Competitive Analysis of H&M using Porter's Five Forces and Generic Strategies

Porter's Five Forces
This model helps an organisation in analysing the competency within the market in
order to achieve greater level of growth and success. The five force of this model facilitates H&M in
analysing its current position within the market. The model of Porter's Five Forces are described as under
in context of H&M:
Threat of new entrant: The barriers to take entrance in the apparel industry are relatively low as
compared to the other industries so there is high threat of new entrants as anyone can easily take entry
into the market. There is no requirement of significant technical knowledge within the industry and with
the development of online platforms, it becomes more easy as well as accessible to sell the products
through online mode.
Threat of competitive rivalry: There are a large number of competitors of H&M and some of them are
ZARA, ASOS, Forever 21 and many more. Although the company is having a niche market and is
considered as a dominant player in that market, yet the competition in the apparel industry is at high
level (Desai, 2019). The cost of shifting within the industry of clothing is low and the threat o0f
competition is high.
Bargaining power of buyers: There is very little cost of switching and the level of competition is fierce
due to which the market share can easily switch to the other competitors of H&M. Therefore, the
bargaining power of buyers is comparably high because the impact of target market within the industry is
crucially higher and therefore its bargaining power also.
Bargaining power of suppliers: There are more than 700 suppliers of H&M because of which the
company is under the pressure on a regular basis. With an average length of 6 years with their suppliers
as well as the greatest being 25 years, the organisation has to interact with large number of suppliers
(H&M Porter Five Forces Analysis, 2022). Hence, the bargaining power of suppliers is moderate to high in
this kind of domain.
Threat of substitute products: Nowadays the people are tending to shift to the newer styles of clothes
that are trendy as well as fashionable by following the latest trends and fashion (Madsen and Grønseth,
2022). Therefore, there is a moderate level of threat of substitute products because if H&M is not able to
regularly innovate as well as follow the trend and fashion then the threat of substitute extends. Also, the
people who are loyal customers of H&M are tending to stick with the brand in the market because they
give trendy and less expensive alternatives to the costly trends. The market share of the respective
company generally not wants to pay more rather than it would stick to the brand and hence will be a high
threat for company.
INTRODUCTION
Within this poster presentation, H&M is an organisation
which is taken into consideration for demonstrating aspects of this poster. This
organisation is a multinational company which is headquartered in Stockholm.
The respective company is famous for its fast-fashion clothing for the women,
men, children as well as teenagers. This poster covers the competitive analysis
of the organisation through the model of Porter's Five Forces and its generic
strategies (CHRISTIANI, 2021). It would help the company in analysing the level
of competition within the market place.
Porter's generic strategies
This framework helps in describing the way in which a
company can gain competitive edge throughout the market. Position of the
company within the industry facilitates in ascertaining its below or above
average profitability. There are three types of generic strategies within this
model and the explanation these strategies are given below in context of H&M:
Cost leadership: Such type of strategy mainly focuses on the policy of the cost
cutting for appealing its price sensitive customer base. The respective company
make efforts in order to win the market by reducing the level of price of its
products along with achieving higher level of returns. H&M can achieve the
cost advantage by ensuring the maximum utilisation of its organisational
resources such as human resources, financial resources, technological
resources and many more.
Differentiation strategy: This is another type of generic strategy that helps the
enterprise through bringing some differentiation within the business which
facilitates in making it unique in the eyes of its customers (Ruckman and
Blettner, 2022). In case if the market base of the organisation felt that there is
something unique in the innovative products of the company then it would be
ready to purchase the products of the respective organisation. H&M is
exercising on understanding the needs as well as perceptions of its potential
market-base to offer the customised products and services. It can also use
other kind of differentiation strategy to offer its products that makes it stand
out in the eyes of the customers.
H&M
CONCLUSION
From above
explanation, it has been concluded that
it is very necessary for an organisation to
analyse the level of competition within
the market as it helps the company in
chasing competitive benefits over its
rivalries. In the explanation of above
poster, the model of Porter's Five Forces
and its generic strategies have been
explained in context of H&M. This
analyses would help the company in
achieving its success for long time and
also facilitates it in capturing a large
number of customers within the market.
Name
References
CHRISTIANI, I., 2021. FORMULASI
STRATEGI BERSAING PT HANSINDO
MINERAL PERSADA DALAM INDUSTRI
PERTAMBANGAN DI KALIMANTAN
BARAT (Doctoral dissertation, Universitas
Gadjah Mada).
Desai, C., 2019. Strategy and strategic
management. In Management for
Scientists. Emerald Publishing Limited.
Madsen, D.Ø. and Grønseth, B.O., 2022.
Five Forces Model. In Encyclopedia of
Tourism Management and Marketing.
Edward Elgar Publishing.
Ruckman, K.E. and Blettner, D.P., 2022.
What Role Does Generic Strategy Play in
How Managers Adapt Their Aspirations in
Response to Performance
Feedback?. Journal of Strategy and
Management.
SC, O.O., 2020. LEADSTAR COLLEGE OF
MANAGEMENT AND LEADERSHIP
SCHOOL OF POST GRADUATE STUDIES
STRATEGIC MANAGEMENT ASSIGNMENT.
Focus strategy: Such kind of strategy is associated with focusing on the particular areas like cost or
differentiation. A company can either concentrate on innovating its existing products or on cost of its
products so that it can attract a large number of potential customers within the market (SC, 2020). H&M
can shift its focus towards lowering the cost of its products of the company because it would give the
company a competitive benefit in capturing its target-base. Once the organisation maintains customer
loyalty within the business, then it can easily focus on the strategy of differentiation in which it can bring
innovation within its existing products.