H&M's Strategic Expansion Business Proposal for Bangladesh

This report presents a business proposal for H&M's expansion into Bangladesh, a rapidly developing economy. It begins with an introduction highlighting H&M's global presence and the rationale for expansion, focusing on Bangladesh's favorable market trends and textile industry leadership. The report explores the Bangladeshi market, analyzes its growing economy, and conducts a SWOT analysis. It proposes market entry strategies, including penetration pricing and a joint venture with Grameen Bank, outlining the benefits and challenges associated with each approach. The report emphasizes the advantages of cheap labor, low production costs, and access to raw materials. It concludes by summarizing the key findings and recommendations for H&M's successful entry into the Bangladesh market.

Running head: EXPANSION BUSINESS PROPOSAL
Expansion Business Proposal
Name of the Student
Name of the University
Author Notes:

2EXPANSION BUSINESS PROPOSAL
Table of Contents
Introduction......................................................................................................................................3
Reason for expansion.......................................................................................................................3
Market exploration of Bangladesh...................................................................................................4
The growing economy of Bangladesh.............................................................................................4
SWOT analysis of Bangladesh........................................................................................................6
Market Entry Strategy......................................................................................................................6
Penetration Pricing...................................................................................................................7
Joint venture with Grameen Bank...................................................................................................7
Benefits and challenges...............................................................................................................7
Benefits....................................................................................................................................7
Challenges................................................................................................................................8
Conclusion.......................................................................................................................................8
REFERENCES................................................................................................................................9

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Introduction
H&M has been recognised as a company who have been successful in establishing a
global market presence as a result of their highly fashionable products. The headquarters of the
company is in Stockholm, Sweden and their company was founded in 1947 by Erling Persson.
The company have been successfully established in approximately more than 4,500 locations
worldwide and they mainly carry out their business through retail outlets. The company mainly
deals with apparel and fashion accessories. The current owner of the company is Stefan Persson.
The company has been successful in entering foreign markets as a result of collaboration,
partnerships and joint ventures that they have been carrying out in the international market were
they have been established. The company have global presence however, they have not been able
to establish themselves in Bangladesh which has been recognised as one of the fastest developing
economies of the world. Thus, the aim of the paper is to judge the market conditions of the
country in order to establish an expansion plan of the company in the country.
Reason for expansion
H&M have been successful in gaining market share all over the globe. They have been
able to implement successful strategies in order to sustain themselves in the market. Bangladesh
has been recognised as a country who have been subject to expansion in a rapid rate. Hence,
expanding into the market of the country provides favourable options to increase the returns of
the company. Furthermore, it can be said that Bangladesh are the leaders in export of textiles all
over the world. Thus, establishing the company in the country is supposed to turn out profitable
for the company as they will be able to source raw materials at a cheaper rate than the company
would be able to do if they were operating form other countries. H&M have established market

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presence in India, the neighbouring giant of Bangladesh. However, the existence of competitors
who offer similar products at subsidised rates made life difficult for H&M despite the abundant
availability of raw materials in the country. The favourable market trends in the country have
been recognised as the reasons as a result of which the expansion plan has been taken up by the
company. Establishing the company in Bangladesh will not only provide favourable supply
options for the company, it will also help the company in generating turnover that will help in
satisfying the needs of the stakeholders of the company.
Market exploration of Bangladesh
Bangladesh is country that has been subject to fast economic growth over the past
decade. The textile industry in the country has been one of the industries that the country has
been huge distance apart from other companies. The aim of H&M is to explore the abundance of
the material that are available in the country. Furthermore, the cheap rates at which the raw
materials are available make the company suitable for expansion for companies who are
operating in the apparel or the textile industry. Companies all over the world have been
importing textiles from the country as a result of the cheap rates of the textiles that are available
in the country. However, the countries that the countries are established in have import rates that
the companies have to incur in order to source the materials. Thus, establishing branches in the
country has been the rationale behind the market exploration plan of the country in the
Bangladesh. The latter is the best was to reduce the rates that the companies are subject to while
sourcing materials from a country such as Bangladesh.

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The growing economy of Bangladesh
Bangladesh is a country that is considered small in comparison to its neighbours. During
the 1970s it was un-imaginable that the country could grow to a stature that it has grown in the
current day. The country has been subject to change in terms of economic development. The
country has also had a strong presence in terms of presence in the global textile industry.
Furthermore, the country has been selected as the target for most of the countries who are in
search of high quality materials at a cheap rate. China is the go-to market for cheap electronics
and Bangladesh is the China in terms of textile production. Globalisation and industrial
revolution took a considerable turn on Bangladesh as a result of which the country has been able
to establish around 4,500 factories in the country. Few years back, Bangladesh were in the
United Nation’s list of one of the least developed countries in the world (Scmp.com, 2019).
Currently they have been able to lose the title and now are one then fastest developing countries
in the word and the credit goes to the economic development of the country. It has been found
out that the country has grown by 18.5% in the index of industrial production. During 2017, the
industrial sector of the country grew by 10.2% with considerable contribution form the small and
medium scale industries. Thus, it is clear that the small country that was overshadowed by
neighbouring countries such as India and Myanmar and Bhutan. Even though the budget for the
fiscal year 2018-2019 was revised from 180,000 crore taka to 174,620 crore taka, the GDP of the
country increased by 8.13 percent (Thedailystar.net, 2019).

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SWOT analysis of Bangladesh
Following is the analysis that consist the assimilation of the strengths, weaknesses, opportunity
and threats of the industries in Bangladesh.
Strengths:
 Availability of abundant amount of
manpower (Islam & Nasrin, 2015)
 The country is considered to be
successful in terms of agriculture.
 The ready-made garment and the
textile industry are blooming in the
country.
 The service sector of the country is
considered to be growing.
 The country is highly commutable
and has global reach.
Weaknesses:
 Insufficient amount of funding
from the government and lack of
capital in general.
 Poor industrial infrastructure
(Islam, Khan & Islam, 2013)
 High rates of illiteracy (Ali et al.,
2014)
 Unavailability of proper
educational systems.
 Subject to frequent natural
disasters.
Opportunities:
 Production cost in the industries of
the country is considered to be on
the lower side.
 Employment opportunity as a
result of the established industries.
 Tourism industry in the country is
considered blooming as a result of
the availability of historical sites
(Mamun & Andaleeb, 2013).
 Favourable trade policies
formulated by the government to
encourage increased amount of
Foreign direct Investment.
Threats:
 The country is considered
politically unstable.
 There is existence of money
laundering (Mamun, & Andaleeb,
2013).
 The country often suffers from
shortage of power.
 High rates of poverty in the
country (Chowdhury et al. 2013).
 Disguised and undisguised forms
of corruption.
 Target of militant groups.
Market Entry Strategy
The product that are offered by the company are considered a little too expensive for the
people of the country. The poverty in the country and the lack of proper infrastructure is two of
the many issues that the company can face while they operate in the market. The company offers

7EXPANSION BUSINESS PROPOSAL
its products in at rates a little higher than what the people of the country can afford. Thus, the
company has to offer their products at prices that the consumers of the community can afford.
Furthermore, it can be said that Bangladesh have received the status of a middle income country.
Even though Bangladesh belonged to the list of the top five poorest nations in the country, the
have been able to mitigate the economic issue and have been subject to rapid growth.
Furthermore, international brands such as Puma, Uniqlo and Giordano have been established in
the country. Thus, entry in the market of Bangladesh can be deemed to be favourable for the
operations of the company.
Penetration Pricing
In the initial days of operation of the company in Bangladesh, they comp ay should offer
their products at subsidised rates. The products should be offered at local rates or even lower
than the local rates. The company have the advantage of cheap labour and abundance of cheap
raw material that they can use for production of the apparel in the country. This, will help the
company in gaining attention for the people of the population who have the purchasing power to
buy product that are created locally by the company at subsidised rates. Apart from the latter the
company should provide credit facilities to the people to assist their customers in arriving at the
purchase decision.
Joint venture with Grameen Bank
The Grameen bank of Bangladesh is the bank with the highest reach in the country
(Kumar, Hossain & Gope, 2015). The financial services would boost the efficacy of the company
in providing flexibility to the customers. It has been found that the consumers in the market are
more likely to purchase a product if the can avail credit facilities. Thus, venture can help the
company in gaining market share in the company. The Norwegian Peace Prize Committee,

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awarded a Nobel Prize to Dr Muhammad Yunus, the founder of the Grameed bank and the
Grameen bank for the sustainable activities that they have been able to carry out in Bangladesh
(Grameen.com 2019). The aim of the founder and the bank as a whole is to develop the economy
of the country. The bank has realised the importance of removal of Poverty from the Bangladesh
and thus have aimed at developing the economy of the country by starting micro-credit facilities.
Such facilities are sustainable contributions that can highlight the efforts of the company in terms
of economic development. It has been found that the economically backward communities have
the ability to contribute to their own growth provided that they are provided with a minimal
amount of help is provided. Furthermore, the valuation of asset under the control of the Grameen
bank has increased over the years, as of 2017, it stood at 239,619 (Grameen.com 2019). The
financial self sufficiency of the company stands at around 103.42% which justifies the capability
of the bank to assist the economic growth of the people of Bangladesh and the country as a
whole (Grameen.com, 2019). The net profit of the company has increased over the years and the
bad debts of the company has been decreasing over the years as a result of which H&M are
favourably aligned to achieve success once they attain a joint venture with the Grameen bank.
Benefits and challenges
Benefits
 Cheap labour: The population in the country is on the verge of rise in Bangladesh.
Furthermore, there are not sufficient jobs available that can help in employment of the
people. Hence, employment opportunities are highly appreciated in the country which is
the reason behind the availability of cheap labour in the country.

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 Low cost of production: The raw materials are available art cheap prices. Furthermore,
the company will not have to import thus minimising the costs. Hence, the raw materials
needed for production are available at cheap prices, making the cost of production low.
 Cheap raw materials: H&M are a company who deal in mainly apparels and the prime
materials that are needed by the company are textiles. Bangladesh is one the leaders of
the world in the production of the same.
 Huge population: The population of the country is constantly increasing. Thus, the
number of people who are subject gain exposure to the products offered by the company
are high. This would help in increasing the sales potential of H&M in the company.
 Favourable trade regulations: The country is highly appreciative of FDI which would
help them in enhancing their economy. The same is supposedly favourable for the
operations of the company in the long-run.
Challenges
 Low per capita income: The country is still subject to poverty even though the country
are in the developing phase. The products offered by the company can turn out to be
expensive for potentially high number of people.
 Unavailability of proper infrastructure. Agriculture is one of the main industries that
exists in the country. Moreover, procurement of infrastructure is a gruesome task as a
result of the economic inefficacy of the states.
 Cutting down the price of the final product: In order for the products to be successful the
Bangladesh, the prices that the products are offered in has to be reduced. It would be
considered as difficult task provided the high quality and the international designers
involved in the creative processes.

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 Establishing lean supply chain: Minimising wastage is something that can change the
course of activities of a business. Ensuring that the wastage is considered a challenging
provided the poor infrastructure and supply facilities available in the country.
Conclusion
H&M have established themselves internationally and have been on the receiving end
customer support as a result of the favourable marketing tactics and the fashionable products that
they offer the consumers. An expansion opportunity has identified in Bangladesh. The country
has been subject to economic growth as a result of which it has been identified for a favourable
location for the operations of H&M. The main issue that can arise with operations in the country
is the unavailability of proper infrastructure and the low purchasing power of the people of the
country. However, cheap labour and raw materials are the advantages as a result of the expansion
plan is supposed to be favourable.

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REFERENCES
Ali, M.M., Hossain, M.B., Minar, M.H., Rahman, S. & Islam, M.S. (2014). Socio-economic
aspects of the fishermen of Lohalia River, Bangladesh. Middle-East Journal of Scientific
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(2013). The Bangladesh paradox: exceptional health achievement despite economic poverty. The
Lancet, 382(9906), 1734-1745.
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at-a-glance-2012-2016-in-usd/ [Accessed 8 May 2019].
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Available at: http://www.grameen.com/the-nobel-peace-prize-2006/ [Accessed 8 May 2019].
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Islam, M. S., & Nasrin, S. (2015). Driving forces of remittance inflow in Bangladesh: An
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Kumar, D., Hossain, A., & Gope, M. C. (2015). Role of micro credit program in empowering
rural women in Bangladesh: A study on Grameen Bank Bangladesh Limited. Asian Business
Review, 3(4), 114-120.
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https://www.scmp.com/business/article/3006802/rise-and-rise-bangladesh
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