Analysis of H&M Strategies Aspects

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Introduction

H&M shops are a popular stop on the shopping itinerary for many students and other young people in Europe and around the world. The company is well known for its competitively priced, fashionable clothing and attracts the world’s most renowned fashion designers. H&M is aggressively expanding internationally; after the conquest of Europe in the 1980-1990s (Johnson et al., 2020). The company has opened stores in the United States and Canada and is now entering the booming Chinese fashion market. The company also faces many challenges caused by intense competition from companies with similar strategies.

Main History Points

In 1947, the company opened its first store in Vesteros, a medium-sized city 100 km from Stockholm. H&M founder Erling Persson traveled to America and wanted to import the concept of high volume and low price he was introduced to in the United States (Johnson et al., 2020). H&M has long been committed to overseas expansion. Like many Scandinavian retailers, the company began its overseas operations in neighboring countries, entering the Norwegian and Danish markets in 1964. In 1976 H&M appeared in the UK, and in the late 1980s opened its stores in Switzerland, Germany and the Netherlands (Johnson et al., 2020). In 2000, the company opened its first stores in the United States and soon thereafter began expanding into new countries recently admitted to the EU. The company expanded its activities mainly by opening its own stores, but sometimes, in accordance with local laws, it opened a small number of stores in the form of franchises (Johnson et al., 2020). Unlike many other companies, H&M until recently was in no hurry to enter the booming Chinese market, but in 2007 it still opened its outlets in Beijing and Shanghai.

Analysis of the Internal Environment of the Organization

The greatest threat is posed by the toughened price competition in the “mass market” of clothing. However, the strengths of the company allow us to reduce its influence on the company and create stimulation of demand not only through prices, but also through promotions, sales, brand status. The organization cannot influence such a threat as “instability of the situation in the world economic market”, since this is a macroenvironment and the organization can only contact it indirectly (Rosenbaum-Elliott, 2020). This threat can be mitigated by gaining customer loyalty among countries where H&M stores are already open, as well as by developing new promotions and expanding the range of promotional products, which will reduce the currency difference.

H&M has strict conditions for cooperation with manufacturers, which allow for good working conditions in countries where it is not spelled out at the legislative level. Due to the movement of production to countries with cheap labor, there is no way to mobilely track the conditions in which clothes are sewn (Rosenbaum-Elliott, 2020). However, the organization is working on this problem and every year fights for equal rights for its employees and those of its suppliers.

Industry Position

The Swedish company Hennes & Mauritz entered the market as one of the largest retail chains in Europe and the second in the world after the Inditex group of companies. Competing with other global players on market in the middle class segment, H&M sells its collections of a similar design and quality at low prices. The production of goods is carried out by independent suppliers, primarily in Asia and Europe, and orders are placed through the production offices of H&M in the field (Rosenbaum-Elliott, 2020). The company places orders for production at 300 factories in different countries. The Swedish office of H&M is mainly responsible for the marketing, advertising and design of the company, while the office in Asia oversees cooperation with manufacturers. The collections are created jointly by H&M fashion designers, fashion designers and buyers. To catch upcoming trends, the company constantly monitors the world around it and draws inspiration from street fashion, cinema, travel and other cultures, as well as from the media, institutes that study global trends, at trade shows and fairs, and from the history of fashion (Rosenbaum-Elliott, 2020). General collection themes are usually planned on average one year before release, while the latest trends can be picked up at the last moment.

Analysis of External Marketing

The external marketing environment consists of a micro-environment and a macro-environment. It includes all objects, factors and phenomena that are outside enterprises that have a direct impact on its activities. The firm’s microenvironment includes the firm’s relationship with suppliers, intermediaries, customers, and competitors. The macroenvironment of the firm is represented by factors that are more common for most, predominantly of a social nature (Rosenbaum-Elliott, 2020). These include factors of an economic, political, scientific, technological and socio-cultural nature. Based on the results of the analysis, it is possible to draw conclusions about the choice of the main factors of the external macroenvironment that will create opportunities and threats for H&M Hennes & Maurits LLC in the forecast period. So, the main threats can be identified two potential opportunities:

  1. Fluctuations in the exchange rate of the national currency negatively affect the pricing of a trading enterprise, the goods are purchased at the foreign currency exchange rate abroad, settlements with suppliers are made in foreign currency.
  2. The rise in prices in the consumer market caused by the rise in inflation rates reduce the real incomes of the population, which negatively affects the effective demand of the target audience of the trade enterprise (Rosenbaum-Elliott, 2020).

As far as the macro environment is concerned, despite its successful development, H&M faces serious challenges. H&M is beginning to overtake other European retailers, most notably Inditex of Spain, which runs Zara, which has surpassed H&M to become Europe’s largest apparel retailer. Over the past ten years, Inditex has increased its turnover fivefold and in 2006 had 2,600 stores in 62 countries (Onditi, 2021, p. 54). H&M’s strong focus on the European market, which accounts for 75% of the chain’s total turnover, is a constraint to growth, as Europe and especially the euro area is a mature market with relatively low growth rates compared to emerging markets (Onditi, 2021, p. 55). In addition, in Europe, already quite high labor costs are constantly growing.

The strongest position is occupied by the H&M, this is primarily due to the many years of experience of the company, as the brand has existed since 1947. The H&M company has the widest assortment of the companies we consider and has the largest coverage of consumers by gender and age (Onditi, 2021). The assortment of the company includes clothes for newborns and clothes for pregnant women. This is the main difference between the company and its competitors.

By price category H&M, ZARA and Motivi are part of the group of companies “Fast-fashion” in the middle price segment. The H&M brand is very popular, so the company has the opportunity to sell its products at a higher price than competitors, while selling the remaining products with discounts of up to 70%, which guarantees the complete elimination of the collection (Onditi, 2021, p. 70). The company Motivi-M LLC has the narrowest range of offered assortments in comparison with competitors. But this is also an advantage, since the stores are highly specialized and offer clothes only for women, while the collections are more focused on young girls. The pricing policy of Motivi-M, LLC, in comparison with competitors, has greater loyalty in price.

The suppliers of products sold through the H&M chain of stores are Best Cotton Mills, Jeyavishnu Spintex, knitwear manufacturer K. M. Knitwear, Premier Mills, part of The Premier Group, Sulochana Cotton Spinning Mills, owned by The Sulochana Group. The production of these manufacturers is located in India, China, Turkey and the Netherlands. Delivery of products is carried out through transit intermediaries located in different countries in which the goods arrive. The trading company H&M Hennes & Maurits LLC has chosen a mass marketing strategy as its strategy for reaching market segments. This choice is justified by the well-known trade enterprise in the market, the strength of the competitive position and the financial stability of the company. With such a coverage of the market, the company is engaged in mass promotion of the sale of the same product for all buyers at once. H&M Hennes Eng Maurits LLC owns six brands: H&M, COS, Monki, Weekday, Cheap, Monday and Other Stories, which are represented in more than 55 countries around the world (Onditi, 2021). The company is the most recognizable retail outlet for mass-market clothing.

Recommendations to Improvement

In the course of evaluating the effectiveness of the marketing activities of the considered trading enterprise H&M Hennes & Maurits LLC, the main directions of improving the existing marketing activities of the enterprise were identified. On their basis, it is necessary to develop an action plan to improve the system of marketing activities of the H&M chain of stores. According to data for 2016, the segment “mass market brands” has become very popular with new groups of buyers who previously preferred retail chains of higher segments (Onditi, 2021). At the same time, taking into account the negative factors of the external environment, popular international chains, including H&M, manage to control the process of price growth by reducing rental costs and obtaining the most favorable commercial conditions in shopping centers. The decrease in demand associated with a decrease in the purchasing power of the population is temporary in nature, therefore, the marketing strategy of H&M Hennes & Maurits LLC should be to retain regular customers with more favorable offers in terms of price and model range that only the H&M brand can offer.

The decrease in demand associated with a decrease in the purchasing power of the population is, therefore, the marketing strategy of H&M should be to retain regular customers with more favorable offers in terms of price and model range (Onditi, 2021). Most buyers of H&M Hennes & Maurits LLC lead an active lifestyle, therefore they need to allocate a certain amount of time to make a purchase, which sometimes business people simply do not have. Therefore, the development of online sales should become a winning direction of development for a commercial enterprise. The future of fashion retail is associated primarily with the regional development of network players and the introduction of new retail formats. Right now, the Internet can attract new consumers, as the profitability of the price and reduction of the time for making purchases come to the fore.

At H&M there is a negative factor inside the stores, affecting sales – the level of customer service and the main characteristics that assess the customer’s disposition to make a purchase – cleanliness, convenience, a pleasant atmosphere in the store, no queues at the checkout and the presence of a sales assistant in the sales area (Onditi, 2021). In this regard, in order to improve the service policy of H&M Hennes & Maurits LLC, it is necessary to improve the qualifications of the trade and operational personnel, introduce more stringent conditions for training new personnel upon induction, and conduct periodic trainings to improve the quality of customer service.

Improving the marketing activities of H&M Hennes & Maurits LLC should cover the activities of the entire company, while at the same time focusing on each individual retail store and online store. The main goal of improving the marketing activities of the enterprise in question should be:

  1. Increasing the loyalty of potential buyers;
  2. Increase in sales of products sold;
  3. Customer satisfaction with service and quality goods sold;
  4. The maximum approximation of the price of the goods sold with the financial capabilities of the target audience, the trademark should be more affordable in terms of price policy, taking into account the negative impact of the unstable economic situation in the world.

The positive effects of improving the marketing activities of H&M Hennes & Maurits LLC should be an increase in the revenues of a trading company in the real and virtual markets, an increase in the company’s competitiveness and an increase in the coverage of the market share.

Conclusion

Over the next few years, H&M will face the challenge of anchoring its rapidly growing brand in a mature market. The change of generations in the consumer audience is not an easy process, as can be attested by the managers of the British ready-to-wear company Marks and Spencer. It is important for H&M not to lose its current customer base as it grows and its tastes change, and at the same time attracts the young people who are willing to spend money. The combination of the volatility of fashion, the emergence of new opportunities and risks of working in developing countries and the severity of competition in this market segment means that H&M managers cannot rest on their laurels and live on memories of past successes.

References

Johnson, J., Whittington, R., Regnér, P., Angwin, D., and Scholes, K. (2020). Exploring strategy. Pearson Education Limited.

Onditi, D. (2021). Evaluation of ZARA and H&M. Marketing mix, PR, corporate finance strategy and CSR. GRIN Verlag.

Rosenbaum-Elliott, R. (2020). Strategic advertising management. Oxford University Press.

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