Impact of Market Trends on H&M: A Detailed Study

This report analyzes the impact of market trends on H&M, a multinational apparel retail industry. It discusses the changing demands and needs of consumers, the competitive landscape, and provides recommendations for improvement.

CW1: INQUIRY PROJECT
FY028

TABLE OF CONTENT
INTRODUCTION...............................................................................................................3
MAIN BODY.......................................................................................................................3
Trends in retail industry..................................................................................................3
Analysis of the organisation...........................................................................................5
Recommendations.........................................................................................................7
REFERENCES..................................................................................................................9

INTRODUCTION
H&M is multinational apparel retail industry, they are best known for their fast
fashion clothing for women’s, kids and men’s. the company was established in 1947.
This report is a detailed study about how the latest retail market trends which are
changing rapidly have affected the functionality of the company and also a thorough
description of the internal environment and its components within the organisation and
lastly all the recommendations and suggestions will be identified under this research of
how company should improve and cope up with the different factors affecting the
company and its operations.
MAIN BODY
Trends in retail industry
Market trends and preferences will change on a rapid pace as the changing in
demands and needs of the consumer. Fashion industry is continuously evolving as
every day there is a new fashion trend introduced in the market and people get drifted
by that, so its really important for the company to keep up the pace with that ever-
changing attitude to maintain the competitive advantage in the fashion retail industry.
Porters five force model is applied to analyse this situation which is discussed below:
Porters five force
Threat of new entrant: The company have a biggest advantage of their
economy of scale which is hard to achieve by new participants because it’s not easy to
do production in large quantity for every other retailer. Also, H&M provides diversified
and wide variety of product range along with that they are customer centric and focus
on maintaining strong customer relationship and invest in their advertising and
marketing as well (Giri, Thomassey and Zeng, 2019). The most important part is that
the initial operating capital and investment required to establish a retail outlet is very
high. Some legalities were also required in order to start a business they need to avail
authorised licensing and authorisation to operate in that particular region or are. All
these factors make it difficult for the new business to enter the market.

Bargaining power of suppliers: The market in which the company operates
have a high availability of suppliers which avail the company with a wide pool of option
to choose from and change their distributor in case they are not compromising with their
demand. So, the distributer has very low power of bargaining. Being a big renowned
brand H&M can opt for different dealer as switching will not cost much. This
establishment is a big brand which is in terms proved to be a beneficial customer for
their dealers, so the profit of the company will defiantly reflect on the distributor and
increase their profit margin also (Petrusevska and Brockova, 2019). But it’s also
necessary for the establishment to do fair trade with these providers because they are
the ones responsible for the manufacturing of their goods and they do not content with
other products which is good so that there should be no substitute for their apparels.
Bargaining power of buyers: The customers have high negotiating power
because there are a huge number of buyers in comparison with the providers. There are
so many premium brands operating in the same industry and providing premium quality
products. The customers have huge option to choose from. In this case retaining the
existing customers and attracting new consumers is a very complex and necessary
function for the company. In order to maintain the engagement with the customers,
company need to provide better quality products with competitive pricing and other
value-added customers services, personalised services and establishment also have to
keep a track of changing preferences of the people in the market so that they can
produce and deliver products in accordance to that.
Threat of substitute products: There can be no substitute for garments, people
can get variation in pricing and quality. Company operates in the industry where
customers from all segments exist people who have high purchasing power can be
threat to the company as price is not much of a constraint for them, they have a wide
variety of options as so many competitive companies of H&M which are providing
premium quality apparels which are more popular and big brands then them. Online
outlets of various other companies can be a threat for the industry as they attract so
many customers as it is a convenient from of making purchases.

Rivalry among the competitors: There are so many competitors operating in
the same market in the same market where H&M operates. People wanted to be ahead
in terms of fashion so they opt. for brands who are proving best latest fashionable
apparels, those who have high purchasing power will not be bothered by the pricing so
a large segment of the market will be threat and need to be retained by the company in
order to maintain their competitive advantage. They should also manufacture products
with affordable pricing by targeting the middle-class segment as they are price sensitive
(LAMBA and POLLOCK, 2017). It will prove to be beneficial move by the company and
which result in acquiring that particular segment of the market as well.
Analysis of the organisation
SWOT analysis is conducted in order to identify the environment of the company.
 Strength
Company deals in providing wide range of products from fashion garments for
kids, females and males including accessories, eyewear’s, perfumes, vases, beauty
products, decorative items like flower pots, vases, blankets and footwears etc. They are
a multinational brand which is operating with their outlets in so many countries all
around the world. Their pricing strategy is one of their biggest strength as they are
providing high quality products at affordable pricing. Establishment also have a fast
fashion model which enables them to provide quick delivery of their commodities to their
stores in no time. H&M presence on all the digital platforms is exceptional and their
customers services through E-commerce outlets are very efficient (Martino and et. al.,
2017).
 Weakness
The biggest backdrop of theirs is that they don’t have their own single
manufacturing unit and they are highly dependent on outsourcing. They are also
criticised for one of their promotional campaign where they promote racism and
addressed a black kid as monkey. One of the issues with the company is that they rely
on the fashion standards which were determines by fashionistas, so it is hard for the

industry to cater to their needs because they demand products which are totally
different from the current fashion style (Mierzejewska, 2017).
 Opportunities
The company has to expand themselves in developing countries because that is
going to be very beneficial for the organization in the market. H&M can take advantage
of the e-commerce platform because that is the new trend which is coming in the
market. The customers are getting very used to this platform which can turn out to be a
great advantage for the organisation to be able to match the expectations of the
customers. The demands of the customers are also increasing which can be fulfilled by
the organisation by having the right methods to do their deliveries. The biggest
challenge of the organisation is that they are not being able to reach the customers on
time therefore the reputation of the organisation is also getting impacted (Théot, 2020).
Improving lifestyle has to be present in the company so that there is going to be higher
functioning which would be present and the third parties in the company also have to be
maintained so that the company will be able to operate effectively.
 Threats
There have to be changes coming in the market which have to be adopted by the
company in order to make sure that they are having the right customers, loyalty and
trust which is present in them. The fashion industry is changing quickly and social media
is influencing the customers as well. The organisation will have to make sure that they
are making the right methods and strategies to be able to match this thread otherwise
the company is going to lose their loyal and trustworthy customers. The competition in
this retailing industry is very high therefore the company will have to work on their brand
reputation and image in the market so that there is going to be higher functioning which
would be present (Ma, 2018). The foreign exchange currency is also fluctuating which
can turn out to be a great threat for the company and its profit margins in the market.
The company is investing a lot of amount on expansion and making the company have
higher reputation in the market which is going to make the organization have higher
functioning.

Recommendations
There are going to be a requirement of a lot of improvement which would be
required in the company so that there is going to be effective working which would be
present. It is very essential for the organization to make sure that they are making the
right decisions in the organization which is going to make the performance level of the
organization (Mierzejewska, 2017). Trends and designs in the market have to be
invested by H&M so that there are going to be required changes which would be coming
in the organization. The customers of the organization have to be well maintained and
satisfied in the organization so that there are going to be higher functioning which would
be present. The customers need new and unique designs of products which are present
in the market so that their lifestyle and demands can be matched therefore it is very
important for H&M to invest in the research and development department from time to
time so that there is going to be higher improvement in the designs. This factor is also
going to help the company be able to gain a competitive advantage and make the
organization have higher profitability margins which is going to make the organization
have higher performance. The brand value and reputation worldwide of the organization
needs to be improved so that there are going to be higher functioning and operations
which are going to be present and that is going to make the reputation and standards
for the customers of H&M going to increase which is going to be a great factor. The
competition in the market is also increasing rapidly which is why the organization will
have to work on these factors to make sure that there is effective working which is
present of the company in the market (Domröse and et.al., 2020).
The employees have to be given the right wages for the efforts they put in the
organization which is going to make the performance of the organization higher. H&M is
getting in cost friendly labours in the company which is a great factor but that can make
the company have a problem in the future as well because these workforce are not
going to be experienced as well as trained which would make the company have higher
functioning and profitability of the company is going to impacted which is a great factor
for the organization to have. There is a lot of pressure on the leaders and managers of

the organization and that factor needs to be monitored so that the company will be able
to operate effectively in the market (Moreno-Gavara and Jiménez-Zarco, 2019). There
is a lot of delay in the deliveries which the company is having for their products and
services because of the lack of knowledge of the employees which are present in the
company and that needs to be maintained so that the company will be able to operate
effectively and efficiently in the market. The company can have a lot of offers and stores
expansion which the organization can have so that there is going to be higher
functioning which is going to be visible and that would make the company be able to
attract more customers. The company will have to work on their licensing the products
and services which they are introducing in the market so that there would be higher
functioning and performance which is going to be present of the company which is
going to be a great factor for the organization to have in the market.

REFERENCES
Books and Journals
Domröse, L and et.al., 2020. Assessment report: recent initiatives in science and policy
to promote sustainable consumption and recommendations to enhance the
German sustainable development strategy in, with and by Germany.
Giri, C., Thomassey, S. and Zeng, X., 2019. Customer analytics in fashion retail
industry. In Functional Textiles and Clothing (pp. 349-361). Springer,
Singapore.
LAMBA, P. and POLLOCK, S., 2017. DIGITIZATION IN THE RETAIL INDUSTRY:
INSIGHTS ON THE POSSIBILITIES BEYOND E-COMMERCE & THE
DRIVING FORCE BEHIND ITS OMNI-CHANNEL GROWTH. International
Journal of Sales & Marketing Management Research and Development
(IJSMMRD).
Ma, J., 2018, July. Consumer responses to controversial marketing communications-the
case of H&M’s “coolest monkey in the jungle” merchandise. In 2018 Global
Marketing Conference at Tokyo (pp. 1017-1017).
Martino, G and et. al., 2017. Supply chain risk assessment in the fashion retail industry:
An analytic network process approach. Int. J. Appl. Eng. Res, 12, pp.140-154.
Mierzejewska, J., 2017. Analysis and evaluation of marketing strategies for clothing
companies on the example of Zara and H&M (Doctoral dissertation, Katedra
Procesów Zarządzania).
Mierzejewska, J., 2017. Analysis and evaluation of marketing strategies for clothing
companies on the example of Zara and H&M (Doctoral dissertation, Katedra
Procesów Zarządzania).
Moreno-Gavara, C. and Jiménez-Zarco, A.I., 2019. Discussion, Conclusion and
Recommendations. In Sustainable Fashion (pp. 183-194). Palgrave Macmillan,
Cham.
Petrusevska, G. and Brockova, K., 2019. THE ROLE OF INTERNATIONAL
TRADE. Knowledge International Journal. 35(1). pp.293-297.
Théot, K., 2020. How Changing Consumer Attitudes Toward Climate Change are
Creating New Opportunities in the Fashion Industry.