Analysis of H&M: External Factors and Competitor Analysis

This report provides an analysis of H&M, including an examination of external factors affecting the company and a competitor analysis. It discusses the background information of H&M, external analysis using the PESTEL model, competitor analysis using Porter's Five Forces model, and internal analysis using the VRIO analysis. It also explores strategic directions and recommendations for H&M.

H&M
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Table of Contents
INTRODUCTION...........................................................................................................................4
MAIN BODY...................................................................................................................................4
Background information of H&M..........................................................................................4
External analysis.....................................................................................................................4
Competitor analysis................................................................................................................6
Internal analysis in context of H&M by using strategic tool..................................................7
Strategic directions tool use by company to gain competitive benefits.................................7
Justification based on chosen tactics......................................................................................8
CONCLUSION................................................................................................................................8
RECOMMENDATION...................................................................................................................9
REFERENCES..............................................................................................................................10
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INTRODUCTION
Strategic management is the ongoing process of planning, organizing, directing, staffing
and controlling all the necessities an organization needs to meet its goals and objectives of
company in effective manner. This help to create wonderful advantage for company in effective
manner. The report is based on the H&M Company which best Fashion Style Company.
Company have different kids of products and services. The reports will analysis the external
factors which affect to company. This will analyze competitors of company as well as internal
capabilities of company. This will select the best strategic direction for company by using
models. At the end of report will explain the some recommendations which are helpful for
business.
MAIN BODY
Background information of H&M.
H&M is the Swedish company which deals into Fashion industry. The company is
multinational clothing retail company known as fast fashion clothing for the men, women,
teenagers and children. The company operates into the 74 countries with over the 5000 stores
under the various company brands. Presently company have 126376 employees with 106 million
net incomes. This creates more value and goodwill for company in effective manner. The
company is listed into the London stock exchange which is provide the best quality of products
and services to their customers in effective manner. This customer more loyal but in the present
situation corona virus company faces various issues and problems with their sales because is fall
in down now.
External analysis.
In order to analysis external factor affect to the company here is select PESTEL analysis
model which is help to completely find out those factors which is affect to H&M from outside
the business. PESTEL model is refers with the political, economical, social, technological,
environmental and legal factor. Explanation of those is as follow:
Political factor:
There refers with the all the political factors which is affect to business in negative
manner. For example: if the Tax rate is increase then it is affect to the H&M because through
those prices of product is also increase (MARKETING THEORIES – PESTEL ANALYSIS, 2019).
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Because when price of product is increase then customers are purchase product from company
then it affect to company. On the other side, if tax rate in decrease then give positive impact on
business growth.
Economic factors:
Economic factors are sloe affect to the company when economic condition is not good of
country then customer not purchase product from company. This create complete negativity for
company H&M. Like presently, due to corona virus economic condition is not good and not
favour of company.
Social factor:
This factors is refers with the need and wants of customer towards product. Like if
company not produce product as per the requirement of customer then customer not purchase
product (Caber, Albayrak and İsmayıllı, 2017). On the other side, if company product as per the
needs of customers then it gives positive impact on company and its profits as well as growth.
Technological factor:
Technological factor is affect to company because now technology complete grow in
positive manner at the market place. In that H&M need to follow updated technology because
their competitors are follow updated technology. Like if company not follow then customer
attracted towards another fashion company which is not good for company.
Environmental changes:
Environmental factor is also affect to the company in negative manner. In that H&M
need to deals in all kinds of weather products is help to gathered customers and maintains trust of
customers. In respect to that management required to maintain needs of customers as
environment changes (Guo and Rong, 2017).
Legal factor:
This factor is consisting with the all the laws and regulations which are affect to business
in negative manner. In that H&M need to follow all the terms and conditions of consumer
protection act. In that management need to provide complete details about the product to
consumer not hide any mistakes if company do that then customers have right to claim on
company which is give negative impact on business.
Those are the external factors which are effect to the H&M in negative and in positive
manner.
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Competitor analysis.
In order to analyze competitors of H&M Company here is select Porter five force model.
That is refers with the Five force which are bargaining power f customer, threat of new entrants,
threat of substitute product, bargaining power of suppliers and competitive rivalry. Explanations
of that are as follows;
Bargaining power of customers:
Bargaining power of customer is the higher impact for the H&M because that effect to
business in negative manner when customers bargain the product as per their prices (Jelassi and
Martínez-López, 2020). In that management needs to sets prices of product lower after analysing
the whole market analysis. This help to control the bargaining power of customers.
Threat of new entrants:
New entrants are come with the new product and something unique in their product
which can affect to business in negative manner. But their impact on the H&M is lower because
their quality of product is good and complete unique.
Bargaining power of suppliers:
These factors have the great impact on the business because there switching power of
supplier is higher (Kannan and Prabhavalkar, 2018). But company deals with that supplier who
has great experience and has long term relations. Through that business have great advantage
with this in effective manner.
Threat of substitutive product:
This give negative impact on the H&M because customer switching power to another
product because in the market have various kinds of substitute product of H&M. Like if
company is not provide better services than customer are switch from the company and move
towards other which is create negative impact on the business.
Competitive rivalry:
There are various competitors for the company where company have impacted in
negative manner (Shtal and Tlegen, 2018). The main competitors of H&M are ZARA, M&S,
Benethon. Those are the main competitors of H&M who impact to business as per the quality
and price of product.
Those are the factors which are help to analysis the competitors within the industry.
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Internal analysis in context of H&M by using strategic tool
VRIO analysis-
It is one of the best strategic model that mostly use to conduct internal environment
analysis in regard to well known companies like H&M as it assist to identify strategic
capabilities of brand (Akhmetshin and et.al., 2018).
Value-
Effective team at workplace is a key resource of company as it helps to provide quality
services and products to customers. It can develop by using appropriate leadership style, which is
possible when leader adopt it. In case of H&M, leader is able to use situational form which
defines its capability in term of building productive group.
Rare-
Effective management is a rare thing that found in most companies, H&M manager
effectively conduct its administration and manage their functions in order to gain competitive
edge and improve performance of staff members (Kearns, Schmidt and Glantz, 2016). With this
key asset or internal ability firm can sustain for longer within clothing sector.
Imitable-
H&M have specific internal capability as it conduct house designer collaboration
practices with well known fashion designers who are able to make their clothes ready for target
market. It is one of the best approaches that firm has used which enable it to achieve current and
further strategic goals.
Organization-
H&M is able to retain skilled and talented workers for longer because its leader and
managers uses effective management and leadership styles which help to create inclusive
working environment for existing and new workers. Positive environment within brand boost
morale of staff and motivate them in term of making effective commitment.
Strategic directions tool use by company to gain competitive benefits
Ansoff growth strategy-
Market penetration-
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According to this tactic, H&M manager can focus on improving existing products and
make it according to buyer’s needs, which is beneficial in term of retaining customers and
attracting new one (Elias, Hendlin and Ling, 2018).
Market development-
This is quite interest strategy of chosen models because it gives company a change when
H&M use it to gain competitive benefits and be competitive within industry. With this tactic,
firm needs to expand their business within new market place with current product portfolio.
Product development-
According to this approach, company needs to make changes within its overall product
development process in term of innovating something new that gain attention of new customers
and give opportunity to existing one to retain with H&M brand forever.
Diversification-
It is one of the most risky by beneficial approaches in term of increasing sales when
implemented successfully because it drive attention of company towards manufacture a new
product with new features and looks as well (Loredana, 2017)
Porter’s generic strategy-
Cost leadership-
H&M can use this strategy along with current one which drives them towards reducing
cost and setting appropriate one which is beneficial in term of gaining competitive benefits.
Cost focus-
This strategy could adopt and implement when firm chose the best pricing strategy and
then provide product accordingly (Martins, 2020).
Differentiation-
This method is unique because it allow production department to produce a new item
which had different features as opposite to existing goods.
Justification based on chosen tactics
As discussed above range of approaches and strategic directions accessible in the world
of business that H&M can use in order to get current and in future benefits. From above analysis,
it has been determined that company can use differentiation and market development strategy
chosen from two different models that had been discussed above. The best thing about
differentiation is that is help to attract new or potential buyers and give valuable product to
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existing target customers in form of innovation and creativity which is quite beneficial in term of
boosting brand image. Furthermore, market development is also useful when it use to obtain
further benefits because it gave company chance to develop or establish business within
profitable market.
From the above two, it has been analysed that market development is the best one
because it is worth it in form of decreasing chance to loos potential buyers after making and
offering new product which they would never like. It give opportunity to H&M in form of
gaining attention of business investors after getting success by implementing chosen strategy.
CONCLUSION
From above analysis, it has been concluded that H&M management by using appropriate
techniques and approaches gain competitive benefits in term of increasing and building wide
customer base and profitability as well more than its rivals that has operated in similar sector
from years ago. Furthermore, it has been identified that manager has overcome all negative
aspects occur due to some external factors, by taking right action and develop effective business
tactics. It has been summarized that by using differentiation and market development strategies
firm has give tough competition to its three major competitors, which is very effective.
RECOMMENDATION
1. Hennes & Mauritz has successfully operated within fashion industry with skilled
applicants as key strength of its business. By following potential suggestion firm will
work even better and be competitive for longer period of time. For example, company
should build as strong workforce at workplace by using the best motivational techniques
and approaches for workers as it help to strengthen their abilities and boost performance
level even better.
2. Furthermore, manager and leader should guide workers according to chosen strategic
direction and develop tactics which is quite beneficial in term of accomplish work on
time and obtain desire outcome in form of achieving further aims and objectives of
chosen brand.
3. H&M management must use product development strategy because it is useful and as
beneficial as above two in the future which in return increase customer satisfaction level
and gain attention of new buyers.
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REFERENCES
Book and Journals
Akhmetshin, E.M. and et.al., 2018. Internal control system in enterprise management: Analysis
and interaction matrices.
Caber, M., Albayrak, T. and İsmayıllı, T., 2017, April. Analysis of congress destinations'
competitiveness using importance performance competitor analysis. In Journal of
Convention & Event Tourism (Vol. 18, No. 2, pp. 100-117). Routledge.
De Tomasi, G. and et.al., 2019. Survival probability in Generalized Rosenzweig-Porter random
matrix ensemble. SciPost Phys. 6(014). p.66.
Elias, J., Hendlin, Y.H. and Ling, P.M., 2018. Public versus internal conceptions of addiction:
An analysis of internal Philip Morris documents. PLoS medicine. 15(5). p.e1002562.
Guo, L., and Rong, K., 2017. Automated competitor analysis using big data analytics. Business
Process Management Journal.
Jelassi, T. and Martínez-López, F.J., 2020. External Analysis: The Impact of the Internet on the
Macro-environment and on the Industry Structure of e-Business Companies.
In Strategies for e-Business (pp. 49-95). Springer, Cham.
Kannan, A., and Prabhavalkar, R., 2018, April. An analysis of incorporating an external
language model into a sequence-to-sequence model. In 2018 IEEE International
Conference on Acoustics, Speech and Signal Processing (ICASSP) (pp. 1-5828). IEEE.
Kearns, C.E., Schmidt, L.A. and Glantz, S.A., 2016. Sugar industry and coronary heart disease
research: a historical analysis of internal industry documents. JAMA internal
medicine. 176(11). pp.1680-1685.
Loredana, E.M., 2017. The use of Ansoff matrix in the field of business. Annals-Economy
Series, 2, pp.141-149.
Martins, A.M.A.R.D.L., 2020. Scenarios and Ansoff Matrix (Doctoral dissertation).
Shtal, T., and Tlegen, T., 2018. Methods of analysis of the external environment of business
activities.
ONLINE
MARKETING THEORIES – PESTEL ANALYSIS. 2019. [online]. Available through:
<https://www.professionalacademy.com/blogs-and-advice/marketing-theories---pestel-
analysis>
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