H&M Business Strategy: Analysis of Five Forces, PESTLE, Value Chain and Competencies

This paper analyzes H&M's business strategy through Five Forces, PESTLE, Value Chain and Competencies. It examines the company's unique brand, human capital, financials, and more.

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H&M BUSINESS STRATEGY
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H&M business strategy
Introduction
With a corporate framework of offering eminence goods at affordable rates, H&M has
built itself as top international fashion industry. The product has a definite desire for style and is
continuously determined to exceed purchaser expectation with its most reliable prices (H&M,
2015). While the paper concentrates on the company as a single brand, there are other products
contained within the Hennes & Mauritz AB group. The company has 3,261 stores in 55 nations
as well as online shops in 12 states (H&M 2018). The company’s stores have diverse clothing
and fittings for men, children, and women. The constantly developing variety has presented
cosmetics, footwear and a company’s home range that has a broad choice of home decorative
and tiles substances (H&M 2015).
While the H&M is an independent trademark, it is enormously swayed by the fashion
sector. Whatever occurs in the industry and with the international economy, it has a direct
influence on the selection H&M creates. The fashion businesses have $1.5 trillion internationally
and hire a million of individuals, and offer a considerable contribution to the overall universal
economy (Bhasin 2017). Mainly, observing at the high street as fashion vending platforms, there
have been, presently is, and will be a steady development of various styles; influencing how it
acts in its market, the high street is under huge burden as many market trends affects its return on
investment, future relevance, and famous (KMPG 2015). The study displays that more outlets are
departing on the high street than those introducing, with 2013 recording 5,839 shops closed and
only 4852 opened (MBA Skool 2017).

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Five forces analysis
The threat of entry (medium): the UK attire sector does not automatically come with
restriction, and therefore it is a secure business (Harrin and Peplow 2017). Initiating an online
workshop is now more accessible, meaning that H&M faces risk from new competitors. They
would be influenced deeply if effective online brands were to open physical supplies such as
Misguided, Boohoo and ASOS (H&M 2018). H&M can overwhelm the threats of new players
since it is an established brand that has a robust customer with product loyalty. New contestants
are faced with the fact that they are fresh and so they need to design a solid repute (Armstrong
and Taylor 2014, pp. 23).
The threat of substitute (medium): the company is constantly faced with the notions of
users going somewhere else to purchase the similar products (Berman et al. 2015, pp. 13). The
market styles such as economic slump made public to hold on to their cash and expend little.
Therefore, they had no choice but to go for cheaper outlets such as Primark where they could get
comparable goods at a lower rate. However, the first product that H&M presented permits them
to hold some of the marker shares when it comes to low-priced but jovial attires (H&M
GROUP 2017).
The intensity of the rivalry (strong): H&M as fast seller is constantly faced with
competition between contestants but eventually they want to be a leader in the market (Custora
2018). To desist from being majorly impacted by competition, the company has planned aspects
of their product that make them stands out of the rest.
Pestle analysis

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Political: H&M have no option but to conform to the political matters and informed laws.
As the company source from the Far East, then, whatever is being conveyed will have to adhere
to customs obligations (Monaghan 2018). If the regime introduces a new tariff, then the
product has to function under the regulations. Lately, new laws have been brought that shows
that firms need to modify 5P for plastic baggage (H&M 2018). Watching particularly at the
important the issue might bring to the company, is that the brand could be affected by the users
who are annoyed to purchase of bag. The frustration could be transferred to the brand bearing in
the mind it is not an error on their behalf (Pratap 2017).
Economic: H&M have to control the financial environment to predict what one does in
future. Supply and demand, devaluation and inflation are the aspects that organisation wants to
take into contemplation (Armstrong and Taylor 2014, pp. 25). If there was to be an increase in
price, then the company will adjust the price of their products. The buying command of users
would vary as customers may not be capable to afford to indulge in a spending binge and as an
alternative go where they can acquire product cheaply (Entrepreneur 2018).
Social: the features are affected by the populace and are determined by social drifts,
community and demographic methodical. At present, over 50 make up over 35% of the
populace and also have disposable revenue thus making them very lucrative target viewers
(H&M 2018). The fashion influences the way H&M may advertise to touch the old viewer.
Other features comprise the cultural and religious upbringings as the demand of specific goods
and very dependent on what population are demanding in that locality.
Technology: with the announcement of more innovative technology comprising the
tablets and phones, brands have to modify their marketing mix to keep up with the trends. Apps

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are more common and accessible than ever, and numerous products are integrating an app into
their sort (MBA Skool 2017). For instance, the extravagance Burbery set up a snap chats and
used it to show their SS1 assortment to the public. H&M have positively integrated technology
into its product by testing it in New York store; there are features that allow users to pay for the
prediction and shared mannequins and cybernetic runaway that could project onto an ad in Times
Square (H&M Group 2018).
Competition
While the company stick to their guns in the middle ground, their brand ethos “fashion
and quality at the best price” (CRM Consulting 2016), they are continuously in comparison with
other products. Within the high street market, H&M is the most appropriately positioned in view
of the quality, price and stylish appeal (Harrin and Peplow 2017).
Forever 21 are the direct rivals for the company as they retail comparable goods. The
benefit the H&M has over the Forever 21 is established customer based in other sections such as
homeware, kid wears, women wear and menswear (Entrepreneur 2018). Topshop is another
direct participant that has a large grip on the style market share. The company has more prestige
standing than H&M, and although some quantities are inexpensive, it comes across as more
luxurious brand. GAP is an indirect competitor, as it has been publicly neglected by users in the
previous years due to its inability to have a niche that makes it stand out from the rest.
Zara is the top brand of Inditex group and presently has more than 2,000 shops across the
globe. The company hold positions 58 in the world as the most valuable brands (H&M Group
2018). Zara is the market leaders and most successful with more prominent market segmentation
than even H&M within the fashion market. Zara and H&M are regularly situated meters apart in

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many physical retailers, and they seem to mimic each other approaches when it comes to visual
selling and advertising. While H&M takes a back seat to menswear, ZARA has more products
approach which pays well as the products are very successful. H&M can invest more cash and
take over significant part in the market. The above evidence proposes that Zara has more
customer outreach (Entrepreneur 2018).
Question 2
The value chain Made by Michael Porters is certainly crucial to observe how a firm
structure is created (Armstrong and Taylor 2014, pp. 30). Two parts constitute the value chain.
Supports activities: (human resource management, technology development, firm's
infrastructure) and primary activities (marketing sales, inbound and outbound logistic and
operations).
Core activities
Most common for EU clothing firms that outsource has the capability to concentrate on
the core operations of the company (Harrin and Peplow 2017). All resources and knowledge can
be focused on one or a few processes. The EU clothing companies are frequently focused on the
activities that are adding the most value to their producers. Core activities are kept internally, and
non-core operations are outsourced. Design, quality, innovation and technology are activities
often held internally; they are primary activities that contribute a lot to the firm’s success.
For the H& M, the core activities are to create fashion and quality at an affordable price
to maintain the competitive advantage. H&M achieve above by working with more than 100
designers that are continuously working to develop the latest brand. The company also has more
than 100 buyers that re-structure the range planning (Harrin and Peplow 2017). Finally, the firm

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has local production offices that are managing the practical things such local contact with the
local suppliers. Size and bargain power: the company is successful as a result of being able to
focus on core activities. The company is active in 28 nations with 145 stores.
Control by culture: H&M is concentrating on core operation, but, it still manages to control the
whole value chain. The culture and spirit of the company are based on the belief that
responsibility, common sense and innovation are the guidelines for company’s co-operators. The
business framework of the company is intended to provide current style at the best value, through
a motivated and dedicated staff. Therefore, the firm relies on its robust culture, norms and values
such as initiative and decentralisation, experimentation, employee involvement is highly praised
and encouraged.
Logistics and IT: The significance of the IT is to be capable of controlling the logistic-chain
effectively. Through the use of suppliers from outside, the company depends on numerous
sections to perform their job efficiently. The technological advancements play a key role in
ensuring that the model of getting suppliers from outside functions effectively. For the H&M,
technology development is best characteristics that assist the company to continue controlling the
extensive providers (H&M Group 2018). The components of a well-functioning logistic chain,
as well as the unique advanced technology such as IT, are thus a complementarity to the
company’s business model.
Closeness to the market: By outsourcing, the company gets in contact with new markets, achieve
control over the users’ needs and more importantly, the transportation time is minimised. To
achieve closeness to the market, an increase in both the international production and independent
suppliers is crucial

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Lower prices and lower costs; The fashion sector is a human resource labor intensive business
that is facing pressure to lower the cost of production and thus lower the prices of commodities
as well. H&M forms a good case of a clothing company that separated production from other
industrial processes thus outsourcing from countries with low wages. Currently, the company is
producing in both Asia and Eastern Europe (H&M Group 2018).
Flexible capital: Companies operating in countries with unstable financial muscles are increasing
capital costs for their firms. The H&M remains actively operational in Eastern Europe and Asia
by lowering its operating capital as well as prices through outsourcing their services from
suppliers abroad instead of engaging in actual production activities (Mstoribori 2013).
Physical facilities: including production offices which are responsible for coordinating with
approved suppliers and factories around the globe, warehouses and distributions centres. As
noted, H&M owns no physical stores forcing them to get their products from other official
producers.
Intangible assets: including their brand, with substantial equity and reputation of their IT system
which has been improved to meet the customer demand through the fulfillment of customer
needs and preferences (SCN Education 2013, pp. 5).
Human resources: includes an effective and efficient management, employees striving to uphold
the firm’s culture and committed personnel who are well qualified.
Financials: the long terms commitment and ownership by the family offers a sound financial
basis for the company. Additionally, the financial results and rations look positive.
Other competencies

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Replication: as far as the H&M evolution is concerned, replication is the most critical
proficiency the corporation relies upon (Smith 2016). Thus, to open adequate novel outlets, the
company minimises the use of formal procedures and rules and wishes to provide its workers
with tactic skills through empirical education in the ground.
Design: centralised plan action not only assists quicker responses to ever-changing market
tendencies in fashion but makes sure that H&M can stay original and novel (Smith 2016).
Stores model: the company desires to have its outlets in the best positions and makes sure that
windows exhibitions are altered and reorganized to gain constant client consideration and that
internal strategy of the store is organized in such a way that it gives the most suitable in-store
experiences for the consumers.
Resources Competencies
Needed to be able to compete
in market
Threshold resources
Physical facilities
financial
Threshold competencies
Design
Store concepts
Supply chain management
Needed to acquire a
competitive advantage
Distinctive resources
Intangible assets
Human resources
Distinctive competences
Culture
Replication
Figure 1: Armstrong and Taylor 2014, pp. 31.

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What is different about the H&M?
Brand and thrust Human capital Financial
Strong brand
Ethical practices
Improving working
conditions
Emphasize on using natural
resources responsibly
Non-hierarchical management
style
Delegation of responsibilities
High level of identification
with H&M’S corporate
culture
Participative culture
Brand worth
Leased stores premises
Revenues
3,500 stores in 57 countries
Employs more than 132, 000
employees
Strategic capabilities (Fader 2012, pp. 15)
Design
High responsiveness to
fashion
Centralised
Minimal period to the market
Supply chain
Purchasing flexibility
Centralised
Highly innovative
infrastructure
Marketing
Log-term advertisement
Collaboration with famous
designers
Strong social media presence
Sustained competitive strategy
The above classification is crucial and useful to comprehend H&M strategic capabilities;
separately identifying the competencies and resources. Therefore, it important to thoroughly
evaluate the extent to which the company H&M strategic capabilities produce a superior position

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compared to its competitors (Fader 2012, pp. 12). The overview below shows the listings with
respect to the company resources and competencies. It is essential to consider the relative
strengths of the H&M strategic capabilities and to what extent they do things differently
compared to the main competitor, Zara (Smith 2016). Strict strategic capabilities have been listed
regarding competencies and resources and evaluated through the lens of the distinctive and
threshold character; there are more specific ways to analyse competitive advantage and what
extent that can be sustained (Fader 2012, pp. 19).
Conclusion
According to the porters, competitive strategy is about being diverse which illustrate that
a different set of operation should be chosen to deliver a unique value to the clientele (Small biz
CRM 2018). Given the actively configured capabilities and resources and strong corporate
culture developed through decades on which the H&M leaders aim to capitalise, there is every
indication that the firm will be capable of sustaining its competitive advantage and keeping up
with Zara’s trends. The clothing business is contemplated to be highly competitive setting as
numerous companies select to outsource non-core operations. Outsourcing enables firms to focus
on their core activities. At the same time, other firms focus on gaining control over as much
division as possible by analysing their value chain. H&M is a well-recognized brand as they have
loyal and secure consumers. Following above, it has been steady since it’s established in 1947
(Statista 2018). The trademark is placed well in a highly competitive market, only failing second
in the rank just behind Zara. H&M has a robust international organisation and hires many
workers on an international basis. Externally, the company faces the forces such as political,
economic, and social and technology. From the above assessment of H&M’s competitive
advantages, main questions are how can H&M turn its temporary competitive advantages and the

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areas of competitive parity into a more advantageous and sustainable position. It is worth noting
that emphasise on company’s competitive positions not only rely on its management of strategic
ability but what their rivals do and how the situations changes. The H&M started as a smaller
participant with original and creative notions about the fashion sector.
H&M pursues the strategy concentrated on the long-term outlook with the unique model
“high prices at lower prices” which offers the firm an unrelenting position in the clothing market.
With a focus on economies of scale, high volume production and low wage, the firms maintain
low input costs and often have the current styles in its shops. The strategic capability is
concerned with the competencies and resources that a company employs to offer value to its
clients.

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