H&M | Macro Environment Analysis | Report

Running Head: H&M
H&M Macro Environment Analysis
Report
System04104
8/25/2019

H&M
1
Introduction
Hennes & Mauritz (H&M) is a leading fashion Swedish company in the world, which
is known for its fashionable cloths and products (H&M, 2019). This report is based on the
business practices of H&M and about various macro environmental factors that affect the
company worldwide. This report also includes a detail analysis of various external
environmental factors with the help of ‘PESTEL analysis’. The report shows the impact of
various competitive factors in the business practice of H&M with the help of ‘Porter’s five
force’ model and explains that how these factors can be controlled or mitigated to ensure a
better organisation future.
About the company
H&M is the famous company of Sweden and it is knwoen for its fashionable
products. The full name of H&M is Hennes & Mauritz. The company operates its business in
more than 71 countries with 4,433 stores across European, Asian, American, Middle East,
African, and Australian countries (H&M, 2018). The company opened four new markets in
2018 and it is continuously focusing on expanding its markets in both physical and online
stores (H&M, 2018). The annual sales of the company was more than 210 billion Swedish
Kronor (SEK) in 2018, while its online sales were increased by 21% in 2018 in its local
currency ‘Swedish kronor’ (H&M, 2018). The company was established in 1947 with a
women wear store and with the idea of ‘affordable fashionable wear for everyone’; the
company become one of the popular brand in fashion industry. The company has 123,283
employees in 2018 worldwide (Statista.com, 2019).
External Environment Analysis of H&M
The company operates its business in 71 countries, so it is usual that company has to
face many external environment challenges to survive in the market (H&M, 2018). H&M is
known for best qualities products at the low cost and believes in provide appropriate value of
money to its customers. Any company has two important external environmental factors that
influence the company and its business oeprations. These environmental factors are divided
in micro and macro environmental factors:

H&M
2
Micro-environmental factors of H&M
The micro-environmental factors of the company include suppliers, competitors,
stakeholders, customers etc. The company have some control over these micro-environmental
factors because these factors affect the business at very low level (Sobande, 2019). For
example, the suppliers can increase the price of raw material that affect the manufacturing or
production of H&M. Like this, competitors can lower their price of their products and it can
only affect the organisation and its sales with low level but not entirely stop the production
process of the company. However, decreasing in customers can be resulted in low profit or
sales decline of the company (Belz, 2017).
PESTEL Analysis of H&M
Macro environmental factors of H&M include six major factors that can distress or
affect the business performance of the company with very strong force. These PESTEL
factors are the major factors that affect the business practices of any business organisation or
sometimes it can cause of shutdown of business organisation if the key people failed to
analyse the impact of these external factors on the organisation. The impacts of these external
factors are as follow:
Political Factors: H&M operates its business in 71 countries with more than 4300
store and 47 online stores (H&M, 2019). The company has to face various political influences
in different countries. The political change or change in political party in a particular country
may adversely or may positively affect the business practice of H&M. The company has
many stores in those countries where political instability is the major cause of economic
failure of that country (H&M, 2019). For example, company operates its business operations
in Turkey, Egypt, Lebanon, and Ukraine etc. where political instability is major risk for the
company (Flank & Karlsson, 2017). The company has to deal various problems related to
political instability issues in these countries and it directly affect the sales of the company in
these countries. It can be easily seen that in below figure the net sales of the company is very
low in instable political countries like Turkey, Egypt, Lebanon, and Ukraine etc.
Apart from this, due to some regulatory reason the company has to work together with
some local or franchising partners to operate their brands in UAE, Egypt, Bahrain, Qatar,
Indonesia, Jordon etc. These countries have strict rules and regulations for foreign
companies. It is also considerable here that franchising strategy is not the part of general
strategy of the H&M (Mathooko & Ogutu, 2015).

H&M
3
(Source: H&M, 2019)
Economic Factors: : Despite being, the concern of Brexit in the European market,
the sales of H&M was increased by 7% in 2018 in compare to 2017 (H&M, 2018). This was
really a big success for the company in recent years in European market. However, when the
profit is converted in the Swedish currency the sales of the company was grown by 10%. The
net sales of the company worldwide were 200,004 million SEK in 2017 while it is grew up to
210,400 million SEK in 2018 (H&M, 2018). The company is one of the profitable companies
in the fashion world. This makes the company more profitable and gives strength to bring
innovative ideas in the organisation. It also helps the company to provide better employment
services to its employees so they can provide bets service to the customers on the stores
(Zhang, Xue, & Burns, 2015).
Social Factors: In present days, the customer are well aware and having various
source to get information that where they spend their money. It is really beneficial for the
company to shows their CSR activities to the customers that can help the company to create a
good image in the public (Chen & Fang, 2019). H&M spends huge amount on the CSR
activities and focuses on sustainability approach. The company has targeted to use 100%
sustainable cotton in their brands and in their assortments by 2020. The company reached at
95% sustainable use cotton in their products, which is 59% more than 2017. The company