BUSINESS MANAGEMENT AND DECISION-MAKING PROCESS: CAIFU
Executive Summary
Caifu, in an effort to maintain its growth and sustainability, looks to invest its money in a credible organization that has a sound management system and trustworthy leadership. Currently, the companies at its disposition include H&M and Next. Prior to committing any initial capital outlays to one of these companies there is a need for a very thorough analysis in relation to what choice would be lucrative to Caifu especially in the long run. As an employee affiliated to Caifu and its interests, I have been asked to come up with a management report to forward to the board members of Caifu Investments Limited, which will further analyse Next and H&M. The management report in question will include an evaluation of the management and leadership approaches used in these firms with regard to primary and secondary data garnered. Moreover, it will measure the after-effects of the above mentioned management and leadership styles in each firm in every firm evaluating myriad economic drivers. This paper is going to give insights on what the management report will entail, the parties involved in making the decisions on behalf of Caifu; the people charged with the responsibility of research and what factors are considered before Caifu arrives at a decision to invest in either H&M or Next.
Introduction
H&M initials stand for Hennes and Mauritz; it is a Swedish multination that deals with selling clothes at retail; it is renowned, perhaps even venerated for providing men, women, teenagers and children with fast-fashion apparel. On the other hand, Next is a famous British multination that involve itself with the retail of clothing, footwear, and home products which is headquartered in Enderby, Leicestershire. The company has approximately seven hundred retail stores, of which five hundred are based in Ireland and the UK; leaving around two hundred in Asia and the Middle East. Both Next and H&M are successful, and it would be a tough choice to make a resolve as to which one is the right one for investment. To get a clear picture of the investment decision would best serve Caifu; there is a need to consider the general management issues faced by H&M and Next in the market like the recession, market changes and globalization among others.
A company profile refers to a certified introduction of a corporation and information about all its products and services. The importance of a company profile is that it creates awareness in relation to the product and niche of the company in the market involved. Existing and new customers are thus able to identify with the company in question.
Company Profile for Next
The mission of Next plc is to become the natural choice retailer in the United Kingdom for men and women who are fashion aware and expect style, distinction and quality from their apparel. The company creates designs, manufactures, and makes the distribution of clothing, furnishing and clothing items possible to about 330 of the company’s retail stores. Right after terminating a short lived global expansion in the year 1999, the corporation closed seven of its own foreign stores among which five were in the United States. Ever since then, the company has then changed its global strategy to that of brand expansion which is bent on franchising (Shen 2014: 35). The corporation owns and manages franchises in about twenty global markets, more so in Far East Asian and Middle Eastern markets. Even though the company is doing well in the United States and in Europe, the
Company Profile for H&M
The parent company for H and M is H & M Hennes & Mauritz AB. The firm is categorized as an apparel and accessories company. H&M has been using various slogans to popularize its products such as who’s next, get ready to do some serious shopping, and you look nice today. Its target group includes men, women and teens that are endowed with a medium to high PPP i.e. purchasing power parity and also happen to have a totally energetic and rebellious approach in life (Dreeves 2012: 55). In relation to segmentation, target grouping and positioning the company is after people that like to spice up their closets and to look stylish all the time.
SWOT Analysis of H&M
Strengths
H&M is deemed to be one of the biggest international apparel retailers. The company has approximately 2300 stores is about forty-five nations and about ninety-five thousand workers employed under their label. The firm presents very high quality and fashionable apparel at reasonable prices; many of the customers deem their stores to have designer clothing at prices of a department store (Amason 1996: 76). Their general delivery timeline is very low; it takes about three months for the company’s output to mature from the design stage to the retailer phase. Another reason that H&M is considered to be a strong company is the fact that it hast guest designers that come through for them with respect to different lines in the store; the company is also known for keeping its clothing prices affordable because it uses a very limited number of middle-men who purchase bigger volumes at wholesale. Finally, the fact that the brand is endorsed by designers and celebrity is a surefire way of winning the hearts of consumers.
Weaknesses
The company’s weaknesses lie in the fact that it buys large volumes which could lead to lowering of the previously affordable prices. In addition to that, the target customers of the company are highly influenced by the shifting macro-economic circumstances and the executive management has put in a lot of capital and maintenance fees for all the varied types of machines needed to produce apparel for every target segments.
Opportunities
Many opportunities lie in the online shopping trend which is gaining a lot of relevance. Emerging economies are bound to give support H&M expansion plans; this is because the corporation is very well positioned to tap the niche organic clothing market.
Threats
The company is threatened by competitors such as Zara, Forever 21 and Gap; is a weak competitive situation as the reputation of premium luxury brands and value retailers increases. The company's most recent business-line home ware has not been capable of getting enough customers in Europe, and the low sales volume of the company is hurting profits. Finally, the issue of unemployment is pressurizing target segments to open spending time and again.
SWOT Analysis of Next plc
Strengths
Next plc is lucky because it has a strong brand name. At the moment, the shares of the company have been exhibiting an upward trend with only a very slight recent pullback. The fact that the firm has a very strong identity has driven the success of sales volumes. The case seems to be that many lovers of fashion buy next and place other brands second place because they what to be linked with a mark of quality; adorning oneself in next seems to be the hippest thing to do right now (Hoffmann 2007: 55). This is a very good thing for companies and individuals looking to invest since all the customers spread the word to their family and friends who come back to buy again. There is really no denying or arguing with NeXT’s revenue and profit figures.
Weaknesses
The weaknesses of Next lie in the fact that it is rivaled by very established apparel companies such as GAP Inc. In addition to that, the company is challenged by an unfavourable tax structure and the huge amount of cash needed to conduct market research and product developments (Ying 2011: 55). The cost structure and future profitability of the corporation are bleak because of weaker sales volumes projections. Such weaknesses may discourage investors like Caifu, who may need to look at financials that reach up to six months so as to make a sound investment decision.
Opportunities
Opportunities for Next revolve around a growing global economy in countries such as Dubai. In addition to that, there is always a chance of making new acquisitions, new markets, a growing consumer demand and avenues for venture capital. With regard to new markets, Next plc could choose to open subsidiary branches in areas of the world where prospective customers are bound to be realized.
Threats
Threats to Next plc include the fact that in the event the company falls into debt, or when the net capital proves non-sufficient to finance the business, external sources of financing prefer to offer short term loans and do so at very high interest rates; with such a predisposition, the executive management is always waiting with bated breath to see how every quarter will turn out (O'Brien and Marakas 2005: 37). In addition to that, the rising cost of deliverables and raw materials have proven to be unattractive to the business.
Management Challenges facing Next Plc and H&M
Management borrows a lot of traits from entrepreneurship and leadership in that it involves exerting all the possible influence that one can fit within an organizational structure so as to achieve the much-needed goals of the firm in question (Arrow and Lind 2014: 37). The executive management of any firm has to make all the factors of production; inclusive of human resources, to work for the greater good of the company. To achieve all the successes that the two companies enjoy today, Next Plc and H&M have undergone a number of management challenges.
Management Challenges Facing H&M
With regard to planning challenges, H&M has had trouble with projecting the events of the future corporate environment. Forecasting the needs of all the workers, predicting the trends in all the apparel industry, wages, union demands and how they would affect the organization in the near future. In as much as the company plans a lot of events, much of occurrences in the clothing industry are left to chance and the confidence in the stock market.
A sound organization structure is needed so that plans are implemented effectively. The challenge that H&M has been experiencing is that of striking a balance between job relationships, human resource and physical factors. An appropriate organization structure is the basis of effective management since minus the best performance all the other areas of the organization will be deemed ineffective.
In relation to controlling, the company has found the processes of checking, verifying, regulating and ensuring that everything takes place in conformity with the strategies adopted and the instructions issued to be very demanding. Any incoherencies in monitoring fail to diminish the gap between desired results and actual performance.
Management Challenges Facing Next Plc
The main challenge facing Next plc at the moment is to realize satisfactory Corporate Social Responsibility (CSR) in relation to all stakeholders. With regard to suppliers, the main challenge that faces executive management is to ensure the company trades ethically and acts responsibly towards all the workers in the manufacturing plants of suppliers; it is an important priority for next (Ansoff 1965: 83). On the other hand, the company deems it important to create surroundings that make it able to attract, retain and inspire the right people to work in every department all through next. In relation to the community, the company is faced with the challenge to support a much-extended range of organizations and charities. The corporate world expects companies to give donations to humanitarian courses. As at 7th January 2016, a number of traders and the management of the company faulted the warm weather in London to be the reason why the company was facing a difficult fourth quarter. All the challenges facing the company revolve around planning, organizing, leadership and controlling. With regard to planning, the company has been having a challenge of clearing up the piled up stocks of early inventory. The organizing challenges come in the name of allocating tasks among all employees; they also come in establishing authority responsibility relationships. Integration of the objectives of the organization with that of workers is also a challenge that comes with leadership at Next plc.
Organization Structure of Next Plc and H&M
Next plc
There are a number of functions that define Next Plc; these fall in line with corporate governance code compliance. The executive management and the principle board committee look to achieve audit functions, fairness in remuneration, shrewd appointments when it comes to promotion (Tanquintic-Misa 2013: 35). An example of a promotion approach that would motivate employees is an in-house promotion; this is despite the fact that the company has time and again used nomination committees in its appointments. The remuneration committee of Next plc is headed by Caroline Goodhall. It is made up of a chairman and four autonomous non-executive directors. On a different note, the audit committee is headed by Steve Barber and is made up of; just like the remuneration committee; made up of three other autonomous non-executive directors. All the committees dealing with important matters within Next plc have a tradition of holding regular and structured meetings and makes consultations with senior management, external auditors and internal auditors when the situation calls for such.
H&M Organization Structure
The executive management team of H&M is made up of a managing director and 16 other people; seven of which are female because the company has a policy of gender equality. The executive management team of H&M is charged with the responsibility towards departments such as finance, accounts buying, production, sales and marketing, new business, brand, communications, growth and sustainability, investor relations, personnel management, Information and communications technology, security, logistics and business development. The company's matrix organization connotes that the individuals sitting at the executive management committee are responsible for the support of the department, best practice and training; and for all the subsidiary branches in all countries work efficiently with respect to the policies and guidelines given by head office. All the country managers are assuming the overall responsibility for sales, profitability and departments in their workstations, i.e., regions. The diagram below shows/illustrates the organizational structure of H&M.
Both Next Plc and H&M operate in the apparel industry; these companies need to adhere to the industry's code of ethics so as to remain relevant in the eyes of all the stakeholders; most importantly the customers and the authorities where the companies are located. The fashion industry has a lot of complex connections to a myriad other fields; inclusive of advertising, manufacturing, retailing, transportation and raw materials. The profits that could be realized in the fashion industry bring about the temptation to fit into place unethical behavior. When manufacturers, producers, consumers, or models are being treated in a manner that is otherwise unethical, fashion executives can change the situation. H&M and Next Plc have been adhering to industry standards such that they have garnered the respect of customers and other stakeholders. With regard to ethics, both H&M and Next are viable candidates for investment.
Conclusion and Recommendations
Generally speaking, Caifu is better off investing in any of the above mentioned companies i.e. Next plc or H&M. This is because they are world renowned and highly venerated for their style and fashion. But one reason that Caifu should pick Next plc is the fact that it has done well to embrace an approach of diversification. Diversification in the sense that it initially started out as a manufacturer of clothes but it later went ahead to start making footwear and home products. Next plc would do Caifu much good because it would bring customers from a much more diversity in comparison with H&M; this is because of the company’s wider product mix.
References
Amason, A.C., 1996. Distinguishing the effects of functional and dysfunctional conflict on strategic decision making: Resolving a paradox for top management teams. Academy of Management Journal, 39(1), pp.123-148.
Ansoff, H.I., 1965. Corporate strategy: An analytic approach to business policy for growth and expansion. McGraw-Hill Companies.
Arrow, K.J. and Lind, R.C., 2014. Uncertainty and the evaluation of public investment decisions. Journal of Natural Resources Policy Research, 6(1), pp.29-44.
Dreeves, H., 2012. Contribution of Brand Image and Brand Identity to Gain Competitive Advantage: A Case study of UK Fashion Brands.
Goworek, H., 2010. An investigation into product development processes for UK fashion retailers: A multiple case study. Journal of Fashion Marketing and Management: An International Journal, 14(4), pp.648-662.
Hoffmann, V.H., 2007. Eu ets and investment decisions:: The case of the german electricity industry. European Management Journal, 25(6), pp.464-474.
Michalski, G., 2008. Operational Risk in Current Assets Investment Decisions: Portfolio Management Approach in Accounts Receivable (Agro Econ-Czech: Operační Risk v Rozhodování o Běžných Aktivech: Management Portfolia Pohledávek). Agricultural Economics–czech, 54, pp.12-19.
O'Brien, J.A. and Marakas, G., 2005. Introduction to information systems. McGraw-Hill, Inc..
Shen, B., 2014. Sustainable fashion supply chain: Lessons from H&M. Sustainability, 6(9), pp.6236-6249.
Romano, C.A., Tanewski, G.A. and Smyrnios, K.X., 2001. Capital structure decision making: A model for family business. Journal of business venturing, 16(3), pp.285-310.
Stokman, F.N., Van Assen, M.A.L.M., Van der Knoop, J. and Van Oosten, R.C., 2000. Strategic decision making. Advances in Group processes, 17(13), pp.1-153.
Tanquintic-Misa, E., 2013. Bangladesh Factory Collapse: Zara, H&M, Western Clothing Retailers ‘Awaken’, Sign Factory Safety Upgrade Agreement. International Business Times. Retrieved from http://au. ibtimes. com/articles/467317/20130514/2013-bangladesh-factory-collapse-zara-hm. htm#. UuT1pxCIXIV.
Ying, Z., 2011. On the Innovation of Apparel Retail Formats——Based on ZARA, H&M and Other Brands of Fast-fashion [J]. Reformation & Strategy, 8, p.041.
