BRICS Economy

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Global Expansion for the BRICS Economy: H&M
Expanding to another country is a risk per se, so the company known as one of the largest retail clothing companies of Sweden, needs to make a clever decision basing themselves on what they have already seen of these groups of countries. BRICS announced two years ago according to the New York Times that they would establish a system that would allow them to bypass the dollar and other global currencies when trading among themselves. If H&M expands to the BRICS economies it will be easier for them since the process of entering won’t be so difficult because of their agreements. If I was the manager of a multinational retail store like H&M, I would undoubtedly expand my company to the BRICS economy rather than the CIVETS economy. First of all the BRICS economy has been going on strong for the last twelve years and little by little they are asserting everything they have said they would do. Even though the CIVETS economies are well known for having a young population, this is the only thing they seem to have in common. Because of their young population, these countries seem to be more independent of external demand as the BRICS; but as manager of H&M I’d rather choose a group of countries that actually needed our demand as a multinational company or their home clothing retail stores would take over H&M and that would mean that our expansion would be a total failure. At the same time, according to Jim O’Neil, the man who created the BRICS term in 2001, by the end of the decade the BRICS will have at least 25% of global GDP. Also he predicted that by 2035 the BRIC nations will be as big as the leading industrialized nations of the G7. For these and various reasons this is the direction where H&M should head into, having in mind that the CIVETS emerged in 2011 and we haven’t seen anything significative that would make us prefer to expand to these countries rather than the BRICS. Also the fact that in some countries of the CIVETS such as Vietnam and Indonesia investing is a laborious project tells us that maybe it’s not the right time of us to expand to any of those two countries. Also the fact that liquidity and corporate governance in Egypt is patchy should be taken into consideration. According to the article “How Half the World Shops: Apparel in Brazil, China, and India.” written in the McKinsey Quarterly, “Multinational retailers seeking new sources of growth are watching the mass markets of Brazil, China, and India, whose large populations and strong economic growth have made them nearly irresistible. As consumers have greater disposable income, they increasingly spend their money on items beyond the basic necessities. One of the first categories to feel this change is apparel” H&M already exists in 43 countries and it aims to expand its number of stores 10% to 15% each year. Since H&M is already in China with 114 stores, in Russia and just opened in South Africa, I think H&M should explore the BRICS market a little deeper expanding their stores to Brazil. First of all, Brazil is an attractive market for the fashion apparel industry. Brazil has a young and large consumer population and since the middle class is expanding more day-by-day H&M would have a very large market potential since there would be a lot of buyers interested in their products. Even though this country has many state-owned enterprises, always keeps their doors open for multinationals and European corporations according to the “Strategies that fit Emerging Markets”. It should be kept into consideration that Brazil is relatively politically stable in contrast with other South American countries. At the same time, just like Zara, H&M is a very well known retail company among Brazilians and in order to shop there they must fly to Argentina or order the clothes online, so the fact that H&M opens in Brazil would attract a larger flow of people. Brazilians have a very...