Strategic Management of H&M: Analysis and Recommendations

This report provides an analysis of the strategic background, PESTEL analysis, internal strategic capabilities, strategic options, and justification of strategic selections for H&M. It also offers recommendations for future strategic directions.

Management

Table of Contents
INTRODUCTION...........................................................................................................................3
Strategic background of H&M.....................................................................................................3
PESTEL analysis of H&M ..........................................................................................................3
Evaluation of internal strategic capabilities.................................................................................5
Strategic Options..........................................................................................................................7
Justification of strategic selections..............................................................................................9
..........................................................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES................................................................................................................................1

INTRODUCTION
Strategic Management refers to the set of various principles which relates to the functions
of planning, organising, controlling and directing business operations. It simply refers to as the
administration of an organisation which helps in achieving organisational goals. It is the co-
ordination and administration of various activities to achieve organisational goals, which
includes setting up of organisational strategy and co-ordinating effort of various parties by
effective utilisation of resources. H&M is a Swedish multinational chain that operate all across
the globe which is commonly known for the fast- fashion clothing for men, women, children and
teenagers which operates in 74 countries with over 5000 stores all across. Present report will
address to various external and internal factors that affect the business and will brief on various
strategic option, selection and their justification with various future recommendations.
Strategic background of H&M
H&M industry oriented their efforts and actions towards the acquisition of a large share
of consumer base around the globe. They are also determined expand their business by establish
their outlets in different nations covering almost every part of the world which enables their
consumers to get easy access to their products and services by physically visiting stores and
through online platforms which have advanced virtual trial feature. Organisation have followed
modified strategy and put their intense focus on investing in online platforms and set up their
digital stores and make them accessible for and user friendly for their audience. The latest plan
of action enterprise followed aims towards refurbishing their operating structure by re-investing
in the modification and innovation which in terms help the company to acquire increased profit
and growth (Souza and Batista, 2017). They have also decided to break the stereotyped designing
and fashion trend and focused on manufacturing apparels and accessories according to the
preference and demand of their consumer base. Establishment also take some essential initiative
towards fulfilling their responsibility towards the environment as they believe that it will be
advantageous for them to be recognised as a brand for its fashion clothing and quality and
sustainability.
PESTEL analysis of H&M
These are various external factors which affects the business functioning in a manner as
being mentioned below such as

Political factors- This factors has affected the business operation in a way as it is being
operating in large number of countries, the monitoring and evaluation of political risk is being
important concern for H&M where it accounts to having outlets in countries and market that
accounts to high political instability such as countries like Egypt, Turkey, Lebanon and various
others where its business operations might get affected as they are not being able to have various
contingency plans that supports for various political instability in the above mentioned countries.
Due to various political regulatory reasons it has to collaborate with various franchising partners
to operate their brand in various countries such as United Arabs, Oman and various others which
do not serve as firm part of strategy of general expansion (Matovic,2020).
Economic factors – This has accounted and affected the business operations of H&M in a way
as it regards to change in various taxation policies in Asian markets which has accounted to
change various business strategies of the company as a result has a impact on sales revenue and
profitability of the company . Its business operations are being affected economically as it
accounted to changing economies of scale where it shifts back from developed regions to various
others where the cost of production, labour, marketing&sales along with operations serves as
challenges for the company. It also states that despite of Brexit unfavourable effects it accounted
to rise in sales by 7% which is a good since such as big political factors does not affect the
functioning of the business in terms of profit making (Ortega, 2016).
Social factors – This factor has affected the business operation in a way as clothing is
determined as a field where consumers are directly attracted towards the same by the celebrities
and social media. It clothing products are so well designed and built as it helps in meeting needs
and wants of its customers which helps in fulfilling there expectation and deriving there
satisfaction which in turn helps in building trust and loyalty of customer and accounting to
increase in sale revenues and profitability of the business. Company accounts to this factors by
using various social media platforms and by creating buzz which accounts to getting various
valuable insight about the consumers buying behaviour where they analyse importance of
designer clothes with attract target audiences.
Technological factors- This factors has affected the business operation as company constantly
monitor and account to updating with the technology to ensure smooth flow of business
operations which helps company to saves lot of efforts in terms of managing business operation
according to the time which also provides insights about the customers of what is being preferred

by them and what not where H&M is continues to develop there app for mobile devices where it
is recently being unveiling the use of H&M club function, which allows consumers to use reward
points on online and in- store purchases using the app on the mobile devices and encourages
technology in business operation (Pan, Chen and Zhan, 2019).
Environmental factor- H&M aims to be a hundred percent circular and renewable by 2030
which means that company accounts to focus all the new products being generated from old
products and states that only durable and recycled materials to be used for manufacturing of is
clothing products. The company accounts to various strategies where it accounts to take
measures to protect the environment as it is being stated that textile industry has major
contribution in pollution where it accounts to proper waste disposal and use of water that does
not harm natural bodies and pollutes the same (Yusop, 2018).
Legal factors- Company accounts to these factors as it follow various laws and regulation of a
country or a region where it operates and non fulfilment of which may lead various restriction
and discontinuation of business operation of H&M. In past two years company is involved in
various number of legal disputes regarding various infringement which as a result might. build
negative image in minds of parties to business and affect its smooth functioning.
Evaluation of internal strategic capabilities
The macro-environment of every organisation is influenced by the activities and
functions carried out within the organisational setting. To get the better understanding of the
changes and occurrence happen to the interior components SWOT analysis is applied which is
discussed underneath.
SWOT-ANALYSIS

Strength: The company have wide variety of product options ranging from apparels to
accessories, eye wears, footwear's and cosmetics etc. They have done expansion by adding up
new décor utilities in their product range like pots, vase, candles with exotic fragrances, flower
holders etc. They use cost leadership technique to attain competitive advantage in the market and
defeating their rivals, as they deals in availing high quality and fashionable clothing and
accompaniments at affordable pricing (Phadermrod, Crowder and Wills, 2019).
Weakness: The biggest backdrop of H&M is that they don't have their own production units they
rely on other manufacturing industries and factories for the fabrication of their products.
Occurrence of shutdown and mechanical or technical error or any other misshapenness in those
units will directly effect the profitability and distribution and function of the enterprise. Another
issue with the fast fashion brand is that fashion industry and people taste in fashion and trends
are unpredictable as they change with a blink of an eye so its hard for the company to keep up
the pace with that ever changing behaviour and supply and produce good which meet everyone's
requirements.
Opportunities: In the present era of technological advancement almost every company came
forward on e-commerce websites and developed applications. Hennes & Mauritz have a great
opportunity to expand their business on digital platform which help them in saving major tax
charges and reduce their operating expenditure and also facilitate them to acquire large consumer
base a people prefer to make purchases through online mode as it is time efficient and more
convenient (Sarsby, 2016). To broaden their business horizon they can also try to launch their
Illustration 1: SWOT analysis
Source: SWOT Analysis–What is it and
How to do it. 2017

business in developing countries, as there operating expense is not that high and the economy is
increasing on a rapid pace. To penetrate in various other cross boarder nations they can use
mergers and partnership with various regional brands to operate in their domestic market.
Threat: H&M is facing huge amount of danger from the renowned and big established brands
like Gap, Forever 21 and ASOS etc. These companies have large amount of customers and
buyers and are more popular and preferred by their masses. Increase of duplicate and
inexpensive copy manufacturers turns out to be a threat for the establishment as those firms
provide customers with cheap copies of branded products. The present pandemic have caused a
huge loss to the organisation as cross-boarder or even internal transportation have restricted by
the government and hue taxes and trade charges have imposed over the export and importing of
resources which effects the overall productivity and profitability.
Strategic Options
There are various strategic option and tools which helps in assessing H&M 's strategic
choices and various future strategic directions which could be understood better by the use of
Ansoff's Growth matrix – It is being also known as products and market expansion grid which
is a tool used by the company to plan and analyse strategies for the growth of the company. It
includes four stages such as
Market penetration- This strategy of growth focuses on H&M to increase sales of existing
products in existing markets which can bes simply understood as firm trying to increase its
market share with the help of market penetration strategy. This could be executed in number of
ways by the company as company may account to decrease in the prices of its clothing products
which helps in attracting customers, increasing distribution and promotion efforts by the means
of strengthening supply chain which helps in making products and services available to the end
customers. It also can be by acquiring competitors in the same marketplace and winning in the
marketplace to ensure increase in the sale and accounts to higher profitability (Loredana, 2017) .
Product development- It helps in focusing of new product development in the existing market,
in these firm develops new products which helps in meeting needs and helps in catering the same
in the existing market. It involves extensive research and development and expansion of the
product range of H&M. It is being employed by the firm to have strong understanding of current
market needs and able to provide innovative solutions to meet the needs of the existing market.

This could be done by research and development, by forming partnership with other firm to gain
access to each partner brand and channels of distribution (Martins, 2020).
Market Development- It refers to the strategy of company by using existing product and
entering into new markets which states expanding into new customer segments and entering into
new geographical regions, it is being most successful when a firm technology can be leveraged
into new markets, potential customers are profitable and lastly consumer behaviour in new
market does not deviate much with the existing markets.
Diversification- It relates to strategy of entering entirely into the new market with the use of new
products by H&M and serves as to be the riskiest of all as it is being focused on both market and
product which is highly uncertain. It can be related diversification where there are potential
synergies between existing business and new products and market development, unrelated
diversification when there is no potential synergies between existing business and new product
and market development (Gurcaylilar-Yenidogan and Aksoy,2018) .
Porter's generic strategy – It describes how company pursues competitive advantage across its
chooses market scope. It is of 3 types such as
Cost leadership- It states and accounts to company winning in the marketplace by decreasing it
prices and offering valuable quality which is being affordable for the target audience (Islami,
Mustafa and Latkovikj, 2020). It states that company sells its product either at a price which is
industry average to earn profits higher than that of rivalry or below the average industry prices
which helps in gaining high market share. It suggests that company must find and exploit all
sources of being having cost advantage operations.
Differentiation- It is the strategy being adopted by the company where it seeks to be unique in
the industry along with some measures that are being valued by the customers. It refers to the
strategy of uniquely positioning company products which are differentiable on the part of the
company with its competitors and helps in winning in marketplace (Omsa, Abdullah and Jamali,
2017).
Focus - It relates to strategy of company in being cost focus which states that firms seeks to
have cost advantage in the target segments and differentiation focus seeks differentiation in
target segment where both the variants of focus strategy rest on the differences between company
target segment and other segments in the industry (Kabure and Ragui, 2020).

Justification of strategic selections
H&M have already acquired advantage in product diversification and product
development but it will be advised for the organisation on the basis of this research that they
should focus their actions towards market development and penetration (Singh, 2017). Hennes
& Mauritz should concentrate on establishing their own manufacturing factories and units, in
diversified locations and where they wish to operate. By doing that their distribution channel will
become more organised and strong they can deliver end products directly to their stores the
outsourcing cost will be prevented and utilised in penetrating to other nations and regions. It will
be more beneficial if they build those fabrication factories in every nation or region they cater in
so it will save them with the custom duty and transportation expenses. Some countries like UAE
wont allow brands to function on their country land on their own or as a individual unit. So to
attain market share in those areas they should consider mergers with their regional brands which
facilitate them to strengthen their roots in their market. Another strategy they should consider to
follow is differentiation policy as there are various fashion brands like ZARA, American Eagle,
Macy's etc. these all are also dealing in the fashion industry and providing latest styling and
premium products having even more elaborated consumers share (Purkey and et. al., 2018). To
cope up with that, enterprise should focus on developing something which have unique and
innovative feature and keep track of the changing demands and trends and try to provide distinct
product from what other competitors are offering.
CONCLUSION
From the above report its is being understood that there are various external factors that
affect the business functioning such as political, economical, social, technological, legal and
environmental which needs to continuously monitored and tracked to support effective
functioning, it also accounted to various internal factors that affect the business functioning,
accounted to various strategic option such as Ansoff's growth matrix and porter's generic strategy
which accounts to company growth and development. It accounted to company background
information and helps in providing with understanding of strategy selection and various

justification. It is being recommended that company should account and monitor all these factors
to support business growth in various challenging dynamics and win in the marketplace and be
continuously updated with the trends and technology to be competitive in marketplace and
accounts to high sales revenue and profitability.

REFERENCES
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performance. Future Business Journa. 6(1). p.3.
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Automotive Firms in Nairobi City County, Kenya.International Journal of Business
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Purkey, D.R and et. al., 2018. A philosophical justification for a novel analysis-supported,
stakeholder-driven participatory process for water resources planning and decision
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