The purpose of the findings in the paper is based on the emphasis of the strategic management of H&M with the main research problem being to undertake an in-depth analytical approach to the company's strategy of marketing and how it is being implemented. The paper will begin with a overall introduction with a measure of background information related to the research question with descriptions of the defined processes, benefits and challenges met in strategic management. The practical aspect will comprise of the exhausted analysis of the strength's of the company, its weaknesses, opportunity and strength.
Company Information
Hennes and Mauritz also known as H&M exists as a $100 billion Swedish based company dealing in the design and retail of fashion wear and related accessories with offers of a broad range of wear, cosmetics, apparel, footwear as well as accessories for all age groups which include women, children, women and men as well as teenagers (Stefan & Wita, 2007:575). H&M is majorly operational in the regions of Europe, North America and Asia with a formidable market presence in over 30 countries with the company's main headquarters located in the Swedish capital Stockholm with nearly 87,000 employers working on a full time basis. The main ideal in the operations of H&M is the provision of a broad range of products that are fashionable and of high quality at prices that are affordable as the company is engaged n continued development of its collections so as to create a customer experience whereby their customers find a new product every time they come to the company's stores for shopping. The company's fashionable products are created mainly with nearly 100 designers and purchases will additional pattern makers not forgetting the permanent designers with the inclusion of Stella McCartney and Madonna among others such as Karl Lagerfeld.
CEO education background and reasons for his success
Stefan Persson is a well known Swedish business magnet ranked among the nation’s 12 billionaires as well as the world's 12th richest person in the world. All of this stemming from the death of his father that ushered him as the company's successor which presented him with the main responsibility of transforming the company into a global fashion formidable force in addition to being the largest European apparel retailer (Mithat. et al. 2011:1560). Stefan Persson has managed to sustain the success of the company as he operates on the notion of developing the objective ideals of the company in the long term rather that making a quick exit after making some financial gain this is in addition to his operational approach that discourages cost reduction by reduction of budgets for advertising as its it does not achieve the company and success of operational efficiency as reduced advertising will mean reduction in customers that will culminate in reduced sales revenues which affects the general operations in the company.
Company vice presidents, directors and board members
The company's team of management comprises of the managing director as well as other fifteen individuals with executive management holding the responsibility of the departments of design, purchase, finance, accounting, and expansion, interior design with display as well advertising, communication, human resources, security, and information technology. This matrix organization means that company members within the team of executive management hold the responsibility of the support, training as well as best practices for specific countries in which the company is operational. The company is in compliance with the regulations of insider trading with several of the company's employees being registered as insiders as well as positioning that gain them to information that is considered internal only. The company's Board of Directors is charged with the management of the affairs of the company on the shareholder's behalf under the leadership of Stefan Persson as the chairman. In addition the Board of Directors is also charged with daily company management of the company which is done according to the issued instructions of the board of directors.
As mentioned the main responsibility of the board of directors is the management of the affairs of the company on the behalf of the shareholders with their election based on the vote of the shareholders in the Annual General meetings. In addition to regulations and recommendations the work of the board at H&M operate on a work plan of work distribution between the board of directors and its associated committees such as the managing director, financial reports, investment and finance with the work plan comprising of the auditing work plan committee (Chitiris. et al. 2001:35). The board of directors is chaired by Stefan Persson with Mia Brunnell Livfors, Anders Dahlvig, Lottie Knutson, Sussi Kvart and Bo Lundquist as board members. This is in addition to Karl-Johan Persson as the company’s president and chief executive officer with Jazz Hayer as the vice president and Tonny Everett as marketing specialist.
The company's organizational structure is based on the segmentation of in form of departments such as design, purchase, finance, accounting, and expansion, interior design with display as well advertising, communication, human resources, security, information technology and corporate social responsibility. The company's corporate culture is based on the normal culture of any international corporation with the objective being the treatment of the entire world as a s single market place with its functions in several countries but with the same operational plans with no favor for specific countries from any of the areas of market with implementation of a similar strategy in all its global locations. The main ideal being the provision of products entailed within multiple segments rather than a single objective marketing which is typical for a company like H&M with adequate resources to cover a wide area of market selection.
Figure 1.1: H&M Organizational Structure
Company headquarter location and number of countries in which it is operational
The company of recent has also been engaged in the development of collections based on interior designs that cater for its varying customers with the inclusion of individuals of all ages and tastes which is the core objective of the company which is to provide fashionable products to its clients. Furthermore, the company y boasts of over 2000 stores spread around the globe with provisions of internet based shopping and sale catalogues in countries such as Norway, Finland, Germany and Austria. This is in addition to the company's outsourcing of all its production procedures with over 600 independent based suppliers that are a mainly located in Asia and Europe as well as a combination of 16 production based offices (Marilyn & Nixon, 2010:215). Suppliers have personal subcontractors and the general amount of units of manufacture totals to 2700 this in all on the backdrop of an approximation in 2010 of 12 billion Euros with the targeted growth of H&M at 10 to 15 percent as such the company is in plans of the establishment of new stores on an annual basis. As such the company is the employment plans of more staff with estimations standing at 6000 to 7000 workers.
Company annual sales
Sales with the inclusion of VAT showed an increment of 11 percent in local currency for the duration of the financial year with a comparison in sales unit showing an increase of 1 percent. Conversion into SEK sales with the inclusion of VAT also showed an increment of SEK 140,948 million. On the other hand the exclusion of VAT showed an increment of SEK 120,799 million this is in addition to the company’s gross profit for the financial year of 2012 amounting to SEK 71,948 million which is a 9 percent increment with correspondence to the gross margin of 59.35 percent. This being at an operational profit amounting to SEK 21,754 million which is a representation of an operation profit margin of 18 percent with the operational profit for the year 2012 being charged at the depreciative amount of SEK 3,705 million as well as consolidation of net interest income at SEK 5.31 million as well as profits at the end of financial amounting at SEK 22,285 million. The company's gross profit of the financial year 2012 after the application of the tax rate of 24.3 standing at SEK 16,867 million as a representation of per share earnings at SEK 10.19 million showing a 7 percent increment; the annual profit is a representation of equity returns at 38.4 percent with capital employment returns at 50.3 percent. H&M's presentation of over 40 markets and a climate of consumers within the industry of fashion retailing show a variation in the countries within the year 2012 this is in addition to the environment showing a continued market gain share in appreciation of the solid customer offers of quality fashion at a price that is affordable in pricing. An increment in sales at 11 percent in the local currency as well as 1 percent in unit comparisons with sales showing a strength in countries such as the United States, Canada and China as well as Russia. Sales were positive in the newly acquired markets of Bulgaria and Mexico with the concentration being in southern Europe with the impact in consumption being impacted in the face of uncertainties in the global and domestic economies as reflected in European countries in which it has operations for instance Greece and Italy although the company has continued to show solid performance in comparison with the markets in these countries where the company is in anticipation of future expansion. The company's brand's for instance COS, Monki, Weekday as well as Cheap Monday are also showing continued expansion more so COS that has continually exceeded the expectations of the company and showing rapid expansion with over 18 stores and located in 6 new countries (Erhard, 2005:91). The end of the 2012 financial year witnessed the expansion of the brand with 64 new stores located in 64 countries with expansion plans for the year 2013 with preparation plans entailing the establishment of new fashion brands as well as other stores with the initial launch being in ten European countries in addition to Belgium and Netherlands. The total annual gross margin stood at 59.5 percent with this figure being an outcome of varied factors both as internal and external with an impact on decision making that align H&M and its strategy of always providing the best offers for its customers in specific individual markets (Nag. et al. 2007:935).
Company core business
The core business of H&M lies in sustainable development as shown in its extensive work of creating sustainability in the clothing industry as the concept has been embraced in the areas of environmental concerns, ethical considerations, human rights and anti-corruption among other areas. As such there have been substantial efforts in the promotion of development in a social approach with the objective being reduction of the impact on the environment. The core objective as such is to formulate positive changes within communities in which the company is actively engaged so as to secure its long term sustainable development core business objective (Prahalad & Hamel, 2006:68). In pursuit of this objective the company has invested in resources aimed at increasing sustainability in the entire production life cycle from initial stages of design to customer care recommendations provided to the customers when they purchase H&M products. The overall emphasis remains on sustainability in application to all business operational areas of the company such as from the use of materials that are sustainable with the company being the largest organic cotton consumer with focus on areas such as extensive initiatives in the improvement of the working conditions within the supply chain.
Fashion industry statistical figures show the company with changes in its average employee numbers with the equivalent of full time employees in its global operations from the year 2005 to 2012 with the company having an average of 53,430 employees across the world (Mahoney & McGahan, 2007:79).
Stock prices and investor relations
The company's investor relations are entailed in the company's engagement in the form of dialogue that is open with the stock market and related stakeholders. As such the information presented is a reflection of the performance of the company’s share on the Swedish and global stock market.
Key ratios per share 2012 2011 2010 2009 2008
per share equity for Shareholders, SEK 26.49 26.65 26.69 24.54 22.33
Earnings per share, SEK 10.19 9.56 11.29 9.90 9.24
Change from previous year, % +7 -15 +14 +7 +13
per share Shareholders, SEK 9.50 9.50 9.50 8.00 7.75
Market price on 30 November, SEK 215.9 214.0 237.4 206.1 149.0
P/E ratio 21 22 21 21 16
Proposal by the Board
In 2010 H&M implemented a 2-for-1 share split. The years 2008–2009 in the table above have therefore been adjusted for the new number of shares.
Distribution of shares, 30 November 2012
Major shareholders, 30 November 2012
Source: Operational analysis data, 2012
Major and international business strategy management issues
The company in its global expansion is experiencing growth in the quality and sustenance with high profit through offers that are compelling to all its customers in the world with positive opportunities after years of formulation for continuity and expansion that is successful. The company provides an inspiring shopping experience in its stores with attractions that attraction fashion enthusiasts across the world. For instance its Vasteras women clothing store that was opened in 1947 in Sweden has developed into a international brand of high rank (Saini, 2009:89). H&M continues to grow in its branding and contemporary concepts with room for expansion for the company in all its operational markets in existence this is reflected in the company’s 10 to 15 percent annual growth concerning new stores with the inclusion of COS, Monki, Weekday, Cheap Monday and H&M Home with the 2013 spring expansion including these new brands as well as other stores. For instance in the year 2012 the company increased its expansion rate with the opening of 304 new stores in comparison with the original plan of 275 outlet stores with the end of the financial year witnessing over 2700 stores opened in 48 countries. There is a continual evolvement of the international retail industry with changes in the streetscapes witnessing changes as well.
SWOT analysis and major competition from companies in the same line of business
In the SWOT analysis of H&M we see the company's strength's in the facts of being one of the biggest and most extensive international retail clothing companies with over 2000 stores in nearly 45 countries and over 90,000 employees under direct employment (Paccess, 2010: 5). This is in addition to the company's provision of clothing that is of quality and matching with current trends at prices that are affordable as well as a reduced general delivery time with only a 12 week process from the stage of design to the phase of retail. The company also boasts of guest designers coming into the company's stores as well as its associations with famous celebrities that allow the company compliments with offers of improved control and flexibility.
On the other hand the company's weaknesses are identified in its large volumes purchase that could result into overstocking with the eventuality of reduction in its prices that are already affordable. The other identified weakness is the company's customer base being largely affected by the changes the general macro economic conditions in addition to the large investment in capital and maintenance for its machine types that are needed in the production of clothing for specified targeted segments. The opportunity for the company lies in its growing online shopping platform that is gaining positive customer experiences and industry reviews as well the support of emerging economies where the company is operational in its plans for expansion. This has allowed the company to position itself strategically in order to enjoy the niche organic apparel based market.
The threats faced by the company are is situation of weak competition in the face of prominent value retailers and the rise of luxury retailers offering premium brand products as well as the slow pace of the company's acquisition of the European market that has led to reduction in sales. This is in addition to unemployment that continues to exert pressure on the targeted segment in addition spending which is discretionary. The company faces competition from companies such as Zara, Forever 21 and Gap.
Conclusion
As presented H&M follows its business operation principles of strong valuation of fundamental respect for its customers and the abilities on an individual basis in showing initiative this is addition to its over 100,000 employees driven by design and creativity in the building of a company that will dominate the global fashion industry. This is in addition to its passion of fashion with ambitions to continually succeed the expectations of its customers this constant drive has led the company to continually improve its services with the same spirit since the first store was opened in 1947.
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