Read the case study below and answer ALL questions.
H&M: A Global Fashion Company Hennes & Mauritz, hereafter H&M Group, is a family of eight brands where employees with different roles, skills and experiences come together to make great design accessible around the globe. H&M, COS, & Other Stories, Monki, Weekday, H&M Home, ARKET and Afound currently constitute the eight well-defined brands which make up the multi-brand matrix organisation called the H&M Group. From its humble beginnings in 1947 as a single shop in the Swedish city Västerås, H&M is now one of the largest names in the retail fashion industry, handling an enormous supply network, warehousing and logistics. H&M employs over 177, 000 people, both in Sweden and in more than 4, 414 stores, which are in over 73 countries, spread across the globe, including most countries in Europe. Over the years, the rapid expansion has continued. Today there are H&M stores in Europe, North America, Asia, the Middle East, Africa, South America, and Australia. It plans to open further stores (it has a target of increasing the number of stores by 10 -15 per cent each year), as well as expanding its online sales operations (currently 51 online markets) by rolling out its digital presence to an increasing number of countries. H&M’s digital ambition means setting up not only a dedicated website to serve each new country, but also the physical presence that can ensure goods ordered on it will be delivered to customers in that country. The most visible part of H&M’s operations is its stores. The company says it wants these to provide an ‘inviting, inspiring and exciting experience’ to shoppers. While every store is unique, any is immediately recognizable as H&M from its signage, window displays and internal layouts. All stores seek to place the clothes centre stage through the use of internal displays that aim to provide styling tips and inspiration. H&M’s online stores try to emulate this experience in the virtual world, while providing additional accessibility for customers who can’t easily get to H&M’s physical stores, and enhanced levels of service by enabling customers to view and order a much wider range of merchandise (and in many more sizes) than will be possible in any physical store. However, the stores are only the end point of a much longer supply process. This starts with design. All of H&M’s garments are designed in Stockholm by its in-house team of clothing designers, pattern-markers and print designers. They aim to provide something for men, women, and teenagers and children, whatever their taste or style. The H&M Group has always believed that great design should, and can, be available to anyone. From the beginning, their role has been to democratise fashion. Today, that means making it sustainable: the only way to keep making great fashion and design available to many people, for many years to come. H&M has a business model that focuses on outsourcing non-core operations so they can focus on the core business model. To do this, H&M buys clothing and accessories from a large selection of suppliers but does not own a single factory. Their core business is to have “fashion and quality at the best price”. In contrast to the design process, H&M does not produce any of its garments in-house, but instead buys its products from a network of over 1900 factories owned by as many as 900 independent suppliers which are based in 2 countries such as China, Turkey, Bangladesh, Cambodia, India and some European countries. H&M views its suppliers as long-term strategic partners who manufacture its products, including being responsible for sourcing the necessary fabrics (mainly cotton) and related components. By eliminating the intermediaries and outsourcing production they are able to focus on the design of their clothing and the retail experience. This approach gives consumers fashionable product with good quality and the best price. That said, they closely manage the production processes to ensure that you get that chic, trendy jacket at a great price. As H&M buys large volumes of garments and other related products in these countries, H&M contributes by creating jobs for many people. For many countries, these jobs, created by companies within the clothing industry such as H&M, spark further industrial development and help to lift individuals and nations out of poverty. H&M’s logistics and distribution operation must then ensure that the right goods end up in the right quantity as required by each store. Factory shipments are transported, mostly by sea and rail, to H&M’s logistics centres, which are strategically located in the geographic vicinity of its stores in each region. Stores do not hold backup stocks, and so must replenish as required from the distribution centres. In 2013, H&M launched its Garment Collecting Initiative (GCI), which enables customers to hand in clothes that they no longer want for reuse or recycling. This is aimed at creating a closed loop in textiles, so that nothing ever goes to waste. The first H&M garments containing materials from the GCI were launched in 2014 – denim garments that contained 20 per cent recycled cotton. Source: www.hm.com (accessed on 30 September 2019)
Question 1
Drawing on the operations management literature and supporting evidence from the case study above where necessary, answer all questions below.
1.1 With the aid of an appropriate diagram discuss any FOUR (4) perspectives that inform the content of the operations strategy of a globally competitive company, such as H&M. In your discussion highlight how a consolidated view of the four perspectives of operations strategy provides broader ideas about the pressures which inform the content of H&M’s operations strategy and provide a practical example to illustrate each of the four perspectives. (15 marks)
1.2 H&M has a business model that focuses on outsourcing non-core operations so they can focus on the core business model. To do this, H&M buys clothing and accessories from a large selection of suppliers but does not own a single factory. Their core business is to have “fashion and quality at the best price”. Identify and discuss the core competencies and core operations of the H&M Group. (5 marks)
1.3 From the perspective of the comparative advantage theory, highlight the factors accelerating the continuous expansion of outsourcing by global companies and discuss the non-core operations which the H&M Group has decided to outsource. (10 marks)
