ATENEO DE DAVAO UNIVERSITY

BACHELOR OF SCIENCE IN FINANCE

A CASE ANALYSIS ON THE BRAND HENNES & MAURITZ (H&M)

In Partial Fulfillment of the Requirements for MGT 4259 3-776

DIAZ, KIRT EMMANUEL

FULGUERINAS, EVS MARGARET B.
SAKAMOTO, SAKURA P.
Student

MELECIO SY JR.

Professor

July 27, 2022

Introduction

I. Mission, Vision

Mission
It is the mission of Hennes & Mauritz (H&M) to produce various fashionable good
quality products to their customers with budget-friendly prices. For them to fulfill their mission
in terms of fashion, H&M continues to create fashion campaigns by partnering with top
designers. On the other hand, H&M also wants to be inclusive and be able to cater people in all
ages and their tastes. With that, they provide apparel, accessories, cosmetics, footwear, and even
interior design collection.

Vision
Hennes & Mauritz (H&M) also envisions that the company could continue to provide
newly developed collections to give their customers new pieces every time. Aside from that,
H&M also wants people to try their products across different countries. With that, H&M aims to
increase the number of their stores by 10% to 15% annually. They are also making efforts to
make their products accessible by setting up their online shop. Their business expansion also
means that H&M could make more jobs and employ more people in their company.

II. Corporate Officers

In its organizational structure, H&M shows that as they operate in different countries,
they do not put biases on certain countries. With that, in their head office in Stockholm, Sweden,
there are different departments that could help them properly plan in various fields. Located in
their head office are departments, namely finance, accounts, expansion, interior, advertising,
design, IT, communication, investor relationship, logistics, human resource, security, and
corporate social responsibility. Given that the corporation also operates in different countries,
H&M also has production and country offices outside Sweden.

III. Present Strategies

In order for H&M to cater to different markets from countries, they implement similar
strategies for all of them. To implement this, H&M offers its products not only to a single market
but to different segments. With this, they can cater to the broad preferences of the market.

Despite being a famous company in the fashion industry, H&M doesn't have its own
factories. With this, H&M heavily relies on their external suppliers handled by their buying and
production department. Given that H&M applies a customer-driven production method, they put
importance on different research for trends and innovations.
IV. Present Supply Chain Structure

The chain starts with the designs and pieces from the designers and procurement
department. Designs made will be forwarded to 21 production offices. H&M also ensures to
establish a good working relationship to cater to mutual concerns. There will be samples to be
sent to the head office. The production office will also negotiate with the worldwide suppliers,
which will forward bulk supplies. Those goods will then be sent to their central warehouse and
stores.

The IT department of H&M plays a significant role in improving their supply chain. To
make things more efficient, H&M have a system through their Information and Communication
Technology. Each department and office can send information regarding their sales and stocks
through this system.

V. Environmental Conditions
According to Mckinsey and company (2021), companies in the fashion industry showed a
20% decline on their revenues from 2019 to 2020, which marked the start and peak of the
COVID-19 pandemic. This became a challenge for the companies as some left the market due to
the challenges they faced. After years of difficulties, Smith (2022) said that the revenue for
companies from the fashion industry summed up to 1.5 trillion US dollars and is expected to
increase up to 2 trillion US dollars by 2026.

On a global survey conducted by McKinsey (2022), it showed that the majority see
inflation and geopolitical issues as top threats in the economy. Inflation nowadays is highly
observed as prices of goods and services are getting more expensive, and the purchasing power
of money is decreasing. This is also connected to the geopolitical issue regarding the conflict
between Russia and Ukraine.
Analytical Tools

I. SWOT Analysis
Strengths Weaknesses

- known brand worldwide - doesn't have its own factory

- provides fashionable pieces for an - low quality
affordable price - relies on external partners
- Established brand in the market - Vague figures

Opportunities Threats

- most people are now shopping online - competitors in the local market
- More people are now interested with - trends are fastly changing
fashion - inflation

Strengths
H&M is already an established clothing brand wherein people can easily recognize them.
They are already a famous brand worldwide and one of the go-to brands for Gen Zs and
Millenials. They are also true to their word for offering fashionable pieces to their customers for
an affordable price. With this, H&M gives an opportunity to their customers to be on trend.

Weaknesses
Despite being a big clothing brand, H&M doesn't have its own factory to produce its
goods. With this, they heavily rely on external partners as their suppliers and producers which
could lead to their slow response to the changing trends and could give up opportunities to their
competitors. Aside from mentioned, the quality of their goods are also compromised just to offer
their products for an affordable price. Lastly, they also present vague figures regarding their
objective in gearing towards sustainability which could start doubts among their consumers.

Opportunities
With the worldwide pandemic that started last 2020, more consumers are into online
shopping and became more proficient in browsing the internet. Given that H&M had already
established its online market way before the pandemic started, it gave them the opportunity to
expose themselves more and let people know about their existence in the internet space. As
people continue to browse the internet, they became more interested in fashion and its current
trends.
Threats
Even big corporations such as H&M have also threats from their competitors. When the
pandemic started, a lot of people started launching their small local businesses. Although small,
they are good at catching up with the trends and providing the exact fits that the consumers are
looking for. Although these small businesses can't easily keep up with the demands, some
consumers are still willing to wait or can easily look up to another small business. With the wide
use of the internet, trends are fastly changing nowadays which could give a hard time for H&M
to catch up given their weakness in relying on external suppliers. Lastly, the global economy is
experiencing inflation which could affect the prices of raw materials and other costs for H&M
which could lead to a price increase of their products.
Problem Ideation

I. Statement of the Problems (SOP)

H&M's strategy management is commendable, given that it has thrived in the apparel industry
for several decades. Although there's no question about the success of H&M, there are areas of
improvement to dominate the sector continuously:
1. H&M requires 2-6 months to design and get products in stores.
2. Given the low level of prices, the quality of the products would sometimes be
compromised.
3. H&M claims to be a sustainable company but fails to present accurate figures for
strategic decisions.

II. Causes and Indicators of the problems

H&M does not have a factory of its own. Instead, they employ around 700 independent
suppliers, especially in Asia and Europe. Also, H&M has 22 production facilities worldwide,
with 11 in Asia, 9 in Europe, and one in Central America and Africa. Given that they outsource
to produce their products, it takes 2-3 weeks for an order to arrive, or it could take up to 2-6
months, depending on the product. Hence, the company must order at the right time to release
the items at an ideal time.

Also, H&M takes so much pride in its mission to increase the number of newly
established stores by 10-15%, where 2,200 stores are already in 38 markets continuously
expanding. With a global strategy of strengthening the brand while contributing to the growth in
profitability and sales. Given the brand's aggressiveness in mass production, the quality of the
products is at stake. Despite attaining its mission, H&M has yet to aid in the quality of its
products.

The Code of Conduct, which H&M designed to maintain control among its
numerous suppliers, is directly tied to the social aims of the company. To work as a supplier for
H&M, all must concur to the Code of Conduct. Therefore, complete adherence to the Code of
Conduct is one of H&M's social goals. Although it might sound promising, H&M still belongs to
the fast fashion industry, one of the greatest polluters (Sakib, 2022). H&M has yet to present
accurate figures and strategic decisions given that it empowers sustainability, clean procedures,
and a love for nature.
III. Impact if the problems if not solved (short term / long term)

If the company fails to address the problems, it will affect the business. A week or a
month difference in product arrival has an immense impact. Trends quickly come and go. Thus,
delays are crucial. What is seen in the mannequin of H&M could be the current or outgoing
trend.

Besides the timing of when to display and what to release, quality is vital in the
discussion of apparel. Despite being known for selling cheap garments, many share their
sentiments about how bad the quality of their products is (Alexander, 2022). In a quality test run
in Metro Shanghai, H&M is among the failed brands. This is due to the lousy fabric quality,
which is considered substandard. It is not the first time that H&M clothing has been found to
have quality issues. (Global Times, 2012) Furthermore, to attain its continuous growth, price and
quality should come hand in hand.

Lastly, H&M's objective of empowering sustainability, clean procedures, and a love for
nature, is on the right track. The brand has to check if they adhere to the required standards
constantly. Failure to address such problems will not just impact the company but the Earth as
well. It might just seem like a failed quality test for now, but mass production of harmful quality
products can also harm the environment.

IV. Identify Decision Criteria

This criteria is important to the company and this will help you make a decision on how you will
solve the problem and which among the alternatives is the best solution for each problem.

In order to help in the decision making process of the company in addressing problems
and coming up with solutions and alternatives, here are the decision criteria:

1. Improve profitability (20 points)

2. Increase in sales (20 points)
3. Maintain customer satisfaction (20 points)
4. Speed of implementation (20 points)
5. Minimal environmental impact (20 points)
Alternative Startegic Choices

I. Identify 3 Strategic Alternatives

Problem 1: H&M requires 2-6 months to design and get products in stores

Alternative Advantages Disadvantages

Build own production - Gain control over - Requires

facilities. production output substantial
- Increase Quality investment from
Control company
- Increases number - Takes considerable
of goods amount of time to
produced and complete.
delivered - The company
currently doesn’t
have any
experience in
running supply
and production
facilities.

Increase number of - Increases number - Might lead to

outsourced Independent of goods more quality
Suppliers and Producers. produced control problems
- Hired companies
will have to
undergo
adjustment periods
to adopt to H&M
system

Conduct logistical analysis - Maintains present - Cannot ensure

to streamline production systems and significant
and delivery of goods. policies improvements
- Lower cost - Maintains the
needed. apparent lack of
- Highlights quality control
production and
 delivery
efficiency

Problem 2: Given the low level of prices, the quality of the products would sometimes
be compromised.

Alternative Advantages Disadvantages

Increase Quality Assurance - Improves product - Might Involve

and Quality Control quality minimal costs that
measures in independent - Ensures company cannot be passed
suppliers and producers. image is on to consumers
maintained - There is a
- Keeps product possibility tat
prices at lower production might
levels further be slowed
down due to
additional
processes

Improve raw material - Allows direct - Increases product

quality by increasing improvements in price
product prices product quality - Might lead to a
- Improves loss of some
company and consumers
product image

Start marketing campaign - Low cost - Does not ensure

highlighting quality of - Allows significant change
products. improvement of in product quality
product image - Might lead to
without the need backlash from
for excessive new consumers
change
Problem 3: H&M claims to be sustainable company but fails to present accurate
figures for strategic decisions.

Alternative Advantages Disadvantages

Create a committee that - Shows - Prone to internal

ensures transparent commitment to conflict of interest
reporting of results from transparency and - Needs additional
strategic decisions sustainability. training time for
- Low cost solution committee
members
- Prioritizes the
corporation’s
social
responsibility over
growth.

Shift priority from - Ensures growth - May lead to

sustainability to growth and and profit are the consumer
improvement main priorities of dissatisfaction
the company - Damages
- May attract company image
certain - May discourage
profit-driven ethical investors
investors

Make internet portal that - Provides easy - Showcases all

leads to all company files access to the company files
classified as “public” results of strategic even those that
decisions could have been
used as
competitive
advantage
- Prone to hacking
- Does not ensure
reliability of files
II. Decision Table

Problem 1: H&M requires 2-6 months to design and get products in stores

Alternative Decision Criteria Total

(100 Points)
1 2 3 4 5

Build own 18 15 18 10 10 71
production facilities.

Increase the number 12 15 12 15 10 64

of outsourced
Independent
Suppliers and
Producers.

Conduct logistical 15 12 15 18 20 80
analysis to streamline
production and
delivery of goods.

Problem 2: Given the low level of prices, the quality of the products would sometimes
be compromised.

Alternative Decision Criteria Total

(100 Points)
1 2 3 4 5

Increase Quality 13 15 18 14 19 79
Assurance and
Quality Control
measures in
independent
suppliers and
producers.
Improve raw material 15 15 12 12 13 67
quality by increasing
product prices

Start marketing 13 15 12 10 13 63
campaign
highlighting quality
of products.

Problem 3: H&M claims to be sustainable company but fails to present accurate

figures for strategic decisions.

Alternative Decision Criteria Total

(100 Points)
1 2 3 4 5

Create a committee 10 10 18 15 18 71
that ensures
transparent reporting
of results from
strategic decisions

Shift priority from 10 10 12 15 13 60

sustainability to
growth and
improvement

Make internet portal 10 10 14 17 15 66

that leads to all
company files
classified as “public”
 The Best Solutions and Implementation Plan

Statement of the Problem 1: H&M requires 2-6 months to design and get products in
stores.

1 What is/are the best alternative solution for each problem?

The best alternative solution for the problem regarding the lengthy requirement of
H&M to design and get products to store is to conduct logistical analysis to streamline
production and delivery of goods.

2 Identify steps, how to implement it?

1. Illustrate the supply chain of the company
2. Integrate technology wherever possible,
a. Autonomous Mobile Robots (AMR) - In warehouses and logistics facilities,
AMRs are more effective in finding, tracking, and moving products.
b. Blockchain - By essentially enabling a shared, publicly accessible framework for
logistics management and asset tracking, blockchain technology is being used in
logistics to make the best use of the available trucking resources.
3. Internal communication within the organization should be well-established.
4. Due diligence and in-depth study are essential when importing to new markets to ensure a
thorough awareness of all applicable rules and regulations.

3 Identify performance measures on how to identify success.

To identify the success of the chosen alternative, Key performance indicators
(KPIs) are to be utilized. KPIs are a group of quantitative metrics used to assess the
overall long-term performance of an organization. KPIs in particular aid in determining a
company's financial, strategic, and operational accomplishments, particularly when
compared to those of rival companies in the same industry.

4 Identify 2-3 control measures to ensure success

1. Supply chain should be followed accordingly.
2. Equipment utilized in logistics should have a scheduled checkup to avoid chain
disruptions.

Statement of the Problem 2: Given the low level of prices, the quality of the products would
sometimes be compromised.

1 What is/are the best alternative solution for each problem?

 The best alternative solution for the problem regarding the compromised quality of the
product is to increase the quality assurance and quality control measures in independent suppliers
and producers.

2 Identify steps, how to implement it?

1. Create a department dedicated on checking the quality control of the products
2. Provide criteria to the suppliers and producers in checking the quality of raw materials
and finished products.
3. Send samples and options on raw materials that passed the criteria for checking and
finalizing materials to be used.

3 Identify performance measures on how to identify success.

In order to identify the success of the suggested solution, the company could benchmark
wherein they could compare their performance with a best practice performance metric
developed from various research and different associations from the industry.

4 Identify 2-3 control measures to ensure success

1. Best raw material based on pricing and quality must be prioritized.
2. Department members must be honest on their responsibilities as the ones ensuring the
quality of their goods.
3. Criteria made for quality control must be highly observed by suppliers, producers, and
even the company itself with no bias.

Statement of the Problem 3: H&M claims to be a sustainable company but fails to present
accurate figures for strategic decisions.

1 What is/are the best alternative solution for each problem?

The best alternative solution for the company’s problem on the lack of accurate figures
derived from the results of strategic decisions is to create a committee that would ensure
transparency through the proper reporting of decision results.

2 Identify steps, how to implement it?

1. Pass a board resolution that mandates the creation of a committee focused on
transparency of company files.
2. Gather competent personnel by either conducting a hiring process or selecting from the
existing pool of company employees.
3. Send the committee members to training and seminars focused on transparency and
sustainability.
4. Publish committee findings
5. Evaluate committee work.
3 Identify performance measures on how to identify success.
1. Number of published committee findings
2. Number of undocumented decision results

4 Identify 2-3 control measures to ensure success

1. Committee members should be independent from upper management.
2. Committee findings must only be revealed to the public on designated dates.
3. Committee members should be transferred from their original positions and must not hold
any responsibility within company operations.
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