Introduction
Hennes and Mauritz is a Swedish based company, which deals exclusively with clothes and cosmetics. H&M has grown over the years and currently it is operated from a leased store, with its sales available over the internet and on a franchise basis. The company has lived its business concept “fashion and quality for everyone at the best price”, by offering exactly that. H&M’s 2010 financial report indicates that amongst its 38 markets, 9 of them are franchise based.
The company has registered high sales over the years, attributed to their technique of delivering fast fashion at very affordable prices in comparison to others. Their stores have variety of clothes for women, men, teenagers and children. The varieties include basic modern fashion to high fashion. H&M’s major collection are accompanied by matching accessories, nightwear, underwear and accessories, a major selling strategy (Datamonitor, 2010).
Despite not owning a factory of its own, H&M is surrounded by very talented designers who produce exemplary good collections for all at vey low prices. As aforementioned, their operations are mainly on leased stores, coupled with internet and catalogue sales. The latter are mainly in Sweden, Norway, Denmark, Finland, The Netherlands, Germany and the United Kingdom. The company’s 2010/1 report indicates that it had 2,206 stores including 50 franchise stores, 35 collection of style, 48 monki stores and a one cheap Monday store.
The end of 2010 saw H&M expand immensely by opening another 168 stores. The stores are located in attractive business locations, however a particular focus on the US as been noted with its new branches stemming up.
However, this does not mean that the emerging markets are down played as the company has an eye on Eastern Europe, China and Japan. Its new branches are self-financed; this is supported by the fact that its sales in the past five years have been on steady rise totalling to almost 72% annually with shares amounting to almost 183% per share.
The exemplary growth is characterized with the company’s sole reliant on new and striking fashions for all genres. H&M aims at increasing its products range, online shopping and in regard to the above; it has already begun an entirely new chain store, named Collection of Style. The COS is integrated with high fashion while offering very competitive prices. The company boasts of very good designs that have graced the ho-off-the catwalk at very affordable prices, a major marketing strategy.
Their store displays are very captivating and allow customers to experiment with entirely new fashions. Due to its popularity, the stores turnover is very fast and new designs keep emerging. The company is entirely sensitive of the host culture and unlike other firms that provide almost similar fashions in all their countries, H&M insist on custom-tailored fashions that integrate both the local market and their buying preferences.
The technique is however supported by the great feedback the company gets from its central centre, where information from all over the country’s branches is collected, product re-in ovation carried out and later released into the market. The process leads to great product differentiation, an identifying trait of H&M (H&M, 2011).
Additionally, collaboration has had very positive effects for H&M. They mainly collaborate with great celebrities such as Madonna, Viktor and Rolf, Stella McCartney and Roberto Cavalla.
As part of its corporate responsibility, H&M is greatly involved with the United Nations programmes, notably the designer against Aids initiative and the various campaigns to increase the use of organic cotton, which assists in reducing chemicals. Further the company advocates for all clothes production lines to adopt a more energy efficient transportation system, thus making H&M the leading global fashion retail shop.
Fashion Concept
As noted, the host culture and the individual in general are considered in the development of fashion. Most fashions put the client into consideration before development of any fashion.
Their collections however are varied and new designs keep merging with time. Women’s collections for instance are catered for all ages and are accessorised with matching shoes in most instances. The men’s collections on the other hand include mostly timeless tailored pieces to modern basics, leisurewear and seasonal fashions that indicate knowledge of the latest fashion trends.
For children the company has divisions of those children who are as young as 0-18 months, 1.5-8 years, and 9-14 years. The main selling technique in this group is however a focus on durability, safety and comfort ability. In terms of cosmetics, the companies department offers variety of make up, skin care and other products. This department receives great attention and is updated often with new colours, scents and new products that show awareness of emerging fashions (Hoover’s, 2010).
Any successful large business however needs to incorporate the H&M’s strategy, which ranges form low priced clothing labels and the technique of storing the must-have season product in the stores.
Performance
Being located in 38 countries, the company has a wide geographic market coupled with great brand recognition. With most of its stores totalling to 2,000 stores, it can only be compared to powerful retail houses such as Gap and Arcadia. Despite not being very expansive, if compared to Wal-mart, it still leads the clothing industry.
The previous years have seen a focus into the market share in H&M, which is geared towards increasing its stores in various countries. There are plans to open stores in other countries such as Israel, Lebanon, Russia, and South Korea. The 2008 recession affected other companies to a great deal, however H&M had a 13% increase from 2007, this indicates how well the company is doing. To get a better glimpse of the picture of the company, it is vital to analyze the company’s revenue (Hoover’s, 2010).
H&M is not ignorant of the power of the local market, much as its focus is on the global market. There is continued customization of product mix that matches the preference of local buyers. The tailoring is enabled by presence of a good reporting system whereby each store gives feedback to a single IT operation, thus coming up with the customized products. H&M is very innovative, thus keeping it abreast in terms of product differentiation.
The financial year ending in November 2010, saw the company register a total of SEK 126,966 million ($17,571.1 million). This was a rise from the 2007, a 7% increase. In 2010/1, Euro zone which is the group’s largest geographic market registered 53-8% in revenue. Euro zone alone accounted for almost 59% of total revenues in 2011.
Its revenues as indicated keep soaring up, the reason why new branches can be opened with ease without any financial constraints. The company as noted generates its revenue through a single business segment, which is only the sale of clothing and cosmetics. Other great revenue earners include Nordic, which registered a 15.7% in 2010, an increase of 4.4% from 2009. The rest of the global stores generated 30.5% (Innovation Leaders, 2011).
Major Competitors
Despite these great success stories, the company faces stiff competition form various companies as discussed. The Arcadia group makes the largest British Clothing retail shop. The company boasts of 2,500 stores all of which are in the UK. Its significant fashion chains include Dorothy Perkins, Miss Selfridges, Wallis, Topshop, and Evans who make up the women attire.
For men, Burton and Topman are top list. The company has opened up 420 franchised stores in 30 countries and they own a flagship Topshop store in New York. In fact, Topshop is regarded as H&M’s main competitor. Secondly, Inditex (Zara), Industria de DiseonTextil (Inditex), which is a Spanish company that exclusively deals with disposable elegant fashion, creates great competition for H&M.
The company operated under eight diverse labels: Zara, Oysho, Massimo Dutti, Pull and Bear, Bershka, Stradivarius, Zara Home, and Uterque. Most of the stores keep the most fashionable clothes, mostly specialising in trends by designers in Spain and keeping the customer wants close. Zara is regarded as H&M’s most relevant competitors. Gap makes the companies third competitor. Gap is renowned for their well articulated jeans, khakis, and T-shirts.
Gap operates almost 3,150 stores globally. It has stocked modern basic for men, women, and children. However over the years, it has incorporated other urban fashions. Its main brands include GapBody, GapKids, and BabyGap. Each of its extensions has its own online incarnation. Gap clothing’s are private labels made for the company, and the company controls all features of its trademark casual look (Datamonitor, 2010).
The creation of fragmented mergers has started to come up in the global companies. This makes competition among large companies to be even stiffer. There is widespread recognition that fashion is a thing of not only a few but a worldwide field. In addition to the already existing global brands, it is evident that new companies are coming up and their growth is very fast.
For example, Japan’s Uniqlo, Spain’s Cortefiel and Hong Kong’s Giordano among others are emerging competitors. These new players are also going global thus increasing competition. General retailers have also adopted the sale of own labels making a significant contribution in the market share. Such retailers have a global presence hence they equally offer considerable competition.
Having looked at the competitors, the company has other threats, weaknesses and strengths which all constitute the SWOT analysis. The company’s main strength is its fast fashion which increases the demand for products. Further, the global presence increases the market. Its main weakness is however the dependence on third party vendors who are supposed to supply their clothes.
The consumer preference for online shopping however makes up the companies main strengths, including its focus on women’s clothes in both the US and UK, and its desire to expand its market to other areas such as the Asia. Its main threats, however, are high costs of inputs, weak consumer spending, most notably in Europe and the U.S, and the foreign exchange fluctuations in some countries where its branches are located.
References
Datamonitor (2010). H& M Hennes & Mauritz AB. Web.
H&M (2011). The H&M brand. Web.
Hoover’s (2010).H & M Hennes & Mauritz AB. Web.
Innovation Leaders. (2011). Profile: H& M. Web.