Strategic Options for H&M: An Analysis

This report analyzes the strategic options for H&M, including market penetration, product development, market development, and diversification. It also discusses Porter's generic strategies and provides recommendations for the company.

STRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Background information of the company ...................................................................................3
External analysis of the company................................................................................................3
Internal analysis of the company.................................................................................................5
H & M Strategic options..............................................................................................................7
CONCLUSION AND RECOMMENDATIONS............................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
In the competitive business world, every company wants to achieve the height in the
competitive environment. The company who follow the strategic options may do it in less time.
In this regard, managers play a vital role in assessing and applying the options for the company's
growth and success. This report is based on the H&M company who offers the fashion and
quality product at best price. This report will be based on the study of internal analysis i.e.
SWOT and VRIO model as well as external analysis i.e. PESTLE and Porter' five forces model.
This report will provide deeper insight about strategic options which H&M should undertake in
order to gain competitive advantages through the applicability of Ansoff matrix.(Ansoff and
et.al., 2018) This report will also provide the implementation of porter's generic strategies in the
H&M company to expand its business to next level.
MAIN BODY
Background information of the company
H&M is a swedish multinational company offers fast fashion clothing for men, women,
teenagers and children. H&M is founded in the year 1947 i.e. 74 years ago. Founder of the
company is Erling Persson. The company is operates in 74 countries with over 5000 stores under
the various company brand. The company is having around 126000 employees working with
them in order to expand the business. H&M company offer the fashioned and quality clothes and
accessories in the best suitable price to their customers. The company began to retail online in
1998 in order to grow the business to the next level. The company makes its online shopping
available in 33 countries, so that the more customer will attract towards the brand of the
company. The company is the second largest global clothing retail company. H&M as a retail
industry is serving worldwide in order increased their net income and collaborating with
different brands.
External analysis of the company
External analysis means examining the external environment of the company by applying
PESTLE and Porter's five forces model.(Schilling and Shankar, 2019) The purpose of external
analysis is to determine the opportunities and threat in an industry.
The PESTLE analysis of H&M company are:

 Political: Despite brexit situation, the sales of the H&M company is increased by 7%
indicate that such big political changes didn't affect the profit making rate of the
company. These changes become opportunity for the company.
 Economical: Due to this pandemic, government announced to completely shut down the
business create more difficulty for the company to operate in. The inflation rate of the
economy increases because of temporary closure of whole country which may affect the
prices of the product of H&M company.
 Social: As H&M company offer clothes and accessories product to their customer which
are the basic requirement of the customer. This requirement even can't change in this
pandemic situation which indicate that the sales revenue is increased. This factor is also
become the opportunity for the company.
 Technological: Because of the technological advancement, customer are more interested
to buy the products via mobile from anywhere. In this context, H&M company makes it
online shopping available in order to increase the customer base. The company grab this
opportunity in the best way.
 Legal: The policies and procedure of every country affect its local businesses. If any
changes makes in the policies of the country for example changes in labour law and
labour law etc. affect the business environment. If any product is manufactured by the
company against the policies of the country may vanish the whole reputation of the
company.
 Environmental: Environmental include all those factors that influence and determined
by its surrounding environment for example changes in climate, whether, location etc.
H&M company use this factor as opportunity by using recycled cloth material for its
production.
The Porter's five forces model of H&M company are:
 Rivalry within the industry: H&M company is in retail industry offering clothes
product to their customer. There are high active competitors are present in the market
who offers the similar product like H&M.(Trigeorgis and Reuer, 2017) Despite high
competition, H&M is one of the leader in retail industry.

 Threat of new entrants: Threat of new entrants in retail industry is quite low because no
small company are able to work as quickly and competitively. H&M has strong brand
personalities and have cost advantages of being long in the industry.
 Threat of new substitute: Threat of new substitute are high in retail industry because of
the changes in taste and preferences of the customer are change when various alternatives
are available to them at low price. H&M company make its product available online as
online shopping makes the retail suffer.
 Bargaining power of suppliers: The suppliers are dependent on the customer makes the
bargaining power of the supplier low. H&M company are more dependent on their
customer, they have to follow the rules set by the brand in order to maintain its customer
base.
 Bargaining power of customer: Bargaining power of customer in retail industry are
high because of various alternatives are available to them even at low price. So in order
to attract more customer H&M company must offer standardized and high quality
product at suitable price to their customer.
Internal analysis of the company
Internal analysis means examining the internal environment of the company by applying
SWOT and VRIO model. The purpose of internal analysis is to determine the strength and
weaknesses of the company.
The SWOT analysis of H&M company are:
 Strength: Strength are the unique point of the company which separates it from their
customers.(Dzwigol, 2020) The strength of H&M company are that they provide high
quality product at a cheaper price even during this pandemic situation by make the
product available online. They make strong brand personalities over the period of time.
 Weaknesses: Weaknesses are some weak point of the company which stop them from
performing at its optimum level. The weak point of H&M company are that instead of
manufacturing it product by own they depend on different suppliers for its production. In
order to convert their weaknesses to strength company must start in house production.
 Opportunities: Opportunities are the situation available to the company by utilizing it
they grow its business to the next level. During this pandemic, the company grab this

opportunity by make the product available online. H&M company exploit the e-
commerce fully.
 Threats: Threats are the factor which have guts to harm an organisation. The intense
competition among the competitors are the factor which affect the H&M company. As
H&M company depends on the suppliers for its production, the increase in cost of
production is become one of the threat factor for H&M profitability.
The VRIO analysis of H&M company are:
 Valuable: Valuable is the factor which describe that whether the resources of the
company has any value or not. If our resources is not valuable it should be outsourced. In
H&M company the resources like raw material, finances, human, and equipments are
highly valuable. This states that the company are using valuable resources in the
organisation in order to take the competitive advantages in the market and maintain their
position in the market.
 Rareness: Rare is the factor which describe that how rare or limited is the resources of
the company. If our resources is valuable but not rare, the company is still lies in the
competitive market. For example the resources of the H&M company such as human
resources are rare but the financial resources and raw material are not rare because it
available to all other competitors as well. This states that the company resources are not
rare but as it is valuable which means that we are not worse than our competitors.
 Imitability: Imitate is the factor which describe that how difficult it is to copy the
resources from the market. If our resources is valuable and also rare but it is not difficult
imitate then it will create problem for the company to take competitive advantages.
Resources of H&M company such as human are not easy to imitate but the resources
such as financial and raw material are easily imitable because it is available to every
company. It is disadvantages for the company as competitors easily imitate the resources
of financial and raw material in the near future as a result we lost our competitive
advantages.
 Organisation: It is a factor which describe that how properly company arranges and
organise the resources of the company.(Hitt and Duane Ireland, 2017) The resources of
H&M company are very well organised by the company which convert the temporary

competitive advantage into permanent competitive advantages. This states that the human
resources of the company are valuable, rare, not easily imitable and properly organised.
H & M Strategic options
The company uses strategies to keep itself in the market competition. H & M being in the retail
sector which is ever changing has to keep its strategies according to consumer tastes and
changing market. Using Ansoff matrix, strategies for the company can be discussed. The Ansoff
matrix is a tool used to analyze and plan strategies for growth. The four strategies of Ansoff
matrix are:
a)Market Penetration: This lays down focus on increasing sales of existing products to an
existing market. In this the firm uses strategies like decrease on prices, increasing promotion and
distribution strategy and acquiring competitor in the nearby market place. This is done to attract
customers to buy the product as these strategies catch their attention (Loredana, 2017).
H &M can offer discount seasonally on its products. It can increase promotions like road
shows, give ads on TV. H& M can also go for acquisition of retail chains to expand its market
which can be a win-win situation for both the retail chains.
b)Product development: It focuses on introducing new products to an existing market. The
move involves expansion of product range. The product development strategy uses research and
development to develop new products or forming strategic partnerships with other firms to gain
access to their brand and provide a combo product.
H & M can go for product innovation and research and form strategic collaborations with
brands of different nature to come in a combo with the product.
c)Market development: The firm enters new market with existing product or brands. New
markets mean entering in new geographic regions and customer segments. It may also mean
entering a new domestic market or a new foreign market (Martins, 2020).
H & M can expand its stores to other nations which have good trade relations and policies with
UK. They can launch products according to the culture and tastes of the people residing there.
d)Diversification: The strategy involves entering a new market with a new product. The
diversification is also of two types which are related diversification and unrelated diversification.

Related diversification means there are potential synergies to realize between existing business
and the new product. Unrelated diversification means in which there are no potential synergies to
be followed between existing business and the new product.
H & M being a retail company can diversify its product range further. It can also go for
an altogether new business after thorough research which can minimize risks and improve
revenues in future.
Porter’s generic strategies
There are three strategies said by Michael Porter as Cost leadership, Differentiation and Focus.
Cost leadership means when a company is able to reduce its operational expenses and achieve
Economies of Scale. This gives company a competitive advantage over others in the business.
The firms successful in this approach have access to capital and use technology to bring costs
down. Efficient logistic system can also help in getting cost advantage. Company employing a
low cost base say by using eco-friendly material at low costs to win over competitors helps in the
long run also to build a sustainable way of achieving cost leadership (Julita Julita and Nel
Arianty Nel Arianty, 2019).
Differentiation is when a company can distinguish its products from each other in market
by adding a distinguish feature. It may be packaging, content of the product or it can also be the
form of marketing strategy for the product.
Focus is the strategy in which customers are being targeted specifically in which a
particular segment is studied, their needs are recognized and accordingly product designing and
pricing is done (Tennent, 2020).
H & M being a large company has learnt to keep its operational costs in check and thus
utilize the money for business operations and research. It also gets the benefit of economies of
scale with large operational size and reduce costs. H&M has a sound logistics system of which it
can make use of low pricing in products. H&M using its fast fashion model has created a
distinguishable feature which lures the customers to buy the products. H&M can also go for
research after taking feedback of customers what changes they would like to see in the products
and incorporate them. The company has the youth and women segmented as customers and has
made strategies accordingly to keep them hooked with new product range and offers. Special

discounts can be given to housewives on women’s day to mark their dutiful nature for family and
thus relating with value belief system in the people.
CONCLUSION AND RECOMMENDATIONS
The study concludes that H&M being in retail sector is affected by internal and external factors.
The SWOT and PESTLE analysis conducted on H&M show the factors involved and how these
factors affect business and are necessary for evaluation of business. These factors are also
influential in business strategy and decision-making. The methods and theories that can be
adopted for strategy making were discussed covering all the factors influencing price and
product research along with customer segmentation. H&M has adopted some of these strategies
and some of it can be implemented with modifications to carve out a sound strategy.
H&M strategies regarding product research has been appreciated speaking of the fast
fashion model in which the designer wear comes faster than any store and matches up to latest
trends. H&M can further strengthen its supply chain and logistics to increase mobility of goods.
Through use of latest technology company can lower down its operational costs. Company can
further diversify its business from retail to reduce business risk and increase revenue from other
sources. Company can start incorporating feedback in their core business of retail and also
increase its online presence. H&M can take up sponsorship of environmental concerns to
promote sustainability. H&M has to go for differentiation continuously so that it can keep its
market share amidst competition.

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