SWOT Analysis of H&M based on PESTLE, Porter's Five Forces and VRIO

This report evaluates the internal and external environment of H&M using various frameworks such as PESTLE analysis, Porter's Five Forces, and VRIO analysis. It provides insights into the strengths, weaknesses, opportunities, and threats of the company.

STRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY - ...............................................................................................................................3
SWOT Analysis of H&M based on PESTLE, Porter's Five Forces and VRIO - .......................3
CONCLUSION -.............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Strategic Management is the concept of management which is concerned with defining
management, examining the competitive environment, evaluating the internal organisation,
assessing strategies and testify that management introduce the strategies.
H&M is the second largest global retail company offering fast fashion clothing for men, women,
teenagers and children.
This report evaluates internal and external environment of H&M with the help of different
Frameworks and Theories.
MAIN BODY -
SWOT Analysis of H&M based on PESTLE, Porter's Five Forces and VRIO -
PESTLE analysis -
The following is the Pestle analysis which helps in determining the key external factors that
influence H&M mentioned below -
Political Factors – UK political environment is stable, but due to Brexit, it has impacted the
employment, legislations taxes etc of H&M (Adelakun, 2019). H&M is the flexible company and
is ready to face the challenges and adjust its marketing and business policies accordingly.
Economical Factors – Economies all over the world has been impacted because of the Covid-19
pandemic and due to this purchasing power of customers is assumed to low. In such situations, to
stop customers to switching to another brand H&M, it provides different schemes and discounts.
Social Factors – Consumer today is influenced by the celebrities and media to adopt luxurious
and materialistic lifestyle, H&M prefer to present more designer fashion goods according to the
current trend.
Technological Factors – H&M update innovative features on their mobile apps such as H&M
club functions which provide customers to collect reward points. Technological advancements is
done regularly so that assistance is provided to various departments of the company.
Legal Environmental – H&M has been involved in various legal disputes although it has
sufficient amount to face any such issues. But company should abide by rules and regulations of
UK. For example, it lost multi-billions money in tussle patent dispute in 2015.
Environmental Factors – Because of the increasing pressure from public and government and to
showcase the transparency of its business (Bismark and et.al., 2018). H&M have decided to

release quarterly updates of its corporate social responsibility. It also recycles its old durable
products.
Porter's Five Forces -
Porter's five forces is framework analysing a company's competitive environment. Discussed
below are the Five Forces which helps in examining and identifying H&M competitive market -
Threat of New-comers – H&M is the part of clothing industry and this industry do not require
large capital investment, so there is high threat of new entrant in this industry. Although to create
and establish brand image takes lot of efforts and is expensive.
Threat of Substitute – This aspect focuses on substitutes available and being offered in the
industry (Danemo, 2018). H&M always tries to provide good quality and diversified products at
lowest price in the market. This cost conscious and customer focused strategy works well for the
H&M.
Rivalry among Competitors – Due the decreased demand because of global pandemic has
increased the competition. With the detailed market analysis and research, H&M tries its best to
come up with the differentiated strategies for its growth and increase its customer base. It follows
cost leadership and differentiation strategy so that it can easily compete with its competitors.
Bargaining Power of Customers – Bargaining power of customers is high because of the
excessive retailers present in UK market (Lewis, 2017). H&M focuses on building brand loyalty
with huge customers base providing quality and style in affordable price.
Bargaining Power of Suppliers – Bargaining power of provider is low because in this industry
there are many rivals available with little differentiation available. Globalization has provided
advantage to H&M, to source low cost manufacturers from different countries to face
competition.
VRIO Analysis
It is the inquisitive technique scintillating for internal evaluation of H&M resources to gain
competitive advantage (Mierzejewska, 2017). VRIO stands for Value, Rareness, Imitability and
Organisation dimensions which are described in detail:-
Valuable Rare Expensive to
Imitate
Organised

Financial
Resources
yes yes yes yes
Human
Resources
yes yes no yes
Distribution
Network
yes yes yes yes
Local Food
Products
yes no no no
Patent yes yes yes no
Valuable - While analysing the valuable resources of H&M, it can be referred that financial
resources, local food products, employees, patents, distribution channels are extremely valuable.
Financial resources help to invest in opportunities, Employees of H&M are highly trained and
talented so is valuable, local products are highly differentiated and patents helps to sell its
products without competitive interference. When we consider research and development and cost
structure, these resources are considered valuable to company.
Rare - While analysing the rare sources, financial resources are categorized into Rare, because
H&M possess strong financial resources that is cannot be easily possessed by anyone in the
industry. Employees or human resources is identified to be rare as they highly skilled and
trained. Local products are not rare because these easily provided by rivals as well. Lot of
investments and research of long period is done to make the distribution networks rare .
Imitate - While considering that which resources can be imitate and which cannot by H&M, it
can be analysed that financial resources are expensive to imitate as they are acquired by the
company from the profits over the periods of time (Perera, 2017). Patents and distribution
channel is also difficult to imitate as identified because it is not legally allowed to imitate patent
and distribution channel are developed gradually over the years.
Organisation - Financial resources and distribution networks are organised because financial
resources are invested in opportunities and also help in combatting threats and distribution
networks ensures that products are available to all its outlets and websites for the ease of
customers.

SWOT analysis -
On the basis of frameworks analysed above, following is the SWOT analysis done below -
Strengths – On the basis of frameworks used above it can be analysed that the paramount
strength of the company is that H&M has the global presence and the well- built brand value.
H&M from the years it found have stable financial resources to come up with more amazing
qualities and products (Shtal and et.al., 2018). It is also analysed that because of the value of
price and affordability it has strong customer base with high customer satisfaction.
Weakness – Every year company is left with the dead stock or unsold inventory which is the
general weakness of the apparel industry. Expensive designs of H&M is been replicated by some
manufacturer which is threat of substitution. The major weakness of the company is to face its
mall strategy that failed in US which is huge capital investments. Company also faced some back
lashes over some insensitive promotions.
Opportunities – H&M continuously works for the growth by making its brand image stronger
with its global presence. With the increasing technology H&M today has the opportunity make
increase its market share at internet market and gaining more customers there (Varley and et.al.,
2018). With the increasing purchasing power customers in UK can be ready to pay more for its
unique and luxurious designs.
Threats – There are few threats that every rising company like H&M faces, that threat of the
global economy the biggest example of this recession due to the Covid-19, threat of competitors
and local artisans because the can replicate company products which also causes threat of
substitute but it is low in UK as customers are more brand and quality conscious.
CONCLUSION -
This report evaluates various frameworks such as to analyse H&M external environment
PESTLE analysis is done to analyse what factors influence the companies external environment.
Porter's five model was used to have complete information about the companies and its industry.
To know about the resources and the capabilities of H&M VRIO analysis was used that what all
resources are adding value, are rare, can be imitated, and are organised. By analysing all the
frameworks SWOT analysis of H&M is concluded.

REFERENCES
Books and Journals
Adelakun, A., Should Porters Five Forces have value in Businesses today?.
Bismark, O., and et.al., 2018. Utilizing Mckinsey 7s model, SWOT analysis, PESTLE and
Balance Scorecard to foster efficient implementation of organizational strategy.
Evidence from the community hospital group-Ghana Limited. International Journal of
Research in Business, Economics and Management. 2(3). pp.94-113.
Danemo, J., 2018. How is AI influencing industry competition?: An exploration of online
retailing using Porter’s Five Forces Framework.
Lewis, R., 2017. Porter's Five Forces of competitive advantage.
Mierzejewska, J., 2017. Analysis and evaluation of marketing strategies for clothing companies
on the example of Zara and H&M (Doctoral dissertation, Katedra Procesów
Zarządzania).
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Shtal, T., and et.al.,2018. Methods of analysis of the external environment of business activities.
Varley, R., and et.al., 2018. Fashion management: A strategic approach. Macmillan International
Higher Education.