H&M External Analysis: PESTEL
H&M is an international company operating in several countries across the globe. Therefore, there is a high probability for the company coming across various political risks as exhibited by different levels of jurisdictions in the several areas of their operations. For example, H&M has several franchises in the politically unstable countries such as Lebanon, Egypt, and Turkey. This calls for the company to scan its political environment keenly and set contingency plans on standby to deal with political instabilities that might affect the company as well as the stakeholder’s goals. Alternatively, the company has to follow the host country’s trade legislation, and consumer protection policies in order avoid conflicts with both the national governments and the consumer rights lobby groups in the host countries. H&M has avoided some of the international political risks by entering into franchising collaboration with business partners in Thailand, Israel, Jordan, Indonesia, Morocco, Lebanon, Bahrain, Oman, Qatar, Saudi Arabia and Egypt (H&M, 2017). This international market entry approach helps the company to avoid regulatory requirements in these countries.In 2016/2017 the H&M had to deal with international political uproar, especially during the Brexit and US General elections that saw the company limit its operations in the two areas. H & M also had to deal with the mounting pressure coming from its decision to open a business branch in Israel in 2015. It was being argued that Israel does not respect the international law and by H&M opening a business in the country, it is a violation of the international trade policies. However, H&M has vehemently defended itself by arguing that it does not side with either of country’s political or religious stance. Instead, it is focused on improving the country economically to help in bringing peace in the region. The company was also accused of violating workers’ rights in some its countries of operation such as Bangladesh and Cambodia. However, the international political environment has been favorable for H&M.
In the past three years, H&M business operations have been threatened by the constant strengthening of the U.S dollar. Besides the US dollar, H&M was greatly affected by the Brexit. The Brexit would have weakened the US dollar, but the United States moved swiftly and increased import tax, making the H&M products too expensive in the American market. In late 2017, the US dollar started to increase again, and the currency fluctuation woes continue for the H&M Company. However, the company has recovered from this impact as depicted through the 2017 half year sales that showed 7 percent growth compared to the 2016 half a year sales (H&M, 2017). H&M obtains its raw materials from Asian based suppliers who deal with US currency and as a result reducing the company profits further.
H&M also suffers from many economic aspects such as inflation, interest rates due to its exposure in many countries. These economic obstacles come hand in hand with stiff competitive pricing strategies employed by other players in the cloth retail industry. Alternatively, the frequent changes in import laws, import duties, and taxes have made it hard for the company to adopt a stable pricing strategy. These economics shocks make it hard for the company to operate as a multinational corporation by maintaining a stable pricing strategy. H&M can overcome economic hurdles availed by its external environment by having an effective supply chain management that will contribute to stable pricing strategy. For example, the company can opt for buying raw materials in bulk, especially from the suppliers offering best rates.
In the current modern business world, consumers have become more concerned about how a business manufactures its products than before (Pergrankvist, 2017). Findings show that consumers would be interested to know the nature of the business they are partnering with. H&M is slowly conforming to the consumer demands through engagement in the corporate social activities. For example, in Bangladesh, India, and Pakistan the company has helped over 150,000 to access clean and safe drinking water (H&M, 2017). The company has also embarked on ensuring clean environment through recycling of unwanted materials from their industry. Apart from the corporate responsibility demands, H&M is also concerned with the media influence on their customers. As a result, the company has focused greatly on the fashion products to meet the rising customer needs on latest and new designs.
H&M embraces equal employment policy by involving a lot of women in its economic activities. The research shows that H&M has employed more women than men, especially at the board and offices level. This is a great chance for the women to showcase their attributes, especially in the industry that is concerned more with the ladies products. The company has also partnered with the International Labor Organization to improve the working condition and offer better wages and salaries to its employees. The social practices employed by the H&M have proved effective in helping the less developed world to conform to the standards practiced in the developed world. In doing so, the company obtains profits my making sure workers’ rights are not exploited.
Just like any other business in competition, H&M has embraced the importance of technology in the business. For example, the company has established online shopping through e-commerce. According to H&M (2017), this approach is anticipated to have a dramatic modern turn, especially in the field of sales and marketing. Through this approach, H&M aims to serve the customers appropriately based on the current shopping trends of purchasing products without physically visiting the retail store. To boost online shopping, the company has developed a mobile phone app that allows customers to order purchases online as well as collect their reward points.
H&M again uses technology in its supply chain and management operations. For example, it has outsourced logistic services from a third party, Hermes, in the United Kingdom. Hermes has robust technological advancement reputation, and it has been very effective in maintaining strong technology supply chain network in H&M. Hermes has also helped the H&M in tracking all its logistics operations. Despite, the complexity in the clothing industry, the robust technology used by H&M has proved its worthiness because it has helped the company to keep the current customer demands. Besides, H&M relies on the same technology to design rapidly changing new fashions.
H&M unwanted materials contribute largely to the environmental pollution. However, the company has started recycling process of unused and old materials coming from their industries. One of the company major objectives is to use 100 percent recycled materials by 2030 (Pergrankvist, 2017). This means that all the H&M new products will come from the old products. H&M is a big and reputable company in the retail industry. Therefore, in any country, they are entering they must make sure their actions and operations do not harm the environment. In doing so, the company will avoid conflicts from the communities and government agencies such as environmental protection bodies.Legal
Over years, H&M has found itself a victim of several infringement legal disputes. For example, in 2015 the company lost multi-billions of money in the tussle patent dispute with UK manufacture infringement of the coveted technology. Despite that H&M can settle the legal disputes arising from other parties in the industry and the market, the company should establish risk management mechanisms to avoid similar dispute from occurring again. These disputes do not affect the H&M profits, but they also damage its reputation.
Despite H&M being a victim in the several legal disputes, the company follows all the national laws appropriately. For example, it is a requirement for its suppliers to adhere to the national laws in the courtiers they are operating in unless the laws conflict with the H&M demands. Secondly, the company does not permit the employment of the underage. Thirdly, the company working conditions conform to the working safety requirements. Fourth, the company embraces equal employment policy whereby there is no discrimination based gender, religion, culture, race, language or background. Fifth, all employees are treated equally according to the position they occupy in the company. H&M also acknowledges the importance of business transparency, and therefore, it undertakes the frequent financial audit. Finally, the company complies with the tax laws as provided by different countries where they have their stores.