H & m case study
- 1. H & M H & M in fast fashion: continued success? Seminar in Public and Business Policies
- 3. Case Overview • Case basically discusses the success of H & M. • According to H & M the success is due to, best fashion items at best price. • Above point was only possible because of best management of supply chain and policy of, to provide latest fashion at best prices. • How policy of expansion implemented? • Culture and other policies regarding management style, operations and employees. • Business Model of H & M and its competitors and how competitors strategies’ forced them to adopt a policy change.
- 4. Introduction of the Company • H&M stands for Hennes & Mauritz • Multinational fast fashion company. • Having 3500 stores, in 61 countries and 132,000 employees till March, 2015, started from 1947 and pioneer in “fast fashion”. • What is fast fashion? • In 2009, the founder’s grandson Karl-Johan Persson joined as CEO and became had become the global leader in the ‘fast-fashion’ segment. • In 2010, they stepped up investments in order to strengthen the brand further and secure future expansion, according to Karl-Johan Persson. • Basic business model is ‘cheap-and-chic”, • Emphasis on high fashion at prices significantly below those of competitors, with the fundamental principle, being ‘Fashion and quality at the best price’.
- 5. Products/Items Overview • H&M deals in fashioned apparels, shoes, cosmetics of women, men and children and other home interior items etc. • Company and brand success was because of heavy advertisements of high profile stars. • Making the brand attractive and loved to be affiliated by people. • Advertisements and other related pictures on next slide, showing this policy. • Major competitors are, Inditex Zara (Spanish brand), Gap, UNIQLO (Japanese brand). • Inditex took over H&M in China, as well, but only in China.
- 7. Apparel Industry • Total market size of the global textiles, apparel and luxury goods market was worth $3049.5 billion in 2011. • Annual compounding growth rate of 3.7% for the period of 2007 to 2011, which is very less. • Slow growth increases competition, which is further intensified due to a large number of small players. • Multitude of suppliers for retailers to choose from. • As international trade liberalized, the number of suppliers globally increases and competition among manufacturers in low wage regions intensifies. Switching from one supplier to another is not a major issue.
- 8. Industry Analysis by Five Forces Model • Generally bargaining power of suppliers is weak, as many suppliers are available to supply in different countries and registered with them. • Bargaining power of buyers is more, there are many competitors and they can switch to other brand easily. • Threat of substitutes is also very high. • Industry rivalry is some sort of high, as industry growth is low, and even one new entrant disturbs it.
- 9. H&M’s Core Values 1. Keep it simple, 2. Straightforward and open- minded 3. Constant improvement, 4. Entrepreneurial spirit 5. Cost conscious 6. Team work 7. Belief in people. • H&M spirit is the extraordinary focus on employee involvement. • Trying new things is also encouraged among purchasing managers • But while trying something new and making mistakes is OK it is important that the same mistake is not repeated. • Experimentation is also present at the store level where interior decoration, lighting, colors, clothes displays. • Locations are swiftly changed depending on sales and customer preferences.
- 10. Business Model of H&M • Retailer of fashion apparel, cosmetics, accessories and shoes for women, men, teenagers and children. • H&M operates from leased store premises, through internet and catalogue sales and some franchise stores. • H&M not owns any factory, in fact outsourced to suppliers/factories. • 10-15 % growth target. • Designs are created by 140 in-house designers.
- 11. Business Model of H&M • Having stores like, • The Collection of Style (COS) offers customers a combination of timelessness and distinctive trends. • The Monki stores provide innovative collections and an inspiring fashion experience characterized by playfulness and colorful graphic design. • Weekday, The Cheap Monday, & Other Stories are other segments or brand positioning of franchises.
- 12. Management Policy and Style • Based on, • simplicity, • a down-to earth approach, • entrepreneurship, • team spirit, straight lines, • common sense and • a belief in individuals and their ability to use their initiative.
- 13. Business Model of Inditex (ZARA) • In-house design and a tightly controlled factory and distribution network. • Company has the ability to take a design from drawing board to store shelf in just two weeks. • Giving ability to launch new items every week, so people keep visiting. • Has a policy of zero advertising and instead invests its revenues in opening up new stores. • Having brands like Kiddy’s Class stores, The Pull and Bear, Massimo Dutti, etc.
- 14. Business Model of UNIQLO • Established a business model encompassing all stages of the business – from design and production to final sale. • Competing by developing unique products. • Quickly makes adjustments to production to reflect the latest sales environment and minimize store-operation costs, such as personnel costs and rent. • High-quality clothing at reasonable prices. • Operates normally under its own name.
- 15. Comparative Analysis on Key Figures H&M Inditex UNIQLO 3500 stores. 2000 stores. 848 stores. 132,000 employees. 80,000 employees. 80, 000 employees. 61 countries. 74 countries. 25 countries. More than $16, 137 million revenue. $ 17,159 million revenue. $ 7835 million revenue. Net Income of $ 2, 880 million. Net Income of $ 2, 372 million. Net Income of $ 688 million.
- 16. Financial Comparative Analysis, Current Ratio, Profit Margin for 2012
- 17. SWOT Analysis • Strengths • In-house designers. • Outsourcing of production, so finding cheap. • Quick adjustment to latest trends. • Better prices than competitors. • Weaknesses • Weak policies regarding catering new entrants. • Opportunities • More opportunity to open stores, in middle east and pacific asia, as well as , south asia.
- 18. SWOT Analysis • Threats • Major threat, is rise in prices of cotton and forcing H&M to decrease profit margins. • Slow growth in industry, so competition is going to intense day by day. • So, needs policy change to tackle it. • Policy of expansion adopted, as other UNIQLO and Inditex increasing presence day by day and hence profits.
- 19. Stores Operations and Management • Positions stores at best locations. • Important communication channel H&M has with its customers. • Always opts for renting store premises, which increases flexibility and adaptability. • As, aligned with H&M values, decision making is decentralized and store managers have considerable autonomy. • Each manager works like entrepreneurs and authorized to take independent decisions, within overall guidelines, like one’s own business. • Increases loyalty and commitment to the organization and motivates them as well.
- 20. Store Operations and Management • Every two or three years a completely new interiors programme is created. To make it attractive for visit continuously. • Both in windows and inside stores, are changed frequently. • Consumers are continually attracted to visit the stores to keep up with the latest collections.
- 21. Management of Marketing and Social Media • H&M’s strong brand image is associated with value and stylish collections. • Highlighting the brand’s high level of awareness, H&M was ranked 21st among the top 100 most valuable global brands according to Interbrand in 2011, with a brand value of $16.5 billion. • ZARA ranked 44th with $8 billion dollars. • Gap ranked 84th with $ 4 billion dollars. • Basic difference is created by huge advertisements campaigns, with high profile celebrities.
- 22. Management of Marketing and Social Media • Has a strong presence on social media, • Facebook • YouTube • Instagram • Google+ • Chinese social media like, Youku, Sina, Weibo. • Updated on regular basis. • Millions of H&M followers share ideas and opinions and get quick answers to their queries. • At its launch in August 2010, the iPhone app was the most downloaded application in almost all of H&M’s markets.
- 23. Policy and Management about Designs • Design is centralized at the Stockholm headquarters and includes a team of almost 200 designers and about 100 pattern makers. • Having direct contacts with factories around the globe. • Centralization enables them to minimal time to market. • Also, allows them to bank on latest trends and responding it. • Much effort is put into researching and predicting emerging market trends. • They conduct customer and employees surveys, focus groups and dialogue session, then adding some their own taste, to make a new entry in market (design). • Fashion shows in Milan, Paris, Beijing, Tokyo and inspiration from celebrities are important source of designs.
- 24. Policy and Management about Designs According to Ann-Sofi e Johansson, head of H&M design department: ‘We try to look out for trendsetters, what’s popping, vintage looks, what’s happening at music festivals. The Internet is getting more important as are catwalk shows, but these are more of a confirmation of what we know is out there.’
- 25. Policy and Management about Designs • So, H&M is a fashion house in its own right, with its own trends. “We do not copy”. • H&M tries to keep unique personality in every country by adding some own touch. • Some are same worldwide, so giving advantage of economies of scale in production.
- 26. Outsourcing Policy and Management • All the production is outsourced to factories in Africa, Pacific Asia and Middle East. • Most of the products are made in China. • Continuously redefines the supply chain, operations systems and guidelines to increase efficiency. • This way, H&M has been able to reduce lead times by 15–20% in recent years. • Also forces production houses to follow their CSR policies. • H&M conducted a total of 2,024 annual audits of suppliers, of which 78% were unannounced. • For quality assurance and • CSR polices check.
- 27. Management of Distribution, Warehousing and IT • H&M makes sure not to place orders too early. So, that if trend changes, new designs can be placed. • H&M puts more emphasis on economies of scale in its supply chain set-up compared to Zara, which focused on flexibility and speed. • The shorter lead time is always not the best, the right lead time is bringing the price and quality into balance. “H&M ‘s Philosophy”. • H&M offers products at cheap price than others, by avoiding middle men, purchasing from low price markets like China, cost conscious and efficient distribution system.
- 28. Management of Distribution, Warehousing and IT • Taking H&M’s mix of supply chain management, logistics and IT into consideration, the company is considered a world leader in these areas, • Close coordination between procurement staff and production houses. • Intelligent use of ICT tools. • Purchasing flexibility decreased incredibly lead time. • Improved logistics to have lightning fast turnaround speed of just 20 days. • All the above points make H&M, a truly unique supply chain innovator.
- 29. CSR Policy • The company has formulated seven commitments called ‘H&M Conscious Actions’. • These include, • Adopting ethical practices, • Improving working conditions, • Using natural resources responsibly, • Other projects include community investments.
- 30. Human Resource Management at H&M • Key of the recipe is, a strong corporate culture with well defined values and making sure that, employees internalize these values. • Use formal training programs as well as on-the-job training to socialize employees into this culture. • Internal promotion and job rotation are two main things also. • Based on commitment, loyalty and regarded as well. • There is alignment between individual goals and corporate goals, as “The key words for continual growth are responsibility and commitment………..I tell employees, if you do not grow, neither will H&M.” (Head of HRM, once said) • Basic policy of HRM department is, “We believe in people”.
- 31. Human Resource Management at H&M • Basic policy of HRM department is, “We believe in people”. • Open-door policy is also great contributor to success of H&M. As, employees can directly discuss any matter with management. • H&M values personal qualities much more than formal qualifications. • In sum, H&M likes employees, • Who are self driven, • Like responsibility, • Decision making and • Capable of leading.
- 32. Internationalization and Expansion Policy and Management • Fashionable and elegant clothes at competitive prices and catering for the dynamic tastes and preferences of customers are main drivers of success. • Since, 1990, the expansion policy has been aggressive. • After 2005, H&M entered 20 countries with more than 1000 stores. • H&M’s strategy is to recruit local people wherever it opens a new store. • H&M looks for those who have the ‘right’ personality and potential to understand and adopt the core values of the organization.
- 33. Internationalization and Expansion Policy and Management • Replicating the same business model and store concept thus defines the core of the company’s expansion strategy. • Before opening a new store, first conducts a thorough evaluation of market potential. • This is done according to factors like demographic structure, purchasing power, economic growth, infrastructure and political risk. • H&M tries to keep minimum formal rules and works in flat management hierarchy, in every country. • Simple business model universally and making subtle modifications and adaptations at the local level.
- 34. Internationalization and Expansion Policy and Management • H&M is really a success story, as many stores initially expanded internationally, but later badly failed like Mark & Spencer, C&A and Benetton. • All success is because of fashion at price less than competitors. • H&M strives to continue this strategy and expand more and more than competitors and cater new entrants as well.
- 35. Our Policy Change Recommendations • They should focus more actively on supply chain management, instead of expansion, so that cost can be managed, decreased. • Connect with cotton producing countries or producers, so that cotton can be available at desired price. • As CEO H&M met with Bangladesh trade minister and requested to regulate industry, but our recommendation is to do more actively. • They should come to south Asian countries as well, like in Pakistan ChenOne, Charcoal etc. are generating well profit with high margins. • South Asian countries are cotton producing countries, so that selling in this market by purchasing from local suppliers will give high margin.
- 36. Cream of Case Study • Attractive fashion and designs, good quality at prices less than competitors. • Flat Management and employees run store like their own. Gives sense of ownership. • Value employees. All above are main factors, contributing to H&M’s success.
- 37. Conclusion • H&M is a great success, from 1 store in 1947, to more than 3500 stores in 2015. • All, is because of trust in its employees and management. • Good management throughout the supply chain. • Quickly reacting to market trends.