H&M's Response to Macro and Micro-environmental Changes

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Retail Theory and Practice

Contents
INTRODUCTION...........................................................................................................................................3
INTRODUCTION TO COMPANY....................................................................................................................4
RELEVANT CHANGES IN THE UK FASHION RETAIL.......................................................................................5
CHANGES IN MACRO-ENVIRONMENT.....................................................................................................5
PESTEL ANALYSIS FOR UK FASHION RETAIL.........................................................................................6
CHANGES IN MICRO ENVIRONMENT...........................................................................................................8
STRATEGIES AND TACTICS.........................................................................................................................10
CHANGES OBSERVED FROM MACRO ENVIRONMENT ANALYSIS...........................................................10
CHANGES THAT INFLUENCE RETAILER...............................................................................................12
STRATEGIES...........................................................................................................................................13
RECOMMENDATIONS................................................................................................................................15
CONCLUSION.............................................................................................................................................16
References.................................................................................................................................................17

INTRODUCTION
Retail is a concept of buying and selling of goods and services also. This assignment is based on
Retail theory and practice, this day's retail industry is more contributing in maintaining
economic growth of any country, Retail is an important sector in business, nowadays peoples
are brand conscious, needed branded clothes choice of peoples also changes and this is the fact
that retail industry is performing well. Retail market also includes FMCG products which are
also a good and large area of earning. Retail is performing in the market as they do timely
delivery of products ordered by customers. In the global market also retail is doing good
business because of supermarkets and food chains in malls. Buying and selling of clothes come
under fashion retail. The retailer is the person who first buys clothes from direct manufacturer
and sells it to the customer is fashion retailing (Lang et al., 2018).

INTRODUCTION TO THE COMPANY
One of the successful fashion retailers of UK is H & M. Hennes and Mauritz in short named as
H&M which is a renowned fashion brand in the UK since 1964. Hennes started with women’s
clothing in 1964 at Norway, later on, Mauritz in 1968 started men’s clothing also and together
with that brand named as H&M which is having both men’s as well as women’s clothing. It
deals with accessories, clothing for teenager and children also. It is headquartered in
Stockholm, Sweden; Company was first listed in Stockholm exchange in 1974. In Europe, H& M
is a big brand and expand its roots in Europe and in 1988 it started an online retail business. In
2000 H&M started doing business outside Europe and open a branch in Newyork US later on
decided to spread its branch in Asia and Middle East countries. H&M is successfully doing their
business in 62 countries having 4500 stores worldwide and approximately 132000 employees
are working with H&M. H&M has a contract with more than 200 factories for the
manufacturing of its clothes. Many great designers worked with H&M and promoted the brand,
some designers have collaboration with H&M for online sales only. H&M have physical bricks
and mortar stores but due to certain downfall in sales, now they are moreover focusing on
providing online stores as at this time as people are moreover interested in online shopping and
deal with inline shopping in around 33 countries. At present H&M is having both physical bricks
and mortar store as well as digital shopping (Arrigo, 2018).

RELEVANT CHANGES IN THE UK FASHION RETAIL
CHANGES IN MACRO-ENVIRONMENT
Macro environment factors are political, Economic, Social, Technological, and legal factors.
There is a continuous change in the retail industry as the choice and demand of people are
changing time to time and according to that fashion choice of people changes. Globalization is
also a big factor for changes in the retail industry. In Europe and all other sectors, there is boom
I retail industry as observed now a day’s people are more brand conscious and it results in
growth in the retail sector. Other sectors are facing huge competition with the retail sector.
After globalization competition in the market increases a lot as everyone is trying to provide
good quality products at minimum cost. Fashion industry is growing bigger and bigger in last
few years as during these years people can afford fashion. Fashion industry is very fast before
coming season they develop their concept and launch their styles (Khan and Hoe 2016).
FACTORS RESPONSIBLE FOR GROWTH IN FASHION INDUSTRY ARE AS FOLLOWS:
 Social Media: These days’ social media plays important role in branding and promotion
of industry, people search on social media as it saves time, people get more option and
it is a source of entertainment also (Priyanka and Srinivasan 2015).
 Sustainable clothing: these days sustainable clothing is in demand H&M produce
sustainable clothes which are environmental friendly and it promotes their brand also
(Guercini and Runfola 2015).

PESTEL ANALYSIS FOR UK FASHION RETAIL
This is a tool used by marketers to analyst the external environmental factors an organization is
facing. PESTEL stands for Political, Economic, Social, Technological, Environmental and Legal.
Figure 1: PESTLE Analysis
[Source: Thompson and McLarney 2017]
Political factor: political factors had a great impact on market, sudden political changes and
reforms affect manufacturing and selling. Issue related to worker and child labour always a
problem for the industry, as per the laws child labour is prohibited, and in a case, if workers are
not satisfied with the daily wages or the medical benefit they get they plan for a strike which
affects production in the clothing industry. Due to political events and political issues of country
impact on manufacturing and selling (Thompson and McLarney 2017).
Economic Factors: Economic factors plays important role in fashion industry as when people
have good income they buy more clothes and in time of recession retailers suffer problem as
they have big stock which is unsold, as a result, stock is sold at lower price which affects the
profit and in the era of competition sometimes retailers had to sell their clothes at cheaper
price to retain their customers (Thompson and McLarney 2017).

Social factors: these days social factors are important in fashion retail industry as nowadays
people want good clothes and they get easily and at cheaper with the help of technology,
people follow artist, clothes which celebrity prefer had a great impact on a consumer (Guercini
and Runfola 2015).
Technological factors: Technology helps a lot it promotes and marketing and promotion of
brand is easy with the help of technology, this generation people first research and select things
then they purchase and this is only possible with the help of technology.
Environmental factors: brands like H&M are more environment-friendly uses more eco-friendly
raw material, takes care of sustainability. Uses less carbon footprint. Packaging of products is
also environment-friendly. Specially retail industry takes care of environment and sustainability
(Choi and Cheng 2015).
Legal factors: certain laws are made which retail industry had to follow, Labor laws related to the
employment of workers, child labour prohibition and environmental laws all this are kept in
mind while production and selling of clothes. As UK based industry was doing trade globally
their products send in the international market for sale, though laws related to international
trade must be followed, a company legal compliance and ethics are base to their business
(Thom et al 2017).

CHANGES IN MICRO ENVIRONMENT
Microenvironment analysis is important for business as it affects the decision-making process, it
relates to company performance and strategy to do business. Factors of microenvironment are
Customers, Suppliers, and Competitors, employees, shareholders and media. (Guercini and
Runfola 2015)
CUSTOMERS: Customers are important for business though in any case, the needs of the
customer must be satisfied. Important is to maintain the after-sales service of the customer.
Example: H&M a UK based industry design clothes as per the latest trend customer demands
from a retailer, to meet the demands of the customers. H&M is focusing on both offline as well
as online store.
SUPPLIERS: To get a product on time is very important, when and where products are needed it
should reach there on time if raw material for clothes manufacturing did not get in time if
further affect the sales. (Guercini and Runfola 2015)
Example: To get raw material on time and on same price H&M maintain a good relationship
with their supplier, renew terms of contract and made it more specific for doing business.
COMPETITORS: Many competitors are there in retail industry but to know what the strategy
our competitor is using, what is his unique selling price, and to find out a good strategy over
there to retain our customer proper analysis is needed. Analysis of competitors how they deal
with changes is important (Guercini and Runfola 2015)
Example: ZARA is a competitor of H&M, what all strategy ZARA implement to retain and attract
their customers H&M must be aware of that, and accordingly H&M change their strategy and
conduct a situational analysis.
EMPLOYEES: Employees are the backbone of any organization, it is important to have talented
workforce to perform well. Skilled and talented manpower can lead any organization to achieve
success. Well trained marketing professionals must be hired to increase in sales; good designer

must be hired for different and variety of designs of clothes, well-trained workers for stitching,
accounting team who manages finance, HR team for process of hiring.
Example: H&M hired designers all over to get good designs for their clothes, to make their
clothes different from any other brand and hired skilled and talented professionals for
management of a business.
SHAREHOLDERS: Shareholders are important for any organization; shareholders had a good
impact on a company, company always want there should be more investors. Management
should keep good relation with shareholder.
MEDIA: These days’ media plays important role in branding and promotion of company, it is
necessary to keep good relation with media as they can give positive as well as negative
feedback in public. Organization do maintain public relation department that manages all query
of public and news to be published in media (Priyanka and Srinivasan 2015).
Example: H&M is opening a new brick and mortar store; they plan a grand opening for the
store, to inform local public about that store H&M give advertisement and that advertisement
is published by media personnel. Media is very much responsible to create positive or negative
impact of the company in front of the public. Publicity of brand increases because of media
promotions.

STRATEGIES AND TACTICS
CHANGES OBSERVED FROM MACRO ENVIRONMENT ANALYSIS
Political Changes:
 Change in government: A close watch on government policies must be kept as a change
in government results change in laws and policies and if there are certain changes in
service sector policies. Government of U.K may apply some compliances of world trade
organization in retail industry as it is compulsory.
 Taxation policy changes
 Changes in regulations for operation of a business in market (Choi and Cheng 2015).
Economic Changes:
 Economic changes are there in UK market as a change in globalization is the reason for
change in economy.
 Hiring of skilled labour impact a lot as it increases the demand for skilled and talented
worker labour in global market (Choi and Cheng 2015).
Technological Changes:
 Use of technology such as mobile has created a great impact, use of mobile in retail
sector attracts most of customer, and it is an innovative way to attract customers.
 Change in technology increases the speed of production and helps to reduce cost of
production, though products of new trends take less time to come to market.
 Change in technology helps in supply chain management faster.

Environmental Changes:
 Some important environmental changes that organization had to take care of
sustainability.
 Another important environmental change is limited use of carbon footprint that every
organization must be aware of.
 Industry waste that is generated should be disposed of properly as that waste contains
chemical which is unsafe for everyone (Choi and Cheng 2015).

CHANGES THAT INFLUENCE RETAILER -
 The major political change that occurs due to any change in government, it changes
certain policies of trade, or doing business H&M faces challenges in import and export
of products, shipping of products became more difficult (Iacovone et al 2018).
 Due to change in the UK market, the economy falls and it results in decrease in sales of
H&M, profit percentage is low, price of shares are down. Despite all these challenges
H&M maintain to made people to buy their clothes.
 These days market is becoming more mature, physical appearance of products matters a
lot most purchasing decision of products is made on the spot. Technology has changed
and brings revolution in fashion industry and to match the demand of the customer as
per latest trend is a big challenge H&M made certain changes, changes machinery which
as per the latest technology which increases the speed of production, payment option
online made available for customer (Yeung and Ang 2016).
 A location where store is situated must be convenient for all customers else it affects
sales of product. Also for physical store travel time and distance must be convenient. It
is a challenge for H&M to open new stores in remote location of city.
 As per the change in environmental laws, H&M is maintaining sustainability in
manufacturing their products.
FOLLOWING ARE MICRO ENVIRONMENTAL CHALLENGES
 The biggest challenge for H&M is to identify the target customer in the area where their
store is located, another challenge is to satisfy the needs of customer as per the latest
trend also H&M provide best possible range of products that fulfil customers need
(Kucharska et al 2015).
 To find the best supplier in market who provide goods at reasonable price and maintain
good relation with the supplier is a big challenge.
 It is a challenge for H&M to maintain good relation with media as negative news in
media can break the attention of the company.