Strategic Management for H&M: Analysis and Recommendations

This report provides an analysis of H&M's strategic management, including external and internal analysis, strategic capabilities, and strategic direction tools. It also offers recommendations for market development and differentiation strategies.

Strategic Management
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TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
1- Background information of H&M...........................................................................................3
2. External: Fast fashion Industry Analysis.................................................................................3
3. Internal: strategic capabilities..................................................................................................5
4- Strategic direction tools in context of H&M...........................................................................7
5 Strategic selection and justification..........................................................................................7
6 Conclusion and Recommendation............................................................................................7
REFERENCES................................................................................................................................9
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INTRODUCTION
Strategic management is an ongoing or continuous process in which senior executive or
managers of organisation plan, monitor and control strategies so that company can gain
competitive advantages. In another words, it involves long process starting from setting
objective, market research, to planning key actions and controlling the process so that best
outcome can be gained at minimum cost. This report is about H&M is fast fashion that has more
than 120000 employees and more than 2000 factories operating in order to delivery qualitative
services to customers. It has contained information related to external and internal analysis by
using several model or tool like SWOT and Pestle analysis. The report also make use of Ansoff
Matrix and Porter generic force in order to understand future strategic direction that could be
used by company to sustain its business for longer time frame.
1- Background information of H&M
Hennes & Mauritz is well known and most leading fashion brand in the whole world.
They manufacture clothes for men’s, women’s and children as well. Firm work and operated its
venture with skilled and talented workforce. It has 1,26,376 workers who are eligible and
knowledgeable. They all are able to work according to vision and mission statement of chosen
brand. Vision of company is to make everyone stylish and allow looking good. Its vision is to
lead change towards renewable and circular fashion while being an equal organization.
By selling quality products to target customers, organization makes 24.3 billion United
State dollars, in 2019. Firm is a leading international fashion firm with high vales and clear
concept of corporate. It successfully managed and operated total 5,043 physical outlets,
established in UK, China, Poland, Franchise stores, Switzerland, Italy, France, Sweden,
Germany etc.
2. External: Fast fashion Industry Analysis
Pestle analysis is an model that helps in understanding several external or macro
environmental factors that impact on strategy and growth of organisation. Management of H&M
by making use of this model can effectively understand dynamic or ever changing nature of
external environment (H&M PESTLE Analysis, 2019). Key elements that affect on smooth
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operation of business are political, economic, social, technology and environment which are
illustrated as follows:
Political and legal factor : H&M is an international organisation so it has to abide to rules and
regulation of different countries made by government in order to promote its business operation.
Company have majority of its production operation in Egypt, turkey and Lebanon that are
suffering from political instability. It has tried to follow trade regulation and several other laws
like consumer protection of host country to grow and expand its business in international market.
Franchising and collaboration are two best strategy that have been used by H&M to minimise
international political risk while entering into other countries like Indonesia, Oman, Egypt and
Saudi Arabia. Thus, it can be stated that company by making use of effective entering approach
have avoided several regulatory requirements and gain competitive advantages (). At same time
Covid-19 and Brexit have also resulted in increase in overall manufacturing cost thus decrease in
overall sales volume of firm.
Economical factor: Brexit have adversely impacted on growth and sales volume of company as
United States have swift and cause increase in import tax thereby making products of H&M
more expensive. There are many other economical obstacle that are faced by H&M such as
competitive pricing strategies set by other organisation that resulted in loss of customers base.
Frequently changes in import duties, taxes and import laws has caused difficult for management
to set standard price at which it can sells products and services to customers (Ajagbe and et.al.,
2016). Thus, H&M in order to cope up with economic factor have purchase raw material in bulk
quantity at minimum price so that maximum value can be offered to individuals at minimum
rates.
Social factor: In modern society, social media and celebrities are two most common factors that
influence customers to choose or have particular fashion clothe in order to look and feel
attractive. Customers are demanding more designer clothes as they want to look different from
others so H&M by offering unique and attractive clothes have fulfilled expectancy of people and
earn huge profit margin. Attitude, taste and preferences of people changes continuous so
marketing manager of H&M is always ready to find new and best method that can be used to
meet expectancy of customers so that company can retained its market positioning.
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Technological factor: In era of digitalisation and more use of internet, social media platform by
younger generation, people are more interested to make online purchase rather than visiting
stores. Online presence give comfort and ease to customers to easily select, review and order
products while sitting at home/ office or anywhere. H&M have effectively adapted itself with
new and innovative technology so that services can be delivered to customers beyond their
expectancy level. Like it has its official websites where people can easily choose particular
design clothes or review previous experienced of customers. Several social media platform such
as Facebook, Twitter and Intragram are used by company to build strong relationship with
customers. Therefore, online payment and home delivery services of company have contribute in
making customers happy and satisfied.
Environmental factor: It can be stated that textile is second most polluting industry that have
caused threat to life of both human and animal. H&M has a goal to make use of recycle clothe
material, make optimum utilisation of resources and release less amount of wastages so that
people can live healthy lifestyles (Chen and Wang, 2017). Therefore, company have decided to
take steps towards sustainability and preservation of natural resources so that no harm can be
caused to end user or people living in society.
3. Internal: strategic capabilities
SWOT is an effective tool that is used to understand internal strength and capabilities of
H&M that helps in making best use of available opportunities so that company. Manager of
H&M can also understand key areas in which company lack thus plan appropriate course of
action that can be used to promote smooth operation of business. Such as:
Strength
Global presences and strong brand image: Company is well know under different brand
names such as COS, Monki, Weekday and H&M and all have unique identify that helps in
influence different segment of people to be part of firm. H&M has more than 5076 stores in 74
market such as Asia, Africa Europe and Australia thus it earn huge amount of revenue and
market share in textile industry (SWOT analysis of H&M, 2020).
Varieties of products and services: H&M has wide varieties of unique design clothes and
dresses that offer ease and more alternative options to select best products for satisfaction of their
respective requirements. It have products range starting from cosmetic, clothes, candle holders
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to blankets thus different individuals as per their respective requirements can select specific
products (Bentley-Goode, Omer and Twedt, 2019).
Weakness
Over dependence on outsourcing: It can be stated that H&M is highly dependent on outsource
production instead of in-house manufacturing as there are more than 900 independent suppliers
that has helped in great success of organisation. But more dependence on outsourcing may cause
huge loss in future circumstances thus manager have to find alternative options to promote
business.
Uninspired fashion: H&M is more reliable on fashion trends set by major designer brand thus
most of the people are not inspired or motivate as it is not based on existing fashion trends.
Therefore, it is another biggest weakness of firm that need to be removed by management of
H&M so that company can enjoy high market share in international market.
Opportunities
E- commerce platform: Organisation has opportunity to expand its business operation by
making best use of e- commerce platform or online method of selling products and services.
H&M by making use of different channel or method such as content, email marketing can attract
maximum number of individuals within limited time frame (de Oliveira and et.al., 2017).
Emerging market: There are several international markets in which company can expand its
business operation like ASIA and Africa. Thus H&M by meeting needs of people in new
emerging market can enjoy higher profitability and market share.
Threat
Global pandemic: There are numerous change in external environment, one such is covid-19
that have resulted in uncertainty about near future.
Increase competition: It can be stated that there are many organisation to provide several
products in order to meet increasing demand of designer clothes and earn huge profitability so it
is one of the biggest threat for H&M.
4- Strategic direction tools in context of H&M
Ansoff growth strategy-
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Market penetration-
It is the best Ansoff growth tactic that H&M can consider and use to get competitive edge
and become a global leader. With this strategy, firm can effort to sell more of its products or
services into current market where potential target customers exist who can purchase items in
exchange of money (Soltani-Fesaghandis and Pooya, 2018). It can help to increase profits
margin and allow firm to satisfy people even better. Market penetration could also aid to acquire
wide market share more than other brands operated in similar industry.
Market development-
It can also beneficial for great growth and success of H&M, because it can help to find
out the most profitable market for company and allow them to develop the new one for current
items (Gardiner and Scott, 2018). It best things about this strategy is that it can help firm to gain
new customers, grow business and increase revenue which is quite useful in term of building
strong brand image. When company implement this tactic successfully, it can lead to competitive
benefit.
Product development-
It can be considered as appropriate action and approach that can use to bring new item to
a market. H&M can use this one as well when management think it is appropriate for venture
growth. They can change existing one or develop new product that attract people towards
purchase which in return increase sales and profitability level even better. With this tactic, firm
can measure and manage its success and win competitive benefits, which is not possible for each
brand to get.
Diversification-
This strategy is quite unique and different because it can change overall concept to firm
and allow them to satisfy target customers (Gyan, Brahmana and Bakri, 2017). Firm can use this
to enter into new market with new concept that attract people and drive them towards purchasing
items from H&M brand. There are several companies who use this strategy and gain benefits
which make them more popular. It can reduce effect of market volatility and time spent in
monitoring product portfolio.
Porter’s generic strategy-
Cost leadership-
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It is important part of marketing tactic that help H&M to become market leader and keep
competitive. This occur when firm lead to category leader for low pricing, in simple words
organization become global leader when they sell its item in very low or affordable prices to
target market. This strategy can easily attract people and allow to do not switch to other one for
longer period of time. It can work beneficial and contribute in achieving set aims and objectives
of chosen brand.
Cost focus-
It emphasize cost reduction with a concentrate market, it can be risky because most
people due to cheap price consider quality of products very low which is not beneficial at all for
H&M. With this tactic, company can enhance their productivity and profitability level even
better and increase customer base as well. It can help firm by reducing competition and enhance
business sustainability. Furthermore, cost focus strategy can aid company to become a market
leader for longer period.
Differentiation-
It is the last tactic of Porter’s generic tactics that also help firm to reach at global level but
have risky factor too. Because most people could take time to consider appropriate quality of
products and find it the best one.
From above analysis, it has been identified that product market development and
diversification will be beneficial for company as this combination can help to get excellent
success.
5 Strategic selection and justification
It can be evaluated and understand from above market analysis, use of Ansoff matrix and
porter generic force that company can select market development strategy and differentiate
strategy in future in order to attain its respective objectives. Both strategies can be critically
evaluated as follows:
Market development strategy: Company by entering into new emerging or international
market with its existing qualitative products and brand image can enjoy huge market share and
generate lot of revenue. It is beneficial for company as it is able to add new and new customers
within firm and increase overall sales volume (Ike, 2017). At the same time it can be critically
stated that market development involves high amount of financial risk, as company have less
knowledge of new market condition i.e, taste and preference of individuals.
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Differentiate strategy: It is another future strategy which could be fruitful for H&M as
company by differentiate its products in terms of design, qualitative can charged high price from
customers. So, positive impact of differentiate strategy is that it helps in creating strong brand
image and contribute company to gain competitive advantages. Whereas, company in order to
differentiate or make innovative design needs to invest huge capital or incurred cost so that
products are delivered beyond their expectancy level.
Therefore, it can be justified that H&M needs by conducting effective market survey can
get knowledge about existing taste and preference of people and enhance its overall profitability.
Differentiate strategy is also best for H&M as it will helps in removing one of the weakness of
firm that is uninspired fashion as company will find new and different way to meet customers
expectancy and attain its goals.
6 Conclusion and Recommendation
From the above report there are several suggestion that needs to be used by H&M to
promote its business operation for longer time frame in both domestic and international market.
Such as:
1. Firstly company need to invest high amount of capital in digital technology so that
seamless or more qualitative experienced can be given to end users. Company through
digital media or internet can easily build strong relationship with customers, understand
their taste and take further steps to meet them in best possible manner for growth of firm.
2. Secondly, It needs to take more action toward sustainable management or less
generation of wastage of clothes or water so that all individuals can enjoy better
lifestyles. It needs to use unique ideas to design its products so that they can be easily
differentiate and preferred by maximum customers (Zhang, 2016).
3. Company needs to work on its organisational culture and employee’s development so
that they have qualified skills and capabilities to deliver best services to end users. H&M
through training employees about the way they need to deal with different customers on
ecommerce platform or stores can helps in retaining their satisfaction level and loyalty
for longer time frame.
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REFERENCES
Book and journals
Ajagbe, A. M and et.al., 2016. Business strategy as a contributor to organizational
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firm’s information environment?. Journal of Accounting, Auditing & Finance, 34(4).
pp.563-587.
Chen, L. and Wang, J., 2017. Business strategy, compensation policy and innovation
performance: A behavioral perspective. Compensation & Benefits Review, 49(4).
pp.189-205.
de Oliveira, M. C and et.al., 2017. Is sustainability in business strategy factual or
figurative?. Race: revista de administração, contabilidade e economia, 16(2). pp.427-454.
Gardiner, S. and Scott, N., 2018. Destination Innovation Matrix: A framework for new tourism
experience and market development. Journal of Destination Marketing &
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Gyan, A.K., Brahmana, R. and Bakri, A.K., 2017. Diversification strategy, efficiency, and firm
performance: Insight from emerging market. Research in International Business and
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Ike, L., 2017. Business Strategy. Xlibris Corporation.
Liu, C. H and et.al., 2020. Co-competition, learning, and business strategy for new service
development. The Service Industries Journal, 40(7-8). pp.585-609.
Soltani-Fesaghandis, G. and Pooya, A., 2018. Design of an artificial intelligence system for
predicting success of new product development and selecting proper market-product
strategy in the food industry. International Food and Agribusiness Management
Review, 21(1030-2019-593). pp.847-864.
Zhang, R., 2016. Business strategy and firm performance: the moderating role of product market
competition. Available at SSRN 2820147.
Online
H&M PESTLE Analysis. 2019. [Online]. Available through: <
mbaskool.com/pestle-analysis/companies/17954-h-and-m.html>.
SWOT analysis of H&M. 2020. [Online]. Available through:
<https://www.marketing91.com/swot-analysis-hm/>.
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