H&M Strategy Analysis | Assignment

RUNNING HEAD: H&M STRATEGY ANALYSIS

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H&M STRATEGY ANALYSIS
Introduction:
The fashion industry at present is one of the most competitive and saturated industry
globally. With the global trends of changing fashion and the influence of social media as well as
internet on the people has led to major changes in the industry. The companies have been
striving for meeting the demand of the market and remaining relevant in the present days of
innovation and global integration (Arrigo 2018.). While there are luxury companies in the
fashion industry that cater to the needs of niche markets, various companies have analysed the
profits in targeting the mass markets. H&M is one of the major name in the fashion and dress
industry that has targeted the middle class market typically an has been a brand known for its
reasonable and affordable price yet providing fashionable and chic products.
The marketing strategy of H&M is to provide fashion apparels at lower price and making
the profit by selling high volume of products. The company is well known for its fast fashion
strategy. Currently it has over 4200 stores in 72 countries with over 17000 employees working
under them. The company meets the demand of customer by producing the current trends
quickly. It has also made itself relevant for the present generation consumers by having an online
presence and a well built customer interaction policies.
The present report will deal with the analysis of the competitive advantage of the
company by critically observing their resources and the marketing strategies that affects the firm
performance. The report will also take into account the role of innovation and the
internationalisation strategy of the company in helping them to attain a profitable position.

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H&M STRATEGY ANALYSIS
Competitive Advantage Theories:
Competitive Advantage strategy by Porter:
The concept of competitive advantage stems from the root thinking that any organisation
can have an advantageous position than their rivals in the market if the resources are optimally
used and the globalisation of the manufacturing and services of the world. The core idea of
competitive advantage is of having certain value added points in the strategy of business that
other organisations in the same industry do not give and thus it will make the customers choose
between the particular products over others (.Tanwar 2013) The theory of competitive advantage
was proposed initially by the Harvard School professor Michel Porter who wrote that the
particular concept helps in creating a sustainable advantage that will help the companies more
revenue over others. He also suggested that being a leaders in the market at present does not
ensure the fact that it will continue to hold the position. In order to gain that, a company has to
fix a particular goal and strategies for operations aligning those with the culture of the corporate
and the values of the employees. Porter made use of three generic approaches in identifying the
source of competitive advantage (Wilson, Lindbergh. and Graff 2014). According to the theory
proposed by Porter, the three generic strategies are Leadership, differentiation and focus. Focus
refers to the offering of any specialised service in the target market. He then divided the focus
strategy in two subdivisions referring to the cost focus and Differentiation focus.
In achieving a cost leadership strategy, a company can increase profit by the means of
reduction of the cost and at the same time charging the industry average prices. If the market
share of the company is increased then the company can make a reasonable profit even if they
have reduced prices. However, the marketing of products in a reduced price is not always as easy
as it seems to. There are chances that the organisations can be attacked by other low cost

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H&M STRATEGY ANALYSIS
producers. Thus, the companies have to take certain leadership stances in order to be confident
that they can maintain the supremacy in terms of efficiency and technology so that they can
produce a good quality product at a lower price.
The differentiation strategy refers to the objective of an organisation of making their
service or product different and more attractive than those of their rivals. This includes the brand
image, the support, durability, functionality and all other things that are valued by the customers.
Companies that use the strategy of creating a focus on the niche market have to
understand the dynamics that their customers values something unique. Thus, these companies
have the necessity of building a strong brand loyalty. \
The main goals that are linked with H&M are profitability, competition and technological
leadership. The strategy used by the company is cost leadership. H&M offers fashionable
clothing at a reasonable price and has a broad share of market. The company needs to follow the
strategy and develop it more since it is typically suitable for the present economic situation. In
order to create a high entry barrier the company must carry out the cost leadership strategy
effectively at the same time supplying quality materials. In order to create a sustainable
competitive advantage through cost leadership, the company needs to focus more on the sell and
market share since there is low profit margin in the strategy.
Resource based theory:
The resource based theory is another important strategic theory related to competitive
advantage. This theory determines how the strategic resources of the company will be able to
achieve the competitive advantage. The managerial responsibilities in applying the theory
include- the identification of the key resources of the company. The next step is to analyse