Theories of Sustainable Competitive Advantage and Organizational Resources

This report discusses the theories of sustainable competitive advantage and the relationship of organizational resources. It explores H&M's global strategy and the role of innovation in designing strategies. The report also analyzes the impact of political, economic, and social factors on H&M's business.

Global Strategy & Foresight
London

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................4
QUESTION 1..................................................................................................................................4
Theories of sustainable competitive advantage...........................................................................4
Question 2: -....................................................................................................................................8
Relationship of Organizational Resources: -...............................................................................8
Pestle analysis of H&M.............................................................................................................10
Question 3: -..................................................................................................................................11
Innovation and Internationalisation: -........................................................................................11
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Global strategy refers to the strategies which focus on the organisation’s globalisations.
These strategies basically cover the areas like global, multinational and international. These
strategies focus on fulfilling the objectives of the organisation in the foreign market. These
strategies help organisation in sustainable competitive advantages and also achieving the aim of
the companies effectively and efficiently.
H & M is the multinational company of Sweden, it is a retailing company and it is basically
known for its quick fashion dresses and clothes for every age people like kids, teenagers, men
and women. Earlier it only deals with the women fashion stores but now it became the global
fashion group. Currently it is dealing in 72 countries with 4200 stores and 177000 employees. It
provides both the facilities to the customers such as online and offline, which benefits the
companies as well as customers.
In this report the theories for the sustainable competitive advantages of H & M, relationship
between the external environment and firm performance and the role of innovation in designing
the strategies in H & M will be discussed.
QUESTION 1
Theories of sustainable competitive advantage
Competition is very important for every business. It helps an organisation in achieving the
sustainable competition. Michael porter influences different types of competitive advantages.
They are cost and different advantage. A competitive advantage refers when an organisation
provides and supplies the same things that are supplied by the competitors but at lower cost and
higher advantage. There is competition in the market and all the organisations want to lead in the
market. Therefore all business applies different techniques to promote their business as well as
earning more profit with compare to another (Liao,2017
Porter’s 5 forces theory:
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The porter five forces theory basically helps H & M Company in identifying the competition
in the market. It helps in identifying the current trend and fashion in the market. The main
motive of this theory is to earn more profitability. The porter five forces theory of sustainable
competitive advantages are as follows:
Threats of new entrants: this force influences the easiness or difficultness in entering in the
fashion industry. The threats of new entrants are very less as new entries requires large number
of investments capital, high technologies, government rules and regulations etc. And is is
considered as a barrier for the new entries. It is difficult for the new entries to enter in the
competition and it is beneficial for the H & M Company, as it can earn large profit and
customer’s loyalty by fulfilling their expectations (Na,2019).
Threats of substitute: substitution refers to the using other products in the place of companies
product. In H & M Company, threats of the substitution are little. In fashion industries,
substitution directly refers to the competition. As the fashion changes very frequently, companies
have to be very fast in implementing the changes in the market, otherwise the chance of
switching brands increases by the customers .
Bargaining power of suppliers: The power of suppliers bargaining increases when they get
another option of the particular products or when the products are available at lower price at
another place. In the H &M suppliers plays an important role as they provide the raw materials to
the company for manufacturing goods. Is is necessary to maintain a strong relationship with the
suppliers. Many a time’s suppliers increase their price of raw materials with the new customers.
But if the relationship of Company and suppliers are good then it may not increases the price.
Suppliers have the power to increase the price of product when the products are very less. Due to
lack of alternatives, they are able to hold the quantities and increase the price without losing
sales (Choi,2018).
Bargaining power of buyers: the bargaining power of the buyers is very high. This force
includes the power of the buyers asking for same quality products in fewer prices. The
bargaining power of the buyers increases with the availability of the products in the same market.
Bargaining power of buyers is a threat for the H & M, because if the buyers are not satisfied with
the price of the products, they can search for the other option in the market. It is important for the
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company to retain its customers, as customers play a key role and influences the overall
performance of the company.
Competitive rivalries: the level of the competition is very high in the H & M companies, as there
are large numbers of competitors, selling the same products in different prices. The only
difference is the brand name. This makes these rivalries more intense. Customers are attracted to
the quality and features of the some brands. The emerging area is frequent changes in the fashion
and other areas are becoming densely populated. It is not difficult for the brands that have higher
brand image to charge the higher price of the product, but it starts diminishing the number of
customers, as it is not possible for all the customers to buy the products at higher price. The H &
M companies can use different ways to attract the customers, like discounts, offers; this helps the
company in competing with the market’s competitors.
Therefore, the porter’s five forces play an important role in identifying the competitions in
the markets. This theory is also helpful for the H & M for determine the fashion and trends in the
market (Kharub,2019).
Porter’s generic competitive strategies:
It is very important for H & M to influence the performance regularly; it should be
identified regularly that the company is performing well in the market and the identification can
be done by its profitability. The performance influence is important because this helps in
identifying the strength and weakness of the company. So that company can work upon the weak
parts and increase its profitability. The profitability is important because it helps company in
long term run in the competitive market. H & M can posses two different types of competitive
advantages they are, cost and differentiation, whereas the generic strategies are cost, difference
leadership and focus.
Cost leadership: this strategy basically consists of H & M, attempting to gain a market share by
appealing cost restricted consumers. So, the aim of the organisation is to be low cost producers.
It is necessary for the company to identify the useful and non-useful costs, and it also removes
the costs which are non-useful costs. The company should invest the available cost where it is
needed more and helps in achieving organisational goals. It is important for the H & M to do the
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mass production of the products; it is helpful for the company as it exploits the economy of the
scale. This also helps in cost cutting during the process of production. It also includes many
stages for cutting the cost. Cost cutting is important for achieving the profit.
With the help of cost leadership H & M can also sell its product for the below market
average, which helps them in gaining the higher share of consumers, which also helps them in
leading from their competitors. Accordingly, there profit margin also remains high due to the
lower cost of the production (ÖNEREN,2017).
Differentiation: this strategy basically focuses on the designing of the products, which is to be
different from al the competitors in the market. This strategy helps in making the product
different and more attractive and innovative, which helps in attracting large number of
consumers. Through this strategy H & M can compete in the market at larger level and wider
scale. This method involves the company, products and services. It also the involves the features,
durability and brand image of the products for the consumers. It is important for the company to
maintain its brand image in the market. During the designing of the products, H & M focuses on
the different criteria according to the needs and demands of the consumers the most important
part of the company is to satisfy the needs of the consumers by their products and services. The
products of the company should be different and unique (Omsa,2017).
The company can charge a premium price only when their products are different and unique,
otherwise it can create a question mark in the consumers mind. It is important that the
differentiation of the products should justify the price of the products to the consumers. For the
differentiation it is important for the company to research, develop and innovate the products.
The company should use the best and high quality products. The branding and promotion of the
products should be at wider level. These are some important factors which influences the
differentiation.
Cost focus: cost focus basically means seeking the development at lower cost advantage, but
only within a small market segment. Cost focus helps company in budget cutting according to
the financial position of the company.
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Differentiation focus: in this strategy, the H & M basically refers to the development of the
product differentiation but within one or very smaller number of market segments. They identify
the group of smaller consumers through which they can reach to the large number of populations.
For the success of this strategy organisation has to identify the group of the consumer where they
can find the different needs and demand of the consumers for approaching the wider consumers
group. If there is no variation in the demands and needs then there will b no basis for the
differentiation. On the other hand, company should also identify that the competitors in the
market are not implementing the same difference (Kong and et.al.,2016).
Question 2: -
Relationship of Organizational Resources: -
Organization resources refer to the resources which are crucial and are used by the company
to its working and for better result. These resources are considered as the important resource to
company for its final result. Key resources of the organization involve the business and its
operation which help in defining the kind to material and business. There are 4 type of
organization resources which are important to company: -
Physical Resources: - Physical resources are the tangible resources of a company which affect
the company and its organization in end results. It includes equipment, building, and inventory
etc. Physical resources are important for the company to function the working of the organization
as without the physical resources its hard for the company to work as without equipment,
inventory and other tangible resources are important to work (Burgelman,2020)
H&M provide its employees the best of the resources which include the best of the
equipment tools, Innovative machinery which help in working better and it also help in making
the work easy. Physical resources considered as stable but still they come with life post which
involves in replacement and management.
Human resources: - Employees of the company are those assets to the company which are
underrated assets of company. Without human resources its impossible to work and the tangible
assets of the company also required human resource for working and utilizing. H&M give the
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best services to its human resources which include the employees from top to bottom and they
provide the best facilities so that they can rely on their resources and utilize them for the best of
the company end result. Better services to the human resource help in providing the best
performance from them and help in better performance for the company and increase the
company performance. Human resource are the backbone of working of an organization and is
very essential for a company to keep their human resource motivated so that they can work better
and keep themselves work hard for the company.
Intellectual resources: - intellectual resources are those which are intangible and nonphysical
resources of a company which are important for the company for working and plays crucial role
in overcoming the result. It includes the brand name, patent of the brand product, copyright of
the company material etc. These resources once get developed and after that they can offer the
company various advantages. H&M intellectual resources are its brand name and the goodwill
for which company always plays the best performance so that they can remain their name in the
market place and stays strong in the industry. Company rely on the intellectual resources as they
work throw-out to make a good name in the market in domestic and international level which is
important for the company to have a good goodwill which also help company in getting better
result.
Financial Resources: - This include the cash, credit, lines of their credits and ability for the
stock plans for employees to organization. Other resources which are important are intellectual
property which are include in the financial resources are patient, and customer intelligence.
H&M also invest in insurance companies which entirely on financial terms and it help use
finance as the resources of organization. Financial resources help the H&M in future also as it is
a safe side to have the financial resources to overcome any loss in the future by any natural cause
or by the loss in the company share.
Pestle analysis of H&M
Political factor: - H&M is a global brand operating company have a number of stores covering
the globe. Company has a monitoring political risk and focus as an important part. H&M has
franchised outlet throughout globe which increase the political unstable, as working in so many
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countries they need to monitor the change closely and contingency plans to be placed to deal the
instability advantageously which can be feasible for stack holder and company itself as feasible
for both.
Economic Factor: - Economic factors include the economic situation of the country and the
company stability in economic conditions. The increase in Brexit rose sale is a good sign to the
business as it is big political turn and around which didn’t impact the company profit rate.
The laws of labours vary from country to country, developing country helps the company as
it has low labour cost and it can increase the profitability of the company. Ensuring the best
prices with the help of buying the bulk stock from market as this is effective procurement. The
tax norms change with the change in time and it impact the economic stability of the company.
Social factor: - H&M work in the accessories and clothing market and have a good goodwill in
the market throughout globe and they are keep on going the positive way and making the brand
more available for the bigger audience, Working in clothing market as clothing field is directly
influenced by the social medias and celebrities as it help the brand as they can relate more with
the help of the favouritism of their celebrity who promotes and company focus on it as a chance
in more of profits. Social factor is the factor which attract the audience and company social
platform.
Technological factors: - Technological factor are the factor which include all the technologies
and innovations which can help in making the best services to the company to its end customer.
H&M focus on providing the best of the technologies to its customer and provide them all the
new innovations and online ways so that it can help the customer and audience and it also
provide the best way to promote the company and its products. Technologies help the company
in getting the best of the feedbacks and it also helps in getting the trends measurement of the
audience and target market which can be used for betterment of the company and increase the
wealth of the company (Nagle, 2018)
Legal Factor: - H&M make compulsory to all its supplier to follow the regulations of the laws
of the city and country they working in, and in any case if the requirements are in any conflict
situation then they need to inform the company regarding this as soon as possible to overcome
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the issues. H&M doesn’t allow child labours in their working and the working areas to be safe
and emergency exits for the employees as those legal terms of safety is essential for the company
to follow for the best of safety to their employees and human resource. Legal include in HR
department also that never hire any criminal and the company should do all the legal criteria’s
when hiring their client with background verification of them.
Environmental Factor: -
The last factor of external factor and Pestel analysis is external factor which include all the
external factor which influence the working of the company in its industry and country. Clothing
industry is one of the biggest industry sector in the world and it can affect the environment in a
huge level and for that the company is providing the best ways to prevent the environment and
the company is focused in working in a way which can help the environment and company itself
as environment is a crucial part of working in anything. There are norms of the government to
protect the environment and company has focused on it and H&M is making itself more in the
recycled clothing so that they can help the environment and it is the best to utilize the resources
in a better way to help the surrounding.
Question 3: -
Innovation and Internationalisation: -
Innovation: - It refer to the meaning of new ideas and creative thoughts, a totally new
imagination from device or any method. Innovation is also viewed as a better solution to
applications, that helps in meeting the new requirement. Innovations of H&M: -
New app and website: - H&M introduced the new websites and application for their customer
with capabilities that promise the customer to improve the experience of audience in both online
and in-store experience (Singh, 2017). It includes the new feature of visual search which help
user to search the catalogue of the H&M with using of images.
AI and Big Data: - Auto intelligence and big data help the company in finding the trends and
improve in assortment of products. H&M still use their designer and merchandise product to
understand the consumer preferences. H&M started using the data process to calculate and
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analyse the store receipts, and loyalty cards & returns. They even analyse the web traffic and
articles to predict the trends in advance. It helps the company in analysing the demand and
supply of the company product in the market. And it also helps in retailer to localize for each its
stores.
Friendly workforce management: - the work consistent of the employees in the H&M is of
non-desk mostly and for that the company need the solution of communication and mobility.
They innovate the communication platform for their employees to chat and talk with another
member to manage the task from one system. The innovation of mobile-friendly helps the
employee to read and reply to messages and manage the working as well. The platform also
helps in eliminating the mails and other apps.
Integrated Payments: - In retailing the experience of payment part is important and it also need
to be solved for the better services to the customer and H&M focus on it by providing the best of
the payment services. The company is using the Fintech to power the online and stores payment
in market which help the audience in better experience and fast.
RFID: - RFID innovation helps the company to find their product easy and it helps in the data
also as it increases the data in smart ways of AI features. It also works as tracker which can help
in finding the product anywhere in the company place.
Internationalisation: -
It refers to the process of increasing the involvement in international market. It is a crucial
strategy to work in global market for a company. It addresses the sustainability & development
in different services and different sectors. It defined with the learning and knowledge of
domestic market and with the time & then gradually invest in the global market. H&M make
progress to the initial stage with relatively longer and slower process.
Entry stage: - H&M choses wholly owned subsidiaries as its entry mode in the global
(Kahn,2018). H&M started with renting stores rather then buying the properties which help the
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company to control and to control the operations, and in decision setting. It also chooses direct
investment to growth prospectus in market like European & American.
Product and design development: - The design as a whole is a factor which help the company in
its success story as they focused in providing the best of design and latest trends. Company
designer helped the company in its trend setter and it also help to understand the global market as
working in international market need to understand the nature, culture of the country as it vary
the taste from places to places and according to the location. Company choose the design and
take the knowledge of the surrounding which help the designer also to provide the best of them.
The development in the strategies of the company to understand the factors which include the
internal and external sources which directly impact the company working.
Policies: - Working in international market need to understand the policies and H&M have
focused in giving the best of services which full fill all the policies of the country they are
working.
Global pricing strategy: - the biggest area to attract and interest for local retailers is the offering
of the prices by the company. This strategy plays very important part as it directly connects the
economic condition of the target market and the audience and the company need to focus on
giving the best to their target market so that they can earn in global market with better result. It
also needs to understand the power of pricing and discount as customer are attracted to the offers
and ways by which the company can make sure to attract and retain the customer. Goodwill and
brand also help the audience to understand the company as a good brand name helps in
generating more of the audience (Knight,2016)
Competitive positioning: -
H&M is one of the largest and growing fast fashion retailer in clothing market. It is a
pioneer to fast fashion industry, the competitive advantage as it have a number of resources that
allow best in the business of fast fashion and to maintain their position in the market with its
competitor is important for the company. They keep on innovate the best way to keep the
position of the company ahead of their rivals and to make the more of the resources of the
company used in generating the goal. Providing more of the international stores and working in
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covering the global market as much as they can makes the company look strong and it also
shows the working of the company and H&M is covering all the audience and making a huge
number of clients globally by giving the services in different ways according to the location and
culture of every country and their working (Garson,2016)
.
CONCLUSION
It can be concluded through this report that the theories of the competitive advantages are
important for identifying the competition and needs and demands of the consumers in the
market. It is also helpful in the sustainable competitive advantage. It can also be evaluated that
the organisational resources, external environment and firm performance are interrelated to each
other and their relationship is important for H & M. The importance of role of innovation is also
evaluated in the report.
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