Strategic Management of H&M: Analysis, Options, and Recommendations

This report provides an analysis of the strategic management of H&M, including external analysis, internal capabilities, strategic options, and recommendations for the future.

Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................3
Strategic background of H&M....................................................................................................3
External analysis of the fashion clothing industry.......................................................................3
Understanding organisations internal capabilities.......................................................................6
Strategic options..........................................................................................................................8
Strategy selection and justification............................................................................................10
Future recommendations-..........................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES................................................................................................................................1

INTRODUCTION
Strategic management is the process of strategy creation, formulation, implementation,
strategy analysis, monitoring and evaluation decisions so that organizations can achieve the
objective. It includes setting the objective, analysing environment, competition etc. H&M is a
multinational clothing retail company. It is founded in 1947 by Erling Persson. It is famous for
the fast fashion clothing for men, women and kids. Company has its presence in 74 countries
This report will discuss the background of the company and the external and internal strategic
tools used by the company. Further it will evaluate strategic options and strategy selection and
justification with recommendations.
Strategic background of H&M
The H&M group is directing their functions and efforts towards acquiring a large
percentage of customer base around the world through establishing various outlets and facilitate
customers with online shopping and installing virtual try-ons within stores etc. Company have
adapted a new strategy and recently re-arrange their focus on investing in digital platforms. They
have successfully set up their e-stores in various nations. Their latest tactic involves emphasising
on their former operating structure and products planning and re-invent and modify them to
attain higher profit margins (Lynch, 2018). The establishment is determined towards developing
apparels in accordance with customers recent demand by breaking their standard manufacturing
and branding techniques and they also started new initiative to be responsible towards the
environment because the administration beliefs that it would be best combination and success
strategy for organisation to be a brand which provide best fashionable quality clothing with
affordable cost and sustainability.
External analysis of the fashion clothing industry
To conduct a detailed analysis and understanding of the macro-environment of the
company PESTEL synthesis will be applied and discussed below
PESTEL

Political: H&M is a multinational company dealing throughout the world , so they have to face
various political guidelines and norms in order to operate in different countries. Every nation has
their set of rules and policies and several taxes which they have to comply with. For example in
UAE, company have to adapt dealership in order to function there, as they have strict regulations
in regard with that as they don't allow foreign company to operate their business activities
independently in their region (Matovic, 2020). Establishment also doesn't have their own
manufacturing units, they tend to outsource their production process, which also one of the
concern for the industry. They have to deliver their product in foreign countries so to
manufacture apparels and garments they alliance with local or regional production factories
which operates on assorted tariffs and rules and this varied from nation to nations.
Economical: Brexit is one and the foremost reason for the monetary fluctuations happening in
the organisation. Due to this the market of United States increase the trading goods charges, this
results in companies increased their operational cost which compel them to sell their products on
high pricing, this causes a direct effect on their overall profit. The currency exchange prices of $
is decreased in past as all their transaction of unprocessed goods and materials take place from
their Asian provider are done in US currency, which cause them huge loss. As time changes the
Illustration 1: PESTEL analysis
Source: How to do a PESTEL
analysis. 2016

financial stability is keeping up its pace which reflect the buying behaviour of the customers and
enable them to spend more on basic as well as luxurious products and services as well.
Social: Now-a-days people are more aware and they tend to trust the brand who are socially
responsible as well as provide good quality and value for money products. People keep track of
establishments every move and initiatives after analysing every aspect, then they begin to trust
and invest their hard earn money in their products (Pan, Chen and Zhan, 2019). Hennes &
Mauritz are well aware with that and they involve themselves in various social activities like
water conservation and help provide clean drinkable water to underprivileged society. They also
monitor their customer preferences as population get influenced with the advertisement and
display of clothing on television and media platforms. They know that customers wanted to buy
what's new and trending in fashion so keeping that in mind they use celebrity endorsements and
influential figures to promote heir garments which attract more consumers.
Technology: This clothing firms is well aware about the benefits of technology, so they develop
a mobile and online application and website for pc which enables the customers to make
purchases more conveniently from anywhere in the world. Understanding the busy schedule of
today's generation establishment know that people now prefer less to physically visit stores
instead buying products online. So they work on launching a user friendly app with all the
advanced and filtering features which facilitate the customers to find and select cloth relevant to
them. H&M also introduced a latest bonus features to their e-commerce website which help
buyers earn reward points and tokens on every single purchase they made offline or online and
they can use or redeem these points on their next purchase as discount.
Environment: Enterprise is responsible toward the ecosystem as they follow major steps to
maintain a healthy and sustainable environment. They use biodegradable and reusable packaging
of products, they also follow good practices of recycling a major part of their waste and
discarded materials. In stores they asked their shoppers to bring their own shopping bags on
checkout or billing points and they tend to offer handbags which are made of cardboard or
recyclable paper material (Shtal and et. al., 2018). One of their initiative is still in process in
which they have decide to manufacture new clothing items from their old and outdated discarded
stock.
Legal: Hennes & Mauritz are very particular about the juridical norms and regulations. Some of
the laws are very strict that sometimes they become barrier for the company to earn large profits

but they still never broke any law or done any unethical work. They need to work on their risk
management procedure to prevent the industry from future incidents or conflicts because these
conflict can cause major harm to their brand image (Yusop, 2018). H&M follow all the legalities
in regard with employment and labour laws, by not hiring any underage worker and ensuring all
the safety measures and providing a risk free environment for their employees to work in etc.
The external factors which were discussed in the above Pestel analysis can help to identify
the future trends because the Brexit have impacted the economy and functionality of business
and the political instability that is a current threat situation for the establishment, in future that
become stagnant then only company can rule out their new strategies according to the new
announced regulations and guidelines. The financial condition of the country is growing with a
stagnant pace so in the future people will regain their spending capacity that will be beneficial
for the organisation. The initiative of H&M for using paper bags will become a trend in itself
because people have become self-aware to much extend, so this initiative of theirs will be an
opportunity for them. As the tariff trades have increased and due to pandemic companies have
faced huge losses so that isn’t going to decrease easily so They should establish their own
manufacturing unit in the operating regions and countries.
Porter's five forces model which is used as a strategic options by management. It has five
aspects-

Figure 1 Porters 5 force
Source: Porter’s Five Forces. 2016
Threat of new entrants- By bringing innovative and unique product in the market H&M easily
done customer retention. Company has taken advantage of economies of scale. Company
adopted cost effective strategy to restrict new entrants.
Bargaining power of suppliers- Company have multiple suppliers because it is present in
different locations. It has good supply chain management through which company purchase raw
material at low cost.
Bargaining power of buyers- H&M has created loyalty for his brand by providing unique, good
quality and innovative products to the customer. They attract low income buyers by selling cost
effective product.
Threat of substitute products- Company always focus on providing good quality products and
innovative products to the customer at the price which is low as compare to their competitors
(Trigeorgis and Reuer, 2017).

Rivalry among existing firm- Company separate itself from its competitors by providing good
quality of products at low costs. By doing market research they are able to target new customers.
Understanding organisations internal capabilities
The micro-environment of every company is effected by the factors and functions going
on within the organisational setting, it is influenced by the internal as well as the external factors
of the business. To examine the interior functioning of the company a detailed SWOT analysis is
performed underneath.
SWOT
Strength: They deal in wide variety of products ranging from footwear's to beauty products and
fashionable outfits and accessories as well. They also expand their horizon by start producing
different décor products such as scented candles and holders and flowers and antiques vases.
Their one of the main strength is that they follow premium costing strategy which help them to
compete with their competitors by providing high quality and sophisticated garments and
commodities as affordable and inexpensive price to their customers.
Weakness: They don't have their own production factories, so they collaborate with various
dealers and manufacturers to fabricate their goods for them. This is a biggest drawback because
they are dependent on the third party to perform functions and fulfil orders, any issue or problem
occur in those units will create a crisis for the company as they get delayed in delivering orders
Illustration 2: SWOT analysis
Source: SWOT Analysis–What is it
and How to do it. 2017

and stocks in stores (ÖNEREN, ARAR and YURDAKUL, 2017). The major issue with their fast
fashion system is that, that rely on the latest designers and styling brands but people demands are
changing day by day and they want totally diversified and distinct product from what the other
brands are offering.
Opportunity: Almost every clothing or retailers organisations are expanding their business
online. It is a great opportunity for H&M to spread out their horizon and start catering on e-
outlets this will save major taxes and operating expenditure and enables company to attain large
amount of buyers. Apart from having their own official application, they can collaborate with
other e-commerce platforms to deliver their products to wide range of people all around the
world (Das, 2017). Establishment can also deal in developing countries like Asia as their
economy and buyers spending power is increasing rapidly. To acquire market share in various
foreign nations they can use dealership and merger process to enter their marketplace and start
operating there as well.
Threat: Hennes & Mauritz is facing huge competition with large and even bigger brands like
ZARA and Gap etc. These enterprises have even bigger customer base and more popular among
people. Increase of various fake copy manufacturing firms are proved to be biggest threat for
them as people can get imitation of their outfits at cheaper prices. The recent COVID situation
hinders the flow of raw material and resources from foreign countries, after this pandemic
industries have increased their transportation and material charges which causes heavy loss and
increased overall expenditure of the company.
VRIO Framework:
Valuable: H&M has many valuable resources which help them to increase the customer base
and also increase the market share.
Rare: those resources are rare which are having by few companies. By this company get
competitive advantage.
Cost to imitate: it includes those resources which are very costly to copy and H&M have those
resources which their competitors cannot copy easily.
Organized: resource which is organized will help the company in getting the competitive
advantage.
Strategic options
Ansoff matrix have four dimensions which are-

Market penetration- Market penetration means to launch existing products in the existing
markets. H&M motivates consumers to use their products more by marketing them in such a way
so that consumer get attracted towards it. To increase the market share company also purchased
many small retailers.
Market development- In this company will sell existing products in new markets. Company has
entered into many new markets. This will incur expenses because company will do marketing for
their products. They also adopted online sales as their new distribution channel.
Product development- In this company will sell new products in the existing markets. Company
launch new products which have new designs, style etc, they do this by doing market research.
New products which company launch are based on market trends and customer needs.
Diversification- In this company launch new products in new markets. H&M can diversify in
various ways. It can establish its textile mill and by doing this they longer have to depend on
supplier for the raw material (Hitt and Duane Ireland, 2017).
Horizontal and vertical integration are two ways through which company can do expansion-
Horizontal integration- In this company takes customer from its competitors. It can be also
done by merging or buying some other company. This is beneficial for the established company
which are already having good customer base but want to increase the profit by gaining more
customers. Buying other company will reduce competitors from the market (Trigeorgis and
Reuer, 2017).
Vertical integration- In vertical integration company have upstream suppliers and downstream
buyers. This integration is not always successful. It means that making promise to a particular
company or process. If market trend change it will lose its flexibility.
Strategy selection and justification
H&M should choose Ansoff matrix strategy because they do innovation and come up with good
quality of products which will help them to always be ahead from the competitors. They also
come up with different discounts and offers which help them to penetrate in the market. This
matrix is beneficial because company do marketing campaigns which help to create good
customer base. Company take feedback from the customer, evaluate market trends and customer

needs before launching any new designs. Company opens up stores in new markets and new
stores in existing market as well (Zhao and et.al., 2017). They also have different pricing policy
from which they target specific market. They also divers their market by doing business online.
Company have such market strategies which help to increase sales and revenue. Company also
focus on improving their existing products so that they don't face losses there.
Future recommendations-
H&M should diversify its business into textile or cotton mill so that they don't have to be
dependent on the supplier for the raw materials and also can supply raw materials to other
retailers. Company can even diversify into sports clothing and apparel because these are very
much in demand nowadays.
CONCLUSION
The above report described a detailed strategical and plan of actions prospect of the
organisation. It has also evaluated and examined all the interior and exterior component of
H&M, their effectiveness and influencing factors of both of these environments. Further the
report analysed all the tactical tools and techniques which help the industry to operate their
current functions and direct the actions towards future accomplishment of objectives. Lastly the
report concluded by attaining the understanding and providing justification of suitable strategy
which is beneficial for the organisation and also identify the future recommendation that can be
provided to the company.

REFERENCES
Books and journals
Das, M.P., 2017. SWOT analysis of micro, small, and medium enterprises in rural society: A
study conducted in the Ganjam District of Odisha. International Journal of Scientific
Research and Management. 5(8). pp.6569-6575.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2016. Replication in strategic
management. Strategic Management Journal. 37(11). pp.2191-2192.
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship. pp.45-63.
Lynch, R., 2018. Strategic management. Pearson UK.
Matovic, I.M., 2020. PESTEL Analysis of External Environment as a Success Factor of Startup
Business. ConScienS, p.96.
ÖNEREN, M., ARAR, T. and YURDAKUL, G., 2017. Developing competitive strategies based
on SWOT analysis in Porter’s five forces model by DANP. Journal Of Business
Research-Turk. 9(2). pp.511-528.
Pan, W., Chen, L. and Zhan, W., 2019. PESTEL analysis of construction productivity
enhancement strategies: A case study of three economies. Journal of Management in
Engineering. 35(1). p.05018013.
Shtal, T and et. al., 2018. Methods of analysis of the external environment of business activities.
Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic
Management Journal. 38(1). pp.42-63.
Yusop, Z.B.M., 2018. PESTEL analysis. COMRAP 2018. p.34.
Zhao, E.Y. and et.al., 2017. Optimal distinctiveness: Broadening the interface between
institutional theory and strategic management. Strategic Management Journal. 38(1).
pp.93-113.
Online
How to do a PESTEL analysis, 2016 [Online]. Available through:
<https://strategiccoffee.chriscfox.com/2012/10/how-to-do-pest-analysis.html>
SWOT Analysis–What is it and How to do it, 2017 [Online]. Available through:
<https://tallyfy.com/swot-analysis/>
Porter’s Five Forces, 2016 [Online]. Available through:
<https://www.business-to-you.com/porters-five-forces/>
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