Essay on Hennes & Mauritz Company - Essay Prowess

Essay on Hennes & Mauritz Company

Essay on Hennes & Mauritz Company

  

Hennes & Mauritz Company

Introduction to retail.

In business commerce, a retailer is supposed to buy products and goods in large quantities from either the importers or the manufacturers. This happens either directly or through wholesalers and then the smaller quantities are bought by end users referred to as the customers or the general public. At the supply chain, retailers are the last ones and the marketers often perceive retailers as part and parcel of their distribution strategy (H&M Company 2012a). On the other hand, fashion retail is associated with many manufacturing, retailing and marketing opportunities and alternatives, it is easy to enter and exit, has short product lives, a broad range of competitors as well as changeable consumer preferences. The fastest fashion market is the clothing market which is characterized by faster manufacturing as well as low prices (H&M Company 2012a). Fashion retail mostly targets mainstream consumers since they are always interested in trendy things and things worn by celebrities. Hennes & Mauritz (H&M) is one of the fast fashion brands in the United Kingdom and this report revolves around this fashion retail.

Introduction to the company

The European fashion market has evolved over time precisely for the Sweden market which is known for modernity and good quality. H & M is a perfect example of the United Kingdom’s fashion Company. H&M was established by Erling Persson in the year 1947 (H&M Company 2013b). This company is one of the most prominent multinational clothing retail around the globe. This company is committed to working directly with the stakeholders through the provision of information required to meet stakeholder’s requirements. The company advocates for fair competition and the company functions in an open market. H&M is a multinational fashion and design company with more than sixty-nine markets and has a stronger digital presence. A recent study reveals that by 31st May 2018, H&M total number of stores was 4,801. This company mostly markets with e-commerce and it has not involved franchising as the main part of its general expansion strategy. H&M stores are run by the company directly except in some cases where the company may collaborate with the franchising partners. This company has grown over the years and it is continuing to grow. The company’s expansion can be perceived as long-term and it occurs in different brands characterized by unique identities. The company’s offerings mainly focus on the fashion fans in the entire world.  H&M must focus on sustainability and quality in both new and existing countries (H&M Company 2016a). The company has recently expanded online; for instance in India, Saudi Arabia, and the United Arab Emirates. This year, H&M plans to open about 390 stores and close about 150 and this will result in an addition of 240 new stores in the company.

 Key relevant changes within the UK fashion retail.

A company’s external factors often play a vital role in business success. Therefore, the PESTEL and SWOT analysis are efficient tools to analyze the H&M’s macro environment and what it has faced in the last ten years.

PESTEL analysis

  • Political factors

The most significant factors affecting H&M are restrictions on exports and imports as well as the relocation of production facilities. H&M tax policies require the company to be tax compliant and this tax policy is perceived to support this kind of retail business (Nawaz & Saleem 2010). Also, due to the expansion strategies the company has a broad range of stores in these foreign countries. Thus, H&M is supposed to understand every foreign country’s regulations before venturing into it.

  • Economic factors

H&M is directly affected by the fluctuation of the United States dollar/ Euro rates of exchange. Therefore, with the higher rates of currency exchange, H&M shall continue to benefit sustainably in the UK as opposed to America. Also, the company experiences an increase in the rates of production cost and this directly impacts the company’s profit. Economic crisis affects consumer spending behavior.

  • Social-cultural factors

H&M’s clients are mostly young adults and youths and are segregated basing on different regional preferences. Differences also occur in the perception of clients and product variance. The company must meet customers’ expectations through the production of trendy and modern products (Nawaz & Saleem 2010). Also, these products are supposed to meet a client’s fashion sense which is the basic role of H&M.

  • Technological factors

The company uses mechanical recycling of natural fibers as their current technological advancement. Also, customers are always informed of their purchasing patterns via communication tools and social media. The company has embraced online shopping through the use of mobile Apps and websites. Moreover, the company has invested in technological systems and IT to meet the client’s expectations.

  • Environmental factors

The clients purchasing behaviors are directly affected by how much the company is environmentally aware (Young et al., 2010). A broad range of multinational companies aims at making use of a sustainable strategy for the business operations to be environmentally friendly. Also, any deviations from the normal weather conditions must have a direct impact on the H&M’s sales.

  • Legal factors

H&M must consider the local laws regarding environmental problems like health standards, child labor, and minimum wage. Also, the company has a good code of conduct laws such as worker’s right, not accepting child labor, housing conditions, health and safety laws as well as environmental monitoring.

SWOT analysis                                                                      

This analysis denotes how the company has dealt with environmental factors.

  • Strengths

The company has a strong IT infrastructure which basically connects all the stores with a specific warehouse. Also, the company has audited its supply chain and thus it must purchase huge quantities from its suppliers (Valentin 2011). The company has a prominent and a powerful brand image. The company values celebrity collaboration, it must be present in complementary businesses and its prices must be kept affordable.

  • Weaknesses

In most times the company depends on independent suppliers to produce H&M products and this is a significant weakness. H&M’s centers of distribution are often located in Europe which slows the distribution process due to geographical distances between the global markets. The company suffers from the lack of control of product production and this causes overstocking (Valentin 2011).

  • Opportunities

Online shopping has been a great opportunity that is attracting abroad range of clients and it is offering a broad range of modern clothing styles. The company lacks normality in a specific style. The company mostly targets its audience from a global perspective and not from a specific demography (Valentin 2011). Another opportunity is the establishment of a sustainability strategy which increases consumer awareness.

  • Threats

Although the company has a sustainable strategy it is hard for the company to be a hundred percent sustainable in all its operations. H&M has been perceived as one of the large water users thus it suffers from the pressure of reducing its water usage. Also, the company suffers from low brand loyalty and the fact that its target audience is not in a specific demographic (Valentin 2011).

Relevant changes within the microenvironment.  

The five porters’ forces are essential in the analysis of the company’s microenvironment.

  • Threat to new entrants

H&M is the second largest retailer in the globe thus threat to new entrants is supposed to be low since H&M is already in the multinational market. Therefore, entering in this apparel industry is easy and does not require a lot of capital investment and many people have got different means of getting into the clothing line business. Moreover, there is a large number of manufacturing contractors and this contributes significantly to opening the industry and the markets to new entrants. Although, the establishment of distribution and advertising channels can be very expensive.

  • Bargaining power of suppliers

Suppliers bargaining power is low since there is a broad range of suppliers with little differentiation. Globalization ought to be increased as well as international trade to make retailers source from foreign manufacturers. On the other hand, manufacturers from low wage countries like India and China suffer from severe competition (Nawaz & Saleem 2010) H&M must ensure that their supplier industries are as well environmental friendly. Supplier power must be low because H&M ensures that suppliers are taken care of thus they are controlled.

  • Bargaining power of buyers

Buyers have a higher bargaining power because of the overabundance of retailers in the market. On the other hand, buyers have long switching costs and they are perceived as the end consumers as well and they often account for a broad range of retailers earnings. This is the reason why the retailers must meet the consumers’ needs and must seek to keep their products updated with the latest fashion trending (Nawaz & Saleem 2010). Although retailers can seek to differentiate themselves by the style they offer their products, price quality, and range.

  • Threat of substitutes

There can be no direct substitutes for apparel like H&M but what happens is that there are always substitutes. The H&M’s online stores often provide a significant channel where the company’s products can be sold and marketed. This company stands at a higher advantage over other stores since their stores are always favorable and preferred for having quality products. H&M ‘s online presence often enhance the brand recognition, increases customer base and this generally promotes brand recognition and enables retailers to decrease traffic in their stores (Nawaz & Saleem 2010).

  • Competitive rivalry

Competitive rivalry is high because there are large numbers of similar retailers in the fashion industry. Despite all this competition H&M competition still remains high. This company faces competition from other retailers like Zara, PVH Corp, Gap Corp, ARROW, Tommy Hilfiger, Old Nay, IZOD, Van Heusen as well as the banana republic (Nawaz & Saleem 2010). This company must maintain its core value to ensure its competitive edge.

Suggest and discuss strategies and tactics that could be used

From the macro and the micro-environmental analysis, we find that the main role of H&M’s group is to ensure change towards circular and renewable fashion while at the same time ensuring that it remains fair and acknowledges equality. Therefore, through sustainable development, this company believes that by 2030 it must match towards renewability through use of durable and recycled materials and this puts it at a higher rank of ensuring environmental conservation.  As a multinational company, this is a significant move since it not only conserves the environment but it also ensures people’s health is in check and the country’s legal status is as well put in consideration (Trice & Beyer 2013). The company operates in a notion that by 2030 it will ensure that all the available suppliers and their entire supplier’s regards climate neutrality.

H&M is facing significant competition from other fashion retail companies and it being one of the leading targets, it must maintain its competitive edge as well. The company’s CEO Karl-Johan Persson declared that the company is supposed to reach audacious goals in the shortest time possible. Also, the company is supposed to benchmark from its competitors to determine their competitive edge. The main idea following the establishment of H&M was to ensure that products are made available to the consumers with the least price as possible. Over the years the company is supposed to value quality to convince customers that products would last long despite the price tags (Trice & Beyer 2013). The company has ever since addressed the issue of poor working conditions and this can be explained well using the motivation theory which claims that a happy employee denotes satisfaction and they ought to be satisfied for them to produce quality work.

The company is supposed to invest in employee’s job satisfaction to meet its long-term requirements of fashion and quality to ensure sustainability. H&M new strategy claims that in the next years there will be abroad range of people on the planet with different tribes and areas of origin and these people will all need clothes. Therefore, the main role of this company would to make sure that these clothes can be sold, used, purchased and recycled in a sustainable and circular economy. By doing this H&M will have eliminated all the negative impacts in regard to this company (Hennes & Mauritz n.d). Therefore, the CEO of this company states that H&M intends to interfere with the connection between increased use of resources and the economic growth.  The implementation of this strategy serves the fact that individuals have the potential to buy less clothing in the future. Also, H&M is supposed to make use of its buyers potential through gaining of market share and attracting its customers in large numbers as well as expanding into new segments and markets. After putting all these in check the company will be in a position on maintaining its competitive edge (Hennes & Mauritz n.d). Moreover, studies reveal that the company has been classified as one among the world’s sustainable companies and with its new strategies there is a possibility of it being at the top of Tesla, Unilever and other prominent and sustainable companies.

 The company has embraced circular economy and this is what has made it gain more followers with the lead time possible and all economist have advocated that the theory of circular economy is directly connected to the future of limited resources. Thus, H&M is supposed to make use of the circular economics theories to break its old neoliberal theories and more so, this circular strategy is efficient in protecting the company from a broad range of copy-pasters. The primary result of the implementation of the circular theory would be an economic revolution and economic boom (Hennes & Mauritz n.d).

Recommendations.

To secure the company’s high profitability and growth, it is essential for running the business in an environmentally friendly and socially sustainable manner (H&M Company 2012a).  When a business is run from a sustainable manner, most aspects in connection with it are supposed to run sustainably. H&M is supposed to use modern advertisement methods to ensure its brand awareness; for instance, it should try to collaborate with highly talented professional designers to ensure that customer’s requirements are met. Also, the company should collaborate with popular celebrities to maintain its competitive edge over the new entrants and other prominent retailers in the market. The company’s staff is constantly increasing and following its expansion strategy it is essential for the company to regard worker’s motivation (H&M Company 2012a). Moreover, the company’s human resource management is supposed to integrate the overall strategies of the company with the human efforts. The pay structures in the industries are supposed to be improved to ensure that workers remain motivated. H&M is supposed to design a strategy where the factory employees are trained to ensure high-quality end results. The company is supposed to establish a reward approach different from the most used approaches that focus on financial sites (H&M Company 2012a). The reason behind the establishment of this is that it gives more opportunities to the employees for them to interact well with professionals in the retail industry and in the process they benefit from a broad range of attractive skills gained.

Conclusion.

H&M have used smart logistics, brand, concepts, expansions as well as a strict code of conducts to ensure that their customers are served with affordable prices as well as ensuring it is the company it is today. This report has covered the PESTEL, SWOT, and the five porters’ forces. Therefore, implementation of the recommendations established in the report will be of great help to the attainment of the company’s success now and in the future. Moreover, H&M has attained its success in the world’s retail fashion industry. It has attained this success through the use of it proper leadership as well as its structure. However, the great regards can be directly associated with its expansion strategy, leadership, and its sustainability strategy. Therefore, these are the main strategies which need to be maintained for the company to attain its long-term success.

Reference List

H&M Company 2016a. Sustainability Commitment H&M Business Partner 2016. Available at:http://sustainability.hm.com/content/dam/hm/about/documents/en/CSR/Sustainability%20Commitment/Sustainability%20Commitment_en.pdf (Accessed: 14 July 2018).

H&M Company 2012a. Annual Report 2012. Available at: https://about.hm.com/content/dam/hmgroup/groupsite/documents/masterlanguage/Annual%20Report/Annual-Report-2012.pdf  (Accessed: 14 July 2018).

H&M Company 2013b. The H&M way. Available at: https://about.hm.com/content/dam/hmgroup/groupsite/documents/en/hm-way/HM%20Way_en.pdf  (Accessed: 14 July 2018).

Hennes & Mauritz AB n.d. Our History. Retrieved from H&M: http://about.hm.com/content/hm /AboutSection/en/About/Facts-About-HM/People-and-History/Our-History.html#cm-menu.

Nawaz, M. & Saleem, M. 2010. Postponement in Fashion Retailing: A Case Study of H&M. Retrieved From http://hj.diva-portal.org/smash/record.jsf?pid=diva2:293502.

Trice, H.M. & Beyer, J.M. 2013. Studying organizational cultures through rites and ceremonials. Academy of management review, 9(4), pp.653-669.

Valentin, E.K. 2011. SWOT analysis from a resource-based view. Journal of Marketing theory and Practice, 9(2), pp.54-69.