Hennes & Mauritz AB comes in the second-largest company globally in the world of fast fashion; this is largely attributed to H&M’s fast-fashion strategy that gives the company a huge competitive advantage over others in the industry.
From humble beginnings with just one store over 65 years ago, H&M has grown into a force to reckon with on the globe with thousands of stores spread around 6 continents. There is therefore a lot to learn from the growth journey of this great company. We now present H&M’s SWOT analysis. Before we go further into detail about H&M’s SWOT analysis, let’s see the brief overview of the company as follow:
Company Overview
| Name | Hennes & Mauritz AB (H&M) |
| Website | https://www.hm.com/ |
| Founders | Erling Persson |
| Chief Executive Officer (C.E.O.) | Helena Helmersson |
| Tagline | Fashion and quality at the best price |
| Headquarters | Stockholm, Sweden |
| Type of Corporation | Public |
| Year Founded | 1947 |
| Revenues (2020) | $20159.4m B |
| Key Products/Services | apparel, shoes, cosmetics, boiled egg, pots, blankets, candle holders and blankets |
| Key Competitors | Zara, GAP |
Now let’s see the detail of H&M’s SWOT analysis which consists of the internal analysis of strengths and weaknesses as well as external analysis on opportunities and threats.
H&M’s Strengths
An effective strategy
H&M uses the fast fashion model to supply the latest trends to designer tables. The fashion industry relies on effective selling strategies to ensure a higher turnover, more cash flows, and higher revenues. This strategy shortens the duration of the delivery time for delivering merchandise from the designer tables to the boutiques and showrooms.
Global presence
H&M started its path on global expansion in 1964 having its first foreign stores in Norway. H&M has now grown to more than 5,000 stores in the 6 continents globally in its 74 markets. The company’s global operations help diversify risk. The company envisions growth of 10% – 15% growth per year
Geography diversification
Geography diversification is a great strategy in reducing dependence on one geographic region. The US market has the largest store count for the company stores but it only accounts for 10% of the total store count for the company. Germany is a critical market for the company but it also accounts for 15% of the total company store count
Huge cash flows
With the fast fashion business model, the company has been able to keep its operating cash flows above board ranging from SEK 20 billion – SEK 29 billion.
Strong appreciation for sustainability
The company’s policy is to use organic cotton which it has done for years. It has gone a step further to invest in the production of organic cotton through a global initiative called ‘Better Cotton Initiative’. The company enlightens organic cotton growers with better techniques for production. Another strategy that the company uses is zero waste production by maximizing on recycling of waste products.
Competitive pricing
The company strives to be sustainable. Even with the high cost of production, the company strives to offer its quality products at affordable prices. It is important to always be sensitive about pricing because regardless of the product, the price really matters.
Wide product range
A wide product range gives customers a chance to choose from many choices and therefore limits the customers from going after other brands in search of other options. the brand’s product line includes apparel, shoes, cosmetics, boiled egg, pots, blankets, candle holders, and blankets among others. The company also has unique sub-brands like H&M, Cheap Monday, and ARKET
Valuable brand
From its inception, the company has had a single eye for customer satisfaction. With this principle, the company has grown into a valuable brand; it is rated 8 on the apparel 50 2021 ranking by Brand Directory.
A strong online presence
With the internet being ubiquitous, companies that adopt an online strategy and exploit it effectively have a huge advantage over their competitors.
An efficient supply chain
A global company definitely requires an efficient supply chain for seamless delivery and for a great customer experience. H&M’s supply chain is NextGen and is therefore highly efficient.
H&M’s Weaknesses
Falling profit margins
While the company sales have kept on increasing year over year by double-digit growth rates, the company’s profit margins have kept on dropping, even much more with the pandemic.
Dependence on outsourcing
H&M does not do in-house manufacturing, the company depends on over 900 independent suppliers in Asia and in Europe. While this has been the bedrock of the company’s success, it predisposes the company to unscrupulous suppliers. It gives H&M weak control of the desired quality of products for its customers.
Inventory challenges
Brands which do in-house manufacturing are able to fluctuate their inventories in a short time depending on the demand in the market. H&M relies on outsourcing and therefore its supply chain is not flexible and responsive enough and with speed to changes.
Controversial products
The company got controversial in 2018 when it advertised its hoodie featuring a black child model dressed in the hoodie with the inscription “Coolest Monkey in the Jungle”. This attracted the wrath of customers from across the globe who chose to boycott the company’s products for promoting racism.
Lack of inspired fashion
H&M relies on fashion trends set by major designer brands for them to decide their choice of merchandise. Unfortunately, most fashionistas are drawn novel designs that are radical
Rising operational costs
Globally, the costs of labor and transport have significantly gone high. In addition, H&M’s center of production is far away in Asia while its key markets are in Europe. This is not only time-consuming but becomes costlier. The delay time delays response time to the changes in the market.
H&M’s Opportunities
Emerging markets
There is a growing market in emerging markets of middle-income households who like fashion and style and could afford it.
Expansion through mergers and acquisition
Mergers and acquisitions present a great strategy to penetrate into markets that would otherwise present barriers to entry for foreign companies. H&M could make use of these opportunities to expand their markets to emerging economies like Asia and Africa. It could expand by consideration of secondhand clothes.
More focus on e-commerce
When compared to other fashion retailers like Zara, H&M still have a long way to go in fully exploiting the benefits that online retailing has to offer. E-commerce will enable the company to push sales through their online channels during these pandemic times when physical in-store sales are dwindling due to COVID 19.
H&M’s Threats
Looming recession
While clothing is a basic human need, fashion and style are basically considered as luxury. As such, fashion houses and retailers need to consider the threats of recession which may sharply impact on their sales negatively.
Stiff competition
The fashion and style industry is rife with stiff competition, H&M faces competition both from new and old companies like Zara, Boohoo, and Macy’s among others.
Trade regulations
Given H&M is an international company; it is bound to strive with different trade regulations. Much more, since the company is Swedish, it could easily fall victim to the aftermath of Brexit.
COVID 19
The success of companies like H&M largely depends on the free flow of raw materials and merchandise. Lockdowns and quarantine threaten the free flow of these materials and merchandise.
Conclusion
With diminishing margins, low control over the quality of their products, and an impending recession, H&M needs to make the most of its opportunities for growth to ensure more margins.
