H&M STRATEGY
Question 1
Hennes and Mauritz (H&M) is a fast-fashion global leader in the fashion industry. Hence, to have a holistic sustainable development point of view, we will examine and address the Marco-environment by looking at PESTEL analysis framework. The competitive forces within the fashion industry will also be revealed throughout the Porter Five Forces Model.
PESTEL ANALYSIS Case Evidence Positive (Opportunities) Neutral Negative (Threats)
POLITICAL factors: Critical observation faced from the public on H&M’s overseas suppliers’ welfare and working conditions. The company is under critical observation on their supplier’s welfare and working conditions that has raised issue on upholding its branding (Yildiz, 2014,pg 580) This endangered H&M reputation as high-profile global leader in the fast-fashion industry. If the workers/suppliers are underpaid or given poor working conditions by such well known company, public will start to criticize on the company’s image. Hence, H&M would face strong political pressure from the concerned media, labor rights and health campaigners which will adversely affect their operation margins.
ECONOMIC factors: H&M is concerned with the increased of Cotton and production cost in Asia Lower profit margin of the company due to increased of costs in Asia. (Johnson et al., 2014, pg 575) This implies that they would need to fork out more money to get the same quality and/or lesser quantity of raw materials in their production. H&M faced inflation in 2011 The business of H&M is facing more competitors due to the poor economic downturn and has affected how the customer spent (Johnson et al., 2014, pg 575) As economic is not doing well, customer who is more prone to price sensitive would purchase them and boost the company’s revenue. Since economic is bad, there is a tenancy that customers will not spend so much on apparel. Hence, they will choose to minimize their spending on changing their fashion apparel so
Hennes and Mauritz (H&M) is a fast-fashion global leader in the fashion industry. Hence, to have a holistic sustainable development point of view, we will examine and address the Marco-environment by looking at PESTEL analysis framework. The competitive forces within the fashion industry will also be revealed throughout the Porter Five Forces Model.
PESTEL ANALYSIS Case Evidence Positive (Opportunities) Neutral Negative (Threats)
POLITICAL factors: Critical observation faced from the public on H&M’s overseas suppliers’ welfare and working conditions. The company is under critical observation on their supplier’s welfare and working conditions that has raised issue on upholding its branding (Yildiz, 2014,pg 580) This endangered H&M reputation as high-profile global leader in the fast-fashion industry. If the workers/suppliers are underpaid or given poor working conditions by such well known company, public will start to criticize on the company’s image. Hence, H&M would face strong political pressure from the concerned media, labor rights and health campaigners which will adversely affect their operation margins.
ECONOMIC factors: H&M is concerned with the increased of Cotton and production cost in Asia Lower profit margin of the company due to increased of costs in Asia. (Johnson et al., 2014, pg 575) This implies that they would need to fork out more money to get the same quality and/or lesser quantity of raw materials in their production. H&M faced inflation in 2011 The business of H&M is facing more competitors due to the poor economic downturn and has affected how the customer spent (Johnson et al., 2014, pg 575) As economic is not doing well, customer who is more prone to price sensitive would purchase them and boost the company’s revenue. Since economic is bad, there is a tenancy that customers will not spend so much on apparel. Hence, they will choose to minimize their spending on changing their fashion apparel so
References: Accounting Tools. (2014). Gering Ratio. Retrieved Aug 29, 2014, from http://www.accountingtools.com/gearing-ratio Investopedia. (2014). Solvency Ratio. Retrieved Aug 29, 2014, from http://www.investopedia.com/video/play/solvency-ratio/ Johnson et al., G. (2014). H&M in fast fashion: continued success? In G. Johnson, R. Whittington, K. Scholes, D. Angwin, & P. Regner, Exploring Strategy Text and Cases Tenth Edition. Pearson Education Limited. Yildiz, P. R. (2014). H&M in fast fashion: Continued Success? In Gerry, R. Whittington, K. Scholes, D. Angwin, & P. Regner, Exploring Strategy Text and Cases Tenth Edition (p. 575 -582). Pearson Education Limited.