Strategic Management of H&M: Analysis, Strategies, and Future Recommendations

This report analyzes the strategies followed by H&M, examines the external and internal environment, and provides future recommendations for the company's growth.

Strategic Management

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1. Strategy of H&M ....................................................................................................................3
2. Strategic tool to analyse external environment .......................................................................4
3. Strategic tool to analyse internal environment ........................................................................5
4. Strategic direction tools ..........................................................................................................6
5. Critical evaluation and justification of future strategy for H&M ...........................................8
6. Future Recommendations .......................................................................................................9
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Strategic management refers to the goals and objectives that are achieved by the
organization along with analysis of external and internal environment (Ansoff, Kipley, Lewis
and et.al., 2018). H&M is Swedish multinational clothing — retail company known for its fast
— fashion clothing for men, women, teenagers and children. This report will analyse the
strategies which H&M follows with aid to external and internal environment. It will also analyse
the strategic tools used with proper examination. Critical evaluation along with justification of
future strategy will be explained more appropriately. Last but not least, future recommendations
will be made for the company to run effectively and efficiently.
MAIN BODY
1. Strategy of H&M
H&M follows different ways of strategies which defines company's focus towards growth
and development -
 Collection of style (COS) offers customers a combination of timelessness and distinctive
trends for both men and women. Arket and Afound are two recent additions to the brand
portfolio of the company (Giertz-Mårtenson, 2020). There is consistency provided to
customers by making some products available over long — time which is emphasized as
Arket. Afound is an innovative off — price marketplace that offers selected range of
discounted products from both external brands and the H&M groups own.
 H&M has perused its growth strategy by increasing the number of stores by 10 -15% per
year and also the company has scaled back its physical expansion and closed some of its
existing stores. Digital expansion by H&M has laid more focus on the collaboration with
the Alibaba in order to reach more customers and target market.
 The core strategies which H&M follows is to keep everything simple (Delirium, 2017).
Constant improvement in its products and services leads to innovation and engage
customers more so that the brand popularity is increased and the company is able to
achieve its set objectives and goals. H&M is cost conscious about its products and

services. Because buying process depends on the customers as how much they are likely
to buy the product.
 H&M strategy is to recruit local people wherever it opens a new store. H&M looks for
the people who have right personality and potential to understand and adopt core values
of the organization.
 CSR strategy of H&M has increased the company's importance. CSR takes several
actions throughout its value chain to keep away actual criticism. The company has
formulated seven commitments called H&M conscious actions which adopts ethical
practices and involves other factors for improving working conditions and using natural
resources naturally.
2. Strategic tool to analyse external environment
The external environment of H&M is examined through PESTLE analysis -
Political — As this brand is operating number of stores across the globe political risk is very
important to be measured (Iacovidou, Busch, Hahladakis, and et.al., 2017). The franchised
outlets in number of markets which are politically unstable including Turkey, Lebanon and
Egypt monitor any changes which are closely related to each other dealing with any political
instability which is feasible for both the stakeholders of company. Thus, political factor plays
main role in the company's rules and regulations.
Economic — In 2019, H&M planned addition of 335 new stores of which 240 were H&M
stores. Customers spend more on the items which are luxurious and deliver premium clothing.
Corporate tax norms of H&M vary accordingly therefore they have to follow specific rules and
regulations. H&M is a profit making company which largely focuses on the areas of expansion
of its business and gain customer engagement. Thus, economic factor plays major role in
analysing external environment which H&M holds for its growth.
Social — H&M has diversified its market through social media marketing which enables
promotion of products and services to increase at large rate (Ulubeyli, Kazancı, Kazaz, and et.al.,
2019). For this the company has made pages on Facebook, Twitter, Instagram, Snapchat,
LinkedIn, Pinterest and YouTube. These social media applications promote H&M's collections
and campaigns, finding out what's new, locating stores and making discounted purchases online.

H&M has also collaborated with various celebrities and other brands which helped it in
marketing done along with 200 — in house collaborations over years.
Technological — Different technological advancement ways are adopted by H&M which are
automated online warehouses, RFID, advanced data analytics and AI competencies which helps
to analyse and understand customer patterns. This lead the growth and development of
technology in H&M company. Digital campaigns also play a very important role in the
technology factor as this being very prior form of promotion and marketing works for the
enhancement in brand reputation and diversification in its products. Thus, technology plays key
role in H&M's growth.
Legal — The regulatory policies of H&M is the main concern for the company to follow it.
Because through that the company will abide by the rules and regulations which are being
implemented in the external environment (Fosher, 2018). The legal risk factors may include the
changes in the company's policies which are applicable in different countries. The company's
expansion and internationalization depends on infrastructure, purchasing power and demographic
structure along with the legal factors which are in practice since the company was being formed.
Environmental — As per the environmental concerns, H&M being the textile industry pollutes
the water bodies as high amount of water wastage is done which results in deadly diseases. The
environmental concern is an important aspect for the company to take care of it so that there is
no amount of wastage or pollution which directly affects the environment. Thus, in growth and
development of the company, environment should be considered prior to set up different
production stores which harms less the public.
3. Strategic tool to analyse internal environment
SWOT analysis are the business analysis are made to make a thing or person to sure that
the objectives and the factors of the project are properly defined and identified (Gürel and Tat,
2017). SWOT analysis shows the present data of the organization. SWOT analysis of the H&M
examine the brand, performance and benchmark of the company.
Strength — H&M are the one of the largest global clothing retailer in the world and have strong
brand name and reputation in the world (Vlados, 2019). Enterprise have capability to stand in the
competitive world and the strength of H&M is that they not on only have customer from their
country or city but also they have customer from worldwide. Organization are also associated by

the celebrities and the designers, and they offer quantity and trendy clothes at an affordable price
and have variety of product that attracts more consumers. Organization has efficient supply chain
to connect with their suppliers and consumers. The biggest strength of H&M is they work as a
team they have belief on their employees, and they also have extra focus on their employee
involvement.
Weakness — They have week internal communication system and have high cost product which
is not purchased by every person. Firm have invested a lot of capital in their maintenance of
machinery and the amount they are spending on machinery and other goods they should invest
on their trainee and employee. Enterprise are mainly dependent on hiring parties from the outside
the company to perform their services. The biggest weakness of H&M is that they cannot make
decision at their own they have to consult to their employees.
Opportunity — Seller offer them variety of products with that they can earn more. Firm have
opportunities to increase there popularity from online stores (Phadermrod, Crowder, and Wills,
2019). They have opportunities to know what needs of the customer are not fulfilled, and they
have opportunities to take business training so that more and more people will come to know
about their products. Implementation of new technology can be beneficial for H&M and it can be
helpful for them to take competitive advantage. New demands of the people leads to more
opportunities for the company to increase there profits and sales.
Threat — H&M not only have pressure of their competitors and local artisans but also on their
overall sales and profits. As H&M is operated in so many countries they have to face the political
climate of the number of markets across the world. They have several agreements that could be a
threat to their exiting pro0ducts and biggest threats is changing global gesture reduces the sales
and profits of the company. If any customer or suppliers complains about the company that there
product have damaged there skin and clothes are not good then company have to face the rules
and regulation of the agreement as decided before. Change in regulation leads to change in
agreement.
4. Strategic direction tools
Strategic tools which are used for H&M is -
Porter's Five Force model -

Threat of New Entrants — The production process is costlier for new entrants but H&M can
tackle this threat by fighting through the cost advantage (Bruijl, 2018). H&M can tackle the
threat of new entrants by producing differentiated products through innovation. Strong marketing
strategies can be adopted by the company so that it does not lose its customers to new entrants in
the market.
Bargaining Power of Suppliers — H&M can purchase raw materials from its suppliers and can
switch the suppliers because the switching cost is low. To ensure efficiency in the supply chain
of H&M products, the company can refer to different suppliers to different geographic locations.
Bargaining Power of Buyers — To attract more buyers H&M should focus on innovation in the
products (Firman, Putra, Mustapa and et.al., 2020). As bargaining power of buyers is weak,
H&M should focus on more building large customer base through marketing. H&M should sell
low prices to low — income buyers.
Threat of Substitutes — The substitutes of H&M are Zara, Gap, Marks and Spencer which
produce similar products residing in the same industry. To decrease threat of substitutes H&M
should produce better quality products at low prices.
Rivalry among Existing Firms — H&M should conduct proper market research so that they are
able to analyse their rivals in the market and plan according their next step towards expansion
and innovation on whole. H&M should focus on new customers to engage them on large
platforms.
VRIO analysis -
Valuable — Employees of H&M are a valuable source to as without them the organization
would not function. The key source to which the company stands on is due to number of
employees in the organization (Hernández and Garcia, 2018). The distribution network which
H&M operates is valuable as it determines the value chain with warehouse, distribution centres
and the stores around the globe.
Rare — The products which H&M produces is rare as more effort is put into researching the
market trends. The technology which the company uses in producing its products is rare which
includes data analytics, AI competencies etc. as company's focus is on the employees, they focus
on their performance to deliver the best of what they acquire for betterment of organization.
Imitable — The products of H&M is an imitable factor because there are various other
competitors of the company in the market. But still H&M has improved its methods and has

innovated new product segments in the market which emphasis on the quality of the products
made. Thus, the imitable factor emphasis on the similarity of products which H&M produces and
vary accordingly.
Organization — The patents and financial resources of H&M are well — organized. Along with
this, the management of the company and the store operation process is also properly managed
which ensures that the organization is working effectively and efficiently. Thus, the organization
factor refers to H&M organized processes and operations which are valued for the growth and
the development aspect progressively.
5. Critical evaluation and justification of future strategy for H&M
H&M being the biggest retailer of fashion in the market faces the challenges of
competing with the other companies similar in the same segment production of products (Segran
and Elizabeth, 2019). The companies which are competing with H&M are Zara, Marks and
Spencer, Gap etc. due to such tough competition in the market the company has to invent certain
future strategies which helps the company to expand its businesses on profitable terms.
The challenges which the company faces are - First, at the higher end, H&M is seriously challenged by Zara's rapid expansion in the
emerging marke. At the other end, H&M is challenged by even lower — cost sellers such
as UK's Primark.
 Second, consumer behaviour has changed more dramatically than many anticipated with
tremendous growth of online fashion retailers like Zalando and Asos in Europe, Amazon
in the USA and Alibaba in China.
These developments had drastic consequences for H&M with declining sales growth,
substantially eroding margins and investors lost faith in the company.
Future strategies -
Diversification — H&M should produce such innovative products which help the product to
seek heights by giving tough competition to its competitors (Gyan, Brahmana and Bakri, 2017).
Diversification in the products should be done so that the company is able to prove its
competencies and skills in the market. This strategy will help the company to review its past
products and compare them with the new products which will prove its existence.

Understanding the needs of potential customers — The needs of customers can only be fulfilled
when the products and services offered to them satisfy their requirement. H&M should focus on
its customers as what their needs and wants are. By fulfilling these factors the company will be
able to analyse the consumer behaviour and the challenge will turn into strength for H&M. Thus,
this strategy should be positively followed.
Justification for the used strategy -
These two strategies are used so that the company does not face any difficulties which it has
been facing as given in the study. These strategies when formulated will help H&M to reinvent
its structure and innovate new plans and procedures which will help to expand its business more
effectively and efficiently.
6. Future Recommendations
Future recommendations for H&M company is - Product development should be done in such a manner that it becomes inimitable by
H&M's competitors. Target market should be analysed beforehand so that it becomes easier for the company
to evaluate current marketing trends and techniques. Social media marketing applications should be utilized skilfully in order to assist for the
future marketing campaigns which are to be formulated for the product promotion. Technology advancement should engage recent technology trends which enhances the
product in effective form. Supply chain and demand for the product should be adjusted so that H&M is able to
produce what they can sell to its consumers.
 Conscious choices can be made by the consumers during this pandemic to make available
the services run effectively and efficiently.
CONCLUSION
Thus, it is concluded from the above report that background strategy helps in providing
information relevant to strategy. The external and internal environment explained PESTLE and
SWOT analysis which assisted in the strategic capabilities of the H&M company. Strategic tools

like Porter's Five Force model and VRIO analysis was done to ensure the strategic affectivity in
reference with the company. Critical evaluation and justification was done in order to analyse the
future strategies and challenges the company is facing. And finally, future recommendations
were denoted to ensure smooth functioning of the business in the organization and the company
as whole.

REFERENCES
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