FINANCIAL NEWS ANALYSIS - Essay Example

The article talks about clothing line H&M. The retailer has suffered heavily in the current fiscal year owing to several things that went against them. This resulted in declining gross margins by around 2% from the last year. In other work, one reason for having a tough year was the rising manufacturing costs of H&M. This was due to the fact that cotton prices throughout the world soared and peaked. This increase in costs result in higher cost of goods sold which lead to declining gross margin for the firm.

This could have been avoided if the company had raised its prices, but the company decided against increasing the prices. The company decided to focus on maintaining strong customer relationship and tried to maintain strong market share and hence did not increase its prices which result in them taking a hit on their margins. H&M happily took the blow deciding to invest in their future rather than focusing on their short term gains. This policy is quite similar to what other companies are doing these days.

The main idea in these days of high uncertainty is to prepare one’s self against losing customer in order to achieve long term gains by associating with the customers and focusing more on the market share rather than on the profitability. Profitability is a short term objective, whereas market share is far sighted thinking. The article also tells us about the fact that almost all the companies in this business are facing tough times due to rising raw material costs. Hence, the current strategy for all the firms should be to survive the storm and try to milk profits when uncertainty is vanished from the environment.

Hence, H&M is on the right path, a path which would lead them to high profitability in the future. The key strategy in current financial environment is to be patient and do not rush thing and H&M have figured out what they are going to do. Although there profits are falling, but market share is increasing which is a positive thing and soon a time will come, when the company will convert its high market share into high profits and that will be the time, when there is certainty in the environment and stability in the cost of doing business.

One reason why it is difficult to conduct business in the current environment is because the costs are rising and the companies cannot formulate accurate strategies at the moment. But in due course when everything has settled down, H&M would take advantage of the situation.