Business Strategy

This document provides an in-depth analysis of business strategy, focusing on topics such as corporate strategy, diversification, and stakeholder analysis. It includes a situational analysis of H&M, a TOWS matrix, and recommendations for the company. The document also covers topics like strategic capabilities and marketing strategies. Suitable for students studying business strategy or professionals looking to enhance their knowledge.

Running head: BUSINESS STRATEGY
Business Strategy
Name of the Student:
Name of the University:
Author note:

1BUSINESS STRATEGY
Table of Contents
1. Journal Entry- Unit 1,2.......................................................................................................1
2. End of Module Journal Entry..............................................................................................2
3. End Module Assignment – Unit 1,2,3................................................................................2
3.1. Situational Analysis for H&M.....................................................................................2
3.2. TOWS Matrix..............................................................................................................4
3.3. Recommendations.......................................................................................................5
4. References:..........................................................................................................................9
5. Appendices:......................................................................................................................10
5.1. Appendix 1: Pestle Analysis......................................................................................10
5.2. Appendix 2: Porter’s Five Forces Analysis...............................................................10
5.3. Appendix 3: Strategic Capabilities............................................................................11
5.4. Appendix 4: VRIO Analysis.....................................................................................11
5.5. Appendix 5: TOWS Matrix.......................................................................................12

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1. Journal Entry- Unit 1,2
In unit 1, I have learned about corporate strategy and diversification. I have gained
much knowledge on different generic strategic directions available. Different reasons for
diversification of a business have also been taught in this unit. Business diversity has become
more important in contemporary days as people are growing more ethnically and racially
diverse. With the help of diversification, business can reduce the risk by means of allocating
the investments among different financial industries or instruments. Furthermore, I have also
learned the roles of corporate parents in creation of business value. The concept of portfolio
management has also been introduced to us in Unit 1 and I am now able to analyse the
business portfolios units and judge upon which to invest in and which to divest. Furthermore,
in Unit 2, I have learned to use stakeholder analysis along with the components of
governance chain of a company and have understood the differences in the structures of
governance across the world along with its advantages and disadvantages.
In my workplace, I shall be using stakeholder analysis for identifying the influence of
different groups of stakeholders of my workplace in terms of their interest and power.
Furthermore, with the help of all these knowledge and understanding, I can easily give my
best to my organisation’s business performance. I can share my valuable understanding
during the decision making process at my workplace regarding diversification of our product
portfolios by identifying the alternative directions for strategy including the market
consolidation or penetration, market development, diversification and product development.
In this way, these learning can aid to my professional development. As far as my personal
development is considered, I think I have developed my skills in setting goals and reach my
full potential. This is likely to aid to my professional development as well.

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2. End of Module Journal Entry
In this module I have acquired much knowledge about business strategy. It is the working
plan of a company to achieve its vision, prioritise objectives and competing successfully
while optimising the financial performance with its business model. I have learnt about the
methods by means of which strategic direction and competitive strategy could be pursued
such as mergers and acquisitions, strategic alliances with other firms and organic
development. I believe that all these learning would help me as a business manager to focus
on my employees on specific goals and objectives.
Apart from these, I have also learnt about the three success criteria for the evaluation of
strategic options (SAFe criteria), which I can use for strategy evaluation at my workplace. In
these ways, these learning will offer me a guide about how my business is performing
internally. I always wanted to have my own business and I think these knowledge and
learning are of great help to me and my business for standing tall in the business market.
With the help of these, I would be able to best determine the future direction of my business
as they will help me in understanding where I am positioned in the market. However, it is
also to mention that I have not clearly understood the way of applying the different
techniques for evaluating the strategic options. I need to ensure further development in this
area as I believe that to make my business perform its best; I need gain a thorough
understanding on the strategic options that are creative and alternative action-oriented
responses for the external situation that my company can face. For this purpose, I have
decided to request my lecturer on giving extra classes to me.
3. End Module Assignment – Unit 1,2,3
3.1. Situational Analysis for H&M

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H&M was founded in the year 1947 by Erling Persson and it was later acquired by
Mauritz Widfoss in the year 1968 (Wallenberg 2018). As per the PESTLE analysis of the
company, the company is facing significant challenge from the political and legal
environment. For example, the US dollar is increasing since last two years and this is
influencing the corporate earnings negatively as the companies like H&M that export or
depend upon the global market for the bulk sales will suffer because the income that they
earn from the international sales will reduce in value on their balance sheets. Furthermore, the
modern customers now need more ethical, transparent and sustainable behaviour and the
products of H&M are widely accepted because of its affordable price and good quality. It can
be regarded as its strength. H&M is also a socially responsible brand it is to note that the
company shoulders this responsibility through its NGO named H&M foundation. It is
collaborated with some of prominent companies and it is aimed at improving the lives by
means of creating a better tomorrow. According to Pedersen, Gwozdz and Hvass (2018),
fashion industry is one among the most polluted industries and in order to address this issue,
H&M is trying to provide sustainable fashion and is also creating minimum impact on the
environment. Furthermore, from the Porter’s Five Forces Analysis of the company, it is clear
that the threats from new entrants are high for H&M as the barriers to entry in the apparel
industry is low. New entrants struggle for competing with the economies of scale that are
achieved by the large companies. This makes creating brand loyalty tough for the companies.
On the other hand, threats from the substitutes is also low as there are no substitutes because
clothing and apparel are necessities for every customer within the industry. Industry rivalry is
medium to high and the main competitors for the company are ZARA, GAP and UNIQLO.
Furthermore, the bargaining power of customers is high as the cost of switching is low within
the industry which further increases the intensity of competition. Low bargaining power of
the suppliers makes the labour cost low.

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The strategic capabilities are widely concerned with the resources and the competence
that a company can employ for providing values to its customers. The strategies capabilities
of H&M remains in its design, supply chain management and marketing. Notwithstanding
this fact, the other areas of the operation of H&M where its strategic capabilities are
significantly visible are the resources and competence. The resources could include the
physical assets like the production officers that hold the duties of ensuring coordination with
commissioned and approved factories and suppliers around the globe. In the given case study,
it is said that H&M does not own any outlets and the company outsource its production to the
approved manufacturers of apparel. On the other hand, the competencies include the design,
store concept, culture, marketing and the CSR (Ksiezak 2016). The business model of the
company is highly focused on delivering the modern trends at the best possible prices and
that too in more effective way by means of building a committed workforce. The VRIO
framework clearly demonstrates that the company derives a high level of its sustained
advantages from its organisational culture and the human resource management. These
aspects are embedded in the H&M’s business model. For example, its organisational culture
is significantly affected by the effective personality of the founder Erling Persson
(Wallenberg 2018). His uniqueness helps the company in gaining competitive advantages
over the other players in the market.
3.2. TOWS Matrix
TOWS matrix is a very simple tool for the generation of strategic options. It is very useful
for the companies for making new strategies on how to defend themselves from the
weaknesses and threats and at the same time, take advantages from their strengths and
opportunities (Gurel and Tat 2017). From the TOWS analysis of H&M, it is clear that H&M
makes use of famous Asian people for promoting its branding. For example, it used Zhou
Xun in Europe. This further fosters mutual benefit for both, from the capabilities of each

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other. Also, it moves rest of the production for the Asian market to Asia for reducing the cost.
In this way, it tries to overcome the weaknesses for capitalising on its opportunities.
Furthermore, it has been identified that the Chinese hold the foreign brands in high esteem for
deterring away from the local brands like IT. H&M needs to have a better understanding and
use of RFID tag system as this will help it in increasing the sales and helping in combatting
the earlier unstable growth of sales that is heading into the future. Also, it can make use of
vertically integrated strategy to improve its efficiencies within newly reduced workforce.
With the same, by means of moving its Asian production to Asia, H&M can speed up the
times of fashion delivery. It can also undertake public image campaign for improving the
negative perceptions of people in the market. It would be of a great help for H&M for fixing
the present perceived negatives.
3.3. Recommendations
When H&M takes decision upon different strategic direction for future, it is likely to face
many challenges. Selecting a suitable strategy at right time could be a very difficult task for
the organisational managers of H&M. For this reason, it is very crucial for the company’s
managers to look at the strategy from the aspects of its viability and value. The main point
that the managers need to do is to settle on a clear foundation for evaluating the diverse
strategic alternatives. The company also need to select a viable methodology in order to
analyse the diverse strategies in independent manner. These strategies could be easily
evaluated and assessed by means of using the SAF criteria (Suitability, Acceptability and
Feasibility). Below are mentioned different strategies and the possible future directives for
H&M on the basis of the SAF criteria.
a) Increasing the existing expenditure of advertising
Sustainability

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 Strategic marketing
a) H&M would be able of exploiting its R&D for the strategic marketing
b) The company will also be making use of the existing products and systems for
reaching the new customer groups by means of marketing.
 Focused budgeting
a) The strategy is suitable for H&M as it has high and focused budgeting for the
marketing and communications.
b) It would also allow the company to withdraw itself from failing markets or
from the markets that have poor market share. It will help it in achieving
access to the rising markets.
Acceptability
 Return on the investment
a) It is acceptable as it impose very low risk in the strategic marketing
investment
b) It promotes high level of returns on investment in the marketing through the
promise of high level of awareness, brand recall and recognition as well as
increased penetration. These will help it in achieving higher sales.
c) The key stakeholders of the company will not reject this strategy and this
makes it more acceptable and easier for implementation.
Feasibility
 Market research and financial cushioning
a) This strategy is highly feasible as of the fact that H&M has a good financial
standing. This means that it can afford to increase its budget for the marketing
purposes.

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b) For the successful outcome of strategy, it is required to ensure that all its
promotional campaigns that are developed are aligned with the needs, behaviour
and demands of the customers. This is also possible for H&M as its investment in
the R&D.
b) Creation of new stock for the high-income groups
Sustainability
 New market development
a) It is suitable for the company as it allows it to develop new markets by means
of tapping into the new groups of customer
b) It will allow H&M to penetrate higher into the prevailing markets
Acceptability
 Alignment with the goals of the organisation
a) It is acceptable as it is aligned with the company goals and mission
b) It is also aligned with the marketing processes and organisational culture.
c) It promises to give high returns
Feasibility
 Market research and financial cushioning
a) It is highly feasible as of the fact that H&M already operates as per its mission and
it has high level of market research and information about the high income groups.
b) It can use the information for the creation of suitable products for them.
Final recommendations:
a) Strengthening the network of distribution- it is important for H&M as it would allow
high level of control over its products in the different markets and at the same time,
would also allow the company to control where its products are place. In this way, it
would improve the accessibility and availability of its products for large range of

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customers. Furthermore, strengthening the network of distribution will help it in
building stronger relationship with its customers.
b) Developing unique marketing strategies or tactics. This will help it in reaching to a
high number of customers and at the same time, to penetrate deep into its target
market group. With the same, it would also allow it to increase the consumption and
trial along with the sales of its products.
c) Adoption of the diverse cultural aspects of diverse markets- Every target group and
market has characteristics of their own. By means of adopting to the diverse cultural
aspects of diverse markets, H&M will be able of connecting better with the diverse
group of customers in different markets. Customers would them feel a greater affinity
and more likeliness of using the H&M’s products and services.

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4. References:
Gürel, E. and Tat, M., 2017. SWOT analysis: a theoretical review. Journal of International
Social Research, 10(51).
Księżak, P., 2016. The CSR challenges in the clothing industry. Journal of Corporate
Responsibility and Leadership, 3(2), pp.51-65.
Pedersen, E.R.G., Gwozdz, W. and Hvass, K.K., 2018. Exploring the relationship between
business model innovation, corporate sustainability, and organisational values within the
fashion industry. Journal of Business Ethics, 149(2), pp.267-284.
Wallenberg, L., 2018. A decade of challenges and possibilities: Establishing fashion studies
at Stockholm University. International Journal of Fashion Studies, 5(1), pp.169-180.
Wallenberg, L., 2018. A decade of challenges and possibilities: Establishing fashion studies
at Stockholm University. International Journal of Fashion Studies, 5(1), pp.169-180.

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5. Appendices:
5.1. Appendix 1: Pestle Analysis
Political Economic Socio-Cultural
a) Importance of CSR
framework
b) Rates of Exchange
a) Outsourcing (Decrease in
costs)
b) Inflation rate
c) Market segmentation
d) Fast-fashion movement
a) Fairness
b) Sustainability
c) Animal Welfare
Technological Legal Environmental
a) Increasing importance of
the online channels
(change in purchasing
processes of the
customers)
b) Strict regulations and
norms for the foreign
companies in certain
countries.
a) Recycling’
b) Climate change
5.2. Appendix 2: Porter’s Five Forces Analysis
Threats from new entrants Barriers to entry in the apparel industry are relatively low. This
makes creating brand loyalty difficult.
Threats from substitutes Low. There are no substitutes as clothing and apparel are
necessities for every customer within this industry.
Industry rivalry Medium to high. The main competitors of H&M are Zara,
GAP and UNIQLO.
Bargaining power of
customer
It is high as the switching costs for customers are low. Fashion
industry caters to all the demographics, typically in the age
range 18 to 35 years.

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Bargaining power of the
suppliers
Low. There are many suppliers in countries with low labour
costs.
5.3. Appendix 3: Strategic Capabilities
5.4. Appendix 4: VRIO Analysis
VRIO Valuable Rare Inimitable Organisation
Sustainable
Fashion
Yes Yes No Yes
Business Model Yes Yes Yes Yes
Brand Yes Yes Yes Yes
Collaboration
with the
Yes Yes No No
Su sta in e d C o m p e ti ti ve
A d va n tag e
Design
a) Minimal time to market
b) Centralised
c) High level of responsiveness tothe
trends
Marketing
a) Long terms campaigns (advertising)
b) Strong social media presence
c) Colleboration with some well-known
designers
Supply Chain Management
a) Centralised
b) Turnaround speed of 20 days
c) High level of innovative infrastructure
Purchasing flexibility

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designers
Organisational
functions
Yes Yes Yes Yes
Human
Resources
Yes Yes Yes Yes
Innovative
Resources
Yes Yes Yes Yes
5.5. Appendix 5: TOWS Matrix
External Factors Internal Factors
Strengths (S) Weaknesses (W)
Opportunities (O) SO Strategic
Options
H&M makes use of
famous Asian people
for promoting its
branding. For
example, Zhou Xun
in Europe.
WO Strategic
Options
H&M moves rest of
the production for the
Asian market to Asia
for decreasing the
cost.
Threats (T) ST Strategic
Options
The Chinese hold the
foreign brands in
high esteem for
WT Strategic
Options
By means of moving
its Asian production
to Asia, H&M can

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deterring away from
the local brands like
IT.
speed up the times of
fashion delivery.
Public campaign can
be taken for
improving the
negative perceptions.