Hilfiger Merchandise and Internalisation - Assignment Example

Hilfiger Merchandise and Internalisation Name Course Name and Code Instructor’s Name Date 1 What might prompt Hilfiger to sell on an international basis rather than focusing purely on the domestic market? Globalisation has presented new avenues in which an organisation can maximise on sales and profits. Hilfiger decision to expand globally ensures that depressed sales in the local market can be mitigated through selling the merchandise in a global environment (Hitt, Ireland and Hoskisson, 2010). International markets provide Hilfiger with opportunity of higher sales if the local market is slow or during the low season (Thomas, 2010). Differentiate economic environments means that Hilfiger can utilise revenues from high season regions to complement regions that are low season (Manlow, 2011). For example, Hilfiger merchandise that does well in United States during the summer period may also mean that such merchandise can do better in Australian market when similar conditions are experienced. Going to global market by Hilfiger means they can gain competitive knowledge and competitive ideas. Participating in international and overseas markets provides invaluable information and know-how in ensuring the business operates optimally. Hilfiger may utilise international markets to be incubators for new merchandise, which in term may become a big hit. Participating in different international markets means that acceleration of ideas is achieved ensuring that new merchandise, which are suitable for a given environment can be produced (Hitt, Ireland and Hoskisson, 2010). Therefore, competitive knowledge and ideas ensures that Hilfiger can operate successfully, and are able to access appropriate information easily that can be utilised in ensuring the business is sustainable at the long run. Moreover, participation in different international market provides a platform for achieving economies of scale. When Hilfiger international exports increases, it means it is easier to spread fixed costs over a lager production area (Thomas, 2010). Such strategy ensures reduction of unit costs, which will translate to more profits for the organisation. In addition, raw materials can be accessed from different regions meaning that the price of raw materials can suite the different environments and also reduce the cost of producing the merchandise (Hitt, Ireland and Hoskisson, 2010). For example, Africa is seen as the region where most raw materials for quality products are obtained from but few consumers for Hilfiger merchandise (Manlow, 2011). On the other and, Europe is not a major producer of raw materials but Hilfiger has a huge following. Thus, combining different environmental factors may make an organisation to operate efficiently and optimally. Entering into international markets makes Hilfiger to take advantage of world niche markets. Some products and services moves faster in certain economies and environments, and such products may easily appeal to certain customer segment (Hitt, Ireland and Hoskisson, 2010). For example, leather jackets appeals to Italian markets and also some famous musicians are usually spotted with expensive and high quality leather jackets in the United States (Mitchell, 2000). This means that a single leather jacket can be produced for both markets and such products may be received positively by the consumer (Thomas, 2010). Therefore, internationalisation of Hilfiger ensures maximisation of niche markets and hence improvement of business financial and economic position. In addition, niche products can either be marketed as unique or new as long as the idea can be appreciated by the targeted audience. Going global also means Hilfiger increase customer base and can start producing merchandise that suits different consumers based on culture, social and economic factors (Manlow, 2011). For example, the local markets may be saturated and thus expanding to international markets means that new customer base can be created. In addition, organisations have seen that internationalisation of businesses is the future strategy to ensure that businesses are successful (Hitt, Ireland and Hoskisson, 2010). Most of the organisations that have entered foreign and global markets and have utilised appropriate strategy have continuously been successful through increasing consumer base and also generating enough revenues to ensure the business is sustainable (Thomas, 2010). In addition, large consumer base ensures that an organisation becomes more efficient through reduction of costs. Internationalisation of business also provides huge pool of experts in certain business requirements. Different businesses environments require different experts with people with certain expertise to ensure the business is successful. Access of large of experienced employees ensures that Hilfiger can access cheaper labour with high quality. For example, Hilfiger has its headquarters in Netherlands but most of its production companies are located in China (Thomas, 2010). Chinese environment provide cheap and quality labour, which translates in high quality products resulting in more revenues for the organisation. Thus, internationalisation is important in accessing pool of experts and also ensuring high standard according to the organisation aspirations is achieved. 2 What factors have led to higher prices in Europe than in the United States for Hilfiger merchandise? According to the analysis from the case study in the textbook, numerous factors have been associated with increase of Hilfiger merchandise in Europe compared with United States. The first factor that has made products in Europe to be more expensive is the use of celebrity strategies in advertising means. Hilfiger have utilised famous people including Thierry Henry, a famous footballer, in adverting the merchandise (Hitt, Ireland and Hoskisson, 2010). These celebrities usually ask for huge compensations that are further transferred to the consumers and hence the high price of United Kingdom Hilfiger’s merchandise. Another factor that contributes to high prices in merchandise in Europe is the type of material utilised in making the merchandise (Thomas, 2010). Consumers prefer high quality cotton, which is expensive. It is expensive both in acquiring and keenness in ensuring the final is of a higher quality compared to customers (Delios, 2012). In addition, equipments and other tools utilised in producing such high quality products are usually expensive to acquire and require competent employees to ensure high standards are achieved. This also contributes to higher merchandise prices. In Europe, different consumers require different merchandise because of their tastes and preferences. In United States, the consumer behaviour is similar and they can easily appreciate certain merchandise when compared to Europe (Zou and Fu, 2011). Europe has diverse cultures ranging from French to Italians whom appreciate different merchandise. For example, Italian consumers appreciate luxury cashmere sweater and high quality leather merchandises. This also translates to expensive materials and higher quality and hence expensive merchandise. Another factor that may contribute to this difference in merchandise price in Europe compared to United States is the operational costs. Product in Europe is comparable expensive compared to operations in United States. For example, product of single merchandise can be three times more expensive in Europe compared to United States. In addition, Hilfiger had to utilise more capital in Europe to attract new market and ensure the current market is maintained. Generally, it is more expensive to produce single merchandise in Europe and hence translates in high prices of Hilfiger merchandises. What problems might Hilfiger encounter by having higher prices in Europe rather than in the United States? Consumer behaviour dictates whether merchandise can be bought and determines preferences to other merchandises from other producers and suppliers. Prices of products and merchandise within a specific contribute immensely to market share and customer segment preferences. Higher prices of merchandise may appeal to high value customers and depending on economic condition of a region, purchase of a product may be affected (Hitt, Ireland and Hoskisson, 2010). It means higher prices in Europe may mean consumers may decide to purchase from competitors. It will contribute to loose of consumers and also may affect revenues for the company (Wenzel, 2008). In addition, consumers shifting to cheaper merchandise may translate to decrease in business transactions and such actions may affect the entire business portfolio. Since there are merchandise that are sold in Europe are the same with those that are been sold in United States, some consumers and suppliers may utilise some strategies to benefit from price difference (Tielmann, 2010). For example, consumers in Europe may decide to purchase merchandise from United States through online since, through their calculations, may mean the end cost of the transaction will be cheaper compared to purchasing in Europe (Schroeder, Clark and Cathey, 2011). In addition, some suppliers may decide to purchase products directly from United States and start supplying the same merchandise to Europe meaning that suppliers in Europe may be disadvantaged (Dewan and Sudarshan, 2010). This difference in consumer perception and expectations make decrease sells by suppliers and stores in Europe resulting in such firms formulating another plan to be sustainable. References Delios, A. 2012. International Business: An Asia Pacific Perspective, 2nd Ed. London: FT Press Dewan and Sudarshan. 2010. International Marketing Management. New York: Discovery Publishing House Hitt, M., Ireland, D., and Hoskisson, R. 2010. Strategic Management: Competitiveness & Globalization : Concepts, 9th Ed. London: Cengage Learning Manlow, V. 2011. Designing Clothes: Culture and Organization of the Fashion Industry. New York: Transaction Publishers Mitchell, E. 2000. Spiritual Answers Today's Questions: The Importance and Relevance of God in Today's Society. New York: iUniverse Schroeder, R., Clark, M., and Cathey, J. 2011. Financial Accounting Theory and Analysis: Text and Cases, 10th Ed. New York: John Wiley and Sons Thomas, A. 2010. Supply Chain Security: International Practices and Innovations in Moving Goods Safely and Efficiently, Volume 1. London: ABC-CLIO Publishers Tielmann, V. 2010. Emerald Group Publishing. London: GRIN Verlag Wenzel, T. 2008. Clothing and Its Connotations in Postmodern American Fiction. London: GRIN Verlag Zou, S., and Fu, H. 2011. International Marketing: Emerging Markets. Cambridge: Emerald Group Publishing Read More