UEH UNIVERSITY

COLLEGE OF BUSINESS
SCHOOL OF INTERNATIONAL BUSINESS -
MARKETING

FINAL TEST
Subject: INTERNATIONAL BUSINESS
H&M FACED BOYCOTT IN CHINA OVER FORCED
LABOUR IN XINJIANG IN 2021
Professor: Nguyen Kim Thao
Course ID: 24C1BUS50320901

Students name: Students ID:

Pham Nguyen Bao Ha 31231025938
Nguyen Van Manh 31231024819
Ho Thi Yen Nhu 31231024695
Trinh Ngoc Minh Quan 31231026187
Doan Thi Huong Truc 31231022803

Ho Chi Minh City, December 21, 2024.

 GROUP PARTICIPATION REPORT

Students name Students ID Participation

Pham Nguyen Bao Ha 31231025938 100%

Nguyen Van Manh 31231024819 100%

Ho Thi Yen Nhu 31231024695 100%

Trinh Ngoc Minh Quan 31231026187 100%

Doan Thi Huong Truc 31231022803 100%

1. INTRODUCTION .............................................................................................................. 1
2. CASE ANALYSIS .............................................................................................................. 3
2.1. Identify the key issues/problems the company faced in the case ...................................... 3
2.1.1. Key issues ............................................................................................................... 3
2.1.1.1. Market access disruption .................................................................................... 3
2.1.1.2. Intense boycott .................................................................................................. 5
2.1.2. The cause ............................................................................................................... 6
2.1.2.1 Political environment .......................................................................................... 6
2.1.2.2. Culture environment .......................................................................................... 8
2.1.2.3. Legal environment ............................................................................................. 9
2.2 Describe the approaches undertaken by the company to address the issues/problems .... 10
2.3. Evaluate the company’s approaches............................................................................ 11
2.3.1 Approach: Using non-confrontational strategy........................................................... 11
2.3.2 Approach: Emphasizing the importance of the Chinese market .................................... 12
2.4. Suggest alternative or better solutions ........................................................................ 13
3. IMPLICATIONS ............................................................................................................. 15
REFERENCES .................................................................................................................... 18
ACKNOWLEDGEMENT
We would like to extend our deepest gratitude to our lecturer, Dr. Kim Thao, for your
invaluable guidance throughout the course and the report projects. First and foremost, we
sincerely appreciate your dedication to sharing profound knowledge and exceptional teaching
skills, which have encouraged us to understand deeper into the field of International Business
Management. Your extensive insights have provided us with a comprehensive understanding
of how global business operates, making the subject not only highly relevant to our academic
journey but also integrative with other disciplines we are pursuing.
Beyond imparting knowledge, you have served as a source of inspiration, motivating us to
actively engage with the syllabus. Your encouragement to express our thoughts and ideas
openly and to utilize the TEAMS app has been instrumental in enhancing our learning
experience. The app proved to be a valuable resource for accessing lessons and staying
connected, further enriching our educational experience.
After finishing, this course has taught us far more than just International Business Management.
We have gained essential skills in teamwork, adaptability, research, and the practical
application of various tools, as well as the ability to connect ideas and effectively share our
findings. These lessons extend beyond the classroom and will undoubtedly serve us well in our
future endeavors.
We are profoundly grateful for the impactful knowledge and experiences you have provided,
and we feel fortunate to have had the privilege of learning under your guidance. We wish you
continued good health and hope that you will keep inspiring future students as you have
inspired us.

Ho Chi Minh, December 21st, 2024.

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ABSTRACT
This report examines an incident involving H&M and the challenges it faced in the Chinese
market. The case focuses on H&M’s 2021 statement addressing concerns about forced labor
and discrimination against Uyghur Muslims in Xinjiang, China, and its subsequent decision to
halt the use of cotton sourced from the region. This decision not only rooted in ethical
considerations and corporate social responsibility but also led to significant backlash from
Chinese consumers, government entities, and media outlets. H&M’s online and offline
operations in China faced disruptions, including boycotts and increased regulatory scrutiny.
This case study explores the political and cultural framework underlying H&M’s decision,
particularly the tension between adhering to global ethical standards and maintaining market
presence in politically sensitive regions. The analysis identifies the challenges H&M
encountered, evaluates its crisis response approach and considers the impact of its actions on
its global operations. Building on those analysis, the report proposes alternative solutions.
By examining this case, the report contributes to a deeper understanding of navigating political
risks and ethical dilemmas in international business, particularly for multinational enterprises
operating in diverse cultural and regulatory environments. Finally, the report outlines
implications for firms facing similar challenges and provides key recommendations to enhance
resilience and sustainable growth in global markets.

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1. INTRODUCTION
Focal company: H&M, or Hennes & Mauritz AB, is a Swedish multinational clothing-retail
company known for its fast-fashion clothing for men, women, teenagers, and children. H&M
is a leading global fashion company with strong values and a clear business concept. The
company has a passion for fashion, a belief in people and a desire to always exceed customers’
expectations – and to do so in a sustainable way. H&M constantly strives to have the best
customer offering in each individual market – which includes giving customers the best price.
Through multiple brands and concepts H&M offers a broad and varied range of inspiring
fashion that lets customers explore and develop their own personal style. It operates in
numerous countries worldwide, offering affordable and trendy fashion items. In 2007, H&M
opened its first in China in Shanghai and rapidly expanded. 2007 was H&M's 60th year
anniversary and the most intense year ever, with many new stores, new markets, new customer
offerings as well as a completely new store chain.
Significance of the Chinese market in the firm performance: China offers MNEs important
opportunities, including H&M. Its GDP presently accounts for 18% of the world total,
comparable to the European Union and second only to the United States (24%). Growth rates
may range from 2 to 5 percent each year over the next decade, based on several scenarios. Even
at a 2% growth rate, the new GDP from 2021-30 will exceed India's entire GDP in 2021. In
some industries, such as cars, luxury goods, and industrial equipment, the China market already
represents 25 to 40 percent of global revenues, and MNEs in those industries will have no
choice but to compete there. Urbanization will assist more people enter the middle class. In
2020, 55 cities in China had per capita GDP above $12,695 (the World Bank's definition of a
high income country), accounting for 27% of the total population.

China's growing urban population and middle class will drive demand in areas such as
biopharmaceuticals, consumer health, and entertainment. Currently, around 65% of the

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country's. The percentage of people living in cities is expected to increase to 80% by 2050,
from 71% in 2030. Urbanization will assist more people enter the middle class. In 2020, 55
cities in China had per capita GDP above $12,695 (the World Bank's definition of a high
income country), accounting for 27% of the total population. "It is important to take a longer
term view on China instead of focusing on short-term volatilities," Bain & Company's Shanghai
partner Bruno Lannes was quoted as saying. "China's economy will continue to grow and
represent an increasing share of global revenues for MNCs doing business here."
As those facts suggest, China is an attractive opportunity for MNCs serving emerging markets
in Asia. After the backflash, H&M also highlighted the importance of the China market in its
statement after the backflash “China is a very important market to us and our long-term
commitment to the country remains strong. Having been present there for more than thirty
years, we have witnessed remarkable progress within the Chinese textile industry. Being at the
forefront of innovation and technology, China will clearly continue to play an important role
in further developing the entire industry. We are proud our suppliers are being part of that
development and we want to continue contributing to driving progress together with our
partners and stakeholders in the country.”
However, China poses distinct hazards for multinational corporations. Rising tensions between
the US and Europe might disrupt global value chains, particularly in vital sectors. China is
seeing the fastest rate of aging among emerging countries, leading to a decrease in labor supply.
China's investment exposure to growing real estate prices also increases risk.
In conclusion, while challenges such as geopolitical tensions, an aging population, and risks in
the real estate sector pose potential obstacles, the Chinese market remains a cornerstone of firm
performance for multinational corporations.
For firms like H&M, sustaining a strong presence and fostering partnerships in China is
essential to capitalizing on its vast opportunities, ensuring long-term growth, and remaining
competitive in the dynamic global market otherwise multinationals that fail to understand and
follow their lead risk ceding global revenue and strategic opportunities to their Chinese
competitors.
Overall business performance and after the backflash: H&M’s global revenue in 2020 was
$20.84 billion (Companies Market Cap, 2020), with China accounting for $890.29 million
(statista, 2020). China accounted for around 5% of group sales in 2020 and is one of H&M's
two top suppliers (Reuters, 2021). After the incident, H&M’s total revenue recorded a marginal
growth to $23.07 billion, In China, sales were down 23% in local currencies after the retailer
expressed concerns about the alleged Xinjiang human rights abuses.
Case for analysis: In 2021, H&M issued a statement expressing concerns over reports of
forced labor and discrimination against Uyghur Muslims in Xinjiang, China. This statement
led to widespread backlash from Chinese consumers and the government. H&M's online and
offline stores in China, subsequently, faced difficulties, with some being temporarily

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suspended or removed from online marketplaces. Chinese consumers also boycotted H&M
products, and state media outlets criticized the company's stance on Xinjiang while the Chinese
government increased scrutiny of H&M's operations and compliance with local regulations.
Why the case is International Business-related
H&M's incident in Xinjiang is a significant case study in International Business because it
highlights the complexities and challenges multinational corporations face when navigating
global supply chains, ethical concerns, and political pressures in other markets. In 2021, H&M
publicly expressed concerns about alleged forced labor practices in the Xinjiang region of
China, stating that it would no longer source cotton from the area. This decision sparked
widespread backlash in China, including consumer boycotts, removal of H&M's products from
e-commerce platforms, and criticism from Chinese authorities.
From an international business perspective, the incident highlights the balancing act between
adhering to ethical standards and maintaining market access. On one hand, H&M's stance
aligns with corporate social responsibility (CSR) about human rights and the growing
expectations of Western consumers and governments to uphold human rights in supply chains.
On the other hand, it highlights the risks of operating in politically sensitive markets like China,
where public sentiment and government influence can significantly impact business operations.
This case also illustrates the importance of understanding cultural and political environments
in host countries. While Western markets may prioritize CSR initiatives, such actions can be
perceived as interference or criticism in countries with differing political contexts like China,
potentially harming the company’s brand reputation and profitability in the long term.
Ultimately, the Xinjiang incident shows how global companies must carefully strategize to
address ethical dilemmas while considering their economic interests and relationships with key
markets. This is a core challenge in international business, where decisions often involve
navigating conflicting priorities across diverse regions.

2. CASE ANALYSIS

2.1. Identify the key issues/problems the company faced in the case
Core Issue: H&M faced a severe backlash in China due to its public stance on forced labor
allegations in Xinjiang, resulting in an intense consumer boycott, delisting from major e-
commerce platforms that lead to significant damage to its revenue in the Chinese market. This
incident poses two key issues that H&M has to face as follows:

2.1.1. Key issues

2.1.1.1. Market access disruption

After being criticized by a Communist Party group for a statement voicing "deep concern" over
claims of forced labor in Xinjiang's cotton industry, H&M’s products were taken down by

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leading Chinese e-commerce platforms including Alibaba’s Taobao, JD.com and Pinduoduo,
Meituan’s shop-listing app Dianping, which delisted H&M’s products. In contrast to several
Western nations where H&M primarily sells through its proprietary app or website, the
company’s operations in China depended heavily on third-party e-commerce platforms such as
Alibaba’s Taobao, JD.com, and Pinduoduo. These “super apps” dominate China’s retail
landscape, integrating shopping, payments, and logistics into consolidated digital ecosystems.
By losing access to these platforms, H&M was effectively cut off from a vast majority of
Chinese online consumers. The company’s inability to compete independently in such a
digitalized market severely hindered its ability to recover sales. This action severely impacted
H&M’s visibility in this country since by 2021, e-commerce is expected to account for 52.1%
of China's retail sales.

Additionally, although mainland China was one of the top four regions for H&M behind
Germany, the U.S. and Britain and accounted for about 6% of 2020 revenue, about 445
physical stores spread across 146 cities in China were taken down from Didi Chuxing, a ride-
hailing app, and map services run by Baidu and Alibaba. The company's smartphone app also
vanished from app stores. By erasing H&M's presence from this kind of platform, consumers
were left unable to locate physical stores, effectively cutting off foot traffic to about 500 H&M
outlets in the country. In the fiscal year 2021, H&M’s sales in China have not rebounded,
falling 41% in the last quarter alone.

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The removal of H&M from major Chinese e-commerce platforms, mapping services, ride-
hailing apps, and app stores represented a comprehensive effort to erase the brand’s digital and
physical presence in China, severely disrupting its market visibility and accessibility.
Moreover, by rendering its physical stores and online channels inaccessible, the measures not
only crippled H&M’s operations but also symbolically framed the brand as unwelcome,
highlighting the vulnerabilities foreign companies face when navigating politically charged
markets like China.

2.1.1.2. Intense boycott

Timeline: Important moments in the boycott of H&M

In March 2021, H&M became the target of a large-scale consumer boycott in China following
its earlier decision to stop sourcing cotton from Xinjiang due to allegations of forced labor.
Although the company had issued its statement in September 2020, expressing “deep concern”
over these accusations and aligning with the Better Cotton Initiative’s (BCI) decision to
suspend cotton licensing in Xinjiang, the backlash erupted six months later. The boycott was
initiated by the Chinese Communist Youth League, which posted images of H&M’s statement
and accused the company of “spreading lies” about Xinjiang cotton. This post garnered over
430,000 likes and was shared 380,000 times on Weibo, triggering a wave of nationalist
sentiment online.
The situation quickly escalated as hashtags like “#I Support Xinjiang Cotton”
(#我支持新疆棉花#) and “#What Kind of Organization is BCI?” (#BCI是什麽组织#) began
trending, amplifying public outrage. State media further fueled the boycott. CCTV accused

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H&M of “double standards,” claiming the company was profiting from China while unfairly
criticizing the country. The state news agency Xinhua mocked H&M by suggesting that its
name stood for “absurd” (huāng miù, 荒谬), while People’s Daily shared a viral post using
H&M’s logo to spell the Chinese word for cotton (mián huā, 棉花), accompanied by the
hashtag “#I Support Xinjiang Cotton,” which was shared millions of times. Influencers and
celebrities severed ties with H&M, with some, such as Wei Ya, actively promoting Xinjiang
cotton in response to the controversy.
The boycott had devastating effects on H&M’s visibility and sales in China. Consumers
abandoned the brand in favor of domestic alternatives, while the removal from critical digital
platforms hindered the company’s ability to recover its market position. The widespread
backlash underscored the power of nationalist sentiment in China and the risks multinational
companies face when navigating politically sensitive topics in such a controlled and collectivist
market.

Due to the Xinjiang controversy, H&M's social media presence in China has declined.

2.1.2. The cause

2.1.2.1 Political environment

The political environment difference is one of the core factors that significantly contributed to
the intense boycott against H&M in China.

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In terms of political system, Sweden’s democratic system, with a strong emphasis on freedom
of speech and individual rights, encouraged H&M to publicly address human rights concerns,
aligning with societal expectations in Sweden. In contrast, China’s one-party system,
totalitarian, prioritizes collective interests and state authority, viewing external critiques as
threats to its legitimacy and sovereignty. H&M’s stance on Xinjiang clashed with these values,
leading the Chinese government to frame the statement as an attack on national dignity.
When it comes to human rights, Sweden’s deep commitment to human rights, labor rights and
ethical labor practices positioned H&M to act decisively on allegations of forced labor in
Xinjiang. Conversely, China’s complex human rights record, characterized by allegations of
forced labor and restrictions on freedom, created a challenging environment for multinational
companies. Moreover, according to CNN, human rights groups have repeatedly accused China
of detaining Uyghurs and other Muslim minority groups in the region in "re-education" camps
and using them as forced labor, which they claim is part of global tech and retail supply chains,
either directly or indirectly. Recent sanctions from the United States and other Western
countries over Xinjiang have sparked a renewed pushback from the Chinese government,
which calls the camps "vocational training centers" designed to combat poverty and religious
extremism. This perception, coupled with China’s defensive response, turned H&M’s ethical
stance into a politically charged issue, sparking backlash and a boycott.
Regarding media censorship, Sweden’s free press with a diverse media landscape allowed
H&M to act without domestic pushback. Conversely, China’s strict media controls,
exemplified by the Golden Shield Project, often called the "great firewall of China", is an
initiative managed by the Ministry of Public Security division of the Chinese government. The
focus of this project is to monitor and censor what can and cannot be seen through an online
network and it is still continually improving in restriction techniques through multiple methods
allowing the government to shape public opinion, presenting H&M’s stance as an attack on
Chinese values.
Finally, in terms of international relations, Sweden’s neutral stance in international affairs,
coupled with its advocacy for human rights, provided a supportive backdrop for H&M’s
statement on Xinjiang. However, China’s increasingly assertive global posture and strategic
competition with Western nations framed the statement as part of an ideological confrontation
rather than a standalone corporate decision.
In conclusion, the political environments of Sweden and China reflect two opposing paradigms
that significantly impact how multinational corporations operate and are perceived. Sweden’s
democratic and rights-driven system fosters a culture of corporate accountability and ethical
leadership, while China’s authoritarian framework prioritizes state control and national
interests, often at the expense of foreign corporate autonomy. For companies like H&M, these
differences necessitate a careful and nuanced approach, balancing global ethical commitments
with the local political context to navigate the complexities of international operations
successfully.

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 2.1.2.2. Culture environment
How countries differ in their fundamental cultural traits and how these differences impact firms
and businesses has been a recurring topic in international business research. Geert Hofstede’s
(1980) work on culture and the cultural dimensions has had high impact on research carried
out in international business studies and has been used in a wider array of business/management
disciplines to delve into a large variety of phenomena (Ferreira et al., 2014). Therefore,
Therefore, we use this tool to discuss how cultural differences between Sweden and China led
to the H&M incident.
One of the most striking distinctions lies in the contrast between individualism and
collectivism. Swedish culture, deeply rooted in individualism (87), values personal freedom,
self-expression, and the autonomy of organizations. This cultural context encourages
companies to take strong ethical stances, viewing such actions as essential to corporate integrity
and social responsibility. For H&M, this meant publicly addressing allegations of forced labor
in Xinjiang, aligning with the Swedish cultural norm of prioritizing individual rights and ethical
independence. In China, however, collectivism dominates (43), emphasizing social harmony,
loyalty to the group, and alignment with broader national interests. In such a context, H&M’s
statement on Xinjiang was not seen as an expression of ethical commitment but as a disruption
to societal harmony and a challenge to collective values. The backlash from both the
government and the public reflected this cultural misalignment, highlighting the risks
associated with applying Western individualistic values in a collectivist society.
The cultural dimension of power distance further illustrates the divide. Sweden’s low power
distance fosters equality (31), decentralized decision-making, and open communication,
creating an environment where companies are encouraged to act autonomously on ethical
issues. This aligns with H&M’s proactive stance, as Swedish culture supports challenging
unethical practices regardless of hierarchical or governmental authority. In contrast, China’s
high power distance (80) emphasizes respect for authority and adherence to hierarchical
structures. Any perceived criticism of government policies, such as H&M’s stance on forced
labor, was interpreted as overstepping boundaries and disrespecting the established order,
prompting a strong and coordinated response from both the state and society.
Although Sweden (29) and China (30) have nearly identical scores for Uncertainty Avoidance
in Hofstede’s model, their cultural contexts and practical applications differ significantly. In
Sweden, the low score reflects a society that values flexibility, adaptability, and a willingness
to navigate ambiguity, which encourages businesses like H&M to take calculated risks and
address global ethical issues proactively. Swedish organizations trust in open and innovative
approaches to uncertainty, often embracing change even when outcomes are not guaranteed. In
contrast, while China’s score also suggests a low tolerance for uncertainty, its cultural emphasis
on stability and predictability translates into stricter control in practice, especially in politically
or socially sensitive matters. Businesses are expected to align with government priorities to
maintain societal harmony, and actions like H&M’s stance on forced labor in Xinjiang are

8
perceived as disruptive and risky. These differences highlight how similar scores can lead to
vastly different interpretations and behaviors, with Sweden fostering openness and China
prioritizing control to manage uncertainty.
In conclusion, the cultural environments of Sweden and China present contrasting values that
significantly impact how H&M’s ethical stances are interpreted. Sweden’s individualism, low
power distance, and moderate uncertainty avoidance provide a supportive backdrop for
independent and principled corporate actions. In contrast, China’s collectivism, high power
distance, and preference for stability create a challenging environment where global ethical
commitments often conflict with local cultural expectations. Navigating these cultural
differences is essential for multinational corporations to balance their values with the
sensitivities of diverse markets.

2.1.2.3. Legal environment

The legal environments of Sweden and China reveal significant contrasts in their labor laws,
transparency requirements, and adherence to international conventions, which profoundly
affect H&M's global operations.
In Sweden, stringent labor laws, such as those enshrined in the Swedish Penal Code, chapter 4,
writes: “A person, who, by coercion, deception or exploitation of another person’s position of
dependence, defencelessness or difficult situation, exploits another person in forced labour,
labour under clearly unreasonable conditions or through begging is guilty of human
exploitation, and can be sentenced to a prison term of, at the most, four years.” explicitly
criminalize forced labor and exploitation, reflecting a strong commitment to human rights and
ethical labor practices. This legal foundation is further reinforced by Sweden’s ratification of
international treaties, including the Protocol of 2014 to the Forced Labour Convention, which
underscores its proactive role in combating forced labor globally. These regulations compel
Swedish companies like H&M to uphold the highest standards in their supply chains, ensuring
compliance not only domestically but also internationally, as evidenced by their decisive stance
against alleged forced labor practices in Xinjiang. In December 2021, President Biden also
signed the Uyghur Forced Labor Prevention Act (UFLPA) - An act to ensure that goods made
with forced labor in the Xinjiang Uyghur Autonomous Region of the People's Republic of
China do not enter the United States market, putting pressure on H&M to refrain from using
materials made from forced labour. In contrast, China's labor laws, while existent, suffer from
inconsistent enforcement, particularly in sensitive regions like Xinjiang, where allegations of
forced labor involving Uyghur minorities have drawn widespread international criticism. The
lack of rigorous enforcement creates an environment where labor exploitation persists with
limited legal repercussions, allowing the Chinese government to dismiss external critiques as
unwarranted interference. This inconsistency not only undermines global ethical standards but
also exposes companies like H&M to significant operational and reputational risks when
navigating the local landscape.

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Transparency and accountability further differentiate the two legal environments. Sweden's
robust transparency framework and strong emphasis on transparency and accountability, with
laws requiring companies to disclose information about their operations and supply chains. The
Swedish Transparency Act in 2005, on the other hand, supports the provisions contained in the
Freedom of the Press Act and offers guidance on how public and private organizations must
stay open and transparent. Additionally, the Principle of Public Access in Sweden allows the
media and general public to access official records. Anyone can scrutinize governmental
activities locally, regionally, and nationally. This legal culture fosters public trust and aligns
with H&M’s commitment to ethical business practices. Conversely, China's limited
transparency and tight government control over corporate data restrict the ability of foreign
companies to operate with similar openness. These restrictions not only hinder external scrutiny
but also fuel public distrust, as seen in the backlash against H&M, where compliance with
Swedish norms of transparency clashed with Chinese sensitivities.
Finally, the two nations diverge in their approach to international conventions. Sweden has
proactive ratification of key treaties on human rights, labor rights, and environmental
protection. In 2017, Sweden ratified the Protocol of 2014 to the Forced Labour Convention,
thereby reinforcing the global movement for combating forced labour in all its forms. China,
on the other hand, selectively ratifies such treaties based on political considerations, with key
agreements only recently adopted following international pressure and not only until 2022,
after the incident, did China ratify the two ILO Fundamental Conventions on Forced Labour.
This selective adherence reinforces the perception of differing priorities, where global ethical
commitments are often subordinated to domestic political interests. H&M’s alignment with
Sweden’s international commitments created a rift in China, where the company’s actions were
interpreted as aligning with geopolitical pressure rather than ethical imperatives.
In summary, Sweden's comprehensive legal framework and its alignment with international
standards provide a strong foundation for ethical business practices, enabling companies like
H&M to lead in global human rights advocacy. Meanwhile, China’s inconsistent enforcement,
restrictive transparency, and selective international engagement create a challenging
environment that complicates efforts to balance global ethical imperatives with local
compliance. These contrasts underline the complexities of operating across such divergent
legal landscapes, where the alignment of corporate actions with differing national priorities
often becomes a critical determinant of success or conflict.
2.2 Describe the approaches undertaken by the company to address the issues/problems
More than a week after H&M came under fire in China for its months-old statement expressing
concern over reports of the forced labor in the region of Xinjiang, the brand undertook several
approaches to manage the fallout and attempt to restore its position in the Chinese market while
navigating the complex political and social landscape:

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Firstly, H&M did take a non-confrontational approach. In further detail, by releasing a
statement emphasizing that it remained politically neutral in that situation (on a Wednesday
night at the time of the crisis, H&M China responded with a post on the Sina Weibo
microblogging site, saying the company did not “represent any political position.”, the
company also tried to avoid directly addressing the boycott or Xinjiang-related controversies
in detail after the backlash intensified. Besides, the brand also reiterated that its commitment
to human rights and sustainable business practices was a global policy, not a targeted critique
of any specific region. Simultaneously, to partly ease the serious status, H&M also tried to
promote positive aspects of its brand by emphasizing its commitment to sustainable and ethical
sourcing practices globally.
Another approach that H&M took was emphasizing the importance of the Chinese market.
H&M showed its respect and engagement with Chinese consumers and business partners by
publishing a statement, the brand said that “China is a very important market to us and our
long-term commitment to the country remains strong. Having been present there for more than
thirty years, we have witnessed remarkable progress within the Chinese textile industry. Being
at the forefront of innovation and technology, China will clearly continue to play an important
role in further developing the entire industry. We are proud our suppliers are being part of that
development and we want to continue contributing to driving progress together with our
partners and stakeholders in the country”. The brand said that it hoped to regain the trust of
customers and business partners in China and was “actively working on next steps with regards
to material sourcing”. H&M also aimed to reassure consumers and the Chinese government of
their intentions: “We are working together with our colleagues in China to do everything we
can to manage the current challenges and find a way forward.”
To mitigate the negative impact and avoid the escalation, the company focused on quiet
diplomacy rather than public confrontation. After the backlash, H&M removed the specific
statement that had sparked the controversy from its website, and refrained from issuing any
statements that could be perceived as further challenging the Chinese government or public
sentiment.
2.3. Evaluate the company’s approaches

2.3.1 Approach: Using non-confrontational strategy

H&M’s adoption of a non-confrontational approach was effective in preventing the situation
from worsening, especially in terms of political issues. By not engaging in direct criticism or
rebuttal, the brand avoided provoking the Chinese government further, which might have led
to permanently alienating the Chinese government and public. Besides, H&M’s restrained
public communication allowed the company to weather the initial wave of backlash without
exacerbating tensions further. However, this method was also considered a double-edged sword
because H&M’s vague response lacked transparency, making it appear indecisive. The fact that
the company tried to remain neutral and issued a statement but did not mention the Xinjiang

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cotton controversy showed that H&M tried to avoid a direct confrontation against the Chinese
market. Many Chinese netizens saw this approach as an evasion of responsibility and criticized
it as insincere and insufficient for reconciliation. It can be proved that the lack of a clear
explanation and apology for H&M’s stance still alienated Chinese consumers as there was a
post from state-owned China Central Television on microblog service Weibo saying on
Wednesday "Why doesn't H&M apologise openly to consumers?" , calling H&M's statement a
"second-rate public relations article full of empty words lacking sincerity". Consequently,
H&M shares were down 2.4 per cent at that time and there was a pretax loss of 1.39 billion
crowns (€315 million) against a profit of 2.50 billion a year earlier in December-February, the
company’s fiscal first quarter.

2.3.2 Approach: Emphasizing the importance of the Chinese market

This approach helped address the cultural issues faced by the brand in such a collectivist culture
like China. By publicly emphasizing the significance of the Chinese market with a respectful
tone, H&M demonstrated its understanding of China’s role as one of its largest and fastest-
growing markets and showed the company’s respect towards the Chinese government and its
willingness to engage constructively with Chinese consumers and partners. This approach
reassured Chinese stakeholders and consumers of the company’s long-term commitment to the
region and its desire to restore trust and cooperation. Furthermore, demonstrating respect for
the Chinese market helped the company avoid a total withdrawal or irreparable damage to its
market position. However, this conciliatory approach drew criticism in Western markets, where
stakeholders felt H&M was compromising its ethical stance for business interests. Critics
argued that by emphasizing H&M’s commitment to the Chinese market, stating it was
"dedicated to regaining the trust and confidence" of Chinese consumers, H&M chose to
prioritize market access and profits over human rights concerns and undermined its earlier
commitment to ethical sourcing and corporate responsibility. Besides, what H&M said was just
lip service to temporarily ease the tension, the company did not pair its words with visible
actions such as localized campaigns to actively engage with Chinese consumers or organizing
discounting campaigns to re-attract the Chinese customers.
In conclusion, despite the company’s efforts to rebuild ties, H&M still suffered serious
damages. In further details, H&M’s products remained unavailable on Chinese platforms for
an extended period, H&M's sales in China were down 23% in the local currency for the second
quarter of 2021 compared to the same time the previous year and months after it became the
target of the boycott, H&M saw its sales slump in China market. The company also witnessed
a loss of $74 million and by the end of 2021, H&M had already closed 60 stores across China,
accounting for 12% of the total number of its stores. It can be concluded that although the
approaches H&M took helped avoid escalating the crisis temporarily at that time, they were
just short-term measures that were insufficient and ineffective due to lacking the clarity and
proactive engagement needed for a stronger long-term resolution.

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2.4. Suggest alternatives or better solutions
Between 2018 and 2022 - a challenging period marked by nationalist boycotts targeting some
global brands like Nike, Adidas in China - Uniqlo maintained its position as one of the top five
women’s clothing retailers on the e-commerce platform Tmall. Remarkably, it was the only
foreign brand that retained its ranking during this time.

Brands’s revenue after the Xinjiang controversy. (Source: Bloomberg)

While other brands started publicly expressing unease about the alleged forced labor concern,
sparking a nationalistic backlash that led Chinese consumers to call for boycotts and hit brand
loyalty and market share, Uniqlo kept quiet and took a different tack to declare that “I want to
be neutral between the U.S. and China,” said Tadashi Yanai, founder of Uniqlo.
Moreover, according to a 2021 government statement, no foreign apparel maker pays more
taxes or employs more people. Whereas President Xi Jinping is seeking to narrow the nation’s
persistent wealth gap with “common prosperity” push, now more than ever, it’s in brands’
interests to be seen giving back to society. A review at H&M revealed that the fast-fashion
giant was not highly regarded by local authorities, H&M’s tax contributions were considered
negligible, and its lack of sponsorship for government-backed events was perceived as a signal
that fostering ties with the Chinese Communist Party was not a priority. While Uniqlo secured
a larger booth than any of its competitors at the politically significant China International
Import Expo in 2021.
While many foreign companies are reducing their exposure to China and relocating production
to other countries, Uniqlo intends to remain firmly rooted. According to sources familiar with

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the company's operations, this decision follows substantial investments in worker training and
the development of a sophisticated supply chain within China.
In addition to making political moves, the company also makes valuable contributions to
society - an important consideration for any business aiming to expand under China’s President
Xi Jinping. The company makes charitable donations to citizens affected by natural disasters,
and regularly partners with local colleges on student design competitions.
While more vocal competitors faced sharp revenue declines in the Greater China region, Uniqlo
experienced the opposite trend, with its earnings increasing by 17% in the year ending August
2021 and maintained its position as one of the top five women’s clothing retailers on the e-
commerce platform Tmall.
Given the H&M backlash in China in 2021 and the positive move of Uniqlo after facing same
Xinjiang issue, we suggest some alternative solutions for H&M to deal with the boycott waves
in this situation, which aim to balance ethical commitments with operational pragmatism,
safeguarding H&M's brand image while minimizing revenue and market losses.
H&M could establish a crisis management framework to respond to incidents. This would
include scenario planning and proactive stakeholder communication to mitigate the fallout from
political issues involving preparing strategies and frameworks to address potential crises
effectively. H&M’s experience with the Xinjiang-related boycott highlights the importance of
proactive measures to mitigate risks stemming from geopolitical issues.

• Scenario analysis and risk assessment: Conduct detailed scenario planning to

anticipate potential backlash and assess vulnerabilities in politically sensitive regions -
> H&M could have identified the risk of backlash by analyzing the Chinese
government's previous responses to Western criticism on human rights, such as
sanctions on brands like Nike or Adidas.
• Pre-crisis stakeholder engagement: Build and maintain relationships with local
governments, NGOs, and key stakeholders to facilitate dialogue during sensitive
situations. Before publicly addressing Xinjiang issues, H&M could have consulted with
human rights organizations and regional trade partners to craft a balanced statement ->
Engaging neutral third parties might have allowed H&M to frame their concerns
diplomatically without alienating Chinese authorities or consumers.
• A slower, more neutral response: A prepared response emphasizing neutrality and
commitment to ethical practices globally would reassure Western consumers without
exacerbating tensions in China. Otherwise, it is also recommended that H&M should
remain silent and avoid divisive statements like Skechers to minimize future risks.
H&M should adopt more proactive approaches to sponsoring and advancing CSR initiatives.
This involves actively engaging in programs that benefit local communities, especially in
Xinjiang, promote sustainability, and address social and environmental concerns. This action
would consolidate H&M brand image and foster trust in authorities and the society, which is

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an important consideration for any business aiming to expand under China’s President Xi
Jinping. For instance, after the backlash over Xinjiang, Burberry participated in relief activities
in China, such as supporting flood victims in Henan in 2021. Burberry donated RMB 1.5
million and supplies like walkie-talkies, water, and food for rescue efforts, marking its first
Weibo post since the Xinjiang cotton controversy. The response has been largely positive, with
netizens praising the brand and pledging to buy its products.
As the Chinese government is ramping up policy support and new employment trends are
emerging, H&M is advised to solidify its presence in China by generating numerous job
opportunities for local residents and providing them with training to foster fair competition
and regain a leading position in this promising market against competitors -> Expanding its
workforce would allow H&M to demonstrate the value of local contributions, enhancing its
reputation among Chinese customers. Given the strong sense of national pride in China,
customers are likely to enjoy a more positive shopping experience when served by local
employees.
Increasing tax contributions is crucial for H&M to demonstrate its commitment to the Chinese
economy. By striving to pay substantial taxes, the company can not only boost its corporate
reputation but also align with the goals of local authorities, fostering positive relations and
ensuring stable operations.
Conclusion: By incorporating these contingency measures, H&M would have been better
positioned to navigate the politically charged Xinjiang boycott, safeguarding its reputation and
business interests globally.

3. IMPLICATIONS
The incidents that H&M faced in China has left behind many lessons for firms and managers
in the same situations. At a time when a number of MNEs have been greatly affected by
nationalist boycotts in China, MNEs such as Nike, Adidas, Uniqlo, or Burberry must carefully
navigate this challenging situation to uphold their values while avoiding losing key customers
or appearing politically biased.
Our teams point out some implications that firms can learn from the incidents.
Avoiding political statements publicly
Companies should avoid political statements unless they are clearly related to the company's
fundamental business aims and expertise, and they should carefully consider if making a
political statement coincides with their core business objectives. For firms in similar situations,
maintaining political neutrality is crucial. Moreover, it is advisable for firms to respond
promptly with clear and accurate statements after the crisis that directly relating to the issue.
According to Jing Daily, the newspaper argued that when fashion brands are dragged into
political conflicts, they will fall into a dilemma. Many foreign businesses have been called for
boycott by the Chinese people, causing them to lose most of their loyal customers as well as

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market share and it is very difficult to recover. Meanwhile, Fast Retailing's CEO, Tadashi
Yanai, has always had a neutral strategy between the US and China. Fast Retailing has always
remained silent whenever a political disagreement broke out. This is also extremely consistent
with the company's tradition that the places they sell clothes are not related to politics.
Thoroughly research the market and environmental factors of the host country
Businesses operating in politically sensitive environments should adopt approaches to navigate
complexities that could significantly impact their operations. It is advisable for them to
understand legal, political, and cultural environment. Business should update information from
reputable press sources, national or international media agencies in the host country as well as
Work with experts or consulting firms that have a deep understanding of that country's political
and legal system. Establishing alliances with legal experts who focus on foreign legislation can
provide valuable information about the particular needs of different markets. These experts
also help businesses in understanding important requirements like accessing transparent supply
chains or product safety standards. They play a crucial role in helping businesses navigate
export laws to reduce the risk of legal issues and product recalls. In order to prepare for future
regulatory changes and maintain competitiveness. Foreign businesses should also take
advantage of foreign chambers of commerce in China to maintain contact with Chinese
policymakers, advocate for more transparent and fair mechanisms, and create a more optimal
business environment.
By integrating these approaches, firms can build a deeper understanding of the host country,
adapt their strategies proactively, and mitigate the risks of cultural or political conflicts.
The case of Starbuck which has remained a positive share and witnessed growth lately in
foreign markets by conducting thorough market research has proven these implications when
MNEs conduct strategies to enter other important markets. In China’s non-alcoholic market,
tea drinks occupy a dominant position, while the coffee market is relatively small. From these
insights, Starbucks adjusted its strategy to fit local needs. The company adds drinks that suit
Chinese tastes, Starbucks will also conduct promotional activities, product launches or cultural
promotions during traditional Chinese holidays, which will effectively boost profit growth.
Applying timely revenue recovery strategies and improving the quality of the products.
Many consumers have called for a vehement boycott of all brands who have expressed deep
concern about the alleged use of forced labor to produce cotton in Xinjiang. However, relevant
cases such as Nike and Adidas are still running rampant on major Chinese e-commerce
websites with huge discount codes despite calls to "boycott is patriotic". Many people showed
no interest and called this a "political game". In the case of Uniqlo, Chinese consumers have
been won over by the quality, leading many local companies to find Uniqlo products difficult
to imitate and copy. The focus on basic everyday wear, as well as promoting quality and
affordable prices rather than focusing on following trends, has also created a difference for this
brand compared to the other giants of international fashion. Ultimately, the foundation of any

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business lies in gaining and maintaining consumer trust, which remains a critical driver of long-
term success. Foreign companies should remain flexible and quickly adapt their strategies to
China's dynamic policies and business landscape, to ensure they can exploit new opportunities
and maintain their foothold. ourselves in this important market. In the face of boycotts or crises,
swift actions such as targeted promotions, clear communication, and product differentiation are
essential for firms to maintain financial stability and market share to temporarily recover lost
revenue during the peak period of the boycott.

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