Retail Practice and Theory: A Comprehensive Analysis of H&M

This report offers a comprehensive analysis of H&M's retail practices and theoretical frameworks, examining its operations within the UK fashion market. It begins with an introduction to the company, followed by an exploration of the changes occurring in the UK fashion retail landscape, including a PESTLE analysis to understand the macro-environmental factors. The report then delves into the micro-environment, utilizing Porter's five forces to assess competitive dynamics. Furthermore, it highlights the strategies employed by H&M, such as cost leadership and differentiation, and applies cyclical and accordion theories to understand the evolution of its retail approach. The report concludes with recommendations for H&M, providing a well-rounded view of the company's strategies and market position. The report is a valuable resource for students studying retail management and business development.

Retail practice and
Theory

Table of Contents
INTRODUCTION...........................................................................................................................1
Introduction to the organisation or company..............................................................................1
Changes that occurs in UK fashion retail....................................................................................1
Changes that occur within micro environment of organisation..................................................3
Strategies and theories that is used by organisation....................................................................4
Recommendation for H&M........................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES...............................................................................................................................8

INTRODUCTION
Retail can be defined as small business that offer and sale goods or services to an
individual in small quantity. This transaction takes place through different types of channels like
online and offline. Moreover it is identified as a sale that ensures the purchaser is the end user of
product or service. Fashion retail is the combination of several clothes that is related with a
supply chain that start from manufactures and end at the consumer. The main agenda behind
fashion industry is to offer different fashion goods and services that are developed according to
the trend and market conditions (Stewart and Shamdasani, 2014). It is a type of retailing that
undertakes the sale of clothes, apparel and accessories that enhance the personality of an
individual.
Introduction to the organisation or company
Hennes & Mauritz is a multi-national retail clothing organisation that offers fashionable
clothes for men, teenager, women and children. They are operating their business in more than
62 countries with a number of 4500 stores. H&M is the second largest retail organisation that
operates their business in global world. In order to provide their products at global level they
make presence of their products online as well as offline method that help them to deliver their
products to all types of people. It was founded in the year 1947 with a small store that particular
offer women clothing. It headquarter is situated in Sweden while it first international store was
established in London in the year 1976. This results that company expand themselves in overall
Europe and in the year 1998 they started their online operations in order to satisfy needs of
customers. In the year 2007 organisation started to operate their business on individuals bases
that helps to increase their market share. This results that they are able to measure their profits
for each unit. Further to develop it in more effective way H&M collaborated with more than 900
independent suppliers that helps them to deliver their product across their physical boundaries.
Changes that occurs in UK fashion retail
In UK there approximately 5000 small and large organisation are successfully operating
their business in fashion industry from more than one decade (Sorescu and et. al., 2011). It
governs that they are able to formulate their clothes according to the market conditions by which
they are also set clothing trends in organisation such as M&S, Zara, Gucci, H&M etc. As 2018
was a difficult year for UK because there are several changes are seen in industry due to which
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organisation need to re-invented new methods, machine due to which they need to invest more
time and money to develop their products. In this task PESTLE is implemented that help to
understand the market environment. So it is easy for H&M to identify the ways that helps to
launch their product effectively in UK.
Political factor- This factor consists the interference of government in a business or
industry. It involves government policy, political stability, foreign trade policy etc. From the
above factor it is stated that operations of H&M are directly affected by government rules and
regulations (Sciacovelli and et. al., 2011). Therefore they need to formulate effective strategy
that help to respond towards current and upcoming regulations of the government. H&M is a
global brand that operates a number of stores in overall globe. So it is important for them to
monitor the political risk in order to retain their business for a longer period in the market.
Example- Brexit raises different problems in the country due to which the sale of their products
will impacted in order to overcome from this management of H&M increase sale of their
products among other countries of world.
Economical factor- Economic factor have an important role in the organisation as they
directly impacted on the profits of the organisation. Factors that are included in economic aspect
are interest rate, exchange rate, inflation and per capita income of consumers. Macro economical
factors deal within government expenditure, taxation policy etc. Where as Micro economical
factor include income, employment rate of local individuals. UK is a developed country so it is
easy for H&M to sale their product because people are able to dispose their income on brands.
This shows that they sale their product with in last years with more than 10%.
Social factor- It is also known as socio-cultural factor that involves the shared belief,
value and attitude of the population (Lorenzo-Romero and et. al., 2011). Factors that are included
in this is population growth, gender, sex, age-distribution etc. The main agenda behind this factor
is to identify the similar interest of the country. Like in present scenario there is constant increase
in the transparency level of consumers. Therefore H&M put more emphasis on its product to
develop as a brand. Apart from this they focuses on CSR practices to attract more number of
customers which also benefits to promote their brand.
Technological factor- In present scenario there is rapid and dynamic changes in the
technological aspect of country. They affect on different business on different products like the
method or way to produce goods and services and development of effective supply chain to
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distribute their products. In context of this H&M developed online website and mobile
application that helps an consumer to collect more rewards points from online and in-store
purchase. Moreover it also increases the strength of their logistic system which helps to manage
and control their deliver services with more efficiency and effectiveness.
Environmental factors- In recent years this factor is impacting on all organisation and
industry that perform their operations in market. Whether they are product or service industry
environmental aspect plays an vital role in the organisation. It is important because there is
regular increase in scarcity of raw materials, more pollution etc. So in this H&M adopt those
changes that reduces the negative impact of their products on environmental conditions. Along
with this H&M developed the aim of using 100% renewable materials to make their products by
the end of year 2030 by using their old products which are easy to recycled.
Legal factor- Each country developed different some rules, regulations, laws and
legislation that help them to keep the interest of their of their local organisation. In context of
H&M they develop health and safety act, consumer rights and laws, product labelling etc. which
help them to perform their function in ethical way. Last two years of H&M are related with
various dispute such as infringement by retailer, lost of patent etc. that raises risk for
organisation as it is related with the reputation of the organisation (Jones and Murphy, 2011).
Changes that occur within micro environment of organisation
Micro environment includes those elements and area of operations that directly affect on
the decisions of the organisation. Factors which are included in this are customers, competitors,
suppliers etc. So to understand them Porter five force in included in this task that show force of
each of this aspect.
Threat of new entrants- This force is high in approach which determines that clothing
industry attracts more number of investors. UK is a developed country due to which their market
is unsaturated. Moreover there are low or less barrier present in market for new companies to
enter in the market.
Bargaining power of buyers- Another negative aspect which is included in this is related
with consumers that directly reduces their profits. It determines that there are low switching cost
is present in market which create positive factor for customer. As price is the crucial factor that
impact on buying decision of consumer.
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Bargaining power of supplier- This approach is not very high in fashion industry of UK
because there are lot of suppliers are present in market. They provides goods and materials to
customers at very low cost. So it is easy for H&M to formulate those decisions which are
favourable for them as they holds more power than the supplier. While in situation of distribution
their products approach is high as they are totally depend on them to deliver their products (Dant,
Grünhagen and Windsperger, 2011).
Rivalry among the competitors- Their are lot of competitors are present in market of UK.
Like H&M faces different challenges from local, national and multi-national competitors.
Further there are low opportunity are present in market because it is a mature market. At last due
to which this approach is high in market is related with the changing trends in the demand of
customers. This directly impacts on the economy scale of the organisation which result that is
hard for them to maximize their profits.
Substitute products- The force or aspect of substitute product show that there are
different copies or similar products are provided by organisation that increases their market
share. This approach is low in fashion industry because it require high investment which
increases their market share. On the other hands an organisation complete their goals due to
which there is increase demand of customers.
Strategies and theories that is used by organisation
Strategies are the ways that help an organisation to complete their goals within minimum
time period through making effective plans that are related with organisation. Some strategies
that are implemented by H&M are mention as follow:
Cost leadership- This is strategy that is based on economic of scale and in origin of the
business enterprise and the function that are performed in the organisation. H&M manufactures
and deliver their products at global level (Dalkir and Beaulieu, 2017). So this strategy works for
them as it includes those areas in which they are able to manufacture their goods at low prices.
This directly increases the profits of the organisation.
Differentiation strategy- This strategy is developed in some recent years and they main
focus on the innovation of the product. H&M is using this strategy from last two decades which
helps them to complete their goals within minimum time period. This strategy helps them to
develop unique and creative design for the organisation. Moreover most of famous celebrities
and designer also contributed in developing exclusive collection for H&M.
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Cyclical theories
Cyclical theory is one of the most well known and traditional theory of organisation. It
work as the wheel of retail theory. Moreover this theory help us to understand the changes that
take place in retail organisation. In this context some of the steps that help to understand market
in better way is mention as follow:
 The first step that is taken by organization is to reduce their price that helps to attract
more number of customers(Combs, Ketchen and Short, 2011). As it decreases the margin
of their product but in context of H&M is also impact on their brand and reputation. To
overcome from this they need to adopt changes that are according to their update trends.
 Another step of cyclical theory help to make changes is related with high price of
products. Like H&M charge high prices from customers as it increases their profits with
enhancing their brand image in parallel way.
 In third step the profits of organization increases by making effective efforts in the
promotion of goods rather than making changes in existing products of the organization.
This helps them to defeat the issue of over pricing of the goods that increases production
cost of H&M.
Management of H&M uses this theory specifically to overcome from the issue of similar
products and threat of new entrants through fighting on prices which directly impact on profits of
the organization.
Accordion theory:
This theory is also interpret as the general theory which provide possibility to retailer for
realizing the mandatory changes that helps them to take first mover advantage. This is a
systematic way to understand the whole institution that start form production process and finish
at till the product reach at their outlet (Brigham and Ehrhardt, 2013).
Cyclical theory is used by organization to understand whole market and make effective
decision in the organization. While the accordion theory is used by organization to make changes
in the process of production activities. Some steps that are used by them to understand whole
market is mention as follow:
 Changes that take place in organization is related with their existing products. In context
of H&M this is useful to find out factors which is related technological aspect.
Management of H&M uses social media to predict the changes that are related with it.
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 Another factors which is related in an organization is to expand their market area by
opening their store into new potential areas. To overcome from the threat of competition
accordion theory is useful as they reduce the sale of other products by anticipating and
predicting the environment of the country.
Recommendation for H&M
By combing all the above points some recommendation that is analysed from the report is
mention as follow:
In present market condition there is tough competition exist in the market of UK. It
determines that huge number of retailers are offering their products in market for satisfying the
demand of customers. Therefore they need to develop effective supply chain so they approach
their customers within time period. Along with this changes that is executed by H&M need to
follow with proper ethics. Like follow of human rights, employment act, company law etc. helps
management to operate their functions within more efficiency and effectiveness. While on the
other hand they need it also help them to accomplish their objective within in each
country(Bowen, 2016).
Another approach that is useful for them is to make collaboration with private as well as
public organisation that increases their market share. Government work within organisational
aspect of country that determines that they accomplish their goals through monitoring relative
factors such as social and environmental factors which impacts on supply chain of organisation.
Further it is also the responsibility of government to make fashion collaboration because this
industry is growing with rapid face that help to combine more taxes for the organisation.
CONCLUSION
In the end from the above report it is concluded that retail stores are increasing their
business rapidly. The reason behind this fast development is that they focused on the needs and
demands of end user. It helps them to make changes according to need of customers which
results that they profitability and productivity of organisation is impacted by the changes.
Whereas to implement them in the organisation management need to formulate effective strategy
and plans that bring positive result in the organisation. While in fashion industry or any other
industry micro and macro environment also plays a major role that impact on product and
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services that is provided by the organisation. Change in trend, increase in pollution, new policy
etc. are some example that show impact on environment on organisational products.
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REFERENCES
Books and Journals
Tate, W. L., Ellram, L. M. and Dooley, K. J., 2012. Environmental purchasing and supplier
management (EPSM): Theory and practice. Journal of Purchasing and Supply
Management. 18(3). pp.173-188.
Stewart, D. W. and Shamdasani, P. N., 2014. Focus groups: Theory and practice (Vol. 20). Sage
publications.
Sorescu, A. and et. al., 2011. Innovations in retail business models. Journal of Retailing, 87,
pp.S3-S16.
Sciacovelli, L. and et. al., 2011. Quality Indicators in Laboratory Medicine: from theory to
practice. Clinical chemistry and laboratory medicine. 49(5). pp.835-844.
Lorenzo-Romero, C. and et. al., 2011. Consumer adoption of social networking sites:
implications for theory and practice. Journal of research in Interactive Marketing.
5(2/3). pp.170-188.
Jones, A. and Murphy, J. T., 2011. Theorizing practice in economic geography: Foundations,
challenges, and possibilities. Progress in Human Geography. 35(3). pp.366-392.
Dant, R. P., Grünhagen, M. and Windsperger, J., 2011. Franchising research frontiers for the
twenty-first century. Journal of Retailing. 87(3). pp.253-268.
Dalkir, K. and Beaulieu, M., 2017. Knowledge management in theory and practice. MIT press.
Combs, J. G., Ketchen Jr, D. J. and Short, J. C., 2011. Franchising research: major milestones,
new directions, and its future within entrepreneurship. Entrepreneurship Theory and
Practice. 35(3). pp.413-425.
Brigham, E. F. and Ehrhardt, M. C., 2013. Financial management: Theory & practice. Cengage
Learning.
Bowen, D. E., 2016. The changing role of employees in service theory and practice: An
interdisciplinary view. Human Resource Management Review. 26(1). pp.4-13.
Online
Marketing theories and PESTLE analysis . 2016. [Online]. Available through:
<https://www.professionalacademy.com/blogs-and-advice/marketing-theories---pestel-
analysis>.
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