Individual Report of H&M Company

Canariov Petru (521082)

IBS, Exchange Student, Saxion University
EIB0V.EXCa: Management & Organisation
Teacher: Birdane Seckin

ENSCHEDE
2021-2022
 I. Introduction
H&M is a Swedish multinational clothing company. It is known for fast-fashion clothing
for men, women, teenagers and children. H&M operates in 74 countries with over 5,000
stores under the company's various brands, with 126,000 jobs, also the company makes its
online shopping available in 33 countries. It is the second-largest global clothing retailer,
behind Zara. Besides this, the H&M group has a multi-brand matrix organisation with well-
defined brands: H&M, H&M HOME, COS, & Other Stories, Monki, Weekday, ARKET and
Afound. The management structure of H&M company is divided by brand, also brand is
headed by a responsible individual and has local sales organisations. Centrally, there are a
number of group functions that support each brand in order to enjoy the advantages of these
common areas, so that each brand and country works purposefully according to central
policies and guidelines.

II. Mission and Strategy

H&M mission statement is “to drive long-lasting positive change and improve living
conditions by investing in people, communities and innovative ideas.” The statement
emphasizes on the manner in which H&M offers the world its fashions and designs. It
comprises of the listed main parts: “Transforming shopping” and “Improving lives”. The
mission statement underscores the determination of the company to refine its brand as a
pioneer of renewable and affordable fashions. In addition, H&M product strategy is about
providing high-quality clothing according to the latest fashion at the best price possible.
H&M aim to make fashion accessible and enjoyable for all. Moreover, the company tends to
innovate not only materials and processes, but also business models and new ways for people
to experience fashion and design. At the same time, the company keeps people at the center
of the business, treating them properly, supporting their rights and celebrating their diverse
talents and perspectives. Last but not least, the company's strategy is related to the
sustainability process, so the company aims to make organic products, and to teach people to
transform to a more beautiful ecological world.
The H&M company states “Taking responsibility for how our operations affect people and
the environment is also an essential prerequisite for H&M’s continued profitability and
growth.”
H&M is driven by strong values such as commercial mindset, simplicity, constant
improvement, cost consciousness and entrepreneurship states in annual report.

III. Critical Success Factor (CSF’s) based on balanced scorecard

 1. Growth Perspective
Train employees - it is a very important aspect in a company especially multinational
and big like H&M, because without this aspect the company will not be able to
deliver its products at a high and quality level, and to face the competitors.
2. Financial Perspecive
Maximize Shareholder Value - in order for the company to achieve its tasks and
follow the strategy, it is very important for it to grow, to maximize the value of the
shares, so that the shareholders invest more and the value of the brand to grow.
Moreover, the company aims to invest in the sustainability of supply chains, so there
is a need for this project to increase the value.
3. Customer Perspective
Inspire Loyalty - Likewise, creating a loyal customer-company relationship is a core
CSF, and if done successfully, then the company's sales increase over a long period of
time.
4. Internal Process Perspective
Create a quality partnership - creating relationships and partnerships is to strengthen
the position of H&M in the market, moreover it develops and grows a trust of
stakeholders, and builds a stronger brand, so the final products become high quality
for consumers.
CSFs are very important and necessary for the company's strategy to reach its
maximum potential, as all these 4 areas have an essential role in building the strategy,
therefore the company realizing these CSFs will provide high quality clothing
according to the latest fashion, at the best possible price.

IV. Key Performance Indicators (KPI’s)

1. Train employees:
- Employee Satisfaction Rating (more than 97%, through an anonymous internal
survey)
- The number of human errors (reducing the error of employees below 1% of the total
production and services.)
2. Maximize Shareholder Value:
- To increase the value of the shares by 7% annually,
- To increase gross profit margin 5% annually.
3. Inspire Loyalty:
- Positive Customer Reviews (100% to be positive reviews)
- Customer Satisfaction Score (98% of customers to be satisfied)
 4. Create a quality partnership:
- Delivery In Full On Time Rate (the delay rate of materials should be less than 1%
of the total)
- Long and Sustainability contracts (contracts with partners from 5 years and up)

KSF KPI Measures

Growth Train employees - delivery + EmployeeSatisfaction + (more than 97%, through

of courses and trainings for Rating. an anonymous internal
the professional and survey)
qualitative growth of the + The number of human + (reducing the error of
employees errors employees below 1% of the
total production and
services.)
Financial Maximize Shareholder + To increase the value of + by 7% annually
Value - Strengthening the the shares,
company financially + To increase gross profit + 5% annually
margin.
Customer Inspire Loyalty - long-term + Positive Customer + 100% to be positive
customer growth Reviews. reviews
+ Customer Satisfaction + 98% of customers to be
Score. satisfied
Internal Create a quality + Delivery In Full On Time + the delay rate of
partnership - achieving Rate. materials should be less
stable and lasting contracts + Long and Sustainability than 1% of the total
and partnerships contracts + contracts with partners
from 5 years and up

V. CSF’s and the KPI’s in relation to the strategy

As I described in previous chapters, H&M's strategy focuses on H&M's product strategy is
to provide high-quality, state-of-the-art clothing at the best possible price. As a result, the
company needs a clear and coherent connection between CSF and KPI, so that the 4 domains
can be achieved according to the balanced scorecard. The growth perspective is an important
perspective in the company, so H&M focuses mostly on employees, as they are the ones who
contact directly and indirectly with customers. As a result, H&M invests heavily in courses,
trainings, workshops so that all employees of the company are highly qualified, trained, and
adapted to the needs of customers. In the end, both the quality of the services and the
products are high and the customers are satisfied. The second perspective, namely the
financial one, is an essential one in a share-based company where making a profit is an
indispensable part of the company's life. Thus, maximizing the value of shares is important in
the stability and strategy of the company, especially as it is a top international company. The
third perspective, namely that of customers, is the basis of the company, as I described
earlier, if the company has loyal and satisfied customers then it is doing well, otherwise it
will face major difficulties. The fourth perspective, of creating quality relationships and
partnerships, is a long-term strategic vision, so as a result of personal research, I noticed that
H&M focuses very much on sustainable and stable partnerships, but if the partners do not
share the same systems of principles and values as H&M, so H&M stops working with them.
Such an example of this when H&M refused to buy cotton produced in northwest China by
Uyghurs.

VI. 4 specific Action Controls

First of all, H&M needs Actions Controls because it is very competitive in the market and
customer requirements are always changing. Action controls are aimed at influencing human
behavior, they tell employees how to do their job, they involve ensuring that employees
perform certain actions known to be beneficial to the organization. As a result, H&M faces
the following risks, which can be successfully overcome if effective Actions Controls are
taken or these risks can create significant barriers to the Company's future business.
1. Growing digitalisation that has rapidly changed consumer’s shopping habits. - this
aspect requires an intense control of the direction of the field of digitization and
innovation within the company, so that the field of innovation and digitalization to do
research and experiments so that in the end the company can apply the most current
digital and innovative standards required by the market, of current and future
conditions.
2. Reputational risk - As one of the world’s leading fashion companies the H&M
group’s brands attract great interest and are constantly in the spotlight. - to safeguard
and manage its brands it is important that the H&M group continues to be developed
and run according to its strong values, which are characterised by high business
ethics.
3. Operating in the fashion industry is a risk in itself. Fashion has a limited shelf-life and
there is always a risk that some part of the collections will not be sufficiently
commercial. - it is crucial to have the right volumes and a correct balance in the mix
between fashion basics and the latest trends. In summary, each collection must
achieve the best combination of fashion, quality, price and sustainability. To optimise
fashion precision, the H&M need to work intensively to optimise the extent of
ongoing buying during the season in parallel with detailed analysis of day-to-day sales
and stock levels in different markets.
4. One or more markets where H&M activate may be affected by events that have a
negative effect on the macroeconomic situation or geopolitical environment in the
country. (f.e. Covid 19 Pandemic) - these changed macroeconomic or geopolitical
circumstances, such as political instability and sudden negative events, may result in
rapid changes in the business environment, such as significant disruption in the supply
chain, and in economic downturn, which is likely to change consumer purchasing
behaviour and thus negatively impact the group’s sales. The H&M therefore needs to
monitor such changes closely and have strategies in place to deal with fluctuations as
advantageously as possible for both the company and external stakeholders.
VII. Human Resources policy
H&M's HR policies are closely linked to its general strategy, as a consequence H&M’s
HR strategy is to expand on a continuing basis. The growth target is 10-15 percent new stores
each year, which means that 6,000 -7,000 new jobs each year. Their staff is spread across
approximately 37 countries and come from different cultural backgrounds. Their strategy is
to recruit locally whenever a new store opens as stated in the annual report (2020). H&M’s
HR Department focus to be a good employer, including in those countries whose laws and
regulations fall short of their own requirements. To quote the Head of HR (2020) “In order to
meet people’s expectations of H&M as an attractive employer, the company develops global
guide lines on diversity, equal rights and against discrimination”. At H&M, HR activities are
guided by a fundamental respect for the individual. This applies to every aspect from fair
wages, working hours and freedom of association to the opportunity for growth and
development within the company. This also indicates that the company has specific policies
for areas such as equal opportunity, managing diversity, and employee development, health
and safety, etc. At the same time H&M has an open door policy granting all employees the
right and the opportunity to discuss any work-related issue directly with management. They
also support their employees’ right and ability to organize and to decide who should represent
them in the workplace.

VIII. Company Culture

H&M's corporate culture model focus on working in teams and lead by exemple.
Teamwork is essential at H&M and is part of their culture. H&M always is driven by own
values and lead by example. Leaders of H&M always are role models and set a good
example in everything they do. At H&M leadership is about inspiration, delegation, feedback
and motivation. As well as H&M has adopted a number of cultural concepts in its quest to
develop a strong organizational culture.

 Teamwork - H&M has integrated the concept of teamwork in an effort to nurture an

effective organizational culture. Subsequently, H&M has outlined a clear set of values
that guide the firm in its quest to integrate effective teamwork.

 Emphasizing on H&M spirit - H&M appreciates the fact that nurturing a high degree
of organizational identification can enhance the firm’s performance. In an effort to
improve its performance, also has adopted a culture of inclusiveness. One of the
aspects that the firm focuses on entails providing employees with an opportunity to
grow.

 Continuous improvement - In an effort to achieve its sustainability objective, H&M

has integrated the concept of continuous improvement as one of its cultural change
efforts. The H&M’s improvement cultural programs focus on different areas, which
include the social environment and the working environment.
 Social performance - H&M is cognizant of the importance of nurturing strong
organizational citizenship behavior. Organizational citizenship enhances an
organization’s psychological and social environment. This aspect culminates in the
development of an environment conducive for working. Subsequently, the concept of
 organizational citizenship has gained significance amongst organizations in their
strategic human resource management practices.
As a result, all these cultural aspects cultivate and support either directly or indirectly the
company's strategy. This can be seen in the performance of the company over the last 2
decades, as well as the future perspective of the company, suggests that the company has
adapted to cultural issues, and knows how to manage ethical and cultural diversity for the
benefit of customers and of the whole company.

IX. Ethics & Ethical Issues

H&M is focused at positioning itself as an ethical entity in the global market. Its
commitment to achieve ethical global citizen status is evidenced by its partnership with
various global organizations. For example, the firm supports the human right principles
advocated by the UN Global Compact. Company ethics focuses on respecting and
promoting human rights and labor law. At the same time, H&M ensures that its
operations do not adversely affect the global population. One of the ways in which the
company achieves this goal is to be aware of the materials used in the production of
clothing, footwear and accessories. However, during its activity the company went
through various ethical issues, which it overcame through correct decisions taken on
time, as well as through a rigorous management control system. Some of the ethical
issues was:
 2013: The Rana Plaza disaster happens. H&M is one of the brands that Rana
Plaza supplies; following the disaster they join the Bangladesh Fire Safety
Accord, working with other brands and labour unions to address health and safety
in numerous factories. They also promise all garment workers will be paid a fair
living wage by 2018.
 2017: The Guardian reports that children are employed in Myanmar factories to
make clothes for H&M. They are paid as little as 0,25$ an hour.
 2018: H&M supplier factories are named in reports by Global Labour Justice
detailing abuse of female garment workers. More than 540 workers describe
incidents of abuse in Bangladesh, Cambodia, India, Indonesia and Sri Lanka as a
direct result of pressure for quick turnarounds and low overheads.
As a result, following these incidents, H&M has developed a rigorous management
control system to prevent such ethical issues. Nowadays, the company researches suppliers in
detail, so as not to employ inertial labor (e.g. children), it also tries to prevent other ethical
illegalities, and in this sense it is conducted according to the established values and
principles. At the same time, H&M scored very well on the Fashion Transparency Index, as it
publishes information about its supplier policies, audits and remediation processes on its
website. However, this is not the same as operating ethically or sustainably. Last but not
least, another system check made by H&M to address ethical issues was that the company
promised a living wage for all garment workers in all countries.
 X. Conclusion
The above analysis shows that H&M has managed to develop a sustainable strategy over
almost 70 years of activity, as well as a set of highly democratic principles and values, as
well as respecting the ethics in its operation. This statement comes from the effectiveness
with which the company acts globally, so that all customers are satisfied with the quality
value for money of the products delivered by H&M on the one hand, and on the other hand
the company ensures that employees adhere to the established code of ethics. and be treated
fairly at the highest possible level. In addition, the company works with other stakeholders,
such as suppliers and customers, to increase its efforts to position itself as a company that
promotes international and democratic values.
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