H&M (Hennes & Mauritz AB) is a Swedish multinational clothing retail company, which is known, as for Fast-fashion clothing for men, women, teenagers and children. H&M has around 4500 stores in 66 countries around the world particularly in the European, Asia, Middle East and North American clothing market. Germany is the major market with 25% of total H&M market shares followed by United Kingdom and Sweden. The brands COS, Cheap Monday, Monki, ARKET, Weekday, Other Stories and H&M Home are included in the H&M Group. These brands offer different segments of men, women and kids with reasonable price (H&M 2017a).
To increase the number of stores by 10% per year and to increase 15% of sales in the existing stores are H;M objectives. H;M strategic objectives mainly focus on development and sustaining financial stability.
Situational Analysis (SWOT)
H;M is a well-known retail that offers clothes with reasonable price. H;M has 66 marketplaces around the world and H;M plans to increase more stores in other countries like Vietnam, Georgia, Columbia, Iceland and Kazakhstan and operated new innovative online markets in Hong Kong, Singapore, Malaysia, Taiwan, Turkey and Macau in Spring 2017. H;M Group has COS, Cheap Monday, Monki, Arket, Weekday, Other Stories and H;M Home which all of those are popular in UK (H;M 2017a).
Developing markets and huge online market progression are operating as weaknesses for H;M. H;M main competitor ZARA has 94 marketplaces with 44 online markets while H;M has 66 marketplaces with 41 online markets (Inditex N.D.). When compared to its competitors, H;M strength turned into weakness
Monki brand is trendy is China. Currently, H;M takes this fact as an opportunity and expand H;M and H;M home brand in China together with Alibaba group in 2018 (H;M 2017b). Nowadays, technologies are developing day by day and H;M will introduce more about its H;M Club application to both existing customers and new customers (N.A. 2015).
Fashion trends keep changing day by day. H;M has to create clothes based on the new trends not to delay behind its competitors. Fast-fashion industry is very competitive. H;M has to be alert of its competitors in order to be equivalent from their competitors with new fashion designs (Bhasin 2017).
Market Analysis (PESTEL)
The observing of the political threat is the most important one for H;M because variations in political factors have serious effects on the company, as H;M is the global brand operating a large number of stores across the world (H;M 2017b). H;M needs to take into account for the income tax rate of the customers by way of it can help in the way that is the lower the tax rate, the higher chance to buy clothing (Simister 2011). In the UK, the standard tax rate is 20% and the highest one is 40% based on the income after grants (Gov.uk, 2017). Due to the effect of the political factor, H;M varies the price depending on which countries it operates.
Economic factors have impact on a company’s profit and operations. Although Brexit has brought negative effects for most of the companies, H&M sales increased by 7% in June 2017 compared to June 2016 (Botter 2017). In the UK, fast-fashion clothing industries are competitive. Sales of the clothing industry grow by 1.3% in 2017 (Mintel 2017).
Nowadays, customer’s buying behaviors are changing day-by-day and new fashion designs are also emerging (Botter 2017). Young people are more interesting on fashion and spend most the their income on clothes as they are influenced by social media and they are more likely to spend money on designer fashion brand (Amatulli et al. 2016). H;M takes advantage on this fact and collaborate with the designer called Canadian Erdem to release high street collection called Erdem x H;M in the UK (Smith 2017). H;M also cooperate with another multi-platinum recording artist and producer called G-Eazy to produce a new season collection G-Eazy x H;M (H;M 2017b).
Currently, H;M uses technology advancement to increase their sales and to attract more customers by promoting the H;M club membership application, which functions as collecting bonus points from in store purchases and from their online purchases by using the H;M club application on their smart phones (H;M 2017b).
H;M plans to produce 100% recyclable clothes materials by 2030. In H;M high street stores, customers can drop off their discarded or old clothes in the bin for recycling. It means that H;M will create products from those recycled items but not all the recycled items will not produced as clothes. Durable recycled materials will be used again for clothes (Pergrankvist 2017).
Since H;M is a Swedish company, it has to follow the law of the Sweden country but it has to follow the legislation of countries where it operates in. For example, in the United Kingdom, the Electronic Commerce Regulations 2002 shows that company must share the information with online customers and standardizes advertising.
Porter’s Five Forces Analysis
Bargaining Power of Customers (Medium-High Force)
By way of there are several choices like Zara, Uniqlo, Gap etc. are available in UK market, bargaining power of customers are high because there is slight or no switching cost to alternate one brand from another.
Bargaining Power of Suppliers (Low-Medium Force)
Since there are lots of suppliers available in the fashion industry, suppliers have low bargaining power on H&M.