H&M's Spirit and Business Model

This case analysis explores H&M's spirit and business model, including their culture, core values, and business strategies. It discusses the attractiveness of the apparel retail industry and identifies threats in H&M's external environment. The analysis also examines H&M's resources and capabilities and how they provide a competitive advantage. Finally, it provides a recommendation for sustaining and strengthening H&M's competitive advantage.

Case Analysis 1 :
H&M in Fast Fashion: Continued Success?
How would you describe H&M’s ‘spirit’ and business model?
With the desire to make fashion accessible and affordable, H&M has managed to become one
of the largest fashion retailers in the world. We know from the case study that Erling Persson,
the founder of H&M, not only created a simple vision to lead the company to achievement,
but has developed a culture that drives stakeholder engagement from internal development
direction, to employee selection, training and education. More specifically, autonomy inspires
employees to run the business like entrepreneurs, to not be afraid to make decisions and learn
from mistakes, to take on tasks spontaneously and to do their best to excel at their jobs. The
combination of culture and core values mentioned in the case study gives the company huge
and unlimited possibilities for further development and the spirit of H&M is fully expressed.
H&M's business model is a mixture of cheap chic and a brick and mortar model. As the
company does not have its own factories, H&M operates this retail clothing business by
outsourcing production to a number of low cost suppliers. The manufacturing assets give
H&M the benefit of low cash outflows and high production capacity, allowing the company
to have a flexible business strategy to maximise profits. In terms of the business management
model, H&M uses an integrated logistics approach where manufactured goods go directly to
a logistics centre and from there are distributed to shops closer to the region. The shops have
no spare stock. If needed, it must be requested from the regional replenishment centre. In
terms of supply chain management, H&M has adopted ICT (Information and Communication
Technologies) for internal information management and tracking of supply chain production
progress. ICT systems enable full transparency of sales, inventory, procurement planning and
production capacity through a circular feedback mechanism, which helps to respond quickly
to trends and reduce inventory levels. The mix of H&M's business model and management
approach has expanded operational flexibility and drastically cut down on lead times, and
enhanced logistics.

Is this a place you would want to work? Why or why not?
It was a great experience to explore more about H&M through the case studies. I have been
impressed by the strong corporate culture and core values that have been defined by the
CEOs over the years. I believe that in such a positive work environment, employees receive
more than just a paycheck, but more importantly, improved inner training and progress. From
the case studies mentioned, H&M provides learning opportunities for employees to try out
new job roles and participate in decision making. Employee engagement values individual
contributions and maximises employee engagement. The positive work environment and the
opportunity to learn new things and be able to develop the skills set means a lot to me as it
gives me a sense of social belonging and the satisfaction of self-esteem. So, yes, it is the
company that I would like to join.
Briefly discuss the attractiveness of the apparel retail industry.
The fashion clothing industry is one of the most important economic sectors in terms of
investment, income, trade and job creation. This is attractive to entrepreneurs because of its
short product life cycle, wide range of products, unstable and unpredictable demand, and long
and inflexible supply processes. The global garment manufacturing industry is expected to
grow more than ever in the coming period. From the case study, H&M's growth has grown
from one shop in 1947 to over 4,600 shops and an online presence in 47 markets in 2018.
Apparel manufacturers are now adopting new technologies to increase their trade. New
business models and competitive strategies are being used to increase profits and growth.
With the development of media such as television and the internet, consumers are becoming
more aware and demanding. They have more choice in terms of quality, price and design.
This is why clothing chains around the world are focusing more on improving the quality of
their products and offering a variety of fashionable designs. Clothing manufacturers are
developing ways to keep up with the pace of change, such as offering at wholesale prices, in
order to survive the global competition. This provides a huge opportunity for our customers.

Identify 2-3 threats in H&M's external environment.
● Social Media and Technological Trends
H&M depends on trends and therefore it has to keep up with their constant evolution. Despite
the fact that the dynamics of fashion trends are always changing, the emergence of social
media and advanced technology have hastened this transformation. Keeping up with all the
latest trends has essentially become a race, and if a business is unable to do so, sales may
suffer.
● Threat of E-commerce
However, expanding online with digital retailers was more difficult and required a diverse
range of skills and competencies. E-commerce has provided H&M with a new platform, just
as it has for other companies. Due to the rise of online shopping, smaller firms now have
almost equal chances to increase sales. Sales from H&M may be distributed to other retailers
when both businesses have the chance to appear on a single platform. Due to the blurring of
these lines whenever it comes to online shopping, this can occur even if these businesses are
lesser in size. It is therefore extremely challenging to maintain and grow rapidly and excel in
the e-commerce world.
● Avoidance of Fast Fashion
The growing voice in society against fast fashion is a huge threat to H&M and other similar
brands. The fashion industry is able to make a lot of money when they produce cheap clothes
quickly because they hand over low-priced production lines and use cheap labour. The
rapidly changing fashion styles due to seasonal changes also caused a lot of trouble in
welcoming the new and removing the old. The low cost of manufacturing also meant that
these clothes were of slightly poorer quality and less durable, and the toxic textile waste thus
contributed significantly to environmental pollution. Finally, people also began to resist the
use of fast fashion.

What are H&M’s resources and capabilities? How do they provide the firm with a
competitive advantage?
The resources and competencies of this company encompass the business model, the
immaterial assets, the culture and the way it is reproduced, and the people. H&M adopted the
cheap-and chic business model which provides fashion at an affordable price. Immaterial
assets include trademarks, patents and brand names that are already well-known; and
technology systems that can be adapted to a variety of demand and supply. H&M has created
a unique culture that no other business can emulate where attributed to staff involvement,
experimental, trial and error learning and fast decision making. To ensure that this culture is
integrated into human resource management, H&M uses aligned training and provides
adequate growth opportunities for its employees. Lastly, H&M emphasises that personal
qualities are far more important than academic results or qualifications, as higher education is
not an indication of a person's ability.
To what extent can these resources and capabilities be sustained? To what extent can
other fashion retailers be successful in imitating H&M’s success?
H&M's approach is to replicate their culture and business philosophy in every new shop they
open. They hire people who are likely to adopt and endorse the organisation's values and
incorporate their culture into their training to ensure that they understand it deeply and can
demonstrate it in them. This practice has been successfully recycled indefinitely in the H&M
business model and has given H&M a sustainable strategic advantage.
All of H&M's business strategies and business models can be imitated or copied, but the
difficulty in this is that other businesses cannot follow the same strategies all the time, as
these can be changed by changing circumstances or the rise of other new businesses.
Give one recommendation on what should H&M and CEO Karl-Johan Persson do to
sustain and further strengthen H&M’s competitive advantage?

In terms of shop operations, the current H&M storefront design already uses a window
display design to catch the eye of the consumer. Frequent changes to in-store and window
display design are not enough to keep up with the demands. If H&M wants to come up with
an unbeatable strategy, it will have to further advance in this area and Making it costly or
difficult to copy designs.

Case Analysis 2
The Global Pharmaceutical Industry – Harnessing The Whirlwind
Identify the main environmental forces in PESTLE currently affecting the global
pharmaceutical industry.
The term "PESTEL analysis" refers to a method for examining the external factors (Political,
Economical, Sociological, Technological, Legal and Environmental) that have an impact on a
company. PESTLE analysis may be used to a variety of circumstances and guide senior
management and professionals in making strategic decisions.
Political
More than other factors, government policy has a strong influence on industrial innovation.
To attract the attention of firms, governments provide special incentives to encourage the
globalisation of the industry. Since the 1980s, governments have targeted medicines as a
politically accessible target in an effort to control increasing healthcare costs. Many
governments have enacted pricing or compensation regulations. The industry lacks the social
and political support necessary to fight these developments.
Economical
Healthcare is a mandatory budget expense. Interest rates, taxation, inflation, and exchange
rates are a few of the economic factors that have an impact on the worldwide pharmaceutical
sector. The export and import of medicines are affected by changes in foreign exchange rates.
High interest rates deter businesses and stakeholders from making investments. The lengthy
process of research and development affects the sector economically. Diversification and
mergers are able to help in opening up new markets or create new treatments.
Social
The pharmaceutical sector faces both possibilities and risks as the population ages more
rapidly. The trick to making a profit will be how to exploit these opportunities. New paths for
the pharmaceutical sector, both locally and nationally, are provided by developments in social
life and trends. Similar to how ageing has significantly altered other aspects of society, drug

consumption is higher among persons over 60 than among those under. Additionally, there is
the problem of rising obesity rates and the dangers they pose to public health.
Technological
New business opportunities will be opened up by technological improvements in the form of
new therapeutic techniques and services. Advanced technology speeds up the data processing
to get more accurate data, better control on new scientific methods and improve them,
research and trials for complex diseases.
Environmental
Pharmaceutical firms cause the rise of air and water pollution which leads to the risk of
disease outbreak risk and other chances for infectious disease to spread around the
community. The poisoned wastes produced during the process of making drugs are worrying
people.
Legal
The pharmaceutical sector is certainly highly regulated and subject to patent law. Product
pricing and liability have a significant impact on pharmaceutical innovation. Regulation also
has an impact on pharmaceutical innovation and may result in a long approval procedure that
delays the introduction of new items to the market.

Briefly discuss the attractiveness of the pharmaceutical industry, using Porter’s five
forces.
Competitive Rivalry
Pharmaceutical industry is one of the most competitive industries in the world. Most of the
organisations have been operating their business for a long time and already have a
well-known brand name to stand firm in the world. There are a lot of small companies
competing with the big companies, the operating margin is high, and the government
regulations make it a very competitive sector. Besides that, the advancement of technology is
also to the point where there is more competition in the industry as there is no margin for
error. The advancing of biotech and generic technology is also pushing the pressure on all the
competitors as they have to adopt the new technology equipment to keep up with the pace.
Threat of Entry
In terms of scale of production, once existing players have large-scale production capacity, it
is costly for potential entrants to keep up with them. For example, in the pharmaceutical
industry, where research and development costs are extremely high. Besides, existing players
have already accumulated a wealth of experience in production and management operations,
and as their experience improves, costs will be reduced. In addition, differentiation means
offering a product or service with more perceived value than competitors, and differentiation
is also an important source of competitive advantage because it reflects the strengths and
weaknesses of the company or product. Thus, the threat of entry is low in the pharmaceutical
industry.
Threat of Substitutes
Substitutes are products and services that offer similar value to those in the industry through
different processes. As a specialist commodity, pharmaceuticals are superbly specialised. It is
not possible to use any health product or other product as a substitute at will. The threat posed
to the pharmaceutical industry is therefore minimal.
Bargaining Power of Buyers
For pharmaceutical companies, the purchasers are mainly wholesalers, medical institutions
and drug retailers like pharmacies. The high switching cost reduced the bargain power of
buyers. Besides that, buyers are able to do online search for the drug information and

prescription given by the doctors giving them more bargaining power. Thus, the bargaining
power of buyers is medium.
Bargaining Power of Suppliers
The pharmaceutical industry is dependent on several organic chemicals. Bargaining power of
suppliers is low and companies in the pharmaceutical industry can switch from their suppliers
at will as no high costs are incurred. Apart from that, suppliers are not in a position to bargain
with buyers because there are too many competitors on the market including manufacturers
who supply raw materials, licensees and R&D businesses, and even the packaging industry is
competitive.
How would these forces change within the next 5 years?
Over the next five years, the competitiveness of the pharmaceutical industry will remain in a
tight phase. With the truth that technology will only progress and not regress, entrepreneurs
will only be able to continuously upgrade their capabilities to meet the demands, and that is
the reason that the threat of entrants is going to be higher because the companies have higher
capability to compete with the rest of competitors. The consequent impact is that the threat of
alternatives will increase along with the rise of new technology launched. Minor changes in
the bargaining power of the supplier and the bargaining power of the buyers will be increased
in the next 5 years as the increased group of sellers appear in the market.
Identify strategic groups within the ethical pharmaceutical industry. What are the key
success factors for each group?
The marketing strategy is the lead. The strategy of differentiating the ‘primary care’ and
‘specialist products’ is of greater value by positioning the primary care products to general
practitioners while costly special products to specialists. Usually the drug is sold on the
market under a trade name which can prescribe the medicine, which means only those
companies who have the patent can make the drug and sell the drug. By getting the patent
rights, the pharmaceutical industry can have a chance to corner the market and make a profit.
Once the patent has expired, generic drugs are able to be sold on the market as a matter of

course. Generic medicines are generally cheaper because the source of the material is also
relatively inexpensive and therefore relatively well accepted by the public. Manufacturers of
generic drugs do not need to take the huge risk of lengthy research and development, nor do
they need to use animals to test the efficacy of their drugs anymore, saving them a lot of time
and expense. High demand, increased production, low cost and high profitability.
Do you want to work in this industry? Why or why not?
This industry is challenging and has a higher salary range which depends on the
qualifications held. It provides the opportunity to do research and explore unknown sectors
which are related to this industry, especially the latest technology. However, this is not the
industry that I would want to join as this industry lacks of variety. There is no room for job
rotation and thus not much skill set to explore.