Strategic Management for H&M

This report provides an overview of the strategic management process for H&M, a global clothing organization. It includes an analysis of the external and internal environment, competitor analysis, strategic choices, and future strategic direction. The report concludes with recommendations for H&M to strengthen its brand image and gain a competitive advantage.

STRAETGIC MANAGEMENT

Table of Contents
INTRODUCTION.......................................................................................................................................3
TASK..........................................................................................................................................................3
Organization background information.....................................................................................................3
External environment analysis by using relevant strategic tools..............................................................4
Competitor analysis.................................................................................................................................7
Internal environment analysis by using strategic tools.............................................................................7
H&M strategic choices and future strategic direction..............................................................................9
Strategy selection and justification........................................................................................................10
CONCLUSION.........................................................................................................................................10
RECOMMENDATION.............................................................................................................................10
REFERENCES..........................................................................................................................................11

INTRODUCTION
Strategic management refers to the process of monitoring, evaluation and ongoing
planning that is important for a company to meet their set aims and business objectives. The
current report is based on H&M, is global firm based in Sweden. This study explains external
and internal environment analysis by using suitable strategic tools or models. Furthermore, it
also clarified competitor’s analysis, future strategic direction and strategic choices of company.
In the final part, evaluation of strategy selection and their justification will be discussed along
with suitable recommendations in this report.
TASK
Organization background information
H&M is one of the best and most popular Swedish clothing organizations in the world,
they offer fast fashion cloths at cheaper prices, and it was founded by Erling Persson, in 1947.
Company develop different strategic plan in order to strengthen their brand image, to gain
competitive advantage and to sustain within fashion industry for longer period. Firm is able to
satisfy their target market by offering products according to their preferences and current trend.
Within fashion industry, competition level is high it put pressure on organizations work under
this sector to make changes within their current business practices. In order to gain benefits from
competitive environment, H&M develop relevant and effective strategy. Firm decided to launch
a buy now, pay later services in United State, to avoid retail deadliest mistake. It allow
consumers to keep an product for minimum 30 days before deciding when they want to opt and
keep to pay for specific item in 4 installments. Organization is the first or latest retailer who
launches and develops this strategy to become market leader; it is quite beneficial in term of
increasing profitability and consumer base rather than its competitors. Along with it, to keep
sustainable H&M focus on sustainable strategy (Razzaq & et.al., 2018).
Fashion industry has been recently called out as one of the most environmentally
damaging sectors. By taking strategic decision Hennes & Mauritz, can sustain within market
place in effective manner that is very beneficial for its business growth as well as success. The
reason behind creating this sustainable strategy is the issues being faced by fast fashion such as

chemical use in fashion production. They develop strategy to use only recycled or sustainably
sourced materials in order to keep competitive.
External environment analysis by using relevant strategic tools
PESTEL model-
Political factor-
The main political factor impacting H&M business strategy and practices is restriction on
exports & imports and relocation of production as it impact negatively on firm sustainable
strategy (Grumiller & Raza, 2019). It create barrier to collection raw material from different
nations or place for producing sustainable product for consumers. Brexit is the main reason
behind import and export restriction between UK and EU. It can be considered as threat for
organization that affects productivity and sales.
Economic factor-
Despite negative impact that Brexit has brought for currencies across Europe,
organization report that their sales increase by 7% on a local currency basis in comparison to
2016 and raise 10% when converted into Swedish currency. It impact on H&M business
positively as they are able to gain positive results (Malik & et.al., 2019). It seen as good sign to
company since such a big political turn around would not affect profit making. It reflect as an
opportunity for H&M to gain increase their sales rather than before.
Social factor-
Fashion industry is a area where individual are directly influenced by celebrities & social
media. Changing trend in attitude of consumers is considered as social factor that put negative
impact on H&M production operation as they feel more pressure from market side to conduct
research about current trends and then produce their item accordingly. H&M garb the
opportunity by manufacturing product according to trend that helps to gain attention of new
consumers towards purchase.
Technology factor-

Technology development put positive impact on H&M as it helps to strengthen their
online presence rather than before. Organization recently uses club function, which permits their
customers to collect reward points from their outlet and online purchases by using app. With the
help of technology advancement they can offer its online services as fast as possible as result
increases consumer base. It is one of the best chance for H&M that they can use to become
market leader.
Environmental factor-
Consumers concern towards environmental sustainability also put positive impact on
H&M business as they create sustainable business strategy that is related to produce chemical
free cloths. With the help of this strategy firm can build strong brand image and gain top position
within fashion industry.
Legal factor-
Changes in labor laws put negative impact on H&M employment contract as it put high
pressure on firm to provide wages and facilities according to legal requirements which is difficult
to do. It directly impact on profit margin and productivity of firm.
Porter’s five force model-
Threat of substitute products or services-
Threat of this element is low because there are no prefect substitutes for clothes are
available in market (Malik & et.al., 2019). H&M grab this opportunity in effective manner; they
can design products by focusing towards sustainability that is quite beneficial for firm in term of
increasing consumer loyalty.
Threat of new entrance-
The threat of this force is low. It is very difficult to enter into fashion sector because it
requires high capital in order to conduct this activity. It put positive impact on H&M as they can
run business and operates their functions in effective manner all around the world.
Bargaining power of suppliers-

Bargaining power of suppliers is a weaker force because number of suppliers available in
market. H&M can choose another supplier to purchase raw material and supply products in
market place. It impact positively on supply chain management and further activities related to it
(Barron, 2019). Number of suppliers in sector in which organization operates is a lot compared
to consumers; it means that suppliers have less control over prices and it makes this force
weaker.
Figure 1Porter's Five Force Model

(Source: Five Forces Analysis of the Fashion Retail Industry, 2017)
Bargaining power of consumers-
The level of this force is weaker because product differentiation within sector is high; it
means that customers are unable to find alternative companies manufacturing cloths. This
difficulty in switching makes this force weaker in sector that impact H&M positively as they can
retain people effectively.
Competitive rivalry among exiting firms-
The degree of this force is high because existing companies within fashion industry give
tough competition to each other in order to gain top position within marketplace. Few
competitors have a wide market share; it means that these will keep in competitive activities to
become market leaders. This can makes rivalry among current organizations a high or strong
force that impact negatively on H&M business strategy and practices negatively, as they need to
make some modification within current actions.
Competitor analysis
Through competitor’s analysis, 3 major rivals to H&M has been identified as they give
tough competition to chosen organization. The third competitors of chosen organization is
Macy’s, they known as international retail firm that sells accessories, home furnishings, clothes
and cosmetic consumers products. It operates specially websites, department and mobile
applications under three brands such as Bluemercury, which help to strengthen its brand image
within market place and make them become a competitor for H&M.
ASOS ZARA Abercrombie & Fitch
It is international fashion brand
in the world and another
competitors of H&M.
Company is known as online
retailer that produce and
provide broad range of fashion
related goods to consumers.
The top most famous and
popular brand Zara was also
included in list H&M
competitors who is capable
to beat and always ready to
keep competitive by offering
the best quality products to
Abercrombie & Fitch is the
main competitor of company; it
is specialty retailer of casual
apparel for women, children
and men. Through outlets and
direct to customers operations,
this competitor is able to

The products of this top brand
are men and women wear,
jewelry, foot wear, accessories
and more.
its consumers according to
their preference and demand
(Huq, Chowdhury &
Klassen, 2016). This
company has 27.4 Million
fans on social media side
such as Facebook and also
has 1.3 Million followers on
Twitter. 20.6Billion
estimated as annual revenue
of Zara which make them a
main competitor of H&M.
engaged people with them and
also its business in selling an
array of goods including casual
sportswear clothes like, woven
shirts.
Internal environment analysis by using strategic tools
SWOT analysis-
Strength-
 In order to keep designs contemporary, organization replenishes outlet inventories daily
and brings cloths to consumers much quickly more than is typical in sector (Flosdorff,
Döring & da Silva Wagner, 2019).
 It can be possible by producing wide volume basics in low cost locations as well as less
volume fashion prices locally.
Weakness-
 High dependency on outside suppliers to produce their products is the weak point of
H&M that impact on its productivity and profitability.
 It can be very risky for company reputation, they outsource to about 700 independent
suppliers worldwide.
Opportunity-

 Outside of Europe, H&M online presence is limited to catalogue with no purchase
abilities.
 Company grabs this opportunity as they can build their online presence among those
which help to increase purchase capabilities of people rather than before.
Threat-
 Intense competition posses threaten for H&M as it impact negatively on organization
business practices and production system.
VRIO framework-
Value Rare Imitability Organization
H&M is able to derive
towards wide amount
of their sustained
competitive benefit
from their unique
organizational culture
and developed HRM.
Organization was
capable to maintain
their Unique
organizational culture,
it define their
strength.
Company is capable
to replicate same
outlet concept across
world and their
overall market
position as well as
strong brand.
Organizational culture
of H&M is highly
encouraged by strong
personality of
founder, these leaders
effectively managed
to uniquely place
brand in sector.
Uniqueness aids
organization to gain
competitive benefits
over competitors in
fashion industry.
With the help of
maintaining supply
chain management in
effective manner,
H&M sustain within
marketplace for
longer.
H&M strategic choices and future strategic direction
Porter generic strategic model-
Cost leadership-

With this strategy, objective of company is to become lowest cost manufacturer in
fashion sector in order to gain competitive benefits. H&M can use cost leadership strategy which
is quite beneficial for its business growth and success.
Cost focus-
This strategy can be utilize by H&M to gain advantage of intense competition, here they
seeks a lower cost benefit in just one or small number of market segments.
Differentiation leadership-
According to this strategy, organization can aims to differentiate within one or small
range of target market segments. It is classic niche selling strategy; many small firms are
capable to establish themselves in niche market segment using it.
Differentiation focus-
When H&M can use this approach they can target more wide markets and goals to
achieve competitive benefit through differentiation across entire of its sector.
After using this strategic direction tools, it has been evaluated that H&M choice cost
leadership strategy that is very effective and beneficial for them in term of increasing
productivity level as well as profit margin more than competitors. With this strategy,
organization gain better profits, it helps to enhance group’s market share and create more capital
that will be used for its business growth. But along with benefits, this strategy comprised with
some draw back such as it because financial cuts in critical fields that damage business. In
context of future strategic direction, H&M will use differentiation focus.
Strategy selection and justification
Differentiation focus is the future strategic direction for H&M as they can utilize this
strategy to gain competitive advantages. It helps to gain consumer loyalty; the main advantage of
this strategy is to generate strong client loyalty by tailoring organization to needs of small group.
When firm cater goods with attributes most valued by this niche market segment, they can
established reputation of service, quality and excellence based on demand of that target
consumers. Along with it, when company get succeed in offering its goods with a strong

reputation to a niche market, they can typically charge premium cost, outcomes in increasing
profitability for business. On the other hand, in term of drawback, limited demand accessible
within a niche market can cause issues as it impact on H&M profit margin.
It can be justified that Differentiation focus strategy is quite beneficial for company as it
will help to keep firm competitive. It allows organization to develop tremendous expertise about
products that H&M offer to its consumers.
CONCLUSION
From above analysis it has been concluded that H&M is able to reach at target market by
developing right and suitable strategies. By using cost leadership and differentiation focus
strategy organization gain competitive advantages.
RECOMMENDATION
 In order to strengthen brand image and enhance reputation in market, H&M
recommended developing their online presence outside of Europe where a lot of people
are seeking for purchasing the best quality cloths via online app.
 H&M must use differentiation leadership strategy because it will help them to build
strong position and gain competitive advantages.

REFERENCES
Book and Journals
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Inspiration and Celebrity-Influenced Design Communication. Fashion Theory. pp.1-20.
Flosdorff, M., Döring, M. & da Silva Wagner, T., (2019). Virtual Reality in the Product
Development in the Fashion Industry: Application Areas, Opportunities, and Challenges
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