Hennes & Mauritz: Managerial Economics and Management Decisions

Hennes & Mauritz (H&M)

Hennes & Mauritz (H&M) is a massive apparel retailer that specializes in fashion for ladies, men, and children. The company operates in over 60 countries, has over 4,500 locations, and employs over 130,000 people. Collection of Style (COS), ARKET, FaBric Scandinavian AB, Cheap Monday, Monki, and Weekday Business are five independent companies with distinct concepts.

Managerial Economics in the Twenty-first Century

Managerial economics in the twenty-first century must be adaptable in order to meet the needs of business. The current management economics approach entails the creation of a framework for analyzing and mitigating internal and external limitations. The intention of this modern approach is to use managerial economics in determining the concepts of certainty, risk, and uncertainty. It also involves the quantitative analysis undertaken by modern day managers that are required to make strategic and crucial decisions that will progress the business. The traditional concepts include: demand analysis, cost analysis, price and output analysis, competition, capital expenditures, and profit maximization. Management decisions made by businesses are responsible for either business successes or failures. In modern times, the responsibilities of managers has become more challenging and complex due to the developments and expansions of businesses to global levels. These decisions today are mainly based on external constraints on both production and the market of the goods. The advancement of technology in respect to innovation and marketing techniques are among the prominent factors affecting businesses decisions. Likewise, the emergence of globalization has significantly caused volatility in prices of products and inputs. Due to this economy dynamics, it has become difficult for managers to make accurate decisions, hence the necessity of a comprehensive analysis as a basis for such decisions. Managerial economics contains concepts that are crucial for establishing a rigorous economic understanding for managers to come up with well-analyzed business decisions.

Strategic Control Systems at H&M

H&M is known for its strategic control systems involving its behavioral and information control. According to chapter 9, there are two distinct approaches to information control; they include the contemporary and traditional approach. The contemporary approach encompasses constant evaluation of the internal and external environments and adjusting as required, whereas the later compares the level of performance to the standards. H&M before undertaking any strategic control system weighs the external environment, the industry, technology, and the size of the firm to establish. This desire by the company to act according to the external and internal environment can be classified as contemporary. Being in the fashion industry, the products are supposed to be trendy in order to apply to the consumers, hence a lot is expected in terms of new product development. Such a move requires the company to do a lot of regular analysis of the surroundings in order to be a market leader in this development. Furthermore, the company can incorporate performance measures, but its approach is suppler, practical, and designed to counter the swift changes, hence it is considered more of a contemporary approach in their information control.

Behavioral Control at H&M

Behavioral control, on the other hand, deals with organizational culture, appraisals, and boundaries. H&M has a well-designed and effective system of behavioral control. The company, for instance, rewards its employees using incentives such as ’it pays to stay,’ which rewards employees for their long-term involvement. The employees are also entitled to a discount in any of the retails either online or in stores, and furthermore, they are entitled to a good salary. Such measures are very influential in ensuring the performance of the business. The rewards system also ensures that the company controls the managerial behavior constraints.

Organization Structure at H&M

Organization structure is a system of explicit and implicit guidelines and policies that indicate a number of work roles and responsibility of a business. There is a structural framework where information is relayed from the top hierarchy to the lowest in the business. In the contrary, a decentralized structure, the decisions are made in each of the levels separately. Organization structure is also a concept that has been adopted by H&M to ensure work is properly coordinated, controlled, and delegated. The organization structure is grouped in a multiple brand matrix of eight brands: H&M, Monki, Cheap Monday, Weekday, COS &Other Stories, ARKET, and H&M Home. The various brands are centrally headed by a single individual and also consist of several local sales units. The brands work in accordance with the centrally laid policies and guidelines, ensuring they benefit from the group units completely. The chief executive officer is appointed by the board of directors and tasked with the daily operations. The CEO also appoints the executive management team, which heads the various units of the company such as production, communications, finance, human resource, sustainability and development, and logistics. There is a head responsible for each of the brands and other new ventures. The headquarters of the company is located in Stockholm, Sweden. Then the other branches are spread across many countries with a joint governance structure. This concept allows it to meet the vast demands from customers, especially since it is the second biggest retailer in the world after Zara.

Strategic Leadership at H&M

The issue of strategic leadership is highlighted in chapter 11. Strategic leadership encompasses three features in order to be effective, they include: integrative thinking, effective use of power, and countering the barriers to change. H&M was founded by Earling Persson when he opened a shop in Vasteras, Sweden and only dealt with women’s clothing. After some time, the founder acquired retail store Mauritz Widforss, hence included men’s clothing in his collection. The different leadership positions beginning with the founder have seen the company record consistent performance over the years. However, the heirs of the leadership positions have been less effective in using power compared to Widforss. This is because the transition position has come with a lack of reverential power in the company. The company has a well-established system that counters the barriers to change. The culture of strategic leadership is elaborate and well defined, hence it is not difficult to establish the direction of the company in the future.

Managing Innovation at H&M

Managing innovation is discussed in chapter 12. Being in the fashion industry, H&M has to keep up with the fashion trends in order to survive competition. The company has excelled due to its ability to come up with creative ideas and application of technology. There is also the incorporation of enhanced marketing strategies that have led to the promotion of new products in the market. H&M is very focused on innovation, and this has been a great boost in its success throughout its branches for many decades. One of the highlights of chapter 12 is the radical innovation, which is considered a major cause of market growth. H&M has been on the forefront of utilizing the concept of radical innovation, in the case of changing from the traditional norms. The history of the company’s innovation process has always been guided by the founder’s legacy. It has been able to be flexible to the changing market dynamics and always remained appealing to the current and potential customers.

Conclusion

H&M has become among the market leaders in the field of cloth retail for many decades. This has been facilitated by its ability to adopt modern approaches in containing internal and external constraints. Technological advancement and innovation have been key ingredients for the performance of this company. The incorporation of the six concepts by the company has also worked more for it rather than against to ensure its future is steered in the right direction. Apart from a few unavoidable circumstances associated with leadership transitions, the rest is not a big deal. The company has been swift to shift from the traditional approach, and managers have incorporated contemporary approach in order to make more analyzed and accurate decisions.

References

Egan, T., P. (1995).Updating Managerial Economics. Business Economics. ProQuest.30.3

Birch, C.M. (1986).Managerial Economics and Management Decisions. Business Quartlely.ABI/INFORM Global.70