Strategic Management of H&M

This report discusses the strategic management of H&M, a leading fashion brand. It covers background information, external analysis, internal strategic capabilities, strategic options, and recommendations for future growth and success. The report also highlights the use of tools such as SWOT analysis and the Ansoff matrix.

Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................................2
Main Body....................................................................................................................................................3
Background Information of H& M...........................................................................................................3
External Analysis......................................................................................................................................4
Internal Strategic Capabilities-.................................................................................................................5
Strategic Option-......................................................................................................................................6
Strategy Selection and Justification-........................................................................................................7
Recommendations-..................................................................................................................................8
CONCLUSION:..............................................................................................................................................9
REFRENCES................................................................................................................................................10

INTRODUCTION
Strategic management is a tool that is used to formulate effective strategies for future
growth and success. It is a framework to determine strategies by analyzing internal as well
external environment of company to attain business goals. It is a process that is undertaken by
managers to make effective for the betterment of organization (Joyce, 2019). In the current report
chosen company is H& M (Hennis & Mauritz) which is a leading fashion brand of Swedish has
presence globally. It provides a range of clothes for all segments of customers. The report consist
various strategies that are being followed by company in order to maintain its existing brand
value. In addition certain tools such as SWOT analysis and PESTLE analysis are applied to
monitors internal and external strategic environment of entity. At the eng some recommendations
have been made to stand out company in competitive market place.
Main Body
Background Information of H& M
H & M stands for Hennis and Mautriz is prominent fashion brands that was founded in
the year of 1947.It offers varieties of fashion clothes for men, women, teenagers, children at
international level Mainly entity is serving to all segments of customers which provides an edge
to it over other rival firms such as Zara, Forever 21. In additions it owns nearly 4000 outlets at
different locations and looking forward to expand business at wide level. It has expanded
operations in almost 55 countries across the globe. Head office in Sweden keep control and make
plans for smooth functioning of business in different nations.
The strategy which differentiates H & M from others is their fast fashion model. In this,
company purchases and makes fashionable clothes available from designers to end users through
its stores in minimum period of time. It is possible due to efficient distribution and supply chain
system of organization (Helfat, 2017). It offers product in affordable price range and offers
ample of discount offers so that customers get attracted towards their offerings. With this, entity
is able to attract more number of buyers. Further, respective organization focuses to eliminate
number of intermediaries in supply chain that make it bale to minimize production cost. Further,
H& M outlets are situated at such a location that are easy to approach due to these feasibility

consumers give preference to it. Therefore, organization is able to maintain higher market share
in fashion industry.
External Analysis
H& M is working in fast fashion industry that is highly affected with external forces.
These forces put a significant impact on overall business operations of company. PESTLE is a
strategic tool which can be used in order to monitor the impact of macro environment. In context
of select company external factors are elaborated below:
Political-H& M is working at global level thus highly affected with political conditions
prevailing in different countries (Kang, 2018) Most of the production process of entity is based
on Turkey, Egypt and Lebanon. Political environment of these counties are highly instable that
affects overall business operations of organization. In addition, Brexit, US & China trade war
affected the whole textile sector by increasing prices of raw material and labor that may increase
production cost at higher level
Economic –Although Brexit brings a lot of uncertainties but company is able to book
nearly 7 % profit margin out of cost. H & M is operating in developing nations too where labor
and other resources are available at cheaper rate thus it is favorable for entity to start production
unit within those countries. Further, tax regime varies in different nations so that significantly
affects existing policies of business unit.
Socials-Nowadays people are highly influences with social media, style statement of
celebrities, models thus H & M is required to monitor recent market trends and act accordingly.
It is analyzed that buying behavior of people are changing at global level so that organization is
required modify its strategies to fulfill the demands arises at market place in an efficient manner.
Technological-Customers are not willing to visit stores to purchase goods rather they
prefer online shopping which provides them convenience and wider choices (Suriyankietkaew
and Petison, 2019). Due to this, H & M has associated with Hermes to improve its logistics
efficiency. In addition, it also needs to adopt artificial intelligence in order to study the recent
trend and design products accordingly.

Legal-H& M is functioning in international market place thus it needs to follow ample of
rules formulated by higher authorities of various nations. Although franchising was not being
adopted by company but due to strict regulations in some countries such as UAE, Oman it had to
adopt this practice. Organization has to secure intellectual property rights so that no one can steal
its designs. Further, it is also affected with employment protection, foreign trade laws of
different countries.
Environmental-These factor highly affected performance as well as brand value of an
organization. It is analyzed that H& M is taking initiatives to minimize the emissions and
wastage generated from company. For this, it is using recycling clothing materials to protect
environment. Company needs to invest huge amount for waste management, emission control
that affects its overall profitability
Above explained elements have great impact over business operations of organization
that needs to evaluate on timely basis. It is essential for H&M to formulate efficient strategies in
order to grab the opportunities of success and growth (Laureiro‐Martínez and Brusoni, 2018). It
is analyzed that above stated factors are essential and help top know the opportunities available
at market place. There is a detailed analysis carried out is PETLE regarding several factors such
as political, economical, social, technological and more which eventually help to formulate
effective strategies for further growth and success of company. For instance with the use of new
and advance technology H & M can earn huge profit margin. In addition, political, social factors
also assist managers to make modification in their existing strategy that is essential for future
development.
Porter's five forces:
Bargaining power of suppliers: Here, several suppliers are present at market place who
provide necessary raw material to company. In regards of H & M, bargaining power of suppliers
is low as there are numerous other vendors present at market place that are providing similar
resources.
Threat of new entrants: It refers to the opportunity for new firms to enter into an existing
market. It is analyzed that there are higher threat to H & M from new firms business model of
company is simple and easy to copy.

Bargaining power of buyers: There are numerous rival firms of H & M present in market
that are providing identical products at lower price. Thus bargaining power of buyers is really
high.
Threat of substitute: It is analyzed that H & M provides quality goods at reasonable price
to customers. There are numerous other firms such as forever 21, Zara that are also working on
similar concept (Kerzner, 2019). Therefore threat of substitute for organization is really high.
Rivalry among existing firms. Here, higher competition is prevailing at market place thus
rivalries among existing firms is also high that affects its overall performance.
From the above discussion, it is analyzed that competition prevailing among existing
firms is the biggest threat of company as the presence of more number of competitors at market
place affects its overall sales and profit margin.
VRIO Frameworks
This is a framework which is used by company to safeguard its internal resources and
capabilities. It provides higher competitive advantage to organization that is essentials to sustain
at market place for longer run.
Resources Valuable Rare Inimitable Organized
Financial
resources
Yes No NO Yes
Employees Yes Yes NO Yes
Patent of H &
M
Yes Yes Yes Yes

Internal Strategic Capabilities-
Internal Capabilities refer to the strengths of company that differentiate it from others
along with areas where it is lacking and needs improvement. SWOT is a tool that best fits to
assess internal environment of organization. It also comprises opportunities which can be avail
for future growth and threats to entity from rival firms. An analysis of internal potential of H& M
using appropriate framework is mentioned below:
Strength Weakness
 It offers wide range of products such as
clothes, accessories, shoes and many
more to cater the needs of huge
segment. With this H & M is getting
preference from customers (Weiss,
2017).
 Company is working at international
level. It owns more than 4000 outlets
worldwide and planning to open more.
H& M has presence in nearly 60
countries that enhances its brand value.
 In spite of huge economical impact
entity is able to maintain profit
margins. Financial performance of
company is outstanding thus investors
are willing to invest huge amount in
entity.
 H& M relies on suppliers to provide
designer clothes. Company does not
manufacture products rather it
outsources from vendors.
 It emphasis to provide affordable goods
to customers thus compromises with
quality.
 Company depends on suppliers and
sometime by after trend clothes from
them. This negatively affects the
existing brand image of entity at market
place.
Opportunities Threats
 H& M is focusing on expansion of
business operations by increasing its
number of outlets at global level.
Expansion will help company to target
huge number of customers domestic as
well as international.
 There is an opportunity to use e-
commerce platforms to attract more
number of buyers. As entity is working
in fashion industry which is highly
inclined towards digital technologies
thus H& M can use these platforms to
achieve business objectives.
 Trends in fast fashion industry are
changing rapidly that is a biggest threat
for respective organization. It needs to
assess the buying behavior, attitude of
people to stay in market for a longer
period of time.
 In addition, there are ample of other
competitors such as forever21, Zara are
present at market place who are giving
extensive competition to H& M. So, it
needs to adopt effective strategies to
compete with rivalries.

Strategic Option-
In the current competitive environment to survive for a longer period of time, it is
essential for organizations to prepare strategies (Venkateswaran and Ojha, 2017). These not only
helps to face the uncertainties but also essential for long term survival and growth. To operate
business effectively it is essential to adopt appropriate strategies. In context of H& M it is using a
framework called Ansoff matrix in the following manner to ensure future growth and success of
company:
Market Development- Under this strategy existing products and services are offered to
new segment of customers. The company can expand market by targeting expanding business in
new locations and serving to new customer segment. H & M adopts different pricing strategies
such as low cost for lower income group and premium products for status conscious people.
Although company is trying to expand its business through targeting different groups of
customers but a lot of segments are still left that may prove profitable.
Product Development- Launching new product among existing customers are known as
product development strategy (Helms and Whitesell, 2017). In this, company comes with an
innovative products and services it was not providing earlier. H & M focuses to launch new
designer clothes and it also takes feedback from customers for further improvements. It is
essential to cater the needs of customers in an efficient manner.
Diversification- In this, Organization launches a new product in new market. There is
higher risk is involved in this strategy as huge uncertainty associate with this. Company also
needs to do huge investment to undertake diversification. It may also hamper the existing brand
image of entity. H & M can expand business in similar areas like apparels, clothing’s and many
more. It can also diversify in unrelated fields such as food, home appliances and so on. It is an
efficient strategy that will help organization to grow but it requires huge investment.
Market Penetration- It is the strategy in which company works in existing market place
with existing product. Neither product nor market is changed under this. But here it is difficult to
create difference and earn profit margin. Company can offer discounts, adopt effective marketing
campaigns to attract more number of buyers. H& M provides discount over products and use
promotional tools such as digital marketing and more to increase in sales. In addition, company

has been acquired a number of small retailers to explore business operations. Further, it also
needs to formulate appropriate strategies so that it will be touch for new firms to enter in market
place.
There are ample of techniques to expand business at wide level. Company can explore
business by launching new product, entering into new market and adopting different offers to
attract more number of buyers (Kim, Kim and Qian, 2018). Diversification is also a way by
which H & M can increase its presence at global market place. Thus entity needs to evaluate
each and every strategy with due consideration before to selecting suitable one.
Strategy Selection and Justification-
To survive in today’s competitive environment, it is significant to explore business
function at wide level. There are ample of strategies such as Market, Product development,
diversification, market penetration that can be used to explore operations at global level. Each
strategy has its own drawbacks as well as benefits that need to assess in an efficient manner so
that company can succeed. Investment need to be done to undertake growth strategies. It may
also hamper existing brand value of an organization at market place. From above discussed
points Diversification seems to be most suitable way to expand operations for H &M. It is
working in clothing, accessories since it started and has good image in fast fashion industry. It is
perceived as renowned brand by customers that provides quality products with best designs on
reasonable price. Company may diversify in some another fields such as consumers electronics.
With this, entity will not only get a chance to launch new product but also will be able to serve
new business Consumers have great faith over brand that will benefited it in future. So, it will be
quiet convenient for organization to work in new product line (Guo, Pang and Li, 2018). But
there are risk factors also associate with this strategy as it also may change positioning of brand
among existing users. For this, H & M needs to be proactive and adopts effective strategies to
receive benefits from its current image. There are ample of rival firms present in market for
entity and diversification is the best way to compete with them. In addition, with this
organization will be able to serve international audience that will enhance its presence.

Recommendations-
 H &M is a leading fashion brand that is able to maintain huge market share globally.
There are some improvements that need to be adopted by company in order to ensure
long term sustainability and growth. These are mentioned below:
 Company needs to improve the quality of its products to build trust among buyers. It is
consider that H & M provides affordable apparels that can be easily purchased by lower
income group people. But the quality of its products is not good thus customers sometime
avoid to do purchase from entity. This is also a reason that entity is not able to attract
more premium customers who seek for standard products (Shin, Park and Lee, 2016).
 There is huge opportunities are available in market. H & M can explore its business by
targeting new segment of customers. It can target old age people also by making a
different product range as per their requirements. The entity primarily deals with young
people who are enthusiastic, fashionable and look for something new. Under the same
brand name it can introduce different apparels to cater the needs of old age people. It will
help company to increase in market share as well as profitability.
 To explore business it should associate with other firms and small retailers to target local
audience. It can undertake joint ventures, strategic alliance to expand operations at wide
level. Brand value and goodwill of entity will enhance with this. It will increase the
efficiency of organization by enhancing its resources, productivity.
 It is analyzed that H & M is depended on suppliers to get designer clothes. Outsourcing
enhances the overall cost of company and also gives control to others. So organization
need to set up its own manufacturing units to produce fashionable clothes rather
outsource it.
The above suggestions are important and need to be undertaken by respective entity in
order to operate business effectively and sustain at market place for a longer period of time. It
will improve the brand image of organization at global level.

CONCLUSION:
With above discussion, it is monitored that strategic management is an effective tool to
improve overall business performance. It is used to make effective plans so that organization can
survive at competitive market place for long term. Discussion has been carried out about various
strategies that can be undertaken by organization to attain predefined goals. In addition, SWOT
analysis is a tool to analyze internal potential of entity to face competition. Analysis of external
environment is also crucial to assess the impact of macro environment upon business setting.
There are ample of strategies like targeting new market, launching new product, diversification
that are essential to explore business operations at global level. Moreover, company need to
assess its current position and undertake effective strategies for further improvements.

REFRENCES
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