MGT5179 Global Business Environment: A Case of H&M Company

Conduct internal and external analysis of H&M in order to identify strengths and weaknesses. 

Explain how strengths and weaknesses interrelate with external macro factors.

Answer:

Introduction 

The purpose of this report is to provide a brief overview to the CEO of H&M Company about the different bodies and structures of companies present in the market. Being a newly appointed assistant manager consultant of H&M, I have presented an investigating report about different types of organizations formed in the market like, public company, private company and not for profit organization.

Further the report guides adequate information about all the three types of organizations. It also gives examples which represent the types of organization. Apart from that the vision, mission, size, scope and functions of the companies are mentioned in the task which gives an idea about the organizational structure of the company. It shall also be noted that all types of companies have their different specification and functions held in the market depending upon their legal structure (Meyer, and Bromley 2013). Further details about the task are discussed below.

Task 1- Different types of organization 

The market has now days become diverse due to which various types of bodies are prevailing in their acceptable target market and earning well by producing the goods and services demanded by the customers. Further, the three different types of organizations are discussed below.

Public Organization

A public organization also known as public company or publically listed company is an organization which is owned and controlled by the general public. The organization is listed on the stock exchange through which people purchases the share of the company and attains their ownership on the company. These companies work to provide benefits to the public sector on a whole. Provided a public company can also be can unlisted company, an unlisted public company refers to the company which aims to raise their capital by assigning their shares to shareholders but is not listed on the stock exchange. the legal structure of a public company is that they are restricted to raise funds from public by the way of issuing shares, bonds etc. to them (Child 2015). These companies are required to add a PLC word behind their company name. And the business of the company is controlled and managed by the board of directors only. Further such companies are also liable to pay taxes to the government for the revenue which they have earned. Also they are required to pay dividend to the members against the profits earned by them. And lastly, the basic requirement of a public company is that they have to issues minimum of 50,000 value shares in the market (Hodson 2014). Further one of the public company and its cope and function are discussed below:

Burger King Co.

Burger King (BK) is an American global retail chain store which serves fast food hamburgers worldwide. The company was originated under the name of InstaBurger King in the year 1953, in Florida. In the times of difficulty the company Burger King was sold to Miami based franchisees namely David Edgerton and James McLamore, they also renamed the company as Burger king; which further in the year 2002 was sold to Diageo and subsequently became public company by listing their shares on stock exchange (Scott 2013).

The products served by Burger king are hamburger, fries, chicken, shakes, dessert, salad etc. The name of burger king is known globally as the company also serves products worldwide; due to which they earned the competitive edge in the target market. Further talking about the size of the company it shall be noted that Burger King has around 34,248 numbers of employees in total in their organization and also the company has total equity of US$ 2.912 billion in the last financial year. The total revenue of Burger king previous year was the US $ 4.05 billion, which states that the company initiates their business operation on a large scale worldwide (Klabbers 2015).

Burger King works with a corporate vision so as to initiate and develop excellence in the industry and gain trust of all the people present in the industry. This vision of the company is linked to the original aim of the organization initiated by the founders of the organization. Further the mission statement of the company is to lay emphasis on the pricing, ambiance, and services implemented by the organization so as to attract more and more customers in the target market. It shall be noted that the major reason behind the success of Burger King is its organizational systemic functions implemented in the organization in accordance to the structure of the organization. Burger king has centralized functional structure.  Centralization helps the company to maintain decision making with the help of core management team, function-based group of organization helps in creating efficiency through initiating specialization in different managerial sectors. Lastly geographic division feature helps the company in creating products according to geographic characteristic present in environment (Clegg, Kornberger and Pitsis 2015).

Private Company

This type of company is also called closely held company which refers to the organization which is held either by non-governmental company or by small number of shareholders. The stocks of such companies are not traded on any stock exchange generally, but the shares are traded privately. Further talking about the legal structure of a private company it shall be noted that such companies have their separate legal identity under which maximum number of shareholders can be 50. “Limited” word shall be added on the back of the company’s name, this word shows that such companies are private company. The shares of such company are traded within a small framework only and the member can sell the shares only to those who are connected with the company. Such companies shall issue capital less than 50,000 thousand bucks (Scott 2013). Further details about the private company are discussed below:

Uber Technologies Inc.

Uber is global transportation technological company which is based in California and carries their business activities all around the world. Uber is privately held company which means that the shares of the company are not listed on any stock exchange. Uber is a giant company which earned estimated revenue of US$ 6.5 billion last year. The company provides vehicle for hire, delivery etc. services through their mobile application in total 633 countries. More than 12000 employees are currently working with the company. Further talking about the vision and mission of the company it shall be noted that Uber works with a mission statement that they work in the business environment so as to bring transportation services approachable by all (Burke 2017). Also with their services the company aims to create a web with the help of which people can travel wherever they want. The company creates a vision to innate their efficiency in the target market and provide maximum possibilities of services to the riders, drivers and to all the customers of the company. Further the success and failure of a company is based on its organizational structure, and Uber holds a good and easily formulated organizational structure which helps the company to achieve competencies. The below mentioned is the organizational structure of Uber with the help of which employees performs their business functions responsibly. The functions correlate to the vision and mission of the company; this shows that the organizations structure helps the company to achieve their defined targets (Meng 2017).

Voluntary Sector

Voluntary/Community sector is a not for profit organization which initiates business activities so as to provide benefits to the society and do not earn any personal gain for the company. Such companies are developed for a social cause and activities under this organization are taken accordingly so as to achieve their social objective. The organization might be governmental or non-governmental, and it is also called the third sector. The legal structure of a voluntary organization is simple as it is controlled and managed by the unpaid management committee who work for the not for profit motive in the organization. Charity is the status of such companies and it is also their prime motive (Cummings, and Worley 2014). Such companies are benefitted with the tax rebate but also they have to face audits and heavy regulations as well. There are four types of legal structure of the organization that is community benefit society, co-operative society, community Interest Company and royal charter bodies. Such companies have limited liability membership as well (Shen 2014). The further example of a voluntary organization is discussed below:

NCVO (National Council for Voluntary Organizations)

NCVO is an umbrella body for the voluntary and community sector in England. This organization was registered to the charity no. 225922. The company works with a motive to initiate and develop the civil services in the environment. The organization was formed by National Council of Social Services (NCSS) in the year 1919. NCVO works with a mission to connect people and organization and develop their sustainable responsibilities toward the civil activities of the country. Around 13000 voluntary organizations are associated with the NCVO workings, so it shall be assumed that the organization works on a large scale to accomplish their targets (Scott, and Davis 2015). NCVO performs the functions in the market to represent its members in front of the government and the world. Also they carry out research and analysis about the community sectors. Further organization initiates all such activities with aim to develop the voluntary sector and initiate and indulge other people in this field as well (Déri 2013). All the activities in the organization are initiated with an aim to make charity to help others. The main help which this organization provided is that it brought many other closed group voluntary organizations together to simultaneously work for same motive and achieve the target collectively. A President of the organization is the one who guides the people to formulate action plan in accordance with their target. Further, three trustees of the company co-operated with each other to ensure the right mix of skills and experience in the organization (Bolman, and Deal 2017). the connecting, supporting, representing activities of the voluntary organization are worked in such a way that it creates identification in the market and assist the mission and vision of the organization that is to make a difference by their activities.

Task 2

The below mentioned essay provides a brief overview of the macro environmental factors affecting the business activities of H&M company. It also discusses the internal and external positive and negatives both factors which influence the activities of the organization. Further details about the task are discussed below:

Talking about the PESTEL analysis of H&M, it shall be noted that PESTEL analysis helps in analyzing the external environmental factor which helps a business to sustain in the target market. It also acknowledges the negative factors affecting the working of the organization. Political factors affecting the management of H&M are that the company is under a pressure by the communities present in the international environment with bars the company from opening their stores in the target market (Oborune 2014). H&M is strictly prohibited from opening their stores in Israel, as the country does not follow any international law. Other political factor that stagnated the growth of the company is that when the company opened their store in Bangladesh, due to which the market conditions of the country; the company also lost their value in the target market. As the labor market of the labor market of the company was cheap and inefficient due to which the same image of the company was produced in the market which portrayed a wrong impression on the target market (Thompson, and McLarney 2017).

Next are the economic factors affecting the growth of H&M, one major positive factor is that the economic factors present in the environment helps the company to attain its pace in the market. As H&M purchases raw material in bulk at very low prices due to which the market price of the product subsequently decreases resulting in optimizing better satisfaction by customer. H&M is among one of the most famous companies which sells products worldwide and is a fast seller at low prices. Considering to the case study it shall be noted that this economic factor which is pulling the growth of H&M in the backward direction (Wang, and Yang 2013).

The social factor which affects the growth of H&M Company in the global market is that the company caters women participation in economic activities by recruiting more women as compared to men in their business process. Thus, this activity enables women to attain equality in the market and stand for their rights as well. The company provides a platform to women so that they can showcase their talents. This activity of company shows that they are concerned towards the growth of women in the market and attain social power as well. Along with social, H&M management also adequately fulfills the ethical responsibility which shall be maintained by a multinational in the global business context (Youell 2013).

Technology is adequately used by the company in inspiring their business activities. H&M believes in technological upgradation with time due to which the company always stays updated towards the technological implementation or any change in the target market. Also as H&M entertain the fashion industry this continuously fluctuates in the market therefore in order to meet the requirements of client the company needs to use the updated technology in their process. Further cyber security activities are efficiently operated in the business so that no competitor understand the core business structure of the company and make use of it for their benefits (ZHOU, LI, and LUO 2013).

The environmental factors highly affect the activities of the business in the competitive market as the fashion retail business is connected with the use of raw material like cloth, leather, cotton etc. So, any change in the environmental factor affects the quantity and the quantity of the raw material in the environment due to which the company faces difficulty in accumulating the raw material according to the demand preset in the market. One benefit which H&M receives in this process is that the company complies with all the environmental laws governing the activities of the business in different countries. Due to such initiation of the company, H&M gained fame and brand image in the target market (Hadži? 2016).

For every business prevailing in the global market, it is important for them to comply with the legal laws of that country. It makes the suppliers of H&M follow the national laws of the company and if any mistake is committed by the company then they shall be informed of time. Further, the activities of the company do not allow child labor etc. activities in the business process, also H&M does not believe in harassing the efficiencies of employees to gain maximum befit from them. Resulting to which, as discussed earlier the company complies with the legal laws governing their activities in the business process. Hiring, contracts etc. activities are initiated freely with any force or coercion (Al Helou 2014).

From the above external analysis of the company, it shall be taken into accounts that there are both positive and negative factors present in the macro environment which affects the growth of the company in the target market. Furthermore talking about the internal analysis of H&M it shall be noted that the company holds strength which them forwards towards the achievement of their organizational objective (Sanchis Sánchez 2015). Like wide variety of products which the company offers in the market. Starting from apparel to cosmetics, shoes, and accessories, the company serves all types of products needed by the customer at one place only. Strength in the unique identity of H&M in the target market apart from that H&M is one of the best companies selling fast fashion at low prices; this gives an advantage to H&M to ace in the global market and cuts competition as well (Yu, and Shi 2013).

The above mentioned are the strengths of the company due to which H&M enjoys their growth of in the target market. But all organization present in the international market has some weakness, like H&M Company. The biggest weakness of the company is their dependence on third-party supplier due to which their cost of the transactions is left in the middle if any hindrance occurs from their side. The company is highly dependent on third parties for their merchandises due to which they have less control over their production cycle. The company have a diversified family of 800 independent suppliers, resulting to which all suppliers have their different nature of working due to which the cycle is unpredictable as these vendors affects the order commitment of H&M and any bad experience from the part of suppliers can adversely affect the brand image of the company in the international market as well (Cortez, et. al., 2014).

Opportunities of H&M are their objective of expansion all around the world by selling fast fashion at low rates. H&M is one of the identified companies in the world which sells trendy fashion at casual rates. So, this can be regarded as the biggest opportunity for the company to gain the market share in the emerging market. Another opportunity for H&M is that they are focused to expand so as to improve the profitability of the business. The company is constantly focusing on expanding their store base across the globe by opening 400 new stores in 2016. Such expansion plans will help the company to improve their top as well as bottom line (Sun, et. al., 2014).

Also, the threat to H&M in the market is the development of e-commerce affecting the growth of the business in the external environment. With the effect of the internet, many companies are entering the target market and affecting their growth. Another threat is emergence of fashion trends due to which the company needs to regularly change the business so as to gain competence. Another threat to H&M Company is the rising labor cost in developed countries. As the company is aiming to expand in globe, so in lower developed countries it is easy for the company to expand but in developed countries, the company faces the problem of rising cost of production (Martikainen 2014).

Connecting the internal factors of the company H&M with the external factors present in the environment, it shall be noted that technological implementation and recent fashion trends are the two factors which the company shall focus on and update accordingly; so as to gain the competitive edge. Apart from that H&M shall also focus on expansion all around the world as it is one of those companies which sell fast fashion and minimal prices. The external factors of the company support them in achieving their objectives. Thus, the management of H&M shall consider the relationship and work accordingly (Gockeln 2014).

Thus, in the limelight of above mentioned events, it shall be noted that there are both types of factors present in the environment which affects the growth of the company. But H&M has a huge scope of acing the target market with its capabilities.

Conclusion 

Thus after summing up the above assignment, the facts that came into existence are that there are different types of companies presenting the target market with different organizational structure as well according to their features present in the market. Mainly voluntary, public and private are some of the companies which are formed in the market. All organizations have their different types of specifications which match the goals and objectives of the company. The report further discusses the legal structure, scope, size etc. of such business processes. Further, it also explains the working of such companies with examples and shows their business activities in their target markets. Further, it also discusses the structure of H&M and their values in the market. The PESTEL analysis shows the macro environmental factors which affect the activities of the business in positive or negative manner. The objective of H&M is to expand in the global business context, so the environmental analysis states the areas where the company can sustain and the areas the company fail as well. Apart from that, the internal analysis of H&M (SWOT) shows their strengths, weakness, opportunities, and threats present in the business affecting their growth (Dach, and Allmendinger 2014). The above mentioned analysis accurately explains the scope of the company to achieve growth in the target market. Further, the interrelationship helps in attaining knowledge about the attributes which can help H&M sustain their growth in the global business market.

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