#98 Someone seems to get it right in China

H&MIn the past, H&M may not always have met analyst’s expectations, it may have taken some heat over the use of Photoshop in some ads, it has been criticized over unfair labor practices, but from this blog’s angle, the Swedish multinational seems to be doing things right in international markets. Considering high profile retail failures such as The Gap’s in Germany, Fresh & Easy’s in the U.S. or WalMart’s in Korea, H&M has been navigating foreign waters without major blunders so far. One of the markets where H&M is very active and expanding is China – a market in which many foreign entrants fail. While H&M did have some run-ins with authorities in China over product quality – excessive PH levels, weak crack resistance, and lower fiber content than claimed, it has all been very contained and hasn’t hurt them. In September 2013, after a year of rapid growth and expansion, H&M opened it’s 3,000th store globally in China where it currently has 170 stores. While this puts H&M behind Inditex’s Zara’s 400 plus stores in China, H&M has ambitious plans for future expansion in the Middle Kingdom. Analysts say that H&M is filling a mid-range gap between sports apparel and high-end luxury clothes in China. By bringing affordable clothes to the market they are catering to the needs of younger Chinese consumers who want Western style shopping experiences and clothes that provide some degree of status that an established global brand conveys.

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22 Responses to “#98 Someone seems to get it right in China”

  1. Philipp Töscher Says:

    Hi there,
    As already mentioned in the article a lot of companies struggled or failed when entering the chinese market.

    I would like to add some of my ideas concerning the success of H&M in the chinese market:

    According to Hofstede’s 5 dimension model China is a high power distance country which also means that people like to show status. As in the article mentioned H&M filled a gap between sports apparel and high end luxury clothes. Providing western clothes for an average price is a market niche and obviously this strategy works.

    Secondly in my point of view sales of H&M is limited in european countries because they already have a very high market share and the majority of european countries are individualistic. This means people do not like to be dressed like everybody else.
    In China, a very collectivistic country, this is different. They are used to school uniforms and unity. So probably that bears a great chance for H&M.

    In addition the uncertainty avoidance indicator is relatively low. A result of this is that customers are not that loyal and willing to try out new brands and products. That can be a great chance for companies but bears also a risk.

    I hope this short analysis was insightful.

    Kind regards,

  2. Katharina Simeth Says:

    Even though disposable income and fashion sense are still at an early stage in China, H&M has high potential in this market.
    The rising income of the Chinese workforce is leading to a heightened purchasing power, especially in the middle class. Right there H&M is filling the midrange gap.
    I can totally understand where the success on the Chinese market is coming from because the young Chinese costumers in particular, want to be able to dress in western brands and designs.
    If the high-street clothing lines are too expensive, mid-range brands such as H&M, Gap, Zara and Uniqlo are the perfect option. All of these brands I mentioned are currently growing fast on the Chinese market and more and more young Chinese like the western feeling they bring with them.
    I once visited an H&M store in Shanghai myself and I could see the total standardization. If I didn’t look at the price tags, I could think myself in a store in Austria as well.

  3. Eva-Maria Mayer Says:

    So, to begin with it is important to discuss the success of H&M in China under the perspective of Gert Hofstede´s cultural dimensions. For this purpose, I will discuss the success under the perspective of the PDI, IDV and MAS indexes in China.
    • PDI = 80
    • IDV = 20
    • MAS = 66

    Firstly, the PDI deals with the fact that all individuals in society are not equal. With 80, China belongs to the higher ranking of PD countries. Therefore, the Chinese culture accepts inequalities within the society, income levels and status. Furthermore, from the angle of marketing it should be considered that consumers want status and have an absolute need of distinction and differentiation. Consequently, a company like H&M has to understand, and obviously H&M understood it, that the market consists of more than a premium sector with high income and purchasing power. There are also segments with low income but these sectors have the same needs wants, wishes and values as the high or higher segments. In other words, H&M found a market niche between the mentioned sports apparel and high-end luxury clothes. Chinese consumers only spend around 1,150 yuan ($180) on clothes a year—a fifth of what Americans spend—but their appetite for new clothes is growing, according to market research firm Boston Consulting Group. And H&M satisfies especially the need of younger Chinese for affordable status clothes from western markets. In China exists a segment of consumers who can rarely afford luxury products but want more fashionable clothing than is available from sports brands or domestic retailers. “Fast fashion” stores like H&M have stepped in to meet this demand. H&M filled a long-standing gap in China between low-end, local brands and the foreign, luxury or sub-luxury brands like Coach or Doctoroff. The Versace for H&M line that launched last year, for example, gives some of the vaunted association of a sought-after luxury brand at a far lower price.

    Moreover, occupying prime retail space has been a cornerstone of H&M’s strategy. Therefore, H&M profits from its consumer desirousness and has an easy game with the Chinese landlords. Because, consumers like H&M and H&M attracts consumers wherever it is situated. For example, if H&M moves into a shopping mall, H&M attracts consumers to the mall. With the result that H&M´s image and reputation is used as an important bargaining chip with Chinese landlords. Finally, H&M profits from these circumstances of low market entry barriers for its business.

    Secondly, at a score of 20 China is a highly collectivist culture where people act in the interests of the group and not necessarily of themselves. Moreover, belonging is the highest need for society with the positive effect for H&M that when his clothing hype caught the Chinese people, the me-too consumer behaviour contributed and boosted H&M´s success. As for Chinese the group influences their purchase decision, H&M´s succeed to create an in-group trend. And this trend provoked a “domino effect” in the society. “Offer fashion and quality at the best price” is the main reason why H&M is so popular. It sells quality clothing with an affordable price.

    Thirdly, the score of 66 in masculinity indices that China is a masculine society that means it is success orientated and driven. The author of the book on Chinese consumerism “What Chinese Want”, Tom Doctoroff said that “the Chinese are the most brand-friendly people in the world.” They use brands as tools for success in society, as weapons of advancement in the battlefield of life.” Consequently the strategy of H&M´s niche targeting is clear. H&M attracts especially young Chinese that have just entered the workforce and as a result they have lower purchasing power but the same needs for status and prestige.

    Another reason for H&M´s success in the Chinese market is that H&M has adapted its products to the needs of the local market. For example, after market entry H&M did focus groups with Chinese consumers to examine the right size of consumers and also the right style preference. Therefore, H&M has revealed that selling green hat´s in China would be a no-go. As the phrase “wearing a green hat” is associated with cuckold. Moreover, the colour white would not be a bestseller in China because, this colour stands for the death.

    Taken together, finally H&M is so successful in the Chinese market because it has taken into account several cultural barriers and differences and has recognized the need for local adaptation in their products and marketing strategies.

  4. Lisa P. Says:

    Dear all,

    I want to start my comment with a statement from H&M’s website: „We are growing with quality, sustainability and high profitability. H&M offers a wide range of inspiring fashion for everyone, and is growing with new stores the world over. There is room for further expansion for the Group in all existing markets as well as in new countries.” (http://about.hm.com/en/About/facts-about-hm/about-hm/expansion-strategy.html)

    A McKinsey study from 2008 revealed the following facts: 63% of the Chinese consumers have a shortlist of preferred brands when planning to buy a product. Another point that should not be underestimated is that since 2008 Chinese consumers have become attentive when buying unfamiliar products. Therefore it is more and more difficult to launch new brands and establish these on the highly competitive market.

    Due to this fact, H&M is growing faster in China than it has in any other market in its 66-year history. H&M is in the top of mind of Chinese consumers as the brand has been built up carefully during the last years.

    China is rated very low on Hofstede’s individualism scale. Most of the decisions are made collectively which is a result of the strong tendency to form groups and to result in a strong society altogether. As already mentioned in the post above, H&M is focusing on young Chinese consumers as their target group. Especially this generation is western oriented, is willing to trade up and is taking emotional considerations more into account when making purchases. Therefore in my opinion H&M jumped on the bandwagon of starlets years ago, as the company started to cooperate with popular fashion designers and to develop special collections. As the collections are limited and, in terms of price, are a bit higher than the normal product range but still lower than the deluxe collections of the designers, this division is getting more and more important.

    Despite Chinas highly masculine culture H&M manages to address their target group in a target-group related way. In the advertisements the focus is laid on relationships (including family and friends) and quality of life. Apart from that the company understands to choose the right middle way between being an international brand and to deal with the local culture. In my own words I would say H&M has a “glocal” approach concerning the branding. Especially in a country like China the culture must not be underestimated. As far as I can see that is why H&M included the sustainability aspect in advertising to use the cultural solidarity as a second sales argument, right after the “brand” itself.

    Concerning sustainability the H&M China website posted the following promotion activities within the last month:

    • H&M customers contribute to clean water in Bangladesh
    • H&M Conscious Foundation supports typhoon “Haiyan” victims in the Philippines
    • H&M appointed in leaders group in new Greenpeace report
    • Update – fire and building safety in Bangladesh

    So in my opinion H&M’s current success is the result of years and years of work as well as a good cultural understanding and local knowledge. Do you agree?



  5. Sabrina Prettenhofer Says:

    There are different kinds of reasons why H&M is successful in China:
    Firstly, H&M concentrates on its customers. As already mentioned H&M is filling a mid-range gap between sports apparel and high-end luxury clothes in China. With this product line they meet the needs of younger Chinese consumers, who can’t afford western brands as Channel or Lois Vuitton. To give them the possibility to gain some Western style shopping experiences, H&M has opened 170 stores in China. Moreover H&M sells some products, which are designed of Isabel Marant who is an internationally known French designer. Through these clothes people with low or middle incomes, especially the younger Chinese, get the chance to buy high quality products of a popular designer to a lower price and because of that to gain some feeling of status.
    Secondly, the fact that China is a high power distance country is also a big advantage for H&M. Chinese like to show their position. One way to do that is to use brands as a status symbol. H&M understands to use this information and communicates the brand as good as possible. They expose their target group that the best way to show their success, position or status, is through H&M products.
    Thirdly, tradition and collectivism are essential points for the Chinese. Both children and adults are educated to look first after the welfare of the group and then to satisfy their own needs. That is the reason, why the group influences the decisions regarding to clothes and trends. Because of the fact, that H&M respect the behaviors and needs of the people, the company has been accepted by the society and can also set new trends.
    Finally, H&M does as much standardization as possible and as much adaption as needed. That means that the company produces and sells all over the world nearly the same products in the same quality. But of course, they have to look for different kinds of cultural differences regarding to colors, symbols, slogans, humor, behavior roles and so on.
    For example, white stands for purity and joy in many countries, but in China it is a color of mourning. Or symbols of animals are also associated with various associations.
    As you can see, the whole package is the formula for success of H&M.
    Kind regards,

  6. Tanja Lukas Says:

    As already mentioned China is a collectivism country.
    Young Chinese have to wear school uniforms, so it is clear that they are part of a group. This is a typical aspect of Chinese culture, collectivism. But because of for example the World Wide Web they can inform themselves about what is going on around the world and they also see that in western countries, people are individuals. They don’t have to wear school uniforms; they are able to wear what they want. Because of these more and more Chinese develop a need to be individual and to show their personality and fashion of H&M enables this.
    Because of H&M or Zara they can create their own style and they can wear young and modern fashion for an affordable price.

    In my point of view H&M considers all important aspects when entering a new market. So they know the culture, changes and needs and under consideration of these aspects they create a marketing strategy which is as much standardized as possible and adapted as needed.

  7. Magdalena Tuppinger Says:

    Concerning Hofstede’s dimensions H&M has great chances to continue to exist in the Chinese market.

    Firstly, the high power distance in China is an advantage for the apparel company, because people want to show prestige. One purpose of H&M is to sell luxury looking clothes for the middle class. So it’s the perfect opportunity for the middle class to “pretend” being part of the upper class.

    Secondly, I have to mention the collective attitude of the Chinese people. There is a strong feeling of belonging to each other and H&M can use it as positive factor, because they produce mass products. In China they don’t care wearing the same style or even the same clothes, whereas in individualistic countries people avoid to wear the same clothes as other do and want to create their own style. Concerning collectivism it would be the best for H&M to hire an opinion leader or a testimonial for their clothes, so that the remaining population orientates on this person and wants everything this person wears.

    Thirdly, China has less uncertainty avoidance. That means that consumers are not so loyal to brands. In a way that’s positive for H&M, because they are new on the market an people are curious. So now it’s their job to “catch” and bind them. This could happen, for example, by offering innovative and functional clothes. Those are factors on which less uncertainty avoidance countries look at among other things.

    At last, the masculinity index goes hand in hand with the high power distance. People, especially men, want to have a lot of money and also want to spend a lot of money for expensive looking things. So why not save some money for clothes which also look expensive and buy more of them instead? In men dominated countries success and work is very important and because of this, they want to show prestige too like in high power distance countries. This is again an advantage for the apparel company, because young men who also want to look like they are successful can afford H&M’s expensive looking clothes easily.

    To conclude, I think H&M could make it to a global player. Once they succeed in China, they won’t stop going into other countries too. Maybe with some intercultural differences, but basically with the same concept. It would be interesting to have the same basic collection in each country and additionally a special collection for each country with the specific wants and needs of the respective customers.

  8. Herbert Prirsch Says:

    i think all of you brought up very interesting points but i see kind of a conflict here between the fact that china is a high power distance country and the trend that the chinese people is seeking the possibility to be individualistic and more “western” than earlier generations were. the point is that h&m offers enormously individualistic fashion according to chinese standards and represents somehow the role of the pioneer in this sector. what confirms this is that when you compare the number of h&m shops in a country to the number of inhabitants you will find out that in austria one h&m shops covers about 120.000 people while in china one h&m shop covers approx. 11 million (!) people. so i think there is a lot of work left to do for h&m to find its position in the market.

    @Katharina Simeth: i can definitely approve your point that h&m stores look completely the same all around the world. A few months ago i visited an h&m shop in dubai and found myself again in the middle of winter jackets and woolen pullovers. i think that this selection of the product range is just not acceptable. no one can tell me that winter fashion can be sold like hot cakes in a country that is 95 % desert.

    but i think that there is a really big chance for h&m to benefit from their current position in the chinese market. for example with the support of campaigns like Lisa P. mentioned in the end of her post, h&m enables the chinese people to escape from the standard of following the one and only leader and show their commitment to things that matter to them like helping victims on the philippines or supporting a greenpeace campaign.

    when i think of hofstede’s model and its 5 factors i instantly connect it with politics. china’s leadership is known for its rigorous measures concerning globalization. just think of censorship on the internet. people are not used to have full access to daily news and what happens around the world. and i think this may also influence the acceptance of western brands in china. i can imagine that people are slightly overstrained with the huge range of different styles and fashion they might have never seen before….

    i am looking forword to some interesting answers.

    regards, h.

  9. Kathrin Friedl Says:

    H&M is one of the biggest daily-fashion companies in the world. This company offers their assortment off- and online and expend in the last year rapidly. (3000 stores)

    In my point of view, the entering in the Chinese market was a good business decision, because this country has developed positive in the last years (income, purchase power, working conditions, sociability, …) and China is ready for new different things.

    Many companies wanted to enter this market and hope for success shortly, because many forecasts say: “China is the future market”. However, many companies struggled or failed , when they wanted to enter this market. In my opinion, the reason for this is, that some companies do not consider the intercultural aspects in different countries. Moreover, H&M needed also time to know and to learn from the Chinese market. This market has a special culture and is totally different to other cultures. If you expend in a foreign country, it is important to include the five dimensions of Hofstede in your marketing decisions: Power Distance, Individualism, uncertainty avoidance, long term orientation and masculinity.

    Furthermore, H&M has different target groups, but the “main target group” are fashion-conscious women between 15-50 years. The style of the Swedish company is internationally successful and modern. The company analysis the Chinese market and see a gap between sports apparel and high end luxury clothes in this market. This is a result of good analytic working and “thinking global – doing local”. In my point of view, this aspect will fit nearly perfect to Hofstede dimension “Power distance”. The people like to show status and many of them can do this in their clothing style. In attention to this, H&M designs every year different collections with famous designers (Versace, …). These assortments are very important for the image of H&M (status) and also for the customers. (the identify with the brand H&M and the international fashion)

    Another point in this case, until now the collectivism is very high in China, but I think the influence of the mobility (internet), western industrial style, increasing incomes and living styles will increase the individualism in China. Of course, it will be a long process, but the market is ready for global brands and more individual styles. This development is also essential for the fashion sector (show your own style).

    Finally, I would recommend in the next years the Chinese Market will increase further in the fashion sector (off- and online). Further international fashion companies will enter the market. In addition to this, the success of these brands depends on the right market-entry-strategy and on the local marketing adoptions.

  10. Platzer J. Says:

    First of all, I would like to declare China as a country with a very high power distance, with a very high grade of collectivism and as a country with a very high masculin index.

    So it was a smart move from H&M to expand in this country, which is also worldwide known as the faster emerging and growing market.
    Although many companies failed to build up their business in this market, H&M did very well in their analysis and prework before launching their business in China.

    First of all, in my humble opinion, H&M somehow adopts their collection always with the help of famous designers or also well known stars. So this is a clever way to cover the power distance and masculin index found in China, because people their want to represent status. With the he help of this international collection and the quite moderate prices, which H&M offers, it is quite easy to obtain for the China population, also in fact that salaries are rising.

    Secondly, I want to mention that China is well known for its collectivism. I personally think here about uniforms in schools. So with the entrance of H&M in the chinese market, young people (especially young women as the major target group of the Swedish cloth company) can afford international fashion to be distuingished.

    All in all I would say, that H&M did a great job entering this market and furthermore they did a very good analysis in this market regarding people, culture, needs and adopted their market entry strategy especially for this special country.

  11. Matthias Dalkner Says:

    It would appear that H&M gets it right pretty much everywhere but how come? One of the reasons might its origin, which is Sweden. A country where power distance is relatively low and individualism is being fostered rather than collectivism. This enables companies like H&M to adjust to market needs and trends very quickly without be constraint by bureaucracy and set in stone procedures. Also the lower uncertainty avoidance compared to other countries is an indicator of acting more open minded and less afraid of taking chances, like the penetration of the Chinese market. Even though history has shown that this can be a very challenging enterprise, a global brand like H&M cannot deny this potential of the Chinese market. Especially when it comes to fashion and lifestyle most of the Asian countries look towards the Europe and the U.S., hence I dare to say that the fact China has a collectivistic society there is clear tendency to individualism when it comes to appearance. One simply has to visit a designer outlet centre somewhere in Europe or the States and typically there are hordes of Chinese people desperate to buy designer clothes, which are hard to get in China or usually just fakes. This actually works quite in favour of H&M because it simple makes no sense to produce fake H&M products due to the companies low price policy. On the other hand H&M clothes cannot be seen as prestige items or status symbols because the label is clearly not visual on the product. It would seem that China will show a greater increase in masculinity, similar to Japan and this is a demand H&M clearly cannot satisfy. At the end of the day we will soon see a similar picture as we see in the western world where clothes have to be either very expensive and supported by great labels or very cheap but still stylish. Everything in-between will disappear as it clearly would stuck in the middle.

  12. Corinna Hohensinger Says:

    China, a country where many foreign entrants fail but not H&M…
    What did H&M right?
    In my opinion there are different reasons for the success of H&M and I think the most important one is the fact that Chinese want Western style and also spending of money for clothes is increasing consistently. Further the company succeeded in filling a mid-range gap between sports apparel and high-end luxury clothes. So China was the right target market for H&M.
    On the one hand, H&M is a fast growing company and on the other hand H&M has a lot of experience with expansion due to the reason that the company opened up it`s 3.000th store globally. Here I see a high level of Corporate Readiness and additional H&M is very pro-active and in general in this mode companies are more likely to lead to success (e.g. Wood 1997).
    In the case of product readiness I was very surprised that H&M was in trouble regarding their product quality because China is famous for lower quality. So it would be really interesting to know if H&M is selling a different quality in China than for example in Europe. Also I think there was a need for H&M to adapt fitting of clothes for the Chinese market.
    So overall H&M did a great job.

  13. Elisabeth Reidlinger Says:

    Dear all,

    we are students from the study program “International Management” at the FH Joanneum in Graz, Austria. Following, we would like to share some of our thoughts concerning H&M.

    H&M, the Swedish multinational clothing manufacturer, recently opened its 3000th store in China and is having success in the Asian area, when filling the middle-range gap between cheap textile products and high-end luxury clothes. Referring to that, we would like to analyse the success of H&M by amplifying Hofstede’s Cultural Dimensions.

    According to Hofstede’s Cultural Dimensions, China has a power distance of 80, which means that inequalities among people are acceptable for the citizens. H&M reacted to the high power distance by serving cheaper clothes to the younger generation and high end-luxury clothes for the customers expressing their status with their clothes.

    With an individualism score of 20 China is a highly collectivist culture where people act in the interests of each other. The Sweden-based company is a popular choice among younger Chinese consumers who share the same shopping behaviour of their international counterparts. Therefore H&M did not adapt its collection. In order to achieve cost efficiency, H&M outsources the labour-intense production of its products to independent manufacturers in countries like China and Turkey.

    The value of long-term orientation is prevalent in Asian societies and has cultural importance. In contrast to that, the culture of Western societies is known to be short-term oriented. Therefore we thought that H&M should be aware of cultural norms and incompatibilities that may occur with local management.

    Concerning uncertainty avoidance, China has a low score with 30 points. Nevertheless, wholly owned subsidiaries are H&M’s preferred mode of market entry in order to keep full organizational control of their foreign subsidiaries. The Chinese culture and also the language are full of ambiguity, this could be a difficult factor for western companies, but as it seems H&M is successful anyway.

    Referring to the market entry strategy, H&M considered all relevant aspects of gaining a foothold in the Chinese market. Before entering the new market, an assessment of the market potential was made, including an analysis of the demographic structure, purchasing power, economic growth, infrastructure, political risk, human rights and environmental sustainability. Furthermore, there is also the big advantage that the Chinese youth is open to western fashion and wants to follow new trends.

    In conclusion, it can be said that they have done a great decision to enter the Asian clothing market, which was contributed by the pursuit of westernization of the young Asian generation. But H&M should not forget to face the fact that China has a one-child regulation. In addition, it is important to align the marketing strategy so H&M has the opportunity to increase their market share and their profit when reacting to that country-specific situation.

    Best regards,
    Elisabeth, Kerstin, Max, Elisabeth and Sarah

  14. The Skilled Sins Says:

    The Swedish multinational H&M is operating successfully on a global scale. As many other multinationals, H&M ventured the step to start its business activities also in the Chinese market. In contrast to many other foreign entrants, H&M did successfully expand in the Asian country and established a solid basis. H&M has ambitious plans for future expansions in China in order to keep up with Zara, one of its biggest competitors.
    In general, the Chinese market still offers a huge potential and is developing in big steps. Despite these promising facts, the level of risk in China is still very high. This concerns several areas which are of high importance and have a great influence on international business such as high governmental involvement, corruption, labour conditions, environmental issues as well as the protection of intellectual property. Especially the involvement of the government in economic activities leads to a big variance of restrictions which can result in financial losses and even in total failure of the operating company.
    In the recent years, corporate social responsibility gained more and more importance. Due to the fact that H&M is a Swedish company, the approaches towards CSR are very differing in terms of ethical, legal, commercial, and public expectations. Sustainability became an indispensable part in the code of conduct of most European companies, whereas this trend cannot be directly transferred to China yet.
    During its expansion process to China, H&M has also been affected by several entry barriers. Many companies have been predestined to fail based on the issues named below. So far H&M has successfully managed to overcome those barriers. When H&M started its operations in China, they struggled especially with the high level of governmental involvement. According to the Pyramid of Ethical Behaviour, it is the first step to fulfil the national laws and regulations. Therefore, it has been hard for H&M to stick to its original concept. The company structure of H&M is built on flexibility because it follows a vertical integration of the distribution network. H&M strictly controls its business activities, which leads to the capability of reacting directly to satisfy the customer’s needs and wants.
    Before H&M finally entered the Chinese output market it originally operated there only to produce its clothes. This way of proceeding enabled H&M a deep insight into the Chinese culture. Therefore, H&M has been equipped with the required skills to handle issues concerning labour law, workforce, logistics, political affairs and how to build up business relationships in China.
    Moreover, the high level of demand of H&M’s Chinese target market is another important factor for the success of the Scandinavian corporation. The densely populated cities on the east coast of China offer a huge market potential. Due to the trend of Westernization especially the young Chinese inhabitants quickly adapt the reasonably priced clothes. Even though the product portfolio is not in a low price segment in terms of Chinese standards, it serves the growing middle class.
    As it has been mentioned before, H&M intends to expand into the interior parts of China. Within this process many new factors have to be considered by the management because the business environment will be different compared to the highly-developed and modernized east coast. Although the backcountry of China becomes more and more westernized, the majority of the inhabitants are still living in a very traditional way. That means that their deeply embedded culture highly influences the buying behaviour. Furthermore, the income is not equally spread among the country. The backcountry is much more impoverished than the east coast.

  15. Denise Luttenberger Says:

    Dear all

    In my opinion, H&M has the best requirement to work global. Because of the high range of products, from sports apparel to high-end luxury clothes in a low and middle-price segment, nearly all over the world, people are able to buy the products. Also in China, the phenomenon of H&M is working and growing. They perfectly meet the needs of the younger Chinese people, which like the western look and style. Therefore, for example they avoid sun, to have a paled face as Europeans have. But, I think H&M has to work different in China as for instance in Austria. In Austria there is a big part for women and only a small part for men, but in China there are much more men than women. Therefore, sooner or later, they have to adapt their product range and offer also more products for men in China.

    Moreover, in a country like China, with a high power distance, status and prestige gets more and more important. This is a big advantage for H&M, because people want to wear modern and high fashion clothes, to call attention. Furthermore, China is a country with high collectivism. Therefore, the group decides, also what gets a trend and what gets a flop. But, with the high product range of H&M, there nearly all groups will find something what they like and afterwards what gets a trend. This also is a big advantage for H&M. The uncertainty avoidance in China is relatively low. Therefore, there is lower customer loyalty as in other countries. But, as mentioned before, H&M has a big product range in a low and middle price segment, so that there are always coming new customers, which buy the same things and can raise the same amount of money.

    The last point I like to mention is, that H&M tries to do as much standardization as possible and as much adaptation as needed. Therefore, they nearly all over the world have the same product range, with small adaptions, which are necessary because of culture and religion. I personally never was in China, but in many other countries and cities. For instance in London or Barcelona, companies like H&M or Zara nearly have the same products as in Austria, only with a small price-difference. For example, I saw a dress in Barcelona, I wanted to buy. But, if they hadn´t my size, I went to an H&M store in Austria (Graz), where I afterwards bought it.
    In summary, I think that H&M is a good example for doing global business right.

    Best regards

  16. Magdalena Patz Says:

    As already mentioned, China is a very collectivistic country with a high power distance and a masculine-dominated society. According to Hofstede’s framework, China shows a high power distance compared to other countries around the globe.

    H&M did a pretty good job in moving to China and expand their business steadily. As H&M is a global player, standardized brands and clothing is available – no matter if you shop in the US or in China. People in collectivistic countries tend to like that trend – being dressed like your friends or colleagues. This is also one reason, why the business model worked out very well.

    The main reason for this success story though is that the company fills the gap between sports apparel and high-end luxury clothes. H&M especially addresses young Chinese people to deliver the feeling of Western style shopping and make a global brand available to them.

    On the other hand, it needs to be mentioned that H&M constantly extends their product range. Last year the company emphasized the usage of testimonials for even more expensive clothes. This is a fact that can also be seen in a very negative way. These “luxury” clothes were produced in the same circumstances and were nevertheless much more expensive than the basics of H&M’s product range.

    Last month H&M introduced a frequent-buyer-program for its customers. People will be asked at the counter if they want to join the H&M club and if they want to collect points for each of their purchase. These points can afterwards be redeemed into vouchers or other small gifts of the company. As a matter of fact, H&M constantly comes up with something new. The frequent-buyer-program shows that they once more focus on customer retention and try to keep their customers happy and satisfied.

    On the whole, H&M did a very good job in researching the Chinese market before entering it. The success mainly depends on the company’s knowledge and the demand for such a brand in China.

  17. Anna R. Says:

    H&M did a really good job when entering the Chinese market but as Herbert states in a few comments above, there is still some work left to do for them when trying to find their position in the market.

    It was often mentioned that H&M is so successful because China is a collectivistic country and therefore Chinese people prefer to buy their clothes at H&M but nevertheless I think that H&M is providing individualistic fashion according to Chinese standards. For this reason I believe that it is more likely that the reason for buying at H&M´s is that the Chinese are seeking more individualistic and western style of fashion and not because they are trying to be the same as others and fit in. This probably shows that they want to escape from the standard of following one person as a group and being the same as the others in a certain group. In order to show these ambitions they start with fashion. H&M just found the perfect combination of being modern, individualistic (according to Chinese standards) and presenting themselves as a strong, global brand (which meets their need of showing status) but at the same time being cheap and available for everyone, which would be their collectivistic aspect.

    Moreover, H&M focuses on the customer and always has different special offers, which make the customers curious. They also emphasize sustainability and established the “H&M Conscious Foundation” in order to make both existing and new stores sustainable in the long-term, which is probably also a success factor of H&M.

    Furthermore they are stating on their website that before they move into other countries or even cities an assessment is made of the market´s potential. Hence factors such as demographic structure, purchasing power, economic growth, infrastructure, political risk, human rights and environmental sustainability are analysed. Therefore I believe that H&M gets a quite good impression of a country or city and deduces the Hofstede dimensions from the analysis and thus knows how to take the specific market. When doing business in China in my point of view, this is extremely important because China is a very difficult market as history has shown and needs a lot of preparation beforehand.

  18. AlexandraMischer Says:

    From my point of view there are different reasons why H&M is quite successful in China.

    First of all H&M is offering a high range of products from children’s gear, sports clothing, business clothes to high-end luxury clothes. So they cover a wide target group.

    Secondly the rising income of the Chinese workforce, because of the economic situation, is leading to a heightened purchasing power, especially in the middle class. This midrange gap is fulfilled by the low and middle-price segment of H&M.

    Furthermore China is a country with a high power distance where status and prestige is quite important. H&M support Chinese to wear hip and modern clothes and deliver them the feeling of western/global style. Moreover China is a very collectivistic country where it is common to where the same style/clothes than friends or family. For example: They are used to wear school uniforms. So this is a great chance for H&M.

    To sum up H&M show how it is possible to be a global play. They are successful all over the world – from America to China. In my mind their secret of success is to do as much standardization as possible and only as much adaptation as needed.

    Best regards,

  19. Sabrina Gindl Says:

    Dear all,
    I agree with all the above mentioned points about the success of H&M in China. As China is a high power distance country and status, image and prestige is very important, it is necessary to consider those facts when entering this market. China is a very specific market, which is in many points different to other markets, as for example the power distance is much higher than in other countries. In the case of the power distance, H&M had a good advantage, because they are offering high quality products with a lower price. This is important because all Chinese want status, high quality, prestige and all of them have the same needs. But the differences are in the income. With H&M also young Chinese which just have their first job, can buy high-quality products. H&M had great chances in China because those young Chinese want western brands. They want to be dressed like western people. H&M gives them the opportunity.

    China is a very collectivistic market. In China the family and friends are very important and more important than the person itself. They want to be in groups and the opinion of the group is very important. This also has to be concerned when entering this market. Chinese like to be dressed like their friends, this is different in western countries. In western countries people don’t want to be dressed like everybody else, but Chinese like this and if their friends go to H&M they do also go there for shopping. Especially young women like to go shopping with their friends and as Chine is also a high power distance country, at H&M they can shop together with lower prices but also high quality.

    As also mentioned, China is really low in uncertainty avoidance. They like new products, they like to try something new. This could lead that the customer loyalty is very low in China but I think, that there are so many people in China, there will be enough young people for H&M for new customers.
    So, the main reason why H&M is so successful in China is, that they considered the intercultural differences. They did as much standardization as possible and as much adaption as needed. So, they have standardized products, in each country the same product, but they adapt their advertisements, slogans, etc. to the Chinese culture. And when entering another market it is one of the most important things to think about the differences in culture.

    Best Regards

  20. Julia Schmid Says:

    Dear all,
    at the beginning I want to mention that H&M is still very successful in China. They plan to open 240 new stores and most of them will be in China. According to the Wall Street Journal H&M has a positive long-term view on the Chinese Market, as their position and also their profitability is strong there. Although there is a slowing growth in China’s economy, the apparel industry is still promising (cf. FORTUNE.COM, 24.09.2015, http://fortune.com/2015/09/24/hm-china-new-stores/).

    I also want to have an eye on two of Hofstede’s dimensions of culture: Individualism and Masculinity. According to Hofstede China has a very low Individualism with a score of 20. Masculinity is quite high with a score of 60.

    China is a collectivistic culture where people want to be part of a group. They do not want to be different or to differenciate themselves from their group. It’s hard for Chinese people to accept people who are not within their in-group. These are seen as an out-group.
    A high Masculinity means that the Chinese population is very success oriented. A typical Chinese employee works long hours for their company, also on the weekend, and their work is more important than social life and leisure activities. It also means that there is a big inequality between men and women. For example, women are seen as house makers and they have to care about the kids, meanwhile the men are the bread winners. High masculinity consumers want to show their success and their status through the products they buy. Functionality is not as important as the fact that the product has to look luxury.

    From my point of view, these two distances are the reason why H&M is so successful in China. I think the fashion chain provides both very collectivistic clothes and quite luxury clothes as they work with different designers. I think the wide offer is also the reason why H&M is successful in many markets and not only in China.
    Further I want to describe my statement in detail:
    As H&M clothes are not expensive but fashionable, lots of people buy their clothes and also clothes which do nearly look the same. Therefore, H&M satisfies the Chinese customers’ desire of being collectivistic and to be like their in-group.
    As I mentioned above, H&M works with different famous designers. These products are always a little bit more expensive than the “normal” clothes. In comparison to other luxury brands they are still reasonable, but nevertheless, look luxury. With these product field H&M satisfies the desire of a high Masculinity and also of being collectivistic, because people can buy more expensive clothes which are still the same as the clothes of their in-group.

    I am sure that H&M took the cultural differences of China, in comparison to the European and American market, into consideration. I think they did a great job.

    Best regards


  21. Miriam Winter Says:

    Dear all,
    First of all I would like to clarify that H&M is still very successful in China and already has more than 300 stores in China. In 2015 H&M opened and is about to open about 400 stores worldwide. Most of them in China.

    In my point of view H&M did a really good job, concerning their expansion in China. I am sure that they took the cultural differences into consideration and had a closer look at the customers desires.

    But I also think that H&M’s strategy really fitted into the Chinese market as Chinese people tend to strive for recognition and they like to show their status symbols, I think they really welcomed the opportunity to get a mixture of really luxury clothes (because they have cooperations with different designers) but also normal-priced, really fashionable clothes. Concerning to Hofstedes dimensions this fits with the rather high Masculinity.

    Furthermore I would like to clarify that in my point of view H&M is also a good option for the Chinese people as they tend to be collectivists. This means that they like to do a lot in groups and act more or less in the interest of the group. In my point of view H&M offers “collectivistic” clothes for everyone. Due to the increasing income of Chinese people, most people can afford clothes from H&M.

    H&M did a really good job, because they took the cultural differences into consideration and did as much standardization as possible and as much adaptation as needed. I think they could be a role model for many other companies as there are more and more companies which fail when expanding to the Chinese market.

    Best regards

  22. Veronika Wolf Says:

    This is indeed an interesting article as it shows that besides the majority of western companies, who did not succeed or struggle in doing business in China, there are some firms that perform well.
    It seems that H&M found the niche between luxury goods (which are so popular in China as a status symbol) and ‘cheap crap from streets sale’.

    As this article is older, I went on the internet to check if the success story still goes on or if Hennes and Mauritz hit the same fate as many other “Westerners”. But still, the success seems to be going on, the label is expanding from year to year. Their target number is increase of sales per 10% annually which they successfully did since 2012 (http://about.hm.com/content/dam/hm/about/documents/en/cision/2016/03/1672018_en.pdf), their gross profit increased by 16 percent …(all financial report data you can find on their website – as long as you trust them). Till September 2015, 299 new stores in China have been opened. H&M planned to open another 240 till the end of 2015 (!).

    What makes me think is the overall presented sustainability concept of H&M and their support of social projects – it is nice to make a campaign in order to empower women – but what about the female workers in Bangladesh who work under more than inhumane conditions for H&M? Or is it already the past? Or did their working conditions change? Why don´t we find anything on the H&M website on that?
    There are news from February 2016 (coming from several media) which says that H&M illegally employs refugees from Syria currently living in Turkey…under bad conditions, for a starvation wages….? And even kids???

    If that all is true…how does it go together with supporting social projects???

    Finally, compared to the issue mentioned above, this is just a random remark…but also such a huge and experienced giant like H&M does make mistakes and has to confess a debt: in January 2016, there were scarfs sold on the market, which looked very similar to a Jewish tallit. That offended a lot of customers, H&M had to apologize….Well, one never stops learning…

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