Business Strategy - H&M Assignment

Business Strategy

Table of Contents
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
P1 ...............................................................................................................................................1
TASK 2............................................................................................................................................3
P2 ................................................................................................................................................3
TASK 3............................................................................................................................................4
P3 ...............................................................................................................................................4
TASK 4 ...........................................................................................................................................6
P4 ...............................................................................................................................................6
.........................................................................................................................................................8
CONCLUSION ...............................................................................................................................8
REFERENCES..............................................................................................................................10
.......................................................................................................................................................10

INTRODUCTION
Business strategy is a course of action or set of decision which help the entrepreneurs in
accomplishing peculiar enterprise objectives. Along with this, it is regarded as master plan which
every organisation implies to assured competitor position in marketplace, carry on its operation,
attract customers and accomplish pre determined goal in an trenchant and prompt manner.
Moreover, it enable company to identify business opportunity and make use of available
resources in order to obtain maximisation of profit (Amit and Zott, 2012). This report id based on
H&M which is one of the multinational clothing retail company and it is commenced in the year
of 1947. It operates in 62 countries with over 4500 stores and headquartered in Sweden. In this
document, it covers impact of macro environment on firm's operation, evaluate the internal
capabilities of company, application of Porter's five force model to examine competitive force.
Finally, developing strategic planning for an organisation is also mentioned here.
TASK 1
P1
Every organization has its own business environment as it is combination of internal and
external factors which influence the firm in accomplishing its goal or objective. There are two
kind of external marketing environment i.e. micro and macro and these environment factors are
beyond the control of marketers ad it directly influence the its decision during creating marketing
strategy (What is PEST Analysis?. 2018). Some of the macro environment factors are
demographic, economic, technology, political factors etc. which effect its productivity and
profitability. However, to analyse or examine external factor PESTLE analysis is considered as
effective tool. PESTLE analysis is a tool which is used to determine or evaluate the central
drivers of change in strategic or business environment (Aithal, 2016). This tool allows H&M to
measure current environment and potential changes in order to face competitors by implementing
productive strategic decision for attaining high level of proficiency among industry. Thus, H&M
implies PESTLE analysis to analyse its external or macro factors which is described below:
Political factor: It is concerned with government policy, political stability, tax policy,
foreign trade policy as well as signifies that how and to what extent government intervenes in
business operation or function. However, the major political factor which negatively impact
H&M as government put some restriction on import and export as well as in relocation of

production facilities which negatively efficient its profitability ratio. However, H&M tackle this
negative issue by maintain its profit margin by reducing its cost as well as acquire incentive to
find out production in specific areas. Along with this, they are welfare with political stableness
of UK government which enable them to expand their business operation effectively.
Economical factor: This factor is consider economic growth, interest rate, exchange rate,
inflation which influence how an organisation does business and also how profitable they are
among market (Bharadwaj, El Sawy and Venkatraman, 2013). Hence, recent economic crise in
UK is greatly impacted H&M business function as it decrease consumer spending behaviour or
patterns and created downward pressure on prices. However, H&M adapted effective decision to
meet out this impact on their productivity as they rises the demand of disposable fashion among
customers by offering attractive pricing strategy which allows consumers to cut down spending
without compromising trendiness.
Social factor: This factor is that area which contain shared belief and attitude of
populations like age, heath consciousness etc. which influence their proficiency. Moreover, UK
population mainly youths and young adults prefer fashion or stylish product and trendy clothes in
order to improve their lifestyle which negatively impact H&M productivity. Therefore, H&M
overcome their negative impact by introducing trendy and stylish clothes for both sexes i.e.
youths and young adults that enhanced customer satisfaction level as well as add value to firm's
brand image among industry.
Technological factor: It is regarded as one of the key factor for business success or
growth as it is related with adapting latest or innovative technology in order to enrich their
profitability ratio. Hence, UK population promote latest technology for trading product or
services which challenged H&M drastically among competitors. Thus, H&M faced their
challenges effectively as they adapt innovative technology for their business logistics as well
provided online facility and home delivery option which attract the customers and it leads to
higher sales growth as well as help them to gain competitive advantage (Blackburn, Hart and
Wainwright, 2013).
Legal factor: Under this factor, it involves government laws and legislation regarding
equal opportunity, advertising standard, consumer rights etc. which enable firm to examine
whether they adhere to legal compliance or not. Thus, recently UK government announced for a
monthly monitor in company to check whether they are maintaining proper working ambiance

and providing equal job opportunity to personnel that impact H&M business operation and
functions. Therefore, H&M strictned their employment regulations and encouraged employees to
maintain their code of conduct which enrich their reputation among competitors and there was
less intervention of government into their business function (Chang, 2016).
Environment factor: It is concerned with maintain ethical standard of company and
preventing environment which improves their overall performance among industry. Moreover,
there is a high demand of eco friendly products among UK consumers which impacted H&M
productivity. Therefore, H&M overcomes their negative effect by implementing a strategy to
recycling the raw materials which created a positive perception among customer which enhance
its proficiency and sales growth among industry.
The above stated PESTLE analysis enable H&M to examine their external environment
and helped them to make effective decision in order to gain competitive advantage.
TASK 2
P2
Business environment is a sum total of internal and external environment which has
direct impact on company's productivity and profitability. Both the environment has equal effect
on business function and it greatly influence organisation's decision making capability.
Moreover, internal environment relates with consumers, suppliers, customers, public etc. who
plays a vital role in accomplishing business pre determined goal in innovative and creative
manner (Ghezzi, 2013). Hence, SWOT analysis is advised as primal way to enhance firm's
proficiency and profit margin. It is a tool which identifies and analyse the business strength ans
weaknesses and enable them to make productive business strategy in order to meet out the
necessitate of customers as well as face company's challenges or threats. However, H&M applies
SWOT analysis to examine their internal ability or potentiality for achieving high profit margin
is given below:
Strength
 H&M has wide range of product
offering as it deals into apparels,
cosmetics, shoes and accessories which
Weakness
 It is excessively dependent on third
party suppliers for its merchandiser as it
outsources its manufacturing product to

provide wider option for customers and
changes their perception towards
company.
 It contain several brands like H&M,
COS, Weekday, Monki etc. and all the
brands has unique identity depending
customer target group.
800 independent suppliers which lower
its control capability over production.
 As H&M produces affordable clothing
but it follows or pick up after trends
from luxury brands which impact their
productivity.
Opportunity
 As today's competitive world is mainly
focused on innovation and creativity. In
case of H&M, it is also existing in e-
commerce industry in several countries.
Therefore, H&M has great business
opportunity in e-commerce sector
which enrich their profitability ratio.
 There is a rising demand of improving
lifestyle as well as brand conscious
among UK population which is one of
the effective opportunity for H&M to
grow their business operation.
Threat
 Apparel industry is subject to speedy
alteration as trends keeps on ever-
changing as well as social media plays
a pivotal role in the process of evolving
fashion trends among consumers.
 There is a intense competition from
local as well as global brands within
apparel and retail clothing industry
which influence H&M productivity and
sales growth.
Therefore, SWOT analysis helps H&M to determine their potentiality and drawbacks in
order to tackle the all current and emerging challenges or threats in an productive and innovative
style. By this, they are enable to enrich their proficiency and can gain competitive advantage
among industry (Hoejmose, Brammer and Millington, 2013).
TASK 3
P3
Every company has enormous competitors who influence their business operation and
decision making ability as well as it impact firm's proficiency or productivity. Hence, in order to
analyse the potentiality of competitors, Porter's Five force model is regarded as essential tool for

accomplishing high level of sales growth and success. However, Porter's Five model is
introduced by Michel. E. Porter, it is a strategic management tool that aid firm to ascertain
competing genre in an industry. Each of the forces has their own strength and weakness which
help strategic planners i.e. company to realize the inherent profit possible within an business in
order to gain competitive advantage. Thus, H&M applies Porter's five force model in their
business function which is explained below:
Threat of new entrants: The economies of scale is reasonably challenging to accomplish
in the industry where H&M run as this makes more easier for those who producing large
capability to have cost advantage which becomes more costlier for new entrants. However,
threat of new entrants for H&M is low because it contains huge capital for positing the market
effectively. Moreover, product differentiation is very strong in apparel or retail industry which
impact the profitability of H&M (Oestreicher-Singer and Zalmanson, 2013). Therefore, H&M
tackle this issue by introducing various innovation to differentiate its product which enable them
to hold back its customers rather than losing them to new entrants and can achieve economies of
scale.
Threat of substitutes: The industry where H&M serves, it contains less threat of
substitutes and those firms mainly focus on quality and price of product which puts more
pressure on H&M productivity. However, H&M overcome its hindrance by putting more focus
on providing greater quality in their products at low price which results increase in volume of
sales. Along with this, it lead buyers to choose H&M products as compared to substitute brand
like M&S, Asda etc. which offer greater quality of products at high price.
Bargaining power of supplier: There are enormous suppliers in retail industry compared
to buyers which signifies with little differentiation available which effect H&M proficiency and
profit margin. Thus, H&M bargaining power of supplier is high. However, in order to keep their
efficiency, H&M prefer to keep a multiple supplier for their raw materials in different
geographic location and develop close relationship with their suppliers which benefits both the
groups in enhancing efficiency of its supply chain (Peng, 2017).
Bargaining power of buyer: In retail industry, there is availability of enormous suppliers
which provide various option for buyers in selecting the products and it effect H&M efficiency
in profitability ratio. As buyers are considered as end consumers for retailers commodity and
account for almost retailers earnings. Therefore, H&M tackled this issue by adapting several

attractive offers maintain their product updated with latest fashion trend which enhance buyers
demand and increase H&M productivity or profitability ratio.
Rivalry among competitors: There is a high level of competition among companies
because there are larger number of related retailers including large and small firms. Along with
this, due to recession, it decreased the level of demand in apparel business aggravating
competition. H&M main competitors are Zara, Van Heusen , IZOD etc. that increases the
opposition among them. However, H&M overcome this impact by conducting market research to
examine supply demand situation within industry which forbid them overproduction (Pretorius
and Maritz, 2011). Along with this, they focus on distinguish their products so that action of rival
will have less result on its customers that seek its unique products.
However, the above explained Porters five force model, enable H&M to realize how
different cause affect profitability of industry as well help them to implement effective strategic
decision in order to gain competitive advantage.
TASK 4
P4
Strategic management is a process which is concerned with long run perspective. There
are various theories or models which help companies to identify their business opportunities in
order to acquire best positioning within competitive retail industry (Schrader, Freimann and
Seuring, 2012). Ansoff matrix is regarded as one of the essential strategy which allows an
organisation to accomplish their pre determined goal within prescribed time limit. This
marketing strategy is developed by Igor Ansoff in the year of 1960. It is refereed as a
communication tool that helps an organisation to foresee possible growth strategies within an
industry as it is a combination of four quadrants i.e. market penetration and development,
product improvement and diversification. However, H&M applies Ansoff matrix strategy which
enable them to attain higher level of efficiency and volume of sales.
Ansoff matrix strategy
Market Penetration:It is the initial quadrant in this strategy in which administration has an
present product with a known market and needs a development strategy inside marketplace.
Moreover,applying this strategy, business penetrate current market for present customers by

more efficaciously marketing their existent products ore services through promoting product,
repositioning brand and so on which enable them to attain high proficiency.
Market Development: This strategy is applied when the firm targets a new market with
present products. For smaller enterprise, it change grow from a current to another industry
where its product or service does not presently compete. Furthermore, implying this strategy, an
organisation innovate a current product into brand new market by producing into brand new
audience.
Product Development: It signifies to those firms which has trenchant market share in an
active market and therefore might essential to innovate fresh products for enlargement. Along
with this, it is more useful when a establishment has strong customer base and cognise that
market for it's existing product has reached saturation. Moreover, implying this strategy business
market new products to their customer base that not yet exist as it acquire innovative or latest
technology in order to obtain maximisation of profit with optimum utilisation of resources.
Diversification: This strategy signifies when the product is entirely new and is being
pioneer into fresh market. Although such a strategy is the dangerous as market and product
development is requisite, the risk can be alleviated through accompanying diversification.
Moreover, there are two types of diversification i.e. related and unrelated. Hence, in related
diversification there are expected synergies between existent and new product or market whereas
in uncorrelated diversification their is no potential synergies among new and current product.
However, H&M can imply diversification marketing strategy as it is one of the
competitive player among retail clothing industry. Through diversification H&M will be enable
to minimise its risk of loss as well helps them to prevent capital in order to generate high return
on investment.
Strategic planning
Strategic planning is an structure management act which is in use to set priorities, centering
energy and resources, fortify operation etc. in order to attain increased level of productiveness
and earnings. Moreover, it enable the firm to provide solid guidance for creating clear, simple
and understandable plan which is well structured and achievable. Along with this, it help H&M
to monitor their key performance indicators, leading indicators predicting risk in order to gain
competitive advantage efficaciously and efficiently. Furthermore, strategic management plan is a
document which is utilized to communicate within organisation as it help firm to implement

effective goals, mission, vision, objective in order to ensure that employees and other
stakeholders are working towards accomplishment of communal goal. Therefore, H&M
implement the strategic management plan in order to enhance business operations and function.
The strategic planning for H&M are as follows:
Vision: H&M main vision is to bring change or modification in circular and renewable
fashion industry by being a fair and transparent to public. Using our effective size and scale, they
seek to catalyse systematic changes across their operation or function so that they can engage
their customers and enable them to provide great fashion or design choices in order to gain
competitive advantage.
Mission: H&M contains impressive mission which helps them to maintain their
productivity within competitive retail world. Their mission is to make a better connected world
as they are the builders of world's strongest infrastructure network, bringing reliable energy,
communication and make use of available resources in order to obtain maximisation of profit.
Objective: By developing impressive objective it enable business to addressing
necessities of both existing and upcoming eras as well as offering their customer more
sustainable clothing which result in making positive effect to infinite individual in distribution of
their product or service.
Strategies and tactics: H&M developed new strategy which allow them to carry out their
vision and take them to sustainability of work. As they mainly focus on maintaining a better
relationship with internal and external stakeholders or experts across the value chain that helps
them to gain competitive advantage and to obtain maximisation of profit in an effective manner.
CONCLUSION
The preceding explained report, it has been concluded that business strategy is an integral
part of company's success and growth as it enable them to implement effective strategy in order
to accomplish their pre planned goals.. Moreover, there are various kinds of tools which is used
to analyse internal or external capabilities of firm such as PESTLE and SWOT reasoning that
enable them to identify its business opportunities in order to enhance their productivity or
profitability ratio. Furthermore, Porters five force model helps firm to examine their competitive
force for achieving best positioning among industry. Along with this, strategic management plan

provide proper guidance to an organisation for achieving pre determined goal in an effective
manner.

REFERENCES
Books and Journals