H&M Business Decision Making: Cost Report and Performance Analysis

This report provides a comprehensive cost analysis and performance evaluation of Hennes and Mauritz (H&M), a UK-based fashion retailer. It outlines the steps involved in preparing a cost report, including data collection, cost segregation (direct vs. indirect), profit margin determination, and variance analysis. Various performance indicators such as turnover, costs, customer satisfaction, employee satisfaction, and profitability are discussed as key metrics for identifying areas of potential improvement. The report also explores strategies for cost reduction through systematic cost control, budget comparisons, employee empowerment, waste reduction, and technological advancements. Furthermore, it emphasizes enhancing value and quality by fostering employee satisfaction, leveraging advanced technology, implementing quality control mechanisms, and expanding business operations to increase shareholder worth and competitive strength. This analysis aims to provide insights into how H&M can optimize its operations for sustained growth and profitability.

Business decision making
TASK 2

2.1 Cost report and analysis
Hennes and Mauritz is UK based organization who sells variety of
fashionable cloth products to different age of people at cost
effective prices. Steps to prepare cost report are mentioned
below:
 At the initial stage, H&M business has to collect information
about different types of costs whether direct or indirect.
 There after, H&M has to segregate costs into direct and indirect
costs. Material, labour and other production overhead are
considered which helps to ascertain production costs. direct
while other will be called indirect.

CONTD....
 After that, management has to decide profit margin to generate
profitability through sales operations.
 H&M's managers has to construct costs report by accumulating
all the costs such as production, office and selling and
distribution costs. It helps to determine total cost of production
and goods sold by the company.
 After that, senior management need to analyse actual results
with the standard costs. Less actual costs indicates that H&M is
administrating operations effectively which helps to enlarge
profitability. Further, high actual revenue than budgeted is also
considered good and indicates high productivity and contribute
to increase profitability as well.

2.2 Various performance indicators used to identify
potential improvements
There are various performance indicators that Hennes and Maurtiz
can use to identify areas for potential improvement, described
below:
 Turnover: Regular supply of fashionable and designer cloth
products at affordable prices helps to enlarge turnover, While, if
H&M face declining in their turnover than it has to take
decisions to improve sales in the future.
 Costs: H&M has to make effective control over the direct as
well as indirect costs. However, if costs is not effectively
controlled by the H&M's management than they should take
decisions to reduce costs other wise, performance will be
adversely affected.

CONTD..
 Customer satisfaction: Supplying clothing products according to
the customer demand is necessary to satisfy them. Otherwise, H&M
will lose their customers because consumers will start to use other
competitor's products. Hence, customer satisfaction is also a
indicators which helps to measure performance.
 Employee satisfaction: Employees are the most crucial and integral
part of H&M. Therefore, company needs to satisfy their employees
through providing good salary, working culture and environment so
that they will work hard and contributes to business success.
 Profitability: It is a sign of operational performance which can be
computed through subtracting total incurred expenses out of
generated revenues. Rising trend of profit is always considered good
otherwise, H&M's management need to work on it.

2.3 Ways to reduce costs, enhance value and quality
Costs can be reduce through following ways:
 Systematic cost control through consistently monitoring of
the H&M's daily functions.
 Comparison of actual costs with the prepared budgets so
that corrective actions can be taken to reduce costs for the
future period.
 Delegate authority and responsibility to the H&M's
personnel at an incentive, specially employees to control
specific kind of costs by suggesting ideas to them.
 Saving through reduction in unnecessary expenditures such
as bargain with suppliers for discounts, eliminate wastage
by recycle and reuse etc.

CONTD..
 Tighter control on financing, curtailment of short-term financing like
training, advertisement etc., reduce pay roll costs and use advanced
technological which helps to automation process.
Enhance value and quality:
 In order to encourage H&M's workforce, managers need to satisfy them by
job specification, standardization and treat them in well manner. Health
environment can be developed through monitoring and motivating them
continuously with the helps to monetary as well as non-monetary rewards.
 Advanced technology and highly talented employees will help to produce
qualitative products and lead to high customer satisfaction. Further, quality
control mechanism also can be use to quality control.
 High profitability will increase shareholder's worth and business value as
well. Further, H&M's business expansion, high competitive strength and
strategic capabilities also contribute to increase corporation value.

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