Custom «Argentine Apparel Industry» Sample Essay
Argentina has a well-developed apparel industry that has registered a significant growth since 2003 in tandem with the general economy growth. Growth remained strong in the wake of the 2008/09 economic recession because of the fact that Argentina, like other Latin American countries, remained largely unscathed by the recession. The sector grew 6% more in 2011 to top $7 billion with the larger part of sales going to the domestic market. The industry slowed its growth in 2012 and is expected to grow at a slower rate in 2013, due to a high inflation in the economy that reduced the disposable incomes. The continued deterioration of the global economy is another contributing factor. The apparel industry is very important to Argentina, as it is a major employer. The sector has benefited from friendly government policies under Nestor Kirchner and Cristina Kirchner administrations. This is shown in form of subsidies and protectionist policies against imports mostly from China. The importation of second-hand clothes is banned which further shields the domestic apparel market from the external competition.
Argentina’s apparel industry products are mainly sold to the domestic market, which consumes 80% of the total production while only 20% is exportd. The main export markets are Brazil, Chile, Bolivia, Peru and Uruguay, which combined an account for 63% of the exports, while Spain, US, Japan and France take in 15.4% of the exports (Inter-American Development Bank, 2008). Pants and T-shirts form the bulk of the exports. The main imported products are heavy coats, pants, and gloves, originating mainly from China (48%) and Mercosur countries (22%) (Inter-American Development Bank, 2008).
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The key players in Argentina’s apparel market per category are Legacy and Kevingston in men’s outerwear, Zara and Falabella in women’s outerwear and Cheeky and Mimo in Children’s wear. Shopping malls are the main channels for apparels, while street outlets are the most common shopping points (Della, & Taylor, 2003). Fast-fashion is trendy in Argentina, while jeans are the most important fashion category. The industry is increasingly focusing on the apparels for active lifestyles and sportswear. The market is highly receptive to fashion, especially among pre-teens and teenagers. This segment is therefore given a special focus since Argentina has a high proportion of young people in its population (Boudon, 2005).
Hennes & Mauritz (H&M) is a new entrant in the Argentine marrket. The Swedish company has experienced a downward trend in its profit attributed to the cost of funding its expansion and an increase in global cotton prices that has reduced the company’s profit margins (Ward, 2011). Argentina is a prime market for H&M’s as its trendy and low cost products march the needs of its market, which is very fashion conscious but with lower disposable incomes (Veronica, & Ringstrom, 2013).
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H&M’s performance is mixed. The revenue increased from $14,103,766 in 2009 to $15,491,372 in 2010, before climbing marginally higher to $15,872,856 in 2011. Gross profit increased from $8.69 million in 2009 to $9.75 million in 2010, before climbing lower to $9.54 million in 2011. The net income grew from $2.28 million in 2009 to 2.67 million in 2010, before reducing to 2.28 million in 2011 (Hoover’s Inc, 2013). The company’s performance is influenced by a rapid expansion that the company undertook over this period, which increased the operating expenses and the price of cotton in the global market. The company decided to absorb it instead of passing the same to its customers in form of the higher price of commodities. While this increased the revenue, it had the effect of eating onto the company’s bottom line.
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