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H&M Swot and Pestel Essay Sample

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H&M Swot and Pestel Essay Sample

H&M is a great company in many aspects. It may be Sweden’s most recognised company after IKEA. It all started with a small women clothing store outside of Stockholm and later grew to be the biggest clothing retail firm that one have yet seen. During this report I will begin with a brief description of the company’s interesting history and end with an overview over its ethical behaviour and corporate responsibility. In the middle of the report I will also conduct a PESTEL- and SWOT analysis to show the company’s external and internal factors.

Description of the Organisation

Hennes & Maurtiz has today 2,206 stores distributed on 38 markets. They had approximately 17,000 employees in 1998. Year 2010, 12 years later, H&M have accomplished to increase their workforce to 87,000 which is more than five times the figures it obtained in 1998. In 2010 their sales landed on roughly 12 billion GBP. This states that sales per employee landed around 138,000 GBP. Erling Persson founded Hennes in 1947. Hennes was a women clothing store in Vasteras, just outside of Stockholm. He got the idea to start a women clothing store during a trip to The United States of America where he embraced a retail concept which was yet unknown in Sweden. Erling expanded his women clothing store concept so it finally in 1960 covered the country of Sweden. Year 1968, nearly 20 years after the first Hennes store was opened, he purchased the men clothing and hunting store Maurtiz Widforss because of this purchase he could now reach out to the other gender and at the same time he also introduced a children’s clothing line. So now he had enough audiences to take the expansion to the next level. He quickly changed the name to Hennes & Maurtiz and in the beginning of 1970s he also introduced two additional segments (teenagers and babies). Until 1982 Erling main objective was to expand the company outside of Scandinavia.

He penetrated retail markets in The United Kingdom, Switzerland and Germany. When his son Stefan Persson took over the CEO post he continued the international expansion. In 1997 when Stefan stepped down as a CEO to take the role as Chairman of the board he had accomplished to double the international markets which H&M where operating in, 12 international markets was now a fact. For the first time the company now decided to continue its business without a family member as a CEO. A man named Fabian Mansson was now chosen to lead the expansion-aggressive retail firm to battle. During his 12 years as CEO he managed to fight his way into additional 23 markets. H&M was now operating in 35 markets worldwide. From USA to Ireland and Denmark to South Korea it was now a present retail chain in nearly every Industrial country that one visited. 2009 was the year when it was time for Stefan’s son Carl-Johan Persson to take over the CEO seat for the multi-national company it had become. Carl-Johan brought the company to where it is today, in 38 markets.

PESTEL-Analysis

Political| Economic|
* Tries to impose Governments to increase minimum wages where their suppliers are located. * Establishment issues in Israel| * Increase workforce annually * Exchange rates are important because of its many markets it operates within * Contributes positive to the global economic wealth by their aggressive expansion| Social| Technological|

* Inventive programme * A strong sustainability and production policy * | * Provide new technology as air condition to its suppliers of cotton. * | Environmental| Legal|
* Reduce carbon oxide by 5% every year. * Makes donation to the organisation * WaterAid to improve clean water in areas where H&Ms suppliers operate. * Biggest user of ecological cotton within its industry| * Do not accept child labour * Code of Conduct which is based in the UN Convention on the Rights of the Child and the International Labour Organisation’s Declaration on Fundamental Principles and Rights at Work.|

In 2008 H&M tried to establish itself thru a franchise in Israel was not so successful. The Palestine News Network (PNN) was not so happy about H&M opening up a store in a village called al-Malha. Apparently the village was before a home for Palestinians before they were cleaned out in 1948 to make room for Israelis. Although H&M don’t take sides on political and religious issues, they have still been facing protests from 28 different organisations about this issue. Over all the PESTEL analysis shows that H&M is a caring company. They care about their suppliers and their workers; they care about their employees and welcome others to come work for them. Their contribution to the global economy by opening up new stores every year generates work opportunities in countries where unemployment rates may be high.

SWOT-Analysis

INTERNAL|
Strengths| Weaknesses|
* Low prices * External manufacturing * Leadership * Owned by a respectable family * Delivery times from design table to retail state * Famous guest designers * Aggressive expansion * Store locations * Recognized brand name * Use of ecological cotton * Strong values| * External manufacturing * Price sensitive to cotton| EXTERNAL|

Opportunities| Threats|
* More jobs * Global expansion * Expand their online store * External manufacturing * Involve more famous guest designers * Recession| * Exchange rates * External manufacturing * Other low price retail companies * Global expansion| SWOT-Analysis tablet

Strengths
H&M’s by far best strength is their competitive prices. In H&M’s brochure ‘H&M in words and pictures’ which can be downloaded from their website one can find their business concept which states that their goal is to “… offer fashion and quality at the best price.” Why H&M can offer such a low prices for such a good quality is because they outsource all production to suppliers and they cut the middle hand. Since they order big amounts of cotton at each order, the producers can give them a competitive price. Since Erling started the business in 1947 his followers have only delivered success to the company. When Carl-Johan took over the role as CEO he was then the third generation of Persson to manage the company and there is no doubt that he would not deliver the same success to the company as his father and grandfather did. Another strong competitive weapon is the ability to distribute the goods from the design tables to the retail stores. The average time for retailers in the same industry is about 6 months. H&M can do this in 3 months which gives them a head start in the trend sensitive world as we live in.

Too attract the more exclusive audience they also introduced a concept in 2004, which involves famous guest designers like Madonna, Roberto Cavalli and Lanvin to make a limited number of clothes which are sold on a limited number of stores around the world. Expansion is key for H&M their goal is to increase the number of stores by 10-15% each year. Their international expansion will mainly be focusing on markets in China, USA and UK during 2011. H&M doesn’t own the stores which they retail in. The reason for this is because it makes it easier for them to always be on the best location for their customers. As the world gets more ecological aware H&M, also get more ecological aware. H&M started to offer goods made from ecological goods in 2004. Today they are the biggest user of cotton within the clothing retail industry. As a result of this they helped to found the Better Cotton Initiative which purpose of existence is to help farmers to grow cotton with as little impact on the environment and on the workforce as possible. Weaknesses

I found it hard to recognise weaknesses for H&M. But no firm is flawless. We have already recognised external manufacturing as a strengths but it could also be a weakness in terms of that the company doesn’t have full control over its manufacturing. H&M does have a lot of controls of the manufacturing process but still problems with the production of cotton can arise in forms of child labour, bad work conditions, and minimum pay wages. If the company would be involved in any of these problems the company’s brand name could be in danger. Cotton is by far the biggest cost within the production process; this makes H&M very sensitive to price changes within that good. A problem to keep low prices for clothes may arise during periods of high cotton prices.

Opportunities
With aggressive expansion come more jobs. H&M has increased their workforce annually since its day of birth. The world is big and although H&M has opened stores in North America, Europe and Asia during the last 20 years there are still markets unknown for H&M. Because of a phenomenon called Globalisation more less-developed countries in less-developed continents are developing in a high pace. So the fact that H&M has not yet entered markets in South American, The Pacific and Africa is probably just a matter of time. Until the end of 2010 H&M had their online store opened to 8 of the 38 markets which it was operating within. The opportunity for H&M to increase the sales figures by opening up their online store for more markets is a fact. External manufacturing could be an opportunity as well as strength and weakness. It helps H&M to not tie up capital in factories. Instead they can use this capital to improve their expansion. Too help improve their market share to the more exclusive audience they could improve the frequency of famous guest designers. During recession people tend to seek to the cheaper alternatives of goods. A recession is of course never good for a company as a whole but to offer low prices during a recession will maybe attract customers that would normally not buy clothes from H&M and when the recession is over they might just keep shopping at H&M

Threats
H&M is operating in 38 different markets; this makes them vulnerable too big turns in the exchange rate. H&M is displaying their income in the Swedish Krona (SEK). This means that all sales outside of Sweden must be exchanged into SEK in the end of the year. Here we encounter external manufacturing once again. Most of H&Ms contract suppliers are located in countries where the governments are often very unreliable, example of countries: Bangladesh and China. The threat of other retail firms like Zara, Gap etc may not be as of very threatening right know, but one should never underestimate the competition of a firm within the same industry.

Ethical behaviour and corporate social responsibility
As H&M doesn’t own any factories, one can think that they don’t care about the working environment of their suppliers. But they do care deeply about their suppliers. They give away millions of pounds every year to organisation that helps improve the working conditions for their suppliers. They also donate money to build up schools close to the factories. H&M supports:

1. Global Impact
2. CEO Water Mandate
3. Millennium Development Goals
4. All for children
5. Hunger relief at the Horn of Africa
6. UNICEF
7. Fashion against AIDS
8. Investing in young people in Bangladesh
9. H&M donates clothes to charity
10. H&M supports the fight against drugs
11. WaterAid
12. H&M Anniversary Fund

H&M also started an incentive program this year where they want to encourage and acknowledge employees’ long-term involvement in the company. To do so they distribute money as a bonus to employees regardless of their position or salary level. They want their employees to benefit from the growth in the same aspect as a shareholder of the company does. Conclusion

H&M is not only a multi-billionaire company that generates enormous profits every year. It’s also a multi-caring company. As I’ve been learning more about the company it has become more clear to me that it does not only exist to serve the shareholders interest. It also exists to serve customers with a feeling of fashion or customers who just want to buy something cheap to wear. Its magnitude of corporate responsibility to its employees and suppliers is something that is rare today. H&M is a great example of a well functioned company who takes all the stakeholders in consideration and embrace them.

Works Cited

Naringslivshistoria.
http://www.naringslivshistoria.se/Foretagsberattelser/Artiklar/Handelsentreprenorer/Erling-Persson/ (Last accessed 5 Nov. 2011)

Fundinguniverse.
http://www.fundinguniverse.com/company-histories/Hennes-amp;-Mauritz-AB-company-History.html (Last accessed 5 Nov. 2011)

Naringslivshistoria.
http://www.naringslivshistoria.se/Foretagsberattelser/Artiklar/Nyckelpersoner/Erling-Persson/ (Last accessed 5 Nov. 2011)

H&M, download link for the H&M in words and pictures brochure http://about.hm.com/gb/abouthm/factsabouthm__facts.nhtml
(Last accessed 7 Nov. 2011)

Associatedcontent. Jasmine Watts, 25th Jun, 2009.
http://www.associatedcontent.com/article/1865303/swot_analysis_of_hm_company_pg2.html?cat=46 (Last accessed 10 Nov. 2011)

H&M, Corporate Responsibility
http://about.hm.com/gb/corporateresponsibility/hmsupports__wesupport.nhtml (Last accessed 14 Nov. 2011)

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