BA Business Management: Environmental Analysis of H&M's Business Model

This report provides an in-depth analysis of H&M's business operations within the fast fashion industry, focusing on environmental sustainability and ethical considerations. It examines the changes H&M has implemented in its business model to address environmental concerns and stakeholder expectations, including the use of sustainable materials and modifications to its value chain. The report utilizes frameworks such as SWOT and Porter's Five Forces to assess H&M's competitive advantage, considering factors like industry rivalry, threats of new entrants and substitutes, and the bargaining power of customers and suppliers. It also explores the impact of political, economic, social, technological, legal, and environmental factors (PESTLE) on H&M's global operations. Finally, the report offers recommendations to management for enhancing H&M's market position and mitigating environmental impact, emphasizing the importance of sustainable practices and differentiating strategies within the competitive fashion market. The analysis concludes by summarizing key findings and reinforcing the significance of ethical and sustainable business practices in the fast fashion industry.

The Global Business
Environment

Table of Contents
INTRODUCTION.......................................................................................................................................3
Discuss changes introduced by company in existing business models for self regulation and adapt to
some concerns raised by relevant stakeholders........................................................................................3
Discuss whether the changes will provide some sort of competitive advantage position and provide
appropriate recommendations to management.........................................................................................5
CONCLUSION...........................................................................................................................................8
REFERNCES..............................................................................................................................................9

INTRODUCTION
In fast fashion industry, there are a lot of changes are being introduced for meeting with
needs & requirements of customers. Due to increasing demand of fashionable clothes, the issue
of pollution is also increasing within the industry. In the present report H & M has been
considered which is a renowned fast fashion company and deals in clothing for men, teenagers,
children and women (Bedianashvili, 2016). Current, it is working within 74 countries at global
level. In the present report the ethics and sustainability case study of H & M is taken into
consideration. The report includes different changes which have been introduced by company in
their existing business models. In addition, competitive advantage for company with the help of
appropriate business models such as SWOT analysis, Porter’s analysis and more have been also
included in the following report.
Discuss changes introduced by company in existing business models for self regulation and
adapt to some concerns raised by relevant stakeholders
It is stated that H & M is a leading fashion company which is working at global level in
order to meet with requirements of domestic as well as international audience in significant
manner. Due to enhancement in competition, now companies are looking forward to produce
clothes as well as other fashion accessories at lower price. Increasing demand & production
cause higher pollution. For this purpose, H & M is making some changes in their existing value
chain which is given as under:
Value chain analysis is related to monitoring all the activities by which companies
convert inputs into outputs for providing value to customers. In this, organization reviews each &
every step of production with an aim to enhance overall efficiency for gaining higher competitive
edge. There are two activities considered in value chain analysis which are:
Primary Activity: These activities are related to primary function of entity under which
inputs are converted into outputs through different activities. It is analyzed that H & M focuses
on sustainability so that they make sure to protect environment by minimizing pollution &
emission problem during production (Doh, Luthans and Slocum, 2016). For this, H & M uses
50% sustainable sources, material, organic cotton and recycled polyester for manufacturing
necessary products. Now, company has changed its business model as per sustainability and

performs such activities which are least harmful for environment. In addition, entity has always
been focused over quality so that
Support activities: In value chain analysis model these activities also play a crucial role
in providing superior services to customers. Due to this, customers are willing to pay higher
amount to company which brings more revenue & profit margin. There are a lot of activities
such as technology, infrastructure and more are used as supportive activities in business. In
context of H & M, they prefer to use efficient technologies for ensuring business growth &
success. For this purpose, they also make changes in current technologies which are being used
by company. It is also helpful in ensuring long term sustainability of organization in current
competitive market place.
Concern of Stakeholders:
Stakeholders are crucial part of business, associate with company in different ways. They
have great interest in activities of organization and have the power to influence functions of
company in an efficient manner. In the current scenario major stakeholders are customers,
investors, managers, government and more. These all are significantly associate with entity thus
have higher concerns regarding enlargement & growth of entity. In this regards PESTLE
framework has been used which is discussed underneath:
Political factors: It is monitored that in the countries such as Turkey, Egypt and more
where H & M is operates majority of business function has been highly political instable. In
addition, trade war between US and China also caused several issues for organization due to
increment in the price of textiles. So, company has to make a lot of changes in its existing
policies as well as norms to survive in global market for longer duration (Tuleja, 2016 ).
Economical factors: However, Brexit significantly affected operations of respective
company. But, after brexit, the company recorded rise in its annual sales & profit margin. Apart
from this, due to lower labor rate in some countries, it is easy for H & M to produce products at
lower price and earn huge profit. Increment in disposable income of customers also helpful in
enhancing overall profitability of organization.

Social factors: In the fashion, industry people are highly influenced by social media and
life style of celebrities. They often prefer to purchase such brands which are being either
endorsed or used by their favorite celebrities. In context of H & M, there is great opportunity for
company to earn huge profit by promoting products through social media platform. In addition,
they also need to make necessary changes in existing products as per needs & requirements of
customers. For this, managers of entity undertake extensive market research for getting
familiarity with behavior, attitudes and other personality traits of customers.
Technological factors: In current environment, it is vital for each & every company to
undertake new as well as advance techniques for performing different business activities in an
appropriate way. In reference of H & M, they have been recognized requirements of current
market (Amankwah-Amoah, 2016). So, the company has its own mobile application through
which customers can easily place the order. At the same time, they can also check reviews, rating
and more. For competing with current level of competition, H & M is required to adopt some
innovative techniques.
Legal factors: There are different norms, guidelines, legislation are followed by different
countries. In addition, countries also make necessary changes in their existing policies which
significantly affect the business. In reference of H & M, they need to measure the changes in
policies, rules and regulations of different countries with an aim to operate business in an
appropriate way.
Environmental factors: As per the given scenario, fashion industry significantly
contributed in environmental pollution. For this, H & M is highly concern about environment
thus emphasis to use sustainable resources, material as well organic product for production
purpose. By this way, they are able to minimize environmental disruption in significant manner
(Rendtorff, 2017).
Discuss whether the changes will provide some sort of competitive advantage position and
provide appropriate recommendations to management
It is analyzed that the changes which company has been introduced in its existing
business model will have to gain higher sustainable competitive advantage. It will strengthen the

market position of organization. For this purpose, position on organization can be understood by
applying SWOT analysis which is discussed as under:
Strength Weakness
 It is stated that H & M has global
presence in nearly 74 countries which is
vital for earning huge revenue and
profit margin.
 The company has variety of products
such as cosmetics, shoes, accessories,
clothes and more. With this huge
variety, they are able to attract more
and more customers.
 The major weakness of organization is
over dependency over outsourcing. In
this regard, H & M outsource most of
its products from independent
suppliers. It may incurred huge cost for
entity.
 Here, H & M has been faced huge
controversies from customers as the
company has allegations to promote
racism through its products.
Opportunities Threats
 In this, organization has an opportunity
to expand business through merger and
acquisition. It will provide them huge
scope to earn potential profit margin
(Hooper, 2016) .
 Company can also expand business in
emerging markets such as Asia, Africa
and more which will allow them to
enhance the market share of
organization in significant manner.
 There is intense competition present in
fashion industry due to presence of
other companies such as Zara, Marks
& Spencer and more.
 It is analyzed that H & M operates
business at international level so
change in trade tariff is also a big threat
for organization.
The changes which has been undertaken by organization will help to get hue edge over
other competitors. In this regards, Porter’s five force model has been used which is mentioned as
under:
Rivalry within industry: Here, rivalry is really higher within the industry due to presence
of several other competitors which are also dealing in same products.

Threats of new entrants: It is analyzed that new brand can easily enter in the market sue
to lowet entry barrier. Apart from this, customers are also not highly loyal towards brand. But, it
is difficult for a new brand to sustain in such competitive market place.
Threats of substitute: In case of H & M threats of substitute are really higher as there are
ample of other competitors present which offers alternative as well as substitute products. So,
there is huge choice available to customers to select an appropriate product (Bruijl, 2018).
Bargaining power of customers: In context of H & M bargaining power of customers is
really high due to presence of other options at market place. There are ample of other
competitors such as Zara and more are present in the market so customers have the upper hand in
terms of price and quality of products.
Bargaining power of suppliers: It is stated that bargaining power of suppliers is lower
for H & M as there are ample of suppliers present in the market. Also, suppliers like to stay with
such a renowned brand so they easily get agreed on norms of organization.
Recommendation:
 It is recommended that managers need to prepare effective strategies for reducing
environmental disruption. They need to put more focus over use of sustainable resources
as well as materials for minimizing environmental pollution. It will also help to
strengthen the market position of company in an efficient manner.
 The other recommendation is related to adopt such approaches by which company can
distinguish itself from other competitors. It is analyzed that there is huge competition is
present within fashion industry which might hamper existing market position of
respective organization. So, management is required to prepare such an efficient
strategies by which entity can easily differ itself from other competitors.
Therefore, it is imperative for company to work as per above stated recommendations as
it will help to improve the existing market image. By this way, organization can earn huge profit
margin for ensuring future growth and success.

CONCLUSION
It is summarized that fast fashion industry is caused higher environmental pollution.
There is case study based in ethics and sustainability of H & M has been refer in the report.
Discussion has been carried out about changes which are coming in the business model of
company for self regulation and concern of stakeholders. Further, these changes also strengthen
competitive position of company which has been discussed with the help of appropriate model
such as Porters five forces and more.

REFERNCES
Books and Journals
Amankwah-Amoah, J., 2016. Global business and emerging economies: Towards a new
perspective on the effects of e-waste. Technological Forecasting and Social Change, 105,
pp.20-26.
Bedianashvili, G., 2016. The Global Business Environment, European Integration and the
Cultural Potential of Social-economic Development of Georgia. Globalization &
Business.
Bruijl, G.H.T., 2018. The relevance of Porter's five forces in today's innovative and changing
business environment. Available at SSRN 3192207.
Doh, J.P., Luthans, F. and Slocum, J., 2016. The world of global business 1965–2015:
Perspectives on the 50th anniversary issue of the Journal of World Business: Introduction
to the special issue.
Hooper, M.J., 2016. The global business handbook: The eight dimensions of international
management. CRC Press.
Rendtorff, J.D., 2017. Cosmopolitan business ethics: Towards a global ethos of management.
Routledge.
Tuleja, E.A., 2016. Intercultural Communication for Global Business: How leaders
communicate for success. Taylor & Francis.