Impact of Micro and Macro Factors on Retail Business

The provided report discusses the effect of micro and macro factors on a retail company's growth and performance. It highlights the importance of adapting investment criteria and establishing wholly-owned subsidiaries to minimize risk and gain competitive advantages in the market.

Retail Theory and
Practice

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Introduction to Retail ................................................................................................................1
Introduction to H&M.................................................................................................................1
Key relevant changes within the UK fashion retail...................................................................2
Changes in the micro environment............................................................................................4
Strategies and tactics used by H&M .........................................................................................5
Recommendations .....................................................................................................................6
CONCLUSION...........................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Today fashion industry is an international and highly globalised industry. Fashion is the
culture of time, attitude, habit and forms of behaviour which are shared and inherited from
generation to generation within the society (Hristov and Reynolds, 2015). It includes clothing,
footwear, accessories, lifestyle, make up, hairstyle and body. In context to Hennes & Mauritz
(H&M) , a Swedish multinational clothing retail company which is introduced in the year of
1947. Its headquartered in Sweden and segmented its product for men, women, teenagers and
children. This report covers introduction about fashion industry and about H&M, analysing
macro and micro factors by using PESTLE analysis, strategies used in retail industry and
appropriate suggestion for improving the growth of fashion industry.
MAIN BODY
Introduction to Retail
Retail is the process of selling consumer goods and services to customers through
multiple channels of distribution to earn profit. Retailing is an integral part of everyday lives and
it is one of the fastest growing sector. Apart form this the reason behind the growth of retail
industry is increase in income of youth segment, rises in nuclear family and increase in social
media penetration. Furthermore, fashion industry is one fastest growing industry which is
concerned with art, culture and social lives of people and produce product according to the taste
and preference of customer as it's regarded as customer oriented industry (Hagberg and
Kjellberg, 2015). Companies who operates their business in retail sector has enormous
opportunities due to adaption of innovative technologies like online trade or shopping which
made them one of the booming industry among other competitors. In case of H&M, one of the
leading company in retail industry which is operated in the year of 1947. Due to qualitative and
creative product of H&M attract the attention of customers and leads to achievement of higher
level of profitability. However, retail market is growing, government is implementing favourable
policies and encourage them to adapt latest trends and technology in order to stand firm among
competitors.
Introduction to H&M
Among fashion industry H&M, a famous and multinational retail company which is
founded in the year of 1947. It's headquartered in Sweden and its business operated in 62
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countries with 4500 stores and around 1,32,000 people are working in company. Along with this
it is the second largest global retail marketing company with having innovative and creative
products which enable them to be a threat for competitors by utilising the opportunities to grow.
Furthermore, H&M is providing clothing and accessories for men, women, children and
teenagers . It is well known for its quality of product which increases the satisfaction level of
customers and also it rises the sales ratio of company. Under strong global competition several
elements which H&M has applied like better quality of product, lean production for eliminating
waste of product in order to capture the market effectively and gain competitive advantage.
Apart from this, it has its own nine brand such as H&M, Monki, Weekday, Other stories,
Cheap Monday, H&M home, Arket and Afound which offers trendy and fashionable products in
clothing, accessories, homewares, beauty etc. They are very customer oriented company and
always concern about the convenience of customer which engage them to trade their product
online, social media and in creative locations. However they are integrating their physical stores
with digital channel by developing different online application, sites and apps. It believe in
optimising the available opportunities or challenges which enable them to expand their market
worldwide and enrich their revenue effectively and efficiently.
Key relevant changes within the UK fashion retail
PESTLE analysis is an analytical tool to identify the macro or external forces which
impact or influence company's growth directly or indirectly (Elbeltagi and Agag, 2016). This
tool benefits company in various ways such as being cost effective, having effective strategic
planning, identifying challenges or threats , and enabling them to make use of available
opportunities to grow. In context to H&M, a multinational fashion retail company imply the
PESTLE analysis in order to evaluate or identify and anticipate the future difficulties and take
corrective course of action in order to get positioning among market. The PESTLE analysis of
H&M are as follows:
 Political factor: This factor encompasses the political stability, government policies and
legislation which affect the company's overall performance and productivity of company.
Being a multinational company H&M faced a political issue i.e. restriction on trade in
import and export in another country which affect its expansion and growth. However
UK government is stable in nature which enable H&M to take corrective course of action
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which is facing by different countries. By this company can enhance and enlarge their
market and can improve the brand image.
 Economic factor: This factor deals with economic stability which impact organisation
profitability and performance (Berry, Broadbent and Otley, 2016). It includes tax rates,
interest rate, foreign exchange rate etc. Recently UK faced a severe financial crises which
hamper the growth of H&M. The differences in market size which reflected greatly on
the consumer behaviour and the overall performance of company. Along with this, H&M
took this financial crises as a big opportunity to grow and implies several offers on
product which attract the customers towards product. By this company is able to stand
firmly among the competitors which improves the standard of company effectively and
efficiently.
 Social Factor: This factor is concerned with social environment and identifying the trends
and taste and preference of population. It includes family demographics, cultural trends,
attitude, changes in lifestyle etc. In present scenario fashion among youth is changing
day by day and influence of social media impact the attitude or perception of customers
which become very challenging factor to H&M. However, being a customer oriented
company H&M target mainly youth and young adults which enable them to improve their
profitability and help them to attain stability in competitive world.
 Technological Factor: This factor consider the rate of technology innovation and
development that affect the company career growth (Moloney, 2015). It includes changes
in digital and mobile technology, automation etc. Furthermore, H&M developed
innovative application, online sites, apps in order to analysed and identified the taste and
preferences of customer. The development of technology improved and popularised the
H&M brand and enable them to do online selling in seven market.
 Legal Factor: This factor includes policies, regulations, interest rate, restriction etc. which
greatly impact the performance of company. Political factor is very much linked with
legal factor. Recently H&M faced a issue regarding modification in regulation of trade in
different country. Yet UK government is static in nature which helped H&M to
accomplish maximisation of profit with the optimum utilisation of resources and helped
in enlarge the market effectively.
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 Environment Factor: This factor relate to the influence of clean environment and
ecological aspect in order to create healthy and safe environment. Currently consumers
are very much aware about eco friendly product (Cox and Dannehl, 2017). For which
H&M took initiative in recycling and reuse the product in order to minimise the wastage
of product. By this company can enlarge and enrich the profitability and productivity in
an effective an efficient manner.
From the above statement PESTEL analysis enable the H&M to tackle the challenges
effectively by adapting opportunities and implementing corrective course of action.
Changes in the micro environment.
The external factors of H&M will directly affect the business of the organisation. The
external factors consist of the following.
Competitors- It was seen that the competitors of H&M had made some changes in the
working strategy and the prices of their products. Due to this H&M started loosing its customers
because the products were available at a very low price. So for retaining its customers back the
company needed to change its pricing strategy. And the company will also require to introduce
some innovative ideas so that more and more customers are attracted.
Suppliers- The organisation also needs to maintain a good relation with its suppliers. As
this will help the company in negotiating the price of the products (Wertheim-Heck, Vellema and
Spaargaren, 2015). And the cost of the company will be saved. This will directly help H&M in
attracting more and more customers because low cost will be involved in the manufacturing and
transportation of the products as compared to its competitors.
Government intervention- Any change in the policy of the government directly affects
the business of H&M. For example if the government has made any changes in the trade policy
than it would be necessary for the organisation to plan the strategies according to those changes.
Otherwise the business might suffer loss. If the company fails to follow the policies imposed by
the government the competitors will take the advantage to attract the customer's. And the
company might also face some legal issues .
Customers- The change in the taste and preferences of the customers of H&M must be
kept into consideration. The plans and strategies for increasing the sale will depend upon the
availability of customers and their demand in the market. The change in the need and preferences
of the customers will depend upon the lifestyle, living standard, preferences, and the income
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level of the customers. Rapid changes takes place in this type of industry and due to this the
demand of the customers also changes. So H&M needs to retain its customers by introducing
innovative ideas in the manufacturing of the product.
Strategies and tactics used by H&M
Business environment is a sum total of internal and external factor which impact
company positively and negatively and company's overall performance (Banerjee and Mishra,
2017). There are various factors which affect company's macro and micro environment which
impact its productivity and profitability. Furthermore, to tackle these issues or challenges H&M
implies various strategies or tactics in order to accomplish organisational goal effectively and
efficiently which is described below:
Macro Factor:
 Fluctuation in exchange rate: In context to H&M it faced an economic crisis i.e.
fluctuation in exchange rates which impact its growth and purchasing cost and it is on of
the economic factor. To tackle this issue H&M implies cost benefit analyse which
evaluate the economy as well as country's profitability. It enable the company to sum the
benefit of a current situation and then subtracts the cost associated with taking that action.
Apart from this it help H&M to evaluate direct and indirect cost, opportunity cost which
provides the clear scenario of current situation and help company to take effective
business decision.
 Decrease in operating profit: In case of H&M it undergoes through fluctuation in
operating profit which impact the sales and brand image of company among competitors.
However, to resolve this challenge H&M apply market analysis i.e. it's an quantitative
and qualitative framework which analyse the market in both volume, value and customer
segment which enable them to improve their sales growth effectively. Along with this it
allow company to concentrate on its potentiality and gain competitive advantage which
enhance the sales and profitability of company.
Micro Factor:
 Change in customer taste and preference: In current scenario fashion industry is one of
the fast growing sector which is fully based on customer wants and needs (Fernie, Fernie
and Moore, 2015). In relation to H&M it faced an issue related with change in customer
demand in frequent basis. However, to overcome this issue H&M adapt customer
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analysis which is related with the satisfying customer demand, needs and fulfilling their
desires in order to achieve organisational goal. Apart from this they developed several
online trade, apps which made more convenient to customer in purchasing the product
and it reflect the company by increasing their productivity.
Recommendations
From the above mentioned it has been recommended that retail fashion industry is one of
the booming sector among other competitors. In current scenario each day customer demand ,
attitude and perception towards are changing according to the culture, trends and social media.
For attaining and gaining customer attention H&M should be more effective in terms of produce
creative products which increase the satisfaction level of customer. By this company can
improve overall performance and productivity. Currently competition is raising day by day in
fashion industry which affect the expansion and career growth of company (Stan, 2015).
However, company should adapt opportunities and imply latest technology in order to stand
firm among competitors. Apart from this company should be punctual and time keeping in
delivering the product which help H&M to gain customer trust and can improve the morale of
customer. Furthermore, company should provide quality of product which enhance the market
growth and help the company to achieve pre determined goal in an effective and efficient
manner. Along with this, company should maintain a fair price which can be affordable by
customer and firm can capture better positioning among industry (Christina and et.al., 2015).
However, every geographic regions has its own culture, beliefs and values which has great
influence on company's market expansion. Therefore, company should be maintain a good brand
image by respecting and honouring each culture and based on their taste and preference company
should introduce effective product. By this company can obtain and achieve competitive
advantage which enable them to attain maximisation of profit with the optimum utilisation of
resources. Apart from this company should focus on analysing or identifying the customer
demand as it changes on frequent basis. With the help of this they can easily grab customer
attention and at the same time also establish the competitive image at market.
CONCLUSION
From the above report it has been concluded that micro & macro factors are are affecting the
growth and performance of the company. It is also learned that company is using expansion
strategy for making their business more efficient. Other than that for expanding, company should
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make changes in their investment criteria (Dholakia, Dholakia and Chattopadhyay, 2018).
Beside company need to have their wholly owned subsidiary which help them to minimise their
risk and gain competitive advantages in the market. By this company can accomplish their
organisation goal effectively and efficiently and can enable them to gain competitive advantage
which improves its proficiency.
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REFERENCES
BOOKS AND JOURNALS
Hristov, L. and Reynolds, J., 2015. Perceptions and practices of innovation in retailing:
Challenges of definition and measurement. International Journal of Retail &
Distribution Management. 43(2). pp.126-147.
Hagberg, J. and Kjellberg, H., 2015. How much is it? Price representation practices in retail
markets. Marketing Theory. 15(2). pp.179-199.
Elbeltagi, I. and Agag, G., 2016. E-retailing ethics and its impact on customer satisfaction and
repurchase intention: a cultural and commitment-trust theory perspective. Internet
Research. 26(1). pp.288-310.
Berry, A. J., Broadbent, J. and Otley, D.T. Eds., 2016. Management control: theories, issues and
practices. Macmillan International Higher Education.
Moloney, N., 2015. Regulating the retail markets. In The Oxford handbook of financial
regulation.
Cox, N. and Dannehl, K., 2017. Perceptions of retailing in early modern England. Routledge.
Wertheim-Heck, S. C., Vellema, S. and Spaargaren, G., 2015. Food safety and urban food
markets in Vietnam: The need for flexible and customized retail modernization policies.
Food Policy. 54. pp.95-106.
Banerjee, M. and Mishra, M., 2017. Retail supply chain management practices in India: A
business intelligence perspective. Journal of Retailing and Consumer Services. 34.
pp.248-259.
Fernie, J., Fernie, S. and Moore, C., 2015. Principles of retailing. Routledge.
Stan, V., 2015. Antecedents of customer loyalty in the retailing sector: the impact of switching
costs. Journal of Applied Business Research. 31(2). p.371.
Dholakia, R. R., Dholakia, N. and Chattopadhyay, A., 2018. Indigenous marketing practices and
theories in emerging economies: Consumer behavior and retail transformations in India.
Journal of Business Research. 86. pp.406-415.
Christina, S. and et.al., 2015. A socio-technical approach to improving retail energy efficiency
behaviours. Applied Ergonomics. 47. pp.324-335.
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