Company Analysis

Among the top apparel and fashion brands in Sweden, H&M is the subject of this paper's study.
According to the corporate website, H&M AB (formerly Hennes & Mauritz) is a Swedish apparel brand
renowned for its selection of reasonably priced and stylish apparel. Erling Persson founded it in 1947
and it was originally known as Hennes, which is Swedish for "hers" (Arrigo, 2017). At the time, it
primarily carried women's goods. In 1968, Persson bought the storefront and inventory of Mauritz
Widforss, a Stockholm-based retailer of sporting supplies. Men's apparel was added to the stock, which
led Persson to branch out toward men's clothing. He changed the business's name to Hennes & Mauritz,
which was ultimately shortened to H&M (Pastore et al., 2022).

In addition to the previously mentioned elements, including inventiveness, production efficiency, talent
management, manufacturing costs, and others, the problem of advertising and corporate identity is
crucial for H&M's growth. In reality, brands make it simple for customers to discern one item from
another. In addition, the H&M emblem gives the company and the brand name owners to benefit from
the reputation connected again with the trademark to avoid being taken benefit of by competitors.
Additionally, it permits H&M to explain the advantages of its products in comparison to rivals (Arrigo,
2017). There are a few prerequisites that were met to create the H&M brand. As evidenced by H&M's
accomplishment, choosing a name for a brand requires that it be memorable, have a positive
connotation, be legal to use, be simple to say, and be easy for customers to recall.

H&M has now recognized in Sweden thanks to its abundant workforce, materials vendors, and clothing
manufacturers. Furthermore, for its operation in Vietnam, affordable workers at an economical cost
may be achievable, which must lower H&M's manufacturing costs. While manufacturers could
guarantee lead time, numerous vendors also provide H&M with affordable and a variety of textiles
(Pastore et al., 2022). H&M has altered patterns for Asian customers and provides compact, machine-
washable clothing due to regional differences in physique and climate. H&M has branched out to new
countries in the past few years, including Asia and Africa. The organization has also lowered potential
losses because of its strong global presence. H&M has approximately 5000 stores spread throughout 6
continents and has locations in even more than 70 countries. The company projects more than 10%
yearly growth (Yide, 2020).

Among the most popular and well-liked clothing brands in the world for both men and women is H&M.
Additionally, H&M is renowned for its garments' durability, creativity, endurance, and funkiness in
complement to its reputation for fashion (H&M, 2022). "Fashion and Quality at its Best Price" is the
H&M goal statement. Additionally, their purses, footwear, and accessory are driving significant sales and
receiving favorable reviews from customers. H&M offers unique apparel and handbag styles to the US,
UK, European, and Asian markets through its online sites. Additionally, H&M sells watches and colognes
(Pastore et al., 2022). This business's major objective is to supply quick fashion items—including
designer fashion, ready-to-wear, fashion accessories, cologne, and cosmetics—to various nations
throughout the world (H&M, 2022). Due to its approach of offering fashion designs specifically for each
country's tastes and demands, which were well-received and adored by customers, the brand has
become well-known.

The two divisions of material procurement product manufacturing are controlled by outside vendors
because H&M does not have any factories of its own. The clients, style, and variety mix are the main
priorities of the procurement team (T&F, 2019). The process of production used by H&M is consumer
driven. The organization places a strong focus on researching and predicting new trends, using both
conventional research methodologies and cutting-edge ones like street fashions. The production offices
serve as a point of contact for both company suppliers and outside vendors. The screening and
inspection of experimental clothing are also handled by production offices, which helps shorten lead
times.

PESTLE Analysis

Geopolitical

As is well established, H&M is a Swedish and European clothing company. Since Asian countries create
the firm's products, the corporation has a cost advantage. Consequently, the result of England departing
the European Union as a result of the Brexit deal was a heavier price. The accessories and apparel of the
company will no longer be more affordable in the UK. H&M has production facilities in Lebanon, Egypt,
Turkey, Cambodia, and Bangladesh among several other Asian countries. Conflict and instability in the
Middle East and Asia harm politics. The global protests and demonstrations and protests have limited
the apparel firm's production (T&F, 2019).

Due to various factors such as increased productivity, comparably high pay, the cost of materials, and
different national labor laws, the total cost of production has increased. The proportional cost
advantage would be eliminated by such advancements. The business has altered its strategy by offering
franchises; as a result, they now have partners in several countries, many of which have been hit by
political unrest, keeping the company vigilant on all occasions. They got into the franchise industry to
put an end to disputes between nations over regulatory matters (Belin, 2019). Multinationals are
required to follow the laws and policies that each country has put in places, such as data protection laws
and trade restrictions.

Economic

H&M has experienced the Covid-19 pandemic's effects, just like every other company. The considerable
interruption of the supply networks has resulted in a major change in client spending habits since the
epidemic began. There was a worldwide economic slowdown after this outbreak. Over 80% of Retail
locations have been closed as a result of the prolonged state of closure in numerous countries, which
unavoidably lost 18% of their previous fiscal year (Belin, 2019). The company succeeded in playing it
smart by investing a significant amount of resources into online retailing throughout that difficult time,
which enabled the company to stay alive even if it couldn't completely reverse the losses. Additionally,
H&M is always in jeopardy due to the US dollar's shifting value. H&M has a big international customer
base. The clothing brand manufactures a lot of its products. The expense of the items per unit is reduced
by the company thanks to efficiencies of scale. The company's internal designers, efficient production
processes, and stock management system are crucial. These factors enhance economies of scale (Belin,
2019).

Social

Since customers want to know where their money is going, firms are being held to higher standards of
disclosure today. H&M has committed to meeting this requirement more and more, saying in June 2017
that the company will start releasing periodic updates and posting its CSR information online (T&F,
2019).  Present conditions suggest that customers would want to spend more on luxury clothing items
because they are being progressively pushed by the media and personalities to lead opulent and
luxurious lifestyles. To keep up with current fashion, H&M has revealed its newest designer
collaboration with Erdem for sale in 2017.

Technological

H&M has adopted the value of digital tools, just like any other company in its field. By using this
strategy, H&M hopes to provide clients with the best possible service in light of the growing popularity
of online shopping. The business has developed a mobile application that helps users to order products
online and redeem their loyalty points to increase online purchasing (Mäkelä, 2019). Once more, H&M
employs technology to run its value chain and operations. For instance, it has contracted with Hermes in
the UK to provide logistical services on its behalf (Yide, 2020). Hermes has a solid reputation for
technical progress, and it has done an excellent job of keeping H&M's supply chain network healthy.
Considering the complexity of the apparel sector, H&M's dependable technology has demonstrated its
value by enabling the firm to meet current client needs. In addition, H&M uses the same technology to
create constantly evolving new designs (T&F, 2019).

Environmental

Environmental contamination is mostly caused by H&M undesirable items. However, the firm has begun
recycling obsolete and unwanted resources from their respective sectors. By 2030, one of the firm's
main goals is to employ only recycled materials. This implies that all of H&M's upcoming items will be
derived from their predecessors. Large and well-known in the retail sector, H&M (Belin, 2019).

Legal

The corporation has recently been under fire for reports of racial intolerance against ethnic minorities in
various shops in Sweden. Salespeople appeared to treat people of different racial origins quite
differentially, particularly when they were switching certain items, according to obscure surveillance
footage that became popular thanks to a local television station (Mäkelä, 2019). For instance, they
seemed to consider evidence from these people that weren't expected of other clients. The problem
was carefully looked into. As demonstrated by the incident in which a manager and a few employees
were fired for changing the label of a retail product to include a derogatory term for people of color,
H&M has a history of being linked to racism. They also received the appropriate legal treatment.

Even However, H&M strictly adheres to international norms, particularly concerning the countries
where they conduct business. They forbid employing anybody under the age of 18, only deal with law-
abiding suppliers, ensure a secure work environment for all of their employees, and advocate the
abolition of all forms of discrimination, such as those based on ethnicity, sexuality, nationality, faith, and
others. The business also appreciates transparency and publishes several economic and other
performance ratings (Belin, 2019).

Internationalization Strategy

Company expansion into a foreign market is accomplished via the use of international market entrance
tactics. The creation of wholly-owned subsidiaries, supplier relationships, licensing, foreign direct
exchange, and licensing are just a few of the numerous market entrance techniques that may be applied
(Testa, 2022). Giving a foreign entity a license allows them to utilize the available property. Capital
investment into a target region through the purchase of capital-generating investments is known as
foreign capital (Mäkelä, 2019). By establishing completely owned subsidiaries whose activities are under
the main company's supervision, businesses can also enter foreign marketplaces. Additionally, the
franchise as a method of entering a foreign market entails the transfer of copyrights to the franchisees
(T&F, 2019).

Another popular tactic is agreement production, which is contracting all or a portion of the firm's
production operations. All of these techniques provide positive outcomes and are useful, but they vary
considerably in terms of equity and risk. While certain business tactics, like foreign direct investment,
demand substantial resources and carry high risk, others, like licensing and franchising, have extremely
minimal risk. In this situation, companies must carefully consider their options and select the best
course of action. According to the current market trends at hand, H&M uses a variety of foreign market
entry strategies (Belin, 2019). H&M enters international markets primarily through the utilization of
investment from abroad.

As already established, foreign direct investment entails the purchase of capital-generating resources in
a new nation to secure a significant and enduring interest. H&M used a similar tactic when they entered
the Indian market. The first business authorized to conduct business in India as a brand name was H&M
in the year 2015. New Delhi became the site of the region's first H&M store. The favorable legislation in
India led H&M to pursue the foreign direct investment entrance approach for the Indian market. H&M
chose to participate in the new rule and extend its endeavors because earlier the Indian government
would not let foreign direct investments, but now they allowed it 100% (Luo & Wang, 2021).

Furthermore, when H&M entered the American market, it did so through a wholly-owned subsidiary. In
contrast to other methods of entering foreign markets, a wholly-owned subsidiary is completely under
the oversight and control of the main corporation, which also reserves the ability to make independent
decisions for the subsidiary, such as those about marketing. H&M is an affiliated firm established in the
USA that runs independently, but the parent organization, which is headquartered in Sweden, controls
and exerts influence over the actions carried out. H&M chose to employ this tactic in the US market
since it allowed them to maintain all of the revenues they generated to own selves (H&M, 2022).

Additionally, the establishment of a subsidiary firm has enabled the business to function without
entering into any partnerships. In particular, H&M employs the outsourced agreement-based
manufacturing model, contracting nearly the whole manufacturing. The fact that H&M has far since
transferred its manufacturing operations should be noted in this context. The majority of the apparel
found in H&M stores is produced in nations like Egypt, Turkey, and China before being exported to other
countries where the fashion retailer has opened up shop (Belin, 2019).

It is quite challenging for the corporation to satisfy the needs of their present and new international
market owing to the high manufacturing expenses, such as wages and the expense of acquisition of raw
materials for usage. Accordingly, a contractual agreement-based production process is a practical way
for H&M to enter international markets as it seeks to build and develop around the globe. Companies
like H&M must make extremely important considerations when deciding on the best market entrance
strategy (Luo & Wang, 2021).

The capacity of a firm's executives to see possibilities and take full advantage of the corporate setting is
an important component of this strategy. H&M extends its business following market segments that
have low risks and big profitability. Therefore, H&M's primary entrance strategies for entering into the
market are a foreign direct investment and contract manufacturing (Testa, 2022).

Recommendations

After carefully examining the dynamics of H&M, it can be concluded that the Swedish multinational
retailer is the global highest clothing brand. Among the most pressing problems are environmental
concerns including rising air pollutants, the worldwide economic downturn, and rising manufacturing
prices. H&M should use its power and assets to tackle these issues. It is advised that the corporation be
more revolutionary in producing apparel and clothing which would contribute to making them
established in the business world, both domestically and abroad because the corporation's major aim is
to offer apparel, clothing, and fashion best suited for the new era at reasonable prices. The corporation
must incorporate acquisitions and mergers into its plan to effectively use branding strategy if they want
to be renowned globally.

The corporation may quickly increase its presence the business sphere in the international rivalry by
purchasing other well-known companies in the fashion industry. H&M should use a corporate branding
move, such as strategy implementation, to make its brand known in the marketplace as the firm still
wants to grow in the worldwide market (Yide, 2020). Utilizing technical advancements like e-marketing
should enable the organization to communicate with its target market. Additionally, this business
entrance plan should be regarded as successful because the firm has taken into account all the variables
that must be evaluated for the organization to keep its competitive advantage and thrive in the
industry's risky environment.

Assignment Reflection

The main aim of this revision and rework of the assignment was to identify the discrepancies between
what was asked in the assignment and what was actually delivered. Additionally, the comments and
feedback given on the initial assignment assisted in narrowing down to the specifics as to where the
discrepancies were present. First and foremost, H&M is now discussed in this specific retest in the global
business context, in comparison to discussing the company in the context of Ghana. The company
introduction now includes thorough discussion of H&M’s functions, with respect to it’s resources and
capabilities that allow it to operate and function in the global business environment.

Secondly, PESTEL is used a framework to judge and analyze the macroeconomic factors that impact and
influence the company in one way or another. Additional significance is given to GeoPolitical, Economic
and Legal factors within this assignment. The flow of analysis is such that each factor is discussed on the
basis of challenges and benefits it has yielded for H&M, and overall does it impact the company
positively or vice-versa. In consequence to discussing the macro level factors impacting the company,
H&M’s past and current internationalization strategies have been discussed. Information through
reliable sources has been analyzed for this part. The internationalization strategies have been identified
by studying about major markets that H&M has entered, and then analyzing the means through which
the company was able to enter those markets.

The internationalization strategies were related to the macro level factors as GeoPolitical, Economic &
Legal factors highly influenced the strategy that H&M employed to enter a specific market. Based on the
above mentioned aspects of the company that were discussed, recommendations were based on the
critical factors that had a high correlation with the company. The recommendations also provided
methods to which H&M could continue with their growth, by utilizing their resources in the various
international markets.

References

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