Impact of Macro Environment on H&M's Business Strategy

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1..................................................................................................................................................3
P1. Impact and influence of macro environment on a given organization and its strategies......3
LO 2.................................................................................................................................................8
P2 Internal environment and capabilities of a given organisation using appropriate
frameworks..................................................................................................................................8
LO 3...............................................................................................................................................10
P3 Porter Five Force model to evaluate competitive forces of market.....................................10
LO 4...............................................................................................................................................12
P4 Strategic planning for organization......................................................................................12
CONCLUSION .............................................................................................................................18
REFERENCES..............................................................................................................................19

INTRODUCTION
Business strategy is a long term plan and include competitive actions through which entity
accomplish their objective and goals in time effective manna strategy. Formation of strategies
requires elevation of all the internal as well as external factors of business environment by
company with the assistance of numerous techniques as well as measures (Burlton, 2015). This
report has been conducted on H&M. Company operates their services in retailing sector and was
founded in the year 1974. Entity conducts their services worldwide and has main products in
clothing and accessory segment. With having more than 1, 26,376 employees this company serve
their customers with best. Present report include discussions upon pestle analysis through which
company can determine different factors prevailing in business environment and can further
formulate strategic plans and measures as to gain significant opportunities from them. Along
with this VRIO, Porter five force analyses is being covered in this report through which entity
can make strategic enhance in their competitive image. Lastly in this report business strategic
plan is being discussed.
LO1
P1. Impact and influence of macro environment on a given organization and its strategies
Business organisation performs their activities and functions in an environment which is
combination of wide range of internal and external forces. All these factors are having capability
to affect functioning of organisation. In this is essential for H&M to properly evaluate factors
that are prevailing in micro environment, as this can have significant impact on organisational
operations. In this, pestle analysis proves to be an effective measure that benefit organisation to
review aspects like social, political, technical, economical, legal and environmental. This further
allows entity to frame competitive strategies in order to ensure maximum advantage in respective
industrial sector.
Political Factors:
Political factor indicated politics influence on organisational functioning. Main element
of this factor includes regulation trade policy, governmental policies, political stability, labour
laws and taxation rules. It has been evaluated that H&M is performing their operations in retail
segment which is facing maximum influence by political decisions. In order to overcome this it
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is essential for company to operate their business functions by staying aligned with ruling
government in order to gain their proper support.
Positive: There is wide range of taxation policies reliefs that government is offering to
entities operating their services in retail sector (Marx, 2015). Further it has been evaluated that
the sector is also receiving more tariff relaxations comparatively to other. This proves to be an
effective opportunity through which H&M can maximize their organizational profitable index in
an effective manner.
Negative: Brexit pose different type of obstacles and hamper performance of industries
engage in retail sector in United Kingdom. It not only reduces buyer’s purchasing power but also
affect individual per capita income that significantly impact upon profit earning capacity of
entities (Why is UK unemployment still low). This issue can be overcome with the assistance of
strategies in which H&M can offer qualitative products with comparatively low cost to
consumers.
Economic Factors:
Economic factor mainly include the factors that are related to disposable income,
unemployment rate, exchange rate, inflation rate, per capita income of individual in a region,
disposable income and economic growth. H&M is required to have proper understanding of
economic factors prevailing in a particular segment as to develop effective strategies against
them and undertake wide range of opportunities to enhance their productivity. In addition to this,
it has been evaluated that due to Covid there higher possibilities of economic inflation that may
further affect company economic in number of ways. In this with the assistance of efficient
financial strategies company can somehow safeguard themselves from drastic losses (Moseley,
2017).
Positive: With having economical developed structure United Kingdom offer excellent
infrastructure facilities through which organisation in retail industrial sector can enhance their
profit earning margin. It been evaluated that retail industry is leading and top contributors in UK
GDP and there are wide range of economic advantages that government is providing through
which H&M can enhance their market share values.
Negative: Due to brexit there is a significant increase in United Kingdom overall
unemployment rate; this can severely affect the workplace structure of H&M in which entity is
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required to attract potential, experienced and skilled candidates with high wages. For this, cost
effective strategies of recruitment and selection prove to be effective for organisation.
Social Factors:
This factor includes attributes like community beliefs, age distribution, population,
consumer lifestyle, health consciousness, career attitude etc (Moseley, 2017). In this
organisation is required to have proper understanding of community beliefs and their attitudes in
which they are operating their business functions as this further ensure maximum opportunity.
Further it has been evaluated that in order to influence consumers mind set after Covid entity is
required to under more safety measures in order to make customers believe that company is
conducting their operations by undertaking concern of proper consumer health safety.
Positive: In United Kingdom most of the individual mind set is tend towards fashion by
taking advantage of this opportunity H&M can expand their business operations profitability
ratio by attracting consumer towards their offerings by providing them highly fashionable
products and services.
Negative:
Retail Industry is facing strong competition in which entities undertake use of aggressive
marketing in order to attract consumer’s attraction towards their products and services at
affordable prices. Along with this, dynamic change in purchasing and lifestyle of customers also
affect H&M overall sales earning capacity. For this entity is required to engage in regular
marketing research as to satisfy customers according to latest trends in less operating cost. Covid
will impact entity is a severe manner and can further affect their profit earning capacity.
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Ilustration 1: PESTEL Analysis
(Source: PESTEL Analysis, 2019)
Technological Factors:
Is one of the most important elements in pestle analysis which is developing at constant
rate. This encourage organisations to update there all department like automation department, IT
department as per according to current technology trend (Linder and Williander, 2017).
Technology provides an opportunity through which organisation can ensure there hire
competitive advantage in respective industrial segment services. It has been evaluated in order to
beat stiff competition H&M is require to undertake use of innovation and technology as to
encourage consumer purchasing behaviour towards organisational offerings.
Positive: H&M operate their business functions in retail segment which is highly affected
sector by dynamic technology. This increases competition rate at maximum extent. In this H&M
is required to ensure that their engagement is high in online business platform as to make
significant increase in productivity and profitability of organisation (Thompson, Strickland and
Gamble, 2015). Technology provide wide range of effective measure that can have positive
impact upon H&M business growth as it allow entity to serve customer irrespective of
geographical location.
Negative: Technology increase competition rate in retail industrial segment at high rate.
Top-notch entities like Zara, Marks and Spencer etc operate their services as per latest
technological trend in order to compete with rivals in an effective way. In this H&M is required
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