Intnl Strat Essay

2331 WordsSep 17, 201310 Pages
PAGE 38 PRACTICE RETAIL IN PRACTICE H&M AND INDITEX’S GLOBAL EXPANSION STRATEGIES By RAPHAEL MOREAU, RETAILING COMPANy ANALyST, EUROMONITOR INTERNATIONAL INDITEX OVERTAKE THE GAP AS WORLD’S NUMBER ONE Inditex overtook Gap as the world’s largest clothing and footwear retailer in August 2008, as the release of its quarterly results showed the retailer’s sales exceeding EUR2.2 billion, while Gap’s quarterly revenues, announced in the same month, fell to just under EUR2.2 billion, following a five percent decline in like-for-like global sales. Although this ascension was helped by the strength of the euro against the US dollar, it also reflects a long shift in popularity towards the Spanish group, which benefited, alongside its lower-priced rival H&M, from its more adventurous and fashionable collections compared to Gap. As such, H&M could soon follow Inditex’s example and overtake Gap. H&M and Inditex both expanded aggressively through news store openings in 2007 and 2008, while the scope of Gap’s global operations remained relatively stable. SPEED, FLEXIBILITY AND PRICES THE KEY COMPETITIVE ADVANTAGES Both H&M and Inditex share common strengths, in successfully being able to meet the rapidly changing demand prevalent in fashion retailing and to adjust their product ranges, thanks to efficient logistics and strict cost control. However, whereas Inditex’s operations are characterised by a high level of vertical integration, with the company owning production facilities in Europe, mostly in Spain, H&M does not have any production site and purchases over 60 percent of its products from low cost Asian markets. For Inditex, the key competitive advantage lies in being able to adapt product offering rapidly to keep its offer fresh, with new items received by stores up to twice in one week, which gives it an edge over H&M. According to Inditex, this outweighs the

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