Strategic Management of H&M

This report explores the strategic management of H&M, including external analysis using PESTLE and VRIO analysis, internal capabilities using the McKinsey 7S Model, and strategic direction. It discusses the company's background, fast fashion industry analysis, and strategy selection. The report also provides recommendations for H&M to enhance its profits and gain a competitive advantage.

STRATEGIC MANAGEMENT

Table of Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
H&M Background information...............................................................................................................3
External: Fast fashion industry analysis...................................................................................................4
Internal: Strategic capabilities.................................................................................................................7
Strategic direction..................................................................................................................................10
Strategy selection and justification........................................................................................................11
CONCLUSION AND RECOMMENDATIONS.......................................................................................11
REFERENCES..........................................................................................................................................13

INTRODUCTION
Strategic management defines as an ongoing planning, analyzing, monitoring and
assessing all the necessities of the business enterprise for attaining the objectives and task within
a specified period of time. In this changes within the business environment impact the
organisation and due to this companies can regularly analyzing the strategies for getting the
higher success. It is very prominent for gaining the competitive advantage and earning higher
profits and revenues so that high sustainability can be enjoy by the enterprise (Moutinho and
Vargas-Sanchez, 2018). Effective management of strategy helps in attracting the number of
customers so that more and more revenues can be generated effectively and efficiently. This
report is based on H&M that is one of the multinational Swedish clothing retailing company that
is founded in 4 October 1947. It is highly known for fast fashion clothing company for men,
women and children. The company deals in around 74 countries with their 5000 stores under
several organisational brands. In this CEO Karl- Johan Persson can appoint the new strategic
manager who can enhance the profits of the company. This project explains the external and
internal environment by using Pestle and Vrio analysis. Further it also includes the Ansoff matrix
that helps in analyzing the best strategy that will helps in generating the high profits and success
in their business industry. At last it explains the selection of strategy and justification. This will
generate the high success and gaining competitive advantage.
MAIN BODY
H&M Background information
H&M is the largest leading clothing store in the world that deals in clothing, footwear
and eyewear, bags shoes related to men, women and children. This firm was listed in the
Stockholm stock exchange in 1974 when they start their operation in the business industry. This
organisation is founded by the Erling Persson with 28% ownership of Stefan person. It is
commonly denoted as a Hennes & Mauritz AB. The company first store that was opened outside
the Scandinavian is in London, UK. Firm will highly focused on expanding their business in all
over the world and it start with Europe in 1998. further they are focused on operating their
business in African, Asian countries also that helps in generating high profits and maximum

customer base in all the world. In 2008, H&M announce to dealing in home furnishing products
and start selling their catalogue online due to this they can establish their presence globally. The
company can producing their cloth to fulfills the demands of customers and enhancing their
brand position within marketplace. In 2019 organisation can become a largest leading producer
of clothing and fashion style. This helps in maximizing their presence and loyal customer’s base
within the international market and it is beneficial for their longer sustainability.
External: Fast fashion industry analysis
External analysis refers to that in which is not controlled by the organisations as it can
occurs outside the organisation. In this organisation can mainly adopts the Pestle analysis to
examine the external factors effectively. In context of H&M, strategic manager can adopts the
use of PESTLE analysis so that they can easily understand the several factors that are
technological, political, social, environmental, economical and legal so that organisation can
prominently focus on their fast fashion industry analysis effectively and efficiently. This also
helps in understanding the business dynamic so that firm will highly focus on continuous
improvement that helps in longer sustainability and gaining high market position (Hill, 2017).
The Pestle for H&M can be shown below:
PESTLE ANALYSIS
It is an effective strategic tool that is adopted by business organisation for identifying the
external business environment and market in significant manner so that best strategic decisions
can be taken by the firm for future growth and success. it can be reflected below in case of
H&M:
 Political factor- This aspect is concerned with the tariff rates, tax regulations and
government stability within the country. UK is political stable country and their tax rates
related to business enterprise are also less that will helps in operating the organisation by
H&M in a beneficial way. It will reflect as a opportunity for the company as they operate
their business effectively and efficiently. But on the other hand due to Brexit occur within
the UK organisation can face the issue in dealing with other European counties
effectively at less cost and it will also affect the production of goods because suppliers

can charge the high rates on material. This will affect company operating cost and this is
the major threat for the firm (Meyer, Neck and Meeks, 2017).
 Economical factor- This factor related to GDP, Growth rate, interest rate, inflation rate
and purchasing power of the customers within UK. The growth rate of the country UK is
high because people earn disposable income due to which they are capable of purchasing
the H&M products and services in effective and efficient way. It reflects as a major
opportunity for the company because due to this firm will gain high profits. At the same
time they can face the major threat that due to Brexit in UK high recession can be occur
and it will negatively impact the H&M operations.
 Social factor- It reflects the attitude, behavior, custom, norms values and perception of
the people within a society. People within UK are highly opened minded and focus on
using the modern and advanced goods and services. In this H&M can get the high
opportunity because of they can offer the high quality and modern products and services
to their customers that helps in enhancing the sales and profits within the market. In UK
people are highly focused on adopting the trendy fashion that will helpful for enhancing
the company profits and sustainability (Hitt, Ireland and Hoskisson, 2016).
 Technological factor- In current business environment technology advancement is very
trendy for enhancing the product visibility and vale in the marketplace. UK is the country
that are highly focused on technological advancement as people in this country are spend
their most of their time on internet and digital platforms to regulate their daily activities.
In case of H&M this will crate high opportunity because they can use the advanced
technology in producing their cloth and promoting their business in global nature. In
fashion industry people are directly influence by social media due to this it affect the
business in proficient manner. This will helps in earning higher profits and revenues. but
at the same time it becomes a threats because it includes high cost due to this operating
cost of company may affected and production of goods contain high price that will affect
overall profit margin of the company.
 Legal factor- This factor reflects the rules and regulations that are imposed by the
government of country for the benefits of the employees and customers so that
organization can face high profits and sustainability. In UK there are several policies
related to fashion industry that will adopted by the firm for attracting customers

appropriately. In case of H&M they can focus on implementing all the policies and laws
related to benefits of employees and customers due to this they get the high performance
results in their future.
 Environmental factor-This aspect is linked with saving ecology and environment from
the harmful activities of business activities. In context of H&M manager can adopts the
several environmental laws that are beneficial for the firm in sustaining in marketplace
with positive brand image. In this company goal is to highly focus on recycling cloth
material at the time of production that will not harm the environment and this will attracts
the large base of customers and helps in gaining more and more profits (Bryce, 2017).
SWOT ANALYSIS
It refers to that tool which helps the H&M in acknowledging the strength and weaknesses
in effective way so that developing the strategy can be done. It also helps in reflecting the
opportunities and threats due to this business can know the external impact in appropriate
manner. In context of H&M SWOT analysis can be shown below to understand the abilities and
capabilities of the company:
Strength Weaknesses
 The major strength of H&M is there
diversified global presence as there
stores are located in around 74
countries having several brand names
depending upon the customer target
groups.
 Another high strength of the
organisation is there best financial
performance in the current previous
years. This will enhance the investors
trust and also helps in monetary
flexibility to the business enterprise
(Hanson and et. al., 2016).
 The major weakness of H&M is their
high dependability on the third party
suppliers due to this they can have less
control over production. Due to this
company commitments related to
order’s affect the image of the brand
and this also affect the customer’s
attractions.
 The weakness of H&M is their
affordable pricing strategy that will
sometimes affect the quality of cloths
and other products.
Opportunities Threats

 The prominent opportunity of H&M is
to high focus on expanding the profits
by spreading their presence globally.
Emphasis on these expansion plans
helps in attracting large base of
customers and also develops the bottom
line and top line of the company.
 Improving lifestyle of people is the
biggest opportunity for H&M because
due to this customers are highly brand
focused and this will enhance the
capital of the company to the high
extent.
 The major threat that a H7M can face is
the high and intense competition
present within the market such as
ZARA, M&S etc. This high
competition will affect the profit
margin and customers base of the
organisation.
 High risk of facing the fluctuation in
foreign exchange affects the H&M
operating profits and revenues.
Internal: Strategic capabilities
Strategic capabilities is refers to a procedure in this several strategies are shaped and put
under the action by the organisation so that they can gain maximum profits against their
competitors. Effectively analyzing the strategic capabilities helps in gaining the competitive
advantage and longer sustainability benefit in an advantageous manner. In case of H&M strategic
manager can includes the several tools for analyzing the strategic capabilities that can be shown
below:
VRIO ANALYSIS
It defines as an abbreviated of Value, rare, imitable and organized. It also reflects as a
strategic tool that is adopted by the business organisation for analyzing their strategic capabilities
by their available resources. This helps in gaining the competitive advantage within marketplace.
In case of H&M VRIO analysis can be shown below:
 Valuable resources- It is very beneficial for the manager of the H&M to effectively
utilize the valuable resources so that they can do the tough competition within

marketplace and gain higher profits in appropriate manner (Vishnevskiy, Karasev and
Meissner, 2016). In this if H&M is highly focus on their valuable resources and possess
prominently that they earn high returns in their business survival. The valuable resources
of the H&M are their employees, distributors, and supply chain logistics because of them
company can gain high market share in effective and efficient manner.
 Rare resources- This components beneficial for the company in understanding that the
products that are prepared by the organisation are rare or not. In case of H&M, rare goods
and services help in gaining the high profits and revenues in effective and prominent
manner. The rare products of the organisation are there manufacturing and production
machines that are used in their clothing. As H&M believes in offering the innovative and
creative goods to their consumers so that high base of loyal customers are retain with the
company and more new customers are attracted towards it.
 Imitable- In case of H&M, company can highly focused on offering the products to their
customers which are not to be copied by another business enterprise. If the goods and
services that are offered by H&M can be copied by other competitor and they can sell it
on low price that will affect the image of the company and reduce the profit margin.
Their financial resources and clothing material are imitable resources for the
organisation.
 Organisation- It is very essential for the business organisation like H&M to manage all
their resources effectively and efficiently. If the resources and material within the
company cannot be used systematically than it will affect the cost of the firm in negative
way. This also reduces the overall profit margin and due to this competitors can take
advantage of it. Several resources that are financial, human resource, investors, and
stakeholders are to be organized effectively and prominently so that high profits can be
gained.
McKinsey 7S Model
It defines that model which helps in examining the organizational design by using seven
distinct components. All these components are to be aligned effectively so that H&M can
enhance their goals and objectives effectively and efficiently. These components can be shown
below:

 Strategy- It reflects as a plan that is implemented by the organisation for gaining the
competitive benefits so that rival firms can be competed in a proper manner. In this if
H&M has not developing their robust strategy that they will reduce their customer base
and overall sales.
 Structure- This aspect shows the way in which business can focus on dividing their
functions in effective manner so that relevant information can be travelled to correct
person. If H&M cannot follow the proper structure they will reduce their effectiveness
due to which rival firm can take the advantage of it(Rosenberg Hansen and Ferlie, 2016).
 System- In this organisation can focus on daily basis activities and taking decisions
according to that. Focusing on effective system helps the business manager of H&M to
implement the changes effectively.
 Skills- In this skills and capabilities of the workforce of H&M can be reflected by
performing the organisational work in effective and efficient way. In these capable
employees helps the company to deal with complex problems so that high profits can be
earned in appropriate manner.
 Style- It depicts the way in which an organisation is managed and organized by
management and top authority by using the effective communication with their
subordinates and employees. In case of H&M manager can adopts the participative style
in which every employee can participate in decision making process by showing their
viewpoint related to task achievement.
 Staff- It reflects as an effective element of the McKinsey model as it can highly focus on
number of employees that are working within H&M. In this manager can focus on
employees training, hiring, motivating factors so that high results can be come out by
beating the competitors within marketplace(Bergh and et. al., 2016).
 Shared values- This component includes the standards and norms that will helpful in
guiding the actions of companies. In case of H&M this aspect is useful to analyzing the
behaviors of employees in appropriate manner so that high values can be achieved in
marketplace.
Strategic direction
The strategic direction reflects the best opportunities for the company that are action
oriented and positive response to the external environment in which business deals (Jenkins and

Williamson, 2015). To effectively understand the strategic direction of H&M manager can
adopts the use of Ansoff matrix that can reflect below:
Ansoff Matrox
Ansoff matrix is refers to a strategic tool that is very helpful for the company manager to
panning the best strategies for the organisation profits and welfare (Ansoff and et.al., 2018).
With the background of H&M the determinants of ansoff matrix can be shown below:
 Product development- This aspect shows the launching of new products and services
within existing marketplace for attracting the potential and existing customers for buying
their products on effective and efficient manner. This helps in enhancing the sales of the
H&M in appropriate way. In this manager of H&M can adopts the strategy of new
product development and for this they can do massive advertising. This can be highly
successful when the firm cans timely focus in customer review so that offering the goods
and services according to that is easy (Peppard and Ward, 2016).
 Market development- It is another growth strategy in which company can develops their
market by entering into new market with their existing products and services. This helps
in attracting and developing the new customer base due to this H&M can enjoy the high
market position. This will majorly beneficial for the organisation in rising their overall
profits and revenues. In this firm will adopts the two ways to enter into the new market
first is enter by using the online mode where they dis not need any physical set up. it
includes less cost and maintenance. On the other hand operating the business physically
that includes more cost and maintenance. Because of good financial support H&M can
enter into the new market by using both the modes that helps in developing the loyal
customers and also maximizing the profit base.
 Market penetration – In this strategy H&M can focus on enhancing their market share
by using existing products and services and selling it in the current market area. In this
strategy organisation can focus on reducing their pricing of offerings or providing the
complementary offers and discounts to their customers so that the market share is to be
developed and due to this high revenues can be gained. In fashion industry, fashion is
changing very frequently due to this company can focus on selling their products and
earn high profits on time. For this they can reduce their proce and offers varieties of

offers to their customers so that they are attracted towards it and purchase the products
and services. This will maximize the profits and revenues without investing much cost
and in small period of time (Albers and et. al., 2017).
 Diversifications- This strategy is considered as a most risky strategy for the organisation
because in this organisation can enter into the new market with new launching. In this if
the business enterprise may fail in fulfilling the needs of customers than they can face
major loss. In case if the customers like the new products and services that H&M can
attain the high market share and profits.
Strategy selection and justification
H&M is the leading company in the international market to enhance their customer base
manager of company can adopts the product development strategy because it helps in attracting
the new customers and gaining higher profits. the presence of the firm can spread in all over the
world and their nee launching helps in gaining high market share and also enhances the brand
image in the marketplace. In this company can focus on fashion related electronic items by
entering into the electronic products. In this they can manufacture the hand dryer, hair dryer,
smart watches that are very useful for the people in toady’s environment. This will helps in
gaining the competitive advantage within the marketplace. It will also helps in attracting the
large base of customers. This is beneficial because firm already have high loyal customer base. it
also has high brand image within the fashion industry. This also helps in enhancing the value of
the brand in the eyes of customers that will also arise the pressure for the competitors to sustain
in market with good base of customers (Baumgartner and Rauter, 2017).
CONCLUSION AND RECOMMENDATIONS
From the above report it is to be concluded that strategic management is a prominent
term as it helps in monitoring, analyzing and identifying the several aspect for gaining
competitive advantage within marketplace. It inculcates the external environment that affect the
business in positive and negative way so that firm can highly focus on positive factors and
reducing the negative factors for attaining higher profits. In this SWOT AND McKinsey helps in
analyzing the strategic capabilities that helps in enhancing the market shares. In this Ansoff

matrix helps in selecting the best strategies for the organisation so that they can get high returns
and large customer base in a specific period of time.
From above study it is to be recommended that the company can have large number of
opportunities in selecting the product development strategies as it helps in gaining high profits
and revenues. in this company can focus on providing the effective training to their employees
and hires a suitable candidate who can effectively handle the company resources so that large
and large number of customers are attracted towards company and H&M can gain high amount
of profits. This also helps in beating the competitors within marketplace and retaining old
customer also attracting more new customers.

REFERENCES
Books & Journal
Albers, S. and et. al., 2017. Strategic management in the aviation industry. Taylor & Francis.
Ansoff, H.I. and et.al., 2018. Implanting strategic management. Springer.
Baumgartner, R.J. and Rauter, R., 2017. Strategic perspectives of corporate sustainability
management to develop a sustainable organization. Journal of Cleaner Production. 140.
pp.81-92.
Bergh, D.D. and et. al., 2016. Using meta‐analytic structural equation modeling to advance
strategic management research: Guidelines and an empirical illustration via the strategic
leadership‐performance relationship. Strategic Management Journal. 37(3). pp.477-497.
Bryce, H.J., 2017. Financial and strategic management for nonprofit organizations. Walter de
Gruyter GmbH & Co KG.
Hanson, D. and et. al., 2016. Strategic management: Competitiveness and globalisation.
Cengage AU.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function.
Macmillan International Higher Education.
Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2016. Strategic management: Concepts and
cases: Competitiveness and globalization. Cengage Learning.
Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis. Routledge.
Meyer, G.D., Neck, H.M. and Meeks, M.D., 2017. The entrepreneurship‐strategic management
interface. Strategic entrepreneurship: Creating a new mindset, pp.17-44.
Moutinho, L. and Vargas-Sanchez, A. eds., 2018. Strategic Management in Tourism, CABI
Tourism Texts. Cabi.
Peppard, J. and Ward, J., 2016. The strategic management of information systems: Building a
digital strategy. John Wiley & Sons.
Rosenberg Hansen, J. and Ferlie, E., 2016. Applying strategic management theories in public
sector organizations: Developing a Typology. Public Management Review. 18(1). pp.1-
19.
Vishnevskiy, K., Karasev, O. and Meissner, D., 2016. Integrated roadmaps for strategic
management and planning. Technological Forecasting and Social Change. 110. pp.153-
166.