Effective Strategies for Business Success

The provided report concludes that organizations must maintain their strategies to achieve success. It emphasizes the use of Porter's generic competitive strategic model as an effective approach for businesses with a good presence at the international level. The assignment also highlights the need for companies like H&M to adjust their strategies to minimize risks and improve performance.

Strategic Management

EXECUTIVE SUMMARY
This report focusses on strategic management and its various tools and techniques that
help a business concern in achieving a competitive edge against its rival firms. This report
focusses on various elements such as introduction and strategic analysis by infusing various tools
and techniques such as Porter five force model. Lastly effect of these tools on organisational
structure has also been mentioned in this report.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN ANALYSIS..........................................................................................................................1
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Strategic management can be defined as a process in which planning, analysis,
monitoring, assessment and more basically being done on a regular basis which directly aid in
meeting company's desired objectives and goals. In present time, as business environment is
carrying a rapid changing nature because of fast-paced innovation, customer expectations and
emerging technologies which basically led organizations restructure their strategies in order to
gain competitive advantages or to sustain at domestic or international market for a longer period
of time (Ansoff and et. al., 2019) . Under this report, in order to understand the overall concept,
firm which has been chosen i.e. H&M. It was found in the year of 1947 by Erling Persson and
operating in approximately 60 nations with more than 4,500 stores. H&M has developed many
strategies to gain competitive advantages using Porter’s model of generic competitive strategies.
Report will show a case of H&M and the issues related to Porter’s model that impacted upon
overall performance level of strategic approach of the company.
MAIN ANALYSIS
In present time, it has been analysed that firm’s competitive behaviour is specifically
become an essential thought related to theorists, practitioners, and policy makers. In the same
way, Michael Porter who is one of a famous American academic known developed a range of
theories related to economics, social causes and business strategy that organisations uses in
different areas to gain many competitive advantages and could improve profit margins as well in
today's market. According to Porter, it is the joint influence of these forces that determines the
intensity of competition of each industry, where the strength of each competitive force is
industry-specific. Profitability, considered as the “rate of return on investment,” is negatively
correlated with the overall strength of these forces. Hence, the greater the strength of these forces
that affect firms, the lower the expected profitability in fast fashion industry.
H&M at the time of developing a strategy, it basically focuses on content, process,
economic and organisational approaches that may aid company in different ways like reducing
the cost of overall cost and time which takes place from planning to executing the strategy at
workplace(Baumgartner and Rauter, 2017).
In present context, H&M is consist with a range of resources that basically aid them in
allowing to improve their own presence at fast fashion business environment. It can be said that,
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whole industry requires proper an organisation that consist of a capability of adopting the new
trends, look into requirements of customers and then develop products and services based on the
needs. This could help them in reaching to all new heights. In the same way, it is required for
H&M to manufacture clothes very quickly, sell high volume of what they have made with low
margins. This could lead them in gaining high competitive advantages. On the other hand,
businesses that are performing at international level uses Porter’s model of generic competitive
strategies in order to gain competitive advantages. In the same way, H&M has also kept its focus
on the same and this is basically being done because of its size where the company is having
around 4,500 stores in all over the world (Borland et. al., 2016) . This size of H&M basically aid
them in cultivating the other competencies which helps in excelling at fast fashion industry. Size
considering low profit margins can allows H&M in spreading the overall cost which is linked
with products that consist of new designs and these basically helps them in quickly capturing a
larger market at international level.
Since H&M is coming under fast fashion industry, that is why a case of this company has
been taken where organisation has developed a competitive strategy to offer customers with
quality based products with low profit margins. Due to its presence at international market was
coming down, it became very much important for them to improve their own measures to retain
the lost reputation. For this, it was required to develop such a team that may aid them in pulling
out favourable outcomes considering a whole new strategy. Since new trends, competition and
more are specifically impacting upon developed strategies and this mainly affects presence of the
company at different positions within the market. Just like H&M, many organisations basically
uses different techniques to develop their own strategies in order to gain many competitive
advantages and these are Porter's model of generic competitive strategies, game theory and so on.
Porter's model of generic competitive strategy:
Michael Porter, an American academic did proper investigation, and through
experiencing with a range of strategies developed by various philosophers has come up with
Porter's model of generic competitive strategy. If it is looked from the point of view of a business
organisation like H&M, one of most relevant and important aspect of the competitive
environment is that, industry in which the H&M is competing with its rivals. Industries are
comprised of firms that produce close substitutes (Bryce, 2017) . However, H&M’s competitive
business environment is basically carrying an effective common structure, and here it can be said
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that there are around five competitive forces which basically impacts upon a competitive
strategy. These forces that are viewed as the determinants of the overall competitiveness
and profitability of H&M are:
Potential entry of new competitors: In present context, where profitable markets that are
also carrying a rapid growing nature which grabs attention of business organisations that are
looking forward to expand themselves. In the same way. H&M and other organisations in same
industry like H&M has also kept its focus on same thing and looking forward to expand itself at
marketplace. This approach, is also impacting upon overall profit margins as well and eventually
reduced the profit margins of existing organisations in targeted market where new entrances are
taking place (Certo et. al., 2016). Here, incumbents operators like telecommunications,
traditional phone company has the power to stop new entrances but this could lead overall
economy to get interrupted of a country.
On the other hand, if it is talked about issues that are linked with new entrance factor of
this model than, it can easily be said that H&M could basically attain competitive advantage only
if it posses ‘capabilities’ that allow it to create not only positive value but as well additional total
value than its competitors. But, rivals of H&M like ZARA, E-SPIRIT and more basically having
a good hold in many targeted areas like India, China and so on that are having positive potential
for new entrances. It is may be possible that organisations that are performing operations at
domestic level may directly impose companies that are looking forward to expand themselves.
Strategy of H&M related to low profit margins could basically gets affected in the most reliable
way.
Intensity of rivalry among existing firms: In the context of H&M there are lot of
national or international competitors or existing local market which affects the company in a
negative way. There are many more reasons which heavily impact on the organisation such as
H&M opportunities of growth, that are not so much high because of the maturity in the sector so
that, variability of price is very affective in consumers when company considers about
alternatives. Competitive rivalry affect by some factors like high competitive advantage by
innovation, strong strategies for competitive environment and competition between in online or
offline companies, focusing on firms ratio and level of advertising in an organization (Gallus and
Frey, 2016) . Therefore, company have to take some efforts for increasing their future growth to
achieve their targeted goals and objectives in a specific manner.
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This factor is one of most essential one which is needed to understand where rivalry is
intense, organisations like H&M could directly grab attention of customers considering a range
of strategies like aggressive price cuts and high-impact marketing campaigns. In fast clothing
sector, trends gets changes on a regular basis that means it is required for H&M to understand the
fact that its suppliers, buyers can go elsewhere if they feel that they're not getting a good deal
from H&M. Thus, this could be taken as an issue which is required for H&M to keep on making
alterations in its pricing strategy. Here, H&M has developed a strategy of low margins in order to
give good rivalry to its competitors and this is specifically impacting negatively on their earnings
and that is why market share of this company is reducing on a regular basis at international
market (Haines, 2016) . On the other hand, marketing function of H&M is really very strong that
could aid them in reaching to new heights and just because organisation is looking forward to
improve its sales, current size would help them in order to do so. Along with this, it has also been
analysed that turn over of inventory is also required to be quick enough of H&M in order to gain
many competitive advantages.
Potential development of substitute products: As per the H&M there are no substitute
products that offered through the other industries which is perform the same function in clothing
industries, so that there are lot of opportunities for development of H&M business because,
There are some potential factors that comes under in threats of substitute such as price related
substitute, switching cost of buyers and level of product differentiation. Some times these factors
can affect an organization but H&M have a lot of option to reducing substitute power from the
market because an organization offered good quality of clothes with changes policy, so that
customer can attract or it increases loyalty of brand.
On the other hand, this factor is being considered as an appropriate approach for a
business organisation like H&M to improve its customer base. Here, consumers basically looks
forward to use an alternative of a product or service that a company (H&M) is offering to its
competitors. This could be understood with a good example, where H&M has offered unique
apparels considering current and future trends but basically consumers somehow finds out the
basic substitutes not with the same quality or name but with same appearance (Hill, 2017). Here,
it can be said that a substitution that is easy and cheap to make can weaken of H&M's position
and threaten its profitability at marketplace.
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Bargaining power of consumers: It is the bargaining power of customers that also
identified the market of outputs. In this, customer has ability to take decision power regarding
prices, which affect the sensitivity of consumers regarding price changes policies. According to
this, H&M can take decision to reduce buyer power such as implementing a loyalty programme.
The buyer power is high when they have lot of alternatives and buyer power is low when they act
independently. For example, if the large number of buyers wish to get their product in low price
then company have no other option to say because of under pressure in the consumers demand.
So that, bargaining power is high and some times it is low on the behalf of company.
In present time, it is not at all easy for business organisation to reduce the prices for
customers and in the same way, it is not basically effective for buyers to drive product's prices of
a business organisation like H&M to reduce. Since H&M is already having around 4500 stores in
approximately 62 nations, this problem is not at all putting impact upon this company(Hill, 2017)
. As organisation in modern time consist a good amount of customers because of its size and this
has given H&M in reaching to all new heights. How much would it cost them to switch from
your products and services to those of a rival? Are your buyers strong enough to dictate terms to
you?
When you deal with only a few savvy customers, they have more power, but your power
increases if you have many customers.
Bargaining power of suppliers: It is the bargaining power of suppliers that also
described the market of inputs. In this H&M, it is not very high because there are various
suppliers in different countries with low labour of costs. According to this, retailer can create the
conditions of demand, this is because they have more power than the suppliers, but suppliers of
raw materials, components and services for the H&M can also very helpful in a effective way. It
also consist some factors like supplier switching cost can relate with firm switching cost and
other factor degree of various types of inputs. Therefore, this model deals with both situations
that is high power or low power. It is also good for H&M to meet suppliers directly to achieve
their targeted sales of products (Hitt and Duane Ireland, 2017) .
This concept can be understood with a good example where an individual is having high
range of choices and this made him/her to move from one expensive product to a cheaper one.
Here, it can be said that H&M would require to offer unique clothes considering the fast
changing approach and keep on making alterations among them as per new trends. But, if
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targeted areas are not having enough suppliers than there is a possibility that stronger position
can easily be grabbed right on time, On the other hand, ability would also directly improve of
H&M in specific time frame. Issue in present situation can easily be seen through different
sections and areas as well.
In the following report, Porter’s five forces analysis is used to determine the intensity of
competition and profitability that can be expected in the fashion retail sector like H&M.
Threats of new entrants, from the global perspective, it will be hard for new entrants to
gain huge economies of scales without investing huge initial investments, like inventories, initial
fund, research and development expenses and advertisement cost. H&M is an large international
retailer company, which has already established strong footholds in the market, so it is very
difficult for the new entrants to compete with H&M. Along with this, the new entrants cannot
copy the design of H&M products, as they do not have the copyright to produce duplicate
product of H&M.
Also if there is strong threat of new entrants in the Retail industry like H&M, then
existent participant will be willing to gain lower profits to reduce the threats from new
participant. The bargaining power of buyers considered high because there are multiple choices
like Zara, etc. Furthermore there is small or no switching cost included when selecting fashion
needs, thus resulting in less or no customer loyalty to the brands. So finally, H&M is required to
monitor their needs as they are the end consumers of their products and these are its main source
of revenue. This is because If the buyers have strong bargaining power then they usually lean to
drive price down thus limiting the potential of the H&M to earn sustainable profits.
H&M is the large international retail company, and there are many suppliers with low
labour costs and all want to deal with H&M, and most of the suppliers do not want to break the
relations which the organisation as they are have more power than suppliers, so most of the
suppliers are always agree with the conditions made by H&M, so the bargaining power of
suppliers will be low as they want to build strong relationship with the chosen organisation.
Threat of substitutes of H&M is very low, because the H&M is the large retail industry,
they itself produce the substitutes of their products with best quality and at low rate than their
competitors. So it is very difficult for the other organisations to produce a substitute of the H&M
products. By having the low rate of substitutes, the success rate of H&M is high. Therefore by
this it gain more profit in the business. Competitive Rivalry where the competitive rate of H&M
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is high, as there are lots of rivals both in large and small business category in the retail sector.
The quick changes in the needs and requirements of customers do not permit to create strong
scale economies. Thus, competition is intense, so it becomes difficult for H&M to earn
sustainable profits.
Considering the above information, it can be said that strategy of low margins that H&M
is having may aid organisation in reaching to new heights in specific time frame (Michael,
Storey and Thomas, 2017). Through this, H&M could also offer customers with a range of
products with low margins because of 4,500 stores and a good presence at international market
(approx. 62 countries).
CONCLUSION
With the help of above mentioned report, it is being concluded that organisations needs to
keep on maintaining its strategies in order to gain competitive advantages. Through this,
maximum benefits could be gained by a company like improvement in existence, enhancement
in profit margins, increase in market share and many more. Porter's generic competitive strategic
model is one of effective and essential approach that can be used by a business organisation if it
is having good presence at international level. It is also required for companies like H&M to
keep on making alterations in its strategies so that risks that an organisation is going through
could be reduced to minimal.
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REFERENCES
Books and Journals
Ansoff, H. I. and et. al., 2019. Implanting strategic management. Springer.
Baumgartner, R. J. and Rauter, R., 2017. Strategic perspectives of corporate sustainability
management to develop a sustainable organization. Journal of Cleaner Production. 140.
pp.81-92.
Borland, H., et. al., 2016. Building theory at the intersection of ecological sustainability and
strategic management. Journal of Business Ethics. 135(2). pp.293-307.
Bryce, H. J., 2017. Financial and strategic management for nonprofit organizations, Walter de
Gruyter GmbH & Co KG.
Certo, S. T., et. al., 2016. Sample selection bias and Heckman models in strategic management
research. Strategic Management Journal. 37(13). pp.2639-2657.
Gallus, J. and Frey, B. S., 2016. Awards: A strategic management perspective, Strategic
Management Journal. 37(8). pp.1699-1714.
Haines, S., 2016. The systems thinking approach to strategic planning and management, CRC
Press.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function.
Macmillan International Higher Education.
Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and strategic
management research. The Blackwell handbook of entrepreneurship. pp.45-63.
Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., 2016. Strategic management: Concepts and
cases: Competitiveness and globalization. Cengage Learning.
Michael, S., Storey, D. and Thomas, H., 2017. Discovery and coordination in strategic
management and entrepreneurship. Strategic entrepreneurship: Creating a new mindset.
pp.45-65.
Percy, L. and Elliott, R. H., 2016. Strategic advertising management, Oxford University Press.
Tjemkes, B., Vos, P. and Burgers, K., 2017. Strategic alliance management. Routledge.
Wheelen, T. L. and et. al., 2017. Strategic management and business policy .(p. 55). Boston:
pearson.
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