Strategic Analysis of H&M: Challenges, Solutions, and Implementation

This report provides a comprehensive strategic analysis of H&M, a global fashion retailer. It begins with an examination of H&M's overall strategic positioning, including its performance, competitor analysis (comparing H&M with Zara), and an in-depth PESTEL analysis of the external environment. The report then identifies and discusses four strategic challenges faced by H&M, likely including issues related to political instability, economic factors (like Brexit and COVID-19), social trends, technological advancements, environmental concerns, and legal regulations. Following the identification of challenges, the report evaluates potential solutions, offering strategies to overcome these obstacles. Finally, it analyzes how H&M could practically implement the chosen solutions within its business operations. The report aims to provide a holistic view of H&M's strategic landscape, addressing its current position, challenges, and potential pathways for future success.

Exam/Assignment

TABLE OF CONTENT
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
1. Analyze the overall strategic position of the company......................................................3
2. Identify and discuss FOUR strategic challenges the company is currently facing............7
3. Evaluate the potential solutions that are available to the company in meeting the
challenge you have identified...............................................................................................10
4. Analyze how the company could practically implement your chosen solution...............13
CONCLUSION........................................................................................................................15
REFERENCES.........................................................................................................................16
Books & Journals.................................................................................................................16

INTRODUCTION
This report is carried upon the company named as H&M which is located in
Stockholm, Sweden. It is the Swedish international company which provides wide variety of
products and services such as clothing, accessories and many more. This organization was
founded by Erling Persson in the year of 1947. The main purpose of company is to offer
superior quality products and services to its customer at affordable cost in order to satisfy
them. In this report, the overall strategic position of company, its external factor as well as
Key competitor is described. In addition to this, there are different kinds of challenges which
are faced by company. And how to overcome with these challenges and implement it in
specific manner within business organization. The primal aim of organization is too boost
sales as well as profitability level in future time period.
MAIN BODY
1. Analyze the overall strategic position of the company
Strategic positioning is concerned with the manner in which a business as an overall
distinguishes itself in a valuable way from its rivals and delivers value to particular customer
segments. It is a systematic, analytical activity that is utilized to explain and differentiate a
company (Pan, Chen and Zhan, 2019). Strategic positioning reflects choices an enterprise
devises about the type of value it will generate and how that value will be created separately
than competitors. It should translate into one of two things, a premium price and lower costs
for the venture. In H&M, the administration of respective firm can analyze the strategic
position by determining the performance of the company, making comparison with the
organization’s main rivals and determining external business environment of the venture.
(a) An analysis of the performance of the organization
Performance analysis is the tool and method of examining or comparing the execution
of a particular situation in contrast to the aim and yet performed. H&M is a Swedish
organization involved in designing and retailing of apparels and other accessories. The
company operates its business in more than 60 nations and also has an effective online
presence (H & M Hennes & Mauritz AB Full-year report. 2020). In last 5 years, the
respective firm performs well and continued to grow internationally. The firm net sales

maximized by 11 percent to SEK 232,755 m 210,400 in the 2019. The gross profit increased
to SEK 122,453 m 110,887. It corresponds to a gross margin of 52.6 percent 52.7.
Apart from this, the administration of this makes development in its performance
through its services. By securing the best combination of fashion, quality, price ad
sustainability of all the brands and continue make development in new perceptions and
optimization of the store portfolio. By offering online services like online shopping through
mobile application and flexible delivery and payment options make contribution in
developing the execution of the venture. The firm also makes investment in infrastructure like
adopting new technology and offering new customer apps and techniques (Nurmi and
Niemelä, 2018). Digital expansion, physical stores and developing of new concepts and
business models assist in growth and success of the firm in last few years.
(b) A comparison with the firm’s key competitor
Competitor analysis is a plan of action where the administration of the firm can find
out main rivals and investigate their commodities, sales and marketing strategies. It also
assists the firm to find that they are doing right and opportunities where they can effectively
one up them by utilizing and implementing strategy they have not taken benefits of (Piqueras
Alonso, 2018). There are several organizations that operate their business in fashion and
clothing sector. But the key competitors of H&M are Zara, Forever 21, Uniqlo, Gap, M&S
etc. Here the information is explained about comparison among H&M and Zara. H&M is
established in 1947 and operating its business in more than 74 nations with over 5,000 stores
under the numerous brands. There are 126,376 employees make contribution in running the
business of this firm (Average number of employees at H&M worldwide from 2005 to 2019).
Whereas, Zara was incorporated in 1975 and operated its business in approx 96 nations with
its 2259 stores. There are 171,839 people are get employment by this respective firm
(Number of employees of the Inditex Group worldwide from 2010 to 2018). The
administration of this firm use effective tools and techniques like social media, TV, internet
and many more to promote its goods and services and getting attention of its target audiences
(H&M vs. Zara vs. Uniqlo: What's the Difference?. 2020). The key differences among Zara
and H&M is that in H&M, collection of style is sold at a high average cost whereas Zara
perceived as high end retailer with effective prices. .
(c) An analysis of the organization’s external environment

External environment is known as macro environment of the company. It consists a
combination of all components coming from the outside of the firm that influence its
execution. To determine the analysis of the external business environment of the venture, the
administration of H&M can conduct macro environmental analysis which is an act of
monitoring the impact of outside factors over the business activities and operations. For this
the management can use PESTEL analysis framework that consist different aspects like
political, economical, social, technological, environmental and legal (Anta and et. al., 2018).
H&M is an organization that operates its business in fashion and clothing industry. It is one
of the largest importers of organic cotton in the entire globe. The brief explanation of external
environmental analysis of H&M is defined as below:
Political factor- These components are all about how and to what level a national
authorities intervenes in the economy and certain business sector. Generally all the impacts
that a government has on its business could be categorized. It consist different aspects like
political instability or instability, corruption, foreign trade policy, taxation policy,
government laws or policy, labor law and trade restrictions etc. The main factor that
influences H&M is political stability of Lebanon because the majority of the manufacturing
of this firm is established in Turkey. Due this instable political environment of the nation, the
business of reactive firm affect in unfavorable manner. Trade war among US and China is
another main concern not only for H&M but for the whole sector in which this firm operates
its business and cause of this, increment occurs in the cost of textile commodities (Cotterill,
2019). Free trade is another aspect of political factor that positively influence the business of
this firm in term of expanding or operating business in diverse nation.
Economical factor- The elements of this factor is determinants of a certain
economy’s execution. It consist different components like disposal income of target
audiences, economic growth, inflation & deflation rate, interest rate, exchange rate,
employment and unemployment rate etc. Brexit is the main factor that affects the economic
condition of H&M in different manner. Due to Brexit, inflation is arisen and the cost of
different things arise like suppliers maximize the prices, cost of fuel also arose and due to
which the respective business firm also make changes in its pricing strategies. Currently
entire world is suffering with problem of COVID19 that also affect the business of respective
firm in term of influencing sales and profits of organization in negative term. The tax norms
alter with time and those impacts the economic stability of the company. Currently in
COVID9 situation, the national authorities of few countries make change in their interest and

tax rate in term of removing or minimizing them which can form positively impact over the
business of H&M in form of maximizing sales and productivity.
Social factor- This dimension of the external environment mentions the demographic
characteristics norms values, culture, and customs of the population in which the company
operates. This aspect considers population trends like income distribution, population growth
rate, gender and age distribution, cultural barriers, safety and health consciousness and
different demographical factors. Clothing and fashion is an area where individual are
instantly influenced by social media d celebrities. H&M is one of the very few ventures in the
world that have women working as administrators on 75% of the posts and 50% women
representation in board (H&M PESTLE Analysis. 2020). It has created to women
participation in economic activities issue by providing job opportunities more women than
men in its workplace and at board levels. Therefore offering women in equal chance to
showcase their talent in a business sector which concerns them the most. This favorably
impact the business of the company in term of building an effective brand image and position
in particular business industry. Apart from this, the administration also offer better pay and
make sure effective hygienic working situation that are safe to work in. It helps in making
efficient engagement of employees and enhancing productivity and increasing profitability
margins.
Technological factor- These components relate to creation and innovation in
technology that may influence the operations of the business sector and the market negatively
and positively. These concerns to technology incentives, the extent of innovation,
automation, artificial intelligence, advancement in technology, research and development
activity, technological change and the amount of technological awareness that a market
acquires (Hughes and et. al., 2019). In current time, mobile phone and internet is highly used
by individual and due to which customer are have not interest in going to the store and
purchasing the clothes when they can do the same through mobile application. This
technology provides the target audience the ease of ordering for their workplace, home and
anywhere. The administration of H&M also offer mobile application technology which assist
in increasing its customer base and sales. Effective technological use in promotion of goods
and services that are offered by respective venture can also help in improving the business in
appropriate manner.

Environmental factor- This factor has come to the front position only comparatively
recently. They have become essential cause of maximizing scarcity of raw materials,
population targets and carbon footprint targets set by the national authorities. These
components consists ecological and environmental factors like climate, weather,
environmental offsets, environmental laws like pollution act and carbon emissions etc.
Textile industry as a whole is the second most polluting business sector after oil and
petroleum industry. Air gets polluted due to manufacturing the clothes merchandise. In
H&M, the administration of the firm effectively follows all the environmental law in
effective manner. The company has an aim and objective that is to be utilize totally recycled
clothes material for its manufacturing and production (Thomas, 2018). Currently, COVID19
is the main environmental factor that highly affects the business of respective business
venture in term of decreasing its cost, target audiences and productivity in unfavorable
manner.
Legal factor- These components may have some overlap with the political factors,
they consist more particular laws like as discrimination laws, antitrust laws, employment
laws, consumer protection laws, copyright and patent laws, health and safety laws. This
factor defines all the laws and regulations that are framed and developed by the national
authorities of to operate the business of originations in effective and efficient manner. It s
clear that firms require to know which is illegal in reference to trade successfully and
ethically. Each nation has its own regulation laws and policies. In H&M, the administration
of the company effectively follow and consider all the laws and regulations like consumer
protection act so that it can safe and secure its customers information (Mustafid, Karimariza
and Jie, 2018). By appropriately follow employment law, the venture provides equal pay and
growth option and healthy and friendly workplace where they execute their roles and
responsibilities in proper manner for the success and growth of the organization. For instant,
H&M has to collaborate with franchising partners in UAE, Kuwait and Oman etc. and
effectively follow intellectual property law so that it can operate adequately.
2. Identify and discuss FOUR strategic challenges the company is currently facing.
There are four kinds of challenges which are faced by company which includes
climatic change, technological change, Brexit as well as lack of fund etc that is going to be
mentioned below:

Climatic change: Due to change in climate, it is necessary for company to alter their
policies which imposes negative impact on performance level of business organization. In
context of H&M, the manager faced the challenge in related to change in climatic condition
that affects productivity and profitability of firm in adverse manner.
Technological change: Furthermore, the technological advancement is the major
challenge for business organization. Due to change in technology, it is necessary for H and M
to implement latest technology in order to provide unique and innovative products to its
customer as per their requirements. Therefore, frequently change in technology imposes
negative influences on profitability of business firm (Goyal, Sergi and Jaiswal, 2016).
Brexit: Due to Brexit, it is important for company to alter their policies and procedure
which enforces adverse influences on profitability and performance of company. And also it
increases customer duty, existing tariffs that poses a potential threat for success and growth
of organization in future time period. This is the major challenges faced by manager of H and
M. For example, currently entire world is suffering with problem of COVID19 that also
affect the business of respective firm in term of influencing sales and profits of organization
in negative term.
Lack of fund: Due to boosting the demands of products, it is necessary to have an
adequate amount of fund. Therefore, the challenge which is faced by company is lack of
money which enforces negative impact on brand image and reputation of organization in
front of customer if they do not fulfilled their demands in timely manner.
There are different types of model such as Porter’s five force and SWOT which is
used by H and M that is going to be mentioned below:
Porter’s five force model
This model is founded by Michael .E. Porter in the year of 1979. It is the tactical
management tool that helps in achieving competitive advantage over rival firm at
marketplace. There are different stages of this model which is going to be mentioned below:
Threat of New Entrants: The threat of new entrants is very low in retail industry.
The manager of Hand M focuses on providing unique and specific products as well as
services to its customer that helps them in gaining competitive advantage over rival firm at
marketplace. In addition to this, there is the need of high investment in order to start their

business in this industry. Therefore, the threat of taking entrant by new firm within industry is
very low (Thursby and Berbari, 2016).
Bargaining power of suppliers: Herein, the bargaining power of supplier is low in
this industry. There are different competitor provide similar kind of products thus the
customer have a choice to switch their brand to competitive firm. Therefore, it is necessary
for manager of H and M to provide superior quality products and services to its customer at
affordable cost in order to satisfy the need of customer at marketplace. The main purpose of
company is to increase sales as well as profitability level in future period of time. It helps in
boosting brand image and reputation of company in front of customer at marketplace (H &M
Porter five force model. 2020).
Bargaining power of Buyers: The Bargaining power of buyer is weak in this retail
industry. The manager of H and M provide differentiated and innovative products to its
customer at affordable price. Therefore, it is difficult for buy to switch their brand towards
competitive firm. It is necessary to provide the products and services as per the need and
wants of customer for retaining them for longer period of time (Kharub and Sharma, 2017).
Threat of Substitute products: The top management of H and M offer unique
products and services to its customer at affordable cost. Therefore, it helps in retaining them
for a longer period of time. There are similar types of high quality products is available but it
is very costly. In addition to this, the organization offer specific and unique products to its
customer in order to gain competitive advantage over rival firm at marketplace.
Competitive Rivalry: There is different competitor of company which is available at
marketplace such as Zara, ASOS as well as Gap. Therefore, it is important for manager of H
and M to assess the demands of consumer by providing superior quality products and services
to its user as per their requirements. Thus, it helps in gaining competitive benefits over rival
firm at marketplace (Burns and Dewhurst, 2016).
Advantages and disadvantages- One of the main advantage of this model is that it assists
the firm in gauging the rival present in the sector in which enterprise so operating as if the
rival is low then it have pricing power which results in the firm earning good profits. The
main advantage of porter five forces model is that it takes into account only above
components and it ignores other components which may have bearing on the environment in
which the company is operating.

SWOT Analysis:
SWOT Analysis is the framework which is used to identifying the internal capabilities
of business firm. It helps in assessing strength weaknesses, threat as well as opportunities
which imposes direct impact on profitability of company at marketplace.
STRENGTH WEAKNESSES
 Due to the global presence of H and
M across the world helps the
company in increasing profit by
eliminating risk at marketplace.
 The company offer wide variety of
products and services to its customer
at affordable cost. It helps in
increasing sales as well as
profitability level in future period of
time (H & M SWOT Analysis 2020).
 H and M achieves a leading position
around the globe assists in increasing
brand image and reputation of
company in front of customer at
marketplace (Wang and 2016).
 Due to provide their clothes at
affordable cost, sometime it imposes
negative impact on quality of
products and services at marketplace.
 Furthermore, the company depends
upon third party and brings the trendy
products after trends gone from
luxury brand are determined as a
major threat for company.
 There are large number of competitor
available provide similar kind of
products which sometime eroded
sales within business organization.
OPPORTUNITIES THREAT
 Due to providing branded products by
manager of H and M, it improves the
lifestyle of individual person. Thus, it
aid assistance in increasing sales as
well as profitability of business firm.
 The manager of company can
emphasized on expanding their
business at global level for increasing
profitability level in future time
period is considered as an
opportunities for company.
 Due to fluctuation in foreign
exchange rate, it imposes negative
impact on profitability of firm is the
major threat for H and M.
 Due to frequently change in taste and
preferences of customer; it is difficult
for company to change their policies.
Thus, it reduces sales of company in
future time period.
 The other major threat for company is
due to different competitors, it is

 Due to implementation of latest
technology for providing innovative
products and services to its customer
as per their need. It helps in retaining
them for a longer period of time (Niu,
Song and Xiao, 2017)
important for company to provide
trendy products to its customer for
gaining competitive advantage over
rival firm at marketplace. Otherwise,
it enforces negative influence on
profit and sales of company.
Advantages and disadvantages- The main benefits of conducting a SWOT analysis is that it
has little or no cost anyone who understands the business can perform a SWOT analysis.
With the help of this analysis, the firm can understand the benefits business better and
address weaknesses. The main drawback of this concept that it does not priorities issues and
provides solutions or offer alternative decisions.
3. Evaluate the potential solutions that are available to the company in meeting the challenge
you have identified.
There are different solutions which is available for business organization in order to
cope up with the challenges in relation to climatic changes, technology change and lack of
fund as well as Brexit that are going to be mentioned below:
 It is necessary for business firm to implement advanced technology for providing
superior quality products and services to its customer at affordable cost. It helps in
facing the challenges in an effective manner.
 The manager of H and M focuses on bring innovative ideas for executing advanced
technology at marketplace. It helps them in gaining competitive advantage over rival
firm in the market. It also helps in attracting the large number of customer at
marketplace (Mouli and Roshni, 2017).
 Furthermore, it is important for business organization to change their policy as per the
alternation in climate which is the best solution for company.
 The H and M use the recycling policies in order to reduce wastage. It helps company
in cope up with the challenges.
 They also focus on using solar panel as well as minimizing the use of polythene bags
for protecting environment at marketplace.
 They change their policies as per alternation in climatic condition at marketplace.

 Due to Brexit, the company makes effective policies and procedure in order to beat
the challenges which are confronted due to Brexit.
 The manager of H and M focuses on maintaining back up plan for beat the challenges
in an effective manner.
 Currently in COVID9 situation, the national authorities of few countries make change
in their interest and tax rate in term of removing or minimizing them which can form
positively impact over the business of H&M in form of maximizing sales and
productivity.
Therefore, there is wide range of solution available for cope up with different challenges
is mentioned above. Therefore, it helps company in increase their sales as well as profitability
level in future period of time. It helps in maintaining brand image and reputation of company
in front of customer.
4. Analyze how the company could practically implement your chosen solution.
It is necessary for business organization to implement effective solution related to
technology which is going to be mentioned below:
The main objective of H and M is to implement advanced technology for providing
unique and specific products as well as services to its customer in order to satisfy them.
Therefore, the three steps which is used to execute advanced technology in an appropriate
manner which is going to be mentioned below:
Stage 1: In this process, the manager of company brings innovative ideas in order
implement advanced technology for satisfying the need and wants of consumer at
marketplace. They also plan the use of input, finance for implementing it in an effective
manner.
Stage2: After making an effective plan, it is necessary for company to take action in
timely manner in order to provide superior quality products and services to its customer
affordable cost.
Stage 3: After completing the above mentioned level, the manager of H and M finally
implement the latest technology for providing innovative products to its customer at
affordable cost.