H&M's Global Strategy: An Analysis of Trade and Business Environment

This report provides an analysis of H&M's international business practices, focusing on globalisation, international trade, and the international business environment. It discusses how H&M leverages outsourcing, particularly in countries like Bangladesh, to minimize costs and maintain quality. The report uses PESTLE analysis to examine the political, economic, social, technological, legal, and environmental factors impacting H&M's operations in various countries, including challenges related to political instability, economic fluctuations, social preferences, technological advancements, legal regulations, and environmental concerns. The analysis also covers H&M's international trade strategies, emphasizing the importance of maintaining good relationships with trade unions and understanding customer needs in different markets. Furthermore, it touches on investment opportunities and the establishment of manufacturing units in profitable locations. This document is available on Desklib, a platform offering a wide array of study tools and solved assignments for students.

Principles of
international business

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK ..............................................................................................................................................3
Globalisation:..............................................................................................................................3
CONCLUSION ...............................................................................................................................6
REFERENCES:...............................................................................................................................7
Books and Journals:....................................................................................................................7

INTRODUCTION
International business states about the commercial practices that are done beyond the
geographical boundaries of the country. It includes all the global movements of the products and
services and also involves number of employees, technology and rational property like
trademarks, patents as well as copyrights. The following report is based on the company H&M
which was founded 1947 by Erling Persson. Company is multinational brand which specialises
in clothing merchandise. Firm is having their headquarters in Stockholm, Sweden. The
following report will cover about the globalisation, international trade, international business
environment as well as opportunities for the investment for the respective company.
TASK
Globalisation:
According to the view point of Bjorvatn and Wald, 2019, Globalisation is the method in which
the knowledge, ideas, information, products and services dispersed around the world. In the
organisation, it is used in the context of economies which involves the free flow of the
investment with nations, free trade and convenient approach to the international resources that
involves enhanced returns, labour markets and perks of the common products. In context to the
H&M, management has outsourced their most of the manufacturing element to very much
experienced suppliers such as Liz Fashion Industry Limited which is a top rated producing
suppliers for the company H&M in Bangladesh which can support firm in minimising its costs
with low rates of labour, low cost of input, less cost of energy and convenient approach to the
consumers because of the legal as well as barriers in trade. This outsourcing has permitted the
firm to gain more margins of profits at the when they are maintaining high quality and level of
fashion as due to the perks which outsourcing their manufacturing has given. The firm is
concentrating on being highly flexible around the board in all the nation company is operating
world wide. It has permitted them to focus on the trends in specific areas of the world as soon as
they become essential to the consumers with the specific time from the manufacturing with in
only 20 days to the outlets. The international business environment is basically the surrounding
and situation in which multi national firms perform their business activities. It is a multi

dimensional activity that involves various factors that are needed to be considered by the
operating companies to perform effectively.
According to the view point of Eisenhardt, (2020), Some of these important elements are
– cultural variations, political risks, legal and taxation differences in different countries. H&M is
a global clothing company that have presence in over 75 countries with around 5000 stores that
are diversed in various sub brands. It is one of the largest clothing retailing brand in the world.
For this, it has used many strategies for accomplishing in the international market. There are
different types of international business environment. For scanning the international business
environment of a multi national company, Pestle is the best tool. PESTLE analysis assist
professionals in getting better insight of external factors which may impact in the operations of
their organisation. Following is the pestle analysis of H&M considering its international business
environment :
 Political – This refers to the matter of dealing with different types of government of
different countries and giving regard to their various policies. Moreover to this, policies
that are made by the government has a crucial role in the growth, survival and success of
the all the business firms and because of instability of government, change in policies ,
fluctuation in trade policies which are made by the government can effect the working of
the firm either in positive way or in negative way. Most of the manufacturing unit of
H&M is set up in Egypt, Lebanon and Turkey. The political environment of Lebanon is
unstable due to regular wars and not fix power of supremacy. The US – China trade war
has increased the prices of textile products. Many other international political issues such
as increasing demands of workers and Brexit were faced by the company in which the
firm is planning to expand which is Pakistan. In addition to it, management of H&M got
in to franchising in order to edge the restrictive conflicts of the several nations. All the
nations has their own regulations and need which the global commercial organisations
should fit to, such as consumer protection policies as well as trade legislations. If the
politics in the world remain stable than it can be more advantageous for the long term
success of the company.
 Economical – This relate to the power of a Pakistan's economy that attracts foreign
businesses. This element has the crucial effect on the entire growth of the company, it
focuses on the failure and success as well as how the firm function their operations for

long period of time in the market. Any fluctuation in the growth of economy in the
Pakistan, inflation, rate of interest as well as foreign exchange, as it can majorly effect the
long term sustainability of the organisation. The setting up of manufacturing units in
profitable for a multi national company as they have comparatively low labour rate.
According to its luxurious and premium clothing quality, it must perform and sell its
clothing products in developed and developing countries to target the high income
consumers that have disposable income to spend on the related products. In addition to it,
just like all the business industries, pandemic COVID 19 has impact the operations of the
respective firm. As the purchasing power and behaviour has altered immensely after the
spread of this disease because due to the lock down distribution chain were majorly
effected in the Pakistan.
 Social – This relate to the behaviour, beliefs and preference of people. In simple words it
means to the dynamic social status which can impact the behaviour as well as needs of
the customers of the company in the market place of Pakistan. The different country in
which it operate have different culture of people which should be considered by H&M to
attract them and make an emotional connection. It should also be flexible according to
the changing attitude of buyers with the changing trends. Additionally, customers are
now becoming more knowledgeable and aware, therefore, more they are more aware of
the organisation they prefer, company requires to focus on sustainability in their
functioning and practices over the year. In case of the company H&M, management is
appropriately understanding this requirement as well as they are concentrated on adapting
methods of sustainability which is the reason for their success in the Pakistan.
Management is also working on several practices of corporate social responsibilities.
 Technological – These refers to the level of innovatory items such as machineries and
materials used by a company. This element of PESTLE analysis involves latest type of
technology , research as well as development. Organisations that adapts it can gain the
edge over their competitors as well as it can assist the firm in increasing their
performance and productivity which can lead to their long term growth and success in the
market (Machkhidze, 2021). The technological changes has increased the online markets
in Pakistan and made the people's preference to buy without going to stores through the
different online platforms by sitting at their home. H&M has actively adopted this and

made its online presence strong. It has also collaborated with technical company Hermes
for adopting advanced technological logistics. In addition to this, the management of
H&M was focused on bettering their current supply chain in Pakistan by installing the
latest tech trends in accordance to make it more effective and efficient as well.
Organisation made the major investment in this aspect which has given them the better
results. Moreover, company also started a latest high tech distribution chain in the
respective nation.
 Legal – These tells about the different regulatory policies of different legislature and
countries that are needed to followed by a business entity to avoid legal punishments and
fines. It also means to the many kinds of legal laws which are linked to the safety of the
customers as well as workers, environment, health and many more. Franchising is not
part of the expansion strategy of H&M but it collaborated with franchising partners in
Pakistan due to the legal factors of the country and high spending power market which
was needed to be targeted. Also, organisation came in light with facing several
allegations regarding the discrimination with the ethnic minors in specific stores of
respective nations. Footage of hidden camera was came out by the local media which has
lead to company facing major backlash in the market area. It has also lead to the negative
reputation of the company that has made the consumers to switch to other brand so it can
affect the long term growth, sustainability and goodwill of the firm in a negative manner
(Ubaid, and Dweiri, 2020).
 Environmental – These are related the ecological factors that involves consideration of
the maintenance of surroundings. This factor also means to the ecological element as in
the current situation of the world so it has now become the most essential element of the
external atmosphere of the organisations. Lack of Natural resource, increase in pollution,
excessive utilisation of the fossil fuels, industrial waste, carbon emission etc. are the part
of this factor. The relevant industry of H&M which is textile, is on of the most polluting
industry. For regulation of this there are several government norms of Pakistan. For
limiting these elements, H&M has made a goal to use recyclable materials in its clothes.
The industry of fashion majorly depends on the weather situations in the various nations
in which fashion merchandise are being sold in the market of the respective nation which
is Pakistan. Management of H&M sends authentic goods to the several nations in which

they have their outlests in order to reduce the cost of curb as well as wastage. Hence, in
accordance to the recent changes in climate and the weird fluctuation in the climate
around the world, so the organisation is having the difficult time in anticipating the
emerging weather situation in accordance to send the needed supply of products.
International trade :
According to the view point of Dvas and Dubolazova, (2018), The exchange of goods or services
across different international boundaries or territories of the world is known as international
trade. It helps in providing the consumers with more choices and business firms with the ability
to sell their products to a larger market. H&M performs international trade and provide its
clothings products around different parts of the globe. The brand has always worked in
maintaining a good relation with other trade unions. It has around 15 millions members in 900
affiliated unions in 140 countries of the world. The global trade around the world has been
rapidly increasing. The methods and interest of H&M towards maintaining good relation in its
international trade has helped it in increasing the brand value through assuring its presence and
has also build positive reputation in minds of the people of the world. For maintaining a good
international trade, the company works in analysing the needs and wants of customers from
different countries through building a friendly relationship with them (Adawiyah, 2021). The
company has a strong assistance team for helping the customers with their doubts and questions.
Opportunities for investment :
According to the view point of Foss, N.J. and Pedersen, T., (2019), This tell about the
availability of chances of getting high returns on certain type of investments. The money that is
invested mostly with enjoyable returns and even multiple times of returns. The establishment of
a company is an investment by the business owner or some other sources such as bank loans with
the motive of making a source of earning a stable and higher level of money than the investment
made. Being a clothing retailer on international market, H&M has various opportunities for
investment that can provide it with high level of returns. Some of these opportunities are
identified in the following points :
 Diversifying and increasing presence – The brand already has a strong presence around
the world but there are many other emerging economies where it can diversify to increase
it market. The increasing of market through diversifying is one of the basic and common
way for a company that is interest in dealing in the global market (Westerbeek, 2021).

 Marketing – The use of different marketing tools and strategies such as – promotional
activities can help a company in making its strong presence in the market. The use of this
technique as investment can help H&M through raising its brand awareness and telling
the consumers about the way in which it can fulfil their wants. In addition to this,
increased brand awareness can assist the firm in gaining more goodwill as well as more
consumer base in different nations which can lead to company attaining their long term
sustainability in the market. With help of it organisation can also expand their business
operations in different countries as well (Radović-Marković, and Tomaš, 2019).
 Research and development – It means to the innovation, creativity which will give the
outcome in the modification in the existing goods or innovation of the new product in
order to sell in the market place. Management of H&M can invest in their research and
development department in order to understand the needs and wants of their conusmer
base in their existing market area. As it is crucially the initial step in producing the new
goods. As it can assist the firm in gaining more consumer base with offering them the
goods they need. It will lead to the long term growth and success of the company in the
market place.
CONCLUSION
From the above report it has been concluded that globalisation is an vast topic that means
the development of international influence through opening the doors of trade across different
territories and international boundaries. These help both, the consumers and the business
organisation dealing through globalisation as the conserve get a more number of choices and the
business organisations get a larger market to increase its probability. The international business
environment is the situation in which the multi national companies preform their operations. The
best way to deal analyse the factors of a business environment is the using of pestle modal. The
name of modal is the acronym of the factors infolded in it. There can be opportunities like
diversifying and marketing that can be one of the best ways for getting returns form the
investment.

REFERENCES:
Books and Journals:
Augenstein, D., 2018. Negotiating the Hard/Soft Law Divide in Business and Human Rights:
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Bjorvatn, T. and Wald, A., 2019. Complexity as a driver of media choice: A comparative study
of domestic and international teams. International Journal of Business Communication,
p.2329488419874367.
Dvas, G.V. and Dubolazova, Y.A., 2018. Development and business support of innovative
enterprises in the Russian Federation. In Innovation Management and Education
Excellence through Vision 2020 (pp. 5654-5657).
Eisenhardt, K.M., 2020. Theorizing from cases: A commentary. In Research methods in
international business(pp. 221-227). Palgrave Macmillan, Cham.
Foss, N.J. and Pedersen, T., 2019. Microfoundations in international management research: The
case of knowledge sharing in multinational corporations. Journal of International
Business Studies, 50(9), pp.1594-1621.
Machkhidze, T., 2021. Globalization and Its Effect on Business Management Processes in
Georgia (Doctoral dissertation, Webster University).
Ubaid, A.M. and Dweiri, F.T., 2020. Business process management (BPM): terminologies and
methodologies unified. International Journal of System Assurance Engineering and
Management, 11(6), pp.1046-1064.
Adawiyah, D., 2022. English Language Teaching and Globalization: to Support Economic
Growth. Premise: Journal of English Education and Applied Linguistics, 11(1).
Westerbeek, H., 2021. Globalisation and the economics of sport business. In The Palgrave
Handbook of Globalization and Sport (pp. 249-270). Palgrave Macmillan, London.
Radović-Marković, M. and Tomaš, R., 2019. Globalization and entrepreneurship in small
countries (p. 174). New York, NY: Routledge, United States.