Marketing Environment Analysis

 

Executive Summary

This paper has the aim to research macro and microenvironment within the apparel industry of the modern fashion industry in the USA. The studied macro environment is based on the PESTEL framework. It investigates which competitive forces influence the microenvironment. The competitive forces comprise the Porters five forces model. The paper includes qualitative research, a literature review, and a case study. The case study appears to be in regards to Swedish fast fashion company Hennes and Mauritz (H&M), which has created a new clothing line from environmentally friendly materials -H&M Conscious. The following information about H&M has its sustainability report (H&M Hennes & Mauritz, 2015). This research shows that most potential clients present a positive attitude to the use of organic cotton in the clothing production. The interest in environmental protection is another feature that attracts these customers. The given marketing environment analysis can be useful for better understanding of the potential customers with high willingness to buy clothes made from organic materials.

Introduction

The company’s marketing environment affects a great variety of factors that have an influence on the way it operates. The company can control some of the factors, but still there are some uncontrollable. The company needs to understand its marketing environment so that it can make the most of the positive factors and directly control the impact of the negative factors (Kotler & Keller, 2012). The Swedish company Hennes & Mauritz AB (H&M) is one of the most popular and profitable clothing retailers in the world. The operating brands names are H&M, H&M Home, Other Stories, Monki, COS, Cheap Monday, and Weekday. The major area of H&M business is retailing; however, the company also engages in manufacturing, design and marketing of clothing. The online company store has started to operate successfully within the United States since 2013 (H&M, 2015) while its online shopping had begun in 1998. The main disadvantages based on the companys analysis relate to the fact that H&M does not own the factories. However, H&M has stable and long-term suppliers, whose reliability is stable, so the company can ensure its suitability and provide high quality and reasonable prices of goods to the customers. The objective of the following paper is to study the apparel industry of macro environment through the literature review about the fashion industry and sustainable development. It comprises the information about the business performance of H&M. Moreover, it shows how this fashion company tackles the sustainability problems driven by the macro environmental factors and competitive forces. The financial report demonstrates that H&M has been performing better year after year.

The Micro Environment Description

Markets

H&M is the second largest multinational fashion retailer in the world. The target market of H&M includes children, teenagers, and middle-aged women and men, who care about their health and the environment, and buy clothes and accessories manufactured only from eco-friendly materials. The collections include segments of gender, age, and income. The major area of H&M business is retailing. According to Lucy Siegle (2013), H&M plans the expansion into new markets. For this purpose, the company has opened 50 new stores, which is one of the pillars of the business sustainability. In addition, the company has expanded its other brands and divisions, such as Other Stories, and launched a new brand H&M Conscious. The above information gives the reason to believe that H&Ms aim is to have an increase in production capacity, which helps to ensure sustainable growth (Siegel, 2013).

Customers

For the determination of H&M target customers, their buying behavior and preferences, the company uses the Customer Relationship Management system (CRM). H&M key customers have experience in the modern fashion trends and prefer to buy fashionable and affordable clothing from natural fabrics. The clients buying behavior and products preference also depend on social class. The social status of H&M target customers is the middle and upper class.

Competitors

The main competitors of H&M are ZARA (Inditex group) and Gap Inc. These multinational companies produce and sell their products for both wholesalers and retailers. They have widely recognized brand names, as well as exemplary representations. The hallmark of H&M competitors is the fact that their clients choose their products on a regular basis and do not pay much attention to changes in fashion trends.

Competitor Details

Competitor	Established date	Size (employees)	Strengths	Weaknesses
Zara (Inditex)	1974	140,000	Strong financial position. Fast delivery. Recognized brand name. A large number of shops. Centralized logistics A vertical integration of time-sensitive items in the manufacturing process	The products are similar to H&M. High prices. The quality (more than 50% of cotton products made from GMO materials). The product quality is sometimes lower than expected
Gap Inc.	1969	137,000	Strong financial position. World-famous brand name. Franchising opportunities Low loyalty among youth generation.	Strong dependence on outside vendors for its products. Asset underutilization.

Distribution

The H&M brand strategy is a global expansion. The companys growth target is the increasing number of the branded stores by 1015 percent per year. Currently, H&M operates through its branded stores in more than 40 countries around the world. The company also has a special web platform that offers online sales in the USA, Finland, the UK, Sweden, Germany, Denmark, the Netherlands, and the other countries. H&M introduced many tools for a dialogue with its customers to improve the efficiency of information exchange between the company and its clients. For this purpose, H&M has launched the corporate website, where the customers can report their product requirements, recommendations or complaints. In addition, H&M introduced a smartphone application that allows its users to stay informed about new products and shares (H&M, 2015).

The Macro Environment Description

Demographic Forces

There are some demographics forces that can affect the fashion industry. The companies can use a variety of demographic characteristics to determine the buying behaviors of consumers or their product preferences and identify their key customers. Targeting consumers with certain demographic characteristics helps the companies to maximize sales and profit. Income is one of the demographic factors that may influence the business. Age is another demographic factor that affects businesses. In addition, customers buying preferences vary by geographic region.

Economic Forces

Economic factors can have both positive and adverse effect on the apparel industry. According to the OECD (2013), the world fashion market is growing steadily and can reach 50% of global GDP growth in 2025, mainly due to rapid growth in Asian emerging markets. During the periods of economic growth, people have more disposable income. Consequently, they can buy more clothes, increasing sales for garment manufacturers, wholesalers, and retailers. The recession has the opposite effect. Sales can be substantially lower. Therefore, the retailers can be stuck with much inventory, and they will have to sell the clothing at greatly reduced prices (Suttle, 2016). Moody (2013) indicates the transformation of the sourcing environment in the clothing industry. Most of the modern fashion companies outsource the production processes to low-cost textile-producing countries such as Bangladesh and Cambodia to minimize their costs and maximize their profits.

Ecological Forces

According to the latest research, the apparel industry largely pollutes the environment and often violates the rights of employees. The problems obviously arise from the fact that companies produce geographically distributed supply chains that are tough to control. Because of public pressure, the fashion companies have shifted their marketing strategies into a more sustainable direction. Moreover, in the apparel industry, no significant changes can happen without the engagement of the big fashion companies into corporate social and environmental responsibility (Easey, 2009).

Technological Forces

Technological factors affecting the apparel industry include the resource availability, demand, and production. For example, if there is a shortage of cotton, the retailers can increase the price of cotton clothing since they have to pay their manufacturers more. Many apparel manufacturing companies set advanced equipment in its enterprises like robots, which leads to dismissal of the employees (Suttle, 2016). With the advent of the Internet, the flow of information on new trends and brands from the supplier to the customer has become easier and faster. It allowed the modern fashion companies to respond promptly to the market signals.

Political/Legal Forces

Many political and legal macro environmental factors influence the success of small businesses in the apparel industry. It has repeatedly raised such issues as workers’ rights and child labor laws. At many enterprises, the employees have no basic workers’ rights such as hygiene, safety, and minimum living wage. Workers picket their employers if their salaries or medical benefits are less favorable than wages of the workers in related industries. Activists can also picket the retailers who buy clothes from countries directly implicated in violating child labor laws (Suttle, 2016). In addition, the fashion companies and designers face the specific problems related to intellectual property protection. It creates new challenges for the apparel industry and the lawyers in particular (Easey, 2009).

Cultural Forces

Several socio-cultural factors affect businesses in the clothing industry. The development and implementation of socially responsible business practices in the fashion industry, such as the sale of environmentally friendly products, the removal of the disputed or recalled products from the shelves, are constantly under the public attention. Currently, there is a steady tendency in the fashion industry of growing organic cotton, using only environmentally friendly materials, eliminating toxic chemicals, recycling and auditing factories. Organic and sustainable materials, recycled, fair-trade, ethically manufactured are some of the main attributes of this eco-fashion trend (Friedman, 2015).

The Core Marketing Concepts

H&M marketing concept is customer-centered and environmentally responsible. H&M uses the right combination of marketing Mix to satisfy the different customers’ needs, offering the best prices and products quality on the market. H&M collection includes everything from the evening dress collection to functional sportswear as well as for each season or occasion. In addition to clothing, shoes, lingerie, handbags, cosmetics, and jewelry, H&M designers also developed fashionable interiors H&M Home for children and adults. The company purchases fabrics only from manufacturers with a good reputation, not seen in violations of workers’ rights, child labor, and chemicals in the cotton growing. The success of H&M fast fashion model is in its vertical marketing system. H&M provides full control of its process from design to sale. The selling concept of H&M is to provide the fashionable items on demand instead of using the whole collection. Such a flexible policy is beneficial for H&M as the shops know the customers needs and submit their requests in advance. H&M relationship marketing concept is to build mutually satisfying long-term relationships with key customers to earn and retain its business. In addition, H&M supports the constructive labor relations with employees, respecting and protecting their rights. As mentioned above, H&M does not set high prices for its products. At the same time, it is important that organic materials cannot be cheap. The H&M product concept proposes a broad range of the most quality clothing from organic materials.

Conclusion

In conclusion, it is important to mention that H&M has proven to be successful due to product and selling concepts in comparison to its competitors. The company has the best opportunities regarding dynamic assortment, which is about fast response time. The fast fashion business model, which is used by H&M, has not only brought it a significant profit but also made it more successful than the nearest competitor Zara and allowed to be one of the most prominent companies within the apparel industry.

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