It is a case study about success and strategies of H&M in Power Point

1. H & M
H & M in fast fashion: continued
success?
Seminar in Public and Business Policies

3. Case Overview
• Case basically discusses the success of H & M.
• According to H & M the success is due to, best fashion items at best
price.
• Above point was only possible because of best management of supply
chain and policy of, to provide latest fashion at best prices.
• How policy of expansion implemented?
• Culture and other policies regarding management style, operations
and employees.
• Business Model of H & M and its competitors and how competitors
strategies’ forced them to adopt a policy change.

4. Introduction of the Company
• H&M stands for Hennes & Mauritz
• Multinational fast fashion company.
• Having 3500 stores, in 61 countries and 132,000 employees till March,
2015, started from 1947 and pioneer in “fast fashion”.
• What is fast fashion?
• In 2009, the founder’s grandson Karl-Johan Persson joined as CEO and
became had become the global leader in the ‘fast-fashion’ segment.
• In 2010, they stepped up investments in order to strengthen the brand
further and secure future expansion, according to Karl-Johan Persson.
• Basic business model is ‘cheap-and-chic”,
• Emphasis on high fashion at prices significantly below those of competitors, with
the fundamental principle, being ‘Fashion and quality at the best price’.

5. Products/Items Overview
• H&M deals in fashioned apparels, shoes, cosmetics of women, men
and children and other home interior items etc.
• Company and brand success was because of heavy advertisements of
high profile stars.
• Making the brand attractive and loved to be affiliated by people.
• Advertisements and other related pictures on next slide, showing this
policy.
• Major competitors are, Inditex Zara (Spanish brand), Gap, UNIQLO
(Japanese brand).
• Inditex took over H&M in China, as well, but only in China.

6. Products/ Items Overview

7. Apparel Industry
• Total market size of the global textiles, apparel and luxury goods
market was worth $3049.5 billion in 2011.
• Annual compounding growth rate of 3.7% for the period of 2007 to
2011, which is very less.
• Slow growth increases competition, which is further intensified due
to a large number of small players.
• Multitude of suppliers for retailers to choose from.
• As international trade liberalized, the number of suppliers globally
increases and competition among manufacturers in low wage regions
intensifies. Switching from one supplier to another is not a major
issue.

8. Industry Analysis by Five Forces Model
• Generally bargaining power of suppliers is
weak, as many suppliers are available to
supply in different countries and registered
with them.
• Bargaining power of buyers is more, there are
many competitors and they can switch to
other brand easily.
• Threat of substitutes is also very high.
• Industry rivalry is some sort of high, as
industry growth is low, and even one new
entrant disturbs it.

9. H&M’s Core Values
1. Keep it simple,
2. Straightforward and open-
minded
3. Constant improvement,
4. Entrepreneurial spirit
5. Cost conscious
6. Team work
7. Belief in people.
• H&M spirit is the extraordinary focus
on employee involvement.
• Trying new things is also encouraged
among purchasing managers
• But while trying something new and
making mistakes is OK it is important
that the same mistake is not
repeated.
• Experimentation is also present at the
store level where interior decoration,
lighting, colors, clothes displays.
• Locations are swiftly changed
depending on sales and customer
preferences.

10. Business Model of H&M
• Retailer of fashion apparel, cosmetics, accessories and shoes for
women, men, teenagers and children.
• H&M operates from leased store premises, through internet and
catalogue sales and some franchise stores.
• H&M not owns any factory, in fact outsourced to suppliers/factories.
• 10-15 % growth target.
• Designs are created by 140 in-house designers.

11. Business Model of H&M
• Having stores like,
• The Collection of Style (COS) offers customers a combination of timelessness
and distinctive trends.
• The Monki stores provide innovative collections and an inspiring fashion
experience characterized by playfulness and colorful graphic design.
• Weekday, The Cheap Monday, & Other Stories are other segments or brand
positioning of franchises.

12. Management Policy and Style
• Based on,
• simplicity,
• a down-to earth approach,
• entrepreneurship,
• team spirit, straight lines,
• common sense and
• a belief in individuals and their ability to use their initiative.

13. Business Model of Inditex (ZARA)
• In-house design and a tightly controlled factory and distribution
network.
• Company has the ability to take a design from drawing board to store
shelf in just two weeks.
• Giving ability to launch new items every week, so people keep
visiting.
• Has a policy of zero advertising and instead invests its revenues in
opening up new stores.
• Having brands like Kiddy’s Class stores, The Pull and Bear, Massimo
Dutti, etc.

14. Business Model of UNIQLO
• Established a business model encompassing all stages of the business
– from design and production to final sale.
• Competing by developing unique products.
• Quickly makes adjustments to production to reflect the latest sales
environment and minimize store-operation costs, such as personnel
costs and rent.
• High-quality clothing at reasonable prices.
• Operates normally under its own name.

15. Comparative Analysis on Key Figures
H&M Inditex UNIQLO
3500 stores. 2000 stores. 848 stores.
132,000 employees. 80,000 employees. 80, 000 employees.
61 countries. 74 countries. 25 countries.
More than $16, 137 million
revenue.
$ 17,159 million revenue. $ 7835 million revenue.
Net Income of $ 2, 880 million. Net Income of $ 2, 372 million. Net Income of $ 688 million.

16. Financial Comparative Analysis,
Current Ratio, Profit Margin for 2012

17. SWOT Analysis
• Strengths
• In-house designers.
• Outsourcing of production, so finding cheap.
• Quick adjustment to latest trends.
• Better prices than competitors.
• Weaknesses
• Weak policies regarding catering new entrants.
• Opportunities
• More opportunity to open stores, in middle east and pacific asia, as well as ,
south asia.

18. SWOT Analysis
• Threats
• Major threat, is rise in prices of cotton and forcing H&M to decrease profit
margins.
• Slow growth in industry, so competition is going to intense day by day.
• So, needs policy change to tackle it.
• Policy of expansion adopted, as other UNIQLO and Inditex increasing
presence day by day and hence profits.

19. Stores Operations and Management
• Positions stores at best locations.
• Important communication channel H&M has with its customers.
• Always opts for renting store premises, which increases flexibility and
adaptability.
• As, aligned with H&M values, decision making is decentralized and
store managers have considerable autonomy.
• Each manager works like entrepreneurs and authorized to take
independent decisions, within overall guidelines, like one’s own
business.
• Increases loyalty and commitment to the organization and motivates
them as well.

20. Store Operations and Management
• Every two or three years a completely new interiors programme is
created. To make it attractive for visit continuously.
• Both in windows and inside stores, are changed frequently.
• Consumers are continually attracted to visit the stores to keep up
with the latest collections.

21. Management of Marketing and Social
Media
• H&M’s strong brand image is associated with value and stylish
collections.
• Highlighting the brand’s high level of awareness, H&M was ranked
21st among the top 100 most valuable global brands according to
Interbrand in 2011, with a brand value of $16.5 billion.
• ZARA ranked 44th with $8 billion dollars.
• Gap ranked 84th with $ 4 billion dollars.
• Basic difference is created by huge advertisements campaigns, with
high profile celebrities.

22. Management of Marketing and Social
Media
• Has a strong presence on social media,
• Facebook
• YouTube
• Instagram
• Google+
• Chinese social media like, Youku, Sina, Weibo.
• Updated on regular basis.
• Millions of H&M followers share ideas and opinions and get quick
answers to their queries.
• At its launch in August 2010, the iPhone app was the most
downloaded application in almost all of H&M’s markets.

23. Policy and Management about Designs
• Design is centralized at the Stockholm headquarters and includes a team of
almost 200 designers and about 100 pattern makers.
• Having direct contacts with factories around the globe.
• Centralization enables them to minimal time to market.
• Also, allows them to bank on latest trends and responding it.
• Much effort is put into researching and predicting emerging market trends.
• They conduct customer and employees surveys, focus groups and dialogue
session, then adding some their own taste, to make a new entry in market
(design).
• Fashion shows in Milan, Paris, Beijing, Tokyo and inspiration from
celebrities are important source of designs.

24. Policy and Management about Designs
According to Ann-Sofi e Johansson, head
of H&M design department:
‘We try to look out for trendsetters,
what’s popping, vintage looks, what’s happening at
music festivals. The Internet is getting more important as
are catwalk shows, but these are more of a confirmation of
what we know is out there.’

25. Policy and Management about Designs
• So, H&M is a fashion house in its own right, with its own trends. “We
do not copy”.
• H&M tries to keep unique personality in every country by adding
some own touch.
• Some are same worldwide, so giving advantage of economies of scale
in production.

26. Outsourcing Policy and Management
• All the production is outsourced to factories in Africa, Pacific Asia and
Middle East.
• Most of the products are made in China.
• Continuously redefines the supply chain, operations systems and
guidelines to increase efficiency.
• This way, H&M has been able to reduce lead times by 15–20% in
recent years.
• Also forces production houses to follow their CSR policies.
• H&M conducted a total of 2,024 annual audits of suppliers, of which
78% were unannounced.
• For quality assurance and
• CSR polices check.

27. Management of Distribution,
Warehousing and IT
• H&M makes sure not to place orders too early. So, that if trend
changes, new designs can be placed.
• H&M puts more emphasis on economies of scale in its supply chain
set-up compared to Zara, which focused on flexibility and speed.
• The shorter lead time is always not the best, the right lead time is
bringing the price and quality into balance. “H&M ‘s Philosophy”.
• H&M offers products at cheap price than others, by avoiding middle
men, purchasing from low price markets like China, cost conscious
and efficient distribution system.

28. Management of Distribution,
Warehousing and IT
• Taking H&M’s mix of supply chain management, logistics and IT into
consideration, the company is considered a world leader in these
areas,
• Close coordination between procurement staff and production houses.
• Intelligent use of ICT tools.
• Purchasing flexibility decreased incredibly lead time.
• Improved logistics to have lightning fast turnaround speed of just 20 days.
• All the above points make H&M, a truly unique supply chain
innovator.

29. CSR Policy
• The company has formulated seven commitments called ‘H&M
Conscious Actions’.
• These include,
• Adopting ethical practices,
• Improving working conditions,
• Using natural resources responsibly,
• Other projects include community investments.

30. Human Resource Management at H&M
• Key of the recipe is, a strong corporate culture with well defined
values and making sure that, employees internalize these values.
• Use formal training programs as well as on-the-job training to
socialize employees into this culture.
• Internal promotion and job rotation are two main things also.
• Based on commitment, loyalty and regarded as well.
• There is alignment between individual goals and corporate goals, as
“The key words for continual growth are responsibility
and commitment………..I tell employees, if you do not grow, neither will
H&M.” (Head of HRM, once said)
• Basic policy of HRM department is, “We believe in people”.

31. Human Resource Management at H&M
• Basic policy of HRM department is, “We believe in people”.
• Open-door policy is also great contributor to success of H&M. As,
employees can directly discuss any matter with management.
• H&M values personal qualities much more than formal qualifications.
• In sum, H&M likes employees,
• Who are self driven,
• Like responsibility,
• Decision making and
• Capable of leading.

32. Internationalization and Expansion
Policy and Management
• Fashionable and elegant clothes at competitive prices and catering for
the dynamic tastes and preferences of customers are main drivers of
success.
• Since, 1990, the expansion policy has been aggressive.
• After 2005, H&M entered 20 countries with more than 1000 stores.
• H&M’s strategy is to recruit local people wherever it opens a new
store.
• H&M looks for those who have the ‘right’ personality and potential to
understand and adopt the core values of the organization.

33. Internationalization and Expansion
Policy and Management
• Replicating the same business model and store concept thus defines
the core of the company’s expansion strategy.
• Before opening a new store, first conducts a thorough evaluation of
market potential.
• This is done according to factors like demographic structure,
purchasing power, economic growth, infrastructure and political risk.
• H&M tries to keep minimum formal rules and works in flat
management hierarchy, in every country.
• Simple business model universally and making subtle modifications
and adaptations at the local level.

34. Internationalization and Expansion
Policy and Management
• H&M is really a success story, as many stores initially expanded
internationally, but later badly failed like Mark & Spencer, C&A and
Benetton.
• All success is because of fashion at price less than competitors.
• H&M strives to continue this strategy and expand more and more
than competitors and cater new entrants as well.

35. Our Policy Change Recommendations
• They should focus more actively on supply chain management,
instead of expansion, so that cost can be managed, decreased.
• Connect with cotton producing countries or producers, so that cotton
can be available at desired price.
• As CEO H&M met with Bangladesh trade minister and requested to regulate
industry, but our recommendation is to do more actively.
• They should come to south Asian countries as well, like in Pakistan
ChenOne, Charcoal etc. are generating well profit with high margins.
• South Asian countries are cotton producing countries, so that selling
in this market by purchasing from local suppliers will give high margin.

36. Cream of Case Study
• Attractive fashion and designs, good quality at prices less than
competitors.
• Flat Management and employees run store like their own. Gives
sense of ownership.
• Value employees.
All above are main factors, contributing to H&M’s
success.

37. Conclusion
• H&M is a great success, from 1 store in 1947, to more than 3500
stores in 2015.
• All, is because of trust in its employees and management.
• Good management throughout the supply chain.
• Quickly reacting to market trends.