Business Model Analysis of H&M

This assignment requires a comprehensive analysis of the H&M business model. Students are tasked with applying PESTEL analysis to understand the external macro-environment influencing H&M. Further, they need to integrate relevant business theories and models to evaluate H&M's strengths, weaknesses, opportunities, and threats (SWOT). The final output should provide a detailed understanding of H&M's current business model and its potential for future success.

Business and Business
Environment

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1 Different types and purpose of organizations...................................................................1
P2 Size and scope of different types of organisation.............................................................2
TASK 2............................................................................................................................................3
P3 Relationship between different organization functions and their objectives and structure3
TASK 3............................................................................................................................................5
P4 Positive and negative impacts of macro environment has on the business operations....5
TASK 4............................................................................................................................................7
P5 Internal and external analysis in order to identify strength and weaknesses...................7
P6 Explain strength and weaknesses interrelate with external and macro factors...............10
CONCLUSION .............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment can be refer as the surroundings of an organization inclusive of its
internal and external factors which impacts on the business. The environment of the a business is
the major factor that affects the company growth and provides modification in activities
according to the time. The business environment includes the various internal and external
factors that influences the strategies and decisions of a company .In this report H&M is a
Swedish multinational clothing retailer brand which offers a huge range of men, women,
teenagers and children (Lee, Olson and Trimi, 2012). The organization is operated almost in 62
countries with approximate 4500 stores. The firm came in inception in the year 1947 by Erling
Persson. The report includes different types of organization and their purpose to operate in
different sectors such as public, private and voluntary with size and scope. It also comprises of
relationship between different organizational functions and objectives, positive and negative
impacts on macro environment, internal and external analysis with strength and weaknesses.
Moreover it also involves the strength and weaknesses interrelation with exterior factors.
TASK 1
P1 Different types and purpose of organizations
Public Sector organisation – DCMS means Department for culture, media and sport is a
public limited company that provides facilities its services to their customers. It is a department
of culture, media and social business firm as they provide different types of services such as
arranging funds from financial institution . The general purpose of DCMS is to provide quality
products to their customers by raising funds and dividing the ownership of an enterprise with
their shareholders. It is capable or allowed to sell shares to public through exchange and stocks
of public listed companies by issuing shares at share market (Rossi, Vrontis and Thrassou, 2012).
DCMS is generally originates from Department of national heritage, which was established
nearby April 1992 from other department. It was renamed as Department for culture, media and
sport in nearly 1997,
Currently it is ministerial responsibility for Olympics returned to Secretary of State. The
full title was Secretary of state for culture, Olympic, media and sports which was remained
unchanged. Legal structure of Public sector organisation -
Central government: These authorised body has proper control on public sector
organisations. They analyse all the working activities and approaches by monitoring approaches
in order to modified them for public services.
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State government: These governmental bodies analyse requirement of public
organisation in the terms of fund to initiate their upcoming program easily. These activities assist
to create legal framework for public sectors firms.
Local government: These governmental bodies initiate several programs in order to
monitoring activities of public sector firms to manage them according to future procedure as well
as activities. For this, they provide funds and capital for future activities as well as program to
attain them easily.
Private Sector organisation- These are the organisation which introduced with the
motive of profit maximisation and generating lots of revenue. H&M is the private sector
company which is founded in 1947. Company deals in clothing and accessories at worldwide
level with their headquarters is in Stockholm, Sweden. Moreover approximately 1,48,000
employees are working in the respective enterprise (Pham, Segers and Gijselaers, 2013).
Structure of the company is given below :- Sole Traders – It includes the organisation which owned and controlled by single
persons. Sole owner of organisation have total control over the operations of company
and having unlimited liability towards their business obligations. Partnership – it is consider when business is introduced by two or more individuals then
that persons and they all invest some predetermined amount of money as an capital for
running company. Every partner is liable for profit and loss as well it is divided according
to the ratio of capital invested (Bryman and Bell, 2015).
 Limited Company – LTD companies have their legal as well special identity in the eyes
of law.
Voluntary Sector Organisation – Organisation which comes under this sector are non-
profit or NGO because they are not working with the motive of profit maximisation. Oxfam is
the organisation founded in 1942 and they are focusing on poverty eradication, advocacy, policy
research and pro-migration. They are serving worldwide and its headquarter is in Oxford,
England. Legal structure of the enterprise is mention below :- Unincorporated - Management commission are there of organization which is named as
council due to formation and having don't detach categorize from trustees. Others - Royal bodies, community interest company, co-operative communities are all
considered here.
 Trust – Trustees are the person who provide money which is known charity (Carroll and
Shabana, 2010).
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P2 Size and scope of different types of organisation
There are several types of enterprise in business environment which is categorised on the basis of
their nature and size such as small, medium and large scale companies. Description of these is
mention below :-
Public sector – Department for culture, media and Sport is the company which comes
under public industry. Therefore, huge financing will play an important role for easy and
smoothly running of enterprise for giving authorities, trustees and by government. Such mission,
vision are explained below : Mission : The Department for Digital, cultural, Media and Sport main mission is to
spread awareness of sports across different sections of society, resulting in character
building and inclusive development (Gharajedaghi, 2011). Vision : Their vision statement is to emphasise on traditional games for healthy and
happier life such as Yoga, chess , Kho -Kho, etc.
 Size : From the analysis of past year information determined that having approximate
annual budget of £1.4 billion (current) & £1.3 billion (capital). Apart from this there are
approximately 550 employees are working in their business .
Private Sector – This sector is mainly governed by an individual or group of people and
their main aim for starting a private venture is to earn maximum profits. H&M is a retail
company and is privately owned which is established in Sweden. Following are the vision and
mission statement of company: Mission: Mission of company is that, they believe in a better fashion for future ones that
makes fair and fashion affordable and desirable for all.
 Vision: Their vision is that their operations run in a way that is economically, socially and
environmentally sustainable (Crane and Matten, 2016).
 Size: According to 2015, there are 148000 number of employees are working in
company.
Voluntary sector – This sector is non profit organisation which works by the donation
and sponsors of interested party. Oxfam is one such NGO operating in voluntary sector and
providing necessary services to needy and homeless people. Following is the vision and mission
of company: Mission: Their main purpose is to create lasting solutions to the injustice of poverty.
They are part of global movement where they empower people to create a future which is
secure and free from poverty (Chesbrough, 2010).
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 Visions: Their main aim is to create a world without poverty. Their are creating a world
where people are valued and are equally treated and enjoy their rights as full of citizens
and also can influence decision that are affecting their lives. There are more than 20,000
volunteers across the United Kingdom.
TASK 2
P3 Relationship between different organization functions and their objectives and structure
Organizational structure is a relationship and interaction between business that assist in
identifying it through different levels. It helps in determining roles and responsibilities which
flow within a business firm. Business firm is a structure for conducting their activities efficiently
and effectiveness. It specifies which individuals will work as superior and which as subordinates
that exist between individual and work. The function of organization is depending on various
functions such as human resource, accounts and finance, marketing and many more. Marketing is
considered as bridging gap between market and customers to satisfy their needs and demand. By
using organizational structure to increase their cost productivity and enhance their working
conditions (Welter and Smallbone, 2012). It helps in a company like H&M to deliver customer
information for developing new product and support to its quality. The major functions of
organisation functions are discussed below as:
 Research and development: This function is used to discover customers needs and their
desires what they expect, wants and also it depends on social culture. It will helps in to
improve H&M product and assist them for introducing new products H&M company. By
using research and development method it will enhance their existing products and also,
company will able to know about their goods and services and guide them by innovative
and creative ideas. This will provide company as a hint for their new ideas to generate
differentiated products. By using this approach H&M able to operate there activities by
enhancing through research and development and also helps in improving overall
department performance. It includes marketing, finance, HR and many more (Elliot,
2011).
 Marketing department: This function is related to marketing which covers a major area
of H&M company. It is a foundation of every organisation to increase their production
and profitability. This is beneficial for both suppliers as well as customers. The H&M
company has to develop and design their product according to a need and wants of
customers. It will create business strategy and ensure company's image and reflect its
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high quality. Marketing department includes production, promotion, advertising and
publicity to increase their sales, production and they provide relevant information to
finance department so that they can develop better and cost effective budget for H&M
company.
 Production department: This department will focus on H&M company which is an
essential element of a business firm to improve their productivity and increase sales of an
organisation. If an enterprise directs or improve their cost effective method, this can also
increase in production and distribution channel which can bring more profits and helps in
increase in marketing of H&M company with greater profitability. This will result in
higher cost production that will improves employees living standards and enhance their
overall sales (Cotter and Fritzsche, 2014).
 Human resource management: This function plays a vital role in organizational
structure which empowers human resource of an organisation. It will enhance their skills,
abilities and experiences while using training and development in HR department. By
using this element it will ensure about the quality of work and enhance their working
conditions by using different techniques which can reduce work into simpler and easier
form. This also includes advance human resource to look after the employees by using
upgraded techniques such as payroll, employment laws, compensation and benefits that
will motivate existing employees skills. This will improve their living standard also
enhance marketing, production and research and development department of H&M
company (Zott, Amit and Massa, 2011).
TASK 3
P4 Positive and negative impacts of macro environment has on the business operations
Every business organisation get affected from its internal as well as external
environment. Organisation need to modify them according to the situation prevailing in the
external market. PESTLE stand for political, Economical, Social, Technological, Legal,
Environmental .External factors are those which are not in the direct control of firm due to which
business have to perform activities in accordance with prevailing scenario. Macro environment
include trade barriers,tax changes,laws and so on. Factors which affect business are as follows-
Political factors: Existing or changing government policies have a direct impact on the
business and its working. These factors include labour law,environmental law,trade
tariffs,foreign trade policy,tax policies,monetary policies etc (Hair, 2015).
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 Positive impact: Stable political environment help the business to expand in their
country as well as other country. H&M have the trade agreement with the European
countries like German and UK without custom duties. The economic instability create
effect on the business due to trade barriers on North America. Reduction in Swedish
corporate tax rate from 28 to 26.3% increase the sale of the country. Swedish country
produce their product in Bangladesh due to availability of cheaper labour and cotton
which are beneficial for the company for the sometime because there is no fulfilment of
safety rules. Later on they realise that exploitation of underdeveloped market destroy
their image and decrease sales.
 Negative impact: H&M face great problem in opening stores in Israel because they don't
respect international laws. The company have to follow law of each country in which
they are entering. H&M sources mainly from countries like china, India ,Bangladesh with
custom duties. Instability in political condition of the country in the form of change of
leaders of USA ,Europe, Asia affect the business policies and strategies.
Economical factors: These are the factors which impact business and its earning for a
longer period of time. Economic factors include interest rates, foreign exchange rate,
unemployment rate, foreign trade, inflation rate etc. Increase in unemployment rate affect the
living standard of the people of the nation. Due to these element business not able to avail market
opportunities prevailing in the country.
 Positive impact : Company always produce product in the country which provide raw
material at best price for designing and inventory management system. Due to Brexit,
currencies of many countries decline but this situation risen the sale of the H&M
company as compared to earlier years (Low, Chen and Wu, 2011).
 Negative impact : Situation of recession always lose confidence of consumer on the
company's product. Due to economic problems H&M difficulty in expansion to different
countries has been surfaced. Change in Inflation rate,interest rate make trouble for MNC
to operate with same or stable pricing policies. Different taxes and import duties unable
the company to source at list price .
Social factors: Social factors are related to cultural aspect ,attitudes and beliefs which
affect the demand of the company commodity. These factors include population analytics,
cultural trends, demographics, attitude changes, lifestyle trends, ethical issues etc.
 Positive impact: H&M customer is getting the variety of products according to their
taste and preferences. Now a days people is more concentrate about the celebrity lifestyle
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and luxury they always want to copy or imitate them which directly increase the demand
of fashion products.
 Negative impact: Changes in the trend create major problem for manufacture while
designing something new. H&M operates in middle east Asia for launching cloth they
have to take in account the social and cultural changes (Van Vuuren, Roberts-Lombard
and Van Tonder, 2012).
Technological factors: Continuous innovation and development in the technology affect
the all market or industry. These factors include digital technology,intellectual properties
issues,information and communications, mobile technology etc. Companies always focus on
improving digital technology but they have to put consideration on new techniques of
distribution and manufacturing.
 Positive impact:Development of media and internet help H&M to rise its popularity
among society. Due to technology more advanced machines are required to follow certain
colours and prints for customer. H&M recently revel the club function for the consumer
to collect rewards points from online or in-store purchase with an aim to increase
repetition of behaviour by prospects (Reeves, Love and Tillmanns, 2012).
 Negative impact: Continuous change in the technology create problem for H&M to
remain in fashion industry as they need to modify their designs and patterns after every
lapse of time. Due to complexity involved in style industry the respective company need
to use new technologies for fulfilling latest demand of the consumer.
Legal factors: Every country have their own rules and regulation which have to be
follow by the organisation who want to enter in some other nation. These factor include
employment law,consumer protection, health and safety regulations etc.
 Positive impact: Due to health and safety law, business have to ensure that there is safety
and emergency exist,fire alarms,fire safety gadgets for the country and its people. H&M a
follow the labour law regarding hiring employee and not making forced contract and not
hiring any criminal which help the business to make profit.
 Negative impact: Legal disputes sometimes create a huge damage to the companies as it
was in the case of H&M who lose the big patent dispute of multi-millions pounds against
UK manufacture. To protect from this situation company started risk management
system.
Environmental factors: With the increase in awareness people are more concerned
about the environment which affect indirectly the demand of the company's product. These
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factors include geographical location,climate change,recycling procedures,waste
disposal,reduction of carbon footprint etc.
 Positive impact H&M mission is to produce 100%r renewable products till 2030 from
the old products of the firm for that they used durable materials which will be used for
products. This help in saving the natural resources of the country.
 Negative impact: H&M always remain in spotlight because of its competitors and
possessing high position due to which they have to make sure and careful whatever
actions it take. The respective company always have to look that there is no
environmental hazards involve in making those products from the sourcing country
(Reeves, Love and Tillmanns, 2012).
TASK 4
P5 Internal and external analysis in order to identify strength and weaknesses
The internal analysis includes the interior aspects of the H&M through SWOT analysis
which covers under strength and weaknesses and external analysis underpins the opportunities
and threat. These both analysis covers the all factors which impacts on the business environment
through inside and outside of the firm. The strength and weaknesses of both the analysis is as
follows -
Positive Factors Negative Factors
Internal Factor Strength Weaknesses
H&M is renowned clothing brand
from almost seventy one years ago
and at present it is the most
fascinating customer brand. It has
a wide range of products that's
why the customers has broad
range of selection such as the
customers can select any of their
favourite outfits. As it offers huge
pool of variety of fashionable
range of apparels. People also
appreciates its products because
their expectations are being
As the people can attracted
towards a brand which has a
big impression in the market.
Although, H&M is one of the
biggest brand across the globe
but it does not has a strong e –
commerce website which
seems too weak to engage the
customer on its website. Until
the people will not get the
navigation pages and product
images they will not attract to
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fulfilled. purchase product.
Each product from H&M is tested
by the experts across the world
before it release in the market. It
guaranties that all of its products
are allergy test made with skin
friendly material and that will not
harm the skin. The company
adhering to guidelines and
regulation tends to achieve a
credible position in the market
(Reeves, Love and Tillmanns,
2012).
H&M depends on the third
party suppliers for its
merchandising. It outsources
approximate 800 suppliers and
because of this it has a lower
control over production and
there is a fluctuation in the cost
of production. As it has a
dependence on third party the
vendors can impact on order
commitments and a bad
customer impression that can
influence the brand.
It also displays an innovative and
creativity at its stores because
people are attracted towards the
creativity and alluring showcasing
because the customer purchases
the products on impulsive
decision-making.
It is an affordable clothing
brand but at some point to
maintain the economic prices it
needs to compromise with
quality of clothes. This makes
it a weak brand because it
competitor like Zara offers a
extensive range of apparels
with quality assurance. That's
why H&M comes after Zara in
terms of quality.
It has top research and
development teams that conducts
a valuable research about the
market and analyse what are the
customers preferences because
there are so many things which
has can impact on the product
It invest a high amount of
money to maintain the
machines and producing the
clothes.
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development. For an example, the
customer buying power which
influences the purchasing decision
of the product. If a person low
income then they would like to
buy the affordable product but if
the product would have high price
then it will not attract to the
customers. So the research team
recognizes the needs and
requirement of the people to make
them satisfied with the affordable
prices. That's why it utilizes the
research and development team.
External Factors Opportunities Threats
H&M can grab the opportunities
to expand its stores in the Asia,
Africa and rising economies.
As there are so many clothing
brand like Zara, Mark and
Spencer Lewis, etc. They are
the big challenges of H&M to
sustain in the market.
As its has a low customer visits
on websites it can improve the
website in order to increasing it
reach to the customers. Because
customer can easily purchase the
products according to their
convenience.
Change in tax rates in Asian
markets is also impacts its
business in countries.
The purchasing power and
lifestyle of people is improving
across the globe which is making
people more brand conscious so it
is big opportunities for the people
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to look at the social factors.
P6 Explain strength and weaknesses interrelate with external and macro factors
Macro factors describes the external aspects such as political, economical, social,
technological, environment and legal. These factors are dynamic in nature and has a major affect
on the business activities of H&M. All of these are not are part of a company but still made an
impact on business and they has some strength and weaknesses that are given below -
Political - The de-globalization surges across the globe and it also give an opportunity to
explore the business across the world. On the other hand, in Israel the H&M is facing a political
to open and run the business to maintain the economic stability.
Strength : The company can expand its business according to the laws and government
legislation of the country. It can take the advantage of low tax rates to explore the business
(Pham, Segers and Gijselaers, 2013).
Weaknesses : The stores in Israel opened due to political force are facing the boycott
from the conditions as it serving in the most controversial region Palestine.
Economic - Changes in tax rates of Asian market causes to ups and down in business.
The business has an different impact according to the distinct economy of the countries.
Strength : When a country has a low economy then H&M can take the benefit of low
labour cost and raw materials cause it will maintain the less production rates according to the
company. Secondly, if the inflation rate is high then people has high purchasing power.
Weaknesses : H&M need to pay more labour cost to reduce the logistics cost from the
low economic country to the developed country.
Social - Customer preference is most important factor for H&M because they are end
user of the clothing products. They need to maintain a social media presence to make them aware
about the products.
Strength : If H&M promotes its brand among the people then it should manage the
appearance of on social media platforms to boost the brand clothing.
Weaknesses : Its compromise with quality impacts the business due to decrease in
customer demand (Bryman and Bell, 2015).
Technological - The innovative technology makes the approaches easy to the customers.
It can use the data analytics and artificial intelligence to serve the better quality service so that
the costumer does not need to wait for long (Reeves, Love and Tillmanns, 2012).
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Strength : H&M can boost the business with the e – commerce website because it has
the easy reach to the customers as they can purchase the product with less time.
Weaknesses : The company needs to capture the attention of its customer through the e
– commerce website.
CONCLUSION
Business environment can be influence by such factors like customers, stakeholders,
government, supply, demand, laws and so on. Along with these elements there is a huge range of
such factors that jolts business operations and process. Therefore this reports covers the different
organizational that are public, private and voluntary sector which has different sizes and scope
and regulation rules according to the government. The above report underpins the relationship
among the organizational objectives and structure, positive and negative impact of macro
environment along with the strength and weaknesses of internal and external environment of an
organization.
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REFERENCES
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Cotter, R. V. and Fritzsche, D. J., 2014. The business policy game. Developments in Business
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Hair, J. F., 2015. Essentials of business research methods. ME Sharpe.
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Van Vuuren, T., Roberts-Lombard, M. and Van Tonder, E., 2012. Customer satisfaction, trust
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Reeves, M., Love, C. and Tillmanns, P., 2012. Your strategy needs a strategy. Harvard Business
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Online
H&M PESTEL Analysis. 2017. [online]. Available
through:<https://businessteacher.org.uk/pestel/hm.php>.
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