The H&M group is the second largest fashion retailer company which is also known as Hennes and Mauritz, was founded by Eriling Persson in Sweden in 1947. The first store was opened in Sweden Vasteras with the initial name of Hennes which had sold only Women’s clothing. It was renamed as Hennes and Mauritz in 1986. Since then, it expanded the products into many sectors such as Men’s fashion, Women’s fashion, Kidswear, accessories and Home furnishing. The company is administered by current CEO Karl-John Persson who is grandson of the founder, and its headquarter is located in Stockholm, Sweden. The firm handles 9 unique brands which are H;M clothing, COS, Weekday, Cheap Monday, Monki, H;M HOME, ; Other stories, ARKET Afound and its major competitors are INDITEX, GAR and Arcadian Group. The company has been operated in the fashion industry for the past 71 years. Under this company, more than 4,800 stores globally are running with 171,000 employees in 71 markets including 47 online markets across over 50 countries, mainly in Europe, Asia, North America and Middle East. According to 2017 full year report, sales including VAT has reached to SEK 231,771millions by the end of the year. Most of the shareholders are Swedish owning 79.1% when 20.9% are hold by Foreigners. The concept of H;M is “Fashion and Quality at the best price to everyone.” The market leads to different segments since there are different styles of clothes for Ladies, Men and Kids. Their main target is medium class people.
Task 1: three analytics in assessing the problem of declining sales and poor financial performance
The H;M group has struggled with weak sales and decreasing 62% of operating profits in the first quarter of 2018, followed by company’s earnings fell down in which some investor started selling out their stocks. The problems are concerned with respective functional areas, including Marketing and sales department and Finance department as well as operations for their products. As a large fashion retailor company, H&M should handle these problem within 1 year (short term) as primary issues. Responsible managers from relevant departments are supposed to analyze the key factors by using historical data and annual reports of the company. They also have to do some researches in both internal (insights of company) and external (social media) to precise their shortcomings in the processes and the customers’ preference in market. They can make some suggestions to resolve the issues with three analytics: descriptive, predictive, and prescriptive which were mentioned in the below.
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Descriptive analytics is represented to provide inside descriptions in the past to know “What has happened?” by using data mining and data aggregation, and help the company to analyze the source of main occurrence in its management. The used data sets are collected from the past historical data which are valid and accurate to understand the events such as declining sales and weak financial performance, that has happened in the past. The H;M group can learn from past performances to fix the problems and examine the past mistakes between its customers and products. These data sets can be helpful to classify the strength and weakness in their functional areas so that they can emphasize on these points as if they are in the strong direction to be in trend or not. The analysis also equip some operational methods to deal with problems to reach its targets and goals. This analysis is used in almost every functional area, consisting of sales and marketing, finance, production and operational activities. Descriptive statistics assist to know the source of these problems in case they can compare the data to make any progresses.
The analytics helps the organization with insights based on historical data (descriptive analytics) to forecast the possible outcomes of future event; “What will happen?” or probability of future occurrence. There is one condition to aware that the statistics cannot be 100% exact since the sources of this analytics is come from probabilities. Mathematical modelling from various systems are unified to analyze patterns in historical and transactional data, and to catch relationships among data sets of sale activities. Predictive statistics are used to forecast the future, anticipate consumers’ behaviors to classify trends in sale activities as well as operational management and inventory. The H&M group can use predictive analytics in analyzing customers’ data, including the capabilities of customers’ spending on its products, their preferences over current patterns or adding new products. The company should have investments in this analytic project team with experts to find new strategy to solve the problems of declining sale and poor financial performance in the company
This analytics goes step beyond than descriptive and prescriptive to provide suggestions on possible outcomes by predicting the consequence of future decisions. Prescriptive analytics guesstimates not only “What might happen” but also “Why it might happen” by providing various decision options before making final decision to have benefits of the predictions or reduce risks in their projects for current problems. Furthermore, they also help to be specific in prediction, and better options or recommendation are provided. Many data sets might come from different sources which can be internally or externally. Combination of techniques and tools, consisting of computational modelling procedures, and business rules, are used in identifying to interpret, suggest, and determine possible decisions to influence the actions of the firm to solve the problem in the future. These statistics ought to be used in large successful companies like the H&M group to enhance purchasing and inventory of supply chain to ensure the products are delivered on time or analyze customers’ expectations.
Although these analytics are complex, they are very useful in each department to fix the problems. For example, the marketing team can set goals for activities or make new projects for multi-channel campaign to improve sales of H;M by using these analytics. Finance department can create plans for budget development and makes decisions to reduce the costs of spending over purchasing products. For products operation, the designers can predict customers’ preferable designs as well as the latest trend in the market. Apart from that, they are able to recommend some reasonable options to CEO from strategic level. As the last stage, CEO and board of directors centralize a final strategy to solve these problems: declining sales and poor financial performance. Anyway, if these analytics are used by the H&M group to identify these problems, the company might have great advantages in making decisions to progress its business even more.
Task 2: Four data sources
To solve the problems of declining sales and poor financial performance, one of crucial parts H&M needs to do is collecting amounts of data which are required to assess in decisions making. The used data should be valid and sufficient in order to know the answer or anticipate the possible outcomes of their actions in the future. The extracted data derived from various sources which can be distinguished into sorts of sections such as internal, market and external as well as contemporary contexts.
This data source has already existed which are generated and gathered inside the company, including sales records, data in supply activities and customers’ data. Internal resources of information need to specific and available which should be ready to get whenever the company urgently need to solve the problems. Nevertheless, these sources are easier and cheaper, and there is no financial costs to gather data. In the company, the relevant departments can collect useful information from databases to review yearly sales records and the expenditures of the company’s products. These internal sources can help the company to make some assumptions such as its weakness and strength in marketing and sales activities or overusing in purchasing from its suppliers.
These sources of information is very reliable which come from company employees, salesmen, dealers and customers. The company needs to do some market research about its competitors’ activities, customers’ satisfaction and the latest trend in market. In order to solve the problems which were mentioned above, market resources have to be current and significant so that the company can understand customers’ buying behaviors and expectation on its products. By this way, the teams which are responsible for the declining sales can understand customers’ performances and they can fill the facts which are missing in the current program. H&M can buy the products from its competitors, and examine them. Analyzing these products can help the H&M group to get information like their patterns, packaging designs, and qualities. Then, the company can recheck its flaws in its distribution network and quality control project. The financial problem might be gradually resolved by increasing sales in market as earnings come flow to the company.
Most of external sources derived from social media and global companies’ publications and reports. This can be next useful source of data collecting. Nowadays, most large companies are placing public reports on their official websites. The information intends to embrace customers’ attraction, investors and franchisees. From these, the H&M group can incorporate valuable data like its competitors’ revenue and their supply chain program. In these days, some customers complain their problems on social media like Facebook or Twitter. Listening customers’ voices also help the company to fix their problems of sales and financial programs.
The data of this source is collated by doing researches for purpose to solve the certain problem. In this source, the collection of data, efficient extraction, illustration and analysis are undertaken by the facts which are: (a) realizing the intention of data being used and (b) various methods and sort of data being organized with suggestion to anticipate the future decisions. In the other word, the source might be based on incomplete records which mean: routine or non-routine, explicit or occasional: regularly or irregularly informed. There are two types of data which are qualitative based on opinion, and quantitative, consisting of statistics from primary research and secondary research. This source also assists the H&M group to predict the possible outcomes in the future by making some strategies to solve the problems.
These four sources can provide customers’ data in their purchasing conduct. The H;M group can use these datasets to review its marketing and sales, financial problems by analyzing the needs of specific customers. For example, if the customer is teenage girl, the researchers can report her information to its superiors how to attract her with their products or services. And then they can identify the reasons of these problems such as unqualified products, bad services or weakness in maintenance. Probably, marketing adopts these sources to handle in either its planning or market communications along with the production and distribution H;M products. The teams from finance department can emphasize on the records of financial activities and cash flow, and sustain the expenditures of the company by using these databases. After they have realized their key problems, the manager and his team can make decision options how to do better in future.
year Quarter Sales (SEK m)
I II III IV
Table 1: sales index for each of the four quarters