Harvard Case - H&M, Rana Plaza, and Beyond: Fast Fashion Under the Microscope
"H&M, Rana Plaza, and Beyond: Fast Fashion Under the Microscope" Harvard business case study is written by Andrew Hoffman. It deals with the challenges in the field of Strategy. The case study is 30 page(s) long and it was first published on : Jun 19, 2023
At Fern Fort University, we recommend that H&M implement a comprehensive digital transformation strategy focused on supply chain transparency, ethical sourcing, and sustainable manufacturing practices. This strategy should be supported by a robust corporate social responsibility (CSR) framework and a new business model that prioritizes long-term value creation over short-term profits.
2. Background
The case study examines the challenges faced by H&M, a global fast fashion giant, in the wake of the Rana Plaza factory collapse in Bangladesh. The tragedy exposed the dark side of the fast fashion industry, highlighting issues of exploitative labor practices, unsafe working conditions, and environmental damage. H&M, along with other fast fashion brands, faced intense public scrutiny and pressure to improve their ethical and sustainable practices.
The main protagonists of the case are:
- H&M: A global fast fashion retailer striving to maintain its competitive advantage while navigating ethical and sustainability concerns.
- Consumers: Increasingly aware of the social and environmental impact of their purchases, demanding transparency and ethical sourcing from brands.
- Suppliers: Facing pressure from brands to meet tight deadlines and low prices, often operating in unsafe and exploitative conditions.
- NGOs and activists: Advocating for worker rights, environmental protection, and ethical business practices within the fast fashion industry.
3. Analysis of the Case Study
This case study can be analyzed through various frameworks, including:
a) Porter's Five Forces:
- Threat of New Entrants: High, due to the low barriers to entry in the fast fashion industry.
- Bargaining Power of Buyers: High, as consumers have numerous choices and are increasingly price-sensitive.
- Bargaining Power of Suppliers: Low, as suppliers are often small and dependent on large brands like H&M.
- Threat of Substitutes: Moderate, as alternative clothing options exist, including vintage, secondhand, and sustainable brands.
- Competitive Rivalry: Intense, with numerous fast fashion brands competing for market share.
b) SWOT Analysis:
Strengths:
- Strong brand recognition and global reach.
- Efficient supply chain and logistics network.
- Strong marketing and promotional capabilities.
- Innovative product development and fast turnaround times.
Weaknesses:
- Reliance on low-cost labor and unsustainable manufacturing practices.
- Lack of transparency in supply chains.
- Negative public perception due to ethical and environmental concerns.
Opportunities:
- Growing demand for sustainable and ethical fashion.
- Advancements in technology and digital platforms for improved transparency.
- Expanding into new markets and product categories.
Threats:
- Increased competition from sustainable and ethical brands.
- Rising labor costs and environmental regulations.
- Negative media attention and consumer boycotts.
c) Value Chain Analysis:
H&M's value chain can be analyzed to identify areas for improvement in terms of sustainability and ethical practices. This includes:
- Inbound Logistics: Sourcing raw materials ethically and sustainably.
- Operations: Implementing safe and responsible manufacturing processes.
- Outbound Logistics: Ensuring efficient and transparent distribution channels.
- Marketing and Sales: Promoting ethical and sustainable practices to consumers.
- Customer Service: Providing transparent information about product origins and manufacturing processes.
d) Business Model Innovation:
H&M needs to innovate its business model to address the ethical and sustainability challenges it faces. This can involve:
- Shifting to a circular economy model: Emphasizing product durability, repair, and recycling.
- Adopting a premiumization strategy: Focusing on higher-quality, ethically sourced products with higher price points.
- Developing a subscription model: Offering access to a curated wardrobe with regular updates and returns.
4. Recommendations
1. Digital Transformation Strategy:
- Implement a robust digital platform for supply chain transparency: Track product origins, manufacturing processes, and worker conditions.
- Leverage AI and machine learning for ethical sourcing: Develop algorithms to identify and prioritize suppliers with strong ethical and sustainability practices.
- Adopt blockchain technology for traceability: Enhance transparency and accountability throughout the supply chain.
2. Corporate Social Responsibility Framework:
- Develop a comprehensive CSR policy: Define clear ethical and sustainability standards for all operations and suppliers.
- Establish an independent CSR committee: Oversee the implementation and monitoring of CSR initiatives.
- Invest in worker training and empowerment programs: Improve working conditions and ensure fair wages for garment workers.
3. New Business Model:
- Transition to a more sustainable and ethical sourcing strategy: Prioritize suppliers with strong environmental and social responsibility credentials.
- Invest in sustainable manufacturing processes: Reduce water and energy consumption, minimize waste, and use recycled materials.
- Focus on product durability and longevity: Design products for longer lifespans and encourage repair and recycling.
4. Strategic Alliances:
- Partner with NGOs and industry experts: Collaborate on ethical and sustainable sourcing initiatives.
- Engage with consumers and influencers: Build trust and transparency through open communication and engagement.
- Collaborate with competitors on industry-wide standards: Promote ethical and sustainable practices across the fast fashion sector.
5. Basis of Recommendations
These recommendations consider:
- Core competencies: H&M's strength in global logistics, marketing, and product development can be leveraged for ethical and sustainable practices.
- External customers: Consumers are increasingly demanding transparency and ethical sourcing, aligning with H&M's need to maintain brand image.
- Competitors: H&M needs to differentiate itself from competitors by embracing ethical and sustainable practices to gain a competitive advantage.
- Attractiveness: Investing in sustainability and ethical sourcing can lead to long-term value creation, improved brand reputation, and increased customer loyalty.
6. Conclusion
By implementing a comprehensive digital transformation strategy, a robust CSR framework, and a new business model focused on sustainability and ethical practices, H&M can navigate the challenges of the fast fashion industry and achieve long-term success. This approach will not only mitigate risks but also create a positive impact on the environment, workers, and the company's reputation.
7. Discussion
Alternative options for H&M include:
- Maintaining the status quo: This would likely lead to continued negative press and consumer backlash, damaging the brand's reputation.
- Outsourcing production to countries with lower labor costs and less stringent regulations: This would be unethical and unsustainable in the long run.
- Focusing solely on marketing and branding: This would not address the fundamental issues of ethical sourcing and sustainable practices.
The key assumptions underlying our recommendations include:
- Consumers will continue to prioritize ethical and sustainable practices when making purchasing decisions.
- Technological advancements will continue to support transparency and accountability in supply chains.
- Governments and industry stakeholders will continue to push for stricter regulations on ethical and sustainable practices.
8. Next Steps
- Establish a dedicated team: Assemble a cross-functional team to lead the digital transformation and CSR initiatives.
- Develop a detailed implementation plan: Outline specific timelines, milestones, and resource allocation for each initiative.
- Engage with stakeholders: Communicate the new strategy and its benefits to employees, suppliers, consumers, and investors.
- Monitor progress and adapt: Continuously track the impact of the initiatives and adjust the strategy as needed.
By taking these steps, H&M can transform its business model and become a leader in ethical and sustainable fast fashion, creating a positive impact on the industry and the world.
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Case Description
"This case is set in August 2021, eight years after the Rana Plaza collapse in Bangladesh, which remains the deadliest fashion-garment incident to date. The case's central issue: What is the most effective way for the major fashion retailer H&M to ensure safety for workers within its supply chain? This is explored from the point of view of H&M's fictional head of sustainability, Kristina Nilsson. Questions that Nilsson must address include: Should H&M re-sign the existing International Accord for Health and Safety in the Textile and Garment Industry ("International Accord"), an about-to-expire, multi-company pact to ensure factory safety? What are alternatives to the International Accord? What internal and external factors are at play that must be considered? How can Nilsson and other executives prove that H&M is a leader in social and environmental issues? This case study is an educational tool that highlights the concepts of corporate social responsibility and ethics as they relate to supply chain management issues such as subcontracting labor to Global South countries and worker's rights in terms of health, safety standards, and living wage."
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