Strategic Analysis of H&M: Evaluating Macro & Micro Environment

This report provides a comprehensive analysis of H&M's business strategy, focusing on both the external and internal environmental factors that influence its operations. The external analysis includes a PEST analysis, examining the political, economic, social, and technological factors impacting H&M, such as the political instability in key production regions and the impact of Brexit. The report also delves into the internal environment using SWOT analysis, highlighting H&M's strengths like its fast-fashion strategy and weaknesses like outsourcing concerns. Furthermore, Porter's Five Forces model is applied to evaluate the competitive landscape, assessing the threat of new entrants, substitutes, and the bargaining power of buyers and suppliers. The analysis informs strategic management decisions and identifies strategic directions, objectives, and tactical actions for H&M to improve its competitive edge and sustain growth. Desklib offers a variety of solved assignments and past papers to assist students in their studies.

Business strategy

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
P1 Impact as well as influence of macro environmental factors on organisation and its
strategies.................................................................................................................................3
Political Factors......................................................................................................................3
Economic Factors:..................................................................................................................4
M1 Critical analysation of the external environment for the purpose of determining and
informing strategic management decision..............................................................................4
P2 Analysation of organisation's internal environment as well as capabilities though using
appropriate models and frameworks......................................................................................5
M2 Critical evaluation of the internal environment of organisation for assessing the internal
strengths and weaknesses along with internal capabilities structure and skill set..................6
P3 Application of the model of Porter's five forces in the given organisation and evaluation of
the competitive forces on the business of the organisation....................................................7
M3 Necessary strategies that help in improving competitive edge of the organisation.........8
P4 Application of the range of theories concepts and model and interpretation of device
strategic planning for the organisation...................................................................................8
M4 A strategic management plan that has tangible and tactical strategic priorities and
objectives................................................................................................................................9
D1 Interpretation of the information and data application on the environmental and
competitive analysis for producing a set of valid strategic directions, objectives and tactical
actions.....................................................................................................................................9
CONCLUSION ...............................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Business strategies refers to those tactics, moves and the actions which is done by the company
to attract the customers towards the product of the company. The ultimate goal of all the strategy
is to strengthen the organisation and achieve the goals of the organisation. There are different
types of tasks present in the organization and the managers of the organization have to develop
effective strategy for all the functions of the organization so that it can be completed effectively
in the organization. The organization chosen here to display this report is H&M, one of the
world's multinational clothing brands based in Sweden. This report is going to covered
description related to the internal and external environment of the organisation. This report also
provides brief discussion related to different theories and the models of strategic management.
TASK
P1 Impact as well as influence of macro environmental factors on organisation and its strategies
External factors refers to those factors of the organisation which is present in outside
environment. This becomes significant for the administration of an organisation to analyse the
external environment so that the complications of the management can be minimised. It is very
important for the management of H&M to conduct PEST analyses if they want for analysing the
influence of macro environmental factors on the business of organisation.
PEST analyses of H&M
It deals with those analyzes of strategic management that are used to evaluate the impact
of the external environment on an organization's business (Brown and Brown, 2019). Various
types of factors are present in this analysis like political, economic etc. A brief discussion
regarding these factors is given below:
Political Factors
The major part of the production of H&M are based three countries named Lebanon, Turkey and
Egypt. The country of Lebanon is one of those country of the world which is badly impacted
with the war and their consequences. The level of disturbance are very high in this country
which negatively impacts the business of the organisation. The trade war between the two giants
of the world named US and China which not impact the business of H&M but also for the entire
because the prices of the clothes are increase in international markets.

Economic Factors:
The happening of the Brexit has negatively impacts the business of many organisations but it
does not impacts the business of H&M because the sale of the company are increase by the
considerable number after the Brexit (Galletta, Mazzù and Naciti, 2021). There are many
operating countries are present with H&M under which the rates of the labour are decreases
which is beneficial for the profit margins of the company.
Social factors
Clothing is one of those brand of the market under which the customers are highly influenced
with the celebrities and the social media. There are many celebrities and the sports personalities
are present in the market which can influence the customers to use the product of the company. It
becomes the opportunity for the company to endorse their product with the helps of these
personnels and increases their sell.
Technological factors
The trend of technological advancement is one of the most important trend of the market. The
customers of the organisation has used effective technological devices for their shopping and
other activities of life. It is very important for the management of H&M to use new and
advanced technology that captures multiple employees in the organisation.
M1 Critical analysation of the external environment for the purpose of determining and
informing strategic management decision
The decision making process of the organisation is one of the important and critical process of
the organisation which the management has to perform ion effective manner. The evaluation of
the external factors has played important role in decision making of the organisation. It is very
important for the management of H&M to analyze the external factors in their organization
which are helpful in decision making (Hristov and Appolloni, 2022). The political factor of the
analyses has reflected the disturbance of the production due to war situation in Lebanon so it is
important to shift the production in another locations of the world.
P2 Analysation of organisation's internal environment as well as capabilities though using
appropriate models and frameworks
Internal factors refers to those factors of the organisation which impacts the business of the
company from inside the organisation. The evaluation of the internal factors is one of the

important factor for the success of the organisation. There are different types of internal factors
are present in organisation and to analyse these factors it is important to conduct the SWOT
analyses of the organisation.
SWOT analyses of H&M
It is related to those analyses of the strategic management which enables the management
to analyse the internal environment of their business. This analyses is one of the most important
and the valuable tool for the development of the strategy in the organisation. There are four
factors are present in this analyses and the brief discussion in relation to H&M are given below:
Strength
 One of the most important and biggest strength of H&M is their fast fashion strategy
which makes the company more competitive in the market. Under this strategy the
management of the organisation has developed new and advanced fashion cloth and
introduce them in the market in short span of time (Juliana, Gani and Jermias, 2021). It is
very helpful for the company for the retention of their customers.
 The another strength of the company is their wide reach in the market. The management
of the H&M has spread their business in six continents of the world with the helps of
their 5000 stores. It helps the company to gain huge profits in the organisation.
 The management of the H&M has provided the affordable prices in the market which are
very helpful for the company to applied different types of customers in the market.
Weakness
 One of the most biggest weakness of the company is that that the management of the
organisation has outsources most of their business process. The main motive of the
company behind this achievement is to deal with the close rivals in the market. This
negatively impacts the business of the organisation because of lack of control on brand in
the market.
 The management of the H&M has to deal with different types of criticism in the market
due to some of their incidents which created many controversies in the market. The
management of the H&M has print controversial line in their cloth which is “Coolest
monkey in the Jungle” and creates the image of black child which sparks the matter of
racism in the organisation (Liu, Wu and Chan, 2021).
Opportunity

 The management of H&M has expand their brand in large number of markets which are
helpful for the company to make any product successful in the market. The customers of
the market has purchase the product in the market without doing anything which are
helpful for the company to operate their business in effective manner.
 The management of the H&M has only focuses on the upper class market but there are
many lower markets are present which are having many opportunities for the company.
 There are many new and advance technologies are developed in the market which can
make the business of the H&M more competitive so if the management of the
organisation has applied these technologies in their organisation its processes becomes
more effective.
Threats
 One of the most biggest threat which the management has faced in their market is the
high level of competition. There are large number of competitors are present in the
market which enables the management to diverse their thinking from their core business.
The management of the organisation has to outsource their business to their strategic
partner which lacks the control of the organisation over their brands in the market
(Magerakis and Habib, 2021).
 There are some policies and measures are happened in the market which impacts the cost
of the labour and the raw material and their prices increase by the large number. It
negatively impacts the business of the organisation and enables them to shrink.
M2 Critical evaluation of the internal environment of organisation for assessing the internal
strengths and weaknesses along with internal capabilities structure and skill set
The management of the H&M has many strengths which helps them to increase and improve
their internal capabilities. International expansion of the company are very helpful because it
provided huge amounts of profits which strengthen their financial resources. The effective and
strong financial position in the market helps the company to deal with the competition in the
market. The profit margins of the organisation becomes improve due to this strength.
P3 Application of the model of Porter's five forces in the given organisation and evaluation of
the competitive forces on the business of the organisation
Since cut throat competition exists in the market and many companies operate in the
same industry it creates stiff competition in the organization. There are a large number of

competitors in the market for H&M in the market. It is very important for the management of
H&M to develop effective strategy in the market so as to improve their profit margins. It is
necessary to use the Porter Five Forces model if one is to evaluate the competitive forces in the
market. Providing effective returns is very important for the management of the organization.
Porter five Forces model of H&M
It is related to those model of the strategic management which is used by the company to
evaluate the competitive environment of the market. There are five forces are present in this
model of the management which reflects the impacts of the environment on the business of the
organisation. The management of the H&M is one of the competitive and experienced
management of the world which are very sensitive towards the competition of the market. The
brief discussion related to five forces on the business of the H&M are given below:
Threat of new entrant
The threat of new entrant are very high in the clothing industry where the management of H&M
has operated their business because of low barriers of the entry. One of the main reason for the
easy entry in this field is that no significant knowledge or the skills are required to enter in this
market. There are many companies are present in the market such as Amazon which takes over
the market on the basis of their technology.
Threat of substitute
The threat of substitute are moderate in the case of H&M because they operate their business in
the market of clothing. The customers in the market of clothing are very sensitive towards the
trends and the fashion so it is very important for the organisations to make their collection up to
date which enables the company to retain their customers in the market. It does not impacts the
business of the H&M because the management of the organisation continually updates their
collection in the market.
Bargaining power of the customers
The bargaining power of the customers are relatively very high in the case of H&M because the
customers of the market are very sensitive to switch towards the other product of the market. The
switching cost in this type of the market are very low in the market.
Bargaining power of the supplier

The bargaining power of the supplier are moderate to high in this scenario. It is very important
for the management of the organisation to evaluate these bargaining power so that it becomes
possible to develop effective strategies in the organisation.
Competitive rivalry
There are large number of rivals are present in the market which provides negative returns to the
company. The competitive rivalry in the case of H&M are high because of the competitors in the
market.
M3 Necessary strategies that help in improving competitive edge of the organisation
It is very important for the management of the H&M that they develop effective
strategies to deal with the competition in the market. The management of the H&M has
outsource their business to their strategic partners which becomes the weakness for the company
so it becomes necessary to make it limit so that the control over the brand can increase.
P4 Application of the range of theories concepts and model and interpretation of device strategic
planning for the organisation
Ansoff Matrix Model
It is one of the important and valuable model which is developed by Ignor Ansoff in the
year 1957. it is related to those model which provides different strategies of growth to the
organisation which helps them to expand their business. The brief discussion related to the
strategies of growth for H&M are given below:
 Market Penetration- It is related to those strategy of the growth under which the
management of the organisation has try to increase the sale of their existing product in
their existing market of the organisation. The management of H&M has to improve their
promotional and the marketing aspects which helps to penetrate the market.
 Market Development- It refers to those strategy of the matrix under which the company
has try to develop new market and target the customers with their existing product range.
It is very important for the management of H&M to analyse the lower markets so that
new opportunities in the market can be opened.
 Product Development- This section of the matrix has reflects the scenario under which
the management of the H&M has try to develop and provide new product in their

existing market. The level of innovation should be more in the organisation (Maniora,
2018).
 Diversification- It is related to those situation of the market under which the company
has offered new product in new market. In respect of respective company if they adopt
this method then they have to develop a new product and they also have to launch it at
new market.
M4 A strategic management plan that has tangible and tactical strategic priorities and objectives
Strategy :- The management of H&M is one of the experienced management of the world
which has developed many strategies for the company and makes them possible for the success I
the organisation. The market development strategy of H&M is one of the important and valuable
strategy.
Objectives
 To increase the sale of the company by 5%
 To increase the customer satisfaction.
D1 Interpretation of the information and data application on the environmental and competitive
analysis for producing a set of valid strategic directions, objectives and tactical actions
H&M management adopts several models which helps them to understand about the competitive
and potential market to achieve the target and target effectively. For example, they adopt
PESTEL analysis to evaluate the external environment of the electronic market and at the same
time it will also help them to develop a strategic plan accordingly (Rehman, and Anwar, 2019).
CONCLUSION
This report concludes different types of internal and external factors which enables organisation
to evaluate their force in the growth of the organisation. This report also concludes brief
discussion related to different theories and the models of strategic management.

REFERENCES
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