External business environment analysis

Layers of the business environment

Diagrama pag 98- Lili

The macro-environment

The P.E.S.T.E.L Framework

POLITICAL- Taxes applied by government

- In Romania 20% for foreign investment

- Governments try to support national company

- it offers credit and other incentives

Economic Factors

High interest rates

- Difficult access to credits- Difficult to give them back

Unemployment

-people prefer not to work

Inflation

Sociocultural Factors

H&M does not have any factories of its own

TECHNOLOGICAL

There are two types of technology that affect the business

1.media technology

-the website has to be updated

2. printing machines

special or more updated machine

Environmental Environmental protection laws

Environmental requirements for IT area

- All IT products IT Eco Declaration

Green transport

-Clean and efficient transport with limited influence on the climate

Legal

H&M follows the Swedish legislation

-it is originally from Sweden

H&M has to follow others country government system

- in country it operates

Porter’s five forces model

Bargaining power of suppliers

H&M does not have any factories of its own

-It works with 700 independent suppliers

Strong relationship with suppliers

- influence its profit margin

High switching costs of firm in the industry

Bargaining power of customers

Insignificant buyer switching costs

- products are standardized

Buyers are fragmented

- no buyer has any particular influence on product or price

Threat of new entrants

H&M, Inditex Group, Arcadia – posses 70% of market share

Strong barrier for new companies - Fixed costs are high

Economies of scale and differentiation

- affordable products

Threat of substitutes products

There are no substitutes

Rivalry

Main competitors: Inditex Group, Arcadia,Gap

Powerful competition

- it affect H&M profit margin- Refocusing on price and value- Became more innovative