COMPANY OVERVIEW

H&M

Hennes & Mauritz AB (H&M) designs, produce and retail clothing items
and other related accessories. Its range of products includes clothing,
cosmetic products and accessories. It has headquarter in Stockholm,
Sweden with Europe (Finland excluded) and Nordic countries been the
primary place of operation. H&M has over 35 markets with over 1988
stores and 76,000 employees (H&M, 2009).

It has estimated revenue of approximately $9,917.3 million during

the November 2006 fiscal year, an increase of 11.7% over 2005. The
company had an operating profit of approximately $2,218.1 million
during 2006 fiscal year and an increase of 16.1% over 2005. It also
had a net profit of approximately $1,565.5 million in 2006 fiscal year
with an increase of 16.8% over 2005 (DataMonitor, 2008)

CHICKENSHOP

Chickenshop is primarily a retailing company started in 1996. It has a

headquarters in Fife, United Kingdom where it has a brand new shop. It
range of products are clothing costumes including footwear, fancy dress
etc, make ups, jewelleries and accessories. It employs 14 peoples with
increases to 20 over the Halloween period (chickenshop.co.uk, 2010).

It has an estimated online value of approximately $3,632.46 and

estimated online revenue of $4.95 per day, $148.38 per month and
$1,805.33 per year (sitetrail.com, 2010).
COMPANY STRUCTURE AND GOVERNANCE

Because of lack of universal capability, the definitions of the size of an enterprise

suffer (Weston and Copeland, 1998). An enterprise size can be explained in
many terms, size can be explained in terms of the annual turnover, the number
of employees, the enterprise ownership and the fixed asset value.

Jordan et al. (1998) considers that a company with less than 100 employees and
less than 15 million euro turnover is a SME. the British Department of Trade and
Industry still maintains their description that an SME is an independent business,
managed by its owner or part owners and having a market share that is small
(Department Trade and Industry, 2001).

The European Commission adopted SMEs definitions in February 1996 as firms

with employees of below 250; have a turnover of less than 40 million Euros and a
total assets of less than 27 million Euros; positive equity resources
(shareholders’ equity and positive net income (Mira, 2002).

Based on these definitions Chickenshop can be comfortably defined as an SME

while H&M is a larger organization.

Keasey et al. (1997) defines corporate governance as ‘the structures, processes,

cultures and systems that engender successful operation of an organisations’. It
may be thought of as an establishing mechanism for the nature of ownership and
the organisation control within an economy (Abor and Adjasi, 2007)

Based on this both definitions, the structure, ownership and governance of a

company can be best explained by corporate governance.
H&M

H&M’s CORPORATE GOVERNANCE STRUCTURE 2009 (H&M, 2010)

H&M is a corporation that applies the Swedish Code of Corporate

Governance. It is based on’ comply or explain’ principle which means that
company that applies this code may deviate from individual rules
provided an explanation on the deviation is given, description of the
alternative chosen and provisions of the reasons for deviation. The
corporate governance of H&M is regulated by both external regulations
like the Swedish Companies Act, accounting regulations etc and the
internal control documents like the codes of ethics, policies and guideline
etc.

The Annual General Meeting

This is the company highest decision making body. This is a once an at

least year forum in which the company’s shareholders exercise their right
to decide on the company’s affairs. Tasks such as board of director’s
members and managing director discharge of liability, profit and loss
allocation decision, election of board of directors is done in the meeting.

Board of Directors

The board of director’s task is to manage the company’s affairs on the

stakeholders’ behalf. The board of directors appoint the managing
director.

Managing Director

The managing director is responsible for the day to day company

management as directed by the board. The task of the board and
managing director demarcation is laid down in written instructions
approved by the board

Auditors

The shareholders appoint the auditors during the meeting. They scrutinize
the annual reports and accounts of the company. They also scrutinize the
company management by the board and managing directors.

CHICKENSHOP

Managing
Director

Web
Sales
Director
Director

Chicken Shop Corporate Governance Structure

Chickenshop applies the UK corporate governance which is also based on

‘comply and complain’ principle. The board of directors contains the managing
director, the sales director and web director whom are also the shareholders of
the company.

Managing director

He is the founder of the company. He is also responsible for the daily

management of the company.

Sales Director
She runs the company. She is in charge of the financial situation of the company
including sales and marketing. She helps in developing in new range of products
and Web projects. She introduces new products like the Balloon and party
decorations which has quickly become a leading business of this type in the
area.

‘Her latest revamp of the company’s new shop has been acknowledged as
ground breaking and forward thinking for the fancy dress industry’
(chickenshop.co.uk, 2010).

WEB DIRECTOR

He is in charge of the web, creating an exciting website of the company to take

the emerging internet culture advantage. He update, creates and mages the
company’s website.

Both Chicken shop and H&M corporate governance main principle code are:

Leadership

An effective board heads the company which have collective responsibility for
the long term success of the company and there are clear division of
responsibilities.

Effectiveness

There are appropriate balances of skill; knowledge, experience, and

independence that enable them perform their duties well.

Accountability

The company’s position and prospect should be presented by the board in a

balance and understandable assessment. In achieving its strategic objective, the
board should be responsible for determining the nature and extent of risk. It
should maintain a good risk management.

Remuneration

The remuneration level should be able to sufficiently attract, motivate and retain
directors of the quality that is required to run the company. Unnecessary high
remuneration should be avoided.

Relations with Shareholders

The stakeholders should have mutual understanding of the objectives and there
should be effective communication between them.
STAKEHOLDERS IMPACT

Freeman (1984) explains that in an organisation, a stakeholder is an individual or

group who is been affected or can affect the achievement of the objectives of the
organisation.

Smith (2002:130-131) categorize the impact of stakeholders as technological,

social, political and market impacts.

H&M

The stakeholders that can be identified and their impacts are:

Shareholders

Shareholders importance and legacy primacy is to make sure that the

directors comply with the obligations of the company (Hemraj, 2003).
They constitute the annual general meeting

Customers

H&M mission statement is “fashion and quality at the best price!” It is therefore
important for H&M to meet their objectives. This is probably the most important
stakeholder that H&M have especially in the fashion industry. They determine
H&M position in the market.

Suppliers

The company does not have a specific supplier. It has a variety of

suppliers. It has a high sale rate and therefore needs to balance it with a
large amount of resources. H&M depends on third parties to manufacture
its products because it doesn’t own any manufacturing facilities. During
fiscal year 2006, approximately 25% of the total production is by two
manufacturers the company engage with (DataMonitor, 2008). If the
manufacturers don’t meet up with the standard of quality or shipping
time, it could cause a material adverse effect on operations.

Government

H&M applies the Swedish Code of Corporate Governance. The Swedish

legislation and Swedish Companies Act is followed strictly by H&M. The list
of agreements with OMX Nordic Stock Exchange Stockholm is the Swedish
Companies acts.

Staffs
These are also important stakeholders of the company. They affect the
production outcome of the company through their performance.

The stakeholder’s impact on the organisation can be as follows:

Political

If there is a change in government system of where the company is

based, it will affect the company. the changes in law that will follow will
make H&M change their objectives or operations to fit the requirement
but luckily H&M is been based in countries with a stable political system

Environment

The environment has always been a concern for H&M, especially organic
cotton growth. Growing cotton against nature have been common among
people recently and been criticized. Therefore, H&M has to protect the
environment so as to retain the company good image by carrying out
roles that protect the environment.

Social

H&M has been in the lead in the fashion trend because of the
characteristic been built on the social that it is fashionable and has a good
quality. It has consider the need of its consumer related to its
environment and reaches these needs with fashion.

Technology

The technology that has an effect on the business is media technology

and printing machines. An updated machine can make special patterns
and colours for making clothes making the clothes quality delivered to the
consumers better. Media technology development will aid the popularity
of H&M through advertisement and website which have to be updated to
get customers attraction to the brand and send the necessary news
events. These will expose the brand to the community more. Part of the
steps in which H&M is taking to improve on their media is reviewing its £5
million UK media business in July 2010.

CHICKENSHOP

The stakeholders that can be identified and their impacts are:

Customers

This is probably also the most important stakeholder that Chickenshop have so it
is important that they meet their objective. They determine the survival and
growth of chickenshop in the market.

Supplier

The company has only one supplier has confirmed by the manger but he
didn’t disclose the supplier information. It has a low sale and does not
need large amount of resources to balance it.

Government

Chickenshop confirms with the UK code of corporate governance and must

adhere strictly to it.

Staffs

These are also important stakeholders of the company as in H&M also.

They also affect the production outcome of the company through their
performance. It is important the keep the workers happy at all times to
have an appreciable growth in the industry.

The stakeholder’s impact on the organisation can be as follows:

Political

If there is a change in government system of United Kingdom, it may

affect the company of they decide to change the law that governs SMEs
which will chickenshop change their objectives or operations to fit the
requirement but luckily United Kingdom have a stable political system.

Social

Chickenshop is growing and surviving in the market because it is been

built on the social that it is fancy and has a good quality. It has considered
the need of its consumer related to its festive periods and reaches these
needs with the fashion provided.

Technology
The technology that has an effect on the business is media technology.
Media technology development will aid the popularity of chicken shop
through their website which has to be updated and maintained to get
customers attraction to the brand and send the necessary information like
top sellers, offers etc. It has to be maintained well so as to be available at
all times since large percent of their sales is through online sales.

Similarities between the Stakeholders of both companies

The two companies consider customers as the most important

stakeholders. The two company use similar code of governance. They
both comply with its adopted government policies. They are also both
reliant on technology to help boost their market. They can be both
affected by political and social influences of the stakeholders MANAGING
DIRECTOR

HOW EACH COMPANY HAS ESTABLISHED ITS STRATEGIC POSITION

H&M

The strategy of H&M has developed along:

 Expansion through proprietary distribution network of centrally controlled

stores setup

 Profitability and competitiveness of price through a production and

logistics management that is efficient.

 Short lead times which ensures market trends quick response and stocks
reduction.

H&M pursues a strategy of vertical integration with the distribution network. This
strategy has allows for direct collection and full exploitation of sales and
consumer information in order to improve and accelerate market response.

H& M ensures the best price by (hm.com, 2010):

 Having few middlemen

 Large volumes buying

 Having a wide and in-depth design, fashion and textiles knowledge

 Being conscious of cost at every stage

  Having a very efficient distribution network

SPEED, FLEXIBILITY AND PRICES THE KEY COMPETITIVE ADVANTAGES

Due to the efficient logistics and strict cost control which H&M have, it has been
to meet the demands of the rapidly changing fashion retailing. H&M purchases
90% of its products from the low cost Asian markets (Moreau, 2008) because it
does not have any production sites.

PROFITABILITY THROUGH LEAN OPERATIONS

Due to leanness and organization efficiency, H&M have a high profit level. H&M
has a robust profitability even thou it has a low price strategy and other factors
like increasing price of commodities and cost of transport.

MORE INTENSE COMPETITION IN WESTERN EUROPE

Having acquired Monki and Weekly chains in Sweden and a strong performance
last year, H&M will build on this positive trend. Low price clothing and footwear
retailers’ competition is becoming stronger and will have an effect on the
company. H&M will be well positioned to resisting the lower consumer market
resulting from the recession affecting most developed market because of has a
price position towards the low scale end. Due to economic downturn in
developed market, many consumers will trade down and look for promotions;
this will make H&M gain a stronger ground over other retailers.

H&M SEEKS TO CATCH UP WITH ITS RIVALS IN EMERGING MARKETS

H&M has operations in over 35 markets and planning to open more stores in
different market locations. H&M is applying a strategy to be more extensive in
its global reach which will be partly linked to a great reliance on franchise stores.
H&M have new market entries in Middle East and Africa.

TOWARDS MULTI-BRAND STRATEGY

Until recent launch of new concepts, H&M has relied solely on its eponymous
brand. The company is building increasingly a multi-brand portfolio by the launch
of this new concept in moving away from single brand strategy. Provision of new
opportunities for the group will be achieved if more premium concept is
developed and it will also help maintain margins.

ONLINE CONCEPTS

H&M also does beyond store based retailing. It does home shopping and internet
retailing.
STRONG BRAND IMAGES

A strong international brand image that associates fashionable clothing has

always been the building block of the success of H&M. It has always been
associated with fashions that are affordable. In order to strengthen its
desirability factor, it has always tried to partner well-known fashion names like
Marimekko, the Finnish textile company in 2008 and Fabric Scandanavian

CHICKENSHOP
The strategy chickenshop is summarized as follows:

 Expansion by opening retail outlets

 Moving towards a multi-brand enterprise

Chickenshop ensures the best price by:

 Having no middlemen

 Being conscious of cost at every stage

 Providing offers like free delivery and same day dispatch ( by been more
efficient)

SPEED AND SIZE

This are the key competitive advantage of chickenshop compared to other

costume online retail shop. They are fast in their dealings because
communication is better due to size of the company. t

MORE INTENSE COMPETITION ONLINE

Due to the small size of the company, company age and trying to gain its ground
in the costume retailing. It might face a risk of been frozen out by bigger and
more experience enterprise. Chickenshop is trying to survive in the market by
been faster in delivery, producing offers and bridging the gap between itself and
the consumers. Due to the fact that it has no middlemen, delivery time will be
faster.

TOWARDS MULTI-BRAND STRATEGY

Until recently, chickenshop was also rely on eponymous brand like H&M. The
company is introducing different brands like accessories, shoes, cosmetics etc. It
has moved away from being a single brand company

IN STORE CONCEPTS

Chickenshop does shop retailing. It is a beyond the on line company. A large size
of its income now comes from in-shop retailing.

CONCLUSION

How sustainable the company is can be analysed using SWOT analysis

H&M

Strength Weaknesses

Multiple Sales Channel Low Revenue Growth and Profit

Margin
Product Mix Balance
Recall of Products
A geographical change which is
wide

Opportunities Threats

Opening of New Stores An Energy Price that is Rising

A collaboration that will be Eurozone Declining retail

successful
Intense Competition
 Fabric Scandinavian acquisition

Swot Analysis of H&M (DataMonitor, 2008)

CHICKENSHOP

Strength Weaknesses

Large Variety of Product Low revenue, capital and Profit

Single market target Unstable Workforce

Single brand One retail shop

Overdependence on Online
retailing

Opportunities Threats

Opening of New Stores Vulnerability to competition

Introduction of Balloon and Party Tax rise.

Decoration

Opening of a retail shop

Swot Analysis of CHICKENSHOP

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