal Manage.  Backstage   years 1.  Suppliers   2.  Strengthen  HR  
  61. 61. Conclusion   Analysis Stage Runway Backstage Implementation Conclusion Sustainable  growth  with  High  Impact  strategic   Objec+ve   ini>a>ves  whilst  keeping  things  Simple   Priori>zing   Recrui>ng  and   Cri+cal  Issues   Managing  costs   growth  op>ons   retaining  talents   Recommenda+on   Set.  Stage   Strut.  Runway   Backstage   Sustainable   Benefits   High  Impact     Simple   growth  
  62. 62. Conclusion   Analysis Stage Runway Backstage Implementation Conclusion Sustainable  growth  with  High  Impact  strategic   Objec+ve   ini>a>ves  whilst  keeping  things  Simple   Priori>zing   Recrui>ng  and   Cri+cal  Issues   Managing  costs   growth  op>ons   retaining  talents   Recommenda+on   Set.  Stage   Strut.  Runway   Backstage   Benefits   NPV:  35.4bn  SEK  over  10  year  
  63. 63. H&M:  Bolder.Bigger.  Be8er    Caroline  Ng                                Candice  Lim                                    Peh  Che  Min                                  Tobias  Chen                                 F . O . C . A . L
  64. 64. Complementary  Slides    Caroline  Ng                                Candice  Lim                                    Peh  Che  Min                                  Tobias  Chen                                 F . O . C . A . L
  65. 65. Financials   Analysis Stage Runway Backstage Implementation Conclusion
  66. 66. Financials   Analysis Stage Runway Backstage Implementation Conclusion
  67. 67. Jus+fica+on  for  Addi+onal  1.6%  CAGR   Analysis Stage Runway Backstage Implementation Conclusion Equivalent of 1.6% of Sales Revenue in 2011
  68. 68. Prioritizing Options for Growth • ncrease  sales  per  square  feet   I • Scheduling  to  maximize  impact   Op+on  1:        -­‐  Fashion  credibility  (Guest  designers)   • Revenue  contribu>ons  unjus>fied   Day  to  day      -­‐  DifferenCaCon      -­‐  Cost  effecCve   performance      -­‐  Untapped  segments   • ncrease  store  traffic   I      -­‐Revenues      -­‐  Brand  visibility   •  onstant  ‘fresh’  image   C •  4/7  Shopping   2 • ntegra>on  of  online  channel     I Op+on  2:   •  reater  reach  to  target  segment   G •  evenue  contribu>ons  unknown   R Online  Channel   •  ost  effec>ve   C •  ack  points  of  differen>a>on   L •  hanging  lifestyle   C •  iral  marke>ng   V •  iversifica>on   D •  ack  understanding  of  foreign  markets   L Op+on  3:   • ncrease  revenues  fast   I •  ight  >ming  to  enter  emerging  markets   R Geographic  Expansion   • ncrease  brand  visibility   I important   •  ompe>>ve  pressures  to  move  fast   C •  onstrained  by  resources   C •  ew  collabora>ons  with  local  designers   N •  iversifica>on   D • ncompa>ble  with  brand  image   I Op+on  4:   • ncrease  revenue  streams  in  lucra>ve  market   I •  igh  risks  involved   H Product  Category  (LT)   •  everage  on  exis>ng  suppliers   L •  upply  chain  complexity   S •  uild  H&M  lifestyle  concept   B •  preading  resources  too  thin   S •  evenue  contribu>on  unjus>fied   R •  iversifica>on   D •  igh  risks  involved,   H Op+on  5:   •  apture  apparel  market  segments   C •  o  economies  of  scale   N Brand  Expansion  (LT)   •  rowth  Poten>al   G • ncrease  complexity;  resource  constraints   I •  annibaliza>on     C •  ffect  group  culture   A
  69. 69. Geographic Expansion: Where first? Variables   Western   Eastern   North   South   MENA   Asia  Pacific   Europe   Europe   America   America   Market  Size   US$379bn   US$64bn   US$352bn   US$88.3bn   US41.5bn   China:  US (Russia:  43.8bn)   (Brazil:  43%  of  total   US:  US$329bn   volume  sales  and   $169bn   nearly  55%  of  value   Japan:  US sales  in  2008  –   lower  end  market)   $134bn   Australasia:   US$11bn   Growth   2.4%   8.9%   4.7%   4%   12%   9%   Poten+al   (Exp  increase)   5.1%  (Male)   Ease  of   • Easy   • Rela>vely   • Easy   • Difficult   • Difficult   • Rela>vely   Entry   • Familiar   easy   • Unfamiliar   • Unfamiliar   easy   market   • Familiar   market   market   • Familiar   market   • Sensi>ve   market  (P)   Compe++on   • Mature   • Emerging   • Mature   • Emerging   • Emerging   • Emerging   Note:  Clustering  is   market   market   market   market   market   market   good   • Stable   • Intense   • Stable   • Intense   • Less   • Intense   compe>>on   compe>>on   compe>>on   Posi+ve   -­‐ve   +ve  (Russia)   +ve   +ve   -­‐ve   +ve   Spillovers   (Brazil)   (Franchise)   (Singapore)   Total  Market  Value  in  2010:  €769.3bn  
  70. 70. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
  71. 71. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
  72. 72. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
  73. 73. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
  74. 74. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
  75. 75. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Look Good Recognition Information Online Self- reliant Search                                Too  risky  to  increase  emphasis  on  Menswear   Evaluation of Creatures of Habit Comfort, Price, Quality Alternatives   PILOT  TESTING  in  CHINA     Purchase Brick & Mortar Rationalization Decision Purchase Less reliance on information sharing Evaluation
  76. 76. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Purchasing Behaviour Process Need Recognition Information The Fashion Guest Designers Search Fraternity Evaluation of Lock in loyalty Alternatives Purchase iPhone Application Decision Purchase Evaluation
  77. 77. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Information The  Fashion  Fraternity   Search To create a comfortable and pleasurable shopping experience - for men only Evaluation of Alternatives Lounge Catalogues Assistance Relaxing and What To Wear Subtle, non- Purchase unintimidating & Fashion intruding atmosphere Tips Decision
  78. 78. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Information The  Fashion  Fraternity   Search To create a comfortable and pleasurable shopping experience - for men only Evaluation of Alternatives Lounge Catalogues Assistance Purchase Decision
  79. 79. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Information Guest  Designers   Search sales per customer x no. of customers Evaluation of Caters to both Alternatives Global Prestige genders Fred   Perry   Purchase Decision Tom     Ford  
  80. 80. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Information Shi  shangyizhu   Search To create a comfortable and pleasurable shopping experience - for men only Evaluation of Alternatives Lounge Catalogues Assistance Purchase Decision
  81. 81. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Information Shi  shangyizhu   Search To create a comfortable and pleasurable shopping experience - for men only Evaluation of Alternatives Lounge Catalogues Assistance Purchase Decision
  82. 82. SeAng  the  Stage  –  H&M  MEN     Analysis Stage Runway Backstage Implementation Conclusion Information iPhone  Application   Search sales per customer x no. of customers Evaluation of Alternatives Sales channel Fashion advice Purchase Decision
  83. 83. Back-­‐up  Slides  
  84. 84. Why men category? •  igh  CAGR   H • ncreasing  market  share   I • ncreasing  acceptance   I • ncreasing  affluence   I • ncreasing  need  to  look  good  and   I trendy   •  o  strong  focus  at  the  moment   N •  hina/India:  Dominant  market   C •  xperien>al   E •  es>ng  area:male  shopping  habits   r
  85. 85. Why not the franchising model? 1.Interna>onal  brands  in  China  are  losing  control  and   ability  to  monitor  channels   2.  Franchisee  has  the  tendency  to  offer  huge  discounts   when  inventory  builds  up   3.  Lack  of  compliance  with  brand  building  ac>vi>es  to   save  money   4.  Franchisee  do  not  see  brand  building  as  part  of  their   responsibility   5.  No  feedback  loop  on  job  informa>on,  supply  and   sales  rebate  
  86. 86. Suits:  Jul  –  Jan  (Summer  sales)   Public  holiday:  Demand  will  spike   25  –  45  years  old   economic  basis  +  strong  pref  for  brand  –  300,000,000   first  >er  ci>es  –  spill  over  to  second  >er  ci>es   3rd  >ers  and  4th  >ers  are  also  upcoming   shopping  is  a    leisure  and  past  >me…switch  shops  less  ouen     community  malls  are  doing  bever   price  focus  to  value  driven  
  87. 87. Why not verticalization? 1.Interna>onal  brands  in  China  are  losing  control  and   ability  to  monitor  channels   2.  Franchisee  has  the  tendency  to  offer  huge  discounts   when  inventory  builds  up   3.  Lack  of  compliance  with  brand  building  ac>vi>es  to   save  money   4.  Franchisee  do  not  see  brand  building  as  part  of  their   responsibility   5.  No  feedback  loop  on  job  informa>on,  supply  and   sales  rebate  
  88. 88. Why not acquire? 1.  Lack  of  exper>se   2.  H&M  is  a  growing  business   3.  Risk  of  cannibaliza>on   4.  Risk  of  spreading  one’s  resources  too  thin   5.  Unable  to  support  too  many  brands  
  89. 89. Why not Integrate? 1.  Lack  of  exper>se   2.  H&M  is  a  growing  business   3.  Risk  of  cannibaliza>on   4.  Risk  of  spreading  one’s  resources  too  thin   5.  Unable  to  support  too  many  brands  
  90. 90. Value  Proposi+on   Analysis Stage Runway Backstage Implementation Conclusion Sustainable  growth  with  High  Impact  strategic   Objec+ve   ini>a>ves  whilst  keeping  things  Simple   Priori>zing   Recrui>ng  and   Cri+cal  Issues   Managing  costs   growth  op>ons   retaining  talents   Recommenda+on   Set.  Stage   Strut.  Runway   Backstage  
  91. 91. •  Wet  Seal  Shows  The  Way   •  Are  you  slowly,  cau+ously  sor+ng  out  how  to  engage  with  your  customers  in   social  networks?  By  Chris  Murphy  ,    Informa+onWeek  September  25,  2010  12:00   AM   •  Are  you  slowly,  cau>ously  sor>ng  out  how  to  engage  with  your  customers  in  social   networks?  Well,  if  your  customers  are  teenage  girls,  and  72%  of  them  are  on   Facebook  and  36%  of  them  have  a  smartphone,  you  don't  have  the  luxury  of  taking   your  sweet  >me.That's  why  teen-­‐girls'  clothing  retailer  Wet  Seal  is  among  those   blazing  a  trail  in  marke>ng  with  Facebook.  One  lesson  it's  learned  is  that  girls  want   to  do  different  things  on  each  medium.  They  use  Wet  Seal's  site  to  create   oueits-­‐-­‐500,000  of  them-­‐-­‐but  they  prefer  to  share  oueits  with  friends  using   Facebook.  Girls  don't  use  their  iPhones  much  to  post  content,  but  they  viewed   750,000  oueits  a  week  on  the  retailer's  iPhone  app  in  the  back-­‐to-­‐school  season.   Here  are  some  hard  results  Wet  Seal  has  seen  with  its  integrated  Web,  social   networking,  and  iPhone  strategy:   •  Girls  using  the  oueit  tool  are  40%  more  likely  to  buy,  and  they  spend  20%   more.Girls  using  a  "Shop  With  Friend"  feature,  accessed  through  Facebook  or  the   site,  have  a  2.5  >mes  higher  conversion  rate.   •  Facebook  is  now  the  largest  marke>ng  base  for  store  traffic,  thanks  to  coupons  and   campaigns,  and  one  of  the  biggest  drivers  of  traffic  to  Wet  Seal's  Web   site.Facebook  also  is  a  gold  mine  for  the  customer-­‐support  team.  "It's  one  of  the   primary  tools  they  use  to  know  if  there  are  problems  out  there,"  says  Wet  Seal   development  director  Shawn  Keim.  Wet  Seal  doesn't  erase  complaints  but  tries  to   resolve  problems  with  comments  on  Facebook,  so  people  see  issues  gezng  taken   care  of.  
  92. 92. Smartphone  penetra+on   The  current   • 91%  of  all  US  consumers  own     H&M  applica+on   and  use  a  mobile  device   • 1.8  billion  smart-­‐phones  in  use     Basic  features   globally  by  2013   •  D,  sta>c  photo   2 M-­‐shopping  takeup   •  8%  of  smartphone  users  say   4 Limited  geographic  reach   they  have  already,  or  soon  will,   do  mobile  shopping   •  nly  works  when  near  certain   O H&M  stores   Poten+al  in  mobile   • Mobile  marke>ng  spend  will     top  USD  1  billion  in  2011   Source:  Forrester  Research,    ABI  Research,  Modus  Associates  
  93. 93. Taobao  Mall   •  Levi’s  is  the  latest  interna>onal  brand  to  set  up  an  online  shop  in  China.  Well,  that   is  made  possible  through  Alibaba  Group’s  Taobao  Mall.  It’s  a  wise  choice  as  Taobao   is  China’s  largest  retail  website  with  more  than  370  million  users  and  receives  over   50  million  unique  visitors  each  day.In  Levi’s  new  online  store,  users  are  spoilt  for   choice  with  over  200  Levi’s  products  to  choose  from.  On  top  of  that,  Levi’s  will  also   introduce  exclusive  online-­‐only  styles  on  Taobao,  a  bonus  to  keep  users  coming   back.Despite  in  early  stage,  Levis’s  effort  seems  to  be  paying  off  well.  Several   thousands  pair  of  jeans  were  already  sold  online,  according  to  Taobao’s  sta>s>cs.   Apparently,  Levi’s  isn’t  the  only  brand  that  has  entered  China’s  online  market   through  Taobao.“UNIQLO,  Adidas,  Procter  and  Gamble,  L’Oreal  Paris,  Lenovo,  Li   Ning  and  Revlon  have  all  launched  official  online  retail  storefronts  on  Taobao  Mall   as  part  of  their  e-­‐commerce  strategy,”  a  Taobao  spokeswoman  told  Penn   Olson.“For  corporate  retailers,  Taobao  Mall  offers  the  infrastructure  for  complete   management  of  their  own  brand  and  online  retail  channel  while  providing  access   to  consumers  situated  in  second  and  third  >er  regions  across  China  in  addi>on  to   urban  centers  such  as  Shanghai  and  Beijing,”  she  added.Business-­‐to-­‐consumer   (B2C)  ecommerce  is  booming  in  China.  Last  quarter,  China  hit  a  new  high  with  a   total  of  64  million  B2C  orders.  Without  a  doubt,  a  large  number  of  orders  comes   from  Taobao.  If  you’re  a  retailer  and  looking  to  capture  the  Chinese  market,  Taobao   seems  like  a  good  place.  
  94. 94. 1)  Eastern  Europe  &  Asia  Pacific   2)  Grow  by  10-­‐15%  new  stores  (220-­‐330  stores   in  following  12  mths)  
  95. 95. Eastern  Europe  
  96. 96. Back-­‐up:  Zara  opera>onal  efficiency  
  97. 97. 2010  Expansion   Region   No  of  new   %  of  total  new   stores   stores   Western  Europe   151   62.1%   Eastern  Europe   29   11.9%   Asia-­‐Pacific   26   10.3%   Middle  East  and   15   Africa   6.2%   North  America   22   9.1%  
  98. 98. Variables   Western   Eastern   North   South   MENA   Asia  Pacific   Europe   Europe   America   America   Market  Size   US$379bn   US$64bn   US$352bn   US$88.3bn   US41.5bn   China:  US (Russia:  43.8bn)   (Brazil:  43%  of  total   US:  US$329bn   volume  sales  and   $169bn   nearly  55%  of  value   Japan:  US sales  in  2008  –   lower  end  market)   $134bn   Australasia:   US$11bn   Growth   2.4%   8.9%   4.7%   4%   12%   9%   Poten+al   (Exp  increase)   5.1%  (Male)   Ease  of   • Easy   • Rela>vely   • Easy   • Difficult   • Difficult   • Rela>vely   Entry   • Familiar   easy   • Unfamiliar   • Unfamiliar   easy   market   • Familiar   market   market   • Familiar   market   • Sensi>ve   market  (P)   Compe++on   • Mature   • Emerging   • Mature   • Emerging   • Emerging   • Emerging   Note:  Clustering  is   market   market   market   market   market   market   good   • Stable   • Intense   • Stable   • Intense   • Less   • Intense   compe>>on   compe>>on   compe>>on   Posi+ve   -­‐ve   +ve  (Russia)   +ve   +ve   -­‐ve   +ve   Spillovers   (Brazil)   (Franchise   (Singapore  -­‐   model)   SEA)   Total  Market  Value  in  2010:  €769.3bn  
  99. 99. M-­‐commerce    a  complementary  revenue  stream   •  5th:  mul+-­‐channel   •  build  integrated  mul>-­‐channel  plaeorms  (addressing  customers  via   different  plaeorms  and  integra>ng  them)  call  centers,  web  &   mobile,  direct,  other,  catalog,  print/mail,  TV,  stores.     •  Customers  touched  by  numerous  channels  will  spend  more  with  the   retailer:  Average  annual  spend  (USD):  260  -­‐>  660  -­‐>  1,620  from   single  channel  -­‐>  dual  channel  -­‐>  tri-­‐channel  (store,  catalog,   internet)  also  creates  more  loyal  customers   •  push  into  online  –  e-­‐/m-­‐commerce   •  “Apparel,  accessories  and  footwear”  is  biggest  category  in  online   sales,  and  is  expected  to  con>nue  to  grow  at  high  rates  (2009-­‐2013   CAGR:  11%,  forecasted  online  sales  for  USA,  $40.3  bn  in  2013)   •  challenge  for  fashion  industry  –  need  to  define  equilibrium  between   brand  and  commercial  objec>ves  
  100. 100. Where  to  expand  in  2011   Growth   Posi>ve     Emerging  markets   Market  Size   Ease  of  Entry    Poten>al   Compe>>on   Spillovers   Asia-­‐Pacific   Middle  East     &  Africa   Eastern  Europe   Franchise  to  MEA   South  America   Cultural  and  legal  constraints   Favorable   Unfavorable  
  101. 101. Where  to  expand  in  2011   Growth   Posi>ve     Emerging  markets   Market  Size   Ease  of  Entry    Poten>al   Compe>>on   Spillovers   Asia-­‐Pacific   Move  to  medium  run  –   Middle  East     &  Africa   1.  compe>>on  is  intense    2.unfamiliar  market     Eastern  Europe   South  America   Favorable   Unfavorable  
  102. 102. Eastern  Europe:  mid-­‐price  on  the  rise   Value  Proposi>on   Focus   Forge   Implementa>on   Conclusion   Timely  opportunity   • Economic  crisis     • Increased  demand  for  middle-­‐   market   Geographical  proximity   • Manufacturers  in  Turkey,     Morocco  and  Bangladesh   • Headquarters  in  Stockholm    
  103. 103. Variables   Western   Eastern   North   South   MENA   Asia  Pacific   Europe   Europe   America   America   Market  Size   US$379bn   US$64bn   US$352bn   US$88.3bn   US41.5bn   China:  US (Russia:  43.8bn)   (Brazil:  43%  of  total   US:  US$329bn   volume  sales  and   $169bn   nearly  55%  of  value   Japan:  US sales  in  2008  –   lower  end  market)   $134bn   Australasia:   US$11bn   Growth   2.4%   8.9%   4.7%   4%   12%   9%   Poten+al   (Exp  increase)   5.1%  (Male)   Ease  of   • Easy   • Rela>vely   • Easy   • Difficult   • Difficult   • Rela>vely   Entry   • Familiar   easy   • Unfamiliar   • Unfamiliar   easy   market   • Familiar   market   market   • Familiar   market   • Sensi>ve   market  (P)   Compe++on   • Mature   • Emerging   • Mature   • Emerging   • Emerging   • Emerging   Note:  Clustering  is   market   market   market   market   market   market   good   • Stable   • Intense   • Stable   • Intense   • Less   • Intense   compe>>on   compe>>on   compe>>on   Posi+ve   -­‐ve   +ve  (Russia)   +ve   +ve   -­‐ve   +ve   Spillovers   (Brazil)   (Franchise   (Singapore  -­‐   model)   SEA)   Total  Market  Value  in  2010:  €769.3bn  
  104. 104. Defining  the  Tiers   First-­‐Tier  Ci+es   Four  municipali>es:  Beijing,  Chongqing,  Shanghai,  Tianjin   Ci>es  with  total  retail  sales  of  more  than  RMB30bn,  annual  per  capita  income  of     RMB11,000  and  high  per  capita  retail  sales  as  propor>on  of  income:   10  provincial  capitals:  Changchun  (Jilin),  Chengdu  (Sichuan),  Guangzhou  (Guangdong),   Hangzhou  (Zhejiang),  Harbin  (Heilongjiang),  Jinan  (Shandong)  Nanjing,  (Jiangsu),   Shenyang  (Liaoning),  Wuhan  (Hubei),  Xi’an  (Shaanxi)   Four  leading  ci>es:  Dalian,  Qingdao,  Shenzhen,  Xiamen   Second-­‐Tier  Ci+es   17  provincial  capitals:  Changsha  (Hunan),  Fuzhou  (Fujian),  Guiyang  (Guizhou),  Haikou   (Hainan),  Hefei  (Anhui),  Hohhot  (Inner  Mongolia),  Kunming  (Yunnan),  Lanzhou  (Gansu),   Lhasa  (Tibet),  Nanchang  (Jiangxi),  Nanning  (Guangxi),  Shijiazhuang  (Hebei),  Taiyuan   (Shanxi),  Urumqi  (Xinjiang),  Xining  (Qinghai),  Yinchuan  (Ningxia),  Zhengzhou  (Henan)   50  prefecture-­‐level  ci>es,  including,  Ningbo,  Suzhou,  Wuxi,  Wenzhou,  Nantong,   Dongguan,  Zhanjiang   15  more  ci>es  with  popula>ons  of  between  500,000  and  2mn   Third-­‐Tier  Ci+es   Approximately  200  county-­‐level  ci>es   Fourth-­‐Tier  Ci+es   Approximately  400  capitals  of  county  towns   Source:  Ogilvy  

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