UG Major Project: Strategic Analysis of H&M's Challenges and Solutions

This dissertation-style project provides a comprehensive strategic analysis of H&M, a prominent fashion and retail brand. It begins by identifying and analyzing three major strategic issues impacting the retail sector, including the effects of Brexit, the need for digital technology upgrades, and the exploitation of skilled labor. The project then focuses on H&M, pinpointing and examining three key challenges faced by the company: technological advancements, the implications of Brexit, and the exploitation of skilled labor. To deeply analyze these challenges, the project utilizes frameworks such as SWOT analysis, Porter's Five Forces, and STEEPL analysis to assess internal and external factors. The analysis then proposes and evaluates potential solutions to these challenges, culminating in a detailed explanation of how H&M could practically implement one specific solution. The project includes an introduction, analysis of strategic issues, challenges, solutions, implementation strategies, and a conclusion, along with references to relevant literature.

Dissertation

Contents
INTRODUCTION..............................................................................................................................
1.Identify and analyze the three strategic issues faced by the overall sector..............................4
2. Identify and analyze three challenges faced by H&M............................................................6
3. Identification and analysis of solution to overcome with challenges...................................10
4. Explanation of how company practically implement one solution.......................................12
CONCLUSION.................................................................................................................................
REFERENCES.................................................................................................................................
Books & Journals...............................................................................................................................

INTRODUCTION
There are lot of changes that are taking place in the internal, external and a competetive
business environment that is affecting various business decisions and functions. Brexit is a
referendum that has affect all the sector and industries that are part of UK overall economy and
has resulted in lot of challenges to be dealt with such organizations. There has been a tremendous
risk that has increased for such organizations especially in case of fashion and the retail sector
there has been lot of changes and rise in the strategic issues (Godhania, Ramanathan, and
Ramanathan, 2019). Present report is based on the discussion of such strategic issues that is
being faced by the retail sector, identification and analysis of the various challenges that are
being faced by H & M as one of the leading fashion n d retail brand. Further here has been
identification and a detailed analysis of solutions to such challenges and one solution that can be
practically implemented by the organsuiation in order to deal with such challenges in the most
appropriate manner.
1.Identify and analyze the three strategic issues faced by the overall sector
There has been lot if challenges that are being faced by the retail organsuiation that are part
of UK ( Retail crisis deepens as 25% of UK’s top retailers are loss-making – study, 2018). So, in
present scenario there is discussion of the three major challenges that are being faced but the
retail brand H & M as given below:
 External challenge: Brexit:
The leaders in UK and most of the leading brands are facing lot of challenges as there has
been 26.5 percent if the organsuiation that are part of the fashion and retail industry who are
facing losses due to lot rising of debt percentage. The number of retailers who are dealing with
high losses has risen by 4 percent and in number 492.
There has been a clear research that has started that the retail crises have been at 25 percent
for all UK top retail brands. In case, of some of the major issues associated with this problems
has been that there is damaged to the sterling value, boosting up of overall production and other
associated cost and the fashion sector is facing cutting down of the whole revenue.

The concern is that the outcomes of Brexit are a major strategic issue for the fashion and
retail sector. Further, another major issue is that there has been the rise on the working cost of
labour. The annual price of labour that is hourly has been rise by 3.8 % in the year 2019 when it
was compared with the same period cost present in the year 2019.
 Competition challenge: Digital up gradation:
Another major issue has been there requirement of up gradation in the use of digital technology.
There are lot of changes that are taking place in the external environmental and are impacting the
overall way business are perform their major functions. Especially in case of the fashion and
retail brands there have been more millennial generations who are being targeted by such brands
and this generation are involved in usage of digital media and is the best way for promoting their
brand. But there has been lot of disruptions that are part of the fashions and retail industry and is
a very common problems faced by H & M as a leading brand of such industry.
For among competitive and relevant for the younger segment of customers it is of immense
importance. In McKinsey state of fashion survey 2019, there have been 79 percent of the total
executives placed in top five trends that are affecting the industry. For staying competitive and
relevant and dealing with the external forces it is very important for fulfillment of the demanding
young consumers. Social media has resulted into dramatic increase in the challenges for
disruption at the external marks. The mergence is explaining that there has been a 50 percent
growth in instagram in advertising spend (Self disruption in fashion industry, 2019). So such
changes in preferences of customers are resulting into shift in the way expenditure is done by
fashion brands.
There are two key aspects such as younger generation preferences for the novelty and up
gradations in the social media and digital technology. In case of brands such as H & M, Dior and
Zara there has been a rise of only 30 percent in comparison with other brands that are have
experienced 300 percent growth. There have been instances of technological disruptions that are
going on and resulting into difficulty for such brands to adopt and be a part of innovation in
terms of use of digital media sources.
 Internal challenge: Exploitation of skilled labour:

Another major and third challenge that is faced by various retail brands is that there have been
many statements that the fashion sector is making exploitation of child labour for customer
attention and production incision for various fashion brands is emerging in various economies
such as UK and USA.
There have been accuses of advantage taken by many individuals for sustaining a career
in the industry for their own benefits. Fashion industry has seen dramatic shifts in the year 2018,
such labour issues in the fashion supply chain has been growing beyond the working conditions,
underpaid workers, underage in developing economies. There are further more issues such as in
the tier 2 and tier 3 suppliers of labour. There have been issues such as trafficking that is mostly
confuse with the sex trade but almost 50 percent of the trafficked victims includes children and
are forced into labour. The working without any much regulations and the fashion industry is rise
with the forced labour and trafficked workers. There have been rising issues with the most luxury
and fashion brands that are known for forced labour in their various supply chains. The external
forces is resulting into lot of pressure for dealing with such issues related to shortage of labor
supply for the fashion and retail brands (The big issues facing in fashion, 2019).
2. Identify and analyze three challenges faced by H&M
The three challenges faced by H & M is technological upgradation, Brexit and
Exploitation of skilled labor. It is important for managers of H&M to overcome with the
challenges in an effective manner. In order to deeply analyze the challenges, different
frameworks is used by the higher authorities of company that will help company to gain an
insight about the factors that is internal and external impact on their performance. The models
and framework is given below that help in identifying challenges faced by company:
SWOT Analysis
It is tool adopted by form to determine and monitor internal capabilities of management
so that business runs smoothly as well as effectively. Accurate information and data is required
to apply this framework in business so that chances of conflicts & errors are less.
STRENGTH WEAKNESS

 Main strength of H&M is that they
deal with variety of products apparels,
cosmetics etc. through which they are
able to attract large customers.
 Also, with increasing number of
customers their financial base is
becoming stronger.
 As the company have large number
of customers due to which they are
dependent upon other retailers and
merchandisers for sale of the
product.
 With dependency on others,
network chain increases and
conflicts of chances and errors are
more.
 With changing rules of Brexit,
H&M has to be aware about rules
and regulations.
OPPORTUNITY
 With good financial profit and ratio,
firm has opportunity to expand their
business at wider level and opening
400 new stores across the globe.
 To expand business safely with
minimum risk, H&M have the
opportunity to merge with other
brands so that risk are shared between
both the parties.
THREATS
 Competition is rising and new
apparels are affecting the sale of
other apparel retailers. Due to this,
firm has to be active all the time
and change their fashion trend
otherwise chances of being
neglected by business is there.
 Also, with impact of Brexit and EU
policy slow down the growth of
business.
 Rising of labour cost in market
have a great impact on business and
this might disrupts the business
environment of H&M.

PORTER’S Five forces
This model is used by an entity in order to gain knowledge about the level of competition
prevailing within the industry. This model include five competitive forces that assist managers of
H&M to overcome with the competition challenge faced by company due to technology
upgradation. The five forces is mentioned below with relation to company:
Threat of entrants: It is determine that threat of entrant is moderate in the industry in
which H&M deals as an individual require medium investment and process of entry is also easy.
Therefore, it is important for H&M to maintain good relationship with all the customers so that
they cannot move to another new brand that is coming into the market.
Threat of Substitutes: The threat of substitute in the fashion industry that is in the
industry in which H&M deals is high as there are lot of competitors prevailing at marketplace
and provide similar kind of products at lower price. It is essential for H&M to offer unique
product in order to attract more number of customer and retain them for longer period.
Bargaining power of buyers: The bargaining power of buyers is moderate as most of the
customers prefer to purchase quality clothing and for this they are ready to pay the amount. In
addition to this, the company have an advantage to earn higher profits.
Bargaining power of suppliers: There are lot of suppliers available who provide raw
material into this industry and thus company has the advantage to shift to other supplier if the
rate of one supplier is high. It decline the cost of company that has a positive influence in profit
margin of H&M.
Competitive Rivalry: There are many competitors prevailing in the clothing and fashion
industry and thus it is essential for H&M to remain in touch with customers and make them feel
valued to be the part of H&M.
In order to compete in market, technology plays an essential role as it provide an
opportunity to company to reach maximum number of people and enhance their overall sales.
H&M is facing issues due to technological upgradation and opening of many online stores. In

order to overcome with this, it is suggested to company to offer unique products and on-time
service to customer that can only be adopt by the using of advance technology.
STEEPL analysis
This model is used by company in order to gain an insight about the external factors that
impact on their business performance. The factors is given below:
Social factor: It include value, opinions, customs, beliefs of people that has a high
influence on the profitability of an organization. It is essential for H&M to produce goods after
considering all the social factors in order to gain success at marketplace.
Technological factor: Technology is changing rapidly and affecting the overall buying
behavior of customers. It is important for H&M to use advanced technology which is consider as
one of the major challenge faced by company.
Economical factor: It include the income level earn by the people living in country and
it is essential for company to consider this factor and set price accordingly that help in increasing
sales and profit of company (Campaign, 2012).
Environmental factor: It is important for an organization to protect the environment in
an effective manner. It is analyzed that people prefer to purchase those products and services that
does not harm environment.
Political factor: The political stability of UK is quite well but after the Brexit, the
country face a lot of issues that affect on the overall performance of an organization. The
inflation rate of UK is decrease due to which the buying capacity of people is decline that affect
on the profitability of an organization.
Legal factor: It is important for an organization to follow all the laws and legislation in
order to smoothly carried out activities as well as operations. In addition to this, it also help
H&M to develop a positive image in market that positively influence on performance of
company.
By the assistance of STEEPL analysis, H&M can gain a deep knowledge about the
external challenge faced by company. It will assist company to cope up with this dynamic factors
and enhance their productivity level.

3. Identification and analysis of solution to overcome with challenges
BCG matrix
BCG matrix that Framework planning tool which is used can we use by H and M planning tool
where it can identify factors impact on the business. This tool is consists of four stages which are
described below:
Dogs: Dog poses to holding the low market share compared to the competitors and
operating in slowing growth market in general they are not worth investing in because this only
true or negative cash return. The market is down because of BREXIT, UK which can impact on
H & M. It has to clearly examine the market oriented market then it has to save itself and can use
the strategy of liquidation or divestiture.
Cash cow: cow can be defining as a most profitable brand and should be milk to provide
as much as possible. The cache clean from cow should be invested into the start to support the
future growth. It also depends on the external environment where the H&M is working. This
company have to use innovative in new product and processes which may become as a new star.
The Best suitable strategies for H&M are product development diversification and retrenchment.
Stars: it can be defined as a good time or it can also explain as the high growth industry
and maintain the high market share. Here H&M should focus on innovative products can use the
innovation in technology also for increasing the cash flow as well as money in hand. For this,
strategic choice vertical integration, horizontal integration, market penetration, market
development as well as product development.
Question mark: it is that situation under the market where the brand requires much
closer consideration. In this, the whole new market share in the fast growing market consuming
large amount of cash in increasing loss. Situation in front of H&M when there is growth in UK.
For this, H&M can use the development and product development strategies.
ANSOFF matrix

ANSOFF matrix can also defined as a product of market expansion treat framework which is
used by an organisation to analyse and plant different strategies for increasing the growth
options. This matrix is divided in 4 categories where each category has business identify
potential strategies which can use in its existing market by combining new product existing
product. These strategies are discussed below:
Market penetration: this is directly related to launching of existing product in existing
market. In context of H&M, use this strategy for current market it fashion product identified
market where it is dealing. It can also use modification in the existing product and good
marketing strategies for eliminating the competition in existing market for product.
Product development: strategy should develop the new product in existing market for
increasing its market share as well as attracting your customers to work organisation. This is
effective strategy which can be adopted by H&M it can launch new products with more
innovation in the existing market. Organisation can reduce the effort of finding potential
customers because of operation in existing market.
Market development: expansion strategy by an organisation where company launch
their existing products in new market. Effective strategy for H&M because company have
number of products which it can use cell in different market other than existing ones where it can
increase the profitability as well as existence in other market.
Diversification: it is the most mysterious strategy which adopted by a firm where there is
full of failure as company have to launch the new product in new market. If company get success
in its operation then it will get huge amount of profit but there is no charges of success in this
type of H&M does not need to invest in this type of marketing strategies.
MC Kinsey Model
It is framework used by organisation to analyse and examine the internal structure of firm
and helps to determine whether they are effectively used or not and assist entities to achieve
goals as well as objectives. In relation with H& M they use this model to run business effectively
and properly. In this, it has several elements which have been mentioned below-

Strategy- It is important elements of model and play vital role in business. This is
because every firm need strategy to gain competitive advantage in market. So, H&M adopts
triple bottom line strategy which states that firm need to adopts and focus on three lines which
are profit, people and planet. This enhances their brand value in market.
Structure- In this, it includes division of departments, activities, etc. To run business
smoothly it is important to have proper structure in business. In relevance with H&M, their
structure is in proper alignment and stable.
System- This specifies the procedures related to business activities and managing them
properly. Thus, H&M maintain their system up-to date and time to time.
Shared values- These are defined as norms or guidelines created or implemented by
corporation. In relation with chosen firm, employee work with ethics and discipline in
management.
Style- It specifies the working and operating technique of organization. In this, H&M
managers and leaders follow value oriented and handled the management accordingly.
Staff- This includes number of personnel and their type in firm. In context to H&M, they
have 1, 27,376 approximately employees.
4. Explanation of how company practically implement one solution
In order to implement the solution, the company can make use of marketing, Human
resource and operation approaches. The company has its own website due to which it can solve
technical issue. In addition to this, Marketing approach allow an entity to reach maximum
number of people and earn higher profits. The company maintain stock that help in solving the
issue of integration raw material. One of the solution to implement change is to adopt Lewin’s
change model that assist mangers of H&M to bring changes and cope with the changes in an
effective manner. The model is given below:
Lewin’s change model: This model was proposed by Kurt Lewin’s in the year 1970s
and involve three stages are as follows:
Unfreezing: It is one of the essential stage and involve an understanding that change is required
(Bahia, Belal and Khan, 2010) . The mangers and employees of H&M is ready to accept the

change and move out from their comfort zone in order to bring change at workplace in an
effective manner.
Change: Herein, people are ensure and have fear to accept change. It is important for
H&M to give time to learn new concepts so that changes can be adopt properly and effectively.
Adoption of changes help company to overcome with the challenges and enhance their
productivity level.
Refreezing: The changes are accepted by the people at this stage and the stability occurs
after the changes have been made. In relation H&M, accepting challenge help them to deal with
issues and maintain a positive working environment that leads to increase in productivity and
profitability of an organization.
CONCLUSION
From the above study, it has been analyzed that companies face many challenges that
directly affect on their overall performance and productivity level. It is important for na
organization to deal with all the issues in an effective manner and develop strategies so that
productivity is maintained. One of the main factor that has influence on the overall performance
and consider as challenge is technology. Technology is changing rapidly and in order to gain
success, it is important for an entity to use advanced technology as it help in providing timely
and rapidly service to customers. Different frameworks and models is adopt by the managers of
company in order to overcome with the challenges and to find the solution in order to deal with
such issues in an effective manner.