Strategic Management Assessment for H&M

This strategic management assessment provides an in-depth analysis of H&M, including their background, external analysis, internal analysis, strategic choices, and direction. It also includes a SWOT analysis and strategy selection process. Read now!

Strategic
Management-
ASSESSMENT

Table of Contents
H&M - Background Information.....................................................................................................3
External Analysis of H&M .........................................................................................................3
Evaluation of strategic choices and direction of H&M using strategic direction tool. ...............6
Internal Analysis of H&M ..........................................................................................................8
Strategy selection and justification of H&M ............................................................................10
CONCLUSION & RECOMMENDATIONS ...............................................................................10
REFERENCES..............................................................................................................................12

H&M - Background Information
Strategic management is the process of setting goals, observing the
internal and external environment and formulating the strategy according
and ensures that management communicates across the organization and
help to achieve them. It involves collecting information of the current
situation and formulate strategies and see their effectiveness. H&M is a
Sweden based multinational clothing retail company and has its
headquarters in Stockholm. It was founded by Erling Persson in 1947. it is
known for its fast clothing retailing business for men, women, children and
teenager. Their vision is to lead the change towards circular and climate
positive fashion while being a fair and equal company. The company strives
to upgrade its collection for the customers and for that they connect with
many designers they have also made the strategy for E-commerce platform
for the people who shop online. The company also outsources the production
according to the cost incurred from each location.
External Analysis of H&M
Pestle analysis is the tool used by H&M to gain a bigger picture of the
industry environment by analysing and monitoring the factors which are
external to the organization. It comprises of the following environment :
Political factors – As H&M operates in more than one country
therefore has more than one risk in their operation. As different countries
have different rules and legislation and trade policy therefore the company
has to be aware about all these. Higher tax policies and trade restrictions act
as a threat to the organizations. Brexit is the major threat to H&M as prices
may rise and delivery of the products may be delayed.
Economic Factors – Change in tax system, economies of scale,
change in labour laws, increasing disposable income in emerging markets
these factors do impact the working of H&M. Despite Brexit the company had
a rise in sales of around 7%. increasing disposable income in the future may

act as an opportunity for the organization as people will spend more of
purchasing.
Social Factor – As H&M operates in society and produces for the
customer therefore customers choices,taste and preference are the most
important factor to be considered. Social media also influence the customers
choice and trends as they get influenced by the celebrities and customers
also prefers designer clothes (Perera, 2017). The changing taste and
preference of the customer acts both as an opportunity and threat to the
organization as frequent changes may lead to higher costs. This is an
opportunity as the company can attract customers by providing them with
new trends in fashion which are unique.
Technological Factor – As the trend of shopping is shifting from
traditional to online one therefore adopting to the latest technology is must
for H&M. The technology gives customer more convenience in ordering and
making the payments. It also helps in data analysis and artificial intelligence
can be used to design merchandise for the customer as per their desire. This
is an opportunity for the organization in the sense that there will not be any
geographical barrier for reaching out customers. And also a threat as
customers will also be aware about the trends of the other competitors.
Legal Factors - There are strict norms and regulations for companies
operating worldwide and H&M also has to abide by these rules to
successfully operate in those countries. The major legal factor is intellectual
property rights. H&M has been a victim in several legal disputes like
infringement by the clothing retailer. To deal with this kind of disputes the
firm is now operating a stringent risk management system. These factors act
as an opportunity for H&M as their unique and own touch products will be
patented and cannot be copied by others.
Environmental Factors – As environmental factors also impact the
working of H&M as textiles is considered one of the most polluting industries.
And now days people are also becoming aware about the environment
protection therefore it is the duty of H&M to produce environment friendly

products. And the company also started recycling process of unused and old
materials coming from the industries. These factors act both as an
opportunity and threat for the organization as by taking care of the
environment may add on to the corporate social responsibility of the firm
which creates a good image in the minds of customers and is also a threat as
these industries can be ordered to shut down if they across the standards of
pollution.
VRIO analysis of H&M
VRIO analysis is the tool to uncover the competitive advantage of the
organization. It is an analytical technique for evaluating the resources of the
company. It has the following components:
Resources Value Rarity Inimitability Organizational
support
Financial Resources Yes No No Yes
Human resource Yes Yes Yes Yes
Technological resources Yes Yes No Yes
Unique touch points Yes Yes Yes Yes
Value – In this components H&M examines if they are able to Exploit
opportunities or able to neutralize threats. H&M values consist of keeping the
things simple and easy to understand. The organization follows informal
communication and has non-hierarchical style. They have a core value of
being honest and open minded and follows an improvement strategy. They
believe in team work and their people. This shows if the financial resources
of H&M are valuable as they help in investing into opportunities and
combating threats (Ariyani. and Daryanto, 2018).
Rarity – It is defined in terms the organization being the founder in
fast fashion as it gives H&M an advantage over the rivals. It is also defined

as the firm being the pioneer of fast fashion. Rarity comes when the firm as a
unique product to offer which is not available in the market yet. To
accomplish this the resources and capabilities of the organization must be
short in supply and also be persistent. If the trends and fashion in cloths of
H&M are easily provided by the competitors than the firm is not achieving
the goal of rarity. The distribution network, patents, skilled employees all
these should be rare and special skilled then it will give H&M a competitive
advantage.
Inimitabilty – Putting a unique and own touch to the design is what
makes H&M inimitable. For this they have employed a unique approach of
hiring in-house designer which gives the latest trend their own touch. They
try to maintain a balance between the latest trends and the basics. The
company do not have a philosophy to copy but to keep their own personality
in each country.
Organizational support – to make their brand viral and make people
aware they go for celebrity ad shoot. This helps in creating a brand value of
H&M and also helps in establishing their name. They also focus on employee
involvement. They take support of different supplier in different countries
where they get cost advantage as their idea is to maintain low input costs
and have more innovative fashion wear. They frequently changes production
to reduce the lead time and improve the efficiency.
Evaluation of strategic choices and direction of H&M using strategic direction
tool.
There are various tools for evaluating the competitive advantage of the
firm like Porter's Generic Model and Ans off model. As per Porter's Generic
Strategies Model there are three basic strategic option available to H&M
for gaining competitive advantage. Porter defined this generic strategy in
three categories to get the competitive advantage which are product
differentiation, cost leadership and focus. Through following this strategy

H&M can get competitive advantage. There are the following types of
strategy:
Cost leadership strategy – It is a strategy used by the organization
to attract customers by lowering the prices of product by producing on a
large scale. It is suitable for those markets in which there are standard
products and very little product differentiation. Branding for that product is
less important. For reducing the cost they increase the level of production,
increase capacity utilization. The organization also use bargaining power to
negotiate at the low prices in terms of production inputs. H&M puts the
prices low for their fashionable apparels (Islami, Mustafa. and Latkovikj,
2020). This strategy is suitable when there is economic crisis a people do not
have enough finance to dispose off and people spend money very carefully.
In this situation the firm has to sell more to earn profits.
Differentiation strategy – It is a strategy of being unique in the
market and getting a competitive advantage. H&M makes their product look
different and attractive from their competitors. The firm has gained success
in product differentiation by undertaking good research and development
about the product and design and also innovate regularly. Effective sales and
promotion is also required to achieve this objective. Differentiation strategy
need development of such product that offer unique attributes that are
valued by customers and are also liked. It depends upon durability, quality
and additional features. To make this strategy a success the firm need to
develop skilled and creative product development team and strong sales
team too who can communicate effectively. There are certain risk associated
with differentiation strategy like it can add on to costs, substitute launched
by the competitors etc.
Focus strategy – In this strategy the firm focuses on specific market
segment and try to understand their needs and preferences. H&M
concentrates on articular niche market. They do this by understanding the
market dynamics and fulfil the personalized need of the customers. As H&M
serves their customers in a very different and unique manner therefore this

creates a brand loyalty on the part of customers (Omsa, Abdullah. and
Jamali, 2017). This strategy attempts to achieve either the cost advantage or
the differentiation advantage. Organization adopting focus strategy have
lower volumes because of which suppliers have less bargaining power.
Ans off strategy
Ansoff matrix is a strategic planning tool that helps the organization to
frame strategies for future growth. Through Ans off Strategy H&M focuses on
its current products and market segment. It is also called product or market
expansion grid. The four strategies are as follows:
Market penetration – This strategy focuses on increasing the market
share with the existing products. H&M achieve this by selling more products
to existing or new customers within established market. This can be
achieved by reducing the prices of the product, acquiring the rivals in the
same market, boosting promotions and distribution system (Loredana,
2017).
Market development – This strategy focuses on expanding into new
market segment by targeting existing customers. This can be achieved by
H&M by entering into a new market or it can also enter into new foreign
market. This strategy can be successful if firm owns proprietary technology
which can be leveraged into new market and catering to new customer
segment.
Product development – This strategy focuses on developing new
products for the existing market segment. This can be achieved by investing
into research and development (Schawel. and Billing, 2018). Acquiring the
products of rivals and merging resources to create a new product is also very
effective.
Diversification – This strategy focuses on developing new products
and entering into the new market. This strategy is the most risk as double
efforts are required as product development is also there and market
development is also there.

Internal Analysis of H&M
Internal analysis is examination of internal components of the
organization to identify its strength and weakness. Analysing the internal
environmental of the organization can be done by two methods which is
SWOT and VRIO. The following is the Internal analysis of H&M:
SWOT Analysis of H&M
Strengths of H&M – H&M offers a wide range of products not only in
terms of clothing but also in cosmetics, shoes and accessories, vases and
pots etc. it also has reliable supplier spreading their roots all over global. The
staff is also skilled as they provide training and learning programs. As they
have a successful track record so this act as a strength to the organization.
They also provide greater customer satisfaction by providing customer
products at affordable prices (Sarsby, 2016).
Weakness of H&M – For producing the clothes there requires
expensive machines to produce such fashionable and trendy clothes and
these machines requires high maintenance cost. There is another weakness
of H&M which is they are overdependent on outsourcing instead of in-house
manufacturing. The fashion of H&M is little bit old fashioned and also faces a
problem of overstocking. They are only good for their core clothing segment
and not on other products.
Opportunities to H&M – H&M has many opportunity present in the
market like they can focus more on E-commerce platform and can overcome
the geographical barrier, they can also go for expansion in different
countries through acquisition and merger and it can also expand the market
segment. The new taxation policy can also impact the business in a positive
way and can increase the profitability. Increasing purchasing power of the
customer is also an opportunity for H&M.
Threats to H&M – Intense competition in the market is a threat to
H&M as many fashionable and trendy brands are coming in the market
(Phadermrod, Crowder. and Wills, 2019). As the firm is operating in different
countries so rise in the cost of labour and raw material is s serious threat to

H&M. The rising pay level to the employees also acts as a threat to the
organization and also lack of innovation by the firm.
Strategy selection and justification of H&M
Strategy selection is very important for the success of the firm and
H&M follows some steps to choose right strategies:
The first step is Carrying out SWOT analysis of the each strategy. Through
this strength, weakness, opportunity and threats of the strategy can be
identified.
The second step is undertaking Porter's 5 forces model to analyse and
understand the nature of industry.
The third step is comparing SWOT analysis with results of Porter's 5b forces
model.
The last step is selecting that strategy which gives the strongest set of
options.
H&M after undertaking all these steps the main strategic goals of H&M
are profitability, competition and technological leadership. They also focus
on expansion to increase number of stores by 10% to 15% every year. H&M
selects a combination of strategy as it does not go for a single strategy
selection. It focuses on differentiation strategy by innovating their designs
keeping in mind the trends going on in the market. Also the firms looks for
expanding the market in new countries and cities and into new markets too.
So it has also adopted the strategy of diversification as entering into new
market with new products. H&M also focuses on cutting cost and increasing
the efficiency simultaneously raising the quality also. It is also focusing on
becoming effective and efficient in production and they will be able to attain
economies of scale. Therefore it is important for H&M to sell huge volumes to
earn profits. It has also adopted cost leadership as it offers fashionable
clothing for cheap prices selling to broad markets. This strategy is also very
suitable for the economical situation.

CONCLUSION & RECOMMENDATIONS
It can be concluded that there are various factors like political,
economical, social, technological , environmental and legal which external to
the organization and must be analysed to be successful. SWOT and VRIO
analysis which are internal to the organization and determine the strategic
capabilities.
Based on these analysis it can be found out that the power of supplier is too
strong and as a result the brand belongs mostly to the suppliers.
Another recommendation based on these analysis is sometimes the quality
of products and apparels are compromised to to make the price affordable.
Also evaluation of H&M's strategic choices and future strategic direction is
done using strategic direction tool like Porter's 5 forces model and Ans off
model.
Also a strategy is selected by H&M by undertaking various steps and H&M
applies the combination of strategies and does not adopts one. They should
also expand their online market coverage and also improve its
manufacturing and distribution processes.
As nowadays people are moving towards environment protection therefore
H&M should develop products which are eco-friendly and recycle clothes.
The firm should also try to made an in-house manufacturing process rather
than outsourcing them.
They should also focus on increasing their sub-brands by introducing new
labels under their brand for specific and different wears for attracting a wider
range of customers.
H&M have various opportunities which it can exploit to increase its profit and
gain a competitive advantage by entering into new market like sportswear,
inner wear etc.

REFERENCES
Books and Journals
Ariyani, W. and Daryanto, A., 2018. Operationalization of Internal Analysis
Using the VRIO Framework: Development of Scale for Resource and
Capabilities Organization (Case Study: XYZ Company Animal Feed
Business Unit). Asian Business Research Journal, 3, pp.9-14.
Islami, X., Mustafa, N. and Latkovikj, M.T., 2020. Linking Porter’s generic
strategies to firm performance. Future Business Journal, 6(1), p.3.
Loredana, E.M., 2017. The use of Ansoff matrix in the field of
business. Annals-Economy Series, 2, pp.141-149.
Omsa, S., Abdullah, I.H. and Jamali, H., 2017. Five competitive forces model
and the implementation of Porter’s generic strategies to gain firm
performances.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Phadermrod, B., Crowder, R.M. and Wills, G.B., 2019. Importance-
performance analysis based SWOT analysis. International Journal of
Information Management, 44, pp.194-203.
Sarsby, A., 2016. SWOT analysis. Lulu. Com.
Schawel, C. and Billing, F., 2018. Ansoff-Matrix. In Top 100 Management
Tools (pp. 31-33). Springer Gabler, Wiesbaden.