Candidate number: khd326 (000796 -0009)

IB Diploma Programme
IB Business Management – Standard Level
Internal Assessment

Research Question: Can

H&M find a solution to their
high cost of production in
order to decrease the unit
price but still maintain good
quality products?

Word Count: 1500

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TABLE OF CONTENTS

Page number

INTRODUCTION—--------------------------------------------------------- 2 - 3

MAIN COMMENTARY—-------------------------------------------------- 4 - 6

CONCLUSION—------------------------------------------------------------- 6 - 7

BIBLIOGRAPHY—---------------------------------------------------------- 8
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Research Question: Can H&M find a solution to their high cost of production in
order to decrease the unit price but still maintain good quality products?

Introduction

H&M, a Swedish multinational beauty and fashion products company, incorporated in 1947

producing accessories, cosmetics, and garments “worth some SKr 26.6 billion ( US$3.15

billion)”1. On March 17th, 2022 H&M’s stock price was at “HM-B (STO) SEK 139.04 and

dropped at a whopping -4.28 (-2.99%)”2. Pete Vegan homeware award was awarded to H&M

this shows their strength towards achieving the goal of being eco-friendly in 2025. Their mission

statement is “to drive long-lasting positive change and improve living conditions by investing in

people, communities and innovative ideas.” 3Their statement emphasizes on the manner in which

H&M offers the world its products goaling to reasonable pricing plus accessibility.

Despite H&M's great effect over the 65 years of their existence there are some weaknesses they

face. Firstly “ due to its fast-fashion model, H&M relies heavily on current trends and designs by

other brands for its production”4 meaning they lack originality resulting in no innovation in the

production area of their business. Secondly, their unethical ways of production, “ cheap labor is

dehumanizing and against fair work principles” 5making the face of their business dirty since the

1
www.encyclopedia.com. (n.d.). Hennes & Mauritz AB | Encyclopedia.com. [online] Available at:
https://www.encyclopedia.com/books/politics-and-business-magazines/hennes-mauritz-ab
[Accessed 26 Feb. 2023].
2
www.encyclopedia.com. (n.d.). Hennes & Mauritz AB | Encyclopedia.com. [online] Available at:
https://www.encyclopedia.com/books/politics-and-business-magazines/hennes-mauritz-ab
[Accessed 26 Feb. 2023].
3
www.unicef.org. (n.d.). H&M Foundation and UNICEF launch new ‘Be Inclusive’ campaign. [online]
Available at: https://www.unicef.org/hm-foundation-and-unicef-launch-new-be-inclusive-campaign.
4
Momin, A. (2021). H&M SWOT Analysis: 7 Threats Hennes & Mauritz is Facing. [online]
pestleanalysis.com. Available at: https://pestleanalysis.com/hm-swot-analysis/.
5
Momin, A. (2021). H&M SWOT Analysis: 7 Threats Hennes & Mauritz is Facing. [online]
pestleanalysis.com. Available at: https://pestleanalysis.com/hm-swot-analysis/.
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production of garments requires toxic dyes, making the working environment non-ethical for

employees. And lastly “ Overdependence of outsourcing” 6 therefore simply depends on

producers giving them access to an increase in the price paid for producing and even handing

them the wound of halting “ causing the sales of H&M to drop instantly”7.

Furthermore, Covid-19 also had a huge impact on the weakening of H&M by increasing

production costs. Going from in-store selling to depending on online stores. Not only did H&M

lose employees during the drastic turn but also lost customers along the way, because of the

increase in the product price. Because of these challenges, I will be investigating:

Can H&M find a solution to their high cost of production in order to decrease the unit

price but still maintain good quality products?

This commentary will be based on the following business tools/theories and 3 supporting

documents:

Tools:

SWOT analysis

Sources documents: The source, title of article

Pestle Analysis: H&M SWOT Analysis: 7 Threats Hennes & Mauritz is Facing

SWOT hub: H&M SWOT Analysis 2023: A Detailed Report!

CNBC: H&M slammed as racist for ‘monkey in the jungle’ hoodie

6
Business Strategy Hub (2020). H&M SWOT Analysis. [online] Business Strategy Hub. Available at:
https://bstrategyhub.com/hm-swot-analysis/.
‌
7
2Stallions. (2020). E-Commerce Platform or 3rd Party Marketplace? [online] Available at:
https://2stallions.com/blog/e-commerce-platform-vs-third-party-marketplace/.
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Main Commentary

Strength:

H&M, being one of the leading industrial corporations in the world, has managed to extend its

global reach by becoming more international by expanding to continents like Asia and Africa.

This has helped H&M grow and diversify through culture. One of their successful strategies is

following the fast-fashion model, the technique makes it quicker to deliver from the design table

to the store, making it possible to meet new collections every season. Another strong arm H&M

carries is having a systematic supply chain, ensuring that customers receive purchased items
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much faster. The Benefit of working with different suppliers is that it decreases the likelihood of

stock running out. Their powerful online presents is an eased service to clients through the

online marketplace. “ It uses third-party platforms and its main website to reach more online

customers and increase E-commerce sales”8.

Weaknesses:

On the other hand H&M lacks production control, originality in production, and suffers from

controversy on ethical values. H&M highly depends on third-party suppliers giving the suppliers

full access to stopping production at any pleased, but it’s also risky for H&M’s products for

suppliers to claim full credits on them. One of the main problems with H&M’s is the lack of

originality. Instead of setting trends they choose to follow them creating this inexpensive appeal,

but also making their fashion false copies enabling them to be unique. Back in 2018 H&M

launched “Coolest Monkey in the Jungle”9 and committed the mistake of putting on display a

black kid model, causing customers worldwide to decide to boycott their products because it was

perceived to be racist. H&M also faces a lot of backlash due to claims from employees not being

treated well. Headlines claim that employees are put in harsh and unsafe environments during

production, such as toxic dies later leading to health issues.

Opportunities:

8
PYMNTS (2023). H&M Earnings Slump as Fast-Fashion’s Four-Way Fight Takes a Toll. [online]
www.pymnts.com. Available at:
https://www.pymnts.com/news/retail/2023/hm-earnings-slump-fast-fashion-four-way-fight-takes-tol
l/[Accessed 26 Feb. 2023].
9
‌PYMNTS (2023). H&M Earnings Slump as Fast-Fashion’s Four-Way Fight Takes a Toll. [online]
www.pymnts.com. Available at:
https://www.pymnts.com/news/retail/2023/hm-earnings-slump-fast-fashion-four-way-fight-takes-tol
l/[Accessed 26 Feb. 2023].
‌
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Furthermore Covid-19 struck back in 2019 leading to online market shopping being an important

aspect of selling products to customers since it was the only access to them during quarantine..

H&M's advantages from having a solid web presence could help them develop quicker since

most of the competitors are in the mix of still figuring out statistical tools for their online market

giving them a head start. H&M selling lower cost products advantage them because it gives

middle-income households in emerging countries access to affordable fashion. This is an

opportunity for them to grow since it decreases the risks of not making it in a new environment.

Threats:

Covid-19 had disrupted the supply chain but also significantly reduced H&M’s sales and

profitability, due to the physical locations being closed. Not only physical stores being closed

have been the problem but also huge competition over the years with “Gucci, Zara, Gap, and

Macy’s”10 “ H&M’s competitors attempt to gain market share and lower demand for their items”
11
.

Conclusion

With H&M’s mission statement being “to drive long-lasting positive change and improve living

conditions by investing in people, communities and innovative ideas.12” they don't operate

towards applying this statement. Yes, H&M offers the world its products at reasonable pricing

10
Anon, (2022). H&M SWOT Analysis 2022: A Detailed Report! | SWOT Hub. [online] Available at:
https://swothub.com/hm-swot-analysis/.
11
Anon, (2022). H&M SWOT Analysis 2022: A Detailed Report! | SWOT Hub. [online] Available at:
https://swothub.com/hm-swot-analysis/.
12
www.encyclopedia.com. (n.d.). Hennes & Mauritz AB | Encyclopedia.com. [online] Available at:
https://www.encyclopedia.com/books/politics-and-business-magazines/hennes-mauritz-ab
[Accessed 26 Feb. 2023].
 7

but lacks originality and good working conditions for employees, which leads to no innovation

in the production area and relies heavily on other fashion businesses. This gives their producers

great control of pricing at H&M and also gives them the power to control the speed,

accessibility, and quality in which their products are received. H&M should apply its mission

statement as it is ethical to satisfy customers but also employment needs that later result in happy

employees creating an atmosphere for great customer service. Suggest applying Masclow’s

Hierarchy or Adam’s Equity Theory in order to motivate their employees and build a better

family at H&M.

Furthermore “Can H&M find a solution to their high cost of production in order to decrease

the unit price but still maintain good quality products?” Yes, H&M can cut down costs by

cutting down production costs. For instance, if H&M was able to find new producers that are

cheaper but still maintain and provide good quality products, H&M can switch to producing their

products with them instead. Another way of cutting costs could be investing in machinery. Yes,

machinery is expensive but it holds advantages such as less employment needed to run

day-to-day activities. Not having to employ a lot of people because one machine already does the

job of many but also faster and more efficiently. Reducing waste would be another way of

reducing costs, and that is where motivation takes place. Once a business treats its employees

well and they are satisfied, this more likely motivates them to give back to the company by

minimizing waste and increasing working capacity. H&M has great products to offer if H&M

manages to fix high-cost production, they’re looking at a bombing return of clients.

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Bibliography

Histories, International Directory of Company. “Hennes & Mauritz AB.” Encyclopedia.Com |

Free Online Encyclopedia, Encyclopedia.com,
https://www.encyclopedia.com/books/politics-and-business-magazines/hennes-mauritz-ab.
Accessed 26 Feb. 2023.

“H&M Foundation and UNICEF Launch New ‘Be Inclusive’ Campaign | UNICEF.” UNICEF,
https://www.unicef.org/hm-foundation-and-unicef-launch-new-be-inclusive-campaign. Accessed
26 Feb. 2023.

Parker, Brianna. “H&M SWOT Analysis (2023) | Business Strategy Hub.” Business Strategy
Hub, https://www.facebook.com/bstrategyhub/, 31 Aug. 2020,
https://bstrategyhub.com/hm-swot-analysis/.

Dijk-Hildebrand, Olwen. “E-Commerce Platform or 3rd Party Marketplace? | 2Stallions.”

2Stallions, https://www.facebook.com/2Stallions/, 25 Nov. 2022,
https://2stallions.com/blog/e-commerce-platform-vs-third-party-marketplace/.

“H&M Earnings Slump as Fast-Fashion Fight Takes Toll | PYMNTS.Com.” Payments News &
Mobile Payments Trends, Consumer Payments News, Financial Technology News |
PYMNTS.Com, PYMNTS.com, 27 Jan. 2023,
https://www.pymnts.com/news/retail/2023/hm-earnings-slump-fast-fashion-four-way-fight-takes-
toll/.

Thomas, Lauren. “H&M Slammed as Racist for ‘monkey in the Jungle’ Hoodie.” CNBC, CNBC,
8 Jan. 2018,
https://www.cnbc.com/2018/01/08/hm-slammed-for-racist-monkey-in-the-jungle-hoodie.html.

“H&M SWOT Analysis 2023: A Detailed Report! | SWOT Hub.” SWOT Hub, 2 Feb. 2022,
https://swothub.com/hm-swot-analysis/.

“H&M SWOT Analysis | EdrawMind.” Edrawsoft,

https://www.edrawmind.com/article/hm-swot-analysis.html. Accessed 26 Feb. 2023.