In 2000, Hennes & Mauritz (H&M) was the second-largest and most global player in the fashion retail business. It operated 682 stores, 80% of them outside its home country of Sweden, and achieved revenues of $3.0 billion and operating profits of $375 million. In 1999, when H&M announced plans to enter the U.S., sales had grown 20% per year and operating profits, 30%, for a decade. After the August announcement of U.S. expansion plans, its share price hit a record $35 (a P/E of over 90). But the new millennium brought challenges and uncertainty. In March 2000, the first nonfamily CEO, Fabian Mansson, resigned after only two years at the helm and the company issued a profits warning. In September 2000, H&M's share price closed at $18.68, a fall of nearly 50% from the prior year. Meanwhile Gap, the world's leading fashion retailer with revenues of $13.7 billion, was adding 600 stores a year and expanding into Europe from its U.S. base. Rolf Erikson, Masson's replacement, impressed few analysts and questions lingered about H&M's ability to maintain its rate of expansion. What did new CEO Rolf Erikson need to do to avert the threat from Gap and restore the company's fortunes?
Swot Analysis of "Hennes & Mauritz, 2000" written by John R. Wells, Galen Danskin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Erikson Rolf facing as an external strategic factors. Some of the topics covered in Hennes & Mauritz, 2000 case study are - Strategic Management Strategies, Growth strategy, International business, Leading teams, Marketing, Risk management, Strategic planning and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Hennes & Mauritz, 2000 casestudy better are - – increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, talent flight as more people leaving formal jobs,
customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Hennes & Mauritz, 2000
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Hennes & Mauritz, 2000 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Erikson Rolf, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Erikson Rolf operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Hennes & Mauritz, 2000 can be done for the following purposes –
1. Strategic planning using facts provided in Hennes & Mauritz, 2000 case study
2. Improving business portfolio management of Erikson Rolf
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Erikson Rolf
Strengths Hennes & Mauritz, 2000 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Erikson Rolf in Hennes & Mauritz, 2000 Harvard Business Review case study are -
Organizational Resilience of Erikson Rolf
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Erikson Rolf does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Erikson Rolf in the sector have low bargaining power. Hennes & Mauritz, 2000 has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Erikson Rolf to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Strategy & Execution industry
– Hennes & Mauritz, 2000 firm has clearly differentiated products in the market place. This has enabled Erikson Rolf to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Erikson Rolf to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Erikson Rolf in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Erikson Rolf is present in almost all the verticals within the industry. This has provided firm in Hennes & Mauritz, 2000 case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Ability to lead change in Strategy & Execution field
– Erikson Rolf is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Erikson Rolf in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Erikson Rolf is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Erikson Rolf has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Hennes & Mauritz, 2000 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Erikson Rolf digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Erikson Rolf has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Training and development
– Erikson Rolf has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Hennes & Mauritz, 2000 Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Operational resilience
– The operational resilience strategy in the Hennes & Mauritz, 2000 Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Highly skilled collaborators
– Erikson Rolf has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Hennes & Mauritz, 2000 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Hennes & Mauritz, 2000 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hennes & Mauritz, 2000 are -
Increasing silos among functional specialists
– The organizational structure of Erikson Rolf is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Erikson Rolf needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Erikson Rolf to focus more on services rather than just following the product oriented approach.
No frontier risks strategy
– After analyzing the HBR case study Hennes & Mauritz, 2000, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Erikson Rolf supply chain. Even after few cautionary changes mentioned in the HBR case study - Hennes & Mauritz, 2000, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Erikson Rolf vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Erikson Rolf has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of Erikson Rolf, firm in the HBR case study Hennes & Mauritz, 2000 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Hennes & Mauritz, 2000, it seems that the employees of Erikson Rolf don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– It come across in the case study Hennes & Mauritz, 2000 that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Hennes & Mauritz, 2000 can leverage the sales team experience to cultivate customer relationships as Erikson Rolf is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Erikson Rolf has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Erikson Rolf even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High bargaining power of channel partners
– Because of the regulatory requirements, John R. Wells, Galen Danskin suggests that, Erikson Rolf is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Interest costs
– Compare to the competition, Erikson Rolf has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Skills based hiring
– The stress on hiring functional specialists at Erikson Rolf has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Opportunities Hennes & Mauritz, 2000 | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Hennes & Mauritz, 2000 are -
Manufacturing automation
– Erikson Rolf can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Erikson Rolf can use these opportunities to build new business models that can help the communities that Erikson Rolf operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Erikson Rolf can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Erikson Rolf can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Low interest rates
– Even though inflation is raising its head in most developed economies, Erikson Rolf can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Erikson Rolf has opened avenues for new revenue streams for the organization in the industry. This can help Erikson Rolf to build a more holistic ecosystem as suggested in the Hennes & Mauritz, 2000 case study. Erikson Rolf can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Erikson Rolf can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Erikson Rolf can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Erikson Rolf to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Erikson Rolf can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Better consumer reach
– The expansion of the 5G network will help Erikson Rolf to increase its market reach. Erikson Rolf will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Erikson Rolf to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Erikson Rolf to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Erikson Rolf is facing challenges because of the dominance of functional experts in the organization. Hennes & Mauritz, 2000 case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Erikson Rolf has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Hennes & Mauritz, 2000 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Erikson Rolf to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Hennes & Mauritz, 2000 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Hennes & Mauritz, 2000 are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Erikson Rolf can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Hennes & Mauritz, 2000 .
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Erikson Rolf.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Erikson Rolf business can come under increasing regulations regarding data privacy, data security, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Erikson Rolf will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Stagnating economy with rate increase
– Erikson Rolf can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Erikson Rolf in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Hennes & Mauritz, 2000, Erikson Rolf may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Consumer confidence and its impact on Erikson Rolf demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing wage structure of Erikson Rolf
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Erikson Rolf.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Erikson Rolf needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Erikson Rolf can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Regulatory challenges
– Erikson Rolf needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Erikson Rolf in the Strategy & Execution sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Hennes & Mauritz, 2000 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Hennes & Mauritz, 2000 needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Hennes & Mauritz, 2000 is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Hennes & Mauritz, 2000 is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Hennes & Mauritz, 2000 is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Erikson Rolf needs to make to build a sustainable competitive advantage.