H&M SWOT Analysis
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- 4. 4 1.0 Company background H&M in London Hennes & Mauritz is a worldwide company specializing in fast fashion and clothing for all ages. in 1947, The company was established by Earling Pearson, when he opened his first store in Sweden, starting with selling women's clothing. in 1964, he opened a shop in Norway. In 1968, Pearson acquired the Mauritz Widfss clothing salesman, leading to the inclusion of a men's clothing set in the product group and a change of name to Hennes & Mauritz It was registered on the Stock Exchange of Stockholm in 1974. Not long after, in 1976, the first store opened outside Scandinavia in London. H & M kept its expansion in Europe and began retailing online in 1998. H & M and its related organizations operate in 70 countries with more than 3,392 stores. In 2017 H&M has 281 stores in the UK only. Currently, The H&M group includes nine clearly defined brands; H&M, COS, Monki, Weekday, & Other Stories, Cheap Monday, H&M Home, ARKET and Afound (H&M, 2018).
- 5. 5 2.0 SWOT analysis SWOT Analysis is a tool used for strategic management and strategic planning in companies. It also helps the entity to build an effective organizational strategy and competitive strategy. It provides information that is helpful in matching the organization’s resources and capabilities to the competitive environment in which it operates. SWOT analysis also known as internal analysis and external analysis. SWOT Analysis has four components: Strengths, weaknesses, opportunities, threats. Strengths and weaknesses are the internal analysis of the company environment while opportunities and threats are the external analysis of the company environment (Rao, 2008). 2.1 Strength Strength is an internal analysis that describe the positive, favorable and creative characteristic of an entity or person. Strength in the company will describe the abilities and properties of the organization in the operation and markets against other firms and competitors that are reported as a result of the analysis of its internal environment. according to (DINCER, 2007), a company can be described as a week, equal or strong compared to their competitors based on five criteria: Relative financial structure, relative market situation, relative production and technical capacity, relative human capacity and management effectiveness, relative research and development potential. Looking to Apple company for example, its main strength is the brand name and logo according to (BOGOST , 2018) Apply logo is worth 1 trillion which is the first company in USA to achieve this (Apple Co., 2018). 2.2 Weakness Weakness is also an internal analysis that describes negative and disadvantages characteristic of an entity or person. Weakness in the company is referring to the limitation or deficiency of the company capabilities, resource, and skills compared to other firms and its competitors. the company weakness can create a serious effect on the organization's performance. financial resources, Facilities, administration capabilities, brand image, and marketing skills can be a reason of weaknesses” (Pearce and Robinson, 1991: 182). it is necessary for the company to determine its weakness and try to reduce and improve them because no strategy can be built upon weaknesses. (GÜREL, 2017). For example of the weakness, Apple products price are high compared to its
- 6. 6 competitors who provided the similar product with high quality and cheap price. These can affect the sales of the company (Martin, 2016). 2.3 Opportunities Opportunities are an external analysis that shows the chances of your business to prosper. Opportunity in the company is a suitable time or situation that the environment gives to the company to achieve its objects. In fact, opportunities are circumstances in the external environment that allow a company to take advantage of organizational strengths, overcome company weaknesses or prevent environmental threats. so the company needs to use the opportunities of its external environment to improve its performance and compete its competitors (Ommani , 2011). Example for opportunities, Apple company has very loyal customer base to its products which will be leading to more sales and increase the company revenue (Apple Co., 2018). 2.4 Threats The threat is an external analysis that shows risks and dangers that can face an entity or persons. The threat in the company is an obstacle that makes impossible for the company to success and causes unrecoverable damages. Threats are the circumstances that show up as a result of the changes in the external environment that would limit the company from maintaining its presence or lose its superiority in competition, and that is not preferable for the company (Ülgen and Mirze, 2010). All external environmental elements that can prevent the company from its effectiveness and efficiency are considered threats. This system will encourage company managements to be cautious of and act more strategically on the developments in and outside their environments. (GÜREL, 2017). Example of threats on Apple Co. the biggest threats for Apple is its competitors. Samsung Co. is one of Apple competitors which also provide same tech to market with high quality and low price (Samsung Co., 2018).
- 7. 7 3.0 SWOT analysis for H&M 3.1 Strengths for H&M A diverse global presence: H&M is a worldwide brand that spread in around the world and has a strong presence. It is operated in more than 70 countries around the world over 6 continents. Lately, in 2017 H&M has grown in potential markets such as Africa and Asia. Strong attendance of H&M in the worldwide will reduce the business risk and will increase the company sales. In 2017, H&M has joined new market a located in Iceland, Colombia, Georgia, Kazakhstan, and Vietnam, as well as the company, has also established new online markets in 2017 in Macao, Hong Kong, Turkey, Singapore, Taiwan, and Malaysia (H&M, 2017). Creating a sustainable environment: H&M Group is one of the biggest users of organic cotton, recycled polyester, and leucyl. Our global clothing group participates to increased recycling and decreased environmental impact. Efficient use of water, chemicals, and energy are important to customers. H&M policies are to reduce greenhouse gas emissions from our operations as they grow up - mainly through the transition to renewable energy. In 2016 the group has reuse and recycling. 96% of the electricity. However, the company would like to receive 100% of future renewable energy. these actions will help the company to build a good reputation for the customers. Moreover, it also shows the ability of the company to continue in the market as most of the market requirement is to use renewable resources in the business operation. Another strength is celebrity endorsement. H&M has been using the celebrity to represent their products to the public in the advertisings or in the annual events of the company. According to (Mccall, 2014), H&M has attended Lady Gaga's concert to play and entertain at their grand release. Lana Del Ray and David Beckham some of the celebrities that the company have used them in their advertisings, with their fashion style, they draw the celebrities’ interest as well as the general public (Alexander, 2016). H & M is a very strong brand, and the public can easily identify and recognized with what is part of the H & M brand. H&M has built a strong and good image of its brand since the company was started in 1968 until now. H&M is trying to satisfy its customers to create a good reputation by providing wide product ring. H&M has six popular brands on the UK street, including H & M,
- 8. 8 Cheap Monday, Monki & Other Stories, H & M Home, COS, and Weekday. Moreover, the company has diverse kinds of products that offered to the market such as clothing, cosmetics, footwear and accessories for a different type of customers. And also the Group has different items like blankets, set of vases and pots as well as candles and Holders of candles. 3.2 Weakness for H&M Unethical History. H&M has involved in many unethical issues that have an effect on the company reputation. according to (Melik, 2010), H&M has involved in child labor and labor exploitation in Bangladesh, Cambodia, and Uzbekistan where children were working up to 14 hours a day in a factory with low income to supply H&M. in January 2018 and other unethical issues has been taking against H&M when the can the company has involve in in racist issue. the company had used a young black child on their advertisement of a new product wearing a green hoodie with the phrase “Coolest monkey in the jungle” that caused controversy among the customer, with many people proclaiming their outrage for what they see as racist advertising. according to (BBC, 2018), H&M group has disclosed that their aim was clearly not to cause offense; it just obviously didn’t enter their minds to think seriously about their black customers. however, H&M have apologized for their mistake. Relying on third-party suppliers: H&M relations exceedingly on external suppliers of its goods. H&M manufactures its products through 800 independent suppliers and therefore has less power over production. Over-reliance on other related parties, sellers can affect the obligations of the company's requests, and any bad experience facing the customer might harm the brand image. For example what happened in one of the H&M suppliers factory when the workers had destroyed the factory seeking for better condition and benefits (Guardian , 2017). This case will bring a bad reputation to H&M even though they are not the owner of the factory but they are considered involved in this issue (Grainger, 2018).
- 9. 9 3.3 Opportunities for H&M Emerging Markets Expansion: Emerging markets in the world have huge potential for garment manufacturing. In the first six months of 2017, H&M was able to come halfway to Zara within seven years after joining the Indian market, having become profitable after only six months of working there (Malviya, 2017). This shows that global brand acceptance is high, and H&M should try to expand into new markets and new locations. Therefore, the company needs to discover those emerging markets in Africa and Asia to take advantage of the new demand generated. These expansion plans could help the Group to improve its baseline as well as the top line. Sustainability in the market: H&M has kept their position in the market for so long since it has been established in 1986. H&M has consistently advanced the ranking of the most sustainable companies in the world over the past seven years. In light of the new corporate strategy, it has the opportunity to be at the forefront of this list, above prestigious brands such as Tesla, Patagonia, and Unilever (Pergrankvist, 2017). sustainability is very important for the company as it shows that H&M has the ability to reduce its risk hence the investors will invest as they are satisfied with a lower risk premium. Online expansion. H&M also exists in e-commerce in different markets. H&M still have the chance to expand the e-commerce platform also to work in a big market. E-commerce can be the future of the garment industry and H&M needs to take advantage of the platform for its potential. The company has performed very well in the countries that had impalement the online market (H&M , 2018). According to H&M Group (2018), H&M has 47 online market and in 2019 it will open two new online market in Mexico and Egypt. This expansion will help the Group to improve their performance and be able to compete in the market.
- 10. 10 3.4 Threats for H&M One of the biggest threats facing H&M is their competition. The H&M group are targeting the stylish young professionals or teenagers who are fashionable. presently, there many other brands who are targeting the same customer of H&M with more reasonable price and high quality. their main competitors are Zara, Forever21, and Gap. for example, Gap is operating in more than 90 countries while H&M is only available in 70 countries (Gap Inc., 2018) This can be considered a major threat, but there is a possibility for H&M to grow and catch with GAP. E-Commerce allows new entrants: E-commerce became more important for most of the trades companies as they will be able to reduce the cost of marketing such as advertising and also will help to reach big target of customer (Cao, 2018). However, e-commerce can pose a threat to well- known brands such as H & M, since e-commerce allows new brands to be on the market on the same platform as famous brands, and so newcomers may affect trademark business such as H&M. Rising labor costs in developed countries: Affordability is one of the main strength of H&M. However, these can be affect by the change of the cost production like increasing in labor cost. Such increased costs affect profitability for the company. The H&M’s suppliers are located in Bangladesh, India, Vietnam, Cambodia, Kenya, and china..etc. as they have low labor cost. For example many Chinese manufacturing firms has turning to Bangladesh to make clothes as the salary of the workers has increased steadily over the last few year (Anbarasan, 2012) As a global company, H&M is increasingly exposed to currency effects and export and import policies of the countries. As what happened in 2015 H&M had faced a huge fall in quarterly earnings because of the strength of the dollar and lower the prices (Vandevelde, 2016). another evidence for the last seen in 2018 when the trade war starts between the USA and other countries China and Europe. according to (BBC, 2018), many multinational companies has been affected by the increase of the tariffs that made by USA government for all the imports products that is coming from China, Europe, Canada and other country. H&M is multinational company which its product will be also subject to tax when it is export to USA.
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