Strategic Management: Analysis of H&M's External Environment

This report analyzes the external environment of H&M, a multinational fast fashion clothing company, using PESTLE analysis. It also evaluates the company's resources and capabilities.

Strategic Management

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
PESTLE Analysis-.......................................................................................................................3
Porter Five Forces-.......................................................................................................................4
VRIO-..........................................................................................................................................5
SWOT Analysis-..........................................................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Strategic management means the analysis of internal and external environment of the
organization such that organizational objectives can be set. H&M is a multinational fast fashion
clothing service provider company which provide clothing options for customers of different age
and gender. Analysis of company's external environment is done in this report with a proper
implementation of PESTLE analysis. With that evaluation of company's resources and
capabilities is analysed in the report.
MAIN BODY
PESTLE Analysis-
Political-
Political instabilities of a country makes a negative impact on company's economic
growth and this can be seen during the events of Brexit where UK's decision of leaving EU has
increases taxation on H&M. This happens because it has to pay taxes in the areas which were
freely available before Brexit.
Economical-
Changing inflation rates of a country makes a negative impact on company's economic
growth because it has a direct impact on buyer's buying capabilities. With that customer's buying
capabilities are directly proportional to the high taxations because it increases the pricing on the
product (Hitt and Duane Ireland, 2017).
Social-
Customers are changing the ways of buying products and this can be seen where
customers are showing high interest in buying products in bulk. With the in the present scenario
where due to COVID-19 many customers have lost their jobs and due to which organization is
forced to reduce its pricing on products.
Technological-
Customers are also showing high interest in utilizing them, due to which company is also
showing high interest in changing the ways of selling products through the means of internet.
With the H&M is also showing high interest in advertising itself through social media marketing
(Shujahat and et.al, 2017).
Legal-

There are wide range of laws such as employee laws where company has to set a
minimum pay structure for all its employees, thus is good for employees but makes negative
impact on employee motivation and company's economic growth.
Environmental-
Despite of company's sales and marketing strategies it is also responsible for establishing
some efforts for environmental welfare. This may increase organizational expenditures but at the
same time it can be used for increasing brand awareness and will generate a positive
organizational image which will lead to improved organizational image.
Porter Five Forces-
Existing market competition-
H&M is fast fashion clothing option service provider which provide wide range of
products to its customers for increasing organizational sales, but organizational sales are affected
due to high market competition. Thus in order to tackle that organization has to implement
creative marketing strategies for increasing its customer count and maintain existing customer
count (Trigeorgis and Reuer, 2017).
Threat of new entrance-
Market of H&M is fill with tough competitors and is continuously affecting
organizational sales but this condition can get more complicated when a new competitor arises.
Thus H&M must develop a strong network and implement creative marketing strategy such that
by improving itself it can limit the threat of new entrance with that it is also buy new small
potential companies.
Power of suppliers-
Suppliers are very important for any organization because they provide raw materials for
developing a product and thus H&M must develop strong relationship with suppliers such that it
is able to get products at lowest possible price. With that company must also search for new
suppliers by which it can switch to the cheapest (Lynch, 2018).
Power of customer-
Customers are the main reason for which this strategy is being developed and therefore
company must make sure that customers are getting the best services by which it can reduce the
chances of brans switching, for achieving this it must implement creative marketing strategy.

Brand switching threat-
Customers can easily switch to other brands which are providing better options at an
affordable pricing, thus H&M has to monitor other market competitions as well such that it is
able to improvise its product placement and pricing, by which probabilities of brand switching
can be reduced.
VRIO-
Value Rare Costly of Imitate Organized Competitive Implication
Financial Yes Yes Yes Yes Advantage over market
competition
Technology Yes Yes Yes Yes Sustainable market
advantage
Product
quality
Yes No Yes No Competitive advantage
Value-
Strong financial strength of the organization is its strength to tackle market competition
and provide high level of services to its customers. With that the technological advancement of
the organization is very valuable to its because of which it is able to provide out of the box
creative designs and high quality products (Durand, Grant and Madsen, 2017).
Rarity-
The strong financial strength of the product is difficult to copy because its wide
geographical reach H&M is able to attract wide range of customers towards the organization.
Company develop products as per its requirement due to which it has customized its machineries
to get cutting edge high accuracy in developed product.
Imitable-
M&H is a multinational organization which is having wide range of products available at
its geographically spread stores due to which it is very difficult for any organization to imitate
this because of its high quality creative designing in developing fast fashion products (Zhao and
et.al, 2017).
Organization-

The company has efficiently organized its resources such that it is able to achieve high
output at minimum expenditures due to which it effectively managed its resources such that high
accuracy can be achieved. A clear organized organizational structure enable organization's
employees to identify their role and requirement due to which their performance is also
increased.
SWOT Analysis-
Strength-
H&M is one the largest clothing based multinational organization which provide wide
range of fast fashion clothing options to its customers, company is having more than 5000 stores
all across the globe. To efficiently manage large number of customers it is having thousands of
well-trained professional employees, through which company provide value of price products to
its customers (Ethiraj, Gambardella and Helfat, 2016). With that company is having strong
financial background due to which it is able to implement creative marketing strategy for
attracting customer towards the organization.
Weakness-
Company provide fast fashion products to its customers due to which its designs are
easily replicable and because of which brand switching often happens. H&M is lagging in
efficiently tackling market competition because its products are not as per current market trends
and not according to customer requirements. Because of this limitation in product designing
customer's engagement with organization is decreasing, which is increasing the chances of brand
switching.
Opportunity-
Company can increase its online sales through the means of online websites like Amazon,
etc. With that company can also increase its geographic reach in other countries through which it
will able to increase its organizational sales. In addition to that company can also implement
creative design options and through social media marketing it can improve the communication
bridge with customers resulting high loyalty and high sales.
Threat-
Rapidly changing market trend and increased market competition are the main threat for
the organization. H&M products are lagging creative and attractive designs due to which it is
lagging in increasing customer buying appeal. With that due to easy designs its products are

easily replicable, due to which customers often switch to better options, which are comparatively
much cheaper than the original and at the same time have to same design like original.
CONCLUSION
From the above analysis it can be concluded that organizations need to set higher
organizational objectives such that it can get an ability to enhance its working capabilities.
However organization's working capabilities is affected by the external and internal environment
due to which it must continuously evaluate the environment and implement organizational
changes such that it is able to achieve its organizational goals.

REFERENCES
Books and journals
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship. pp.45-63.
Trigeorgis, L. and Reuer, J.J., 2017. Real options theory in strategic management. Strategic
Management Journal. 38(1). pp.42-63.
Zhao, E.Y. and et.al, 2017. Optimal distinctiveness: Broadening the interface between
institutional theory and strategic management. Strategic Management Journal. 38(1).
pp.93-113.
Durand, R., Grant, R.M. and Madsen, T.L., 2017. The expanding domain of strategic
management research and the quest for integration. Strategic Management
Journal. 38(1). pp.4-16.
Ethiraj, S.K., Gambardella, A. and Helfat, C.E., 2016. Replication in strategic
management. Strategic Management Journal. 37(11). pp.2191-2192.
Lynch, R., 2018. Strategic management. Pearson UK.
Shujahat, M. and et.al, 2017. Strategic management model with lens of knowledge management
and competitive intelligence. VINE Journal of Information and Knowledge
Management Systems.