Answered: Identify and describe the economic…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Transcribed Image Text:Hennes & Mauritz AB (H&M) is a Swedish multinational clothing-retail company known for its affordable fashion brand that appeal to men, women, teenagers, and children across the globe. H&M Group reaches fashion lovers and has come a long way since the first Hennes store opened in the Swedish city back in 1947. Today, H&M Group has 4,743 stores worldwide. As the company continues to grow, they plan to open around 290 new stores until the end of 2019 (Hmgroup, 2019). Amidst all these, H&M experiences major struggle in getting rid of excess inventories. In 2018, it is reported that the company has $4.3 billion (P215 billion) of unsold clothes. This sent shock waves across the fashion industry. "Most of our range is sold in our stores or online, sometimes at a very beneficial price through our sale and other commercial campaigns. Other examples of sale activities include temporary pop up-outlets in certain markets where we sell garments at reduced prices. We also actively move garments to stores where we see a greater demand, or even to other countries where we have too few of the garments. If garments remain unsold at the end of the commercial season we evaluate storage until the next season," said Dan Mejia, H&M Philippines head of communications and press (Legaspi, 2018). H&M sources apparel products from over 250 factories in Bangladesh, China, and India (Corpuz, 2016). Analysts have been pressing Karl-Johan Persson, the company's chief executive, over the issue. Inventory levels were up, Mr. Persson said, because H&M was opening 220 new stores and expanding its e- commerce operations, and so it needed to fill the racks (Paton, 2018). Under the assumption that there is enough customer pool for affordable clothing, critics blamed this problem on poor inventory and warehouse management. Answer the following items: 3. Identify and describe the economic benefit of warehousing which may leverage H&M's sales. 3

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