Report Strategy Enterprise and Innovation 1

This report analyzes the internal resources and capabilities that give H&M a competitive advantage, identifies key drivers of change in the external environment, and evaluates the influence of major competitive forces on the business activities and profitability of the organization.

REPORT STRATEGY
ENTERPRISE AND
INNOVATION 1

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
Analysing internal resources and capabilities that give H &M a competitive advantage...........3
Key drivers of change in the external environment and their impact on the business activities
of H&M.......................................................................................................................................6
Evaluating the influence of major competitive forces on the business activities and
profitability of the organization...................................................................................................9
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
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INTRODUCTION
Enterprise strategy is a wide form of strategy within the organization which deal with
issues that affected to the company (Ischenko, 2018). It is developed by top management team
and board of director at higher level with in the firm. Enterprise strategy is important for
company survival and achieving the goal. Innovation is a process of implementing ideas and
introducing new product in the market which is beneficial for company.
H &M is a Swedish multinational clothing company headquartered in Stockholm. It is
second largest clothing retailer in the world and it was founded by Erling persoon (Candeloro,
2020). It focus is fast fashion clothing for women, men, teenager and in November, this company
operate in 74 countries with over 5000 stores.
Letter, this report will explain about internal resources and capability that give H&M a
competitive advantage. Identify the key driver of changes in the external environment and
evaluating their impact on the entrepreneurial activity of company. Using five forces framework
and other tools, evaluating the impact of competitive forces that influence entrepreneurial
activity and profit within retail industry.
TASK
Analysing internal resources and capabilities that give H &M a competitive advantage
VRIO model is an internal environment analysis framework that helps the businesses to identify
the capabilities and resources that give them competitive advantages (Jovanov, 2019). It is a tool
that provide a ground to begin mapping out and understanding what resources make the company
successful and provide competitive advantages. With the help of VRIO model, analysing the
internal resources and capability that give competitive advantages of H&M ;
Resources or
capability
valuable Rare Inimitable
and non -
substitutable
Organized to
exploit
Impact of
competitive
advantage
Advertising
product and
services
Yes No Yes Yes Increasing
customer trust
and loyalty
Cost Yes Yes No Yes Provide better
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advantage and
differentiation
product at
lower price
Better human
capital
Yes No Yes Yes Quality
enhancement
and better
leadership
Price
discrimination
Yes No Yes Yes Attract the
customer
Innovation
capability
Yes Yes No Yes Discovering
new and better
product
Strong global
presence
Yes Yes Yes Yes Realized
sustainable
competitive
advantage
Access to new
technology
Yes yes Yes Yes Connect with
the customer
easily
Enhance value
chain system
Yes No No Yes Increasing
productivity
Advertising product and services – From the above table this is a capability of the
company to advertising the good and services with the lower price and higher quality which
increase the interest of the consume. It is valuable for the company because it attracts the
potential customer and give competition in the market (Zameer, 2020). This is a reason customer
prefer one particular product rather than other company and this capability help H&M to get
competitive advantages in the market.
Cost advantages and differentiation – From the above table defining the capability that
gives competitive advantage to the H&M. It is valuable for company to provide same product
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and services at the lesser price than it competitor that gives advantage to the company. It is rare
activity for the company because most of the company not prefer to change their price.
Differentiation give advantage to the company when organization give better product to the
customer then its competitor in the market.
Batter human capital – It is resources for company and company is only strong as its
people, as such hiring, training, retaining skilled employees is a competitive advantage of any
company. Putting time and care to selecting outstanding people for position, train current
employees, offer professional development opportunity. Create culture where people feel
motivated and give their best to the company (Yang, 2018). It is not rare but valuable for the
company to compete with other in market that will give competitive advantages to H&M. It is
imitable because every company has skilled people.
Price discrimination - From the evaluation It is one of the most powerful price
strategies for company to take competitive advantage. It is very valuable tool for expanding the
company reach and compete with other and This capability give competitive advantages to the H
& M. This strategy is important because it can stimulate consumer to purchase lager quantity of
their product and it also motivates the consumer group to purchase product and services.
Innovative capabilities – It is capability for a company to gain superiority through
innovation and innovation in process, product or new business model provide strong competitive
advantage to the H &M. Innovation is a valuable and rare because it gives competitive
advantages to the company (Saeidi, 2019). It is all about improving the whole business activity
as improving knowledge, skill, ability and generate new ideas that help the organization to
compete with other.
Improving value chain - value chain is a class of activity in the company which create
product and service. It helps the management to think of H&M in term of set of activities, this
activity helps to analysis source of competitive advantages. Primary activities involve physical
delivery, creation of product, this activity will very between types of organization. The
supportive activity helps to improve the efficiency and effectiveness of primary activity.
Access to new technology - It is a capability of the company and with the help of
advancing the technology H&M get competitive advantage. It helps the company to
communicate with target market and reach anywhere in the world (Antoni, 2019). It helps the
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company to increases capability to coordinate its activity regionally, nationally, globally and
generate revenue. Information technology is changing the way companies operate and It is
affecting the entire process by which companies create their product. Furthermore, it reshapes
the product and entire packaging of physical goods, services and information, company provide
to create for their buyer. The important role of information technology in value chain, this
concept divides a company activity into the technology and economical. A business is profitable
if the value creates exceeds the cost of performing the value activity.
Strong global presence – It is a capability of the company is international presence can
act as strategic boosting of business and allowing them to overcome the dependency on domestic
market (Kubeš, 2018). it is rare valuable and imitable for the company to give competitive
advantage. It helps the company to generate revenue, find new talent and find new customer in
the global market that give competitive advantages to the company. It generates opportunity for
the business to win new customer and adopting a change in their sales strategy.
Key drivers of change in the external environment and their impact on the business activities of
H&M.
The major drivers in the external environment of H&M may be identified with the help of
the PESTLE Analysis which is an appropriate framework used to gain the macro picture of an
industry or a company. It includes various factors which are as follows:
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PESTLE
ANALYSIS
POLITICAL
ENVIRONMEN
TAL
ECONOMIC
SOCIAL
TECHNOLOGIC
AL
LEGAL
Different political
climates in various
countries
Several barriers may
arise in the strategy
forming of the
business
Recession and
Covid-19
pandemic
Increased inflation
rates and taxation
policies
Good social appeal
of the brand in the
market
Customers may
connect with the
brand
Adopting advanced
technology may be
beneficial
Attractive online site
may be helpful
Improper legal
frameworks in
different
countries
Fines and
penalties on the
organization
The production
process may suffer
due to environmental
factors
Different climate
conditions in several
countries

Political Factors
H&M may be operating in various countries and political climates of these countries may
be different having unpredictability and unsuitability in their structures which may arise different
issues for the organization. It may have a negative impact on the organization and the company
may make several changes in their current strategy in order to sustainable in the market
(Hnatenko and et.al., 2020). The company may adopt franchising as its business strategy which
may not be appropriate according to the political environment of different countries and may
increase barriers for the organization to grow.
Economic Factors
This factor may have negative impact on the business as the economic environment all
over the world may have faced certain issues in operating due to the influence of Covid-19
pandemic. The world is facing a condition of recession and the profitability of H&M may have
significantly decreased due to these reasons. There has been an increase in various inflation rates
and taxation policies which may have been the key drivers for the change in the current strategies
of the organization.
Social Factors
H&M may have a good image in the market due to their social appeal and attraction
towards their products. The customer may connect with the brand and have increased their
engagement towards buying its products overtime due to their changes in the recent fashion
trends. The company may prepare effective strategies in order to promote their products and
services to the customers appropriately (PESTEL Analysis, 2022). It may have a positive impact
on the sustainability of the organization which may be useful for the company to expand in
various different regions in the world and increase their market share.
Technological Factors
This factor may have a positive impact on the business as the management of the
company may highly focus on adopting advanced technology in order to enhance the customer
experience and satisfaction. It may be a useful approach for the company in order to enhance the
overall experience of customers in order to gain competitive advantage in the industry. The
organization may have a developed their online site and may use data analytical tools for
increasing engagement of customers towards the organization.
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Legal Factors
The legal frameworks and administration of different countries may increase the issues
which may increase the changes in the organization. The management may have to evaluate
these legal driving forces in order to reduce the threat of fines and penalties on the organization
due to specific rules and regulations in different nations (Li, Cui and Zheng, 2021). This factor
may have a negative impact on the organization by increasing instability in its current structure.
Environmental Factors
The fashion industry may get influenced by the climate conditions of the place they are
operating in. The business is expanded into various countries and the climatic changes may
impose negative impact on the decision making and policy formation of the organization. It may
be a key driving force which influence the production and supply of the products and services of
the organization.
Evaluating the influence of major competitive forces on the business activities and profitability
of the organization
Porter's five forces is a strategic analysis model, which is an effective approach used to
identify the key forces that determines the attractiveness and competitive intensity of a market. It
consists of five forces which are as follows:
Supplier power
The bargaining power of suppliers in this domain is moderate to high. The organization
may have a wide variety of suppliers all over the world and the supply chain may play a crucial
role in the industry needs in order to appropriately maintain the business. The suppliers may have
a benefit in their as there is less technical knowledge required in order to enter the market and
start a business (Shao and et.al., 2020). This force may have a significant impact on the stability
of the firm and may create pressure in order to make effective changes in their current strategy
for improving their efficiency.
Buyer power
The bargaining power of customers is on the higher side as the fashion industry may have
high competition which may reduce the costs of shifting towards other brands for the customers.
The organization may still be less affected by this factor as it may have loyal customers and the
pricing strategy of the organization may also focus on proving customers with affordable
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products. This force may have a significant impact on the overall profits of the company which
needs to be considered by the management in order to remain sustainable in the industry.
Competitive rivalry
The competitive rivalry for the business is high as the organization may be operating in a
very competitive and dynamic market (Porter's Five Forces - The Framework Explained, 2022).
The cost of shifting is low and the threat of competition is high for the brand in the market. It
may force the organization to make effective changes in their current policy in order to gain
competitive advantage and reduce the negative impact of this force on the organization.
Threat of substitution
The threat of this force may be high for the organization as the consumers may regularly
shift to new clothes according to the changing market trends (Wu, Zhao and Li, 2021). The
organization may require constant efforts towards launching innovative and creative products for
the customers. It may be useful in increasing their engagement towards the brand and enhancing
profitability of the organization in the industry.
Threat of new entry
This force may have a high threat for the business as it may be easy for the new players
to establish their business in the fashion industry. Various online platforms may provide
assistance to these entrants in order to sell their products effectively. This factor may have a
negative impact on the overall profitability of the organization and may reduce the market share
of the organization. The market is dynamic and new brand may have a good opportunity in order
to gain popularity in the industry and reduce the business of the brand.
CONCLUSION
On the basis of above discussion, it has been concluded that improving and enhancing the
internal resources and capabilities that give competing advantages to the company in competitive
market. The report has been identified various key driver of changes in external environment,
that affected the company in positive and negative way. Furthermore, it has been described
various competitor forces that influenced the company activity and help them to achieving profit
in the retail market.
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REFERENCES
Books and journals
Antoni, D and Akbar, M., 2019. E-supply chain management value concept for the palm oil
industry. Jurnal Sistem Informasi.15(2).pp.15-29.
Candeloro, D., 2020. Towards Sustainable Fashion: The Role of Artificial Intelligence---H&M,
Stella McCartney, Farfetch, Moosejaw: A Multiple Case Study. ZoneModa
Journal.10(2). pp.91-105.
Hnatenko, I. and et.al., 2020. An approach to innovation potential evaluation as a means of
enterprise management improving. International Journal of Supply and Operations
Management. 7(1). pp.112-118.
Ischenko, N A., 2018. The formation of financial strategy of enterprise development. Business
Inform.(5). pp.324-328.
Jovanov, T and Temjanovski, R., 2019. Tools for assessment of strategic business units in the
marketing activities of companies. Macedonian International Journal of
Marketing.5(9).pp.36-44.
Kubeš, V and Rančák, J., 2018. Sustainability of organization performance via management
techniques. Entrepreneurship and Sustainability Issues.5(4). pp.1031-1042.
Li, R., Cui, Y. and Zheng, Y., 2021. The impact of corporate strategy on enterprise innovation
based on the mediating effect of corporate risk-taking. Sustainability. 13(3). p.1023.
Saeidi, P and Saeidi, S P ., 2019. The impact of enterprise risk management on competitive
advantage by moderating role of information technology. Computer Standards &
Interfaces.63. pp.67-82.
Shao, S. and et.al., 2020. Environmental regulation and enterprise innovation: a review. Business
Strategy and the Environment. 29(3). pp.1465-1478.
Wu, W., Zhao, K. and Li, L., 2021. Can government subsidy strategies and strategy
combinations effectively stimulate enterprise innovation? Theory and evidence.
Economia Politica. 38(2). pp.423-446.
Yang, S and Anwar, M., 2018. Enterprise risk management practices and firm performance, the
mediating role of competitive advantage and the moderating role of financial
literacy. Journal of Risk and Financial Management.11(3). p.35.
Zameer, H and Yasmeen, H., 2020. Reinforcing green competitive advantage through green
production, creativity and green brand image: implications for cleaner production in
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Online
PESTEL Analysis. 2022. [Online]. Available Through:
<https://corporatefinanceinstitute.com/resources/knowledge/strategy/pestel-analysis/>
Porter's Five Forces - The Framework Explained. 2022. [Online]. Available Through:
<https://www.mindtools.com/pages/article/newTMC_08.htm>
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