MKT101A - Marketing Fundamentals Assignment

MKT101A- MARKETING FUNDAMENTALS
ASSESSMENT: Marketing Environmental Scan Report
H&M’s MARKETING ENVIRONMENTAL ANALYSIS
Table of Contents
INTRODUCTION...........................................................................................................................2
1

COMPANY BACKGROUND........................................................................................................3
SITUATION ANALYSIS...............................................................................................................3
PESTE analysis........................................................................................................................3
SWOT analysis........................................................................................................................5
COMPETITIVE ANALYSIS..........................................................................................................6
H&M........................................................................................................................................6
ZARA......................................................................................................................................7
Forever21.................................................................................................................................8
CONSUMER BUYER CHARACTERISTICS...............................................................................9
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................9
2

INTRODUCTION
H&M is a multinational clothing retail company of Swedish origin which provides primarily
fashion wear for men, women and children in Europe, North America, and Asia. Erling Persson
is the founder of this retail fast fashion clothing business and stared this company in 1947. It has
a widespread network that reach most of the part of globe (Datamonitor, 2006). H&M is one of
the company which has successful marketing strategies to grow their business and gets over
strong competition of clothing markets. Here, to have an insight of marketing fundamentals, I do
a research on H&M clothing company to demonstrate the model of marketing strategies used in
this company. This report provides a comprehensive analysis which covers the marketing
environment, competition and consumer behavior application for H&M.
COMPANY BACKGROUND
The Swedish clothing company Hennes Mauritz, also known H&M, is located in Stockholm,
Sweden and employs 1661,000 workers in more than 4500 stores worldwide (H&M, 2017). To
differentiate H&M from other cheap clothing retailers, their strategy is to collaborate with
famous designers as Karl Lagerfeld, Stella McCartney, Madonna, Jimmy Choo and David
Beckham to generate clothes to general population at affordable prices (Capell & Beucke, 2005;
Zimmerman, 2009). Now they consist of six different brands H&M, Cheap Monday, and COS,
Weekday, Monki and other stories. H&M’s vision is to provide the customer with better offers
than before and constantly exceed their customer’s expectation (H&M, 2017). It develops by
operating through complementary retail channels such as stores, Internet and catalogues in
various geographic location and by offering a balance product mix to attract huge number of
customers. However, currently, the company faces the threat of decreasing retail sales in
Eurozone and strong competition from Forever 21, Zara.
SITUATION ANALYSIS
Marketing is defined as “an organizational function and a set of processes for creating,
communicating and delivering value to customers and for managing customer relationships in
ways that benefits the organization and the stakeholders (Amstrong, 2014). According to Kotler,
a company can get success if its marketing mix is adapted to the trend and development in the
marketing environment (Pride, 2015). Therefore, a good understanding of the marketing
3

environment is the key point for a successful business. The analysis below clarifies the factors
affecting marketing environment in H&M
PESTE analysis
 Political factors: is an important part in decision of the international marketing strategy
of H&M. Since H&M expand its stores in different market, it is important to be updated
and aware of political changes in different market, especially in less developed country
which have more negatively political risks. For example, H&M used to get their products
made from Bangladesh due to cheap labor and cotton. After that, media started
condemning them so they signed fire protection treaty and only work with factories who
have proper equipment and safety measures implemented (Nieuwhof, 2010). Economic factors: H&M tries to keep the best prices by buying material in bulk and from
market which offer the best rates, in house designing, and effective management system.
However, to maintain competitive price strategy, they have to face economic shocks due
to their market expansion. They have faced the difficulties in interest rates, inflation and
currency rates fluctuation, taxes and import duties/laws changes in different countries.
These factors make H&M difficult to keep their low price.
 Social-culture factors: H&M is one of the very few companies in the world who have
women working as manager on 75% and 50% women representation in board (Adamkasi,
2015). This provides women the equal chance to show their talent in an industry. The
international female labor will have better wage, working conditions. This strategy of
H&M also ensure that the women in undeveloped market are not exploited. In terms of
culture, like international company, H&M faced religious differences when expand their
market in different countries. For example, in China where fur-clothing was very
successful, while this material is against in Sweden. H&M has to adapt to these factors
which will influence the customers buying behavior.
 Technological factors: Technological development will help company to grow. For
H&M, technology such as Internet, cell phones, email give them a big opportunity to sell
their clothes online. People today tends to spend less time to go shopping and finds it
comfortable to be able to shop online from their homes. To make the most profitable
global expansion, it's important for H&M to be aware of these environmental factors that
will affect their international marketing strategy.
4

 Environment factors: H&M is one of the biggest clothing retailer, so they are very careful
in for each action. They have to ensure that there are no environmental hazards involved
in the making their product, the factories are following environment law and no illegal
dumping in water.
 Legal factors: The laws in different countries can influence the business in various ways.
They can be restrictions for advertising and tariffs for export and import. Like other
company, H&M has to change their marketing mix according to different markets. For
example, H&M does not hire child labor in the manufacturing of company’s good if the
national law does not allow. Other basic laws will be implemented in hiring employee
based on his/her free will and they do not hire any criminal (H&M, 2017).
SWOT analysis
Strength
- H&M are one of the biggest global clothing retailer. They have about 4500 stores
worldwide in approximately 68 countries and around 161,000 people employed under
them. In addition, they also have a big online shop for those who come to store (H&M,
2017).
- They offer quality and fashionable clothes at a low price that almost everyone can
afford. Since they are able to outsource the production to factories in Asia and Europe to
a low price, they are able to sell them to a low price as well. They also keep the prices
affordable by using few middle-men and buying large volumes cost consciously (H&M,
2017).
- The inventories in the store are small, so they do not need a warehouse at every store.
By this way, they can minimize the cost for production.
- They have been associated with celebrities and designers
- They offer a big range of products for women, men, children, which can satisfy people’s
need when they come to H&M’s stores.
Opportunities
- H&M is a well-known brand in the world, so they have opportunity to expand their
markets.
5

- They keep expand their product line. From the beginning, they just sold women clothes,
then they included clothes for men, children as well. Nowadays, they also sell cosmetics,
accessories, home interior as well.
- They already have a big online shop which have been a success. An opportunity will be
to expand the online market in more countries and increase the sell even more.
Weaknesses:
- The biggest weakness of H&M is that their clothes aren't exclusive. For example, due to
the low price, every people can buy and found the same dresses when they are on street.
This make people buy more expensive and unique clothes from and exclusive brand.
- For clothes that are so cheap, H&Ms can’t provide the best quality. A T-shirt that costs
only $10 may have lost its shape after a few washes.
- H&M’s shops are always very chaotic. There are too much clothes everywhere which are
not in order making people difficult to find their clothes. If you just want one specific top,
you may give up because it is very hard to know where it is.
Threats
- The biggest threat of H&M is the strong competition with other companies such as
ZARA, Mango, Forever21, etc. They have the same idea in business which is to sell
trendy clothes with low price.
- Another threat is technological changes. It's as important for H&M always update and
move forward.
- Global changes can be a threat. If a country will changes regulations that influence the
import or export, it can be a big problem for H&M to get the material with reasonable
price and also to send their products to the stores all over the world.
COMPETITIVE ANALYSIS
As mentioned previously, one of the biggest threats that H&M faced is the competition with
other companies which have similar business idea such as ZARA, Mango, and Forever21. This
part focuses on comparison of marketing mix between H&M and its competitors (ZARA and
Forever21) to have a better understanding of the marketing advantages and disadvantages in
H&M in comparison with the others.
6

H&M
Firstly, the marketing approach of H&M is summarized according 4 key elements called 4 Ps:
Product, Place, Price and Promotion (Pride, 2014).
 Product: H&M offers a variety of accessories and clothing such as jeans, dresses, jackets,
jewelry, shoes with a focus on quality and latest fashion with a reasonable price. In
addition, their style which is for young people and new products frequently is an effective
strategies help H&M get a high sale of products.
 Place: H&M’s stores are located in major city with easy accessible location across the
world. It offers a variety of product at one store which makes customers feel convenient
to shop. Moreover, the products are manufactured in countries where cheap labour is
available is another strategies to reduce the costs.
 Price: H&M provides products at a reasonable price which is much lower than other
company like ZARA or TOPSHOP. The company also offers various discounts on all
their products which attract the youth and lead to increase in sale for this company
 Promotion: Their advertisements focus on the apparel images that are effective and
cheap. They also use social media to spread out their latest designs, promo codes and
discounts to encourage people to shop at their store.
ZARA
 Product: Zara is one of the leading luxury fashion labels in the world. Like H&M, Zara
offers products for men, women and children. However, they have very different
segmentation of offering. While H&M focuses on womenswear (50%), Zara’s breakdown
is very balance which is approximately 30% for each segment (Figure 1). These
weighting suggest that they competing for different consumer types. The ZATA customer
could be more mature and diverse, while H&M’s predominant consumer is young
women. Another different is that unlike H&M, Zara products are unique and distinct
label which can be identifies easily. This makes ZARA become more special and attract
more people who want to show their personality.
7

Figure 1: Segmentation of offering at ZARA and H&M. Adapt from Smith, K. 2014
 Price: Sharing the same business idea is offer high fashion clothing with low on price,
however, Zara provides different price strategies. H&M have the bigger online offering,
with currently around two thousand more options than Zara. In addition, H&M’s average
price point at H&M is $21.40 which is just a half of Zara’s price ($48) (Smith, K.). This
makes H&M become more affordable to more people than ZARA.
 Place: Most of the Zara stores are owned by the company. This helps to keep the
shopping experience at Zara intact and constant. The stores are located in posh locations
and are spacious and modern in look with walled mirrors and excellent lightings. Their
stores are designed by Zara’s decoration team.
 Promotion: Promotion strategy is one of the most differences at the two retailers. Unlike
H&M, Zara barely spends any money on advertising, does not engage in any flashy
campaigns. They prefers spending their money on opening new store and believe that its
show windows are enough for advertisements and do not need anything else to sell their
product. By contrast, H&M invests a lot of money on advertising on newspaper, online
magazine, etc. and their online shop is more successful compared with ZARA.
8

Forever21
 Product: Forever21 is a global company with a diverse range of products. It sells
clothing, accessories and apparel for girls, men and women. It focus on quality and latest
fashion with a low price and clothing for young women (Forever21, 2017).
 Place: Its headquarters base is in Los Angeles and with time has spread its network in
several countries of the globe. Most of the manufacturing factories are located in China
as it produces nearly 60% of the total products (Forever21, 2017). The company has a
wide distribution network and includes vendor and supplier manufacturing services
options.
 Price: Like H&M, Forever 21 is meeting the fashion demands of its customers at
reasonable prices. Forever 21 is one of the coveted brands because of its good price as
well as qualitative products.
 Promotion: To maintain the loyalty of its customer, Forever21 has adopted several
promotional policies. It has taken help of social media to create brand awareness through
platforms like Instagram, Pinterest, Facebook and Blogs. Commercials are shown
through both print and electronic media in television, billboards and newspapers.
CONSUMER BUYER CHARACTERISTICS
Consumer behaviour is impacted by psychological and sociological factors (Pride, 2014). H&M
is one of the most famous clothing brands in over the world and quite successful in producing
effects on consumer behaviours. Before customers make their decision, they search information
that they need. Customers get information of appearance, touch of product and choose their
preferring one. These senses and information finally create a sensation and perception in mind of
customer. This is the way how the psychological impacts of a brand or product on customers
(Pride, 2014). The brand logo of H&M is the red letter in white background. The colour red in
white is vivid, expressing the passion and active style fashion. Moreover, to make people feel
familiar with its brandIn addition to the perceived sensation and perception by customers, Coca-
Cola promotes its brand in every walk of life to get repeated exposures they also used social
media platforms such as Facebook, Twitter, Pinterest and Tumbler advertise and promote their
products. For example, it has over 14 million fans in its Facebook page (H&M, 2017). The media
9

provides it with an opportunity of shaping its brand image and pushing its products. H&M also
provides blogs, wikis and websites for their customers to review and rate their products and
services. By this way, H&M have more changes to understand their customer’s needs and made
changes in their marketing strategies to meet the consumers’ needs.
While customers decides if they want to buy a product or services and whether the brand worth a
repeatedly purchase, their attitudes and decision making is very important. Attitudes toward a
brand are the results of psychological perception and memory. Another important factors
influences customer’s decision making is the social-culture differences between the brand and
preferences of customers. For example, In Sweden, there is no problem for women to wear short
skirts and dresses. However, in Indian, the females have to put clothes covers most of their body.
Another change of H&M due to the social/culture in Indian market is that the Indian often used
their traditional clothing and colourful clothes, this facilitates H&M to adapt the style and have
change in their product. Understand the demand and social/culture characteristics of Indian’s
market will help the company have better idea of product design in order to meet the market’s
needs. So how H&M maintain its attractiveness facing the social-cultural differences and
changes? The answer is the quick changes and innovations in brand and products.
CONCLUSION
H&M is the second largest clothing retailer in the world and known for its fast-fashion clothing.
The marketing strategy of H&M is to make a brand occupy a distinct position, relative to
competing brands, in the mind of customers. It provides consumers with fashionable, high-
quality clothing at the best price possible. Based on my analysis on H&M marketing
environment, H&M expresses a good example of an international company using good
marketing strategies to adapt to the competitive environment in the world. All their marketing is
part of the shopping experience, aiming to guide and inspire customers to find the right fashion
products both in their stores and online.
10

REFERENCE
Datamonitor. (2008). H&M Hennes and Mauritz: Company Profile. London: Charles House
Capell, K. and Beucke, D. (2005). Attention Frugal Fashionistas, Business Week, Issue 3936, p.
16.
Zimmerman, A. (2009, April 21) "Do Discount Designer Duds Make The Grade?" Wall Street
Journal Eastern Edition, vol. 253, Issue 92, pp. D1-D7.
H&M. (2017). H&M. Retrieved from H&M: http://www.hm.com/
Amstrong, G., Adam, S., Denize, S. M., & Kotler, P. (2014). Principle of marketing (6th edition).
(Always learning). French Forest, N.S.W:Pear.
Pride, W. M., Ferrell, O. C., Lukas, B. A., Schembri, S., & Niininen, O. (2014). Marketing
principles. South Melbourne, Vic.: Cengage Learning.
https://lesa.on.worldcat.org/oclc/905957272?databaseList=638
Niewhof, A. (2010). Swedish fashion chain H&M under pressure. The electronic Intifada
Retrieved from:
https://electronicintifada.net/content/swedish-fashion-chain-hm-under-pressure/8759
Smith, K. (2014). Zara vs H&M-who’s in the global lead. Edited. Retried from:
https://edited.com/blog/2014/04/zara-vs-hm-whos-in-the-global-lead/
Forever21. (2017). Retrieved from: http://www.forever21.com/CA/default.aspx?lang=en-US
Adamkasi. (2015). PESTEL Analysis of H&M. PESTEL. Retrieved from:
http://freepestelanalysis.com/pestel-analysis-of-h-m/
Kotler, P., Keller, K. (2012). Marketing Management (14th ed.). New Jersey: Prentice Hall
Fontelo de Oliveira, Rita. (2015). Consumer Behavior Towards Clothing Brands. .
10.13140/RG.2.1.4827.7847.
11