Business Strategy Report: H&M's Competitive Analysis and Planning

This report provides a comprehensive analysis of H&M's business strategy, examining the impact of the macro environment using PESTEL analysis, including political, economic, social, technological, environmental, and legal factors. It delves into H&M's internal environment and capabilities through the VRIO framework, assessing the value, rarity, imitability, and organization of its resources. The report also applies Porter's Five Forces model to evaluate the competitive forces within the retail market. Finally, it discusses strategic planning for the organization, offering insights into how H&M can maintain and enhance its competitive position. The analysis covers various aspects of the company's operations, including the impact of external factors, internal strengths, and strategic recommendations.

BUSINESS
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
LO1..................................................................................................................................................1
P1. Impact and influence of macro environment on a given organization and its strategies. 1
LO 2.................................................................................................................................................5
P2 Internal environment and capabilities of a given organisation using appropriate
frameworks.............................................................................................................................5
LO 3.................................................................................................................................................6
P3 Porter Five Force model to evaluate competitive forces of market..................................6
LO 4.................................................................................................................................................9
P4 Strategic planning for organization...................................................................................9
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................15

INTRODUCTION
Business strategy is a long term plan and include competitive actions through which entity
accomplish their objective and goals in time effective manna strategy. Formation of strategies
requires elevation of all the internal as well as external factors of business environment by
company with the assistance of numerous techniques as well as measures (Burlton, 2015). This
report has been conducted on H&M. Company operates their services in retailing sector and was
founded in the year 1974. Entity conducts their services worldwide and has main products in
clothing and accessory segment. With having more than 1, 26,376 employees this company serve
their customers with best. Present report include discussions upon pestle analysis through which
company can determine different factors prevailing in business environment and can further
formulate strategic plans and measures as to gain significant opportunities from them. Along
with this VRIO, Porter five force analyses is being covered in this report through which entity
can make strategic enhance in their competitive image. Lastly in this report business strategic
plan is being discussed.
LO1
P1. Impact and influence of macro environment on a given organization and its strategies
Business organisation performs their activities and functions in an environment which is
combination of wide range of internal and external forces. All these factors are having capability
to affect functioning of organisation. In this is essential for H&M to properly evaluate factors
that are prevailing in micro environment, as this can have significant impact on organisational
operations. In this, pestle analysis proves to be an effective measure that benefit organisation to
review aspects like social, political, technical, economical, legal and environmental. This further
allows entity to frame competitive strategies in order to ensure maximum advantage in respective
industrial sector.
Political Factors:
Political factor indicated politics influence on organisational functioning. Main element
of this factor includes regulation trade policy, governmental policies, political stability, labour
laws and taxation rules. It has been evaluated that H&M is performing their operations in retail
segment which is facing maximum influence by political decisions. In order to overcome this it
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is essential for company to operate their business functions by staying aligned with ruling
government in order to gain their proper support.
Positive: There is wide range of taxation policies reliefs that government is offering to
entities operating their services in retail sector (Marx, 2015). Further it has been evaluated that
the sector is also receiving more tariff relaxations comparatively to other. This proves to be an
effective opportunity through which H&M can maximize their organizational profitable index in
an effective manner.
Negative: Brexit pose different type of obstacles and hamper performance of industries
engage in retail sector in United Kingdom. It not only reduces buyer’s purchasing power but also
affect individual per capita income that significantly impact upon profit earning capacity of
entities (Why is UK unemployment still low). This issue can be overcome with the assistance of
strategies in which H&M can offer qualitative products with comparatively low cost to
consumers.
Economic Factors:
Economic factor mainly include the factors that are related to disposable income,
unemployment rate, exchange rate, inflation rate, per capita income of individual in a region,
disposable income and economic growth. H&M is required to have proper understanding of
economic factors prevailing in a particular segment as to develop effective strategies against
them and undertake wide range of opportunities to enhance their productivity. In addition to this,
it has been evaluated that due to Covid there higher possibilities of economic inflation that may
further affect company economic in number of ways. In this with the assistance of efficient
financial strategies company can somehow safeguard themselves from drastic losses (Moseley,
2017).
Positive: With having economical developed structure United Kingdom offer excellent
infrastructure facilities through which organisation in retail industrial sector can enhance their
profit earning margin. It been evaluated that retail industry is leading and top contributors in UK
GDP and there are wide range of economic advantages that government is providing through
which H&M can enhance their market share values.
Negative: Due to brexit there is a significant increase in United Kingdom overall
unemployment rate; this can severely affect the workplace structure of H&M in which entity is
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required to attract potential, experienced and skilled candidates with high wages. For this, cost
effective strategies of recruitment and selection prove to be effective for organisation.
Social Factors:
This factor includes attributes like community beliefs, age distribution, population,
consumer lifestyle, health consciousness, career attitude etc (Moseley, 2017). In this
organisation is required to have proper understanding of community beliefs and their attitudes in
which they are operating their business functions as this further ensure maximum opportunity.
Further it has been evaluated that in order to influence consumers mind set after Covid entity is
required to under more safety measures in order to make customers believe that company is
conducting their operations by undertaking concern of proper consumer health safety.
Positive: In United Kingdom most of the individual mind set is tend towards fashion by
taking advantage of this opportunity H&M can expand their business operations profitability
ratio by attracting consumer towards their offerings by providing them highly fashionable
products and services.
Negative:
Retail Industry is facing strong competition in which entities undertake use of aggressive
marketing in order to attract consumer’s attraction towards their products and services at
affordable prices. Along with this, dynamic change in purchasing and lifestyle of customers also
affect H&M overall sales earning capacity. For this entity is required to engage in regular
marketing research as to satisfy customers according to latest trends in less operating cost. Covid
will impact entity is a severe manner and can further affect their profit earning capacity.
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Ilustration 1: PESTEL Analysis
(Source: PESTEL Analysis, 2019)
Technological Factors:
Is one of the most important elements in pestle analysis which is developing at constant
rate. This encourage organisations to update there all department like automation department, IT
department as per according to current technology trend (Linder and Williander, 2017).
Technology provides an opportunity through which organisation can ensure there hire
competitive advantage in respective industrial segment services. It has been evaluated in order to
beat stiff competition H&M is require to undertake use of innovation and technology as to
encourage consumer purchasing behaviour towards organisational offerings.
Positive: H&M operate their business functions in retail segment which is highly affected
sector by dynamic technology. This increases competition rate at maximum extent. In this H&M
is required to ensure that their engagement is high in online business platform as to make
significant increase in productivity and profitability of organisation (Thompson, Strickland and
Gamble, 2015). Technology provide wide range of effective measure that can have positive
impact upon H&M business growth as it allow entity to serve customer irrespective of
geographical location.
Negative: Technology increase competition rate in retail industrial segment at high rate.
Top-notch entities like Zara, Marks and Spencer etc operate their services as per latest
technological trend in order to compete with rivals in an effective way. In this H&M is required
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to invest maximum funds in technological aspect and innovation and further take advantage of
cost efficient strategies and frame budget accordingly in order to gain maximum competitive
advancements.
Environmental Factors:
Environmental factor includes aspects like climate policy, environmental rules, weather
etc. Organisations in any industrial sector are required to be committed with environment and
engage in environment safety activities as to operate their services and business functions in
environmental friendly manner (Teh and Corbitt, 2015). H&M is a leading organisation in retail
segment thus it is essential for entity to undertake practices like waste management, renewable
resources into business functioning in order to protect environment.
Positive: Government of United Kingdom is offering additional benefits and advantages
to those organisations who are investing in renewable technology. This is having positive impact
upon H&M as it can further ensure entity brand image as well as long term sustainability in
market.
Negative: Environmental negligence can impact upon operations goodwill and
profitability of H&M in a negative manner. As individuals now a days are majorly concerned
towards environment. Thus, in order to influence consumer attention towards entity it is essential
for company to undertake use of environmental friendly initiatives in order to satisfy customers
in a well defined manner while having maximum emphasize upon environment safety measures.
Legal Factors:
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Legal factors are an essential aspect in pestle analysis as this element has maximum
influence upon business operations in any segment. In context with retail sector it has been
evaluated that there are different type of legal implications, laws and legislations that are
government rules, employment legislations, copyright, discrimination, protection law, health and
safety law that are enforced by government and are required to be abide by organisation
operating their business in retail sector. Thus, it is important for H&M to abide all essential legal
laws and legislations that art developed by United Kingdom government for organisations in
retail industrial sector.
Positive: Legal laws and applications have significant and positive impact of
organisational functioning as if an entity abides all legislations like consumer protection law,
employment law and intellectual property law (Scholes, M.S., 2015). Then they can significantly
able to increase their brand image in marketplace and can further serve customers in law full
manner. Further it has been evaluated that it a encourage entity to gain formative support from
government agencies in many aspect like borrowing of funds. Thus, it is essential for H&M
management to ensure that entity is abiding all essential legal obligations in their workplace
structure as to stimulate their growth in an effective manner.
Negative: in has been evaluated that there are many penalties and legal compliances that can
be faced by organisation those who neglect compliance of legal legislations and laws. It also
affect entity to perform that operations in ethical manner that somehow decreases there
competitive image in industry. Thus, it is essential for H&M to make sure that they abide all the
essential legislations in order to avoid any penalty and obligations.
LO 2
P2 Internal environment and capabilities of a given organisation using appropriate frameworks
It is important for an organisation to constantly gain knowledge of its internal environment
in order to incorporate improvements within the same. This provides assistance to the
corporation in gaining a competitive advantage in market place.
VRIO Model:
This analytical framework is widely used by organisation for the analysis of its resources
as well as capabilities (Schaltegger, Hansen and Lüdeke-Freund, 2016). It has been identified
that global reach, high quality offerings, competent workforce and technological resources are
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considered to be the 4 main resources for H&M. It has been acknowledged that the workforce of
the entity fulfils all the 4 criteria. The reason behind the same is explained beneath:-
Valuable
The workforce of H&M is regarded to be valuable because constantly training sessions are held
to enrich their professional personality with necessary skills and knowledge base. This helps in
making them competent as per the requirements of the company.
Rare
The workforce of H&M is considered rare because the skills and competence held by them
cannot be present within individuals pertaining to the rival firms of the respective retail
corporation.
Inimitable
The manpower within the confines of concerned retail organisation is regarded to be inimitable
as the skills set, competencies and knowledge base of personnel cannot be copied by anyone by
usage of any means, not even through training.
Organised
The employees of H&M are regarded to be organised as they are provided with empowerment
opportunities at constant intervals of time. This equips them with the necessary attributes, traits
and professional skills which are essential for carrying out the tasks of the company.
LO 3
P3 Porter Five Force model to evaluate competitive forces of market
There are wide range of factors that are prevails in business environment and are required
to be effectively analyse by entities as to develop strategies and policies against them as to
further take advantages from these in order to maximize their business growth. In relation with
H&M management undertake advantage of Porter five force analyses as to effectively evaluate
factors that are influencing their business operations:
Threat of New Entrants – Low:
Retail industry is facing threat of new entrants due to high investment that are required to
be made by new ventures in order to establish their business in respective industry. Along with
this because of strong competition in retail sector and existence of reading entities like Zara,
Gucci and Marks and Spencer new entrants may face high competition (Hart, Sharma and
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Halme, 2016). In addition to this it has been identified that with the presence of large number of
organisations in retail industrial segment customers seeks towards affordable products as well
services with high quality. It create hurdle in front of new entrant as to emerge out as a player
and serve customers accordingly. Thus, H&M by undertaking advantage of significant
opportunity can invest in technology, innovation and uniqueness in order to differentiate
themselves from other organisation. It further encourage them to maximise their competitive
force in effective manner.
Threat of Substitutes – High:
There is high presence of number of competitive entities in retail industrial segment that
creates threat of substitutes that are also facing by H&M. As organisations like Marks and
Spencer, Forever 21 and Zara offer their products and services in marketplace with high quality
and affordable price range as to influence consumer purchasing power. In this it is essential for
H&M to overcome high threat of substitution while undertaking cost effective strategies in
innovation. As it further allow entity to attract customers with unique and innovative offerings at
comparatively low rate.
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Illustration 1: Porter Five Force Analysis Model
Bargaining Power of Buyers - High:
Retail industrial segment is facing high bargaining power of buyers. As in this industry
there are number of organisation that provide quite similar services and products in competitive
price range. This influence bargaining power of buyers, as they can easily shift their tend
towards any other company easily. In this H&M is required to provide their customers with
diverse range of services and products in affordable price base as to ensure their long term
connectivity with organisational offerings.
Bargaining Power of Suppliers – Low:
It has been evaluated that supplier is having low bargaining power in retail segment as
H&M is operating their business functioning as a leading retailer and offer wide range of product
and services to consumers in affordable price range .Along with this company is having high
market brand value that make suppliers to work with this organisation in order to ensue higher
profitability on continuous base. This creates significant opportunity, as H&M with the
advantage of low bargaining power can conduct their production process with cost-effective raw
materials and can further make their investment on innovation and high tech technology as to
increase their overall profitability base.
Competitive rivalry – High:
Retail Industry is one of the leading sectors all around the world which is contributing
maximum contribution in country economic growth by providing wide range of employment
opportunity. United Kingdom is having strong competition force in retail industrial sector as in
this organisations like Forever 21, Marks and Spencer, Zara and Gucci develop high competition
in marketplace with their highly qualitative products and services in low price. This significantly
increases competitive rivalry (Eaton and Kilby, 2015). In order to ensure maximum competitive
advancements H&M is required to ensure that they have sufficient budget through which they
can undertake advantage of innovation and uniqueness in their business functions in order to
serve consumers according to the latest trend that are prevailing in retail industrial segment. This
not only increases the competitive power but also maximise overall profit earning capacity of
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organisation. In addition with is it also facilitate company to ensure the long-term sustainability
in marketplace.
As per the above mentioned discussion it has been evaluated that H&M is facing strong
competition in retail sector due to the presence of leading entities. In order to overcome this it is
essential for company to invest maximum funds in high tech technology and innovation as to
maximise productivity and efficiency of both organisation and employees at great extent in order
to serve customers with high quality product in cost effective manner. This not only benefit
entity to perform their operations with low operating cost but also create opportunities for them
to enhance their market share base and profitability index.
LO 4
P4 Strategic planning for organization
H&M is a well renowned British retail company which deals in wide array of products and
services in order to serve its customers in an effective manner. In this relation, it becomes
important for the organisation to carry out strategic planning as this allows the retailer to
stipulate strategies through which it can gain an edge in market place. In this regard, the top
management of this retail corporation is applying Ansoff Model as this will allow the entity to
select the most appropriate marketing growth strategy. Thus, the application of this model in
context of H&M is presented below:-
Market penetration:
The market penetration strategy consists of sale of existing products withtin existing
marketplace. If H&M follows this strategy, they can retain their customers around the retail
market. In fact, they can boost the sale of their existing products and services, by introducing
different kinds of promotional offers within the brands (Higgins, Omer and Phillips, 2015). This
will help the entity in gaining the attention of larger base of customers in domestic market and
retaining the customers as much as they can. In this relation, the best time to promote the best is
acknowledged to be in the festive seasons which can be beneficial to facilitate increase in sales.
Market Development:
The market development strategy refers to dealing with the present products within the
confines of new market places. In the case of H&M, if the company wants to grow or promote
their brand within other markets, it may choose to follow the strategy of market development.
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This will provide aid to the retailer in identifying the scope of their existing products within the
boundaries of new market (Johnson, 2016). H&M is considered to be one of the most potential
retail ventures in United Kingdom, thus it can easily target new buyers within emerging markets
by pitching their products through application of wide variety of marketing practices. This
directly leads to an increase in sales as well as the goodwill of the respective brand.
Product Development:
It refers to the launch of upcoming products within the confines of the existing market.
The preferences of consumers fluctuate anytime resulting in the market seeking a new product or
service through the innovation of present product or development of new product (Chang,
2016). This strategy if applied by H&M will assist the corporation to meet the clients’
expectations. For this purpose, H&M needs to take into account and monitor the market
environment so as to improvised their products according to the market demands. The new
offerings can thus imply positive changes with the brand such as increase in sales and retention
of large number of buyers.
Diversification:
It constitutes the strategy to promote the upcoming products within the confines of new
market. This strategy is sometimes considered to be risky as this may even turn into breakeven
point for the entity dependent on how it performs within the market. H&M can gain entry into
new product segments such as repair and maintenance or any other, but only with the proper
execution of market research in the context of location, economy, market environment and the
requirements of consumers (Pisano, 2015). After promotion of new product, its awareness is very
essential to boost up the sales within the new market.
It has been analysed that market development is the best strategy for H&M as the company has
already established image for its products and services within the existing market and it can
launch the same offerings in new market to increase its revenues.
Strategic management plan
Vision: To become the word of mouth for customers.
Mission: To offer market disruptive products by leveraging innovation and making it
central to the organisational culture.
Goal and Objective: The goal of the firm is to enhance its market positioning. The
objective is to increase its profits within the next 6 months.
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Strategies and tactics: John Lewis will leverage market development to enhance its
customer base as well as boost its financial performance in the long run. Further, it will use the
tactic of value addition to gain an edge over the rival firms in market place.
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CONCLUSION
As per according to report it is concluded that, business strategy is defined as a set of plan,
actions and measures through which organisation can strengthen their business plan while
increasing their competitive force in respective marketplace. These strategies provide advantage
to entities that further influence them to accomplish business goals and objectives in time
efficient manner. There are different types of macro and micro environmental elements that are
prevailing business environment and have capability to affect their operations in negative and
positive way. For this strategic tools like porter five forces, Pestle and VRIO analysis effectively
assist entity to undertake opportunities from micro and macro environmental factors and
significantly increase organisation capability to earn maximum profitability and productivity at
great extent.
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REFERENCES
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Online
Why is UK unemployment still low? We are working longer hours. 2019. [Online]. Available
Through<https://www.theguardian.com/business/2019/nov/17/why-is-uk-
unemployment-still-low-we-are-working-longer-hours>
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