COMPANY MANAGEMENT by Jessica Fredlund

Company Management Final Project Uterq端e entering the Swedish market

IED BA Fashion Marketing and Communication Jessica Fredlund, Alexandra Dahlgren, Freja Lina Nyman, Emelina Nyqvist

‘What Business are you in?

The plan is to expand the Spanish retailer Uterqüe and establish it in Sweden. The brand belongs to Inditex group that also owns Zara, Bershka, Stradivarius, Pull&Bear, Massimo Dutti and Oysho. Uterqüe is the newest retailer in the group and since the launch year 2008 they have expanded to 17 countries worldwide. Uterqüe offers accessories and exclusive garments at affordable prices. The company emphasizes high quality with focus on details. Its collections are built up around formal garments although the accessories such as shoes, bags, and custom jewellery are in the focus of the collection. Everything is carefully chosen and the company produces its collections as limited series, in order to create the feeling of exclusivity. The stores are designed to create a joyful shopping experience. The unique furnishings, lightning and its high focus on good customer service create an elegant feeling in store. These elements result in a customer oriented shopping experience, which is important for the company. Objectives After research and analysis we find the market in Sweden to be promising and well thought-out to establish this establishment on. This because of Sweden having a stable political situation, a strong economy and a market willing to embrace international corporations. We feel that Uterqüe does not get the acknowledgement it deserves on the Spanish market solely, and want them to expand their business in order to share their products with the rest of Europe as well.

Especially in the Northern countries they have the prospect of being well perceived, as there are similarities with the Scandinavian designers and their creations. The market are women interested in fashion and open to new concepts and international stores, which is why we decided to spread the concept of Uterq端e to the Scandinavian countries, starting in the south of Sweden. The company started expanding their business to other countries more in the northern parts of Europe, with six stores in Belgium and online activity from their website to both Germany and Holland. This seems to lead to a natural step of expanding the business to the Scandinavian area. With the current economy people are more willing to spend money on quality as opposed to quantity. This fits well into the concept of Uterq端e, focusing on less of each style, but higher quality.

Analysis Company The Spanish company Inditex is one of the worlds largest fashion groups that own Uterq端e. Inditex runs over 5000 stores around the world and it is built up around approximately 100 companies focused on manufacturing and distribution. The headquarters is located in La Coru単a in North-western Spain where they also established their first store in 1975. One of the key factors that lead to the success of the group is their vertical integrated value chain. The group controls its manufacturing, design, logistics, distribution, management and retail sales by itself, which helped them keep tight control over the process. Inditex is set apart from the competitors by the successful international expansion. The group began to expand in

1988 when they opened a Zara store in Portugal, at that moment the group had 60 Zara stores in Spain. This expansion strategy is applied to other Inditex owned companies as well. Almost all stores worldwide are owned by the group itself, apart from the ones in countries were foreigners cannot own companies such in Middle Eastern. Uterqüe is the latest addition to the Inditex group and the first store was launched in 2008. The brand is today represent in 17 countries with a total of 89 stores. The brand produces accessories such as handbags, jewellery, footwear and small leather goods. The brands own specials team in La Coruña designs the products, where the headquarters also are located. The Uterqüe products are based around the interaction between accessories and clothing, although the accessories are the focus point. The products are made of recyclable material and the brand approach a more sophisticated profile compared to other brands inside the group. Production The distribution centre for the accessories and shoes of the Uterqüe collection is located to Elche, Alicante in Spain. Uterqüe is mainly focused in accessories and shoes, which is why the distribution of these products is of importance. The Inditex owned company Tempe is distributing the complementary products for Uterqüe, similar to all accessories and shoes offered by the group. Tempe is dealing with more than 44 million pairs of shoes every year, which result in a need of a successful management process when dealing with the products. Tempe has three main functions, which are stock supply, warehousing and shipping. The production of the shoes and accessories are managed by subsidiaries in Morocco and Asia, from where they are

send to Tempe in Spain. The products are distributed by Tempe in Spain from were they are delivered to the European stores. The distribution centre is a key point in the supply chain as products are continuously entering and leaving the warehouse. The Uterq端e store receives products from the distribution centre twice a week similar to the other companies owned by Inditex. The distribution centre is integrated with the store and connected through a communication system directly managed in store. Each store report sales and demanded products directly to the distribution centre. The Uterq端e stores can also regulate the quantity of products delivered to the store, in order to adjust the collection to the customer demand and minimize the risk of unsold stock. With the assistance of the communication system the store can receive a product within a maximum time of 48 hours, which is why the punctuality of the distribution centre is crucial. Product The products offered by Uterq端e are produced in quality materials such as leather, silk and cashmere. The company offers a wide range of products, although the emphasis is laid on accessories and complementary products such as shoes and jewellery. The different product categories are divided into four groups; ready to wear, bags, accessories and footwear. Inside each product category the products are classified after either size or product description. The bags are divided into three different sizes and categorized after large bags, small bags and party bags.

Prices in the domestic market -Bags The price range for a large bag in leather sold in the Spanish market is between 129 € and 199 €. The bags in the category of small bags have a price range between 79 € to 169 €. Party bags costs 79 € or 99 € and are not only made in leather but also polyester materials. -Accessories The accessories category includes different products such as bracelets, rings, earrings and watches mad of metallic, resin, textile or glass materials. The bracelets costs 29 €, 39 €, 59 €, 69 €, 79 € and 99 € depending on the material and the size. Earrings and rings are priced between 29 € and 59 €. Necklaces depending on the materials are priced between 69-119 €. Watches from the current collection costs 119 €. Other accessories such as belts are priced between 29-79 € and sunglasses costs 69 €. Gloves and scarves are priced between 49-69 €. -Shoes The sandals and opened toed shoes are priced between 89 € and 129 € depending on the style. The low-heeled sandals are in a lower price range meanwhile the high-heeled sandals are higher priced. The flat shoes and ballerina shoes costs 49 € or 59 €. Low and high Boots costs between 99 € and 149 €. -Ready to wear The Uterqüe outerwear have a price range between 169 € and 299 € depending on the style and the materials. The longer jackets and the

leather jackets are higher priced than the outerwear made of polyester and cotton. Blazers are priced between 129 € and 169 €. Silk dresses are priced 99 € and a leather dress costs around 197 € while the knitted dresses are priced between 59 € and 79 €. The shirts costs between 49 € and 79 € depending on the material used and the tops are priced between 39 € and 59 €. The Uterqüe sweaters costs between 49 € and 99 €, were the higher priced sweaters are made of exclusive materials such as cashmere. The shorts costs 49 € and regular pants are priced around 79 € with an exception from the leather pants that costs 299 € and denim pants that costs 49 € or 59 €. Uterqüe skirts are priced from 69-89 € with an exception from the higher priced material skirts made of leather that costs 199 €. Beachwear, such as bikinis and bathing suits costs 69 € or 79 €. Financial Report During year 2011 Uterqüe opened nine new stores and the group are planning further five to 10 new openings during 2012, which shows on a planned expansion. Uterqüe stands for 0.5 % of the group’s total net sales. Reported net sales for Uterqüe shows on a 36% growth during 2010 compared to 2009. The net sales for the company increased from 44 million € in 2009 to 59 million € in 2010. Although increased net sales, Uterqüe showed a 12 million € lost earnings during year 2010 but taken in consideration the fact that the loss includes 12 million € for accelerated depreciation of assets. This could be in relationship with the aggressive expansion during 2010 when they opened 23 new stores and probably had to loan capita for new store openings. During 2010 they entered 5 new countries, which in total make Uterqüe present in 16 markets worldwide. In September 2011 the group rolled out the

Internet commerce for the company and they are forecasting a further growth for 2012. Inditex has reinforced the capital for Uterqüe with 20 million € during year 2011 in order to strengthen the company’s growth. This financial reinforcement shows that Inditex are predicting a bright future a successful growth for Uterqüe. Growth When expanding internationally Uterqüe has chosen to open centrally located retail spaces in upscale shopping areas. In order to establish a more exclusive brand image than its other brands, Inditex opened Uterqüe flagship stores in the most exclusive shopping areas. For example in 2010 Uterqüe opened in Tesvikiye Avenue in Istanbul, Turkey and in 2008 they established in Metaxa, Glyfada in Athens Greece, which both are the most exclusive shopping areas in these cities. Environmental All the Uterqüe stores are eco-efficient and Inditex has developed a store model that combines environmental principles in order to attain a sustainable store. The company communicate environmental messages in order to build up awareness around the company as environmental friendly. In store the lights are highly efficient, which reduce electricity consumption. The materials used are eco friendly and organic paint and varnishes are used. The wood used in store is certified and comes from sustainable forests. Automatic temperature regulations are used for the air conditioning systems in order to maintain the same temperature all year around. The bags and the packaging are also made out of materials from sustainable forests. Plastic materials used for the plastic bags are made of certified 100% biodegradable materials.

Target market â&#x20AC;&#x201C;Sweden Opportunity for international retail concepts - Ă&#x153;terque In Sweden the consumer and property owner have a positive attitude towards new international concepts that add variety to the retail structure. There are 130 international retail chains on the Swedish market, originating from Scandinavia, Germany and UK. Over 30% of all the foreign retailers have more or less 20 outlets on the Swedish market. Scandinavia is known as very fashionable and up-to-date in the apparel industry. According to that the Scandinavian youth have a tendency to wear trendy and innovative clothes comparing to other European countries. Sweden is the second leading exporter of garments among the Scandinavian countries. Swedish fashion designers such as Acne, Whyred, Filippa K and Odd Molly have entered the international market. The industry also shows that Swedes are very good at retailing and creating mid-prices clothing. The high spending consumer who looks for luxury goods usually look at foreign brands for both adults and children. The Swedes has increased their interest for organic clothes and are more aware of the environment comparing to other countries in Europe. Retail sales growth The Swedish retail market is one of the most increasing in Europe according to the growth. Two reasons are the population growth and

rising disposable incomes. The retail industry is the largest in Scandinavia and has shown a positive growth. The retail sales have been measured in current prices and shown an increase by 3.7% (2010), 68 billionâ&#x201A;Ź. According to the Swedish Trade federation they have counted the retail sales to grow by 30%. Good supply of retail space In Sweden there are many retail spaces available. They have also planned on -going expansions retail projects. Shopping centers out of town stands for a third of annual retail sales. As mention before the Swedes welcome international concepts as they offer differentiation to the retail industry. Franchising Sweden has a great franchising industry, which is dominated by domestic concepts. This creates opportunities for international franchisors. The franchise industry had a turnover growth of 180% since 2002. Purchasing In 2008 had the consumption decreased even if the income of Swedish households has increased. This shows that the Swedish people are saving their money in a greater level than before. The main reason for this is that people are concerned about recent job cut warnings. Another reason is the interest rates on house loans and the banks new laws. If buying a house or an apartment you need to be able to pay between 10-15% cash. This is also a reason people spend less money in the apparel industry. The National economic research reports shows lately that Swedish households are more positive about their current situation and about purchasing. This should make people more likely to spend more money

of their income on brand name fashion items and also different lower priced fashion items. According to Statistics Sweden, a household with two children spend 1800€ every year on garments. The average woman spends 700€ on clothes each year and the man spend more or less half of that amount. As mention before there is an increased interest for organic clothes. Some of the bigger chain stores are selling organic clothes. Swedish people are concerned with corporate social responsibility and poor labor conditions and get much media attention.

Tourism

The tourism is not a very important sector in Sweden but is has been growing since 1980. The most common visitors are coming from Germany, UK, Norway, Denmark and USA. The tourist season is during the summer but winter skiing holidays attracts foreign visitor as well. The tourism can affect our sales in a positive way during the summer and the winter season.

The target Market – Malmö Instead of the expected launch in the capital City, we have chosen Malmö to be the first choice for Üterque. This because of fast growth, both geographical and economical. The city of Malmö has a population that consists of 302 835 inhabitants and is the third largest city in Sweden. Located in the south it has great advantage in many aspects regarding shipping as the bridge to Copenhagen Denmark makes it easier for foreigners to cross the border, which is beneficial for the economy. The bridge provides the opportunity for 28 600 people to commute every day.

Every last Saturday the stores in Malmö have extended opening hours, which encourage a larger purchase since it is combined with the salary weekend. Thanks to bridge and close distance to the rest of Europe, the consumption from tourism increased by 15% with 6,8 billion Swedish crowns (approximately 7,2 million €) in 2011, which was a record for the City. The corresponding number for Sweden in total is 254,4 billion Swedish crowns. This made it possible for 4 758 annual employments to be created, a 12% increase from the prior year (2010) the majority being in trade and retailing.

From the late 90’s until today, Sweden’s turnover on the matter of tourism have been close to unmodified with Malmö City as an only exception in the national average. This indicates a strong candidate to establish a new business in. It is not only via the bridge by train that people travel through, in 2011, 1,9 million people travelled to Malmö by plane, an increase of 22% comparing with the year before.

The conditions for fashion companies have been good when looking at new statistics. On the biggest shopping street in Malmö there are 85 stores, only eleven are not fashion related. However are the premises prices are high, approximately 5-600€ per square meter a year. Since Malmö has put larger investments in growth and renovation, the central premises has increased a large amount in rentals. This change is notable when looking at statistics over private owned stores versus greater retailers and franchisees with bigger budget. In the late 90’s the majority of stores where individual ones, today however individual entrepreneurs are rare. The reason behind the raised price is the new image the City has chosen to focus on a younger more fashionable target. This is a positive objective for Üterque when entering the Scandinavian market.

Gothenburg After Malmö, Uterqûe will expand their business to Gothenburg, the second greatest city in Sweden next to the capital Stockholm. The city has 930 000 citizens. The city provides several strengths and opportunities for our company. It is a natural process for us to expanding the business to Gothenburg next after Malmö. It is most likely for foreign owned businesses to look at Stockholm as a potential location, but choose Gothenburg because the rent levels are inexpensive. The market prices are lower than Stockholm and there are more suitable facilities available. It is between 5-15 % less expensive comparing to the capital. We want to locate Uterqûe on Drottning gatan in Gothenburg. The location is near all the largest and most popular malls and also near our competitors. We want to be near the competitors, as we want to have similar clientele. The premises in Gothenburg have a cost of approximately 9000SEK per square meter per year. Many companies also prefer Gothenburg for the character of a small town instead its big city services. The companies have good contact with local organizations such as “Business Region Göteborg.” that are assisting the companies during the establishment process. Gothenburg is located at the west coast and it is an attractive city for both local citizens and tourists. The last ten years it has been an increase in both tourism and the number of citizens. The tourism is important during the summer in terms of sales for many retail stores. Tourists from Norway spend much money in shopping because it is cheaper to purchase in Sweden.

Gothenburg has positioned itself as leading international export region and it is highly competitive. The port of Gothenburg is the largest in Scandinavia and is making it able the city to position itself as one of the most important and best logistic locations in Europe. According to Regional Innovation Scoreboard 2006 the city is the second most innovative region in Europe. Today the city has more than 60 000 university students. The students are helping to create wealth of available knowledge. Gothenburg has a strong growth in retail businesses and foreign investors have invested heavily in the region. The key objectives of the strategy for sustainable growth in Gothenburg are: •

The population increases with more than 8000 inhabitants per year.

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Geographical expansion of the commuting labor market region.

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Extension of the infrastructure

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The aim is to double the market consisting public transportation in 2025

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Expansion of the city center and produces a basis further growth in the sub region centers.

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Expansion of new homes for over 30 000 inhabitants

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Commercial space for over 40 000 new jobs

Stockholm analysis Stockholm is the biggest city in Sweden, being the capital, and the largest urban area in all of Scandinavia, with over 2 million inhabitants. This trend is constantly going up since 19801, and by the year 2030 Stockholm is expected to have 2 400 000 citizens. This increase in population creates a good foundation in welfare, as well as an attraction force for companies, organizations and high-educated people. Out of the 2 million citizens living in Stockholm, a little more than half belong to our target group women. When combining this with the age range we specify in (25-44) we find that there are 316 198 people in our target group in this area. The average price for renting a store is €1235 (SEK 11 000) per square meter and year. This is the highest price in Sweden, 5-15% higher than Gothenburg and 10-20% higher than Malmö. The general economy of Sweden is reflected on Stockholm’s, but the Stockholm region is often the big driving force when it comes to the country’s economy, especially when you look at the employment rate and the salaries.

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http://www.scb.se/ http://traveltrade.visitstockholm.com/

The diagrams show the employment level in Stockholm (dark green graph) versus the whole country of Sweden (light green graph). You can tell from the results that Stockholm keeps a more stable approach, which is a big advantage for the whole country. Stockholm is the biggest city in Sweden when it comes to tourism and international visitors. In 2011 they reached a new record of overnight visits, with 10.4 million. Apart from this, digital media and book publisher Lonely Planet named Stockholm one of the most important places to visit in 2011. Both Stockholm’s and its tourism are growing at a fast rate, as the number of overnight stays has increased by 50% in the last then years2. This increases the stability of establishing new companies and keeping them steady in the city. Competitor analysis Filippa K Filippa K was founded in 1993 and based on the concept of style, simplicity and quality. The brand combines timeless simplicity to a contemporary edge to urbanities modern whose have an eye for good design. Their vision is to create garments that people can have as their “favorite clothes”. It should be perceived as well-fitting and comfortable clothes that are wearable over and over again. Filippa K is located in over 20 countries and has 50 brand stores in Europe 25 being own shops. The brand is represented in more than 600 selected retailers worldwide. The head office is located in Stockholm, Sweden.

http://traveltrade.visitstockholm.com/

In the Swedish market the brand has high brand recognition and the own store is located in the capital. As we first are going to enter the Swedish market in Malmö, it will we be located on the same street as Filippa K’s own store. Price The brand offers designed products combined with quality to an attractive price. The price range is between 50-300€, which is similar to Ûnterque’s prices. Product Filippa K offers quality products such as clothes, accessories and shoes for both men and women. They offering similar products comparing to Ûterque, which shows that it can be a competitive brand for us when entering the Swedish market. Whyred ”Clean living under difficult circumstances”. Whyred is a Swedish brand, founded in Stockholm 1999. Whyred has quickly been established as one of the main fashion brands during Stockholm Fashion week (mercedes benz fashion week). The founders, Roland Hjort, Lena Patriksson and Jonas Karlsson, where prior H&M employees that together wanted to create a new concept of “mod culture street-smart elegance.” Together the founders had skills within fashion design, marketing as well production and it is those strengths that have set the boundaries for the brand’s success. Whyred has five own stores in Sweden and Denmark, including their flagship store in Stockholm, however including retailers the brand can

be seen in approximately 230 stores in 21 countries, France, Spain and Germany are some to mention, as well Offices in Stockholm, Copenhagen and Paris. Whyred also have agencies in Italy, Germany, Norway and Japan. The mod inspired look are representing a typical minimalistic Nordic design with both men and women’s collection. Additionally shoes and accessories are parts of the brand and have a typical Scandinavian style and design. On the homepage the image and style of the brand are being described as intelligent luxury - elegant garments with a casual luxurious feeling to it, and is focusing on bringing out the personal style in all customers. The prices are around 50500€. Tiger of Sweden Tiger of Sweden is a Sweden originated fashion company founded in 1903. The focus was during the earlier years on creating men’s suits in a high quality for more elderly men. During the 1990s this changed and the company decided to take a different direction and started developing garments with more focus on design. With this the company could reach a wider target group, and they went from being the creators of solely classic garments to being one of Sweden’s most successful designer companies. The price range of the brand increased together with the quality of the clothes. Today the price varies between €59 to €229 for a dress, €39 to €159 for a top, and around €50 to €100 for accessories, such as belts and wallets.

Tiger is established in all the Scandinavian countries, as well with concept stores in Germany, South Africa and Canada. Apart from this there is a store-in-store in Switzerland, opened recently. As mentioned, Tiger was originally a brand aimed at med, particularly elderly ones. This has changed during the past 20 years and now the target group is evenly divided between men and women looking for trendy and durable clothes. This is one of the reasons why we consider Tiger of Sweden a direct competitor to Uterqüe, since the latter is also a brand which focus a lot on being fashionable and maintaining a certain standard on their garments at the same time. The two brands also convey a similar type of feeling when visiting their stores – a feeling of minimalism and lavishness, which goes hand in hand with the brand image. Uterqüe is said to mean “The one and the other”, referring to the fact that they specialize in not only quality made clothes but also offers a variety of accessories for women. Tiger offers a line of this as well, with bags, wallets, belts, shoes and sunglasses at affordable prices, similar to the Uterqüe system. Rizzo Rizzo is a Swedish retailer with Italian heritage that offers shoes, ladies bags and accessories in a medium to high price range. A medium sized bag costs between 120 and 225€ meanwhile a pair of shoes costs around 150€. The company was founded by the Italian Rudolfo Castelucci in 1977 and has today 16 stores in Northern Europe. The production is placed in Italy and the collection is based on classical Italian style combined with latest fashion trends. Every season Rizzo

offers a wide range of shoes, accessories and bags with high emphasize on quality and details. Rizzo is located in the three main cities in Sweden: Stockholm, Malmö and Gothenburg. In all cities they have opened points of sales in the central area and with at least one shop in the main shopping streets. SWOT analysis Strengths -

Affordable prices. Uterqüe strives to be luxury at reasonable prices, making the brand target more people.

Limited production. They produce at a limited amount per style, resulting in a feeling of more exclusivity. Another advantage this technique has is the low amounts of garments and products left at the end of the season; if one particular one has not sold well.

Part of well-known corporation. Inditex is one of the most important fashion design and distribution groups in the world, and belonging to that group makes the brand of Uterqüe stronger.

Weaknesses -

Relatively unknown outside of Spain. Only having been opened a few years, Uterqüe is not yet established on an international market, which can be shown by the lack of knowledge people have for the brand, especially in Scandinavia.

Small popularity in social media compared with its competitors, for example Whyred. While Uterqüe has 56 000 fans on Facebook, Whyred has over 220 000. The same goes for Twitter, where Uterqüe has barely 3000 followers and Whyred has over 42 000.

Opportunities -

The market in Sweden is strong, because of a more stable economy than the majority of Europe.

Our demographic target group is well established in the areas in the cities where we want to launch, which are also the shopping streets most fitting for our brand.

Threats -

The Swedish brands in the same price range are already established and popular on the Swedish market.

A new unknown brand might have problems with the launching.

The increase of pricing in Sweden compared to Spain

The target The target for Ă&#x153;terque is Female with an upper incomer. She is single or cohabiting without any children and prioritize career before family life. The target is higher educated with a university/university college

degree and lives in an apartment in the centre of an urban city. Her objectives when going shopping are durability but still fashionable clothing. Her dressing is sophisticated and modern. She prefers style over a specific brand and qualitative products to an affordable price. Target objectives The image of Üterque is affordable luxury but to a slightly higher price than low-budget retailers, therefor the target is prioritizing herself when it comes to shopping and is able to shop spontaneously from time to time.

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Woman

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Age 25-45

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Middle-middle/high income

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Single/cohabiting

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Chooses career over family life

In January the population of Sweden consisted of 9, 482 855 inhabitants, 4 756 021 of them being women. Looking at statistics, females in Sweden have an income of approximately 87% of men’s salary, with the peek for women being ages 25-55.

PEST Analysis Political Sweden, as well as all Northern countries in general, has not been known to have any political instability. No dramatic power shifts or reforms have been done to severely affect the possible establishment of a new company. Looking forward, one cannot see any reason why this stability would change in the near future. This is a clear possibility for new companies to make an establishment. On a good and stable market, the outcome from a stable political situation is of good help when you want to function as a company. Sweden has Free Trade rules with a variety of countries. This means what goods shipped in and out of the country can be freed of tariff. This involves the EU countries and countries with special agreements with EU3. Some of Inditex’s production takes place in Spain, where the EU rules apply, but the majority of their production takes place in lowproduction countries such as China and Morocco4. This means that the Free Trade rules don’t apply, and there are various requirements on the products and shipping that needs to be filled in order to transport the goods. Taxes in Sweden are generally quite high. Joint-stock companies in Sweden pay 26.3% income tax. When it comes to Value Added Tax (VAT) the EU has some requirements on the member countries since the member fee is calculated out of the VAT. Sweden has been criticised

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http://www.swedishtrade.se/sv/exportfakta/tullar-och-handelsregler/ Grupo Inditex Annual report 2010, April 2011

by EU for having a too big market free from VAT, for example the dental care market and some import5. Sweden puts a lot of value in the law of protecting employees. They have a certain law invented in 1982 that was created for just this porpose. It’s called Law of Employment Protection, or LAS (Lagen om Anställningsskydd), and is meant to look after employees when they are dismissed or they quit. The law includes time of dismissals, timelimited employments and after-leave pay. Furthermore, Sweden has laws including paternity leave, working hours and paid vacation. Economical The central bank in Sweden set an inflation goal in 1993, that the consumer price index (CPI) should increase with 2% each year, because this level of inflation has historically proven to be beneficial for Sweden. The CPI measures the pricing evolution in the private consumption in every household. When the inflation is 0% the risk is bigger of making payments inflexible and investments in companies less profitable6. The GDP in Sweden reached 389 billion€ during 2011. Compared to 2010 the GDP increased by 3.9%. The growth during the first quarter of 2012 was 1.5%7.

5http://www.skatteverket.se/foretagorganisationer/moms/momsvidexportimport/importombud.4.

3dfca4f410f4fc63c8680006821.html http://www.riksbank.se/ 7 http://www.scb.se/ 6

Social Education in Sweden is free, and mandatory from children age 7 until they turn 16. The percentage of people studying at a university level is higher than 5 years ago, and is still rising8. In 2011 33% of Swedish people between 25-64 years had a university degree. Between the age range of 25-34 the numbers were higher, at 42%. One reason why the number of university students is constantly on an uprise in Sweden is the steady political and economical situation, as well as the amount of programs on a high school education level being preparation for higher studies. Sweden’s percentage of unemployment has since the beginning of 2010 started to show a trend of going down. However, in the fall of 2011 the financial crisis and its following recession started to have an affect on those numbers. In April 2012 the number of unemployed people were 390 000, which is 7.8%, and out of those 146 000 were fulltime students looking for work9. Stockholm analysis Stockholm is the biggest city in Sweden, being the capital, and the largest urban area in all of Scandinavia, with over 2 million inhabitants. This trend is constantly going up since 198010, and by the year 2030 Stockholm is expected to have 2 400 000 citizens. This increase in population creates a good foundation in welfare, as well as an attraction force for companies, organizations and high-educated people.

http://www.scb.se/ http://www.ekonomifakta.se/sv/Fakta/Arbetsmarknad/Arbetsloshet/Arbetsloshet/ 10 http://www.scb.se/ 8 9

Out of the 2 million citizens living in Stockholm, a little more than half belong to our target group women. When combining this with the age range we specify in (25-44) we find that there are 316 198 people in our target group in this area. The average price for renting a store is €1235 (SEK 11 000) per square meter and month. This is the highest prices in Sweden, 5-15% higher than Gothemburg and 10-20% higher than Malmö. The general economy of Sweden is reflected on Stockholm’s, but the Stockholm region is often the big driving force when it comes to the country’s economy, especially when you look at the employment rate and the salaries.

years11. This increases the stability of establishing new companies and keeping them steady in the city. Technology

This image pictures the role of information and communication technologies, and how Sweden ranks number one as being a facilitator in the above for a more economically and socially sustainable world. The report compares technological infrastructures, political and consumer attitudes along with other factors. Sweden is constantly developing in the technological factors, and a big reason for this includes a good education system in the information field. One example of Sweden being pioneers in technology is the one of Ericsson, a company producing telecommunications infrastructure. Sweden was one of the first countries to establish a telephone network with this company.

http://traveltrade.visitstockholm.com/

E-Commerce Consumers shopping online in Scandinavia As the technological advances have increased the last years, almost all households have Internet access in Scandinavia. The shopping habits online have increased and practically everyone has at one time or another purchased items online. The consumption is equally balanced between women and men. Since the Internet provides a great range of products at the online stores, the consumer ages are evenly spread.

Have you made a purchase online the past year?

Danmark 93% Norway 94%

Sweden 91% Finland 88%

The chart shows that the consumption of online items is high. This can be an opportunity for Unterqûe to expand their business to an online store, this to all Scandinavian countries in order to create brand awareness and provide information about their products. This will also be an opportunity for them to increase the total revenues.

Have you made a purchase online the past year? 100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 18-‐28 years 29-‐40 years 41-‐52 years 53-‐64 years

This chart shows that the wide range of ages purchasing online is equal. The greatest purchase power our target has who is between 2540 years old with 95% and 96%.

Positioning map We decided to compare the characteristics of price and exclusivity, because we feel that Uterqüe is strong in both these traits. The brand’s motto is to mix the concept of exclusivity with affordable prices, so we decided to see where out competitors stand in this issue. After analysing our four chosen competitors, the findings were that they all use high-class materials and textiles. Filippa K is similar to Uterqüe both in that and in price, only being slightly higher. Tiger and Whyred are both significantly higher in price, but use the same system of limited collections, as well as the high-quality materials. Rizzo, we found, uses quality-materials, but as they mass produce most their products they don’t focus as much on exclusivity. They however, do keep the prices low, which is a possible threat for us in that department.

Entry Strategy Branding Strategy The brand Uterqüe will enter the new market, Sweden, with the sophisticated brand image they have in the domestic market although with higher intensity. The price setting in the new market will be higher due to additional costs from promotion and taxes, which requires more focus on the exclusive brand image. Uterqüe will enter the market with an elegant personality that reflects the high quality of the products. Uterqüe will enter the new market with an image of a unique brand targeting urban women with a middle- to high social status. The brand will position itself as a high quality brand offering products to a more affordable price than its competitors. The brand will stress the high quality in the accessories and the complementary products as a unique concept in the new market. Also important when entering the new market is to focus on the environmental responsibility as it is highly appreciated among the new target. Uterqüe offers unique fashion accessories and complementary products for the urban woman searching for good quality. Products Uterqüe will enter the new market with the new spring summer collection for year 2013. We will offer products only for women and it will be the same products as in the domestic market in order to not change the already established production. Changing the product range in the new market would also affect negative on the profits, as the production and manufacturing process would be totally changed.

In store we will start the launch with a wide range of products from the whole collection in order to be able to test the collection. The communications through the PDA system to the distribution centre will facilitate regulate the products after demand. The products will be tested during a short period of time in order to after the testing period regulate the collection after the new markets demand. Price In order to create the price setting in the new market we have to take in consideration the differentiation in VAT rates and additional costs for distribution and logistics. The VAT rate in Sweden is 25 %, which is 7 % higher compared to the domestic market Spain with 18 % VAT. In order to calculate the final price in the new market we will calculate a price based on the retail prices in the home country. As the VAT rate is already included in the final price we know that we first have to add further 7 % VAT to the new market. There are also additional costs for logistics that we have to consider when price setting. In the new country labour costs are higher, which also will affect the final price. Corporation tax in Spain is 30 % compared to 26. 3 % in Sweden, which means that we do not have to raise the price due to higher corporation tax in order to keep the profit margin. The rental space in the domestic market is a higher cost per square meter than in the new market, which result in a lower rental cost. That result in the fact that we do not have to consider higher rental costs and instead we might have a margin in the domestic product price. When price setting the Uterq端e products in the new market we assume that the final product price in the domestic market already includes a

profit margin. When price setting the products we have decided to add 27 % on the final product price in the domestic market. This means 7 % higher VAT in the new market and further 20 % addition including the logistic costs and higher labour costs. Below is to find a chart of the current price setting in domestic market and the new price setting in the new market. Counting the retail price in Swedish krona with the currency as counted 12th of June 2012.

Distribution UterqĂťe will use the same distribution channel as Zara and Massimo Dutti in order to avoid unnecessary expenses. Inditex are world leading in distribution and has a developed system and always manage to deliver fast fashion. The clothes, accessories and shoes are shipped with airplane at the same time from Alicante to Copenhagen in Denmark. The clothes are manufactured in La CoruĂąa in north of Spain and delivered to Alicante before shipped to Copenhagen in Denmark, from where the final delivery is sent. This will be an opportunity for us as we will use the same distribution channel as the other Inditex owned companies already existing in the Scandinavian market. In Copenhagen the delivery will be organized and sent with trucks to our different cities MalmĂś, Gothenburg and Stockholm in Sweden. It is an advantage for us as the Oresund Bridge that connects Denmark

and Sweden allows us to drive with trucks instead of using for example boats. We will use the logistic firm DHL that is used to Zara and Massimo Dutti. This will save us fewer expenses in terms of distribution costs as we will combine ours delivery with the rest of the Inditex companies. When the items reach the store they are already labeled in the warehouses with the price in Euros for the domestic market. We will use the same labeling system as the other Inditex companies in order to create a facile and save timing process. We will use the PDA system installed in Swedish crones as the currency. They will automatically transform to the current price in Sweden but the exchange rate keep locked. The pricing will only change if the prices rise in the domestic market and not due to exchange rate changes. E-Commerce The analysis of the Scandinavian E-commerce shows that the consumption of shopping online is very high and we see this as an opportunity. We will open an online shop available for the Scandinavian countries at the same time as the retail opens in Sweden. The web-shop will not be available for purchase from Norway as they are not members of the European Union and do have different restrictions regarding trade. Product range available in the Swedish offline store will be the same for the Scandinavian web-shop. The price setting in the web-shop will be transformed into the local currency for the country to where the products are shipped in order to facilitate for the consumer. Exchange rates will be locked for each country and the prices will not change when the currency change in order to keep the same prices. Changing prices could be confusing for the consumer

and the brand could appear as less serious if prices changing, which could result in damaged brand image. This strategy is the same used in other Inditex online stores as they use the same price setting over all for a country in-store and in the web-shop. Marketing mix Communication Inditex has usually a policy of Zero external advertising. Uterqûe saw a geographical demand of communicating their brand and products. They released ads in different women magazines last year. We see this as an opportunity as we want to create brand awareness in the Swedish market. We will implement a marketing department in Stockholm Sweden and hire a Swedish marketing manager. He will be responsible for the communication on the Swedish market. We will be shown in women magazines as Swedish Elle, “Damernas värld” fashion. The magazines are fashion oriented and targeting the same segment as Uterqüe. We will also invest money into store opening and concentrate on marketing inside the store. The interior design and the image are important in order to communicate to our costumer. We will have the same advertising in the magazines and in the store in order to create brand awareness and recognition. Press release We will send a press release when we have the premier opening. The objective for this activity is to create attention in media about our opening.

Local magazine We will advertise in a local magazine in MalmĂś and inform about our opening. Store We will have a commercial team from Spain in order to assist when opening the new store. They will assist by organizing the stock room, the merchandising and educate the new staff in store. We will have a Store manager and two full time employees. We donâ&#x20AC;&#x2122;t want to contract too many employees in the beginning in order to assure the profitability. We will instead contract four more employees working on contracts based on hours. This will be an advantage for us as we work with the demands in the store. We donâ&#x20AC;&#x2122;t want to pay unnecessary expenses and instead regulate the employees depending on customers. The interior design will be the same as the other stores in the domestic market. We want to keep the high exclusivity image of the store and it is more inexpensive than creating a total new design of the store. The Store manager is responsible for the store image and needs to be aware of new regulation regarding merchandising and the interior design that can change after time.

Financial Highlights Financial Projection Assumptions Summary For the financial projection assumptions we need to take in consideration the corporation tax for the new market, which is 26.3 % every year. We also add 25% value added tax to the products, which we assume will be a stable number during the three coming years. Uterqüe will be entering the market with a capital and do not have to take loans in the new market, nor buy any property, as we will rent a store space. This is why we do not have to consider any interest charge on that numbers. Financial Projection assumption

Corp. Tax VAT

2013

2014

2015

26,3%

25%

Value of Investment When calculating the value of investment we first have to calculate the rental expenses for our stores. The first store in Malmö will have a price of 6000€/year/m2. The second store expanding during year 2013 will be in Gothenburg and it will have a rental cost of 9000€/year/m2. The third store expanding in Sweden will be in Stockholm and it will have the highest rental expense of 11000€/year/m2. Counting with a store size of 80 square meters in each town.

The total investment for year one with only one store will be 22740 € and the second year while running two stores the investment will be 411000 €. After establishing three stores in Sweden the total investment for one year will be 623852 €. Value of investment

Rental Expense Marketing manager Salary

2013

2014

2015

€ 54,176

€ 135,440

€ 234,762

€ 48,000

Salaries Contracted

€ 88,030

€ 176,060

€ 264,090

Salaries Extra

€ 20,000

€ 40,000

€ 60,000

Other Expenses

€ 1,000

€ 2,000

€ 3,000

Security Cost

€ 2,000

€ 4,000

€ 6,000

Packaging

€ 2,000

€ 4,000

€ 6,000

Promotion and Advertising

€ 1,000

€ 1,500

€ 2,000

Registration Cost

€ 11,534

N/A

Total

€ 227,740

€ 411,000

€ 623,852

Break-even point To calculate the break-even point we assume an average price for a product to be 160 €. When calculating the average price we base the numbers on average price for all product categories. The first year we have to sell 1423 products to reach break-even point, second year 2569 products and the third year when running three stores 3899 products have to be sold. The number of products sold might be seen as low but one need to take in consideration that it is an average price and many of the products are lower priced.

Break even point Total Invest

€ 227,740

€ 411,000

€ 623,852

Average price/product

€ 160

Units sold to reach break even

1423

2569

3899

Sales Forecast Projection When forecasting the sales for one year we looked at the average sales for Uterqüe stores worldwide. The average sales numbers for one store/month was 61.458 € during year 2010 counting 80 stores worldwide. Taking in consideration that the new market has fewer inhabitants and that it is a new market we assume a lower net sale number than calculated average. Calculating on higher sales during the store opening period, Christmas period and tourist season. Assuming that January will be a period with lower sales due to the aftermath of the Christmas purchases. The total income for year one will be € 88,625.72 € with one store running in the new market. The goal is to increase the sales with 10 % each year, which is a realistic assumed number due to former sales success the company shown with a total increase of 36% worldwide.

Sales&forecast&Projection 2013 Net=sales Expenses EBIT Corp=Tax=(26.3%) Income

Mar €&&&&&&&&&&&35,000 €&&&&&&&&&&&18,979 €&&&&&&&&&&&16,021

Apr €&&&&&&&&&&&&&28,000 €&&&&&&&&&&&&&18,979 €&&&&&&&&&&&&&&&&9,021

May €&&&&&&&&&&&&&&23,000 €&&&&&&&&&&&&&&18,979 €&&&&&&&&&&&&&&&&4,021

Jun €&&&&&&&&&31,000 €&&&&&&&&&18,979 €&&&&&&&&&12,021

Jul €&&&&&&&&&32,000 €&&&&&&&&&18,979 €&&&&&&&&&13,021

Aug €&&&&&&&&&29,000 €&&&&&&&&&18,979 €&&&&&&&&&10,021

Sep €&&&&&&&&&32,000 €&&&&&&&&&18,979 €&&&&&&&&&13,021

Oct €&&&&&&&&&26,000 €&&&&&&&&&18,979 €&&&&&&&&&&&7,021

Nov €&&&&&&&&&27,000 €&&&&&&&&&18,979 €&&&&&&&&&&&8,021

Dec €&&&&&&&&&40,000 €&&&&&&&&&18,979 €&&&&&&&&&21,021

2014 Jan Feb €&&&&&&&&&17,000 €&&&&&&&&&28,000 €&&&&&&&&&18,979 €&&&&&&&&&18,979 €&&&&&&&&&&(1,979) €&&&&&&&&&&&9,021

Total €&&&&&&&&&348,000 €&&&&&&&&&227,748 €&&&&&&&&&120,252 €&&&&&31,626.28 €&&&&&88,625.72

Risk management A possible risk to take into consideration when entering a new country and its market, like we are, is the currency differences affecting the profitability of the sales. In our case, entering the Swedish market, the Swedish Crown is more stable than the Euro, at least at the moment. In emerging market the currency can be unpredictable, due to the fast changes, but this in not a considerably big risk with the stable Swedish market. However, the currency is constantly changing, which will always be somewhat of a risk. The inflation is low at the moment but the forecast tells that this will increase when the wages and raw materials prices do12. The chart below shows that the trend could go either way for the Euro vs. the Swedish Crown, and possible loss of profitability is at stake13.

Another possible risk Uterqüe might be facing is being an original of its kind entering the Scandinavian market. As they cannot compare themselves to others, they have no experience in the new market or cannot learn from others mistakes.

12 13

http://www.riskbank.se http://eur.exchangerates24.com/sek/trend/?q=30

Commercial risks cause a possible risk for both the exporter and importer. There is a risk of losing goods in the shipment, slow or no payment from the buyer or rejection of the goods from the buyer. As Uterqüe is not set up in Sweden yet, they don’t yet know all the links in the chain and there is a risk of conflict brought up by the above. To limit the risk of this, there are a few precaution steps to take. According to media Private Sector14, one can limit the risk by using contractual arrangements and guarantees, contingency funds, which is a small percentage of the cost of the garments to ensure the transportation goes smoothly, and private insurance, which also protects against property damage. A political risk lays in the documents necessary not being completed property or not being clear enough. This could be regarding shipping, delivery, packaging and marketing. The bureaucracy in Sweden takes the importance of an official document seriously, therefore this is essential to make the process run smoothly. Apart from this, Sweden has political stability so no other great risks in this apartment are imminent. Overview The strategic plan is to enter the Swedish market and introduce Üterque to the Scandinavian market. Instead of Stockholm we have chosen Sweden’s third largest City, Malmö that is a fast forward innovative City with stronger connections the rest of Europe, giving us advantages in many areas such as distribution and logistics, as well tourism and traffic from the bridge. Comparing to launches in Spain, we are going to increase the non-existing marketing budget and make sure that the new market will be aware of the new brand. 14

http://rru.worldbank.org/documents/publicpolicyjournal/069ruster.pdf

The outcome are predicted positive since the population in the area have a high rated match with our target, combine that with Sweden’s strong economy and shopping habits we are judging that Üterque are bound to succeed. After having established a foundation, the next step is to open a second store in Gothenburg, Sweden’s next largest City. The object here is the high visiting number from Norway and the fact that it is a city with a high trafficked harbor, expanding our shipping options. The third store is predicted to open third year in the capital Stockholm, in order to establish a brand image in the capital as well. Stockholm as the third location is a strategy chosen for geographical reasons, as well economical. The southern cities have better connections to the domestic market and the distribution will be smoother there, therefore is the first step to enter. The rental expenses for a store premises is almost twice the price compared to Malmö, which reduces the risks. We chose to establish a stable income and a brand image in the south of Sweden before entering the more competitive and expensive capital. Since the Nordic countries have such high numbers of online shoppers, an e-shop will be established, however will Norway not be included since it is a non-European country. A great advantage is that Üterque is owned by Inditex, which is already established in Sweden with both stores and headquarters in Stockholm. This will reduce the costs for establishing a new office only for the brand, as we can cooperate with the other brands in the group. We will also register Üterque AB in Sweden, which is a form of establishing a share company on the market. This we choose to do, as the company will be able to deduct value added taxes in Sweden if registered. Foreigners have the possibility to have fully ownerships of share companies in Sweden, even

though being citizens in another country. This will be an advantage for Uterq端e because of the possibility to deduct VAT when declaring the taxable income. Conclusion The analysis shows that Sweden is a strong market due to its stable economical and political situation. The market is open to international brands, which will be a great advantage for expanding the brand Uterq端e. The fact that the new market is known for being style sensitive is a high advantage as the interest for the products offered will probably be high. We will overcome the threat of being an unknown brand by stressing advertising and promotion more in the new market, compared to the home market. In Sweden there is a possibility for foreign countries to own 100% of the business, which will be an advantage used instead of entering with franchise concept, although it is a concept widely used. We predict a bright future for Uterq端e in the new market as the brand is owned and supported by the already established group Inditex. This advantage will be positive regarding distribution, logistic and collaborations with other brands inside the group already established on the market. The communication with the production department in Spain will be a great advantage, as we will receive products adapted to the Swedish customer demand. We predict a bright future for the brand in Sweden, as it is one of the most increasing markets regarding growth in Europe. Additional positive factors for further growth are that the company is in a growing phase with intensions to expand. The company focus on environmental issues, which is something highly appreciated among

the target audience and will be used as an advantage when entering the new market. Combining the facts that the market is stable, the brand is growing and that the product suits the market demands, it is a good first step before entering the Scandinavian market aggressively.

Sources: http://www.uterque.com/ www.inditex.es/ Sweden - Location and size, Population, Services, Banking and financial services. Retail http://www.nationsencyclopedia.com/economies/Europe/Swed en.html#ixzz1xVbcUlBP http://www.globaltrade.net/f/market-research/text/Sweden/TextilesApparel-Leather-Footwear-Accessories-Apparel-Apparel-IndustryOverview-in-Sweden.html http://www.nationsencyclopedia.com/economies/Europe/Sweden.ht ml http://www.malmotown.com/sites/default/files/filearchive/malmoturis mrapport_2011_lowres_2.pdf http://www.sydsvenskan.se/malmo/butikskedjorna-tar-over-gagatan/ http://practicalanalytics.wordpress.com/2012/02/29/target-yourshoppers-retail-predictive-analytics/ http://www.scb.se/statistik/_publikationer/OV0904_2011A01_BR_05_A01 BR1101.pdf http://www.scb.se/statistik/_publikationer/HE0108_2000I05_BR_HE50ST07 02.pdf http://www.businessregiongoteborg.com/huvudmeny/whygothenburg /gothenburgoneofthefastestgrowingregionsineurope/ourstrategy.4.3d1 4895b11d61baea8a80005659.html http://www.worldbusinessculture.com/Business-in-Sweden.html http://www.whyred.se/web/home/home/home.php http://rizzo.se/ http://www.filippa-k.com/ http://www.taxrates.cc/html/sweden-tax-rates.html