Corporate Strategy Case Study

This case study analyzes H&M's corporate strategy in the fast fashion industry, focusing on its competitive advantages, value chain analysis, and the impact of competitors like Zara and UNIQLO. It discusses the company's market position, operational strategies, and the challenges it faces in maintaining competitiveness. The study employs frameworks such as VRIN and Porter's five forces to evaluate H&M's strategic capabilities and sustainability in the retail market.

Running head: CORPORATE STRATEGY
Corporate Strategy
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Table of Contents
Introduction......................................................................................................................................3
Analysis...........................................................................................................................................4
Threat of new entrants.................................................................................................................4
Sources of barriers.......................................................................................................................5
Value Chain Analysis..................................................................................................................7
Primary Activities............................................................................................................................9
Inbound Logistics........................................................................................................................9
Operations....................................................................................................................................9
IT system...................................................................................................................................10
Outbound Process......................................................................................................................10
Transportation............................................................................................................................10
VRIN Analysis...........................................................................................................................11
Conclusion.....................................................................................................................................11
Reference.......................................................................................................................................12

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Introduction
The case study on ‘H&M in fast fashion: continued success?’ analyses the function of
strategic abilities to bring up competitive advantage and the primary issues can be considered in
explaining the competitive sustainability. The clothing company H&M has always been in the
leading position in the international fashion market because of its special concept, unique
business model and the ability to mix the amazing designs at an affordable price. But the
company has been threatened by its competitors so it should start considering the fact and
examine the continuity of competitiveness in the strategic capabilities. This study found out that
the areas of function in which the company has always had an advantage via the competitors and
the benefits can be enjoyed in the long run.

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Analysis
Threat of new entrants
Fig: Porter’s five forces
Sources: Foucault and Frésard 2016
The total size of H&M’s market was around $3049.5 billion which increased by 3.7% in a period
of four years. Since there is a slow growth, the competition increased which again got affected
because of several smaller players. The most important competitors of H&M are Zara and GAP.

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Another new and comparatively smaller competitor is a Japanese company UNIQLO which has
just began to expand. The problem in fashion industry is that the changes are very sharp and
sudden. The trends are applicable to uncertain and unpredictable changes. The customers who
are at the end of the supply chain get the opportunity to select and purchase from a wide range of
variety. The fast fashion category also looks into the fact of cutting cost and bargains. With the
increase in international trade, there is a growth in the global suppliers which increases the
competition among the local manufacturers. To enter into the retail sector, there is not much
need of a high capital. There are many suppliers who help an individual to set up their own retail
store within an affordable range. But, in the international market there are some big corporations
who hold a major part of the industrial revenue. The scale economies and size of those
corporations help in building brands in several retail outlets and they have a greater potential in
buying when it comes to negotiate with the suppliers.
Sources of barriers
H&M had 218 outlets with the most attractive one in Paris and another 230 new stores
with 35 stores in China. Zara increased the competition by opening 120 new stores in China but
later Inditex took hold of H&M and became the biggest fashion retailer in the world in terms of
market capitalization. This rapid increase of Zara had threatened the existence of H&M. Increase
in competency and rise in the cost of production, the business started to suffer. Poor economic
condition resulted in the increase in competition for the customers who invested in fast- fashion
business. The Japanese company UNIQLO is a retail chain operator which has specialization in
designing casual garments for men and women. Its sales and profits are the highest among other
companies in Japan. It also has special retailer store or SPA model which takes care of the
design, production and sale. They keep on modifying the SPA model which helps in

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distinguishing them from the competitors. Their products remain unique and different from
others (Barney and Peteraf 2014). They are quick in making changes in the production to portray
the latest sales environment and reduce the cost of operating store which includes rent and
personnel cost. Thus UNIQLO provides high quality clothing at an affordable price. They used
to operate a range of 848 and 275 stores in 2012. Their 135 stores are present in China, 16 in
Hong Kong, 75 in South Korea, 17 in Taiwan, 5 in Malaysia, 6 in Singapore, 10 in UK, 4 in
Thailand, 2 in Russia, 2 in France and 3 in USA. They have almost 70 partners and
approximately 75% of their products are made in China. UNIQLO had revenue of $7835 million
in 2011 with an increase of 0.6% from 2010. Their net income became $688 million in the
financial year which was %787 million in the previous year. H&M, the retailer of fashion
apparel, on the other hand, provides the customers with a combination of unique trends and
timelessness for both men and women. Their innovative collection and an amazing fashion
experience along with a colorful graphic and playful design attract all the customers. Another
category sells their own individual brands and collaborate design with independent fashion tags.
There is a combination of street fashion and subculture with the effect of catwalk. Their business
is operated from their leased store outlets by means of internet, sale of catalogue and some
franchise stores. The do not have their own factory. The production is outsourced to other
independent suppliers to work for them. H&M has a growth target to increase their number of
outlets by 10-15% each year as well as increase the sales in the comparable units (Grinblatt and
Titman 2016). They have a self- financed system of their growth and development. By the end of
the year 2010, H&M had around 2206 outlets including 50 franchise stores, 35 COS stores, 18
Weekday stores, 48 Monki stores and 1 Cheap Monday store. The group H&M outsource their
product manufacturing to 700 different and independent suppliers through their 16 domestic

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production offices in the continents of Asia and Europe. The strength of employee in the
company H&M is 94000. They have recorded their revenue as $16137 million in the financial
year of 2011, with an increase of 1.4% from the year 2010. So, their net income became $2321
million in 2011 in comparison to a net income of $2880 million in the previous year. Their
strong brand image is associated with the value and collection of style. Their association with
200 in- house designers and other famous designers has a unique approach that has been carried
out by the retailer company for a long time (Johnson 2017).
Value Chain Analysis
Value chain analysis is the process where the firms tend to analyze the primary activities
and support activities that add extra value to its final product thus analyzing the activities in
order to reduce the cost of production and operations. It constitutes of all the activities that the
firms include from output to input. It is, in fact, a strategic tool that would help a firm to analyze
its internal activities with its special reference to the external activities. It also comprises of the
understanding of competitive advantage. Following the case study it can be identified the
current state of output and input competitive advantage of the firm. It also forecasts the status of
the firm. Thus by taking value chain analysis as the significant tool for the identification of
competitive advantage the analysis process would be helpful in understanding the process of the
basic concept. Following concepts are to be taken into consideration while identifying the
elements of value chain:
i) Effective relation with the buyers
ii) Integration with the suppliers
iii) Identification of the external contractors
iv) Integration of direct distribution system

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v) Minimization of merchandise system
With the execution of these elements the value chain of the company is analyzed with the
proper comprehension of the policies. In terms of considering internal analysis in relation
with the external analysis, both the effective changes are to be taken into consideration.
Having read the case study it can be considered as serious concern that most of the external
contractors of the company have been integrated with core business policies and
performances. Such professional integrity has been has been empowered with the effective
changes. C the following diagram succinctly demonstrates the VCA (Value Chain Analysis)
of H&M. Being the second largest apparel company in Europe, H&M has potential value
chain process. The logistics performance of the company has maintained a certain standard
of its own. Though the company does not own all the factories, it acts as the advantage of the
same. The reason of such advantage is that the company can easily change its suppliers in
need. On the other hand, due to the size of the business, the suppliers can easily be
manipulated in terms of logistics management. The company indeed aims to be maintaining
lowest production or supply cost however maintaining higher profit margin. In terms of
inbound logistic, H&M definitely follows the process of sustainability. This is how the basic
understanding of the entire case has to be taken into certain understanding on the entire
understanding of the basic understanding of the entire case. The aim of the company is to
provide better quality and tend of fashion goods in the market. Due to effective market
competition from the companies like Uniqlo that offers cheaper clothing with trendy fashion
to the market, like H&M, the case company is bound to eradicate certain setbacks in its
logistics process. These setbacks have been the greater number of wastes thus accumulating

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higher amount of cost. In order to get rid of such hindrances, H&M needs to ensure the
negation of waste thus ensuring lower range of waste management cost.
Primary Activities
Inbound Logistics
One of the major values of the company is the sustainability in business process and
sustainability in production. As a matter of fact, this has been taken into certain consideration
pertaining to the effective business chances, the major concern pertaining to sustainable
operations needs to be strengthened within the company. Through business integrity with the
contractors the company also ensures the process of different understanding of the cases
pertaining to the effective understanding of the entire understanding of the entire case. As a
matter of fact, this has been taken into certain process pertaining to the effective understanding
of the entire case. The company also ensures waste management system in manufacturing,
transport and other sources. As a matter of fact, this has been taken into certain consideration
pertaining to the effective understanding of the process.
Operations
Since the company is only concerned about the operations of designing the clothes, it also
maintains effective transparency. The company is highly concerned about the environment of
the shops it is locate in. As a matter of fact, this has also projected cozy, simple and well
maintained working ambience within the shops. According to Haberberg and Rieple (2017), the
company has always been locating the stores quite nearer to the customer’s congested areas. It
also proposes similar service to the competitors.

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IT system
The company has also provided itself with effective information technology system. As a
matter of fact, this has to be taken into certain consideration pertaining to the effective
understanding of the fact, in terms of creating the issues with basic procurement from the
suppliers. Since the most effective swift has been the efficient information technology sharing,
this has helped the suppliers to comprehend how the company wants them to execute the
logistics process. This is how the company has ensured inbound consideration into the core
business process.
Outbound Process
As a matter of fact, outbound logistics would be denoting the fact of accepting the consideration
of the suppliers. As a matter of fact, this has to be taken into certain consideration pertaining to
the basic understanding of the issues. This has to be taken into certain consideration pertaining to
the consideration of the entire understanding of the entire vision and mission of the company. As
a matter of fact, this has to be taken into certain consideration pertaining to the effective issues to
respond to the market.
Transportation
From the aforementioned case study it has been taken in to consideration the
transportation process of the entire understanding of the fact. Transportation process of the
company has been associated with effective socialization of the contractors. Though the
company keeps a proper professional rule, this has to be taken into certain consideration
pertaining to the effective understanding of the issues. As a matter of fact, most important factors
have been the procedure of experimental learning. The following diagram helps understand the
core value chain analysis process of the company:

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VRIN Analysis
VRIN stands for Valuable, Rare, Inimitable and non- substitutable. These are the
paradigms for the company that links it to the consideration of unique characteristics of the
company. Since VRIN provides best practices as a source of competitive advantage. As a
matter of fact, following analysis would be taken into consideration:
i) Valuable: the company is valuable in the process of socialization of the contractors so
that it can create an impactful source with the suppliers.
ii) Rare: the company has the rarest characteristic trait to provide a succinct
understanding of the fact pertaining to the resources
iii) Inimitable: the process of logistics of the company is inimitable
iv) Non- substitutable: the process of resource procurement is highly non-substitutable.
Since this has been taken into certain consideration pertaining to the functional area,
this has to be taken into certain consideration.
Conclusion
From the aforementioned analysis, it can be stated that most of the business process
characteristic traits have been detected so as to find out how this has been taken into certain
consideration. In fact, the process needs to be taken into certain consideration pertaining to the
generation of professional excellence. From the frameworks and the outlines of VRIN and
Porter’s five forces model, it can be stated that this has to be taken into certain consideration
pertaining to the effective process of the entire culture.

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