Swedish multinational company H & M Hennes & Mauritz AB or H&M is one of the largest clothing retailers in the world and one of the most prominent clothing and apparel brands in the global market. The company is also well-known for its fast-fashion business model. It operates in more than 70 geographical markets with more than 4800 physical stores and more than 10700 employees. This article explores the internal and external factors affecting the business of H&M using the SWOT framework.
Situational Analysis of H&M: A Discussion of Internal and External Factors Relevant to Its Business Using the SWOT Framework
1. Strengths
H&M banks on the fast-fashion business model similar to competitors such as Zara and Shein. It is one of its sources of competitive advantage. The company also has a fashion-forward philosophy that compels it to design, produce, and sell products based on the latest trends in the market. It has also expanded its product portfolio beyond clothing and apparel.
Below are the specific strengths of H&M:
• Efficient Production Through Fast-Fashion: The fast-fashion model allows the company to mass produce its products for mass consumption at a faster rate and cheaper cost compared with the manufacturing processes of traditional clothing and apparel brands while taking into consideration the latest trends in design.
• Penetration Pricing as Value Proposition: Another strength of H&M comes from the cost-efficient fast-fashion production that enables it to utilize penetration pricing. This pricing strategy allows it to maximize its market reach and compete against high-end fashion brands and even other established casualwear brands.
• Expansion and Diversification of Portfolio: The company has also expanded its product portfolio. These include different categories of clothing and apparel such as casualwear, sportswear, and footwear, among others to compete against alternative and substitute brands. It also has homeware products.
• Strong Supply Chain and Distribution Network: Its approach to supply chain management has factored in the importance of sustainability which takes into consideration waste reduction, low energy consumption, and recycling. It also has a solid global distribution network composed of physical stores and an online store.
• Collaboration with Designers and Celebrities: An interesting aspect of its promotional strategy is its partnerships with designers and celebrities. The company has collaborated with known fashion designers such as Jimmy Choo and Alexander Wang, fashion houses such as Versace and Kenzo, and celebrities like Madonna.
2. Weaknesses
The overall business of H&M and its different strategic approaches have some shortcomings. Some of these are even a source of its weakness. The company lacks vertical integration unlike Zara and remains dependent on outsourcing. Furthermore, because of its fast-fashion business model, its designs depend too much on the latest trends.
Below are the specific weaknesses of H&M:
• Overdependence on Suppliers or Outsourcing: The company lacks a vertical integration strategy. It does not have in-house production capabilities because it outsources most of its production requirements to hundreds of independent suppliers in Europe and Asia. This strategy creates supply chain risks,
• Lack of Innovation Due to Uninspired Designs: Another weakness of H&M is that it has never seen itself as a trendsetter. It remains reliant on the fashion trends set by major designer brands or fashion houses. Some of its designs are even too generic unlike other fast-fashion brands such as Zara and Primark.
• Controversies and Notable Ethical Issues: The company has struggled with its corporate social responsibilities. It figured into several controversies in the past including alleged racism and cultural appropriation, greenwashing, and labor rights abuses in its outsourced production facilities, among others.
3. Opportunities
Remember that H&M is a fast-fashion retailer. However, Zara remains the dominant fast-fashion company while companies like Shein are building their competitive advantages using digital communication technologies. The strengths of some of its top competitors present an opportunity for the company to expand its market share and maximize its earnings potential.
Below are the specific opportunities for H&M:
• Optimization of Production and Operation: The company can benefit from adopting key supply chain management and production strategies such as vertical integration and production automation to resolve its problems regarding its overdependence on suppliers or outsourced manufacturers and labor rights issues in the past.
• Improved Product Development and Marketing: Another opportunity for H&M rests on an innovative approach to designing and producing clothing and apparel products. It can partner with celebrities, fashion designers, and even other brands to develop unique and fashion-forward designs with mass-market appeal.
• Building Further Its E-Commerce Platform: Its existing e-commerce platform or online storefront can be improved further. It has an established brand name and resources needed to compete with companies such as Shein. It can also experiment with the value-adding benefits of artificial intelligence. and augmented reality.
4. Threats
H&M operates in a highly competitive environment. Industry rivalry is intense due to factors such as the presence of differentiated brands and low entry barriers that create a threat from new entrants, the threat that comes from substitute brands and products, and the bargaining power of consumers and the bargaining power of suppliers.
Below are the specific threats to H&M:
• Threat From Online-Enabled Brands and Entrants: Shein has demonstrated that it can compete against other fast-fashion retail giants at less cost by maximizing the benefits of electronic commerce instead of traditional distribution channels such as company-owned or company-licensed brick-and-mortar stores.
• Presence of Counterfeits and Unbranded Products: Another threat to H&M is the presence of counterfeits or fake products sold on the black market and even on reputable electronic commerce platforms. There is also an abundance of unbranded clothing and apparel products that can be purchased offline and online.
• Rising Costs Associated With Production and Operations: Several costs threaten the profitability of the company. These include the costs of purchasing production inputs or raw materials, labor costs in its outsourced production facilities, shipment and other costs associated with logistics, and rent for its physical stores.
• Impact of Economic Downturns and Market Slowdowns: Fast-fashion brands target consumers that are sensitive to price. Economic downturns and market slowdowns affect the purchasing powers of these consumers and can compel them to switch and choose alternative products and even substitute products.
• Mounting Criticism Toward Fast-Fashion Companies: There is an increasing activism against companies engaged in fast fashion. This business model has been criticized due to its unsustainability or negative impacts on the environment, as well as for imitating designs from notable fashion houses and fashion designers.